Business of ABS & Associates - Essay Example

EXECUTIVE SUMMARY ABS & ASSOCIATES is a full-service consulting and accounting business born to provide high satisfaction by rendering excellent services, standard accounting, financial planning and management consulting services, and creating an enjoyable atmosphere at a very moderate and affordable price. In ABS & Associates, we will maintain a friendly, fair, creative and innovative work environment, which respects diversity and new ideas. This is the philosophy we intend to use, to build the ABS & Associates brand within the shortest time possible and make it a leading brand in the UK. Our Mission: To give our clients profession advice base on the nature of their businesses and provide accounting, auditing and business consulting and tax services at an affordable rate. Purpose - ABS & Associates is a new brand within the United Kingdom consultancy industry that intends to provide fast, reliable accounting, technical and managerial assistance to local, national and international businesses. With ABS & Associates, we sell solutions & results. Our Objective: ABS & Associates short term objectives are to generate a margin of profit, grow at a challenging and manageable rate, and make a margin of 12% within the first few years of operation. Our long term objectives include ascending to the top five positions in the industry, become a leading auditing and consulting brand within Europe, capturing about 30% of the European and the UK consulting industry market share. Marketing Slogan: “Good accounting and management makes an excellent business” The timing for setting up this business venture is the best. In the present phase of rampant accounting and auditing scandals coupled with stringent and ‘difficult to interpret and understand’ regulations set forth by regulatory bodies, the global financial crisis, ABS and Associates business consultancy intends to give prospective clients just the services they much desire to sail out of these huddles. The present niche market, existing demand from prospective clients, as well as personal desire nested at college to one day start our auditing and consulting business, the procurement and existence of highly professional and qualified Accountants at our reach and scope to support the business, give this venture a bright future. The proprietor of this business ABS, has masters degrees in Business Administration, is a Certified Public Accountants with thirteen years of professional experience in the Accounting/Auditing business. My desire of quality services and access to a pool of talented team of Accountants and Consultants will provide ABS & Associates with what it takes to make this venture an extremely successful one. (Bourdieu et al, 1984). In the light of our vision and mission statements, the growing reputation of the proprietor which will be supported by our brand of talented Accountants and Consultants we will hire, will take us to the top of the industry in Europe in record time. The keys to success in our business are: Location: This business will be strategically located at points reachable with little or no stress to all clients. That is why we have chosen as head office, London, the business hub and administrative region of the UK. The Region house some of the major financial institutions in the world and is both strategic in business and politics. Reputation: We intend to be at the top of the industry within local and record time. Every step we take, any action will place will revolve on doing ordinary things in an extra ordinary way. Our previous reputation in other and related business domains and those of other seasoned accountants and consultants we build us goodwill and our brand name within record time. Environment: As, a new and key player, our environment will be a relaxed, friendly and welcoming to clients as we serve them with the best professional services. Convenience: In the consultancy industry the world over, we will be a one stop shop offering our clients and would be clients a package of different services in one setting at extended (convenient-driven) business hours to match with their internal company schedules. Relationships: Developing, growing with our customers and partners in their respective businesses. Company Summary ABS & Associated will be a limited liability company owned by the founder ABS and the other business associates. The operations of ABS will cover all business sectors, from communications, retail, consumer shops, transport and logistic companies, manufacturing firms and other service firms like mail delivery, insurance