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Specialization in Financial Consulting for Today’s Youth, Capstone Project Example

Pages: 25

Words: 6787

Capstone Project


  1. Floor Plan of Boys & Girls Club
  2. Resumes of the persons identified as ownership or management of the company
  3. Floor plan of the facility
  4. Price Lists of Products or Services
  5. Advertising Budget


Executive Summary

Kibou is a small limited liability corporation (LLC) tax service company set in Prince Georges County (PG County), Maryland. The idea of hope and instilling hope is the foundation of the Kibou Company. With the economy so unstable, and debt at an all-time high, it is vital that today’s youth be given as many tools as they can to make educated financial decisions. A great number of young people from the inner cities are creating large amounts of debt for themselves because they are ignorant of how to manage their finances and/or don’t have a clue of the language used on the documents they sign. Kibou believes that a mass shift can take place if youth are properly prepared and are taught how to build healthy credit and healthy financial habits. With an emphasis on customer service Kibou will differentiate itself from other tax services in the area by establishing a welcoming friendly atmosphere for the consumers in our target market. It is important to build long-term relationships with civic groups, church groups, and school groups. We will also be involved in community activities. We can’t just market and sell our services; we must deliver those services with a focus on excellence. Kibou will provide a website that will appeal to youth looking for financial guidance and alternatives. Times of operations/ visitations, descriptions of our services, and the costs will be included in the site.



Company Summary

Industry History

The accounting practice has a rich history dating back to Luca Pacioli and the first printed treatise of bookkeeping in the world, the Summa de Arithmetica, Geometria, Proportioni et Proportionalita, which was published in Venice in 1494, and was reprinted at Toscolano in 1523 (Alexander, 2002). Half a century following the emergence of accounting as a formal profession, there were approximately 6,000 practitioners, 38,690 by 1957, and over 120,000 worldwide chartered members in the UK countries like Canada, New Zealand, Ireland, Australia, Scotland and South Africa, not counting the certified accounting professionals in the United States and other countries (Alexander, 2002). This profession comprises a vast, worldwide network of professional accountancy that is dominated by several, immense, global accounting firms (Alexander, 2002). Accounting uses various bases of measurement, mainly the cash basis, the accrual basis or historical cost, and variations of these in order to track and analyze information about the economic affairs of an organization, including their transactions involving the following elements:

  • “Private property: The power to change ownership, because bookkeeping is concerned with recording the facts about property and property rights.
  • Capital: Wealth productively employed, because otherwise commerce would be trivial and credit would not exist.
  • Commerce: The interchange of goods on a widespread level, because purely local trading in small volume would not create the sort of press of business needed to spur the creation of an organized system to replace the existing hodgepodge of record-keeping.
  • Credit: The present use of future goods, because there would have been little impetus to record transactions completed on the spot.
  • Writing: A mechanism for making a permanent record in a common language, given the limits of human memory.
  • Money: The “common denominator” for exchanges, since there is no need for bookkeeping except as it reduces transactions to a set of monetary values.
  • Arithmetic: A method of computing the monetary details of the deal” (Alexander, 2002, p.2).

Modern accounting is generally thought of as the systematic development and analysis of information about the economic affairs of an organization and the primary purpose of accounting is to communicate relevant information between and among the producers and users of such information (Alexander, 2002; Bisman, 2012).

Details acquired from stringent accounting practices can be used:

  • By business managers to help them plan and control the organization’s operations,
  • By the owners and board of directors or regulatory bodies to help them appraise the organization’s performance and make decisions about the company’s future,
  • By owners, suppliers, lenders, employees, and others to guide their decisions regarding how much temporal or fiduciary emphasis to place on the organization,
  • By governmental entities to establish how much tax liability the organization carries and,
  • Customers can use these details to decide the fees they will charge when contracts necessitate cost-based payments (Bisman, 2012).

Accounting provides companies with viable information for all these purposes through the maintenance of files of data, analysis and interpretation of these data, and the preparation of various kinds of reports. Most accounting information is primarily historical and observes things that the organization does, records their effects, and prepares reports summarizing what has been recorded while the rest of the details are comprised of forecasts and plans for current and future periods. These details can be developed for any kind of organization, not just privately owned, profit-seeking businesses.

