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Plan For Personal Fitness Equipment Inc - Assignment Example

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Summary
This assignment "Plan For Personal Fitness Equipment Inc" focuses on Personal Fitness Equipment Inc which is a privately held Corporation founded by Dr. John. Dr. John is a qualified Doctor specializing in personal Fitness and has got about 15 years of experience in this field. …
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Plan For Personal Fitness Equipment Inc
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Extract of sample "Plan For Personal Fitness Equipment Inc"

BUSINESS PLAN


This business plan is part of our regular business planning process. We revise this plan semi-annually.

INTRODUCTION:

Particulars Underlying Assumption
Company Name The name of the company is assumed as Personal Fitness Equipment Inc
Promoter Dr. John
Product Personal Fitness Equipment(PFE)
The project cost USD 150000
Promoters capital USD 50000
Bank Finance USD100000
Interest on bank finance=3%
Loan repayment is to start in October and the installment amount is USD 833
Sales Forecast It is estimated that the Turnover for the first year would be USD 500000 and the Selling Price of the Product is fixed at USD 50 per unit
Inventory It is assumed that desired Inventory of PFE is 20% of next month’s Sales forecast. Inventory is valued at Total Variable cost.
Raw Material 1) It is assumed that the product requires Two types of material
Material A and Material B.
2)Production of One unit of PFE requires 1 kg of Material A and 2 kg of Material B.
3) The purchase cost of Material A is assumed to be USD 6 per Kg and that of Material B is USD 8 per Kg
4) It is assumed that desired Inventory of Materials is 30% of next month’s Purchase requirement. Inventory is valued at the cost of Raw materials.
Direct Labor Direct labor cost is estimated at USD 4 per Unit
Collections from Debtors • Cash sales are estimated at 30% of the sales
• Collections in the same month are estimated at 60% of sales
• Balance of 10% of sales would be collected in the next month.
• Discount of 2% would be given to the customers paying in the same month of sale.
Payment to Creditors 70% of the month's purchase cost to be paid in the same month.
30% of the month's purchase cost is to be paid in the next month
Variable Overhead This cost is estimated at USD 2 per unit
Depreciation The life of the assets is estimated to be 15 years and Depreciation is calculated on a straight-line basis which works out to USD 10000
Fixed Overhead This cost is estimated at USD 60000 per Annum

GENERAL COMPANY DESCRIPTION:

Personal Fitness Equipment Inc is a privately held Corporation founded by Dr. John. Dr. John is a qualified Doctor specializing in personal Fitness and has got about 15 years of experience in this field. Dr. John is the inventor and designer of "Indoor Fitness Equipment." Prototypes have been produced, used, and tested. This business plan will serve as the framework for bringing the product to market. All development costs to date have been borne by Dr. John personally. At this point Dr. John owns 100% of the common stock of Personal Fitness Equipment, Inc along with his friends and relatives. It is his intention to obtain funds from the bank to procure the fixed assets required for the production of the product.
Start-up Expenses and Capitalization:
The start-up costs for Personal Fitness Equipment Inc. are estimated at $1,50,000. All start-up assumptions are based on an actual infusion of $50,000 in the form of capital to be introduced by Dr.John. The balance amount of $ 1,00,000 is proposed to be brought in through Bank Finance at the interest rate of 3%. A certain portion of the funds will be utilized to procure raw materials to fund the production of the initial inventory.
LOCATION:
A company office would be located in the Atlanta market area. Available office space has been located in Atlanta. This office space is small and may be secured at a nominal cost. As needs dictate office and/or distribution facilities will be expanded. Initially, the small office will serve to manage marketing functions and sales/order processing.
PRODUCTS AND MARKETING PLAN:

Personal Fitness Equipment Inc is in the business of manufacturing Fitness types of equipment for personal use. The promoter has come up with a unique design of Personal Fitness Equipment (PFE). This equipment is easy to use and is being priced at a cheaper rate. The main feature of this equipment is the safety standards and the wide range of exercises that can be performed with this equipment. The equipment is proposed to be made with metal of ideal weight.
This product designed by Dr. John can be produced at a low cost, is lightweight, and independent tests have been performed at universities and Local Gyms. The users have given positive feedback that the regularity of their physical exercise has increased after purchasing this product.
Thus, the Management of Personal Fitness Equipment, Inc, is confident that the product “PFE” can be successfully marketed.

FINANCIAL PLAN

The Appendix section has all the relevant Financial Projections. The sales forecast for the first year of operation is estimated at USD 500000. The company is expected to earn Gross profit at the rate of 54% of the turnover. The net profit of the company is estimated at USD 113770, which works out to about 23% of the turnover. Thus, the profitability of the company is good.

The company is expected to Break Even at a turnover of USD 157895 which is when the company sells about 3158 units of the product. The margin of safety in terms of Sales revenue is USD 342105. The company is able to meet its financial commitments like Repayment of Loan and interest.
Taking into consideration the Promoter’s background, Unique features of the product, Marketability of the product, financial projections; Demand for the product, this business plan can be considered as financially feasible. Read More
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