To determine the viability of a project, it is necessary to carry out a financial forecast analysis (Holland, Sanchirico, and Johnston 69). ServiceME is a web portal project that is very expensive to establish. Therefore, financial assistance was sought from credit institutions. This is one of the reasons why the project must have a detailed revenue model to facilitate the loan settling process and to enable the stakeholders to earn some profit. This paper will give a detailed description of ServiceME’s anticipated revenues, expenditures, and the anticipated net profit for the first four quarters based on the prevailing market conditions.
As indicated, ServiceME is a web portal business that started on a low tone, and most of the funding came from credit institutions. The loan matures at the end of the first quarter; therefore, loan repayment expenses are expected to appear in the list of the monthly expenditures from the beginning of the second quarter. To bring a clear outlay of how the loan was spent, a detailed description of the monies borrowed is shown below.
- ServiceME bought its domain name for $200. This is a one-time expense, but renewal for the ownership of the domain name is done every year.
- ServiceME paid $ 10,000 to hire a professional designer who came up with the eloquent appearance of the site.
- ServiceME bought a very articulate Apple computer that would act as the main server. It also bought some other smaller computers that would help serve customers whenever the workload is too much. The computers cost $6,000.
- ServiceME bought printers, flash drives, and external hard disks for $1500.
- ServiceME bought five Nikon digital cameras for $2000.
- ServiceME made business cards, bought an office phone, and other office equipment at a cost of $600.
- Goodwill paid for the business premises amounted to $ 10,000.
- The business licensing fee amounted to $1000. This fee must be renewed per year.
- The miscellaneous expenses that comprised of voice call expenses, commuting expenses, and the organizing committee allowances amounted to about $10,000.
Fixed quarterly costs
- Since ServiceME is a web portal business, it is expected to undergo some web hostage expenses of $200 per quarter.
- ServiceME is a web portal business that anticipates dealing with e-commerce; therefore, it will need to pay for disk space, bandwidth, and a secure socket layer encryption that would cost $80 per quarter.
- ServiceME will have to undergo some design and production costs of about $100 per quarter.
- ServiceME will need to set aside an average amount of $ 1000 per quarter for site content expenses. The amount may vary depending on the number of articles, the number of words, and the length of time.
- Internet fees will cost about $40 per quarter. However, this is a tentative estimate because with time; the company may decide to share the WiFi with the neighbors and cut the internet fee expenses.
- Rent, water, and electricity bills would amount to $600 per quarter.
- Salaries and wages would cost about $2,000 per quarter (the amount includes the cost of hiring an accountant).
- Consultation fee would amount to $1,000 per quarter
- Miscellaneous expenses would be about $1,000 per quarter.
The web portal business is flourishing in the dawn of the information age. Moreover, the business anticipates offering the best of services to have a competitive advantage over its competitors. While it may not do very well in the first quarter, the company would be popular in the second and subsequent quarters and its website would experience some traffic. The main ways through which ServiceME is likely to generate revenue are as listed below.
- Finder fee: ServiceME anticipated to generate revenue amounting to $600 by directing people to other websites, where they can find the products and services of their interest. In the subsequent quarters, ServiceME may earn $900, $1200, and $1500 from the finder fee.
- Advertisement fee: ServiceME will capitalize on making its site very popular so that it can find many clients advertising from their website. For the four quarters, the company anticipates obtaining advertisement fee income of $1500, $2000, $4000, and $6000 respectively.
- ServiceME anticipates becoming a broker. It may sell products and services, domain names, developed websites, software, and all junks of stuff (Powel, Jones and Cutts 55). ServiceME anticipates obtaining revenue of $600, $1000, $1500, and $2400 respectively for the first four quarters.
- ServiceME can also make about $400, $500, $800, and$900 for the first four quarters from pop-up ads.
- Sell of sponsored content would earn ServiceME an amount of $600, $1000, $1500, and $2400 for the first four quarters.
- ServiceME is likely to make many other miscellaneous incomes from affiliate marketing, blogs, downloads, donations, micropayments, revenue from subscriptions, banner ads, revenue from sponsorship of site sections, affiliate revenue, and web hostage packages among others. ServiceME anticipates having some miscellaneous income amounting to $1000, $1500, $2400, and $3000 for the first four quarters.
Calculating the net profit
The net profits are calculated by eliminating all the expenses of the company (Farris et al. 56). Firstly, we consider the loan to be settled.
- Total loan offered: $41,300.
- The interest rate agreed upon is simple interest at a rate of 24%, payable on a fixed quarterly basis for a period of 3 years (12 quarters), as from the beginning of the second quarter.
- The total amount including the interest is $51,212.
- The amount to pay for the loan on a quarterly basis is $4,267.667.
The anticipated net profits for ServiceME are summarized in the table below.
|Revenue/expenditure||Quarter 1 ($)||Quarter 2 ($)||Quarter 3 ($)||Quarter 4 ($)|
|Sponsored sites |
|Design & production||100||100||100||100|
|Water & electricity||600||600||600||600|
|Salaries & wages||2000||2000||2000||2000|
As evident from the summary table, ServiceME will experience some losses in the first two quarters. However, as it becomes popular, its profits will double or even triple over the quarters. Therefore, ServiceME is a worthwhile investment that requires focused individuals to run it. In the first and second quarters, the stakeholders of the company may have to service the losses from their own money. However, they would begin obtaining their rewards from the third quarter and in the subsequent quarters.
Farris, Paul, Neil Bendle, Phillip Pfeifer and David Reibstein. Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, 2010. Print.
Holland, Daniel, James Sanchirico and Robert Johnston. Cost–Benefit Analysis: Concepts and Practice, Upper Saddle River, NJ: Prentice Hall, 2006. Print.
Powel, Thomas, David Jones and Dominique Cutts. Web Site Engineering: Beyond Web Page Design, Upper Saddle River, NJ: Prentice Hall, 2008. Print.