CollisionSyzygy, Inc.

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Auto Insurance Claims Business Plan

Financial Plan

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:

File Server

$50,000

ISP Lines

$12,000

New Phone System

$25,000

15 New Computers

$22,500

Office Furniture

$10,000

Misc. Computer Supplies

$15,000

Total

$134,500


Furthermore, the equity investment allows for the addition of key personnel as mentioned earlier in this business plan. Key promotional programs and travel expenses, including the attendance at the annual NACE Exposition, will require capital and operating expenses totaling approximately $444,500.

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.

7.1 Important Assumptions

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.

General Assumptions
FY 2001 FY 2002 FY 2003
Plan Month 1 2 3
Current Interest Rate 12.00% 12.00% 12.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 35.00% 35.00% 35.00%
Other 0 0 0

7.2 Break-even Analysis

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.

Break-even Analysis
Monthly Units Break-even 7,335
Monthly Revenue Break-even $204,148
Assumptions:
Average Per-Unit Revenue $27.83
Average Per-Unit Variable Cost $4.04
Estimated Monthly Fixed Cost $174,526

7.3 Projected Profit and Loss

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.

Pro Forma Profit and Loss
FY 2001 FY 2002 FY 2003
Sales $3,471,781 $6,931,840 $8,318,208
Direct Cost of Sales $503,757 $1,056,105 $1,330,692
Other $0 $0 $0
Total Cost of Sales $503,757 $1,056,105 $1,330,692
Gross Margin $2,968,024 $5,875,735 $6,987,516
Gross Margin % 85.49% 84.76% 84.00%
Expenses
Payroll $1,393,555 $2,433,950 $2,806,243
Sales and Marketing and Other Expenses $444,500 $466,725 $490,061
Depreciation $26,904 $26,904 $26,904
Leased Equipment $0 $0 $0
Utilities $12,000 $12,600 $13,230
Insurance $24,000 $25,200 $26,460
Rent $54,000 $56,700 $59,535
Payroll Taxes $139,356 $243,395 $280,624
Other $0 $0 $0
Total Operating Expenses $2,094,315 $3,265,474 $3,703,058
Profit Before Interest and Taxes $873,709 $2,610,261 $3,284,459
EBITDA $900,613 $2,637,165 $3,311,363
Interest Expense $0 $0 $0
Taxes Incurred $305,798 $913,591 $1,149,561
Net Profit $567,911 $1,696,670 $2,134,898
Net Profit/Sales 16.36% 24.48% 25.67%

7.4 Projected Cash Flow

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.

Pro Forma Cash Flow
FY 2001 FY 2002 FY 2003
Cash Received
Cash from Operations
Cash Sales $69,436 $138,637 $166,364
Cash from Receivables $2,671,342 $5,934,512 $7,807,786
Subtotal Cash from Operations $2,740,778 $6,073,149 $7,974,150
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 $2,000,000 $0 $0
Subtotal Cash Received $4,740,778 $6,073,149 $7,974,150
Expenditures FY 2001 FY 2002 FY 2003
Expenditures from Operations
Cash Spending $1,393,555 $2,433,950 $2,806,243
Bill Payments $1,362,952 $2,738,301 $3,302,833
Subtotal Spent on Operations $2,756,507 $5,172,251 $6,109,076
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 $134,500 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $2,891,007 $5,172,251 $6,109,076
Net Cash Flow $1,849,771 $900,898 $1,865,074
Cash Balance $3,811,099 $4,711,998 $6,577,071

7.5 Projected Balance Sheet

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.

Pro Forma Balance Sheet
FY 2001 FY 2002 FY 2003
Assets
Current Assets
Cash $3,811,099 $4,711,998 $6,577,071
Accounts Receivable $861,600 $1,720,291 $2,064,349
Other Current Assets $0 $0 $0
Total Current Assets $4,672,699 $6,432,289 $8,641,421
Long-term Assets
Long-term Assets $326,791 $326,791 $326,791
Accumulated Depreciation $67,568 $94,472 $121,376
Total Long-term Assets $259,223 $232,319 $205,415
Total Assets $4,931,922 $6,664,608 $8,846,836
Liabilities and Capital FY 2001 FY 2002 FY 2003
Current Liabilities
Accounts Payable $192,010 $228,026 $275,356
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $192,010 $228,026 $275,356
Long-term Liabilities $0 $0 $0
Total Liabilities $192,010 $228,026 $275,356
Paid-in Capital $3,907,335 $3,907,335 $3,907,335
Retained Earnings $264,666 $832,577 $2,529,247
Earnings $567,911 $1,696,670 $2,134,898
Total Capital $4,739,912 $6,436,582 $8,571,480
Total Liabilities and Capital $4,931,922 $6,664,608 $8,846,836
Net Worth $4,739,912 $6,436,582 $8,571,480

7.6 Business Ratios

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.

Ratio Analysis
FY 2001 FY 2002 FY 2003 Industry Profile
Sales Growth 106.02% 99.66% 20.00% 2.40%
Percent of Total Assets
Accounts Receivable 17.47% 25.81% 23.33% 26.30%
Other Current Assets 0.00% 0.00% 0.00% 64.30%
Total Current Assets 94.74% 96.51% 97.68% 90.60%
Long-term Assets 5.26% 3.49% 2.32% 9.40%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 3.89% 3.42% 3.11% 48.20%
Long-term Liabilities 0.00% 0.00% 0.00% 9.50%
Total Liabilities 3.89% 3.42% 3.11% 57.70%
Net Worth 96.11% 96.58% 96.89% 42.30%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 85.49% 84.76% 84.00% 100.00%
Selling, General & Administrative Expenses 69.13% 60.29% 58.34% 60.10%
Advertising Expenses 10.73% 5.64% 4.94% 1.70%
Profit Before Interest and Taxes 25.17% 37.66% 39.49% 5.20%
Main Ratios
Current 24.34 28.21 31.38 1.66
Quick 24.34 28.21 31.38 1.45
Total Debt to Total Assets 3.89% 3.42% 3.11% 57.70%
Pre-tax Return on Net Worth 18.43% 40.55% 38.32% 5.80%
Pre-tax Return on Assets 17.72% 39.17% 37.13% 13.70%
Additional Ratios FY 2001 FY 2002 FY 2003
Net Profit Margin 16.36% 24.48% 25.67% n.a
Return on Equity 11.98% 26.36% 24.91% n.a
Activity Ratios
Accounts Receivable Turnover 3.95 3.95 3.95 n.a
Collection Days 56 69 85 n.a
Accounts Payable Turnover 7.73 12.17 12.17 n.a
Payment Days 28 28 27 n.a
Total Asset Turnover 0.70 1.04 0.94 n.a
Debt Ratios
Debt to Net Worth 0.04 0.04 0.03 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $4,480,689 $6,204,263 $8,366,065 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 1.42 0.96 1.06 n.a
Current Debt/Total Assets 4% 3% 3% n.a
Acid Test 19.85 20.66 23.89 n.a
Sales/Net Worth 0.73 1.08 0.97 n.a
Dividend Payout 0.00 0.00 0.00 n.a