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5.0 Financials
Our marketing plan requires annual revenues of $1,600,000 for this year. We anticipate that we will have revenues of more than $2,500,000 within 5 years. Our marketing expenses will equate to an average of 2.5% of total sales throughout.
The marketing plan is based on these three parameters:
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Increasing our efficiencies through better use of our facilities and expertise. Variable costs will be reduced, as we are able to make use of the capital investment we have in our systems. We will invest in these systems with the expectation that we will benefit as we have in the past from their capabilities. It provides us a competitive edge many of our competitors cannot afford.
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We will continue to invest in marketing activities based on a percent of total revenues. As our revenues increase, so will our marketing resources.
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We will forecast and track revenues on a detail basis to provide objective feedback regarding progress in the areas of industry expertise, specialization, and client revenue sources by type.
5.1 Break-even Analysis
Our variable costs are less than 38% of revenues. This is a result of our fixed costs including our facility, computer and technology expenses, and our salaried staff. Variable costs include temporary/seasonal hires, compensation for CPAs based on performance, and client demands that require travel and other per-job based expenditures. Variable costs are expected to continue to decrease as a percent of revenues as we strive to further benefit from technology and become less dependent on wages and salaries.
Break-even Analysis
| Break-even Analysis |
| | |
| Monthly Revenue Break-even | $42,283 |
| | |
| Assumptions: | |
| Average Percent Variable Cost | 31% |
| Estimated Monthly Fixed Cost | $42,250 |
Break-even Analysis
5.2 Sales Forecast
Revenues for this year are based on a 5% growth rate. This is conservative and will be more challenging as we work to diversify our revenue base.
Sales Forecast
| Sales Forecast |
| | 2006 | 2007 | 2008 | 2009 | 2010 |
| Sales | | | | | |
| Business Clients - Tax Preparation | $448,000 | $447,200 | $480,000 | $614,400 | $787,000 |
| Business Clients - Tax Planning | $272,000 | $258,000 | $260,000 | $304,200 | $356,000 |
| Business Clients - General Consulting | $144,000 | $206,400 | $300,000 | $324,000 | $350,000 |
| Business Clients - Other | $112,000 | $154,800 | $200,000 | $216,000 | $233,000 |
| Individual Clients - Tax Preparation | $352,000 | $309,600 | $300,000 | $360,000 | $432,000 |
| Individual Clients - Tax Planning | $128,000 | $137,600 | $140,000 | $152,600 | $166,000 |
| Individual Clients - Personal Finance Consulting | $96,000 | $154,800 | $240,000 | $256,800 | $275,000 |
| Individual Clients - Other | $48,000 | $51,600 | $80,000 | $82,400 | $85,000 |
| Total Sales | $1,600,000 | $1,720,000 | $2,000,000 | $2,310,400 | $2,684,000 |
| | | | | | |
| Direct Cost of Sales | 2006 | 2007 | 2008 | 2009 | 2010 |
| Business Clients - Tax Preparation | $147,839 | $147,567 | $148,550 | $149,800 | $150,500 |
| Business Clients - Tax Planning | $89,760 | $91,200 | $92,800 | $93,400 | $94,500 |
| Business Clients - General Consulting | $47,522 | $48,500 | $49,500 | $50,500 | $52,000 |
| Business Clients - Other | $36,960 | $37,500 | $38,500 | $39,500 | $40,000 |
| Individual Clients - Tax Preparation | $95,039 | $96,500 | $97,500 | $98,500 | $99,500 |
| Individual Clients - Tax Planning | $34,561 | $36,000 | $37,200 | $38,300 | $39,200 |
| Individual Clients - Personal Finance Consulting | $25,921 | $26,500 | $27,500 | $28,500 | $29,000 |
| Individual Clients - Other | $12,960 | $13,500 | $14,500 | $15,500 | $16,000 |
| Subtotal Direct Cost of Sales | $490,562 | $497,267 | $506,050 | $514,000 | $520,700 |
Sales Monthly
5.2.1 Sales by Partner
As the projection shows, we track revenue by partner, but a significant amount of the total revenue comes from the billing of the staff itself. Craig Moore will be retiring in the year 2010. The detail for this table is included in the appendices.