and so on. Company ownership: The founder ABS will be the President and Chief Executive Officer of the company and will contribute and own 15% of the company capital while the other members each will contribute and own 5%. Profits and losses will be distributed in the same manner. The start-up capital will be used for the design, office supplies and equipment, heating and lighting of the office premise. Office supplies will amount to approximately £5,000, and the legal and other administrative charges will cost about £50,000. The founding partner, ABS will invest £150.000 while the rest of the partners put in £50.000 each. In sum, a total of £568 800 will be used on office expenses and start-up while £402.500 will be required for capital expenditures as summarized on the table below. Start-up Summary. Start-up requirements Opening expenses: Office Supplies £ 5 000,00 Insurance £ 24 500,00 Lighting and Heating £ 80 000,00 Transportation £ 100 000,00 Salaries and Wages £ 309 300,00 Miscellaneous Expenses £ 50 000,00 Total Start-up expenses (I) £ 568 800,00 Start-Up assets Computers, Printers, and Faxes £ 25 000,00 Motor Vehicles £ 100 000,00 Furniture £ 12 500,00 Software programs £ 15 000,00 Research and Development £ 250 000,00 Total Assets (II) £ 402 500,00 Total Start-up Cash Required (I+II) £ 971 300,00 To achieve our objectives, ABS & Associates is seeking additional financing. This loan will be paid from the cash flows from the business, with the assets of the company, supported by the character experience, assets and personal guarantees as collateral security. We will be seeking an additional £750000 Company location and facilities ABS & Associates consultancy will be located in London, the central the financial and business hub of the United Kingdom. This location is strategically situated on one of the busiest and most populated urban conurbations in Europe. Being a commercial, financial and business city, it is a high profile area, with easy access from all parts of world. The premises have been secured at £2.500 per month. ABS & Associates is considered a complete ‘accounting and consultancy firm. We will offer a wide range of services, some of which will include: Tax Consultancy: ABS & Associates will assist businesses, individuals and other entities with tax strategy, planning, and compliance. ABS & Associates will also be delivering a wide range of business advisory services through its dedicated tax professionals spread all over the country. Our cream of tax consultants, lawyers and other in house resources will be the idea integrated solution to the client’s problems. Audit and Assurance: At ABS, our pool of human capital and resources will help customers and would be customers with complex accounting issues like valuation, share plans, listing, corporate treasury and adherence to IFRS conversions. We will develop an approach that best suits our client’s nature and size of business drawing upon our expertise. Human Resources: At ABS, the customers are primary to our activities, thus through a multi-disciplinary approach we will give advice on all aspects of people management, helping our clients to create value for their businesses through people. Transactions: Our cream of experts will give companies and firms advice on corporate strategies on issues like mergers and acquisitions, growth and exit plans, divestments and strategic valuation. Performance improvement: ABS & Associates intend to help organizations in their designing, management and execution of lasting change. We will also help companies to build the knowledge necessary to make this change effective and sustainable. MARKETING STRATEGY Our motto ‘Good accounting and management makes an excellent business’ will be our main marketing tool. ABS & Associates will invest and lay emphasis on customer satisfaction to market our services and break through the market. As we will lay emphasis on relationship marketing Most of our clients will be through referrals to existing clients. Through extensive use of the media like the radio, television and other forms of communication such as the telephone, ABS & Associates will make maximum use of personal negotiations. Through the past positive credentials within our background we will do cold selling and marketing. At ABS & Associates also rely on our past clients on an individual basis to be our marketing agents. MANAGEMENT SUMMARY All the partners of ABS & Associates are experts in diverse areas. All the partners are certified public accountants and consultants in business. The business ideal behind ABS & Associates is to organize and