Verdant Innovatives Financial Projections
Verdant has a very strict cost and pricing structure shown in the financial calculations below. With funding, we expect to produce and sell 10 units within the first year. With Verdant Innovatives near the end of testing a prototype, we believe this is a fair assumption. At a price of $2000.00 a unit, our first year of revenue is an estimated $20,000. Conversely, costs for the first year will equate to $21,000. However, over the next five years, Verdant will operate at an estimated profit of $31,000, $160,000, $442,000, and $708,000 for 2021, 2022, 2023, and 2024, respectively. Costs include fixed expenses, such as salaries, research and development, marketing, storage, and equipment; and variable expenses, such as raw materials, production and assembly, transit and installation, and maintenance, that will increase on a per unit basis.
When projecting Verdant’s yearly fixed costs, a few assumptions were made. Firstly, salaries will increase over time as a result of increased time spent on the venture. As time continues, Verdant will always consider the possibility of adding a new member to the payroll, which would inflate the salary cost structure. As for R&D, marketing, storage, and equipment (fixed expenses), the costs remain fixed until there is a breaking point in production. For example, as sales unit sales increase, there will be increasing need for larger storage facilities to cater to inventory. Although fixed costs will increase, Verdant will still benefit from an economies-of-scale, in which the per unit cost will ultimately have a downward trend.
Since total variable expenses fluctuate on a per unit basis, we meticulously reviewed how much each cost would be. Firstly, we determined raw materials would cost a total of $400/unit based upon data we have seen in our prototype. Secondly, we predicted Production and Assembly of our unit would cost roughly $50 per unit based on research of current third-party manufacturers. Thirdly, we determined that the average transit and installation would cost roughly $100 per unit based upon average distance to our customers in the D.C., Maryland, and Virginia metro area and estimated time for a worker on site. Lastly, we predicted our maintenance costs, which includes warranty, would be roughly $50 per unit. This accounts for any defects in the product that may occur within the first five years of operation. To see a more detailed breakdown of Verdant’s cashflow over the next five years, refer to the table below.