Company Legal Form

Kibou (pronounced Key-boo) means hope in Japanese and is a small limited liability company (LLC) tax service organization. Creating the company as an LLC is beneficial for a number of reasons that are typically unavailable to sole proprietorships and general partnerships, such as:

  • LLCs grant owners the right to protect their assets, as they are typically not personally responsible for the business debts and liabilities of the LLC, and this prevents creditors from pursuing the personal assets, such as the house, savings accounts, and other personal assets of the owners to pay business debts. In a sole proprietorship or general partnership, owners and the business are legally considered the same, which allows the owners personal assets vulnerable to seizure due to business matters (BizFilings, 2012).
  • LLCs ordinarily do not pay taxes at the business level and enjoy pass-through taxation, which means that all business income or loss is “passed-through” to owners and reported on their personal income tax returns and whatever tax due is paid at the individual level (BizFilings, 2012).
  • LLC status may help a new business establish credibility with potential customers, employees, vendors and partners since this status represents a sincere commitment to the business venture (BizFilings, 2012).
  • LLCs have fewer compliance requirements, state-imposed annual requirements, and ongoing formalities than other types of business structures and there are fewer restrictions regarding whom can establish and LLC or how many owners and LLC may have (BizFilings, 2012).
  • LLCs allow for the establishment of a flexible management structure and, because they are free to establish any organizational structure agreed upon by the company owners, LLCs can be managed by the owners or by managers, unlike corporations which have to be formally administrated by a board of directors that manage the major business decisions of the company and officers who manage the daily affairs (BizFilings, 2012).

However, some potential disadvantages to establishing the company as an LLC include:

  • Articles of Organization must be filed with the state and the applicable state filing fees paid in order to create an LLC and many states require the payment of ongoing fees, such as annual report and/or franchise tax fees (BizFilings, 2012). Although the fees are typically not exorbitant or too much for small businesses, they are more expensive than fees for a sole proprietorship or general partnership, both of which do not require formation documents to be filed with the state, but a few states, like New York and Arizona, also require LLC owners to publish notice of the LLC formation in local newspapers for several weeks, which can be expensive (BizFilings, 2012).
  • Transferable ownership. Ownership of an LLC is often harder to transfer than with a corporation since corporations can sell shares of stock to increase ownership and LLCs usually must gain the approval of all owners before adding new owners or altering the ownership percentages of existing owners (BizFilings, 2012).

Location & Facilities

Kibou Tax Service Company, LLC will be established in Prince Georges County (PGC), Maryland (see Appendix C). Kibou customers will be receiving service from certified tax preparers that will provide service to high school students as a beginner course during the school year once a semester. We will also provide and intermediate and advanced training during the summer months. The beginner course will train students on the basic language and completion of a federal tax as well as a W-4. It will also teach students how to set-up checking accounts as they prepare for work in the immediate summer months. The intermediate summer course will discuss online banking, budgeting, explore savings, and teach students how to assign funds to various venues electronically. The advanced course will focus on banking security, maintenance, setting financial goals, and other aspects of accounting with training to be held on site at the school, club, or other facility. We will provide this training to high school youth through a number of venues, such as the school system, Boys and Girls clubs (see Appendix A), and YMCA’s. We believe this is a more the comparable base to begin with, as there are more than 28 high schools, 34 Boys and Girls Clubs, and one YMCA in PGC.

Management Structure

Kibou Tax Service Company, LLC is a new accounting business that will provide training to high school students and individuals in the PGC area. The owner has extensive business experience and over 20 years’ experience as a financial planner, with specific concentration in the field of accounting since 1995 (see Appendix B). With an MA and CA, the owner is highly competent in the field of accounting and remains current on all practices and standards. The owner will employ an adept manager/assistant to help facilitate the every day activities of the company and a number of accounting executives with a background in educational studies to be determined in accordance with the client load. As a small business, Kibou will initially employ less than 20 individuals and the number of employees will grow in conjunction with the company’s clientele with the managerial structure adjusting to suit the number of employees. Upon start-up, the owner will delegate responsibilities to the manager, who will them disperse assignments to the accounting instructors and these initial instructors will be promoted to assistant managerial positions as the staff grown. The assistant managers will receive instructions from the manager or owner and will disseminate instruction to the remaining staff members, although the subordinate staff will also be able to communicate with the manager and owner should the need arise.

Products & Services

Kibou will serve as a training program and the goal of Kibou is to train high school youth in basic personal finance and how to complete and file tax forms to help high schools to address students about starting out life on firm financial footing. With a dedicated staff, Kibou will be ready to give excellent customer service and would like to see continued growth in dedicated customers. Kibou will target local schools, clubs and YMCA’s with special focus on introductory workforce preparation. Kibou is unique in that we do not seek to be seen as the new company on the block, but rather the company the customers look at and say “they should have been here all along.” It is our goal that we serve as the span lock securing the bridge of life to underprivileged youth transitioning into their adult life.

