Car Wash Business Plan

Soapy Rides Car Wash

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Financial Plan

7.0 Financial Plan

The following plan outlines the financial development of Soapy Rides. The business will be initially financed by a $30,000 investment by Mark Deshpande and will finance growth through cash flow. This will mean that the company will grow more slowly than it could, but it will ensure that Mark retains control over the direction of the company. In year three, it is hoped that the company will be able to open a second location. It is envisioned that an outside loan or equity funding will be sought at that time.

7.1 Important Assumptions

The financial projections for Soapy Rides are based on the following assumptions. These assumptions are thought to be quite conservative, as are the financial forecasts.

General Assumptions

General Assumptions
	FY 2002	FY 2003	FY 2004
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%
Sales on Credit %	15.00%	15.00%	15.00%
Other	0	0	0

7.2 Break-even Analysis

Fixed monthly costs for Soapy Rides are estimated to be approximately $7,500, and break even monthly units are 203 units per month.

Break-even Analysis



Break-even Analysis

Break-even Analysis:
Monthly Units Break-even	203
Monthly Revenue Break-even	$9,122
Assumptions:
Average Per-Unit Revenue	$45.00
Average Per-Unit Variable Cost	$8.00
Estimated Monthly Fixed Cost	$7,500

7.3 Projected Profit and Loss

The following Profit and Loss table illustrates income and expenses monthly for the first year, and annually for the next two years.

Profit and Loss

Pro Forma Profit and Loss
	FY 2002	FY 2003	FY 2004
Sales	$109,800	$155,339	$232,204
Direct Cost of Sales	$4,583	$6,994	$11,047
Other	$0	$0	$0
	------------	------------	------------
Total Cost of Sales	$4,583	$6,994	$11,047
Gross Margin	$105,218	$148,345	$221,157
Gross Margin %	95.83%	95.50%	95.24%
Expenses:
Payroll	$61,680	$88,312	$113,174
Sales and Marketing and Other Expenses	$2,600	$1,550	$1,700
Depreciation	$2,070	$2,070	$2,070
Leased Equipment	$0	$0	$0
Utilities	$3,325	$3,500	$3,750
Insurance	$1,800	$1,800	$1,800
Rent	$4,800	$5,500	$6,000
Payroll Taxes	$15,420	$22,078	$28,294
Other	$0	$0	$0
	------------	------------	------------
Total Operating Expenses	$91,695	$124,810	$156,788
Profit Before Interest and Taxes	$13,523	$23,535	$64,370
Interest Expense	$0	$0	$0
Taxes Incurred	$3,204	$5,884	$16,361
Net Profit	$10,318	$17,651	$48,009
Net Profit/Sales	9.40%	11.36%	20.68%

7.4 Projected Cash Flow

The following Cash Flow table illustrates that if Soapy Rides meets projected sales, it will have positive cash flow after month three of operation.

Cash



Cash Flow

Pro Forma Cash Flow
	FY 2002	FY 2003	FY 2004
Cash Received
Cash from Operations:
Cash Sales	$93,330	$132,038	$197,374
Cash from Receivables	$13,918	$22,242	$33,044
Subtotal Cash from Operations	$107,248	$154,280	$230,417
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	$107,248	$154,280	$230,417
Expenditures	FY 2002	FY 2003	FY 2004
Expenditures from Operations:
Cash Spending	$2,072	$2,548	$4,082
Payment of Accounts Payable	$93,389	$132,822	$176,854
Subtotal Spent on Operations	$95,461	$135,370	$180,936
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	$95,461	$135,370	$180,936
Net Cash Flow	$11,787	$18,910	$49,481
Cash Balance	$20,487	$39,397	$88,878

7.5 Projected Balance Sheet

Soapy Rides' balance sheet illustrates a healthy financial position for this new company. The monthly estimates are included in the appendices.

