Auto Repair Service Business Plan

Quick and Dirty Auto Repair

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Financial Plan

QDAR expects to raise much of its own capital, and to borrow on a guaranteed ten year SBA loan. This provides the bulk of the current financing required.

7.1 Break-even Analysis

QDAR's break-even analysis is based on the averages of the first-year figures for total sales by units, and for operating expenses. These are presented as per-unit revenue, per-unit cost, and fixed costs. These conservative assumptions make for a more accurate estimate of real risk.

Break-even Analysis
Monthly Units Break-even 6,969
Monthly Revenue Break-even $724,208
Assumptions:
Average Per-Unit Revenue $103.92
Average Per-Unit Variable Cost $42.81
Estimated Monthly Fixed Cost $425,871

7.2 Projected Profit and Loss

As the profit and loss table shows, QDAR expects to continue its steady growth in profitability over the next three years of operations.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $9,540,000 $11,269,125 $13,311,654
Direct Cost of Sales $3,930,000 $4,642,313 $5,483,732
Other $0 $0 $0
Total Cost of Sales $3,930,000 $4,642,313 $5,483,732
Gross Margin $5,610,000 $6,626,813 $7,827,922
Gross Margin % 58.81% 58.81% 58.81%
Expenses
Payroll $4,315,000 $4,530,767 $4,757,322
Sales and Marketing and Other Expenses $27,000 $35,830 $72,122
Depreciation $120,000 $138,000 $158,700
Utilities $1,200 $1,260 $1,323
Payroll Taxes $647,250 $679,615 $713,598
Other $0 $0 $0
Total Operating Expenses $5,110,450 $5,385,472 $5,703,065
Profit Before Interest and Taxes $499,550 $1,241,341 $2,124,858
EBITDA $619,550 $1,379,341 $2,283,558
Interest Expense $26,748 $22,467 $20,217
Taxes Incurred $120,157 $304,719 $534,930
Net Profit $352,645 $914,156 $1,569,711
Net Profit/Sales 3.70% 8.11% 11.79%

7.3 Projected Cash Flow

The cash flow projection shows that provisions for ongoing expenses are adequate to meet QDAR's needs as the business generates cash flow sufficient to support operations.

The short-term loan is expected to be paid out within one year, while an SBA loan will be repaid in ten years.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $9,540,000 $11,269,125 $13,311,654
Subtotal Cash from Operations $9,540,000 $11,269,125 $13,311,654
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 $9,540,000 $11,269,125 $13,311,654
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $4,315,000 $4,530,767 $4,757,322
Bill Payments $4,680,133 $5,661,245 $6,808,402
Subtotal Spent on Operations $8,995,133 $10,192,012 $11,565,724
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $55,000 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $15,335 $20,000 $25,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $540,000 $660,000 $770,000
Dividends $0 $0 $0
Subtotal Cash Spent $9,605,468 $10,872,012 $12,360,724
Net Cash Flow ($65,468) $397,113 $950,930
Cash Balance $34,532 $431,646 $1,382,575

7.4 Projected Balance Sheet

QDAR's projected company balance sheet follows.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $34,532 $431,646 $1,382,575
Inventory $360,250 $425,545 $502,675
Other Current Assets $50,000 $50,000 $50,000
Total Current Assets $444,782 $907,191 $1,935,251
Long-term Assets
Long-term Assets $890,000 $1,550,000 $2,320,000
Accumulated Depreciation $120,000 $258,000 $416,700
Total Long-term Assets $770,000 $1,292,000 $1,903,300
Total Assets $1,214,782 $2,199,191 $3,838,551
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $382,473 $472,726 $567,374
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $382,473 $472,726 $567,374
Long-term Liabilities $234,665 $214,665 $189,665
Total Liabilities $617,138 $687,391 $757,039
Paid-in Capital $250,000 $250,000 $250,000
Retained Earnings ($5,000) $347,645 $1,261,800
Earnings $352,645 $914,156 $1,569,711
Total Capital $597,645 $1,511,800 $3,081,512
Total Liabilities and Capital $1,214,782 $2,199,191 $3,838,551
Net Worth $597,645 $1,511,800 $3,081,512