Little information is given to inner city youth on some of the essentials of sustainable adult living. Many times they are not exposed or prepared for the transition into adulthood. Filing taxes, filing out tax forms for employment, with holdings, direct deposit, checking/ savings accounts, credit building and more all become in the field lessons. Many times mistakes are made that were it not for their youth, they would not have time recover from. Kibou will also provide financial news and information directed specifically for youth on a regular basis via the Kibou Face Book, Timeline, and Twitter accounts. Customers will be able to post questions and give comments on multiple topics.

It is our goal that once this program has taken root in PGC, which it will germinate into the rest of Maryland, Virginia and the District of Columbia school systems. Kibou does ultimately feel this program is something that we hope can be incorporated in the regular required curriculum for graduating high school seniors in schools across the country. Our management philosophy is based on responsibility and mutual respect. People who work at Kibou will work in an environment that encourages creativity and having fun. Along with a team of 10 employees, my consultant Marc Felton will play an active role in the day to day operations of the facility. Marc Felton is a part owner and has years of experience in providing service to youth. Kibou would like to see first year sales at over $400,000 with a five to nine percent increase for year two (see Figure 1).

Figure 1: Four Year Profit Projections

Market Analysis

Target Market

There are more than 28 high schools in PGC that service thousands of students daily (PGCPS, 2012). Since the target consumer is high school students, it would be prudent for Kibou Tax Service Company, LLC to develop a working relationship with the members of the PGCPS Board of Education members for all nine school districts (PGCPS, 2012). Establishing Kibou Tax Service Company, LLC as a staple program within all PGC high schools will take time, as the research revealed word-of mouth/recommendations/referrals as the primary way in which accounting services are selected by new clients. Although the target market is high school students, familiarizing parents with the premise for the program through various means of advertising may stimulate interest in the program and facilitate its adaptation within the PGC high school curriculum through parental requests for its inclusion. Furthermore, inviting parents to visit the Kibou Tax Service Company, LLC office and meet the instructors will also encourage their belief in the importance of the program, which will facilitate implementation. With an emphasis on customer service Kibou will differentiate itself from other tax services in the area by establishing a welcoming friendly atmosphere for the consumers in our target market. It is important to build long-term relationships with civic groups, church groups, and school groups because this will help create a demand for the program being included into the high school curriculum. We will also be involved in community activities.

Industry Analysis

Within the entire United States, there are currently no tax service companies that provide educational services to high school students even though there are 257 CPA firms listed in the Yellow Pages for Prince George’s County, MD. The U.S. Census Bureau estimates that there are 863,420 people residing in this county as of 2010. The Census also estimates that there are 301,906 households and approximately 72,759 businesses in Prince George’s County, MD (U.S. Census Bureau). Tax preparation cost an average of $229 for filing a 1040 with Schedule A and state return at an independent CPA office and about $129 to file a 1040 with a state return and no itemized deductions (Perez, 2010). However, the average prices at franchised tax offices like H&R Block and Jackson Hewitt are $189 per return and $208 per return, respectively (Perez, 2010). Currently, only institutions of higher education offer accounting programs and none are offered in high schools on the PGC area. Furthermore, the recent influx of tax preparation companies that have transitioned to online services that are often available at significantly lower costs, like TurboTax has created a much more competitive market and makes it vital that even the lay person understand how to correctly fill out their tax documents.

Competitive Analysis

There are currently no similar programs that offer accounting training to high school students and the curriculum proposed by Kibou Tax Service Company, LLC would be a pilot course with no precedent model for comparison. This particular niche appears to be vacant in the market, with most accounting/CPA firms focused on volume and throughput, leaving little time available to get to know the client’s business well enough to become a financial “partner.” In addition, Kibou will be bringing the lessons to the students when and where it is convenient for them to learn. The school and community forums will offer an environment with adequate equipment to perform the services being offered. Generally, the CPA and accounting firms service business and individual clients and offer full-service monthly accounting and tax reporting services, while the tax preparation services like H&R Block concentrate on preparing individual tax returns.

Kibou Tax Service Company, LLC is attempting to establish a completely separate segment in the market for students that are just emerging into the workforce who, like many non-business individuals, currently maintain their own financial records and prepare their own tax returns. A review of competitors’ marketing strategies reveals that there are currently no companies in PGC that perform such services, but existing firms tend to advertise through the Yellow Pages, in newspapers during tax season, and the general approach to get new business is through networking, referrals, and personal selling. Accounting is primarily a referral-driven business and if a new business of a certain type is desired, personal calls are made with targeted accounts. Other strategies used by area firms include telemarketing and encouragement/reward programs that gift current clients for referring new clients. Networking within business groups, civic groups, church groups, and other community forums is important, even if the business results are not immediately realized.

