Business & Finance - Marketing
Sample Solution
Business Model
My business model is to develop and sell a new type of smartphone app. The app will be a social networking app that is specifically designed for people who are interested in outdoor activities. The app will allow users to connect with other people who share their interests, and to plan and coordinate outdoor activities together.
Full Answer Section
I have selected this business model because I believe that there is a large and underserved market for this type of app. There are many people who enjoy outdoor activities, but they often find it difficult to find other people to do these activities with. My app will make it easy for people to connect with other people who share their interests, and to plan and coordinate outdoor activities together.
I also believe that this business model is sustainable because it is based on a subscription model. Users will pay a monthly subscription fee to use the app. This will provide me with a recurring revenue stream that I can use to develop and maintain the app.
Financial Goals
My financial goals for the next five years are to:
- Generate $1 million in revenue in the first year.
- Increase revenue by 20% per year for the next four years.
- Achieve profitability within three years.
Revenue Projection
To project my revenue for the next five years, I used the following assumptions:
- I will have 10,000 users in the first year.
- The average user will pay a monthly subscription fee of $10.
- I will increase my number of users by 20% per year.
Based on these assumptions, my projected revenue for the next five years is as follows:
| Year | Number of Users | Monthly Subscription Fee | Revenue |
|---|---|---|---|
| 1 | 10,000 | $10 | $1 million |
| 2 | 12,000 | $10 | $1.2 million |
| 3 | 14,400 | $10 | $1.44 million |
| 4 | 17,280 | $10 | $1.73 million |
| 5 | 20,736 | $10 | $2.07 million |
Pro Forma P&L Statement
The following is a pro forma P&L statement for the next five years:
| Year | Revenue | Cost of Goods Sold | Gross Profit | Operating Expenses | Net Income |
|---|---|---|---|---|---|
| 1 | $1 million | $100,000 | $900,000 | $600,000 | $300,000 |
| 2 | $1.2 million | $120,000 | $1.08 million | $720,000 | $360,000 |
| 3 | $1.44 million | $144,000 | $1.3 million | $840,000 | $460,000 |
| 4 | $1.73 million | $173,000 | $1.56 million | $960,000 | $600,000 |
| 5 | $2.07 million | $207,000 | $1.86 million | $1,080,000 | $780,000 |
Assumptions:
- Cost of goods sold is 10% of revenue.
- Operating expenses are 60% of revenue.
Pro Forma Cash Flow Statement
The following is a pro forma cash flow statement for the next five years:
| Year | Cash Flow from Operations | Cash Flow from Investing | Cash Flow from Financing | Net Change in Cash |
|---|---|---|---|---|
| 1 | $300,000 | -$500,000 | $500,000 | $300,000 |
| 2 | $360,000 | -$200,000 | - | $160,000 |
| 3 | $460,000 | -$100,000 | - | $360,000 |
| 4 | $600,000 | - | - | $600,000 |
| 5 | $780,000 | - | - | $780,000 |
Assumptions:
- Cash flow from operations is equal to net income.
- Cash flow from investing is -$50