Income statement for a sample non profit organization

. Donation, Grant, and Gift revenue

21.2% of Mental Health and Crisis Intervention revenue was by Substance Abuse charities, equivalent to $6.3 billion. As a startup entity will limited resources our ability to command large portions of this revenue stream is very limited. In addition, we suspect the revenue growth will be limited as the COVID-19 pandemic has lowered revenues throughout the broader economy. As such we are assuming, we can obtain half of one percent of the overall $6.3 Billion market. This estimate is derived from being located in dense states with access to large pools of capital. We assume that revenue growth will coincide with overall GDP growth of 2% to 3% per annum (Agyemang, 2019).

2. Interest and Investment Income

A portion of donations will be invested in a portfolio of securities. These securities are intended to provide addition income that can be used in the operations of the business. Currently the portfolio will be constructed of half equity securities and half bond securities. The equity portion is expected to generate 6% to 9% growth per year. This growth is comprised of 2-3% GDP growth, 2-3% Dividend Yield, and 2-3% of Price Inflation based on the federal reserves mandate. The bond portion will be allocated to investment grade securities yielding 2% to 3%. As a result, we expect the portfolio overall to yield between 4-6% per annum off an initial investment of $500,000

3. Sales Revenue

Periodically, the company will engage in sales efforts to help support the business. These sales efforts will include selling of company merchandise such as clothing, coffee mugs, magnets, bumper stickers, and other misc. goods. There is no research or precedent to determine this figure. The estimate will be $100,000 of sales

4. Advertising

Advertising is critical to operation success. It allows consumers to recognize our product offering will also solidifying our presence in the market. It also allows us to communicate our value proposition to consumers while also establishing trust. Research has shown the advertising budgets for prominent non-profit firms range anywhere from 5% to 25% of revenue depending on the brand. Prominent brands such as Relay for Life often raise substantial sums of money and can therefore use a large amount of money for advertising. As an initial startup, will use a conservative estimate of 10% of revenue dedicated for advertising.

5. Cost of goods sold

Cost of goods sold relate to the cost of material used in merchandise clothing, coffee mugs, bumper stickers and so forth. For major retailers such as Walmart and Target, gross margin ranges from 20% to 30%. To be conservative we will estimate gross margin at 25% meaning that costs of goods sold will be 75% of the sales revenue.

6. Depreciation

The business during initial operations will purchase buildings, land, computer, desk, chairs tables and other property plant and equipment. Each of these items is expected to depreciate at a different level. However, depreciation is tax deductible as such we will use an accelerated depreciation method in early years to help lower our overall tax burden. Our largest expense by far will be related to land and building expense. The industry standard is deprecation land and building by 40 years. We will assume a land and building cost of $4,000,000, totaling a depreciation cost of $100,000

7. Employee benefits

To attract retain and empower employees, benefits must be near industry standard. Industry paid in the non-profit sector is lower than the for-profit sector. Likewise, employees are typically motivated both intrinsically and extrinsically by factors not necessary associate with salary. As such we intend to pay market rate salaries and market rate benefits. The median employee salary is between $32,000 and $70,000 per year according to day from PayScale. We initially intend to hire 10 personnel to work in the office. Janitorial and cleaning duties will be outsourced and not on our payroll specifically. These expenses will be included in the “Maintenance and Repairs” line item. We assume a median salary of $45,000 per year for each employee with manager being higher, and entry level position being lower. The benefits portion will include an employee much for HSA contributions of $600 per employee or $6000 per year for 10 employees. We will also match defined benefit contribution plans up to 3% of salary or $1,350 per employee per year. To be conservative total benefits will be roughly $20,000 per year (Acton, 2012)

8. Furniture and equipment

Furniture and equipment are needed to provide services to patrons to frequent the facility. This will include table, chairs, couches, desks, and other equipment. As initially, only 10 employees will be working in the facility. Researching online typical desk cost a minimum of $1000. Apple computers new can cost roughly $2000. Couches to administer services and great guest can cost $1500. In total, the estimate for furniture and equipment will be $50,0000

9. Insurance

Insurance is required for both the building and the individual employees. The company will be contributed to health insurance and other benefits including fraud insurance, pet insurance, and life insurance. Insurance for a $4 million building is roughly $67,000. In addition, the company will pay other insurance premiums for employees on behalf of the company. Total insurance will be $100,000

10. Interest expense

Periodically the company will engage in debt transactions designed to help facilitate liquidity for the company. This is particularly useful in the current low interest rate environment. As interest rates are low, the company can borrower and service a large amount of debt. However, as the company is a start-up, very conservative debt levels must be utilized in order to ensure the company can continue as a going-concern. As such, heavy restrictions will be placed on the company as it relates to access to the debt capital markets. Here, the company will look to have very large interest coverage ratios to ensure the company can withstand a significant economic downturn which could reduce contribution amounts to the company. Currently interest will be $0 as the company will not engage in a debt transaction until it can sustain operations under an entire business cycle.

11. Maintenance and repairs

Maintenance and repairs will be limited to cleaning and general to the building oversight. As the building is near and will be depreciated over 40 years, repairs and maintenance are limited. However, cleaning will be required throughout the facility. In addition, groundskeeping services will be needed to maintain the appearance of the building. Minor building complications including leaking facets, or HVAC issues will need to be address periodically as well. As such a majority of these services will be contracted out. The going rate for these services is between $30 and $50 per hour. We estimate that 10 hours will of service will be needed at roughly $500 per week. Over a 52-week year we estimate the cost of these services to be $26,000 per year

12. Office supplies

Annual limit of $15,000 per year.

13. Payroll taxes

1. 6.2%- Social Security

2. 1.45% - Medicare

3. 7.65% - Combined Employer contribution

4. Gross Pay of $450,000 * 7.65%= $34,435

14. Mortgage

1. $4M * 4.5% Interest Rate

Interest rate is higher relative to the risk being taking by the mortgage lender. Typical mortgage rates are between 3% and 4.5%. The higher risk indicates the higher risk undertaking be providing the mortgage to the company.

15. Research and development

R&D is planned creative work aimed at discovering new knowledge or developing new and significantly improved goods and services. This includes activities aimed at acquiring new knowledge or understanding without specific immediate commercial applications or uses, activities aimed at solving a specific problem or meeting a specific commercial objective and, systematic use of research and practical experience to produce new or significantly improved goods, services, or processes. Research and development costs are related to research related to new and innovative treatment programs for patients in the facilities. This includes studies related to new intervention techniques. Much of the research and development budget will be outsourced until the facility can bring these capabilities in house.

16. Salaries and wages

To attract retain and empower employees, benefits must be near industry standard. Industry paid in the non-profit sector is lower than the for-profit sector. Likewise, employees are typically motivated both intrinsically and extrinsically by factors not necessary associate with salary. As such we intend to pay market rate salaries and market rate benefits. The median employee salary is between $32,000 and $70,000 per year according to day from PayScale. We initially intend to hire 10 personnel to work in the office. Janitorial and cleaning duties will be outsourced and not on our payroll specifically. These expenses will be included in the “Maintenance and Repairs” line item. We assume a median salary of $45,000 per year for each employee with manager being higher, and entry level position being lower. The benefits portion will include an employee much for HSA contributions of $600 per employee or $6000 per year for 10 employees. We will also match defined benefit contribution plans up to 3% of salary or $1,350 per employee per year. To be conservative total benefits will be roughly $20,000 per year (Berman, 1989)