Kibou will employ similar methods to advertise this program to create familiarity with this new type of accounting service within the community. However, a threat to be aware of is the emergence of new competitors or CPA firms that decide to institute similar programs that cater to students or youth. The accounting program is very strong there, and offering classes at non-traditional times and locations attracts area adults who may be looking for a second career leading to their own self-employment in an accounting business.


Market Strategy

Four Ps

Unlike products which are produced, then distributed and sold, accounting services are produced and consumed simultaneously in a real-time environment. For this reason, distribution issues tend to focus on making the services available in a convenient manner to the most number of potential clients. The product that Kibou is offering is education in accounting for high school students in PGC with the expectation of expansion to schools in other Maryland communities and then other states. Kibou Tax Service Company, LLC will maintains an office in the PGC area so potential clients are able to come to the office to assess the services offered in a professional environment and parents can meet the instructors in an independent setting so they too can receive helpful information regarding the product being offered. This flexibility is especially attractive to PGC residents because it will allow the school board members that make important decisions regarding the curricular agenda of PGC high schools to have access to Kibou Tax Service Company, LLC staff members and services when it is convenient for their schedule. Clients can also contact Kibou Tax Service Company, LLC by telephone, fax, and hopefully soon e-mail and via their website. The familiarity created through the Yellow Pages ads and other advertising methods as well as the ease of communication by various methods will help to promote the program being offered by Kibou Tax Service Company, LLC as well as the convenient service hours, in addition to the regular business hours for added expediency.

Price List

The fee breakdown is based on what typical accounting firms charge for the most common services rendered, which coincide with the skills that will be taught to the high school students. The fee schedule takes into account individual and business clients’ specific needs and the forms that young employees will have to know how to fill out. Typical schools will pay the business hourly rate of $55per hour per student for small classes of up to 15 students and they will be taught one of the typical services indicated in Appendix D. Personal/household tax preparation and filing prices are a function of the forms and schedules involved and typical accounting practices charge a base fee of $50-$125 plus an extra $10-$15for each schedule and personal consulting or other non-tax filing services are usually priced at the $25 hourly rate, which is what Kibou Tax Service Company, LLC will charge schools for teaching this to students.

Selling Strategy

Research indicated that acquiring familiarity about the program through interactions with the members of the PGC Board of Education and advertising about the program in media like the Yellow Pages will help build awareness and favor. Even a small 2″ × 2″ boxed ad can create awareness and attract the desired target client, above and beyond the ability of a simple listing to do so. The PGC Yellow Pages covers the relevant market area, delivering over 30,000 copies to residents and business. Other forms of advertising (see Appendix E) would include brochures that could be sent home with students to inform parents about the accounting program or mailed home based on parent contact lists acquired from the school. Newspaper advertising and restaurant advertising would also be used to generate recognition of the program amongst PGC residents.

The brochure mailings would provide printed referential materials about the current discussion topic to generate interest and a demand for the addition of the Kibou Tax Service Company, LLC accounting curriculum in PGC high schools. Public relations activities would include community events and giveaways and the customer reward programs would provide existing clients with discounted services for referring other schools to Kibou Tax Service Company, LLC, which provides added value to the services while increasing the client base. Reply cards would ensure that Kibou Tax Service Company, LLC is able to continually improve their services according to the needs of the customer and the total advertising budget will be implemented with the goal of gaining one high school as a new client every four to six weeks and milestones would be marked by the corresponding staff growth to accommodate the additional workload. Additional milestones would be demonstrated by increased accounting competencies and financial stability of the emerging youth.

Sales Forecast

The following assumptions will be incorporated into the Kibou Tax Service Company, LLC proforma statements:

  • All operating costs are based on Kibou Tax Service Company, LLC management research of similar operating companies.
  • Automated informational systems will reduce Kibou Tax Service Company, LLC staff requirements.
  • Developmental start-up costs are amortized over a five-year period.
  • The office lease costs are deferred until year two combined and lease back to Kibou Tax Service Company, LLC.
  • Overhead and operations costs are calculated on an annual basis.
  • Kibou Tax Service Company, LLC founder salary is based on a fixed salary expense basis.
  • All fixed and variable labor costs should rise annually at five percent.
  • All revenues, past year 5 are figured to rise annually at seven and a half percent.
  • Fixed annual, administrative, and office expenses rise at an annual rate of two and a half percent.

