TO: Jeff Johnstone, President
FROM: Zixiang Zhao, Financial Planning Assistant
DATE: 2/28/1997
SUBJECT: New Payment Plan Recommendations
After analyzing our Balance Sheet of year 1996, I realized we have 67% of assets come from our inventory, which is too much, and we only have 6% of assets cash, which is too little.
Currently our customers are required to make a 5% deposit when they place the order and have to pay the balance in there to six months when the order will be shipped. Not many people are able to payback such an amount of money since our boats are priced from 20,000-500,000 dollars, which also narrowed our targeting consumers to those who have enough cash in hand.
In order to increase our cash, decrease our inventory and be able to sell our boats to mid-age successful people who are still not ready to pay out a huge amount of money at one time, I recommend diversifying our customer payment plan. Most people are not able to buy a car paid in full at one time, so dealers give various payment plans to their customers to make a deal. If we can sell our boats the way car dealers sell their cars, such as monthly payment with a certain ARP, I am sure not only our sells will increase, but also our cash flow will increase too.
We are able to do this by cooperating with big banks or credit unions, on the one hand these financial institutions are happy to see more people are consuming from them, on the other hand we may reach more potential customers who are doing business with those banks. By the promotion from banks or credit unions, our sells channels will be extended too.