A Business Plan Prepared by TERALYN KANKA
for
Teralyn Kanka Dr. Chang Portfolio Two June 13, 2011
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Table of Contents EXECUTIVE SUMMARY
4
Mission Statement
THE COMPANY
5
Mission Vision Type Of Business Location Objectives
PRODUCTS & SERVICES
6
Purpose Of Product Stage Of Development Pricing Objectives Production Cost Pricing Structure Distribution
THE MARKET
9
Industry Profile Market Segmentation Target Market Competition Competitive Advantage Market Strategy
MANAGEMENT plan
12
Management Team Contributing Members Future Positions Communication
FINANCIAL PERFORMANCE/PROJECTIONS
14
Start-Up Summary Income Statement Income Statement Projections Statement Of Cash Flow Statement Of Cash Flow Projections Balance Sheet Balance Sheet Projections Break-Even Analysis
APPENDIX
19
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EXECUTIVE SUMMARY Mission Statement MODEMAP is a consumer fashion magazine offering comprehensive coverage of fashion shows from major international catwalks. Soon to become the new fashion bible for the design industry interested in the seasonal runway shows, MODEMAP offers high quality photography and professional level reporting that you can expect. Everything you could possibly want is all packaged neatly into a 100 plus page super glossy collectable magazine.
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THE COMPANY Mission MODEMAP strongly rooted in the importance of print as a timeless medium by which creativity and design can be showcased. Our love for both printed design and fashion come together in this unique publication with an extraordinary approach to layout and design. We promise to always produce content that is both stimulating and inspiring through a unique composition of imagery from international catwalks.
Vision Future endeavors include, but are not limited to, spin-off magazines covering a broader range of fashion topics and a fully interactive digital magazine, accessible through our website. The company also plans to budget for additional personnel to provide administrative and sales support for the magazine.
Type of Business MODEMAP is sole proprietorship owned by Teralyn Kanka.
Location The MODEMAP office is currently located in the home of owner Teralyn Kanka, at 6508 Beverly Ave, McLean, Virginia, 22101. Contributors to the magazine are based in several locations throughout the country, with web-based communication used as meeting grounds for all correspondence and work submissions. All business, editorial, and other major operations are conducted through the McLean office. Printing and distribution of all MODEMAP publications is outsourced to Magazine Solutions, Inc. It is not anticipated that additional offices will be needed in the duration of the magazine’s first two years.
Objectives The initial objectives of MODEMAP are as follows: 1. To have 20,000 subscribers by the end of year one through marketing efforts which include distribution of promotional first issue, direct-mail, and sampling. 2. To have an additional 30,000 subscribers by the end of year two through organizational sales. 3. To sell an average of 26 advertising pages per issue throughout year one. 4. To publish a 132 page promotional first issue with press runs of 50,000 by the end of the first six months. 5. To break-even on initial investment of $125,000 by the end of the first year, or 15,242 units sold.
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PRODUCTS & SERVICES Purpose of Product The magazine is driven by content, circulation, and advertising. The magazine’s content will primarily be made up of editorial work (catwalk images, backstage photos, designer interviews, etc), occupying 80% of the actual pages. Advertising will occupy the remaining pages and will account for the majority of MODEMAP’s revenue. A typical consumer fashion magazine has twice as many advertisements which generates a considerable amount of revenue for the company. Although MODEMAP will have fewer ad pages we will be able to charge higher ad rates based on our unique specified audience. Our first, non-promotional issue will be 132 pages and contain 128 pages of editorial content and 26 pages of advertising. Future issues may very slightly. In order to maintain the magazine’s status as an indispensable source for content and quality that our audience craves, MODEMAP offers the following features: • Brilliant imagery and creative design in layout and organization of content; • Coverage of bi-annual fashion week in New York, London, Milan, and Paris; • Thorough research and in-depth analysis of emerging seasonal trends to look out for;
Stage of Development Business planning and prototype development are currently underway while further research is being conducted on consumer preferences and competitor pricing. Our promotional first issue is set to launch during the second week of January, 2012, just prior to the kick off of fashion week for the Autumn/Winter 2012/2013 season. Subscribers of this issue will receive the print publication along with member-only access to MODEMAP’s digital version online at www.modemap.com.