Implementation Strategy

Overall Strategy

The initial phase of development for Kibou Tax Service Company, LLC involves preparation and development of the company’s client base through the advertising campaign and introduction of the accounting program to the PGC community. Kibou Tax Service Company, LLC will be housed at the location indicated in Appendix C and will establish its own identity, management directives, and capital sources. Incorporating a total quality management approach using a Customer Care Advantage program, Kibou Tax Service Company, LLC will develop key relationships with the high schools in PGC and will administer accounting courses that will provide local students with necessary life experience regarding financial management. Through word of mouth and advertising, additional schools and parents will be made aware of the program and encourage investors for capital start-up funds, which are documented in this business plan.


Following the initial introduction of the accounting courses in the PGC high schools, implementation of sales, advertising, and marketing strategies developed will instigate the relationships with Kibou Tax Service Company, LLC and its initial clients. The advertising will also enable Kibou to identify and pursue other high schools within the PGC community. Kibou Tax Service Company, LLC will target the identified “niche” industries to “specialize” in accounting and finance management instruction. Strategic partnerships with specific industry associations like the Boys and Girls Club and YMCA organizations will be explored so that Kibou will be able to provide course instructions at a variety of times outside of school hours. Kibou Tax Service Company, LLC anticipates additional support staff and efforts to several community related entities will allow the company to consolidate its efforts with a centralized office. This Plan does not contain funding needs for this Phase. Initially, Kibou Tax Service Company, LLC management will focus its efforts in introductory activities, which does include a financial analysis and follow-up efforts depend upon the timely development of the introductory phase. The analysis of its client service base will allow Kibou Tax Service Company, LLCs growth funding capital to directly impact the rate of which marketing and development of this service occurs and the rate of growth potential is obtained.

In general, the act of planning helps make sure organizations remain relevant and that they are able to properly respond to the needs of the communities they are intended to serve while contributing to the growth and stability and growth of the corporation at large (McKay). In addition, planning provides a foundation from which the company can measure their progress and assess the resulting impact of the changes being facilitated, encourage program development, and allows the company to orderly and systematically determine their future endeavors (McKay). From a managerial perspective, planning enables the setting of policies and goals that will guide the business and provide a clear focus executive and senior staff members can use for program implementation and agency management (McKay). Developing plans that are inconsistent in their focus and scope and do not fully address vital sustainability issues (Lachman, Pint, Cecchine, and Colloton) prevents the plan from being effective in successfully achieving the intended goals.

Control Plan

Three key factors include creating a common vision, developing a model for change, and rewarding changes made according to the model. A common vision gives direction, focus, and commitment to the employees. Organizational changes often starts in one unit or subculture of an organization and people tend to behave in ways that provide rewards or reinforcement, so it is important to keep employees motivated through bonuses and incentives for making the necessary changes (Brown). Tools for change are vital because they provide the employees with information to make the changes, support and collaboration from necessary departments, and the resources required to implement the changes (Brown). There has been a profound change in business school thinking away from a concentration on big business and the rise of the multi-divisional firm towards a greater focus on the entrepreneur and entrepreneurship as legitimate areas of study. Although strategic planning information is vital for making budgeting decisions, the chief function of the strategic plan is to guide the agency’s management activities, provide employees with a shared purpose and motivation through clear articulation of the values and goals of the corporation, and present a means of communicating with people inside and outside the agency (Grant 13). A concise strategic plan will allow the reader to easily understand:

  • The overall mission, including the activities of the highest priority activities and its primary customers (Grant 13).
  • The bureau’s operating environment and organizational factors (Grant 13).
  • Specifies the statewide results, outcomes, and goals necessary to carry out its mission (Grant 13).
  • Established objectives the agency can measure to determine the overall progress to achieving the goals (Grant 13).
  • Specifications regarding how the agency will measure progress during the planning period (Grant 13).
  • Strategies the agency intends to use in pursuit of the objectives (Grant 13).
  • Exact measures of the additional resources the company will need to successfully implement the indicated strategies (Grant 13).

