Budget of Income and Expenditure

1. Annual sales forecast:

Total sales
First year projected sales are estimated to be $795,788
The total sales are based on the following assumptions:
Average item price: $331.58
Total sales $795,788÷Total units 2,400=$331.58
Though here we can not use the means of circular reasoning by using Total sales to derive your avg price and then use avg price later to derive total sales, but in this way to get a rough idea about the average price can be understood with Price range of products you sell, key category that sells most and the prices in that category taken into consideration. 

Average customer transaction: $397.90 (1.2 units per transaction)
JeansLand provides luxury fashion jeans, tops and jewelry to our target customers. Consider of the high price of each products, so we expect among 10 customers there will have 2 customers to purchase 2 products in our store.

Expected traffic in store: 100 traffics per day; 6 customers per day
There are two subway lines under the IAPM shopping mall. According to the market research, the total passenger flow volume of IAPM is estimated to be around 120,000 per day and the shopping mall has 238 stores. JeansLand will be located on the basement floor, which is near the subway station. Therefore, the average traffic per store is 504 (120,000÷238=504.2). Since our store is brand new and doesn’t have high awareness, I expect 12% of the average traffic, which is about 60 traffics per day. Since my jeans are rather expensive for some people, my conversion rate will be comparably low – maybe about 10%. Therefore I will have only 6 customers every day, 6 customers each buying 1.2 units that will be 7.2 units per day. My store opens 365 days per year, so I will sale 2628 units one year. This is very close to my sales estimate.


2. Monthly sales forecast:
My three highest sales months are February, August and December. Because we have clearance event on February and August, so this will increase the sales. Also, students are having summer vacation on August and on February it has one of the most popular western holidays, Valentine’s Day. And for December, there are many holidays’ promotions during this period, such as Christmas, New Year and Chinese spring festival. Also, in these three months, we will increase the retail price a little bit as the demand far surpasses supply in this period, accordingly leading to the increase in the gross margin.

My two lowest sales months are April and November. Since we don’t have promotion events on these two months and there’s no big holiday during these days. So we might attract less customers on these two months. While in these two months, the retail price will voluntarily decrease as the product is accumulated as not many people buy it, resulting in the decrease of the gross margin. 

3. Markdown:
The highest markdown months will be in February, August and January at 18% off. Because we will have clearance events in February and August and the highest discount will be 50% off. In January, we will have New Year promotion and there’s three-day vacation for New Year, which will increase customer flow volume. Also, it is close to Chinese Spring Festival. In China, there’s a tradition that people will buy new clothes before this biggest holiday.

Since I plan to build JeansLand as an upper class womenswear retail store, there won’t be too much markdown. In the first year, the markdown percent will be 7.0%, including clearance sales, holiday promotions, employee discount and membership discount. To put it more specifically, we will offer 50% off for clearance sales, which is the highest discount. Employee discount will be 40% off for jeans and Our VIP customers can get 10% off for every purchase. 

4. Expenses:
Wage: $5,420/month
The wages for total employees in JeansLand is $5,420/month, which is divided to 8.2% of total sales (the source for wage rates is from $5,420/$65,040=8.2%). 

Store manager/Owner: $2,000 (12,000RMB)/month
Assistant store manager: $1,500 (9,000RMB)/month
Full-time Sales (2): $600 (3,600RMB)/month x2=$1,200/month
Part-time Sales (2): $3(18RMB)/hours 
                $3/hours X 4hours X 30days X2=$720/month

Rent: $15,000 (90,000RMB)/month
The rent is the largest expense of JeansLand. However, in China especially in big city like Shanghai, store rent is generally very high and occupied the largest part of whole investment. Our store will be located in IAPM, which is a brand new shopping mall built in Shanghai CBD. It will be approximately 800 square feet. Rent takes 22.6% of total sales.

Travel expense: $16,000/year
We will go to Magic New York trade show on February every year and have a buying trip to New York on July every year. The total travel expense will be $16,000 per year, which is 

Commission:
Besides the basic salaries, I will provide salesperson 3% commission of their net sales. And every January, the month before Chinese Spring festival I will offer them 6% commission as bounces.

Health insurance:
The health insurance will be 8% of employee’s salary. The total will be $5,069, 0.6% of total sales.

Insurance:
Employee insurance will be 20% of their salary. The total will be $12,672, 1.6% of total sales.

Accounting/book:
The accounting and book will be around $10 every month, include notebooks, account books, papers, pens and other office tools.

Banking:
Banking includes account opener fee, bank transfer fee, and other relative expenses. I assume it will be $20 per month.

Utilities & Security:
This will be around $300 per month, which includes water, electricity, gas, security and other relative expenses.

Telephone:
Telephone fee will be about $100 per month.

