Projecting Revenue

Part of our assignment this week is to construct an income statement for our business. In forecasting, it’s important to consider the customer’s lifetime value. Engine Kite’s main product offering is the kite itself, but our business will eventually includes sales of kiteboards, kiting accessories and gear, and Engine Kite branded apparel. Our business model mirrors that of Hurley or Burton, a company that became associated with one quality product (surfboards and snowboards, respectively) and then expanded its product line to include gear and apparel. The consumer is drawn into the lifestyle that the brand portrays.

Notes on Income Statement:

  • The costs for manufacturing the kites and board are actual quotes we received from kite manufacturers
  • Distribution costs include the cost of shipping our products
  • We estimate that more sales will occur during “peak” kite surfing season, February – May.
  • Our estimated sales are probably a bit optimistic and our actual cost of goods sold will probably be higher…but this exercise was done using the best information on costs and production in the industry that we could gather.

Some of the assumptions I made in creating this chart were as follows:

  • Kiteboard sales will be equal to kite sales
  • $75 in accessories and apparel sales is tied to each kite sold
  • Around 8% of our goods cannot be sold due defects or returns
  • Customer acquisition will be ~$60 a kite. Marketing may include including one free lesson with each kite sold.
  • Operational expenses are low because we are a lean startup and do not foresee many administrative costs. Our products are also produced by outside manufacturers, alleviating the need to rent production facilities.
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