Objectives have been established for Kibou Tax Service Company, LLC so that actual performance can be measured against them. Thus, at the end of 2012, Kibou should have:

  • $400,000 in total revenue
  • 5-7 schools as regular clients
  • Be teaching approximately 10-20 accounting classes per week
  • Anticipate 90% customer retention, which is not measurable for first year

Each subsequent year, new objectives will be set for these benchmarks, and actual performance will be measured against them. If actual performance falls short of objectives, investigation will be made into the cause, and plans adjusted accordingly. In addition, it is recommended that Kibou Tax Service Company, LLC keep track of the source of all new clients (“Where did you hear of me?”) in order to measure the effectiveness of each type of promotion. Each subsequent year’s budget should adjust spending toward the types of promotion that are accounting for the most new clients. Customer satisfaction is most directly reflected in the year-to-year customer retention percentage. All lost customers should be investigated to find out why they left. A customer satisfaction survey may be considered after three to four years in the business.


Financial Statements and Projections

Revenue and Cost Estimate

The overall salaries for the year are roughly estimated at $68,250 (see Table 1), which are based on the anticipated growth patterns of the accounting program within PGC high schools. Combined with all the other anticipated expenses, as delineated in Table 1, the total startup costs are calculated by combining these expenses for the entire year.

Table 1: Initial Funding Cost-estimates

Startup Expense Cost
Legal $1,000
Advertising $7,343
Consultants $15,000
Insurance $3,900
Rent for Office space $23,000
Research & Development $1,000
Office Furniture & Equipment $252,000
Salaries $68,250
Transportation $2,550
Utilities $5,800
Taxes & Licenses $11,700
Work Expenses $2,350
Office Supplies $2,250
Miscellaneous $2,700
Other $5,000
Total Startup Costs 403,843


Forecasted Profit and Loss Statement

The purpose of the profit and loss statement is to provide a summary of the financial performance of a business over time, and this can be calculated on a monthly, quarterly or annually basis. It reflects the past performance of the business and is the report most often used by small business owners to track how their business is performing. This statement for Kibou Tax Service Company, LLC (see Table 2) specifies the total sales revenues for the entire year and measures this against all of Kibou’s combined expenses for the same period to determine whether the business is profitable.

Table 2: Income Statement: Forecasted Profit & Loss Statement

Income Statement: Forecasted Profit & Loss Statement

January, 2012-December, 2012

Gross Sales 346,400
Less returns and allowances 1,000
Net Sales 345,400
Cost of Goods
Office Set-up Costs, January 1 160,000
Purchases 90,000
Freight Charges 2,000
Total Merchandise Handled 252,000
Less Inventory, December 31 100,000
Cost of Goods Sold 152,000
Gross Profit 193,400
Interest Income  500
Total Income 193,900
Salaries 68,250
Utilities 5,800
Rent 23,000
Office Supplies 2,250
Insurance 3,900
Advertising 7,343
Telephone 2,700
Travel and Entertainment 2,550
Dues & Subscriptions 1,100
Interest Paid 2,140
Repairs & Maintenance 1,250
Taxes & Licenses 11,700
Total Expenses 133,290
Net Income $60,110


Forecasted Balance Sheet

The balance sheet is commonly defined as the financial report that quantifies the total assets, liabilities, and equity or cash flow of a business for a specified period of time. The balance sheet (see Table 3) summarizes the revenues, expenses, and net income of Kibou Tax Service Company, LLC. This also helps to determine the overall profitability of a business for various purposes.

Table 3: Forecasted Balance Sheet

Income Statement: Forecasted Balance Sheet
1 Prorated Salary
Labor Costs Rise Annually 5%
Operating Costs Rise Annually 2.5%
REVENUES M 1 M 2 M 3 M 4 M 5 M 6 M 7
Total Revenue 14,550 35,850 52,500 73,625 79,146.88 85,082.89 91,464.11
Fixed Labor Cost $5,687.50 $5,687.50 $5,687.50 $5,687.50 $5,687.50 $5,687.50 $5,687.50
Variable Labor Cost $2,860 1 $8,580 $9,009 $9,459 $9,932 $10,429
Operating Expenses 4,400 $6,910 $7,083 $7,260 $7,441 $7,627 $7,818
Loan Repayment $2,043 $2,043 $2,043 $2,043 $2,043
Total Cost of Goods Sold $18,943 $36,813 $43,955 $45,874 $47,884 $47,947 $50,154
Gross Margin (Profit or Loss) ($2,419.5) ($963) $8,545 $27,751 $31,263 $37,135 $41,310
Percent of Revenue (%) 16.30% 37.70% 39.50% 43.60% 45.20%
Income Tax (33%) $2,820 $9,158 $10,317 $12,255 $13,632
Development Cost Amortization $1,640 $1,640 $1,640 $1,640 $1,640
(Monthly Straight Line Method)
{After Tax} Net Income ($779.5) $677 $7,365 $20,233 $22,586 $24,881 $27,678