MILESTONES MILESTONES
Finish Business Plan Acquire Financing Complete prototype/media kit/rate card Acquire Advertising First Promotional Issue! Marketing Program Starts Plan vs. Actual Review Complete web site First Break-Even Month Hire Employees
Start Date 3/13/2011 5/13/2011 3/13/2011 10/5/2011 2/9/2013 2/15/2012 5/14/2012 3/5/2013
End Date 5/13/2011 3/10/2011 5/3/2011 7/10/2011 1/14/2012 3/6/2012
Totals
The company plans to publish two issues a year based on the seasonality of fashion week. Because of the in-depth nature of content and the quality of high-resolution images, the shelf life of each issue would extend well beyond the six month intervals between releases. In fact, the very nature of the magazine, and of the audience it targets, suggests that MODEMAP is a collectable print magazine with an eternal shelf life.
Pricing Objectives Our subscription and cover price reflect the magazine’s relevance to its readers, its exclusive availability, and prices of similar magazines published by our direct competitors in the UK and Paris. The two most important variables involved in determining prices, however, are the total number of copies circulated and the competitive landscape. With only 50,000 print runs Modemap has limited availability, giving it the exclusivity necessary to charge a price higher than highly circulated fashion magazines. Our nearest direct competitors are located oversees but are well known in the
KANKA 7 industry and charge high subscription and single-copy prices that average roughly $64 on subscriptions of 2 issues per year, and $18 on single-copies.
Production Cost There are many costs involved with running a magazine. Maintaining a circulation makes up a large portion of these costs and are most attributed to the printing and mailing of copies. In 2009, related newsstand sales costs typically ran around $2.00 for a newsstand issue (50% of the cover price). Printing, binding, and mailing costs ran $1.25 per issue. In addition to printing, binding, and mailing costs, magazines also had to cover the costs of editorial content creation, design, and advertising sales effort. Similarly, printing and distribution costs make up the majority of Modemap’s operation costs. The initial prototype and promotional press run of 50,000 is covered in the initial funding from the start-up summary. Revenues from subscription sales will be used to cover the cost of printing and distributing the magazine. The following is a break down of these costs and the resulting pricing structure. A single issue of the magazine costs about $90,000 to produce. All direct costs are associated with outsourced printing and distribution through Magazine Publishers, Inc. The cost includes a circulation of 50,000 press runs of a 8.5” x 11” (standard size), 132 page, glossy, perfect bound magazine. Bulk production of the issue lowers MODEMAP’s cost substantially, as does direct distribution from the third party facility to the subscriber. At $90,000 for 50,000 press runs, the cost to produce a single issue is roughly $1.80. A detailed breakdown of pricing based on quotes from Marketing Solutions, Inc. can be found in the appendix of this plan.
Pricing Structure The magazine’s pricing structure depends on both circulation and advertising. Subscription prices must be within market range but must also represent MODEMAP’s image and the expectation of that image for its readers. Price points for circulation and advertising differ, therefore each component has it’s own pricing model.
Circulation Pricing Circulation sales include subscriptions and single-copy sales (newsstand, etc). The cover price for a single issue of MODEMAP is $9. The price for a one-year subscription is two times the cover price, or $18.
Advertising Pricing Advertisers are concerned with the number of people they reach per dollar amount spent on advertising. Prices are based on the size of ad desired, location within the publication, and number of times the ad runs. Cost per thousand (CPM) breaks this information down, and is determined by the rate for a full-page, one-time black and white ad divided by the number of thousands of copies of the circulated magazine. Therefore, if we expect each issue to have a total readership of 200,000 (4 readers per issue times 50,000 circulation), we can determine our ad rates by multiplying total readership by the industry’s average CPM. $50 average CPM x 50 thousands of copies = $10,000 ad rate per page Modemap’s ratio of advertising to editorial is 1:4. A 132 page issue will contain 26 pages of advertisements and 128 pages of editorial content. Therefore total sales from ad pages in a single issue will amount to roughly $26,000.