Sales Breakdown by Partner
| Sales by: Partner |
| | 2006 | 2007 | 2008 | 2009 | 2010 |
| Sales | | | | | |
| Franklin | $193,300 | $223,000 | $230,000 | $234,000 | $236,000 |
| Moore | $169,600 | $200,000 | $207,000 | $150,000 | Retiring |
| Benning | $167,000 | $195,000 | $202,000 | $210,000 | $230,000 |
| Sonnett | $152,800 | $184,500 | $189,000 | $195,000 | $200,000 |
| Cummings | $154,100 | $185,000 | $190,000 | $196,000 | $200,000 |
| Williams | $145,800 | $178,000 | $186,000 | $192,000 | $200,000 |
| Other | $617,400 | $554,500 | $796,000 | $1,133,400 | $1,618,000 |
| Total | $1,600,000 | $1,720,000 | $2,000,000 | $2,310,400 | $2,684,000 |
| Average | $228,571 | $245,714 | $285,714 | $330,057 | $447,333 |
Sales Breakdown by Partner Monthly
5.2.2 Sales by Segment
Our most important markets are our "large" and "growth" business clients. We have made strides to focus on revenues from these more profitable and faster-growing segments. This lowers the dependency on our "individual" client base, and our goal is to continue this focus for the future.
Sales Breakdown by Segment
| Sales by: Segment |
| | 2006 | 2007 | 2008 | 2009 | 2010 |
| Sales | | | | | |
| Large Business | $672,850 | $702,000 | $815,000 | $889,000 | $1,000,000 |
| Growth Business | $538,500 | $516,000 | $600,000 | $694,000 | $900,000 |
| Individuals | $388,650 | $502,000 | $585,000 | $727,400 | $784,000 |
| Total | $1,600,000 | $1,720,000 | $2,000,000 | $2,310,400 | $2,684,000 |
| Average | $533,333 | $573,333 | $666,667 | $770,133 | $894,667 |
Sales Breakdown by Segment Monthly
5.2.3 Sales by Specialization
Our three targeted areas of specialization in medical/health, dental, and lodging represent a relatively small portion of total income, but these are some of the most profitable accounts for the firm. These areas also offer the possibility of ongoing monthly billing opportunities to spread billing throughout the year, versus the heavy concentration of activity around the tax schedule. Manufacturing still represents a significant number of annual billable hours, but the low to no-growth rate no longer makes this an attractive segment.
Sales Breakdown by Specialization
| Sales by: Specialization |
| | 2006 | 2007 | 2008 | 2009 | 2010 |
| Sales | | | | | |
| Medical/Health | $27,200 | $309,600 | $380,000 | $472,500 | $550,000 |
| Dental | $24,000 | $275,200 | $340,000 | $405,000 | $500,000 |
| Lodging | $192,000 | $223,600 | $280,000 | $337,500 | $400,000 |
| Manufacturing | $64,000 | $68,800 | $60,000 | $67,500 | $75,000 |
| Individual Revenues | $304,000 | $550,400 | $620,000 | $652,500 | $67,500 |
| Other | $988,800 | $292,400 | $320,000 | $375,400 | $1,091,500 |
| Total | $1,600,000 | $1,720,000 | $2,000,000 | $2,310,400 | $2,684,000 |
| Average | $266,667 | $286,667 | $333,333 | $385,067 | $447,333 |
Sales Breakdown by Specialization Monthly
5.3 Expense Forecast
Marketing expenses will correlate with firm revenues. This is based on a 2.5% factor of annual revenues. These expenses include any client development activities that promote the firm or any individual within the firm.
