Startup AB: Overview$/$Background

Startup AB$,$ which is in the pre$-$product commercialization startup stage, is preparing its five year financial forecast to support both its upcoming capital fund raising initiative and internal financial budgeting. The Company plans to leverage the provided $$#$2-$Assignment $($Financial Modeling$-$Startup AB$)$ Excel Spreadsheet integrated Financial Model. Fortunately, this beginning Excel Financial Model closely resembles Startup AB$$s business model. If any non$-$applicable input variables exist, don$$t delete the variable as it will negatively impact the embedded spreadsheet formulas. Remember that any of the $$non$-$applicable$$ business input variables can easily and effectively be eliminated by $$entering zeros$$ for the corresponding non$-$applicable variables within this #$2-$Assignment $($Financial Modeling$-$Startup AB$).$ Also, only modify or adjust the $$Input Assumption $$ Variables$$ under the $$Income Statement Assumptions$$ tab within this #$2-$Assignment $($Financial Modeling$-$Startup AB$).$ Don$$t ever enter input data directly into or manually insert computed numbers$/$figures into the any of the Financial Statement tabs within the Financial Modeling.

Given the below Co$-$Founder Executive developed business $$input assumptions$$ for just the Income Statement populate or insert these assumptions into the $$Income Statement Assumptions$$ tab ONLY within the #$2-$Assignment $($Financial Modeling$-$Startup AB$)$ in order to create$/$prepare an annual forecasted five$-$year Income Statement. This Financial Modeling is effectively a virtual simulation of the Startup.

Startup AB: Income Statement Assumptions

Strategically, the CEO plans to outsource all future manufacturing requirements in order to mitigate capital requirements and enable the Startup to focus on its core competencies of building a strong brand identity. Since the product development for both Product A & B has not yet been completed, the CEO has not been able to fully finalize negotiations and secure firm unit prices from a specific outsourced manufacturer. However, based upon extensive conversations with several potential manufacturers, which have indicated there will be significant economies of scale associated with Product A$,$ the CEO has forecasted the below stated unit costs for Product A & B$,$ respectively. However per the Co$-$Founder discussions, the CEO is nervous regarding the significant forecasted declining unit costs for Product A$.$

After extensive consumer market research, conversations with targeted key Distributors, and forecasted remaining Product Development projections, the VP Sales & Marketing prepared the following forecasted annual unit sales forecast based upon targeted $$wholesale$$ Unit Sales $($i$.$e$.$ the unit price received from the Distributors$)$ pricing strategy for both Product A & B$.$ Per the Product Development plan, Product B will not be ready for sale until the beginning of Year $3$ so the Unit Price$/$Costs are just zero for the first two years. Additionally under this current product pricing strategy, Startup AB plans to take a $$breakeven$$ approach towards handling$/$shipping$.$ Startup AB plans to charge each customer an $$8$ shipping$/$processing fee per all units, both Product A & B$,$ and estimates the corresponding packing & freight costs to also be $$8$ per all units over the next five years.

Year $1$ Year $2$ Year $3$ Year $4$ Year $5$

Product A:

Unit Price $$0$ $$200$ $$200$ $$200$ $$200$

Unit Sales $010,00025,00045,00065,000$

Unit Cost $$0$ $$100$ $$80$ $$75$ $$75$

Product B:

Unit Price $$0$ $$0$ $$75$ $$75$ $$75$

Unit Sales $005,00015,00030,000$

Unit Cost $$0$ $$0$ $$25$ $$25$ $$25$

Currently, the Startup AB executive full$-$time staffing only includes the two Co$-$Founders: the CEO @ $$140,000$ and the VP Sales & Marketing @ $$110,000$ base salaries. Each Co$-$Founder owns a meaningful equity position in the Startup. Beyond the two current Co$-$Founders, the executive team will include a VP Engineering & Operations @ $$95,000$ and future CFO$/$Controller @ $$85,000.$ The VP Engineering & Operations, who is initially overseeing the outsourced product development of Product A$,$ will only be working $$half$-$time$($i$.$e$.0\mathrm{.}5$ FTE$)$ during the first year, but will then transition into a full$-$time employment status at the start of Year $2.$ The current executive staffing plan is recruit and hire the CFO$/$Controller to join the Startup full$-$time beginning in Year $2.$

Given the Startup plans to exclusively sell both Product A & B thru large Regional Distributors, Startup AB will not require a traditional sales field force. The CEO & VP Sales & Marketing personally will effectively handle all sales related initiatives that are targeted at several key Regional Distributors. However, the business will need to provide strong telephonic delivered customer service in order to support these Distributors and to ensure the longevity of these critical strategic partnerships. Therefore, the Co$-$Founders have forecasted