Consider the following situation: | 563 | Aaniiih Nakoda College

    

You and two of your very best friends have started an engineering consulting firm named “Six Sigma Is Not Enough.” This firm deals with the design of products or processes for consistent greatness. 

You have established a monthly revenue stream of $25,000 per month for the first year. There are six customers (two per partner) and they are located within a two-hour drive. In other words, your firm’s total revenue is $25,000 per month and you pay all your salaries, costs, etc. out of that revenue. 

You need to continue marketing your services so you write articles for trade websites, participate in professional societies and other name-recognition activities.  This leads to quite a work week!  Your headquarters is “Your town’s or city’s name here” but you could spend a lot of time traveling. If the COVID-19 situation clears up you plan to increase your travel. Consider the possibility of 20 trips a year at an average cost of $2,500 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. Growth is critical for your firm—clients leave and join over time. Assume revenue per client is constant.

Create and explain a financial model that governs a three-year planning horizon for your firm. The three 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.