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Prehistoric Computers Financial Plan
Introduction
Prehistoric Computers has redesigned the traditional operations systems with an e-operations series of systems. The e-operations plan has implemented systems to support the revenue growth strategy. The next step is to approve and implement the financial plan, the real backbone of a business plan. To start the financial plan, Prehistoric Computer forecasts exactly how much capital will be needed to finance the e-business operations during the critical start-up phase. Financing is necessary for the new technology investment, additional management staff, marketing effort, customer relations system, and other working capital expenditures.
Financial Plan
Prehistoric Computers has already begun the e-commerce initiative by implementing the Web site successfully. The next rollout of the mini-ERP system involves significant financial investment. Today, Prehistoric Computers has over 11 weeks of inventory available. Primarily sales are in the form of credit card payments, cash, or COD, see financial statements in Appendix C. There is a modest balance of about 1.75 weeks’ sales outstanding as account receivable. There is no long-term debt; the building is owned free and clear, as is the equipment. The short-term debt is a revolving cash line of credit with the bank. The accounts payable is modest at just over two weeks worth of sales. The company is in a solid position to seek financial assistance. The financing plan includes seeking a 0-year mortgage on the building. It is feasible to obtain $1,80,000 to start funding the technology and the needed inventory for growth as the Web site initiative begins to take off. Partial funding will be from the increased level of sales already evident from the Web site initiative. Sales have increased 15% in the first nine months of 00. Sales are on track to increase 5% by year-end. The next level of funding will be in the form of a SBA or Economic Development loan for low-income areas backing bank loans. The research on this type of program indicates a promising program that focuses on government-backed loans from a local lending institution. These programs support for profit companies that are adding jobs in low-income areas such as outside Little Rock, AR. The time frame is approximately one year to obtain the needed financing and the SBA or Economic Development backing for the long-term loans. Preliminary conversations with the local loan officer of Prehistoric Computer’s bank are favorable towards this program. The needed maximum of $5,000,000 can be obtained using these methods in conjunction with tight controls on inventory to sales ratios and cash ratios. A third possibility exists if Prehistoric Computers wishes to go public by selling shares to either employees or local individuals; or if the President’s family wishes to increase the investment in the firm to aid in the expansion plans. This third choice is a contingency plan as a short-term solution for financing issues.
Technology Costs
In order to support a larger, more streamlined organization, Prehistoric Computers will implement an Enterprise Resource Platform (ERP). The ERP will handle all business transactions within the company. Implementation costs fall into two broad categories equipment and resources. Equipment includes all software and hardware required to complete the implementation. Resources include man-hours, facilities and contingency costs. Hardware costs for the ERP implementation are expected to be $0,000. These costs include $16,000 for database and ERP servers, $1,000 for an enterprise server, and 1,000 for an uninterrupted power supply. Prehistoric Computers has negotiated pricing for ERP software costing $5,000. The platform of choice is Icores Everest system. Miscellaneous costs are expected to be $15,000, bringing equipment costs before annualized software maintenance to $80,000. Software maintenance is expected to be 18% of licensing, or $6,00 per year moving forward. The ERP implementation will require a non-exempt Database Administrator salaried at $5.000. Human Resources will have $8,000 in contingency for headcount or consulting. One non-exempt Computer Analyst may be required for continuing operational enhancements. Headquarters will house the backbone of the ERP, but will need airflow and security improvements costing $15,000. The ERP will utilize the existing network, but will require $1,000 in improvements. Resource costs will be $160,000. Total capital requirements for the ERP Implementation are $40,000. These costs include $16,000 for Servers to hold the database and ERP, $1,000 for an enterprise server, and 1,000 for an uninterrupted power supply.
People Resources
Instituting an e-business strategy and aggressively expanding the business will require a number of resources beyond those found internally at Prehistoric Computers. Prehistoric Computers will immediately need a Database Administrator. The company will also observe a strategy to develop internal people resources as a means of meeting long-term needs.
