This is an individual project where you will be acting as a consultant to an entrepreneur who wants to start a new business. As the consultant, you’ll create a 5 year budget that supports the entrepreneur’s vision and strategy, as well as the needs for equipment, labor, and other startup costs.
You can choose from one of three types of new business startups — a landscaping company, a restaurant, or an electronics store that sells portable computing devices. Each business has its own Business Profile detailed in the sections below. The purpose of the Business Profile is to guide you in understanding the scope of the business, the entrepreneur’s startup costs, and financial assumptions.
The project requires you to create a written budget proposal, a supporting Excel Workbook showing your calculations, and a PowerPoint presentation summarizing the key elements of the budget proposal, which you assume will be presented to a management team.
This is an individual project. Each week you will complete a section of the project in draft form. In Week 7, you will submit the final version of the project’s Budget Proposal, Budget Workbook, and Budget Presentation in PowerPoint.
Deliverables Schedule / Points
|1||Section 1.0 Executive Summary (Draft)||10|
|2||Section 2.0 Sales Forecast (Draft)||10|
|3||Section 3.0 Capital Expenditure Budget (Draft)||10|
|4||Section 4.0 Investment Analysis (Draft)||10|
|5||Section 5.1 Pro Forma Income Statement (Draft)||10|
|6||Section 5.2 Pro Forma Cash Flow Statements (Draft)||10|
|7||Final Budget Proposal||90|
|7||Final Presentation w/ PowerPoint||30|
|Total project points||180|
Business Profile: The Cutting Edge – Landscaping
The vision of the entrepreneur is to create a 5-team landscaping business that caters to upscale neighborhoods in Miami, Florida. The company is to be called “The Cutting Edge”. The goal of the entrepreneur is to generate income of at least $42,000 per year as his personal salary, as well as profits of 4% after tax sometime no later than the second year of operation. The entrepreneur intends to buy a route of 100 homes from a lawn service company whose owner is retiring.
a) Market Focus/Analysis
The landscaping business targets upscale neighborhoods with home associations which demand lawns to be manicured and well-cared for. Customers tend to be upper middle, to upper-class individuals with household income levels of $110,000 or more. The geographic focus is Miami and its surrounding area. The area is expected to show slow economic growth of about 1% per year over the next five years.
The product is lawn maintenance and landscaping services as well as minor irrigation equipment repair. The primary source of income is expected to be in the form of lawn-cutting, debris-blowing, and edge trimming services. However, the company will also do reseeding, landscaping and foliage/tree planting, tree trimming, and light irrigation system repair when necessary to keep their customer’s lawns watered and healthy.
c) Basis of Competition
Customers hire the Cutting Edge due to its reliability in showing up when they are supposed to, quality lawn service, as well as their ability to keep lawn sprinkler systems in good repair, sparing the homeowner of the inconvenience of calling a sprinkler repair for minor repairs such as broken or clogged sprinkler heads, or other minor sprinkler system repairs.
- The cost of registering a limited liability company in Florida – filing fees listed at the bottom of the application for located at: http://form.sunbiz.org/pdf/cr2e047.pdf
- Business insurance, estimated at $1,000 per year
- No health benefits except for the owner of the business
- Workman’s compensation fees
- The cost of the initial route of 100 homes, at a cost of $120,000
Costs you should estimate through research, experience or other methods
- Team equipment for lawn cutting, which includes equipment for a two-person team:
- A pickup truck
- A trailer
- A large riding lawnmower
- A smaller riding lawnmower
- A push lawnmower
- Two gas-powered lawn trimmers
- Two gas-powered lawn edgers
- Safety equipment for eye and ear protection
- Tools for minor equipment repair on the job
- A drink cooler
- 2 gas powered blowers
- 2 tree/hedge trimmers
- 2 long ladders
- Buck saws for cutting branches
- The cost of 10 workers, two per team
- All operating costs such as advertising, phone, a small 400 square foot office complete with utilities, internet, laptop computer, accounting software like QuickBooks, office supplies, and annual depreciation on equipment.
*If you have questions about startup requirements, or think other startup costs necessary for the business are missing, then make an assumption and state it in the relevant section of the report. This list is not necessarily complete.
Given Financial Assumptions*
- The owner will be granted a loan for the initial startup, repayable over 10 years at current interest rates for small business loans.
- The owner will use personal funds to operate the business until it generates enough cash flow to fund itself.
- Essentially, 60% sales are made by credit card and 40% are made by check. All credit card sales are a paid to the company daily by the credit card company.
- 2.5% of credit card sales is paid to the credit card company in fees.
- The average lawn service costs $150 per month. Irrigation repairs are minimal at an average of $50 per customer per year, landscaping and other services are about $200 per customer per year.
- Equipment is depreciated on a straight-line basis over 5 years.
- The owner has health benefits, other workers do not.
- Each lawn takes about 1.5 hours to cut and manicure, as well as any other repairs or extra services like tree or shrub trimming.
- The entrepreneur will manage the company and draw a salary, but will not service lawns or perform other services.
*If you believe any other assumptions are necessary, please state them in your budget proposal.