Financial Statement Justification for a Substance Abuse Non Profit Business Plan

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1. Donation, Grant, and Gift revenueThe organization will focus primarily in the Framingham, MA area. The population is roughly 72,208 and grows along the national average of 1% per year. 9% of Framingham residents have experienced some form of mental health illness. 23% of Framingham adolescents said they felt sad or helpless, about 6% higher than what was reported across MetroWest. As a result, the organization will focus heavily on mental health issues in this market. Initially, our budget is generating $500,000 in revenue for the first year of operations. This will be derived from a variety of sources included donations, grants and gift revenue. As a startup entity with limited resources our ability to command large portions of this revenue stream is very limited. In addition, we suspect the revenue growth will be limited as the COVID-19 pandemic has lowered revenues throughout the broader economy. We believe we will see continued donations to mental health related to COVID-19 once vaccinations are widely available and distributed. We believe the population is well suited to support the organizations as the demographics are very appealing. For one half of the residents have their bachelor’s degree or higher, indicating a highly educated workforce. Also the median household income is roughly $85,000, much higher than the national average of $65,000. We assume that revenue growth will coincide with overall GDP growth of 2% to 3% per annum (Agyemang, 2019).2. Interest and Investment IncomeA portion of donations will be invested in a portfolio of securities. These securities are intended to provide additional income that can be used in the operations of the business. Currently the portfolio will be constructed of half equity securities and half bond securities. The equity portion is expected to generate 6% to 9% growth per year. This growth comprises 2-3% GDP growth, 2-3% Dividend Yield, and 2-3% of Price Inflation based on the federal reserve's mandate. The bond portion will be allocated to investment grade securities yielding 2%-3%. As a result, we expect the portfolio overall to yield between 4-6% per annum off an initial investment of $20,000.3. Sales RevenuePeriodically, the company will engage in sales efforts to help support the business. These sales efforts will include selling of company merchandise such as clothing, coffee mugs, magnets, bumper stickers, and other misc. goods. There is no research or precedent to determine this figure. The estimate will be $10,000 of sales1. AdvertisingAs a startup, advertising will be critical to the success of the operation. As resources are limited, we intend to use gorilla marketing tactics to help generate awareness on the part of donors and potential clients suffering from substance abuse that need our services. The initial advertising budget will be $25,000. $5,000 will be spend on a donor’s banquet to thank large contributors to the organization. The remaining $20,000 will be used to create flyers, posters, and other materials to generate interest in the organization. The amount will also consist of online marketing and advertising on prominent social media websites.

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4. Cost of goods soldCost of goods sold relate to the cost of material used in merchandise clothing, coffee mugs, bumper stickers and so forth. For major retailers such as Walmart and Target, gross margin ranges from 20%-30%. To be conservative we will estimate gross margin at 25% meaning that costs of goods sold will be 75% of the sales revenue. As a result, COGS will be $7,5005. Rental ExpenseAs a startup, we don’t intend to purchase land or a building and will instead look to rent. Commercial rental rates in Framingham, MA on a per square foot basis range from $15 to $30 depending on location. Our location is critical to…

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…and not on our payroll specifically. These expenses will be included in the “Maintenance and Repairs” line item. We assume a median salary of $50,000 per year for each employee with the manager being higher and the entry level position being lower. The benefits portion will include an employee much for HSA contributions of $600 per employee or $1200 per year for 2 employees. We will also match defined benefit contribution plans up to 6% of salary or $3,000 per employee per year. To be conservative total benefits will be roughly $10,000 per year (Acton, 2012)17. SoftwareSoftware includes licenses related to Microsoft office, Bloomberg licenses for the investment portfolio, and other non-profit related databases. Bloomberg license costs $20,000 per terminal for 2 terminals. Microsoft license cost $70 per license for 4 employees. Other non-profit licenses cost between $3,000 to $4,000 per year. The software line item will also include access to hiring databases and other professional associates that can provide a pool of applicants for future hiring initiatives18. TravelDue to COVID-19 travel restrictions will be limited for 2021 and the beginning of 2022. Travel allowances will be used for owners to travel to trade publications, meet with potential donors or to build the brand with other stakeholders. Although no travel will occur in 2021 the budget will have an allowance of $5,00019. UtilitiesUtilities include gas, electric, internet, water and other energy expenses.20. Contingency ReserveThe contingency reserve will be used in the event of an unforeseen circumstance that can impact the operations of the business in an adverse manner. These funds are only to be used in emergency purposes. In any profitable year, 5% of profit should be allocated to the reserve.20. Employee BonusIf the organization is profitable in any given year, 10% of all profits will be shared with the employee base, in this case $7,253….....

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