Auto Parts Store Business Plan

Southeast Racing Parts

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Financial Plan

7.0 Financial Plan

• Salaries and rent are the two major expenses, while depreciation is another significant cost that will increase as the company develops.
• We want to finance growth mainly through cash flow. We recognize that this means we will have to grow slowly.
• It should be noted that the owners of Southeast Racing Parts do not intend to take any profits out of the business until the long-term debt has been satisfied. Whatever profits remain after the debt payments will be used to finance growth, mainly through the acquisition of additional inventory.

7.1 Important Assumptions

Key assumptions for Southeast Racing Parts are:

• We do not sell anything on credit.
• We assume the continued popularity of auto racing in America.
• Monthly sales are the largest indicator for this business. There are some seasonal variations, with the months January through June being the highest sales months.
• We assume access to capital and financing sufficient to maintain our financial plan as shown in the tables.

General Assumptions

General Assumptions
	FY 2000	FY 2001	FY 2002
Plan Month	1	2	3
Current Interest Rate	10.00%	10.00%	10.00%
Long-term Interest Rate	10.00%	10.00%	10.00%
Tax Rate	25.42%	25.00%	25.42%
Other	0	0	0

7.2 Key Financial Indicators

The key indicators in our plan illustrate increasing sales, control of costs, and increasing profit margins.

Benchmarks



7.3 Break-even Analysis

For our break-even analysis, we assume running costs of approximately $6,000 per month, which includes payroll, rent, utilities, and an estimation of other running costs.

Based on a 30% margin, we need to sell about $20,000 per month to break even, according to our assumptions.

Our sales forecast indicates that monthly sales are expected to be much greater than the break-even point mentioned in the table.

Break-even Analysis



Break-even Analysis

Break-even Analysis:
Monthly Units Break-even	20,000
Monthly Revenue Break-even	$20,000
Assumptions:
Average Per-Unit Revenue	$1.00
Average Per-Unit Variable Cost	$0.70
Estimated Monthly Fixed Cost	$6,000

7.4 Projected Profit and Loss

The detailed monthly pro-forma income statement is included in the appendix. The annual estimates are included on the following page. We expect income to hit $36,000 at the end of the first year of business. It should increase to around $60,000 by the third year as the reputation of our business, its employees, and services become apparent to the local racers. Second year revenues anticipate the addition of one part-time employee, along with one full-time employee in the third year.

The credit card surcharge expense was based upon 50% of sales being paid for with plastic, and assuming a 2% service fee. The inbound freight charges were based upon 2% of cost of goods for year one, 1.75% for year two, and 1.5% for year three. Depreciation was figured upon $29,000 in expensed equipment at the rate of seven years.

Profit and Loss

Pro Forma Profit and Loss
	FY 2000	FY 2001	FY 2002
Sales	$367,019	$472,085	$608,670
Direct Costs of Goods	$245,154	$314,147	$402,472
Speedingticket.net	$0	$0	$0
	------------	------------	------------
Cost of Goods Sold	$245,154	$314,147	$402,472
Gross Margin	$121,865	$157,938	$206,198
Gross Margin %	33.20%	33.46%	33.88%
Expenses:
Payroll	$26,400	$39,680	$66,016
Sales and Marketing and Other Expenses	$13,404	$15,734	$18,489
Depreciation	$2,650	$3,445	$4,478
Office Supplies	$600	$780	$1,014
Utilities	$2,400	$2,400	$2,400
Security/alarm	$360	$360	$360
Insurance	$840	$840	$840
Rent	$19,200	$19,200	$19,200
Depreciation	$4,140	$4,140	$4,140
Leased Equipment	$0	$0	$0
Payroll Taxes	$3,960	$5,952	$9,902
Other	$0	$0	$0
	------------	------------	------------
Total Operating Expenses	$73,954	$92,531	$126,839
Profit Before Interest and Taxes	$47,911	$65,407	$79,359
Interest Expense	$0	$0	$0
Taxes Incurred	$11,999	$16,352	$20,170
Net Profit	$35,912	$49,055	$59,188
Net Profit/Sales	9.78%	10.39%	9.72%

7.5 Projected Cash Flow

Cash flow projections are critical to our success. The following table shows cash flow for the first three years, and the chart illustrates monthly cash flow in the first year. Monthly cash flow projections are included in the appendix.

