Diane's Dog Sweater Case Study - Production and Financial Projections Dianne was excited. She had made the decision to grow her online business. She felt that was the right business model that fit the future vision of her business, where in a few years the business could virtually run without her. But there was a lot of work to do before then. She felt that women under the age of 30 was a good target group to go after, so she needed to think about how she was going to begin promoting to them. She was going to call the line "The Dog Fashionista line." She knew that they didn't mind spending more money for a higher quality product. They loved more stylish designs that made a real fashion statement for their dogs. The overwhelming majority of this market had smaller dogs as most lived in apartments, so she needed to keep that in mind when she was doing her production plan. Part of her growth plan was to grow her business from a making Made-To-Order sweaters in her garage to a leased business space where she could grow the business. She had some business decisions to make and needed to have a better idea of what her cash flow needs would be to grow the business. She had to figure out the total of her capital expenditures required to get her business set up to execute on her Growth Plan Dianne wasn't looking forward to going through the Pro- forma income statement with her accountant. She never was very good at math and finance, but realized it was a critical skill she needed to learn if she was going to be successful growing her business. First she needed to move her Made-to-Order production out of her garage based on her sales projections for year one. Diane was going to focus on selling two products in 2020. The first was a custom dog sweater priced at $50. Per sweater cost to produce the sweater was estimated at $25.The second product was the stylized t-shirt for the owners that matched their dog's sweater style priced at $30, which cost $10 to make. Starting in January 2020, Dianne is projecting that she'll make an average of 25 sales per month for the first three months, 50 sales per month for the next 3 months, 75 sales per month for the next 3 months, and 100 sales per month for the last 3 months. She also estimated that 20% of her customers buying a dog sweater would also buy a t-shirt for themselves. Diane also decided Leger do any of the . months, 50 sales per month for the next 3 months. 75 sales per month for the next 3 months and 100 sales per month for the last 3 months. She also estimated that 20% of her customers buying a dog sweater would also buy a t-shirt for themselves. Diane also decided that she would no longer do any of the sewing herself beginning in 2020, so she needed to hire people. She calculated that I person using the new commercial sewing machines she was buying could produce 2 sweaters per day. The custom T-shirts could be made same day, thanks to a new t-shirt press she would be buying for the office. The sewing office would be open on average for 22 days per month. Diane also decided to move the production out of her garage, mainly because the city contacted her and said it wasn't zoned for a commercial business and therefore she could not operate it there. She signed a 3 year lease for a building beginning in December 2018 for $2,500 per month. Diane looked at what equipment and other expenditure she would need to get the business ready to expand. The list included: 2 commercial-grade sewing machines - $2,000 Office equipment - $1,500 T-shirt Press - $1,000 Shopify online store and website - $3,500 2 office computers plus design software - $4,000 - Marketing set-up (logo, business cards and brochure) $1,000 Company incorporation and other legal fees - $1,000 The business had $10,000 cash in their account Questions: How many sweaters does Dianne need to produce in 2020? How many t-shirts? How many sewers will Diane need to hire in 2020 to keep up with production? Should she hire them at the same time? If not, when should she hire them? What is the total Capital Expenditures bill? Why isn't her building rent listed as a capital expenditure? What type of expense is it? Diane's Dog Sweater Case Study - Production and Financial Projections Dianne was excited. She had made the decision to grow her online business. She felt that was the right business model that fit the future vision of her business, where in a few years the business could virtually run without her. But there was a lot of work to do before then. She felt that women under the age of 30 was a good target group to go after, so she needed to think about how she was going to begin promoting to them. She was going to call the line "The Dog Fashionista line." She knew that they didn't mind spending more money for a higher quality product. They loved more stylish designs that made a real fashion statement for their dogs. The overwhelming majority of this market had smaller dogs as most lived in apartments, so she needed to keep that in mind when she was doing her production plan. Part of her growth plan was to grow her business from a making Made-To-Order sweaters in her garage to a leased business space where she could grow the business. She had some business decisions to make and needed to have a better idea of what her cash flow needs would be to grow the business. She had to figure out the total of her capital expenditures required to get her business set up to execute on her Growth Plan Dianne wasn't looking forward to going through the Pro- forma income statement with her accountant. She never was very good at math and finance, but realized it was a critical skill she needed to learn if she was going to be successful growing her business. First she needed to move her Made-to-Order production out of her garage based on her sales projections for year one. Diane was going to focus on selling two products in 2020. The first was a custom dog sweater priced at $50. Per sweater cost to produce the sweater was estimated at $25.The second product was the stylized t-shirt for the owners that matched their dog's sweater style priced at $30, which cost $10 to make. Starting in January 2020, Dianne is projecting that she'll make an average of 25 sales per month for the first three months, 50 sales per month for the next 3 months, 75 sales per month for the next 3 months, and 100 sales per month for the last 3 months. She also estimated that 20% of her customers buying a dog sweater would also buy a t-shirt for themselves. Diane also decided Leger do any of the . months, 50 sales per month for the next 3 months. 75 sales per month for the next 3 months and 100 sales per month for the last 3 months. She also estimated that 20% of her customers buying a dog sweater would also buy a t-shirt for themselves. Diane also decided that she would no longer do any of the sewing herself beginning in 2020, so she needed to hire people. She calculated that I person using the new commercial sewing machines she was buying could produce 2 sweaters per day. The custom T-shirts could be made same day, thanks to a new t-shirt press she would be buying for the office. The sewing office would be open on average for 22 days per month. Diane also decided to move the production out of her garage, mainly because the city contacted her and said it wasn't zoned for a commercial business and therefore she could not operate it there. She signed a 3 year lease for a building beginning in December 2018 for $2,500 per month. Diane looked at what equipment and other expenditure she would need to get the business ready to expand. The list included: 2 commercial-grade sewing machines - $2,000 Office equipment - $1,500 T-shirt Press - $1,000 Shopify online store and website - $3,500 2 office computers plus design software - $4,000 - Marketing set-up (logo, business cards and brochure) $1,000 Company incorporation and other legal fees - $1,000 The business had $10,000 cash in their account Questions: How many sweaters does Dianne need to produce in 2020? How many t-shirts? How many sewers will Diane need to hire in 2020 to keep up with production? Should she hire them at the same time? If not, when should she hire them? What is the total Capital Expenditures bill? Why isn't her building rent listed as a capital expenditure? What type of expense is it