Phaethon's Chariot Restorations

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Automobile Restoration Business Plan

Financial Plan

The business of Phaethon's Chariot Restorations does not require substantial outlays for inventory and virtually all sales are on a cash/credit card basis, so increases in sales will not be accompanied by initial cash-flow deficits.

8.1 Start-up Funding

The start-up costs are to be financed by the owner's personal investment and by a 7-year loan.

Start-up Funding
Start-up Expenses to Fund $23,500
Start-up Assets to Fund $142,000
Total Funding Required $165,500
Assets
Non-cash Assets from Start-up $132,000
Cash Requirements from Start-up $10,000
Additional Cash Raised $0
Cash Balance on Starting Date $10,000
Total Assets $142,000
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $119,000
Accounts Payable (Outstanding Bills) $6,000
Other Current Liabilities (interest-free) $5,500
Total Liabilities $130,500
Capital
Planned Investment
Owner $35,000
Investor $0
Additional Investment Requirement $0
Total Planned Investment $35,000
Loss at Start-up (Start-up Expenses) ($23,500)
Total Capital $11,500
Total Capital and Liabilities $142,000
Total Funding $165,500

8.2 Break-even Analysis

The Break-even Analysis is based on the average of the first-year figures for total sales and average cost of sales, and by the averaged annual monthly operating expenses. These conservative assumptions make for a more accurate estimate of real risk, showing that we need to have the monthly sales shown in the table and chart below.

Break-even Analysis
Monthly Revenue Break-even $20,506
Assumptions:
Average Percent Variable Cost 21%
Estimated Monthly Fixed Cost $16,120

8.3 Projected Profit and Loss

As the Profit and Loss table shows, the company 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 $311,044 $471,406 $623,707
Direct Cost of Sales $66,540 $101,869 $132,203
Other Costs of Sales $0 $0 $0
Total Cost of Sales $66,540 $101,869 $132,203
Gross Margin $244,504 $369,537 $491,504
Gross Margin % 78.61% 78.39% 78.80%
Expenses
Payroll $82,143 $204,200 $232,800
Marketing/Promotion $22,500 $22,500 $22,500
Depreciation $19,992 $20,000 $20,000
Rent $21,600 $15,200 $24,000
Utilities $15,200 $24,000 $0
Insurance $24,000 $0 $0
Payroll Taxes $0 $0 $0
Fixtures $8,000 $0 $0
Total Operating Expenses $193,435 $285,900 $299,300
Profit Before Interest and Taxes $51,069 $83,637 $192,204
EBITDA $71,061 $103,637 $212,204
Interest Expense $6,672 $5,852 $4,720
Taxes Incurred $13,319 $23,335 $56,245
Net Profit $31,078 $54,449 $131,239
Net Profit/Sales 9.99% 11.55% 21.04%

8.4 Projected Cash Flow

As can be seen from the Cash Flow chart and table below, Phaethon's Chariot Restorations has a number of advantages that provide for a large amount of growth in the company's cash account. Because it is the company's policy that the clients to provide the parts for the the restoration, the company has a very low cost of goods sold account and therefore a high gross margin. Clients can purchase the parts themselves, or if they prefer to have us make the purchase, we will locate the part, charge the customer's credit card, and then purchase the part from the supplier/vendor.

Furthermore, the custom nature of the business means that there is no inventory cost to speak of or accounts payable. With the ability to generate so much cash flow, it is assumed that the company will seek to use this asset to expand its markets and production capacity in the near future.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $311,044 $471,406 $623,707
Subtotal Cash from Operations $311,044 $471,406 $623,707
Additional Cash Received
Sales Tax, VAT, HST/GST Received $20,716 $31,396 $41,539
New Current Borrowing $5,000 $7,500 $5,000
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 $336,759 $510,301 $670,246
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $82,143 $204,200 $232,800
Bill Payments $176,173 $209,073 $244,046
Subtotal Spent on Operations $258,316 $413,273 $476,846
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $20,716 $31,396 $41,539
Principal Repayment of Current Borrowing $3,500 $6,000 $7,500
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $16,476 $17,492 $18,570
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $2,400 $4,000 $4,000
Dividends $9,000 $0 $0
Subtotal Cash Spent $310,408 $472,160 $548,455
Net Cash Flow $26,352 $38,141 $121,792
Cash Balance $36,352 $74,493 $196,284

