Company X Case

1 Introduction

Company X is a start-up company which currently specialises in the web development sector. The company consists of two technical co-directors which deal with any development work and technical aspect of the work and the creative director who deals with both client interactions and the design aspect of the work. The company had been taking clients for the last 2 years and have recently reached a total revenue of 100,000. The company has been planning the expansion from a service based model to less work intensive product based model. Over the next few years a combination of the two models will be employed with the development and launch of a social media based product. More specifically the development and deployment of Facebook applications for named brands, including the customisation and hosting of the pages.

The scope of this report will be to look at the financial feasibility of this product over the next two years in order to determine if it can be considered a viable option for the company.

2 Product Costs 2.1 Costs

The nature of each type of cost is detailed in the following sections. A simplified table of fixed costs and variable costs will be shown here and a full breakdown of costings can be seen in the Appendix A. Also due to the nature of the services required, all costings will be in USD and will later be converted to GBP with exchange rates based on the average for the last two years.

2.1.1 Cost of Sales

For this particular product the cost of sales would include the hosting fees to store images and html files, as well as the cost of transferring data to the users web based device from the servers. These operate on a sliding scale based on usage. Google App Engine will be responsible for transferring the data files which correspond to the tab, with a fixed monthly fee to allow for unlimited usage (subject to costs outside original quota). The images will be loaded from Amazon s3 storage.

2.1.2 Professional Fees

2.1.3 Technology Costs

Initial expenditure will involve the purchase of up to date machines for the two main developers and designer which are assessed to have a straight line depreciation over expected lifetime of 3 years. An additional company land line would be required to deal specifically with client communications. At the beginning of the project, while the number