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Distribution We will distribute MODEMAP subscriptions and single copies through a paid circulation of 50,000. The option to adjust our strategy in the future to include controlled distribution (free copies sent to specified consumer groups) is available if need be. Subscriptions will be mailed directly from our outsourced printing and distribution company, Marketing Solutions, Inc. Distribution charges for first promotional issue include printing, labeling, and mailing. These expenses are included in the required funding on the company’s startup summary. Single-copy sales, including newsstand sales, account for only 10% of all magazines sold. According to the MPA, sixtyfive percent of printed magazine copies are unsold. Retailers return the unsold issues the distributor who then shreds and sells them for scrap paper. Magazines will be distributed through regional wholesalers to specialty and boutique book stores and other predetermined retailers targeting similar consumer groups. Discounts in the amount of fifty percent of the cover price will be applied to the distributor on each sale.
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THE MARKET Industry Profile There are 5,000 companies in the US magazine publishing industry, producing more than 20,000 with a combined annual revenue of $40 billion. Several large companies like PRIMEDIA, and Meredith publish multiple titles with high circulations. However, among the 20,000 existing titles, there are only 400, produced by companies like these, with circulation of more than 100,000 copies. Magazine revenue comes from two sources: circulation and advertising. Seventy percent of this revenue is from advertising, while circulation of subscription and single-copy sales makes up the remaining thirty percent. Sales from single copies are typically low due to distributor fees and other discounts, making up only 10% of total magazine circulation in 2009. Subscriptions, on the other hand, provide the necessary revenue to cover printing and productions costs for each issue. Due to the lack of profit earned on subscriptions and single sales, publishers must place a lot of importance on advertising sales in order to become profitable. Large established companies have relatively low entry barriers for creating new magazines because of existing staff and production capabilities. Having a wide selection of magazines is beneficial to these companies because it gives them a wider audience to offer advertisers. Smaller magazines, however, requirement significant funding to cover high startup costs involved in operating and printing a magazine. These small companies are able to compete by specializing in niche markets that provide advertisers with a specific targeted audience. Marketing research is extremely important to small magazine publishers. Advertisers will pay a lot of money to reach a select group of consumers if they are carefully picked and closely measured. By precisely defining their reader’s demographics, small magazine publishers can offer advertisers a highly qualified audience at a higher rate. To determine circulation, publishers tally subscriptions and single-copy sales. Advertisers can then determine the cost to reach the given target market by calculating the cost per thousand readers who will see it (CPM). While a magazine’s ad rates are largely effected by circulation, other factors like size, color, and position of the actual ad are also considered. Most magazine publishers outsource printing and production to external printing companies. Distribution of magazine subscriptions is usually through the USPS at a special rate or through an outsourced distributor. Single copies placed on newsstands and in retail locations by national distributors or regional wholesalers who then take a significant percentage of magazines sales. The trend toward online content and digital subscriptions is unmistakable. More and more magazine companies are jumping to make an online presence for themselves in an age where people rely on the internet for almost everything. The high and increasing cost of printing and distribution has lead publishers to develop new marketing strategies that offer multivariable platforms which include digital versions of their magazines online.
Market Segmentation MODEMAP is a consumer fashion magazine unlike any other currently on the market. It appeals to a specific audience of fashion industry professionals and the fashion-obsessed through its insightful and inspirational content. For this audience, MODEMAP is more than a resource, its an addiction. Our audience segmentation of potential devoted readers is composed of females between the ages of 25 and 35, with an average household income of $75,000.