Balance Sheet

Pro Forma Balance Sheet
Assets
Current Assets	FY 2002	FY 2003	FY 2004
Cash	$20,487	$39,397	$88,878
Accounts Receivable	$2,552	$3,611	$5,398
Inventory	$483	$737	$1,164
Other Current Assets	$1,000	$1,000	$1,000
Total Current Assets	$24,522	$44,745	$96,440
Long-term Assets
Long-term Assets	$10,000	$10,000	$10,000
Accumulated Depreciation	$2,070	$4,140	$6,210
Total Long-term Assets	$7,930	$5,860	$3,790
Total Assets	$32,452	$50,605	$100,230
Liabilities and Capital
Current Liabilities	FY 2002	FY 2003	FY 2004
Accounts Payable	$2,184	$2,686	$4,302
Current Borrowing	$0	$0	$0
Other Current Liabilities	$0	$0	$0
Subtotal Current Liabilities	$2,184	$2,686	$4,302
Long-term Liabilities	$0	$0	$0
Total Liabilities	$2,184	$2,686	$4,302
Paid-in Capital	$30,000	$30,000	$30,000
Retained Earnings	($10,050)	$268	$17,919
Earnings	$10,318	$17,651	$48,009
Total Capital	$30,268	$47,919	$95,929
Total Liabilities and Capital	$32,452	$50,605	$100,230
Net Worth	$30,268	$47,919	$95,929

7.6 Business Ratios
The following table contains important ratios for the car wash industry, as determined by the Standard Industry Classification (SIC) code, 7542.
Ratios

Ratio Analysis
	FY 2002	FY 2003	FY 2004	Industry Profile
Sales Growth	0.00%	41.47%	49.48%	3.00%
Percent of Total Assets
Accounts Receivable	7.86%	7.14%	5.39%	8.70%
Inventory	1.49%	1.46%	1.16%	9.50%
Other Current Assets	3.08%	1.98%	1.00%	26.40%
Total Current Assets	75.56%	88.42%	96.22%	44.60%
Long-term Assets	24.44%	11.58%	3.78%	55.40%
Total Assets	100.00%	100.00%	100.00%	100.00%
Current Liabilities	6.73%	5.31%	4.29%	29.30%
Long-term Liabilities	0.00%	0.00%	0.00%	27.80%
Total Liabilities	6.73%	5.31%	4.29%	57.10%
Net Worth	93.27%	94.69%	95.71%	42.90%
Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	95.83%	95.50%	95.24%	0.00%
Selling, General & Administrative Expenses	86.59%	84.13%	74.45%	68.20%
Advertising Expenses	0.91%	0.74%	0.56%	1.50%
Profit Before Interest and Taxes	12.32%	15.15%	27.72%	2.70%
Main Ratios
Current	11.23	16.66	22.42	1.53
Quick	11.01	16.39	22.15	0.88
Total Debt to Total Assets	6.73%	5.31%	4.29%	57.10%
Pre-tax Return on Net Worth	44.68%	49.11%	67.10%	3.40%
Pre-tax Return on Assets	41.67%	46.51%	64.22%	8.00%
Additional Ratios	FY 2002	FY 2003	FY 2004
Net Profit Margin	9.40%	11.36%	20.68%	n.a
Return on Equity	34.09%	36.83%	50.05%	n.a
Activity Ratios
Accounts Receivable Turnover	6.45	6.45	6.45	n.a
Collection Days	43	48	47	n.a
Inventory Turnover	12.00	11.46	11.62	n.a
Accounts Payable Turnover	43.76	49.64	41.49	n.a
Payment Days	5	7	7	n.a
Total Asset Turnover	3.38	3.07	2.32	n.a
Debt Ratios
Debt to Net Worth	0.07	0.06	0.04	n.a
Current Liab. to Liab.	1.00	1.00	1.00	n.a
Liquidity Ratios
Net Working Capital	$22,338	$42,059	$92,139	n.a
Interest Coverage	0.00	0.00	0.00	n.a
Additional Ratios
Assets to Sales	0.30	0.33	0.43	n.a
Current Debt/Total Assets	7%	5%	4%	n.a
Acid Test	9.84	15.04	20.89	n.a
Sales/Net Worth	3.63	3.24	2.42	n.a
Dividend Payout	0.00	0.00	0.00	n.a