7.5 Business Ratios

The following table outlines some of the more important business ratios for the auto repair industry, as described by the Standard Industry Classifications (SIC) Index code 7538, General Automotive Repair Shops.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 18.12% 18.12% 7.00%
Percent of Total Assets
Inventory 29.66% 19.35% 13.10% 9.60%
Other Current Assets 4.12% 2.27% 1.30% 23.80%
Total Current Assets 36.61% 41.25% 50.42% 42.20%
Long-term Assets 63.39% 58.75% 49.58% 57.80%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 31.48% 21.50% 14.78% 34.80%
Long-term Liabilities 19.32% 9.76% 4.94% 24.70%
Total Liabilities 50.80% 31.26% 19.72% 59.50%
Net Worth 49.20% 68.74% 80.28% 40.50%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 58.81% 58.81% 58.81% 0.00%
Selling, General & Administrative Expenses 55.09% 50.69% 46.95% 75.20%
Advertising Expenses 0.03% 0.09% 0.34% 1.30%
Profit Before Interest and Taxes 5.24% 11.02% 15.96% 1.70%
Main Ratios
Current 1.16 1.92 3.41 1.17
Quick 0.22 1.02 2.52 0.65
Total Debt to Total Assets 50.80% 31.26% 19.72% 59.50%
Pre-tax Return on Net Worth 79.11% 80.62% 68.30% 1.80%
Pre-tax Return on Assets 38.92% 55.42% 54.83% 4.60%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 3.70% 8.11% 11.79% n.a
Return on Equity 59.01% 60.47% 50.94% n.a
Activity Ratios
Inventory Turnover 10.91 11.82 11.82 n.a
Accounts Payable Turnover 13.24 12.17 12.17 n.a
Payment Days 27 27 27 n.a
Total Asset Turnover 7.85 5.12 3.47 n.a
Debt Ratios
Debt to Net Worth 1.03 0.45 0.25 n.a
Current Liab. to Liab. 0.62 0.69 0.75 n.a
Liquidity Ratios
Net Working Capital $62,310 $434,465 $1,367,877 n.a
Interest Coverage 18.68 55.25 105.11 n.a
Additional Ratios
Assets to Sales 0.13 0.20 0.29 n.a
Current Debt/Total Assets 31% 21% 15% n.a
Acid Test 0.22 1.02 2.52 n.a
Sales/Net Worth 15.96 7.45 4.32 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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Break-even Analysis
Monthly Units Break-even 6,969
Monthly Revenue Break-even $724,208
Assumptions:
Average Per-Unit Revenue $103.92
Average Per-Unit Variable Cost $42.81
Estimated Monthly Fixed Cost $425,871
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $9,540,000 $11,269,125 $13,311,654
Direct Cost of Sales $3,930,000 $4,642,313 $5,483,732
Other $0 $0 $0
Total Cost of Sales $3,930,000 $4,642,313 $5,483,732
Gross Margin $5,610,000 $6,626,813 $7,827,922
Gross Margin % 58.81% 58.81% 58.81%
Expenses
Payroll $4,315,000 $4,530,767 $4,757,322
Sales and Marketing and Other Expenses $27,000 $35,830 $72,122
Depreciation $120,000 $138,000 $158,700
Utilities $1,200 $1,260 $1,323
Payroll Taxes $647,250 $679,615 $713,598
Other $0 $0 $0
Total Operating Expenses $5,110,450 $5,385,472 $5,703,065
Profit Before Interest and Taxes $499,550 $1,241,341 $2,124,858
EBITDA $619,550 $1,379,341 $2,283,558
Interest Expense $26,748 $22,467 $20,217
Taxes Incurred $120,157 $304,719 $534,930
Net Profit $352,645 $914,156 $1,569,711
Net Profit/Sales 3.70% 8.11% 11.79%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $9,540,000 $11,269,125 $13,311,654
Subtotal Cash from Operations $9,540,000 $11,269,125 $13,311,654
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 $9,540,000 $11,269,125 $13,311,654