Marketing Expense:
The total marketing expense will be $64,560, which is divided to 8.1% of total sales.
We will have a grand opening on May. We plan to have a party and invite celebrities to our fashion show. The cost of party will be $975 and for fashion show it will be $6,900
We will have magazine editor advertisements forth a year. This kind of advertisement is released both articles and photos. Considering of the price of whole page advertisement is too high for us to afford, we chose this type advertisement, which can introduce our store by words and also show some images of our products. The cost is $3,300 every time and will be issued on February, May, September, and December. 
We have online advertisement on YouKu, one of the biggest video websites in China. The cost is $3,750 every month. This is the largest cost of the whole marketing expense.
We have ads on Baidu online search engine, which is the biggest online search engine in China. The cost is $250 every month.
We also paid celebrities to post our products and store information on Weibo (Chinese Twitter) to attract more customers.
We will release look book twice a year on March and September, which cost $2,000.

5. Inventories
My three highest months of supply are February, August and December. Because we have clearance event on February and August, so this will increase the sales so as to increase the supply at the same time. Also, students are having summer vacation on August and on February it has one of the most popular western holidays, Valentine’s Day. And for December, there are many holidays’ promotions during this period, such as Christmas, New Year and Chinese spring festival. Therefore the purchase frequency for these three months is also the highest as people buys the most frequent in these three months. We can have a fair knowledge that these three months will be with the lowest inventory as the products have been bought by the customers.

My two lowest months of supply with the lowest purchase frequency are April and November. Since we don’t have promotion events on these two months and there’s no big holiday during these days. So we might attract less customers on these two months. There is no doubt that the highest inventory months will be these two months as people don’t buy them so much and therefore they will be accumulated into the inventories consequently.

6. Start Up Costs
There is no doubt that in the first beginning of the establishment of a company or a brand, what is a must is a certain amount of start up costs, without which the company can’t operate normally. The same case also goes to my jeans company. The items such as technology and phones, selling floor and backstock fixtures, leasehold improvements (materials & labor), rent deposit, wages and salaries, marketing startup, opening inventory, other start up expenses, contingency reserve , working capital and other items are mostly the components of start up expenses. Among them, the highest start up costs lie in the items of opening inventory that is the so-called BOM$ inventory which will cost nearly to $83,369.44. And the lowest start up costs is the items of technology and phones that is the money spent for cash register, fax, copier, printer, PC, phones, software etc., the lowest value being at $2,700.00. Together with all the other items, the total start up costs reach a value that is high to $226,658.44 as can justify why there existing a high value of loan at the first month. Only by loaning can a company deal with the capital problem in the first period of establishment. It is also indicative that to have a rather high amount of start up capitals is really important for a company to run the business.
   
7. Loan Information and Cash Flow 
What comes at this part is about the loan information for all the sixty months, during which the detailed information about the balance of loan, principal, interest and payment of each month will be elaborately discussed. In all the sixty months, the interest rate continues to be 3.60%, which won’t cause burden to pay down the loans and therefore the loans can be refunded gradually month after month. At the first beginning, the balance of loan turns to be the highest that is $67,997.53, each month being with the same principal $1,133, the balance of loan continues to become less and less with a monthly payment ranging from $1,337 to $1,140, till pay down the debt in the end. That is to say, it takes sixth months to pay down the whole loan whose value is at $67,997.53 at the first place.
And as for the cash flow, it is forecasted with the detailed information of the profit or loss of GMS-Expenses, the monthly Incr. of Inv, the shrink and MDs, the depreciation expense and the principal payments taken into consideration. After the prediction, the result turns out that the cumulative net cash of September is the highest for the first whole year which equals to $85,092, while the lowest comes to $47,748 which occurs in January. Talking about the monthly working cash, March is with the highest amount which reaches $25,307. That is to say in March it can operate with the biggest flexibility and adjustment. While on the other hand, the working capital for other months to be in minus, as they are urgently in need of the working capitals. The best condition for a company is to be with a certain amount of working cash that is as high as possible.  

8. Future
With all the above being discussed, including total sales, monthly sales, gross margin, profit forecast, expense summary, inventory summary, start up costs, loan information and cash flow summary, what comes next at the list will be the assumed future conditions for my company from my own point of view mainly made up of years 2 and 3 sales assumption and why, years 2 and 3 Gm% assumptions and years 2 and 3 turn assumptions. The years 2 and 3 sales will keep increasing due to its being able to well grasp the promotion skills and the correct judgment toward when to increase or decrease the number of products according to the needs of the customers. Or maybe we can put it another way that it is competent enough to right judge the relationship of demand and supply. 
Speaking of the years 2 and 3 Gm%, it will also increase as it is in a positive correlation with sales. In the above we have stated that the sales will keep increasing, therefore it will as well change to a better situation at last. There is no doubt that the years 2 and 3 will turn to a trend that is making profit bit by bit as in that time, the loans will be paid down and its customers will spread to all over the world, contributing to its prosperous development in the long run if under the proper management and timely adjustment. 


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