Each partner has an individual budget for his or her marketing activities. The combined totals for those by marketing line item are listed in the following table.
Marketing Expense Budget
| Marketing Expense Budget |
| | 2006 | 2007 | 2008 | 2009 | 2010 |
| Advertising | $4,848 | $5,000 | $5,200 | $5,400 | $5,600 |
| Dues | $1,940 | $2,250 | $2,450 | $2,650 | $2,800 |
| Meals & Entertainment | $2,020 | $2,400 | $2,600 | $2,800 | $3,000 |
| Printed Materials | $9,700 | $10,800 | $12,900 | $14,500 | $16,000 |
| Public Relations | $5,600 | $5,850 | $6,350 | $6,550 | $7,200 |
| Sponsorships | $6,868 | $7,200 | $7,650 | $7,800 | $8,400 |
| Travel | $4,444 | $4,600 | $4,900 | $5,200 | $5,600 |
| Web Support | $4,848 | $5,500 | $6,000 | $6,800 | $7,500 |
| Other | $600 | $600 | $800 | $1,000 | $1,200 |
| | ------------ | ------------ | ------------ | ------------ | ------------ |
| Total Sales and Marketing Expenses | $40,868 | $44,200 | $48,850 | $52,700 | $57,300 |
| Percent of Sales | 2.55% | 2.57% | 2.44% | 2.28% | 2.13% |
Monthly Expense Budget
5.3.1 Expense by Partner
As the table and chart shows, with additional information in the appendices, a majority of our expenses are managed by the seven partners, not by marketing. Each partner has an expense allocation that is overseen by marketing to deal with specific client development programs, marketing of expertise, and related projects. Marketing holds each partner accountable, although not always an easy task, to leverage these client development resources for the best return possible.
Expense Breakdown by Partner
| Expenses by Partner |
| | 2006 | 2007 | 2008 | 2009 | 2010 |
| Expenses | | | | | |
| Franklin | $5,000 | $6,000 | $6,500 | $6,750 | $7,000 |
| Moore | $5,000 | $6,000 | $6,500 | $6,750 | $0 |
| Benning | $4,850 | $5,500 | $6,000 | $6,250 | $6,600 |
| Sonnett | $4,800 | $5,500 | $6,000 | $6,250 | $6,600 |
| Cummings | $4,650 | $5,000 | $6,000 | $6,250 | $6,600 |
| Williams | $4,250 | $5,000 | $5,500 | $6,000 | $6,500 |
| Moore | $4,100 | $5,000 | $5,500 | $6,000 | $6,500 |
| Other | $8,218 | $6,200 | $6,850 | $8,450 | $17,500 |
| Total | $40,868 | $44,200 | $48,850 | $52,700 | $57,300 |
| Average | $5,109 | $5,525 | $6,106 | $6,588 | $7,163 |
Expense Breakdown by Partner Monthly
5.3.2 Expense by Segment
Consistent with our growth strategy, a majority of our expenses are dedicated towards marketing to businesses rather than individuals. Our marketing expenses are targeted to communicate our expertise and how those skills will benefit business clients.
Expense Breakdown by Segment
| Expenses by Segment |
| | 2006 | 2007 | 2008 | 2009 | 2010 |
| Expenses | | | | | |
| Business | $26,900 | $30,000 | $34,000 | $36,000 | $39,000 |
| Individual | $11,000 | $12,000 | $13,500 | $15,400 | $17,000 |
| Other | $2,968 | $2,200 | $1,350 | $1,300 | $1,300 |
| Total | $40,868 | $44,200 | $48,850 | $52,700 | $57,300 |
| Average | $13,623 | $14,733 | $16,283 | $17,567 | $19,100 |
Expense Breakdown by Segment Monthly
5.3.3 Expense by Specialization
The following table and chart show our expenses broken down by specialization.