Target Market The MODEMAP reader is an innovator- open to, and active in trying new products. She has a great level of knowledge and experience in the fashion industry. Her friends and family are influenced by her and go to her for advice that they trust. She reads all the major fashion magazines - Elle, Vogue, Harper’s Bazaar, Marie Claire - and gets her daily dose of
KANKA 10 online fashion heaven through a plethora of fashion blogs and other fashion resources which she has bookmarked foreasy access. Over the years, consumers have proven their commitment to magazines by spending their hard-earned money to purchase them on the newsstand and/or by subscription. Consumer’s of magazines like Elle Collections and Vogue Collections have been spending an increasing amount of money just to get their hands on a copy. A quick search for both of these titles on the internet shows countless blog rolls discussing how expensive single copies of the magazines were to purchase and how they will continue to purchase them despite potential price increases. This devoted audience is exactly who MODEMAP is targeting. These print loving fashion addicts are loyal followers of everything fashion, never losing interest in what they love. It is advantageous for our company to target readers like these because it gives us assurance that their devotion for us will not sway so long as we continue to deliver a quality publication that is relevant to their wants and needs. For this audience, MODEMAP is a collectible. It is an indispensable resource and everyday staple that is stored safely on the bookshelf for continued reference and inspiration in years to come.
Competition ELLE Collections Collections is produced by British Elle under the direction of Editor Lorraine Candy. The magazine in it’s 10th edition of catwalk coverage with a print run of 65,000. The title began when designers realized they wanted a magazine that would focus on a wealth of imagery and catwalk coverage that wasn’t suitable for the regular issues. The magazine contains creative uses of imagery and text that bring together all the important key looks from the catwalks. Collections launched their first app this February that guides users through the top ten shows of the spring/summer season. Cover price for a copy of Collections averages $10.50 (converted to US) at its home location in the UK. Try to obtain one of these copies in the US and you’ll pay more than double that - distribution fees add on mega bucks to single issues. One copy at Barnes N’ Nobles runs around $18.99.
Vogue Collections Vogues Collections is relatively the same as Elle Collections, however Elle’s catwalk guide is more focused on graphic layout and creatively design content. Vogue primarily used a grid system for their layout of catwalks and backstage photos. Pricing for Vogue Collections sits slightly higher than Elle’s, though the reasoning behind this is unknown. A single issue will cost you around $42.00 in the US. A one year subscription with bi-annual issues runs $64.00 on most online magazine shops. MODEMAP’s content will appeal to those readers of Elle Collections who admire it in part for it’s graphic inspiration as well as its fashion.
Competitive Advantage Our exclusive fashion magazine is the only of its kind in the US, giving MODEMAP a unique position and definite advantage in the market. With no direct competitors based in the US and prices far lower than competitor’s that include oversees shipping costs, MODEMAP is the only fashion magazine available with complete, bi-annual coverage of fashion week.
Market Strategy Our strategy is based on serving our clearly defined niche market of fashion industry professionals. Fashion experts and the simply obsessed are a committed and passionate clientele. The task is to reach and inform the target market.
KANKA 11 MODEMAP plans to utilize direct mail in its initial marketing strategy. Sample runs of 50,000 issues will be distributed to a selected list of fashion industry professionals and lovers who we suspect will be interested in the magazine. All costs associated with these sampling programs are included in the promotion budget in our startup summary. A total of $89,250 will be spent on direct mailing of promotional issue in order to acquire subscriptions.
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MANAGEMENT plan MODEMAP is produced by a small team of fashion industry experts who are passionate about fashion and design. Founder and editor-in-chief, Teralyn Kanka, is currently the only full-time member of MODEMAP’s team. Any need for additional help in general management, editorial, artistic, sales and marketing, and accounting roles is obtained through outside contributors to the magazine. As the magazine subscription base grows, MODEMAP intends to increase inhouse staff to improve overall efficiency. All production, distribution, and fulfillment services are outsourced.
Management Team Teralyn Kanka, President / Editor-in-Chief Teralyn is the creator of MODEMAP publications. She has a background in Foreign Affairs from the University of Virginia, and currently attends the Art Institute of Washington, where she is a candidate for a BFA in fashion and retail management. Her experience in the industry is attributed to 12 years of passion and dedication toward her career in retail operations. Teralyn has worked with industry professionals for the majority of her life. Daily communication with retail executives, buyers, and stylists has provided her with a breadth of insight into the inner workings of the fashion industry. Beyond retail’s inner workings, Teralyn believes that fashion is among the most significant forms of art and expression. Her love for imagery and graphic design led her to seek further education in fine arts at AIW. It was there that she developed a plan to create a unique publication that combined her love for both fashion and graphic arts - MODEMAP. Aside from outsourced printing and distribution, Teralyn is responsible of every aspect of the business - from general management, accounting, and sales & marketing, to the graphic development and editorial design of each individual issue. Though Teralyn is the only full-time employee at the company, she has the help of several contributing members who have expressed willingness to help make the magazine a success.