The Database Administrator (DBA) position will spearhead the behind-the-scenes resources needed for Prehistoric Computers e-business operation to be effective, dynamic, and an asset to the overall business. The company will be targeting median level people with wide-ranging skills. Average salary for a mid-level DBA is $54,6 with total compensation averaging $76, (See Appendix B for detailed information). The DBA position will not only be able to develop and manage the company’s internal needs, but will also be able to speak knowledgeably to external consultants and other entities within the company regarding technical issues for the website.
Developing internal people resources is a long-term goal of Prehistoric Computers. The company sees its e-business strategy not only as a means of expanding revenue but also as a means of further employee involvement in the business. The company will lead off the e-business strategy with a number of company wide meetings explaining the need to incorporate e-business into the overall business. Employees will be encouraged to provide ideas and feedback on how to make the implementation successful.
Management is also strongly encouraged to seek the resources of a Change Management Specialist, as funding becomes available. Such a position will analyze future people resources needs and identify how those people resources needs should be met. Internal resources may be able to be developed to meet future needs or outside people resources may need to be brought in on either a consultant or direct employee basis. The position will be filled on a consultant or temporary basis.
Conclusion
A proper financial plan can lead to a strong management team, extremely high growth prospects with high degree of global scalability, clear path to profitability, and a viable and cost effective marketing strategy. With over 11 weeks of available inventory, outstanding accounts receivable, no long-term debt and modest accounts payable, Prehistoric Computers is in a solid position for financing their e-operations. The financial plan is positioned to achieve the approvals and external support sought. Prehistoric Computers stands to win in a big way with the implementation of proper financial plan and the aggressive growth plan based on the technology investment.
Appendix A
Product Quantity Per Week Wholesale Price Inventory Cost
Monitors 6 $4.8 $4,07.68
Printers 11 $15.00 $1,680.00
Laptop Base Unit 4 $55.00 $1,0.00
LCD Display 144 $.5 $,6.40
Hard drives 40 $18.00 $4,0.00
RAM 56 $1.00 $,07.00
Processors 40 $18.00 $4,0.00
PCMCIA cards 75 $11.66 $874.50
DVD drives 15 $1. $,48.75
CD ROM 56 $1.57 $,17.
1/ floppy disk 56 $14. $,87.44
Zip drive 40 $1.80 $4,75.00
Misc. Cables 144 $5. $86.56
Power supplies 6 $1. $1,18.7
Motherboard 11 $1.1 $,14.8
Cooling fan 144 $. $1,48.56
Heat sink/cooling fan 144 $.15 $1,17.60
Heat sink 144 $1.4 $1,86.6
NIC cards 18 $1.68 $,51.04
Video card 18 $1.1 $1,560.
Sound card 18 $14.80 $1,84.40
I/O ports 160 $8.00 $1,80.00
Mouse port 160 $5.50 $880.00
Keyboard port 160 $6.50 $1,040.00
Parallel port 160 $7.50 $1,00.00
On/off switch 18 $5.00 $640.00
Mini tower 6 $.6 $56.16
Monitor Cable 144 $.75 $1,404.00
Printer Cable 144 $.75 $1,404.00
Miscellaneous various various $15.00
Parts Inventory Cost Per Week $7,6.6
Parts Inventory Cost Per Year $,758,0.88
Laptop/computer % Historical Average Computers a week
70% laptop 80% broken items 0,000/8=500 computers turnover every 45 days
0% computer 0% want faster computer 00 computers a week exchanged
100 computers getting from vendors
Total = 400 computers a week
Appendix B
Job Descriptions and Salary Information
Database Analyst II Job Description and Salary Information
A typical mid-level Database Analyst (DBA) “reviews, evaluates, designs, implements and maintains company database(s). Identifies data sources, constructs data decomposition diagrams, provides data flow diagrams and documents the process. Writes codes for databases access, modifications, and constructions including stored [sic] procedures. May require a bachelor’s degree in a related area and -4 years of experience in the field or in a related area. Must be familiar with standard concepts, practices, and procedures within a particular field. Relies on limited experience and judgment to plan and accomplish goals. Performs a variety of tasks. Works under general supervision; typically reports to a project leader or manager. A certain degree of creativity and latitude is required” (Salary.com, IT, 00).
