Aquarium Services Business Plan

EcoAquatics

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Financial Plan

The main financial problem is working capital for the first few months before business clients pay, and I support that by not paying myself.  I don't foresee the kind of client relationships that will cause long-term problems getting paid, but I also have to be able to support their occasional delays because this won't be important to them.

7.1 Important Assumptions

The following table outlines the general assumptions for EcoAquatics.

General Assumptions
Year 1 Year 2 Year 3
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 30.00% 30.00% 30.00%
Other 0 0 0

7.2 Break-even Analysis

The break-even is based on a very realistic assessment of the present hobbyist nature of this business. 

Break-even Analysis
Monthly Revenue Break-even $201
Assumptions:
Average Percent Variable Cost 2%
Estimated Monthly Fixed Cost $197

7.3 Projected Profit and Loss

As the Profit and Loss table shows, we have a small hobbyist business here with very few expenses.  The website hosting is an estimate, because it may actually be free.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $2,400 $7,200 $9,000
Direct Cost of Sales $48 $144 $180
Other Costs of Sales $0 $0 $0
Total Cost of Sales $48 $144 $180
Gross Margin $2,352 $7,056 $8,820
Gross Margin % 98.00% 98.00% 98.00%
Expenses
Payroll $1,800 $5,400 $6,750
Sales and Marketing and Other Expenses $200 $300 $300
Depreciation $0 $0 $0
Website hosting $360 $400 $500
Utilities $0 $0 $0
Insurance $0 $0 $0
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $2,360 $6,100 $7,550
Profit Before Interest and Taxes ($8) $956 $1,270
EBITDA ($8) $956 $1,270
Interest Expense $0 $0 $0
Taxes Incurred $0 $287 $381
Net Profit ($8) $669 $889
Net Profit/Sales -0.33% 9.29% 9.88%

7.4 Projected Cash Flow

The cash flow involves a loan from founders, which is essentially equivalent to not paying myself for the first two months plus a smaller loan from parents, to support the working capital requirements.  Otherwise I would show a negative balance. 

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $0 $0 $0
Cash from Receivables $2,007 $6,413 $8,705
Subtotal Cash from Operations $2,007 $6,413 $8,705
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $500 $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 $2,507 $6,413 $8,705
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $1,800 $5,400 $6,750
Bill Payments $478 $1,167 $1,342
Subtotal Spent on Operations $2,278 $6,567 $8,092
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 $500
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 $2,278 $6,567 $8,592
Net Cash Flow $228 ($154) $113
Cash Balance $228 $74 $187

7.5 Projected Balance Sheet

The balance sheet seems acceptable for a low-key hobbyist business.  The loans carried are mainly the first two months of sacrificed compensation to myself.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $228 $74 $187
Accounts Receivable $393 $1,180 $1,475
Other Current Assets $0 $0 $0
Total Current Assets $622 $1,254 $1,662
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $622 $1,254 $1,662
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $130 $93 $112
Current Borrowing $0 $0 $0
Other Current Liabilities $500 $500 $0
Subtotal Current Liabilities $630 $593 $112
Long-term Liabilities $0 $0 $0
Total Liabilities $630 $593 $112
Paid-in Capital $50 $50 $50
Retained Earnings ($50) ($58) $611
Earnings ($8) $669 $889
Total Capital ($8) $661 $1,550
Total Liabilities and Capital $622 $1,254 $1,662
Net Worth ($8) $661 $1,550