Contributing Members It is anticipated that the company will have earned enough revenue by the end of year one to be able to introduce a payroll plan for a full-time staff. In the meantime, MODEMAP is lucky to have several contributing members who consistently donate their time and expertise to ensure the magazine’s success.
Daphne Kane, DC Contributor Ms. Kane graduated from George Washington University in 2009 with a Bachelors in International Politics and is currently working as a marketing manager at a top law firm in Washington, DC. She is among our Capital’s most stylish and influential people. Daphne is a frequent contributor to MODEMAP’s editorial content, reporting on up-to-date fashion news and trending information.
Jihan Bowes, New York City Contributor Ms. Bowes holds a BA in Anthropology from the University of Virginia. Upon graduation she moved to NYC to work in fashion sales for the Conde Nast beauty magazine, Allure. Two years later she continued her relationship with the company at another one of their publications, Glamour magazine. Jihan’s background in magazine publishing is extremely helpful to MODEMAP’s launch and continued success.
James Kanka, Los Angeles / DC Contributor Teralyn’s and her brother, James, have shared similar interests in creative fields throughout their lives. For the two siblings, MODEMAP is the first creative project they have worked on together. James, a video production and photography professional, spent the last five years pursuing his career in Los, Angeles, California. His work covers everything from production of small, independent films, to music videos, to full scale movie theater flicks. James’ is
KANKA 13 MODEMAP primary photography and trend spotter. He travels to NYC several times a year to capture trends from fashion week and what’s happening on the city.
Future Positions As additional funding is receiving and increases in revenue occur MODEMAP will hire additional management to perform the following roles:
Circulation Manager / Promotions Coordinator Maintains the subscriber list and acquires new mailing lists. Meets with the publisher to discuss marketing strategies and circulation patterns.
Art Director Works with the editor to plan editorial content for each issue, designs the page layout and advertising placement, edits and proofreads copy, creates artistic assignments, and oversees all aspects of production of each issue.
Editor Creates all assignments for free-lance writing, researches and develops new story ideas, receives copy and determines its acceptance or rejection, edits copy for ideas and accuracy, and writes cover story. Provides a written editorial calendar to entire staff with structure of magazine content.
Advertising Manager Meets with publisher to establish advertising goals for each issue of the magazine, discusses new leads, and tracks pricing etc. All expected ad sales are reported to editorial prior to each upcoming issue to allow for arrangement of ads/editorial layout. The advertising manager receives salary plus 15% commission for ads sold.
Communication Communication among the contributing members and the editor will occur weekly via Skype or telephone conference to discuss new ideas and editorial content. Formalized meetings will occur once the magazine is able to hire full-time employees. A written editorial calendar will be given to all staff members so they are aware of the intended content/ layout in future issues. This will assure that all employees are on the same page.
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FINANCIAL PERFORMANCE/PROJECTIONS Start-Up Summary The purpose of these investments are to raise seed capital to launch the magazine. A personal investment of $50,000 and an initial private investment of $75,000 make up the sufficient funding to publish our first issue in 2012. Money in excess of the expenses will be used for full-scale sampling and marketing subscriptions.
