Question

you are requesting initial funding of $500,000 to start and run a start-up online consignment retailer. Prepare a 3 Year Income Statement (Profit & Loss) Projections and Break-Even Analysis in excel.

Answer 1

I exepect the start up to initially have a sales of 1,000,000 USD for the first year which would be ramped up to 4,000,000 in the second year and as we expand in the third year, I expected the sales to hit a figure of 10,000,000

The cost of sales will be high for the first year which I expect to 70% of the sales. However as we gain experience, the cost of sales is expected to decrease to 60% in the second year and 50% in the third year. We expect to keep the selling and admin expenses a constant for all the three years as shown in the table below. The taxes as per the new corporate tax laws are assumed to be 21%

The Income Statment for the first three is as shown below:

Year	1	2	3
Expected Annual Sales	1000000	4000000	10000000
Cost of Sales	700000	2400000	5000000
Gross Profit	300000	1600000	5000000
Selling and Admin Expenses	250000	250000	250000
Earnings before taxes	50000	1350000	4750000
Taxes at 21%	-10500	-283500	-997500
Net Income	60,500	1,633,500	5,747,500

As per the table, we expect to break even in the second year

The exact break even point is calculated as follows:

Break even point = 1 + (500,000 -60,500)/1633500 = 1.27 years

The excel screen shot is as follows: