Financial Forecast

The total startup cost of the business is $135,000, of which $35000 goes towards the initial machinery & tooling, while $100,000 is for the product launch. However, the team has raised $2 Million total from internal investments, equity seed capital, and debt instruments, of which the seed capital is conditional on achieving $2 Million in sales. The team is confident this marker will be achieved and hence the number has been included in the proforma section of the financial analysis. As per team estimates, at $29.9, the product will sell approximately 80,000 units in the first year since launch, with the number growing 50% annually for the initial stage as the product expands to more geographies. 

Based on these figures and conservative growth estimates, ManeMagic is projected to break even within its first year of operation, with growing cash flows year on year.

Discounted Cash Flow Analysis - 

As you can see from the Discounted Cash Flow Analysis below, the product can break even within approximately a month, displaying the great potential of ManeMagic to capitalize on the market gap the team has identified. ManeMagic is on track to generate approximately $10 Million in net cash flows over 5 years,  with a relatively small investment of $135,000, about 1.5% of the value generated in the next few years, while assuming a conservative target estimate of 1.2% of the global hair care market.

 Increasing the product price increases the product margin (which is already huge), allowing an increase in the value generated per unit sold. However, there will also be a significant decrease in product volumes since demand decreases with cost. Decreasing the product price, on the other hand, will increase the volume sold while decreasing the product margin. However, the exact effect of these price changes and the optimal price of the product cannot be determined analytically and pricing has hence been decided based on other products in the target market category our product falls into. 

Net Running Cash Balance - 

As visible from the proforma, the net cash balance is initially built up from the personal investments from ManeMagic's founders, Investor's equity capital, and debt from a small business loan with an interest rate of 7%. While it declines slightly during the initial year when there are few/no sales, the net cash balance grows exponentially to about 5 times its initial value to $8.85 Million, growing at around 14% QoQ. This demonstrates that in addition to being a profitable business venture, ManeMagic also has immense potential to generate growing cash flows since its early stage, and proves it is an effective investment.