manage the business relatively in a creative and innovative manner to generate very high levels of customer satisfaction, and to create a working climate conducive to a high degree of personal development and economic satisfaction for employees. At ABS & Associates, we will organize classes to our employees for them to improve on their knowledge and skills on auditing and consulting and other areas of deficiency. Our packages will be unique in the industry as through handsome pay packages we will motivate our employees as can be seen in our start up summary. The company is created on a mutual partnership with the partners contributing and sharing all profits and losses on a 3:1:1 basis. To ensure smooth, efficient and effective take off, the founder will act as the Chief Executive Officer for the first year on a salary of £1500 per month while the other partners sit in as management supervisors on a salary of £1.000 per month each. There will however, be need for the engagement of a full time CEO on a monthly remuneration of £2000 after the business has taken off and is fully functional after the first year. The potential Chief Executive Officer will be drawn from our team of accountants and consultants we intend to employ. This is also intended to act as a motivator for hard work amongst the employees for this possible promotion. THE PERSONNEL PLAN ABS personal plan include a receptionist who will welcome and position customers for services according to their order of arrival. The receptionists will also be responsible for taking and directing all business telephone calls. The Teller will collect and record all cash transactions. Our two tellers will be on a handsome salary of £500 each. Being a consultancy firm, we at ABS intend not to keep many office workers but will have a variety of field workers who will interact with companies and individuals. We intend to employ at least 2 consultants for a start. This figure is expected to rise drastically as it is expected that we will expand rapidly and go international within only two years of existence. THE FINANCIAL PLAN For simplicity purposes, our bills will be paid one month after the successful completion of any job. Hence, all cash received in a month will be considered as payment for services rendered in the preceding month. Also, payroll will be combined into one, bearing in mind that all auditors and consultants will be paid a flat £1.500 per month plus a 5% motivation on sales for each month. Assuming that the company for the first year does business with 35 firms which pay an average of 30.000 per job. These number of jobs then increase to 50 and 75 during the second and third years respectively. Expenses in doing this business which will involve travelling and other material costs for the three years also grow steadily as. We will also take a comprehensive insurance on our business at a premium of £15000, £18000 and £24000 for the three years respectively for both the business and workers. Research and development will be amortized at 10% straight line basis per annum while computer equipment will be depreciated at 25% . ABS & Associates intend to obtain a bank loan of £750.000 to help finance the start-up of the business. This will be a long term loan payable within five years at an annual rate of 15%. For working capital management, the company also intends to maintain a current account with the bank into which payment for bills will be made. It will be a five year loan payable every year end. The company also seeks to maintain a cash impress of £5000 for any eventualities. Since most companies’ financial years have been adjusted to match with calendar year, it is assumed that all business will be done in December and the bills settled the following month that is January the following year. Taxes on profit will be deducted at 30% which is the UK tax rate. If during the year, other expenses in addition to the start up expenses With the above in mind, the company’s financial statements will look as follows. ABS & Associates PROJECTED INCOME STATEMENT FOR THREE YEARS. 