A. Cost Assumptions: The initial target market for the business is the city of Los Angeles....

 

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A. Cost Assumptions: The initial target market for the business is the city of Los Angeles. Trucks2go needs funding for setting up its Inspection Center (for interviewing its gig-workers and inspecting their vehicles), the Trucks2go app, the website development, marketing, personnel, etc. The following are the cost assumptions: (detailed justification and calculations for each number is provided elsewhere.) 1. The founders of the company have secured a small business startup loan to start the company. The loan is secured on the physical assets of the Inspection Center and a founder's personal assets. The loan will cover the initial investment of $100,000 in the Inspection Center and initial app development of $500,000 which is planned to be outsourced. This is a 5 year loan, with an annual interest rate of 6.5% and monthly payment is scheduled for payback. 2. Initial website development will cost $200,000 in the first year. 3. Initial Trucks2go app development will cost $500,000. 4. Initial eCommerce backend Database System development including cloud hosting services: $1,200,000. 5. Operation cost of Trucks2go system, including website/app/backend upkeep and Admin personnel will be a total of $300,000 in the first year. It is this low because it will only be operational for 3 months in a small test market. Operation cost will increase to $800,000 for Year 2, and this is projected to increase by 50% per year over the previous year for Year 3, Year 4 and Year 5. 6. Additional Infrastructure costs (such as building rental, office equipment, etc.): first year will be $100,000, and this is projected to increase by 30% per year over the previous year for Years 2, 3, 4, and 5. 7. Additional Personnel costs: first year will be $200,000 (as all executives are not initially taking salary), the second year will be $800,000 and this is projected to increase by 50% per year over the previous year for Year 3, Year 4 and Year 5. 8. Marketing costs: these are estimated to be $500,000 for the first year, and will increase: by 10% for Year 2, by 15% over Year 2 for Year 3, by 20% over Year 3 for Year 4, and by 20% over Year 4 for Year 5. B. Revenue Stream Assumptions: Trucks2Go has done substantial market analysis and surveys. There are two major revenue streams: 1. Transaction fees: Trucks2go's major source of revenue will be earned by taking a 35% cut of the transaction amount (which is on par with Uber and Lyft's cut). Based on their extensive marketing research for the Southern California region, the transaction total is estimated at $300,000 in the first year as the company is testing out the market, recruiting users, and rolling out the app. The second year is estimated to be $4 million, and will continue to increase: by 50% over Year 2 for Year 3, by 60% over Year 3 for Year 4, and by 40% over Year 4 for Year 5. 2. Affiliate marketing revenue: It is estimated that the company will only begin to have an affiliated marketing revenue of $10,000 in Year 2 and this is estimated to increase each year over the previous year by 20%. A. Cost Assumptions: The initial target market for the business is the city of Los Angeles. Trucks2go needs funding for setting up its Inspection Center (for interviewing its gig-workers and inspecting their vehicles), the Trucks2go app, the website development, marketing, personnel, etc. The following are the cost assumptions: (detailed justification and calculations for each number is provided elsewhere.) 1. The founders of the company have secured a small business startup loan to start the company. The loan is secured on the physical assets of the Inspection Center and a founder's personal assets. The loan will cover the initial investment of $100,000 in the Inspection Center and initial app development of $500,000 which is planned to be outsourced. This is a 5 year loan, with an annual interest rate of 6.5% and monthly payment is scheduled for payback. 2. Initial website development will cost $200,000 in the first year. 3. Initial Trucks2go app development will cost $500,000. 4. Initial eCommerce backend Database System development including cloud hosting services: $1,200,000. 5. Operation cost of Trucks2go system, including website/app/backend upkeep and Admin personnel will be a total of $300,000 in the first year. It is this low because it will only be operational for 3 months in a small test market. Operation cost will increase to $800,000 for Year 2, and this is projected to increase by 50% per year over the previous year for Year 3, Year 4 and Year 5. 6. Additional Infrastructure costs (such as building rental, office equipment, etc.): first year will be $100,000, and this is projected to increase by 30% per year over the previous year for Years 2, 3, 4, and 5. 7. Additional Personnel costs: first year will be $200,000 (as all executives are not initially taking salary), the second year will be $800,000 and this is projected to increase by 50% per year over the previous year for Year 3, Year 4 and Year 5. 8. Marketing costs: these are estimated to be $500,000 for the first year, and will increase: by 10% for Year 2, by 15% over Year 2 for Year 3, by 20% over Year 3 for Year 4, and by 20% over Year 4 for Year 5. B. Revenue Stream Assumptions: Trucks2Go has done substantial market analysis and surveys. There are two major revenue streams: 1. Transaction fees: Trucks2go's major source of revenue will be earned by taking a 35% cut of the transaction amount (which is on par with Uber and Lyft's cut). Based on their extensive marketing research for the Southern California region, the transaction total is estimated at $300,000 in the first year as the company is testing out the market, recruiting users, and rolling out the app. The second year is estimated to be $4 million, and will continue to increase: by 50% over Year 2 for Year 3, by 60% over Year 3 for Year 4, and by 40% over Year 4 for Year 5. 2. Affiliate marketing revenue: It is estimated that the company will only begin to have an affiliated marketing revenue of $10,000 in Year 2 and this is estimated to increase each year over the previous year by 20%.

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Financial Assumptions and Projections Trucks2go has done substantial market analysis and surveys The... View the full answer