As an e-business start-up to analyze, the firm is involved, which manufactures beauty gift boxes for women and sells them online. To achieve a positive net operating profit (NOP) over the next one to two years, this is crucial to assess a number of factors that affect revenue. These criteria include all of the firm’s revenue streams, sales plan, target market, total incoming cash flow, as well as the cost of sales. During the first months of the start-up launch, negative values are allowed when profits cannot cover costs. However, in the long term, a positive NOP is essential to achieve to justify all investments.
When planning income, this is important to take into account the features of the product sold. Regarding the considered e-business, the start-up owners should break down the number of subscribers by tariffs. For instance, premium beauty boxes may be sold with an additional cost of 10%, while standard sets may have a regular price. In addition, this is critical to take into account the seasonality of sales as a criterion that determines demand. It is likely that the dynamics of sales will be higher during holidays, for example, at Christmas. As a result, to increase net profit, more production should be planned before holidays to meet demand indicators and sell more products.
The analysis shows that income planning in the considered financial model contains both real and planned figures. During the first months of start-up development, the growth mock-up can only consist of a forecast. To determine revenue, the e-business’ management can utilize a bottom-up strategy that implies multiplying the average revenue per customer acquired by the expected number of clients. This means that if beauty boxes have a fixed price, the average value of their sales can be taken as an average profit, and this indicator can be taken into account as an intermediate result of development. If, after a few months, the profit does not come close to the planned indicators, this will mean a mistake in planning. Therefore, a clear sales algorithm should be built while taking into account the interests of the target market.
When building a financial model, this is crucial to consider the real and projected costs of the start-up. In relation to the considered e-business, these costs relate to the manufacturing of products, including the purchase of raw materials, the modernization of technologies, and other basic items. Marketing solutions should also be included in the list of costs because, for successful online sales, interaction with Internet users implies creating a convenient selling platform. At the initial stage, partnerships with popular media resources can be established to promote products, and this will also require advertising costs.
Finally, fixed costs are must-be-considered, which include employee salaries, rent, and other unavoidable payments. When compiling the expenditure part of the development model, this is essential to take into account the specifics of costs. For instance, when determining the amounts for the salary of employees, additional costs should be taken into account, particularly insurance premiums. When developing a model for two years, which corresponds to the stated strategy for the considered e-business, the management should take into account the increase in costs caused by inflation and plan the budget based on this economic parameter. Following these steps may help the start-up achieve a positive NOP within two years.