F and R Auto Repair

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Auto Repair Shop Business Plan

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Financial Plan

The following sections outline the financial plan for F & R Auto Repair.

7.1 Break-even Analysis

The company's Break-even Analysis is based on an average company's running costs within this industry, including payroll, and its fixed costs for such things as rent, utilities, etc.

Break-even Analysis
Monthly Revenue Break-even $14,564
Assumptions:
Average Percent Variable Cost 10%
Estimated Monthly Fixed Cost $13,107

7.2 Projected Profit and Loss

The following table and chart show the projected profit and loss for F & R Auto Repair.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $178,800 $200,256 $215,417
Direct Cost of Sales $17,880 $20,026 $21,542
Other Production Expenses $0 $0 $0
Total Cost of Sales $17,880 $20,026 $21,542
Gross Margin $160,920 $180,230 $193,875
Gross Margin % 90.00% 90.00% 90.00%
Expenses
Payroll $93,300 $102,000 $117,000
Sales and Marketing and Other Expenses $6,000 $7,200 $7,400
Depreciation $1,992 $2,000 $2,000
Leased Equipment $6,000 $1,000 $1,000
Utilities $4,800 $5,000 $5,000
Insurance $7,200 $7,400 $7,400
Rent $24,000 $24,000 $24,000
Payroll Taxes $13,995 $15,300 $17,550
Other $0 $0 $0
Total Operating Expenses $157,287 $163,900 $181,350
Profit Before Interest and Taxes $3,633 $16,330 $12,525
EBITDA $5,625 $18,330 $14,525
Interest Expense $1,892 $1,700 $1,500
Taxes Incurred $522 $4,389 $3,308
Net Profit $1,219 $10,241 $7,718
Net Profit/Sales 0.68% 5.11% 3.58%

7.3 Projected Cash Flow

The following table and chart are the projected cash flow figures for F & R.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $160,920 $180,230 $193,875
Cash from Receivables $14,635 $19,636 $21,267
Subtotal Cash from Operations $175,555 $199,867 $215,142
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 $175,555 $199,867 $215,142
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $93,300 $102,000 $117,000
Bill Payments $77,017 $86,232 $88,638
Subtotal Spent on Operations $170,317 $188,232 $205,638
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 $2,000 $2,000 $2,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $172,317 $190,232 $207,638
Net Cash Flow $3,238 $9,634 $7,504
Cash Balance $6,138 $15,773 $23,277

7.4 Projected Balance Sheet

The following table shows the projected balance sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $6,138 $15,773 $23,277
Accounts Receivable $3,245 $3,634 $3,910
Inventory $1,815 $2,033 $2,187
Other Current Assets $0 $0 $0
Total Current Assets $11,198 $21,440 $29,373
Long-term Assets
Long-term Assets $20,000 $20,000 $20,000
Accumulated Depreciation $1,992 $3,992 $5,992
Total Long-term Assets $18,008 $16,008 $14,008
Total Assets $29,206 $37,448 $43,381
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $7,088 $7,088 $7,303
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $7,088 $7,088 $7,303
Long-term Liabilities $18,000 $16,000 $14,000
Total Liabilities $25,088 $23,088 $21,303
Paid-in Capital $12,000 $12,000 $12,000
Retained Earnings ($9,100) ($7,881) $2,360
Earnings $1,219 $10,241 $7,718
Total Capital $4,119 $14,360 $22,078
Total Liabilities and Capital $29,206 $37,448 $43,381
Net Worth $4,119 $14,360 $22,078

7.5 Business Ratios

The Business ratios give an overall idea of how profitable and at what risk level F & R Auto will operate at. The ratio table gives both time series analysis and cross-sectional analysis by including industry average ratios. As can be seen from the comparison between industry standards and F&R's own ratios, there is some differences. Most of these are due to the fact that there is a very large variance in assets, liabilities, financing, and net income between companies in this industry due to the vast differences in company size.

Overall the company's projections show a company that faces the usual risks of companies in this industry and one that will be profitable in the long-run. The company shows that it has higher SG&A costs than other competitors, however management has deliberately overstated costs and minimized profits in order to create a "safe" or "buffer" zone in case of hard times or other unforeseeable problems. Pre-tax return on net worth and pre-tax return on assets appears to be very high, especially within the first two years, however this is due to the fact that the company will be operating with fewer assets than most companies in the first few years until it can build up enough cash to acquire the tools and facilities that are desired and go beyond the "adequate" level.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 12.00% 7.57% 7.00%
Percent of Total Assets
Accounts Receivable 11.11% 9.71% 9.01% 8.80%
Inventory 6.21% 5.43% 5.04% 9.60%
Other Current Assets 0.00% 0.00% 0.00% 23.80%
Total Current Assets 38.34% 57.25% 67.71% 42.20%
Long-term Assets 61.66% 42.75% 32.29% 57.80%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 24.27% 18.93% 16.83% 34.80%
Long-term Liabilities 61.63% 42.73% 32.27% 24.70%
Total Liabilities 85.90% 61.65% 49.11% 59.50%
Net Worth 14.10% 38.35% 50.89% 40.50%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 90.00% 90.00% 90.00% n.a.
Selling, General & Administrative Expenses 89.32% 84.89% 86.42% 75.20%
Advertising Expenses 1.34% 1.50% 1.39% 1.30%
Profit Before Interest and Taxes 2.03% 8.15% 5.81% 1.70%
Main Ratios
Current 1.58 3.02 4.02 1.17
Quick 1.32 2.74 3.72 0.65
Total Debt to Total Assets 85.90% 61.65% 49.11% 59.50%
Pre-tax Return on Net Worth 42.28% 101.88% 49.94% 1.80%
Pre-tax Return on Assets 5.96% 39.07% 25.41% 4.60%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 0.68% 5.11% 3.58% n.a
Return on Equity 29.59% 71.32% 34.96% n.a
Activity Ratios
Accounts Receivable Turnover 5.51 5.51 5.51 n.a
Collection Days 57 63 64 n.a
Inventory Turnover 10.91 10.41 10.21 n.a
Accounts Payable Turnover 11.87 12.17 12.17 n.a
Payment Days 27 30 30 n.a
Total Asset Turnover 6.12 5.35 4.97 n.a
Debt Ratios
Debt to Net Worth 6.09 1.61 0.96 n.a
Current Liab. to Liab. 0.28 0.31 0.34 n.a
Liquidity Ratios
Net Working Capital $4,111 $14,352 $22,070 n.a
Interest Coverage 1.92 9.61 8.35 n.a
Additional Ratios
Assets to Sales 0.16 0.19 0.20 n.a
Current Debt/Total Assets 24% 19% 17% n.a
Acid Test 0.87 2.23 3.19 n.a
Sales/Net Worth 43.41 13.95 9.76 n.a
Dividend Payout 0.00 0.00 0.00 n.a