Balance Sheet Assumptions
Starting cash will be determined using a cash flow statement
Accounts Receivable: all sales will be cash
Inventory: Beginning inventory will be enough to generate $1000 in sales. Distributors sell to bookstores for 40% off the cover price, so COGS for those items will be 60%. I will undoubtedly have to prepay for this first shipment as I have not yet established a payment history with the distributor.
Prepaid expenses: First and last month’s rent is required.
Deposits: A $500 damage deposit on the rented office space is required.
Startup expenses: $250 in legal fees to form an LLC
$150 materials fee to create a booth for school festival events that is easy to set up and break down and creates an attractive display
Business stationery and business cards will be created using desktop publishing and will be printed as needed.
Web design services will be employed in a limited way for help setting up the online catalog. Estimated 5 hours at $45/hour (going rate, according to web design students at school), total $225.
Equipment: My existing computer, a Dell desktop, will be dedicated to the business, estimated value (including software) $800.
Office Furniture: A desk, a chair, a file cabinet, five bookshelves to hold inventory and a table for the shipping area will all the furniture required. Priced at used office supply store.
Telephone system: A phone capable of accommodating 3 lines for future growth, and an office intercom. Priced at Office Depot for $250.
As I have yet to establish credit with any suppliers, I will have no trade payables. I do not foresee any long-term debt as I anticipate having sufficient cash for all start-up expenses and working capital until the business is profitable.
An initial owner’s equity investment of $5,900 will provide the needed capital.
Income Statement Assumptions
Sales will be mainly through an online
storefront. Additional sales will be
achieved by having a booth at Waldorf school seasonal events in the
According to bizstats.com, COGS for book publishers is 31%. Included in this number is royalties and reprint rights for books that Rudy’s Bookshelf will produce. Books produced by other publishers that I resell will carry a 60% COGS, a standard discount in the bookselling industry.
Payroll: I will have no employees at first, or will employ only casual labor at festival events.
Rent: The first year I will work out of my home. As the business grows, I will need approx. 500 square feet. An ad in the Seattle Times for a commercial space in Montlake Terrace (“448sf from $15/ft/yr.”) would put my rent at 448*15=$6720 per year or $560 per month.
1. Low-cost web marketing
2. Promotional fundraising events aimed at Waldorf schools around the country. I will provide catalogs and offer to refund back to the school 20% of all books purchased during the sales. Cost: 20% of sales
3. Booth at local school festivals: 20% of sales to schools, plus cost of booth (est. $250)
4. A two-color catalog will be printed once a year in the summer, preparing for back-to-school and holiday sales. First printing. 1,000 copies at 2.25 per copy. Graphic design services estimated at $500 per year. These figures are based on previous experience.
Depreciation: Assume 5 year useful life on computer, office furniture and equipment, using straight-line depreciation.
Insurance: General business liability will be sufficient, estimated at $600 per year based on bizstats.com percentages
Legal & Professional Services: Est. $250 for legal fees to create an LLC, plus $500 per year for professional tax preparation
Office Expense: Basic office supplies, copier paper, printer cartridges, postage, est $50/month.
Taxes: State excise tax
Sales tax collected on in-state sales
I will skip SUI & FUTA for myself, but will pay L&I
Telephone: Telephone system will include 1-line business account for now with voicemail and an 800 number. Priced online at $50 per month
Travel: Travel by car to six festivals per year, est. $50 per festival.
Utilities: About 5% of my home will be dedicated to my business, so about 5% of my utilities bill will be deducted as a business expense, about $15/month.
Web hosting and e-commerce: I will use the Yahoo stores starter package at first for a $50 set-up fee, $39.95/month hosting fee and a 1.5% transaction fee.