Comprehensive Business Plan: Owner's Reward and Profitability Analysis

This business plan focuses on determining the owner's target reward based on a required rate of return of 25%, considering a risk-free investment rate of 5%. The initial investment is $100,000, with owners receiving salaries for their efforts, growing at 10% annually. The preliminary profit plan projects revenue growth from $80,000 in Year 1 to $117,128 in Year 5, with a net profit margin increasing to 28.50% ($33,381). The analysis indicates that the business can cover expenses and provide a sufficient return on investment. The plan also highlights the common practice of reinvesting profits in small businesses, potentially resulting in lower initial owner salaries. Desklib provides access to this document and other solved assignments for students.

Running head: BUSINESS PLAN
Business Plan
Name of the Student:
Name of the University:
Author’s Note:

1BUSINESS PLAN
Owner’s Target Reward
The estimated reward for the owners target reward would be calculated on the base of the
required return from the business depending on the risk and return characteristics of the business
class. The required rate of return from the business class would be around 25%, which includes
the risk free rate of investment of around 5% (Deo and Sethi 2016). The initial investment
amount considered by the investor would be around 100,000 where the investor or the owner
would be paid for the extra time effort and responsibility taken in the form of salaries. The
investor would also be rewarded a return on investment of around 25% for the total capital
invested in the business. The salary payable for the top management level would be around 5200
for the effort given by them and hence would grow by about 10% per year. After assessing, the
income of the business plan and the income from the business the net profit generated from the
business would be able to sufficiently cover all the key expenses of the company including the
overhead expenses and the salaries. The net profit margin of the company is estimated to be
higher than the required rate of return for the business venture showing a good profitability
picture for the business (Liu, Lawrence and Vu 2015).
H. Complete Preliminary Profit Plan:
Particulars Year 1 Year 2 Year 3 Year 4 Year 5 Percentage
%
Revenue $80,00
0
$
88,000
$
96,800
$
106,480
$
117,128
100.00%
Gross profit
margin
$48,00
0
$ 52,800 $ 58,080 $ 63,888 $ 70,277 60.00%

2BUSINESS PLAN
Overhead $20,00
0
$22,000 $24,200 $26,620 $ 29,282 25.00%
Net profit margin $
2,800
$
25,080
$
27,588
$ 30,347 $ 33,381 28.50%
The above table relevantly depicts the overall revenue, gross profit, overhead and net
profit margin of the new business. In addition, the table represents the overall net profit margin,
which will be generated by the company over the accumulated revenue on the fiscal year. This
relevantly helps in detecting that the overall profits of the owners are mainly at 28.50% of the
total revenue, which amounts to $33,381 in the last year. However, the gross profit margin is
mainly at the levels of 60% of the total revenue, which indicates the cost of production
consumers 40% of the total revenue to deliver the specified products for selling. Furthermore, the
overhead is mainly assumed to be at the levels of 25%, which eventually help in detecting the
level of administrative expenses that is being used by the company to adequately support the
relevant expenses to increase brand image and conduct other activities. However, some of the
starters relevantly use the total profits is investment for the business, which relevantly make the
salary of the owner nil or low (Ghezzi et al. 2015). Hence, from the evaluation it can be detected
that small business relevantly composes low profits for the owners, as the income is reinvested.

3BUSINESS PLAN
Reference
Liu, C., Lawrence, A. and Vu, M., 2015. Be On Target: A Business Plan for Promoting Wellness
in Target Stores.
Deo, P. and Sethi, D., 2016. Financial Planning-A Shareholder Perspective.
Ghezzi, A., Cavallaro, A., Rangone, A. and Balocco, R., 2015, April. A Comparative Study on
the Impact of Business Model Design & Lean Startup Approach versus Traditional Business
Plan on Mobile Startups Performance. In ICEIS (3) (pp. 196-203).