Introduction
I am writing to provide a detailed analysis of your business plan. Kindly read the analysis to observe the calculations and various considerations you can pursue. I have made a summary and recommendation in the last part of the memo to ensure that you can understand the intended message.
The company’s primary objective is to provide lawn mowing services to the surrounding area to obtain funds to help puLandscapingrsue schooling. The target market for this landscaping company will consist of hotels, institutions with gardens, and neighbors in the same neighborhood. Lando landscaping has created measures to ensure it attracts and obtains more clients since it hopes to gain a substantial market share in the upcoming years. In addition, the landscaping industry hopes to manage and gain a competitive edge by concentrating on providing top-notch customer service and client retention.
To ensure client satisfaction, the business plans to add a buddy as a stakeholder and consider recruiting some classmates and friends to help with labor provision. Later, a specific plan and things to examine before hiring new employees were outlined. There is a need to hire someone to assist with bookkeeping since you need to learn to keep detailed records of business activities. Aside from more workers, the business has to purchase more equipment, such as a motorized drivable lawn mower, to boost operating capacity. The plan includes detailed methods for making investment decisions and instructions for preparing financial statements and maintaining the balance sheet. Advice on ethics, business methods such as marketing, and recommendations to the company has been documented for the company to fulfill its goals.
Income Statement
To establish the net value of the Lando Landscaping firm over three years, the company must submit a complete financial statement and balance sheet. The income statement shows the total sales or revenue of the company less the expenses spent during the period. The payment of consumers after services are rendered the primary source of income for Lando Landscaping. Pruning, landscaping, grass cutting, and gardening are the primary services offered by the company. The total annual income is derived by multiplying the total number of clients by the price of each service provided and then adding the totals.
Calculation of income/revenue for 2020
Calculation of revenue for 2021
Calculation of revenue for 2022
For example, according to the tables above, the total income for 2020 grass mowing is (30 * 30) = $900. This is because landscaping costs nothing, whereas trimming and gardening cost $900 and $400, respectively. Therefore, the total revenue for 2020 is (900+0+900+400) = $2,200. Using the same approach, the income in 2021 will be $2200, and $2065 in 2022.
There must be a provision for depreciation for the equipment that the company wants to acquire for its operations in the costs. Using the straight-line depreciation approach, the lawn mowing equipment will decline at $360 per year, whereas the motorized drivable lawn mower would depreciate at $900 per year. Therefore, the above sums will add fuel prices to the expenses, which will grow by $200 yearly. Lando Landscaping’s costs during the last three years are as follows.
The total expenditures for the years will be $3,825 for 2020, $3,920 for 2021, and $3,840 for 2022 based on the abovementioned extra expenses. In the case of the acquisition of a friend who desires to contribute $8,000 as equity and then become a shareholder, the capital for the firm is likely to expand, boosting the business profit. The assets, liabilities, and shareholder equity contributions to the firm will all be included on the corporate balance sheet. The Lando company has few assets. The equipment and tools for 2020 amount to $1000, $375 in 2021, and $200 in 2022. The company has no cash or obligations and plans to increase its stock; if it can find a suitable shareholder, the equity will add up to $8,000.
Horizontal and Vertical Analysis
According to the following vertical financial statement, fuel has lowered expenditures because it accounts for fourteen percent of total expenses in 2020 and seventeen percent in 2022. The firm acquired the tools for the first year, 2020, signifying a 10% decrease in the following year due to using the same tools. Marketing appears to have grown from the base year era. This rise is due to the Lando landscaping business spreading by word of mouth from satisfied clients. Analyzing the financial statement horizontally reveals that the purchase of fertilizer grew by 300% in 2021, owing to increased client acquisition. Total spending increases during the three years. The reduction in tool purchases is 175% in 2021 and 47% in the next fiscal year, 2022.
Marketing and Growth Strategy
Lando landscaping plans to market its services to additional prospective area clients. The utilization of marketing flyers would be acceptable for implementing this advertisement. The pilots will include the name of the company, its location, contact information, the services it offers, and any discount rates. The company is considering hiring extra people to help distribute fliers. Another method of advertising in the strategy is the employment of monthly advertisements in newspapers. Applying the techniques above is expected to result in a 4.75% growth rate over the next two years.
For a firm to succeed, investment decisions must be well-researched. To make an investment choice, the Present Net Value of a project must be assessed. For example, if the company buys a motorized drivable mower, the NPV will be as follows. The cash flow is $30, the interest rate is 6.25%, the time period is six months, and the original investment is $3000. By dividing the cash flow by the sum of one and the interest rate powered by the time needed, the net present value (NPV) is calculated. The initial investment is then deducted from the result. The NPV for the motorized drivable mower was determined to be 20.85. In general, if the NPV is positive, the investment is adequate, and if it is negative, the investment is inadequate. Lastly, Lando should consider getting a motorized drivable mower to help with business operations.
Conclusion
As the business owner, Lando may either obtain a loan or support himself from business profits if he desires to pursue specific courses. If demand is minimal during winter, Lando may work six days and take one hour daily. If he charges $35 per hour, he will have (35 6) in one week, equaling $210. Because a year is divided into 54 weeks, the total amount he will receive from his service in a year is (54210), equal to $11340. This total income much exceeds the needed certificate fee of $6000. Therefore, Lando should save from his earnings rather than take out a loan with interest, which will be an additional cost to himself and the firm.
Recommendations
The business must get a license from the appropriate government to operate legally and successfully. For activities to occur, business permits must be followed. The company must keep track of its operational expenditures. If applied, this might help the company comprehend its cashflows and make critical decisions for the company because it has not been adequately practiced since the firm started. Monitoring expenses also makes it easier to determine if a company is a long-term profitable or losing money. The Lando landscaping business should consider hiring Carlos with the funds he wants to spend since it will boost working capital. Lando needs help learning bookkeeping so Carlos will help. Before hiring Carlos for his company, Lando should conduct a background check on his financial situation, personal interests, and managerial skills.