Cash



Cash Flow

Pro Forma Cash Flow
	FY 2000	FY 2001	FY 2002
Cash Received
Cash from Operations:
Cash Sales	$367,019	$472,085	$608,670
Cash from Receivables	$0	$0	$0
Subtotal Cash from Operations	$367,019	$472,085	$608,670
Additional Cash Received
Sales Tax, VAT, HST/GST Received	$0	$0	$0
New Current Borrowing	$0	$0	$0
New Other Liabilities (interest-free)	$0	$0	$0
New Long-term Liabilities	$0	$0	$0
Sales of Other Current Assets	$0	$0	$0
Sales of Long-term Assets	$0	$0	$0
New Investment Received	$0	$0	$0
Subtotal Cash Received	$367,019	$472,085	$608,670
Expenditures	FY 2000	FY 2001	FY 2002
Expenditures from Operations:
Cash Spending	$27,427	$38,133	$47,819
Payment of Accounts Payable	$254,471	$379,163	$497,880
Subtotal Spent on Operations	$281,899	$417,295	$545,699
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out	$0	$0	$0
Principal Repayment of Current Borrowing	$0	$0	$0
Other Liabilities Principal Repayment	$0	$0	$0
Long-term Liabilities Principal Repayment	$0	$0	$0
Purchase Other Current Assets	$0	$0	$0
Purchase Long-term Assets	$0	$0	$0
Dividends	$0	$0	$0
Subtotal Cash Spent	$281,899	$417,295	$545,699
Net Cash Flow	$85,120	$54,790	$62,971
Cash Balance	$86,120	$140,910	$203,881

7.6 Projected Balance Sheet

The table shows the annual balance sheet results, with a healthy projected increase in net worth. Detailed monthly projections are in the appendix.

Balance Sheet

Pro Forma Balance Sheet
Assets
Current Assets	FY 2000	FY 2001	FY 2002
Cash	$86,120	$140,910	$203,881
Inventory	$26,196	$33,568	$43,006
Other Current Assets	$0	$0	$0
Total Current Assets	$112,316	$174,478	$246,887
Long-term Assets
Long-term Assets	$29,000	$29,000	$29,000
Accumulated Depreciation	$2,650	$6,095	$10,573
Total Long-term Assets	$26,350	$22,905	$18,427
Total Assets	$138,666	$197,383	$265,314
Liabilities and Capital
Current Liabilities	FY 2000	FY 2001	FY 2002
Accounts Payable	$24,754	$34,416	$43,158
Current Borrowing	$0	$0	$0
Other Current Liabilities	$0	$0	$0
Subtotal Current Liabilities	$24,754	$34,416	$43,158
Long-term Liabilities	$0	$0	$0
Total Liabilities	$24,754	$34,416	$43,158
Paid-in Capital	$80,625	$80,625	$80,625
Retained Earnings	($2,625)	$33,287	$82,343
Earnings	$35,912	$49,055	$59,188
Total Capital	$113,912	$162,968	$222,156
Total Liabilities and Capital	$138,666	$197,383	$265,314
Net Worth	$113,912	$162,968	$222,156

7.7 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5531, Auto and Home Supply Stores, are shown for comparison.

Ratios

Ratio Analysis
	FY 2000	FY 2001	FY 2002	Industry Profile
Sales Growth	0.00%	28.63%	28.93%	4.90%
Percent of Total Assets
Accounts Receivable	0.00%	0.00%	0.00%	14.50%
Inventory	18.89%	17.01%	16.21%	47.50%
Other Current Assets	0.00%	0.00%	0.00%	14.40%
Total Current Assets	81.00%	88.40%	93.05%	76.40%
Long-term Assets	19.00%	11.60%	6.95%	23.60%
Total Assets	100.00%	100.00%	100.00%	100.00%
Current Liabilities	17.85%	17.44%	16.27%	39.20%
Long-term Liabilities	0.00%	0.00%	0.00%	15.50%
Total Liabilities	17.85%	17.44%	16.27%	54.70%
Net Worth	82.15%	82.56%	83.73%	45.30%
Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	33.20%	33.46%	33.88%	32.00%
Selling, General & Administrative Expenses	23.41%	23.06%	24.10%	19.60%
Advertising Expenses	0.49%	0.50%	0.50%	1.40%
Profit Before Interest and Taxes	13.05%	13.85%	13.04%	1.50%
Main Ratios
Current	4.54	5.07	5.72	2.03
Quick	3.48	4.09	4.72	0.59
Total Debt to Total Assets	17.85%	17.44%	16.27%	54.70%
Pre-tax Return on Net Worth	42.06%	40.13%	35.72%	3.50%
Pre-tax Return on Assets	34.55%	33.14%	29.91%	7.60%
Additional Ratios	FY 2000	FY 2001	FY 2002
Net Profit Margin	9.78%	10.39%	9.72%	n.a
Return on Equity	31.53%	30.10%	26.64%	n.a
Activity Ratios
Accounts Receivable Turnover	0.00	0.00	0.00	n.a
Collection Days	0	0	0	n.a
Inventory Turnover	10.42	10.51	10.51	n.a
Accounts Payable Turnover	11.20	11.30	11.74	n.a
Payment Days	24	28	28	n.a
Total Asset Turnover	2.65	2.39	2.29	n.a
Debt Ratios
Debt to Net Worth	0.22	0.21	0.19	n.a
Current Liab. to Liab.	1.00	1.00	1.00	n.a
Liquidity Ratios
Net Working Capital	$87,562	$140,063	$203,729	n.a
Interest Coverage	0.00	0.00	0.00	n.a
Additional Ratios
Assets to Sales	0.38	0.42	0.44	n.a
Current Debt/Total Assets	18%	17%	16%	n.a
Acid Test	3.48	4.09	4.72	n.a
Sales/Net Worth	3.22	2.90	2.74	n.a
Dividend Payout	0.00	0.00	0.00	n.a