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Business Plan Essay

1336 words - 6 pages

The Financial Business Plan of an Ideal Company

Dianna Schrock

Instructor: Jeff Bloom

AIU Applied Business Mathematics

December 13, 2015

1. Banking and loan arrangements

Since this is a small business start-up with little financial requirement, we would opt to go for a microloan program since this will be easier to acquire and does not require too much collateral and will just require personal guarantee of the three of us, as the business owners. This will enable us acquire basic facilities for starting such as Machinery, furniture and fixtures, and working capital. Microloans will also facilitate flexibility on repayments as we plan to start repaying the loan ...view middle of the document...

We shall therefore compute the total interest payable at period end and discount it monthly from the first year and month of repayment.

Total interest payable= 58000*8%*3= 13,920

Total amount payable= 58000+13920

= $71,920

Monthly repayment= $71,920/ (3*12)

=$ 1,997.80

2. Taxes to be Collected, Paid and/or remitted

Payroll tax

The business shall be collecting and remitting income tax, especially the payroll tax on salaries of the three partners. This shall depend on the prevailing income tax rate to ensure compliance. Assuming the payroll tax rate shall be 7.65% and that the partners are each earning $800 monthly for the start, the amount of annual tax collected from the three partners shall be as follows:

7.65%*800*3*12

=$2,203.20

Sales Tax and Value Added Tax

This shall be calculated by multiplying the purchase price (for those taxable goods bought for sale) or Cost of production (for those taxable goods manufactured by our business), by the applicable tax rate. Assuming the tax rate is 8.5% and the cost of manufacturing or buying a unit of a product is $10, the sales tax for the same product shall be;

Sales tax= 8.5%*$10

=$0.85 per unit of that product.

3. Pricing, Commissions, Discounts, Mark-ups and markdowns

All these shall be strategically computed to ensure that in selling, the business at least meets the Average variable cost at worst, or the gross profit margins. This is geared towards ensuring business continuity and make it able to repay the loan, as it balances on expanding its customer base without compromising its objectives. The pricing policy to be developed must put into consideration all the competition, survival and wellbeing of the business financially.

Mark-ups shall be applied on those products that the entity has a comparative advantage in producing, compared with its competitors. This will cater for cost and profit margins of the business, and also take care of the discounts and commissions that will be advanced to some customers due to various reasons.

Commissions, discounts and markdowns shall also be advanced to lure customers and also aid in the establishment of a market penetrating strategy due to the low costs and incentives. This should also apply in cases where the entity want to dispose those products that have stayed in stores for long, or the perishable products.

In advancing these, the business will be able to lure more customers and stir more sales and hence increase the liquidity of the entity and thus improving its income. It will also lead to an established customer base which will ensure continued sales and income.

4. How to acquire inventory and computers

These items shall be acquired through a tendering process. As per the plan, out of the $50,000 capital, the costs to be used to acquire these items is $35,000. We shall advertise for invitation of tenders for the supply of each of the items, that is, Inventory and computers. Once...

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