- You just bought a fashion boutique in downtown (or your hometown—you pick) that’s been around since 2012.
These businesses are fictional, but you are free to incorporate actual local and regional data when writing your paper. For instance, assume that your store exists along with the other stores that also currently exist in downtown. Helpful information about your downtown is easy to obtain online (census data, for instance), or is just a short walk away (maybe you want to see what buildings are currently available for lease, for instance).
For any of the three businesses above, the basic financials are as follows:
• 2016 gross sales: $630,000
• 2017 gross sales: $750,000
• 2018 gross sales: $670,000
• 2019 gross sales: $650,000
• 2020 projected gross sales: $620,000
Over that time, your store has also averaged the following:
• Cost of Goods Sold (COGS) has averaged about half of gross sales (50%). So COGS was about $315,000 in 2016, for instance.
• Payroll has held steady at about $180,000 per year. The previous owner took a modest $30,000 salary (but was also entitled to all the profit as the sole owner of the company).
• The owner retired and no longer works for the company. There are two other full-time employees who are each paid $35,000 per year (no commission). One has been there 5 years and one has been there 1 year. There are also 6 part-time employees—mostly college students. They have each worked at the store an average of 9 months.
• The profit margin has held steady at about 6% per year of gross sales. Example: the profit in 2019 was 650,000 x 0.06 = $39,000.
• You paid $116,000 for the business, along with an additional $103,000 to purchase the unsold inventory and equipment in the building. You put 1/3 of your personal savings down ($73,000) and borrowed the remaining amount from the bank at 5% interest on a 10-year loan.
• You rent the 1,500 square foot building for $1,200 per month. You have 12 months left on the existing lease; the lease period has renewed every 5 years.
Sample Solution