“A typical Database III working in Little Rock, AR earns a median base salary of $40,0, according to [an] analysis of data reported by corporate HR departments. Half of the people in this job earn between $4,7 and $50,08. An average benefits package pushes the median total compensation for a Database Administrator to $76,” (Salary.com, IT, 00).
Change Management Specialist (Human Resources) Job Description
A typical Change Management Specialist “enables organization to achieve greater flexibility and attain competitive advantages by leveraging its human capital. Conducts need analysis and resources allocation studies to determine most effective use of human capital resources. Makes recommendations to top management based on research. Requires a master’s degree in area of specialty and 7 years of experience in the field or in a related. Demonstrates expertise in a variety of the field’s concepts, practices, and procedures. Relies on extensive experience and judgment to plan and accomplish goals. Performs a variety of tasks. May provide consultation on complex projects and is considered to be the top-level contributor/specialist. A wide degree of creativity and latitude is expected. Typically reports to top management” (Salary.com, HR, 00).
A typical Change Management Specialist working in Little Rock, AR earns a median base salary of $7,44, according to [an] analysis of data reported by corporate HR departments. Half of the people in this job earn between $84,74 and $111,66. An average benefits package pushes the average total compensation for this position to $1,47” (Salary.com, HR, 00)
Appendix C
Prehistoric Computers
Income Statement for Period Ending /0/00
(dollar figures are in thousands) Months 00 00
Sales Revenue
Computer Sales $ 4,1 $ 5,000
Services 41 0
Total Sales Revenue 4,744 5,000
Sales Costs
Computers and Components ,0 ,758
Services 0
Total Sales Costs ,5 ,758
Gross Profit 1,1 1,4
Gross Margin 6 % 5 %
Operating Expenses
Sales & Marketing 100 5
General & Administrative 775 817
Research & Development 0 0
Total Operating Expenses 875 84
Operating Income 7 400
Operating Margin 7 % 8 %
Interest Payments 4
Earnings Before Taxes 8
Provision for Taxes 117 1
Earnings (net income) 16 5
Profit Margin 5 % 5 %
Dividends paid to Shareholders 0 0
Earnings available to Shareholders 16 5
http//www.moneychimp.com/articles/financials/income.htm
Prehistoric Computers
Balance Sheet as of September 0, 00
(dollar figures are in thousands) 00 00
Assets
Current Assets
Cash and Equivalents $ 40 $ 160
Accounts Receivable 166 147
Inventory 80 616
Total Current Assets 1,6
Real Estate (purchase price) 1,600 1,600
Equipment (depreciated value) 54 47
Goodwill (depreciated value) 0 0
Total Assets ,78 ,00
Liabilities
Current Liabilities
Accounts Payable 1 186
Short-term Debt 60 0
Total Current Liabilities 7 06
Long-term Debt 0 0
Other Liabilities 0 0
Total Liabilities 7 06
Total RE / Owner’s Equity ,106 ,814
http//www.moneychimp.com/articles/financials/balancesheet.htm
References
CDW.com (00), The Right Technology Right Away. Retrieved September 8, 00
from the CDW.com Web Site http//www.cdw.com/shop/search/Results.aspx?grp=LNG
MonkeyChimp.com (00). Financial Forms. Retrieved September 8, 00 from the
World Wide Web http//www.moneychimp.com/articles/financials/income.htm
Radioshack.com (00), Product Catalog. Retrieved September 8, 00 from the
Radioshack.com Web Site http//www.radioshack.com/category.asp?catalog%5Fname=CTLG&category%5Fname=C
Salary.com (00), Salary Wizard HR-Change Management Specialist. Retrieved on September , 00 from http//hrsalarycenter.salary.com/salarywizard/layoutscripts/swzl_compresult.asp?
Salary.com (00), Salary Wizard IT (All)-Database Administrator. Retrieved on September 8, 00 from http//hrsalarycenter.salary.com/salarywizard/layoutscripts/swzl_compresult.asp?
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