8.5 Projected Balance Sheet

The following table presents the Balance Sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $36,352 $74,493 $196,284
Inventory $17,818 $27,279 $35,402
Other Current Assets $30,000 $30,000 $30,000
Total Current Assets $84,170 $131,772 $261,686
Long-term Assets
Long-term Assets $102,400 $106,400 $110,400
Accumulated Depreciation $19,992 $39,992 $59,992
Total Long-term Assets $82,408 $66,408 $50,408
Total Assets $166,578 $198,180 $312,094
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $23,476 $16,621 $20,366
Current Borrowing $1,500 $3,000 $500
Other Current Liabilities $5,500 $5,500 $5,500
Subtotal Current Liabilities $30,476 $25,121 $26,366
Long-term Liabilities $102,524 $85,032 $66,462
Total Liabilities $133,000 $110,153 $92,828
Paid-in Capital $35,000 $35,000 $35,000
Retained Earnings ($32,500) ($1,422) $53,027
Earnings $31,078 $54,449 $131,239
Total Capital $33,578 $88,027 $219,266
Total Liabilities and Capital $166,578 $198,180 $312,094
Net Worth $33,578 $88,027 $219,266

8.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Industry Standards, Antique and Classic Automobile Restoration services, SIC code 7532 are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 51.56% 32.31% 1.55%
Percent of Total Assets
Inventory 10.70% 13.76% 11.34% 9.44%
Other Current Assets 18.01% 15.14% 9.61% 29.30%
Total Current Assets 50.53% 66.49% 83.85% 52.30%
Long-term Assets 49.47% 33.51% 16.15% 47.70%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 18.30% 12.68% 8.45% 20.70%
Long-term Liabilities 61.55% 42.91% 21.30% 28.94%
Total Liabilities 79.84% 55.58% 29.74% 49.64%
Net Worth 20.16% 44.42% 70.26% 50.36%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 78.61% 78.39% 78.80% 100.00%
Selling, General & Administrative Expenses 68.62% 66.84% 57.76% 73.48%
Advertising Expenses 6.43% 1.40% 1.40% 1.33%
Profit Before Interest and Taxes 16.42% 17.74% 30.82% 0.60%
Main Ratios
Current 2.76 5.25 9.92 1.95
Quick 2.18 4.16 8.58 1.31
Total Debt to Total Assets 79.84% 55.58% 29.74% 55.95%
Pre-tax Return on Net Worth 132.22% 88.36% 85.51% 1.18%
Pre-tax Return on Assets 26.65% 39.25% 60.07% 2.67%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 9.99% 11.55% 21.04% n.a
Return on Equity 92.55% 61.86% 59.85% n.a
Activity Ratios
Inventory Turnover 5.98 4.52 4.22 n.a
Accounts Payable Turnover 8.25 12.17 12.17 n.a
Payment Days 28 36 27 n.a
Total Asset Turnover 1.87 2.38 2.00 n.a
Debt Ratios
Debt to Net Worth 3.96 1.25 0.42 n.a
Current Liab. to Liab. 0.23 0.23 0.28 n.a
Liquidity Ratios
Net Working Capital $53,694 $106,651 $235,320 n.a
Interest Coverage 7.65 14.29 40.72 n.a
Additional Ratios
Assets to Sales 0.54 0.42 0.50 n.a
Current Debt/Total Assets 18% 13% 8% n.a
Acid Test 2.18 4.16 8.58 n.a
Sales/Net Worth 9.26 5.36 2.84 n.a
Dividend Payout 0.29 0.00 0.00 n.a