Background:

Swamy, as a graduate, joined a Mumbai headquartered company's Delhi Branch. After two years of
selling business information newsletters for the company, he moved to the rival firm. He felt it more
comfortable to sell the new firm's products as the company was well known. He also leveraged his
contacts from his previous firm and improved the sales of the company. His supervisors were thrilled
by his sales performance, and his colleagues envied him. In this job, he learned about databases,
data collection techniques, and database products.

He moved to another firm as there is a flat hierarchy in the firm, and he knew that horizontal growth
is tough in this firm. So he changed to another firm in a sales role for the division which focuses on
business information service. But due to the dot com bubble, the division got closed, and he moved
to ABC limited. He was happy with his work as he used to sell the products designed by others in the
past, and now he was involved in the development of the products. This helped him to handle
queries confidently. He completed the learning circle for the product with these learnings as he
knew the markets from research, analysis, design, and sales perspective.

During one of the incidents, Swamy made his company agree to make a report for one of the clients,
which he made during his free time. After a week of work during his free time and analyst from the
client company, he finished the report, and the client was thrilled with their work. After looking at
the bill, he realized the amount he can earn if he starts working independently. But he was
discouraged by his colleagues. Now he wants to decide whether to start the company or not.

Analysis:

Revenue in First Year is 50,00,000

Revenue in Second Year is 90,00,000
Revenue in Third Year is 1,40,00,000

Man Power Cost in First Year is 16,64,000

Man Power Cost in Second Year is 21,71,000 
Man Power Cost in Third Year is 34,45,000

Office Expenses in First Year is 13,50,000

Office Expenses in Second Year is 17,61,328
Office Expenses in Third Year is 27,94,921

Profit from First Year is 19,86,000

Profit from Second Year is 50,67,672
Profit from Third Year is 77,60,079

Retained Profit from First Year is 20% of the total profit  3,97,200
Retained Profit from Second Year is 20% of the total profit 10,13,534
Retained Profit from Third Year is 20% of the total profit 15,52,015
The opportunity cost of Working in his existing company for year 1 is  12,00,000 
The opportunity cost of Working in his existing company for year 2 is  13,20,000
The opportunity cost of Working in his existing company for year 3 is  15,84,000
This estimate is based on the case information wherein Swamy decides he can substitute his
yearly salary by writing 5 to 6 research reports. Going by the principle of conservatism we
have assumed a higher salary because there is also the aspect of a steady stream of income
from his current employment compared to the current risk of venturing out on his own.
Assuming that he has an increment in salary of 20% every year.

Economic Profit from 1st year in business is 3,88,800

Economic Profit from 2nd year in business is 27,34,138
Economic Profit from 3nd year in business is 46,24,064

If we assume that after a period of time the business will plateau and will reach its maturity
stage in the next few years.Given the fact that one can only publish and sell so many research
reports given the fact that there is only a limited number of companies in the market and their
requirements of research reports is also limited.