Consider the following situation:
You and two of your very best friends have started an engineering consulting firm. This firm studies advanced principles and makes recommendations to clients in the area of “your specialty here.”
You have established a monthly revenue stream of $48,000 per month for the first year from six customers (two per partner) located in the southwestern US. Your headquarters is Las Cruces, NM but you spend a lot of time traveling. You actually make about 30 trips per partner a year at an average cost of $2,000 per trip to make sales and attend conferences besides consulting. Every year you each buy a new computer and update software at $5,000 per year per partner. You hope to expand to four customers per partner by year 3. Assume revenue per customer is $8,000 per month.
Create and explain a financial model that governs a five-year planning horizon for your firm. The four of you consult, travel, market, make sales calls, attend professional conferences and use computers and Internet access to do your jobs. Do not consider inflation, taxes or interest in any part of this analysis.