2010 2011 2012 Sales £1 050 000 £1 800 000 £3 000 000 Cost of Sales £250 000 £350 000 £480 000 Gross Profit £800 000 £1 450 000 £2 520 000 Other Expenses: Office Supplies £5 000 £18 500 £24 000 Insurance £24 500 £35 000 £50 000 Lighting and Heating £80 000 £90 000 £100 000 Transportation £100 000 £115 000 £130 000 Salaries and Wages £309 300 £346 800 £406 800 Miscellaneous Expenses £50 000 £55 000 £65 000 Earnings Before Interest, depreciation and Amortisation £568 800 £660 300 £775 800 Interest payable (15%) £33 750 £33 750 £33 750 Depreciation of Fixed Assets (25% straight-line method) £38 125 £38 125 £38 125 Amortisation of R&D expenditure (10%) £25 000 £25 000 £25 000 Profit before tax £471 925 £563 425 £678 925 Tax (30%) £141 578 £169 028 £203 678 Profit after Tax £330 348 £394 398 £475 248 ABS & Associates PROJECTED BALANCE SHEET FOR THE THREE YEARS FIXED ASSETS 2010 2011 2012 Computers, Printers, and Faxes £18 750 £14 063 £10 547 Motor Vehicles £75 000 £56 250 £42 188 Furniture £9 375 £7 031 £5 273 Software programs £11 250 £8 438 £6 328 Research and Development £225 000 £202 500 £182 250 TOTAL £339 375 £288 281 £246 586 CURRENT ASSETS Cash/bank £3 700 £3 700 £3 700 Accounts receivable £1 050 000 £1 800 000 £3 000 000 TOTAL £1 053 700 £1 803 700 £3 003 700 TOTAL ASSETS £1 393 075 £2 091 981 £3 250 286 LIABILITIES CURRENT LIABILITIES Accounts Payable £87 727 £437 236 £1 156 293 Long term debt £750 000 £705 000 £670 000 Shareholders equity £225 000 £225 000 £144 000 Net results £330 348 £724 745 £1 199 993 Other liabilities TOTAL LIABILITIES £1 393 075 £2 091 981 £3 250 286 From the above figures, it can be seen that ABS & Associates is a feasible business that intends to make profits within its first year of operation. The following ratios will be used to determine the financial health of the business for the cumulative three years Ratio Formula 2010 2011 2012 Return on assets Profit before taxes/Total assets 0,41 0,32 0,24 Return on equity Profit before taxes/Shareholders equity 0,76 0,88 1,03 Returns on sales Net profit/net sales 0,31 0,22 0,16 Debt ratio Total Debt/Total liabilities and equity 0,30 0,24 0,19 From the above analysis, it can be seen that at the end of the first year, the company would have generated enough earnings to take care of its working capital and start repaying its long term debt. Though returns on assets and profit margin seem to be decreasing as the years go by, the company intends to adopt a rigorous management style that will cut down on cost and hence drive up these values. ABS & Associates STATEMENT OF CASH FLOW FOR THE THREE YEARS 2 010 2 011 2 012 Net Profit after tax £330 348 £394 398 £475 248 Add back Depreciation £38 125 £38 125 £38 125 Amortization £25 000 £25 000 £25 000 Net cash flows from operating activities £393 473 £457 523 £538 373 Cash Flows from Investing activities Purchase of equipment -£402 000,00 0 0 Cash flows from financing activities* - - - Loan from Bank £225 000 0 0 Start-up contributed Capital £750 000 0 0 Net cash flows £966 473 £457 523 £538 373 *Cash flow from financing activities is zero because it has been interest on loan was has been taken care of in the calculation of net income. NET PRESENT VALUE CALCULATION Total Cash Flows £1 962 368 Discount rate 15% 15% 15% Present value of cash flows 0,869565217 0,75614367 0,657516232 Present value of cash flows £840 411 £345 953 £353 989 Total Cash Flows £1 540 352 Initial Investment -£971 300,00 Net Present value of cash flows £569 052 CONCLUSION. ABS & Associates has a collection of seasoned and well reputable consultants. ABS, the founding member has thirteen years experience in similar businesses. The rest of the team, that is Bila, Clarton and Andrews are known names in Europe for their enormous contributions to the auditing and accounting field. These four, are just a perfect match such a partnership in this type of business. We intend to use our past experiences both in our respective firms in negotiating new contracts, breaking new grounds and giving our clients maximum value for their various businesses through coaching and mentoring as well as establishment of business financial reports. The cream of consultants that will work with us will be adapted to a fast paced dynamic environment that will embrace succession planning to make the business last for ages. References Bagley, C., Dauchy, C. (1998) The Entrepreneur’s Guide to Business Law. New York:West Bodie Zvi et al (2007): Investments. McGraw Hill. Fifth Edition Bourdieu, P. (1984)., Distinction, trans. R.Nice, Routledge and Kegan Paul, London. Cornwall, J. C., Vang, D. O., Hartman, J. M. (2003) Entrepreuneurial Financial Management. An Applied Approach. Pearson. Debbie, H. (2005) Personnal Financial Planning: Theory and Practice. Hallow. Pretice Hall. Penman Stephen H. (2007) Financial Statement Analysis and Security Valuation. McGraw Hill, Third Edition. Vessenes, P., Vessenes, K. (2005). Building Your multi-million Dollar Practice: Success Strategies for Top Producing Advisors. Chicago, Derborn Trade Pub. Web sites consulted: http://www.entrepreneur.com/services/sampleplans/ http://www.pwc.com Read More