Expense Breakdown by Specialization
| Expenses by Specialization |
| | 2006 | 2007 | 2008 | 2009 | 2010 |
| Expenses | | | | | |
| Medical/Health | $9,800 | $0 | $12,000 | $15,000 | $17,000 |
| Dental | $9,800 | $0 | $12,000 | $13,500 | $15,000 |
| Lodging | $8,200 | $0 | $10,000 | $12,000 | $14,000 |
| Other | $13,068 | $44,200 | $14,850 | $12,200 | $11,300 |
| Total | $40,868 | $44,200 | $48,850 | $52,700 | $57,300 |
| Average | $10,217 | $11,050 | $12,213 | $13,175 | $14,325 |
Expense Breakdown by Specialization Monthly
5.4 Linking Expenses to Strategy and Tactics
Our marketing expenses represent a small portion of total revenue generated, as illustrated on the following graph. Regardless, marketing-based efforts and our marketing expenditures must produce results. Our Marketing Director tracks this correlation and reports to the partners regarding our progress at our scheduled meetings. We expect to see our strategies impact the bottom line in the preferred areas. Our relatively conservative approach appears to be a good fit. An unexpected decrease in revenues will impact our marketing budget, and we will address this issue if required.
Sales vs. Expenses Monthly
5.5 Contribution Margin
Contribution margins should increase as a result of these factors:
- Increased efficiencies and revenue through specialization.
- Increased efficiencies through use of our available technology.
- Economies of scale from growth and better utilization of capacity.
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More evenly spreading work out throughout the calendar year.
Contribution Margin
| Contribution Margin |
| | 2006 | 2007 | 2008 | 2009 | 2010 |
| Sales | $1,600,000 | $1,720,000 | $2,000,000 | $2,310,400 | $2,684,000 |
| Direct Cost of Sales | $490,562 | $497,267 | $506,050 | $514,000 | $520,700 |
| Other Variable Costs of Sales | $4,855 | $0 | $5,200 | $5,600 | $5,850 |
| | ------------ | ------------ | ------------ | ------------ | ------------ |
| Total Cost of Sales | $495,417 | $497,267 | $511,250 | $519,600 | $526,550 |
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| Gross Margin | $1,104,583 | $1,222,733 | $1,488,750 | $1,790,800 | $2,157,450 |
| Gross Margin % | 69.04% | 71.09% | 74.44% | 77.51% | 80.38% |
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| Marketing Expense Budget | 2006 | 2007 | 2008 | 2009 | 2010 |
| Advertising | $4,848 | $5,000 | $5,200 | $5,400 | $5,600 |
| Dues | $1,940 | $2,250 | $2,450 | $2,650 | $2,800 |
| Meals & Entertainment | $2,020 | $2,400 | $2,600 | $2,800 | $3,000 |
| Printed Materials | $9,700 | $10,800 | $12,900 | $14,500 | $16,000 |
| Public Relations | $5,600 | $5,850 | $6,350 | $6,550 | $7,200 |
| Sponsorships | $6,868 | $7,200 | $7,650 | $7,800 | $8,400 |
| Travel | $4,444 | $4,600 | $4,900 | $5,200 | $5,600 |
| Web Support | $4,848 | $5,500 | $6,000 | $6,800 | $7,500 |
| Other | $600 | $600 | $800 | $1,000 | $1,200 |
| | ------------ | ------------ | ------------ | ------------ | ------------ |
| Total Sales and Marketing Expenses | $40,868 | $44,200 | $48,850 | $52,700 | $57,300 |
| Percent of Sales | 2.55% | 2.57% | 2.44% | 2.28% | 2.13% |
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| Contribution Margin | $1,063,715 | $1,178,533 | $1,439,900 | $1,738,100 | $2,100,150 |
| Contribution Margin / Sales | 66.48% | 68.52% | 72.00% | 75.23% | 78.25% |
Contribution Margin Monthly
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