OFFICE EQUIPMENT Apple MapBook Pro Apple iMac Adobe Design Premium 5.5 Quick Books iWork Printer / Scanner / Fax Machine Phone Total Store Equipment
2,200 1,999 1,899 200 60 400 50 $6,808
OFFICE FURNITURE Desk/Chair File Cabinet Total Furniture
700 199 $899
OFFICE SUPPLIES Paper Stationary & Business Cards Ink Total Office Supplies
48 150 113 $311
START-UP EXPENSES Equip./Furn./Supp. Business License Promotional Issue (50,000 press runs) Media Kit (5,000 press runs) Postage Insurance (prepaid) Online Service Travel Subtotal Total Start-Up Expenses
8,018 150 89,250 2,450 400 3,000 120 9,700 113,088 $113,088
FUNDING Private Investor Personal Investment Investment Needed Total Reserve
75,000 50,000 113,088 $11,912
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Income Statement Pro forma by Year for the Years Ended December 31, 2012, 2013, 2014
REVENUES
Circulation Advertising Total Revenue Cost of Sales Gross Margin
2014
855,000 936,000 $1,791,000 489,600 $1,301,400
2013
47.7% 52.3%
27.3% 72.7%
675,000 780,000 $1,455,000 390,000 $1,065,000
2012
46.4% 53.6%
26.8% 73.2%
378,000 624,000 $1,002,000 75,600 $926,400
37.7% 62.3%
7.5% 92.5%
OPERATING EXPENSES
Sales& Marketing Expenses Sales & Marketing Payroll Advertising Promotion Travel Total Sales & Marketing Expenses General & Administrative General & Administrative Payroll Office Equipment/Furniture Office Supplies Phone Web Hosting & Domains Licenses Insurance (prepaid) Payroll Taxes Total General & Administrative Total Operating Expenses
71,000 0 1,932 100 120 0 3,000 7,564 $83,716 $196,166
Net Income (Loss) Before Taxes Income tax (15%) Net Income (Loss) After Taxes
1,105,234 165,785 $939,449
Assumptions Circulation Revenue Cost of Sales Sales & Marketing Payroll Advertising Promotion Travel General & Administrative Payroll Office Equipment/Furniture Office Supplies Phone Web Hosting & Domains Licenses Payroll Taxes
51,000 2,450 35,000 24,000 $112,450
2.8% 0.1% 2.0% 1.3% 6.3%
4.0% 0.0% 0.1% 0.0% 0.0% 0.0% 0.2% 0.4% 4.7% 11.0% 61.7% 9.3% 52.5%
49,000 2,450 20,000 21,000 $92,450 65,000 0 1,932 100 120 0 3,000 7,068 $77,220 $169,670 895,330 134,300 $761,031
3.4% 0.2% 1.4% 1.4% 6.4%
4.5% 0.0% 0.1% 0.0% 0.0% 0.0% 0.2% 0.5% 5.3% 11.7% 61.5% 9.2% 52.3%
0 2,450 89,250 19,400 $111,100
0.0%
0 7,707 2,082 100 120 150 3,000 0 $13,159 $124,259
0.0%
802,141 120,321 $681,820
0.2% 8.9% 1.9% 11.1%
0.8% 0.2% 0.0% 0.0% 0.0% 0.3% 0.0% 1.3% 12.4% 80.1% 12.0% 68.0%
Subscription & single-copy sales. See Sales Forecasts, lower right $$$ printing/issue, $$$ postage/issue, $$$ labeling/issue. See Personnel Plan below Direct Mail - $$$ for, Media Kit - $2,450 for 5,000 copies/year 1st year includes promotional issue See Travel Expenses, lower left See Personnel Plan below $6,808 equipment + $899 furniture = $7,707 Initial $150 on business cards, $161/month on paper & ink
$150 single start-up fee 6.2% FICA on payroll wages
Income Statement Projections Modemap has relatively low operating expenses in the first year of business because the company has no paid personnel to account for any large editorial or payroll production fees. Owner/Editor-in-Chief Teralyn Kanka will begin to pay herself in the second year based on an large increase in revenue from the preceding year. Two other key members will be hired and receive wages that are included under the sales and marketing and general administrative payroll categories on the income
KANKA 16 statement. Breakdowns of salaries can be found in the appendix of this plan. Publishers generally have high accounts receivable due to the unstable payment records of advertising agencies. Ad agencies typically have poor credit histories, pay in arrears, and place a large number of ads during the fourth quarter. These factors contribute to seasonal cash flow issues for many publishers. The company is projected to see nearly $1 million in net revenue by their third year in operation.