Financial Projections

Breakeven Point

This method is used to determine the exact point at which the business neither takes a loss nor makes a profit. It is calculated at a point where sales have grown at a greater rate than costs and the two lines cross. This analysis includes an estimate of income and expenses and helps determine whether or not Kibou Tax Service Company, LLC will bring in enough money to meet its costs. The following equation is used to calculate this:


In regards to the breakeven point for Kibou Tax Service Company, LLC, it would be calculated as follows:

$25,000 = 0.75780                               $27,563 = 0.426566

$35,850- $2,860                                  $73,625- $9,009

This means that in the second month of operation, based on these sales, Kibou Tax Service Company, LLC would not earn enough money to break even. However, the decreased cost per unit for month four indicates that by this time, Kibou Tax Service Company, LLC would be earning a profit.

Financial Position

The current business plan, prepared by the company, shows that Kibou Tax Service Company, LLC will generate gross revenues in excess of the projected $400,000 with over $900,000 in year one, $7.3 million in year three and up to $50 million in year five. This is based on lofty estimates regarding the success of the accounting program in PGC high schools and the rapid expansion of the program to include all PGC high schools within the first five years. IPO or acquisitions can potentially begin in year two and finance all residual cash requirements as the company expands at a rapid rate due to the success of the program. Decreased debt and financial mismanagement by youth would potentially result in reduced numbers of youth with bad credit. Full return of capital is possible in year three.

Table 4: Estimated Financial Position

  Year 1 Year 2 Year 3 Year 4 Year 5
Income 750 938 938 938 938
Management Fees 200 250 250 250 250
Web Site 150 188 234 293
M & A 150 188 234 293
IPO 2,000 6,000 18,000 54,000
Gross 950 3,338 7,375 19,422 55,480
Office 150 188 234 293 366
Salaries 750 938 1,172 1,465 1,831
Web Site 200 250 313 391 488
Marketing 200 250 313 391 488
Total Expenses 1,300 1,625 2,031 2,539 3,174
EBIDT (350) 1,713 5,344 16,883 52,307


Capital/Investment Needs

The term capital investment typically refers to monies used by a business to purchase fixed assets (see Table 5), like land, machinery, or building space and it also refers to money invested in a business with the understanding that the money will be used to purchase fixed assets, rather than used to cover the business’ day-to-day operating expenses. As demonstrated in the Revenue Cost Estimate from Table 1, the capital requirements for Kibou Tax Service Company, LLC is estimated at a little over $400,000.

Table 5: Capital Requirements to Start Kibou Tax Service Company, LLC

Venture Funding $408,000
· Salaries · $63,000
· Website · $25,000
· Office · $252,000
· Marketing · $30,000
· Seed Funding · $8,000
· Reserves · $30,000


Alexander, J.R. (2002). History of Accounting. Association of Chartered Accountants in the United States, 1-16. Retrieved from

Bisman, J.E. (2012). Surveying the landscape: The first 15 years of Accounting History as an international journal. Accounting History, 17(1), 5-34. Retrieved from Accounting & Tax Periodicals (2619140161).

BizFilings. (2012). Benefits of creating an LLC. Retrieved from

Brown, D.R. (2011). An Experiential Approach to Organization Development. (8th Ed.).

New Jersey: Pearson Education.

Grant, R.M. (2010). Contemporary strategy analysis instructors’ guide: An overview. (7th Ed.). Retrieved from

Lachman, B.E., Pint, E.M., Cecchine, G. and Colloton, K. (2009). Developing Headquarters Guidance for Army Installation Sustainability Plans in 2007. RAND Corporation. Retrieved from

McKay, E.G. (2001). Strategic planning: A ten-step guide. MOSAICA. Retrieved from

Perez, W. (2010, November 16). Tax preparation prices and fees: What’s a reasonable price to pay for preparing tax returns? Guide. Retrieved from

PGCPS (Prince George’s County Public Schools). (2012). Links to all schools. Retrieved from

U.S. Census Bureau. (2012). State & County QuickFacts: Prince George’s County, Maryland. Retrieved from


Appendix A

Floor Plan for Boys & Girls Club

(Retrieved from


Appendix B

Resume for Kibou Owner & Manager

Accounting Manager

Couples extensive financial knowledge with a strong foundation of business management

Ambitious, dedicated and disciplined business leader and financial champion, utilizes a proactive approach to overcome hindrances and implement prudent financial management. Compassionate team leader, mentor and coach, encourages personal and professional growth for all to succeed. Consensus builder, encourages open and frank dialogue, engages multiple stakeholders in consistently achieving results.