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $4,315,000 $4,530,767 $4,757,322
Bill Payments $4,680,133 $5,661,245 $6,808,402
Subtotal Spent on Operations $8,995,133 $10,192,012 $11,565,724
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $55,000 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $15,335 $20,000 $25,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $540,000 $660,000 $770,000
Dividends $0 $0 $0
Subtotal Cash Spent $9,605,468 $10,872,012 $12,360,724
Net Cash Flow ($65,468) $397,113 $950,930
Cash Balance $34,532 $431,646 $1,382,575
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $34,532 $431,646 $1,382,575
Inventory $360,250 $425,545 $502,675
Other Current Assets $50,000 $50,000 $50,000
Total Current Assets $444,782 $907,191 $1,935,251
Long-term Assets
Long-term Assets $890,000 $1,550,000 $2,320,000
Accumulated Depreciation $120,000 $258,000 $416,700
Total Long-term Assets $770,000 $1,292,000 $1,903,300
Total Assets $1,214,782 $2,199,191 $3,838,551
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $382,473 $472,726 $567,374
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $382,473 $472,726 $567,374
Long-term Liabilities $234,665 $214,665 $189,665
Total Liabilities $617,138 $687,391 $757,039
Paid-in Capital $250,000 $250,000 $250,000
Retained Earnings ($5,000) $347,645 $1,261,800
Earnings $352,645 $914,156 $1,569,711
Total Capital $597,645 $1,511,800 $3,081,512
Total Liabilities and Capital $1,214,782 $2,199,191 $3,838,551
Net Worth $597,645 $1,511,800 $3,081,512
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 18.12% 18.12% 7.00%
Percent of Total Assets
Inventory 29.66% 19.35% 13.10% 9.60%
Other Current Assets 4.12% 2.27% 1.30% 23.80%
Total Current Assets 36.61% 41.25% 50.42% 42.20%
Long-term Assets 63.39% 58.75% 49.58% 57.80%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 31.48% 21.50% 14.78% 34.80%
Long-term Liabilities 19.32% 9.76% 4.94% 24.70%
Total Liabilities 50.80% 31.26% 19.72% 59.50%
Net Worth 49.20% 68.74% 80.28% 40.50%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 58.81% 58.81% 58.81% 0.00%
Selling, General & Administrative Expenses 55.09% 50.69% 46.95% 75.20%
Advertising Expenses 0.03% 0.09% 0.34% 1.30%
Profit Before Interest and Taxes 5.24% 11.02% 15.96% 1.70%
Main Ratios
Current 1.16 1.92 3.41 1.17
Quick 0.22 1.02 2.52 0.65
Total Debt to Total Assets 50.80% 31.26% 19.72% 59.50%
Pre-tax Return on Net Worth 79.11% 80.62% 68.30% 1.80%
Pre-tax Return on Assets 38.92% 55.42% 54.83% 4.60%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 3.70% 8.11% 11.79% n.a
Return on Equity 59.01% 60.47% 50.94% n.a
Activity Ratios
Inventory Turnover 10.91 11.82 11.82 n.a
Accounts Payable Turnover 13.24 12.17 12.17 n.a
Payment Days 27 27 27 n.a
Total Asset Turnover 7.85 5.12 3.47 n.a
Debt Ratios
Debt to Net Worth 1.03 0.45 0.25 n.a
Current Liab. to Liab. 0.62 0.69 0.75 n.a
Liquidity Ratios
Net Working Capital $62,310 $434,465 $1,367,877 n.a
Interest Coverage 18.68 55.25 105.11 n.a
Additional Ratios
Assets to Sales 0.13 0.20 0.29 n.a
Current Debt/Total Assets 31% 21% 15% n.a
Acid Test 0.22 1.02 2.52 n.a
Sales/Net Worth 15.96 7.45 4.32 n.a
Dividend Payout 0.00 0.00 0.00 n.a