The information contained in the Financial Plan section assumes that an equity investment is made into CollisionSyzygy, during June, 2000, and that the following capital investments are made:
|New Phone System|
|15 New Computers|
|Misc. Computer Supplies|
With these capital and personnel investments, CollisionSyzygy expects to achieve significant sales growth. For the period ending May 31, 2001, sales are expected to be (whopping), growing to (knock me over with a feather) by June 30, 2003. Cost of Sales should be (wow)%. Net profits after taxes and miscellaneous expenses should range from (alright!)%, for the period ending May 31, 2001, to (sound the fanfare)% for the period ending May 31, 2003.
Calculations throughout this business plan have been based upon key assumptions which are summarized in the following table. The following brief glossary will explain the terms used:
Payment Days is the average number of days (30) which takes CollisionSyzygy to pay its bills.
Collection Days is the average number of days (60) needed to collect an invoice issued by CollisionSyzygy.
Tax Rate refers to the corporate tax rate used in the calculations.
Sales on Credit % (98%) is an important assumption that helps to determine the Accounts Receivable balance. This becomes part of the formula used in the Balance Sheet for the Accounts Receivable row.
Personnel burden (10%) is the sum of employer taxes and benefits paid over and above salaries on behalf of employees. This estimate is multiplied against salaries in the Personnel table. It is also factored into the Profit and Loss table.
Estimated average monthly fixed expenses, average per-unit revenue, and average variable costs were used, as shown below, by the company to determine the sales level needed per month to break even. As mentioned before, claims processing business is profitable only when high volumes are reached. The company management believes CollisionSyzygy will reach its break-even sales volume by the fourth month of operations.
June and July, 2000 are expected to result in slight losses as CollisionSyzygy uses the venture equity to virtually retool its operation for significantly higher sales generation. A net after-tax loss for June, 2000 is estimated, with monthly after-tax profits by May 31, 2001. A jump in personnel costs, expected in January, 2001 as the new CFO and COO additions are made, reduces profits from the prior month, December, 2000.
By May 31, 2002, after-tax profits for the year should climb to nearly (yippie) on gross margin (sales after Cost of Sales) of (whoa Nellie!). After-tax profit margin should be approximately (green w/envy)%.
By May 31, 2003, after-tax profits for the year should reach (yowzah!) on gross margin of (huzzah-huzzah). An after-tax profit margin of (O-M-G)% is expected.
After July, 2000, cash flow from operations continues an upward trend and results in a positive cash balance for the period ending May 31, 2001. The following chart illustrates monthly cash flows for June, 2000 through May 31, 2001. As the Pro Forma Cash Flow table shows, it is possible for CollisionSyzygy to have a cash balance twice the size of the net capital injection.
The following Balance sheet shows the year-end values for 2001 through 2003. It reflects the capital contribution. The contribution is reduced by a shareholder loan, from Mr. Smith.
CollisionSyzygy is virtually debt-free, making it more resistant to economic downturn.
Profitability ratios indicate strong, after-tax profit margins for the period ending May 31, 2001 to the period ending May 31, 2003. Return on equity (ROE) is also very strong for the same period range.
Activity Ratios indicate that asset turnover (sales divided by assets) should be 1.27 for the first year. Sales on credit should average approximately 16 times the average accounts receivable balance.
Liquidity of the firm's cash position is excellent. The current ratio (short-term assets divided by short-term debt) indicate that CollisionSyzygy has short-term assets to cover each dollar of short-term debt. Furthermore, subtracting out any expected accounts receivable, the firm still has about (beaucoup bucks) for each dollar of short-term debt.
Net working capital does reflect the cash investment.
The following table summarizes the financial health of CollisionSyzygy. Industry profile ratios based on the Standard Industrial Classification (SIC) code 6411, Insurance Agents Brokers and Service, are shown for comparison.