BUSI 336 Week 6 Financial Feasibility Analysis (Group) Example

Counting the Cost: A Financial Feasibility Analysis for SteadyHome Safety Services

Startup Capital Requirements

The founder's existing pickup truck will tow the trailer, which avoids a vehicle purchase. Estimates come from supplier price lists and quotes the group gathered in Modules/Weeks 3 through 5.

Projected First-Year Income Statement

The founder will keep a hospital job during the first year, so the business does not need to pay a salary while it proves itself.

Break-Even Analysis

Each assessed household produces average net revenue of $600 ($66,000 divided by 110) and variable costs of about $316 ($34,790 in materials and labor divided by 110), leaving a contribution of about $284. Dividing fixed costs of $16,000 by $284 gives a break-even point of about 57 households per year. The forecast of 110 households provides a margin of safety of roughly 48 percent.

Sensitivity Test

If only 55 households buy, half the forecast, net revenue falls to $33,000 and contribution to about $15,600, leaving a loss of roughly $400 before the founder's compensation. That loss could be covered from the $6,000 reserve. The business therefore survives a weak first year, though it would not yet justify leaving the founder's job. Federal data show why such tests matter: roughly one in five new private businesses close within their first year, and about half are gone within five years (U.S. Bureau of Labor Statistics, 2024). A plan that works only if every forecast comes true is a hope, not a plan.

Funding Plan

Cassar (2004) studied the financing of new ventures and found that startups rely heavily on owners' funds and debt, with larger and more asset-intensive ventures more likely to use outside and bank financing. SteadyHome is small and light on assets, so the group proposes $12,000 from the founder's savings and a $10,000 microloan through a lender in the U.S. Small Business Administration's microloan program, for $22,000 in total. Keeping the loan small limits monthly payments to an amount the business can cover even in the sensitivity scenario.

Biblical Worldview

In Luke, Jesus pictures a man who lays a tower's foundation without budgeting for the walls and becomes a joke to the neighbors when the money runs out (English Standard Version Bible, 2001/2016, Luke 14:28-30). This analysis is that counting. Proverbs also pictures the debtor as bound to the creditor (English Standard Version Bible, 2001/2016, Proverbs 22:7), which is why the group limited debt to less than half the startup capital and chose a loan the business can repay in a poor year.

The analysis leaves two questions open. The 35 percent materials ratio rests on supplier quotes for common installations and may rise if customers choose larger projects such as ramps. The contractor labor figure assumes the partner contractor handles only work requiring a license, so a change in that arrangement would raise costs.

Conclusion

SteadyHome is financially feasible as a part-time launch. Startup costs are modest, break-even requires about half the forecast customers and a pessimistic scenario produces only a small, covered loss. The business is not yet attractive enough to replace the founder's salary, which the plan acknowledges. The Draft Business Presentation will carry these figures forward with the earlier analyses.

References

Cassar, G. (2004). The financing of business start-ups. Journal of Business Venturing, 19(2), 261-283. https://doi.org/10.1016/S0883-9026(03)00029-6

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

U.S. Bureau of Labor Statistics. (2024). Business employment dynamics: Establishment age and survival data. U.S. Department of Labor. https://www.bls.gov/bdm/bdmage.htm