Statement Of Cash Flow Pro forma by Year for the Years Ended December 31
Cash at Beginning of Year
2014
2013
2012
145,774
124,774
11,912
171,000
135,000
77,112
51,000 71,000 0 $49,000
49,000 65,000 0 $21,000
89,250 0 0 ($12,138)
0 0
0 0
0 0
0 0 $0
0 0 $0
0 0 $0
0 0
0 0
75,000 50,000
0 $0
0 $0
0 $125,000
49,000 $194,774
21,000 $145,774
112,862 $124,774
OPERATING EXPENSES Cash receipts from customers Cash paid for Sales & Marketing Expenses General Operating & Admin. Expenses Income taxes Net Cash Flow - Operating Expenses
INVESTING ACTIVITIES Cash receipts from Sale of property and equipment Collection of principal on loans Cash paid for Purchase of property and equipment Making loans to other entities Net Cash Flow - Investing Activities
FINANCING ACTIVITIES Cash receipts from Private Investment Personal Investment Cash paid for Repayment of loans Net Cash Flow - Financing Activities Net Increase in Cash Cash at End of Year Assumptions Cash receipts from customers Sales & Marketing Expenses General Operating & Admin. Expenses
20% of total circulation sales (yr1: $378,000 x .02 = $77,112) Payroll, (1st year - promotional issue in cash, no payroll) Payroll
Statement Of Cash Flow Projections Expenses and other cash outflows accounted for include payroll and a first year initial expense for the first promotional issue. Cash flows are projected to increase in year three and will fluctuate depending on advertiser’s ability to pay on their accounts.
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Balance Sheet Pro forma by year as of December 31
ASSETS
2014
2013
2012
194,774
145,774
124,774
1,620,000
1,320,000
924,888
0
0
0
1,814,774
1,465,774
1,049,662
0
0
0
$1,814,774
$1,465,774
$1,049,662
74,166
55,670
35,009
489,600
390,000
75,600
0
0
0
Income taxes payable
165,785
134,300
120,321
Total current liabilities
729,551
579,970
230,930
0
0
0
Retained Earnings
1,085,223
885,805
818,732
Total owner's equity
1,085,223
885,805
818,732
$1,814,774
$1,465,774 [42]
$1,049,662
0.40
0.40
0.22
2.49
2.53
4.55
1,085,223
885,805
818,732
Current Assets Cash Accounts receivable Inventory Total Current Assets Fixed (Long-Term) Assets Total Fixed Assets
Total Assets LIABILITIES & OWNER’S EQUITY Current Liabilities Accounts payable (Operating) Accounts payable (Production) Short-term loans
Long-Term Liabilities Total long-term liabilities
Owner's Equity
Total Liabilities and Owner's Equity Common Financial Ratios Debt (Total Liabilities / Total Assets) Current (Current Assets / Current Liabilities) Working Capital (Current Assets - Current Liabilities) Assets-to-Equity (Total Assets / Owner's Equity)
1.67
1.65
1.28
Debt-to-Equity (Total Liabilities / Owner's Equity)
0.67
0.65
0.28
Assumptions Cash Assets
Cash at end of the year from cash flow statement
Accounts Receivable
Total sales - cash receipts from customers
Inventory Accounts Payable
Includes all operating expenses except payroll
Accounts payable (production costs/cost of sales) Short-term loans Income taxes payable
Balance Sheet Projections
15% of net income (before taxes), from income statement
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Break-Even Analysis For the Period:
Jan 1, 2012 - Mar 30, 2012
Selling Price (P):
$9.00
Break-Even Units (X):
15,242 units
Break-Even Sales (S):
$137,173