7.6 Business Ratios

My guess is that what I am doing is not going to be equivalent to the kinds of real businesses whose numbers were contained in the financial databases shown in the rightmost column here.  Furthermore, I am not intending to seek bank loan or investment.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 200.00% 25.00% 8.79%
Percent of Total Assets
Accounts Receivable 63.28% 94.09% 88.75% 28.12%
Other Current Assets 0.00% 0.00% 0.00% 44.18%
Total Current Assets 100.00% 100.00% 100.00% 76.27%
Long-term Assets 0.00% 0.00% 0.00% 23.73%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 101.29% 47.28% 6.73% 38.61%
Long-term Liabilities 0.00% 0.00% 0.00% 13.60%
Total Liabilities 101.29% 47.28% 6.73% 52.21%
Net Worth -1.29% 52.72% 93.27% 47.79%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 98.00% 98.00% 98.00% 100.00%
Selling, General & Administrative Expenses 98.33% 88.71% 88.12% 82.68%
Advertising Expenses 0.00% 0.00% 0.00% 1.66%
Profit Before Interest and Taxes -0.33% 13.28% 14.11% 1.37%
Main Ratios
Current 0.99 2.12 14.86 1.59
Quick 0.99 2.12 14.86 1.22
Total Debt to Total Assets 101.29% 47.28% 6.73% 60.22%
Pre-tax Return on Net Worth 100.00% 144.59% 81.92% 3.09%
Pre-tax Return on Assets -1.29% 76.23% 76.41% 7.76%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -0.33% 9.29% 9.88% n.a
Return on Equity 0.00% 101.21% 57.35% n.a
Activity Ratios
Accounts Receivable Turnover 6.10 6.10 6.10 n.a
Collection Days 57 40 54 n.a
Accounts Payable Turnover 4.69 12.17 12.17 n.a
Payment Days 27 36 27 n.a
Total Asset Turnover 3.86 5.74 5.41 n.a
Debt Ratios
Debt to Net Worth 0.00 0.90 0.07 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital ($8) $661 $1,550 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.26 0.17 0.18 n.a
Current Debt/Total Assets 101% 47% 7% n.a
Acid Test 0.36 0.13 1.67 n.a
Sales/Net Worth 0.00 10.89 5.81 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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General Assumptions
Year 1 Year 2 Year 3
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 30.00% 30.00% 30.00%
Other 0 0 0
Break-even Analysis
Monthly Revenue Break-even $201
Assumptions:
Average Percent Variable Cost 2%
Estimated Monthly Fixed Cost $197
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $2,400 $7,200 $9,000
Direct Cost of Sales $48 $144 $180
Other Costs of Sales $0 $0 $0
Total Cost of Sales $48 $144 $180
Gross Margin $2,352 $7,056 $8,820
Gross Margin % 98.00% 98.00% 98.00%
Expenses
Payroll $1,800 $5,400 $6,750
Sales and Marketing and Other Expenses $200 $300 $300
Depreciation $0 $0 $0
Website hosting $360 $400 $500
Utilities $0 $0 $0
Insurance $0 $0 $0
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $2,360 $6,100 $7,550
Profit Before Interest and Taxes ($8) $956 $1,270
EBITDA ($8) $956 $1,270
Interest Expense $0 $0 $0
Taxes Incurred $0 $287 $381
Net Profit ($8) $669 $889
Net Profit/Sales -0.33% 9.29% 9.88%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $0 $0 $0
Cash from Receivables $2,007 $6,413 $8,705
Subtotal Cash from Operations $2,007 $6,413 $8,705
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $500 $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 $2,507 $6,413 $8,705
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $1,800 $5,400 $6,750
Bill Payments $478 $1,167 $1,342
Subtotal Spent on Operations $2,278 $6,567 $8,092
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 $500
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 $2,278 $6,567 $8,592
Net Cash Flow $228 ($154) $113
Cash Balance $228 $74 $187
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $228 $74 $187
Accounts Receivable $393 $1,180 $1,475
Other Current Assets $0 $0 $0
Total Current Assets $622 $1,254 $1,662
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $622 $1,254 $1,662
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $130 $93 $112
Current Borrowing $0 $0 $0
Other Current Liabilities $500 $500 $0
Subtotal Current Liabilities $630 $593 $112
Long-term Liabilities $0 $0 $0
Total Liabilities $630 $593 $112
Paid-in Capital $50 $50 $50
Retained Earnings ($50) ($58) $611
Earnings ($8) $669 $889
Total Capital ($8) $661 $1,550
Total Liabilities and Capital $622 $1,254 $1,662
Net Worth ($8) $661 $1,550
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 200.00% 25.00% 8.79%
Percent of Total Assets
Accounts Receivable 63.28% 94.09% 88.75% 28.12%
Other Current Assets 0.00% 0.00% 0.00% 44.18%
Total Current Assets 100.00% 100.00% 100.00% 76.27%
Long-term Assets 0.00% 0.00% 0.00% 23.73%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 101.29% 47.28% 6.73% 38.61%
Long-term Liabilities 0.00% 0.00% 0.00% 13.60%
Total Liabilities 101.29% 47.28% 6.73% 52.21%
Net Worth -1.29% 52.72% 93.27% 47.79%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 98.00% 98.00% 98.00% 100.00%
Selling, General & Administrative Expenses 98.33% 88.71% 88.12% 82.68%
Advertising Expenses 0.00% 0.00% 0.00% 1.66%
Profit Before Interest and Taxes -0.33% 13.28% 14.11% 1.37%
Main Ratios
Current 0.99 2.12 14.86 1.59
Quick 0.99 2.12 14.86 1.22
Total Debt to Total Assets 101.29% 47.28% 6.73% 60.22%
Pre-tax Return on Net Worth 100.00% 144.59% 81.92% 3.09%
Pre-tax Return on Assets -1.29% 76.23% 76.41% 7.76%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -0.33% 9.29% 9.88% n.a
Return on Equity 0.00% 101.21% 57.35% n.a
Activity Ratios
Accounts Receivable Turnover 6.10 6.10 6.10 n.a
Collection Days 57 40 54 n.a
Accounts Payable Turnover 4.69 12.17 12.17 n.a
Payment Days 27 36 27 n.a
Total Asset Turnover 3.86 5.74 5.41 n.a
Debt Ratios
Debt to Net Worth 0.00 0.90 0.07 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital ($8) $661 $1,550 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.26 0.17 0.18 n.a
Current Debt/Total Assets 101% 47% 7% n.a
Acid Test 0.36 0.13 1.67 n.a
Sales/Net Worth 0.00 10.89 5.81 n.a
Dividend Payout 0.00 0.00 0.00 n.a