Core business competencies include:

– Executive Leadership – Expense Planning & Control – Budget Preparation

– Account Reconciliation – Financial Analysis


– Office Management – Resource Management – Payables & Receivables

– Project Management – Selection & Recruitment – Performance Appraisals

Professional Experience

Living Lighting Inc., Vancouver, British Columbia 2000 – present

Held the following 2 progressively responsible positions:

Accounting Manager 2005 – present

-Compile and present detailed monthly, quarterly reports for Senior Management perusal and act as the focal point in preparing year-end.

-Key member of the leadership team, administering all accounting functions for this commercial lighting manufacturer with $2.5 million annual revenue.

-Manage a 15-person team, encouraging personal and professional development of the culturally diverse department.

-Devised and deployed multiple cost-savings initiatives resulting in a 20% reduction in company expenditures.

Accounting Coordinator 2000 – 2005

-Partnered with the IT Department to implement a 10-month accounting system conversion from manual to automated computerized processing.

-Created and implemented accounting policies and practices supporting the new automated system.

Richmond Design, Richmond, British Columbia 1995 – 1999

Staff Accountant

-Reduced payroll processing time by 20%, saving $55,000, implementing an in-house payroll system, eliminating the need for an outside payroll provider.

-Led a major project transitioning all accounting aspects from MS Excel to Microsoft Dynamics GP (formerly Great Plains), completing assignment on time and under budget.

Green Bin Manufacturing, Kamloops, British Columbia 1993 – 1995


-Directed all bookkeeping functions for this 50-person manufacturer including: account receivable, accounts payable, payroll, journal entry, billing & collections, and monthly financial reporting.

-Calculated and submitted annual corporate income tax statement to Revenue Canada.

BC Imports Limited, Vancouver, British Columbia 1990 – 1993

Assistant Controller

-Supervised 3 employees responsible for Accounts Payable, Accounts Receivable and Payroll Administration using ADP with full accountability for hiring, training, and performance assessment.

-Maintained the $1.5 million General Ledger encompassing Canadian, U.S. and Chinese currency transactions.

-Prepared internal and external financial and tax statements for review by corporate and external Audit Teams.

-Played a key accounting role on various project teams ensuring mandates completed in accordance with company financial guidelines and budgetary allowances.

Mills & Associates, Vancouver, British Columbia 1988 – 1989

Junior Accountant

-Processed weekly payroll using Corona Software for the 40-person staff complement.

-Assisted the Controller in preparing annual corporate tax returns and employee taxation documentation.

-Partnered with suppliers to reconcile a 55 day accounts receivable backlog.

Education & Professional Development

Supervisory and Management Training Institute, Vancouver, British Columbia

Leadership Skills Seminar 2009

Management Coaching Skills 2008

Sexual Harassment Training 2008

Assertiveness Training 2007

Institute of Chartered Accounts of B.C.

Chartered Accountant 1996

University of British Columbia, Vancouver, British Columbia

Master of Arts – Economics 1989

Bachelor of Arts – Economics 1987


Appendix C

Floor Plan for Kibou Tax Service Company, LLC

(Retrieved from


Appendix D

Price Breakdown for Products & Services Offered

Business Client Services:  
Hourly Rate: $55.00
Example Typical Services:
Accounts Payable & Receivable Payroll
Check Writing and Ledger Entries
General Ledger and Balance Sheet Preparation
Quarterly Tax Document Preparation
Billing and Collections
Terms: Volume Discount for Long-Term Commitment and for Bundling of Services
Individual Tax Related Preparation:
Hourly Rate: $25.00
Example Typical Charges:
1040EZ (1.5 hours) $37.50
1040A, (2.0 Hours) $50.00
1040 w/Schedules (4.0 Hours) $100.00
Terms: Net – $5.00 Upon Receipt



Appendix E

Advertising Budget for Kibou Tax Service Company, LLC

Company brochure (2-color, 1,000 quantity, high quality paper) $450.00
Reply card (2-color, 500 quantity, card stock) $150.00
Lists (new businesses, home-based businesses) $750.00
Postage (mailing 420 parents, 30 high schools) $250.00
Public relations activities and sponsorships $1,000.00
Customer reward program $500.00
Newspaper advertising (Shopper) $1,036.80
Yellow Pages advertising $621.50
Telephone book cover advertising $535.00
Restaurant placemats (5 restaurants/10 events) $1,650.00
Miscellaneous flyers $200.00
Advertising specialties (giveaways) $200.00
Total for first year $7,342.80


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