FIXED COSTS Advertising - Media Kit
2,450
Promotion
89,250
Payroll
0
Supplies/Equip./etc
8,218
Travel
9,700
Online Service
120
Total Fixed Costs (TFC)
$109,738
VARIABLE COSTS (Variables Costs based on Dollar Amount per Unit) Cost of Circulation Sales
1.80
per unit
Overhead
0.00
per unit
Other (specify)
0.00
per unit
Sum:
$1.80
Variables Costs based on Percentage Commissions
0.00%
Other (specify)
per unit per unit
Sum:
0.00%
Total Variable Cost per Unit (V)
1.80
Contribution Margin per unit (CM) = P - V Contribution Margin Ratio (CMR) = 1 - V / P = CM / P
7.20 80.0%
BREAK-EVEN POINT Break-Even Units (X) = TFC / (P - V) Break-Even Sales (S) = X * P = TFC / CMR
15,242 units 137,173
TARGETED NET INCOME
Targeted Net Income Before Taxes (NIBT) Units required to reach targeted NIBT, X = (TFC + NIBT) / (P-V) Sales required to reach targeted NIBT, S = (TFC + NIBT) / CMR Rate of return on sales before taxes = NIBT / S Tax Rate (T) Net Income After Taxes (NIAT) = (1-T)*NIBT Rate of return on sales after taxes = NIAT / S
Assumptions Advertising fixed cost Promotion Payroll Supplies/Equip./etc Travel Online service
Media kit, direct mail, reply card, etc Production cost of promotional 1st issue No paid employees during first year Includes flight & hotel expenses for fashion week
700,000 112,464 units 1,012,173 69.2% 25% 525,000 51.9%
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APPENDIX PRINTING QUOTE - Profiles Marketing Group
PRINTING SPECS
5,000
ADDITIONAL
ADDITIONAL
1,000’s
5,000’s
1 (16) Page 4/4 50# #4 Gloss 1 (16) Page 4/4 50# #4 Gloss 1 (16) Page 4/4 50# #4 Gloss 1 (16) Page 4/4 50# #4 Gloss 1 (16) Page 4/4 50# #4 Gloss 1 (16) Page 4/4 50# #4 Gloss 1 (16) Page 4/4 50# #4 Gloss 1 (16) Page 4/4 50# #4 Gloss 1 (4) Page 4/4 80# #3 Gloss Perfect Bind Total Printing
$1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $900 $250 $9,950
$80 $80 $80 $80 $80 $80 $80 $80 $50 $50 $740
$400 $400 $400 $400 $400 $400 $400 $400 $250 $250 $3,700
Mailing $.90 / Unit Labeling $20 / 1,000
$4,500 $100
$900 $20
$4,500 $100
Total Distribution
$4,600
$920
$4,600
TOTAL
$14,550
$1,660
$8,300
*132 pages, plus cover, 8 3/8 x 10 7/8
PRINTING & DISTRIBUTION COSTS
PRINTING
LABELING
MAILING
$900/+1,000
$20/1000
$900/1000
5,000
$9,950
$100
$4,500
$14,550
10,000
$13,650
$200
$9,000
$22,850
15,000
$17,350
$300
$13,500
$31,150
20,000
$21,050
$400
$18,000
$39,450
25,000
$24,750
$500
$22,500
$47,750
30,000
$28,450
$600
$27,000
$56,050
35,000
$32,150
$700
$31,500
$64,350
40,000
$35,850
$800
$36,000
$72,650
PRESS RUNS
TOTALS
45,000
$39,550
$900
$40,500
$80,950
50,000
$43,250
$1,000
$45,000
$89,250
*132 pages, 4/4 50#, #4 Gloss - Magazine
KANKA 20
PER UNIT COST
PRESS RUNS
VARIABLE COST
PER UNIT COST
10,000 20,000 30,000 40,000 50,000
$22,850 $39,450 $56,050 $72,650 $89,250
$2.29 $1.97 $1.87 $1.82 $1.79
*132 pages, 4/4 50#, #4 Gloss - Magazine
PERSONNEL PLAN
SALES & MARKETING PERSONNEL Ad Sales Manager Subscription Manager Subtotal
2014
2013
2012
36,000 15,000 $51,000
34,000 15,000 $49,000
0 0 $0
56,000 0 0 15,000 $71,000
50,000 0 0 15,000 $65,000
0 0 0 0 $0
GENERAL & ADMIN. PERSONNEL Teralyn Kanka, CEO/Editor Daphne Kane, Journalist Jihan Bowes, Runway Consultant/Magazine Specialist James Kanka, Photographer/Graphic Designer Subtotal Total People
Total Payroll
6
6
1
$122,000
$114,000
$0