Salesoft

In: Business and Management

Submitted By sumaprasanth
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Break-even Analysis

PROCEED: Financial Analysis for Salesoft
Number of prospects = 20 (given)
Expected number of final buyers = (1/4) of 20 = .25*20=5
No of users per final buyer = (200 + 600) / 2 = 400
Sales Revenue per user (400 users per buyer) = $ 2,400 (given)
Sales Revenue (expected) = 2,400 * 400 * 5 = $ 4.8 million
Development cost for remaining modules = $ 1 million (given)
Profit = $ 3.8 million

Trojan horse: Financial Analysis for Salesoft
Expenses
R&D cost = $ 200,000 (given)
Marketing expense = $500,000 (given)
Total cost = $ 700,000

Revenue
Miller
Revenue per user = $ 1,000 (given)
Break even number of users = 700,000/1,000 = 700
For average firm size of 70 users,
Number of buyers required = 700/70 = 10 (For break-even)

Number of buyers required to meet the profit PROCEED make = 4,500,000/1000 = 4,500
For average firm size of 70 users,
Number of buyers required = 4500/70 = 64.285 ~ 65 (For meeting the profit PROCEED make)

Tanner
Revenue per user = $ 400 (given)
Break even number of users = 700000/400 = 1750
For average firm size of 70 users,
Number of buyers required = 1750/70 = 25 (For break-even)

Number of buyers required to meet the profit PROCEED make = 4,500,000/4,000 = 11,250
For average firm size of 70 users,
Number of buyers required = 11,250/70 = 160.71 ~ 161 (For meeting the profit PROCEED make)

Conclusion
Salesoft can make more profit if it proceed with Trojan horse if the number of users is more than 65 (Miller’s plan) or 161 (Tanner’s…...

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