Mad Keen Motors

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Automotive Repair - Sales - Valet Business Plan

Financial Plan

Website Expenses and Costs:

We expect to spend £6,200 over the next year on developing and then maintaining the website, with regular updates. We project another £6,200 will be needed for the same areas over the following two years.

In addition, we will have a slightly lower price/cost spread for website-related sales, once online coupons and other discounts are included. These have been factored in to the cost of sales. We will track this amount with a special record for "website coupons" in our sales and customer database.

Website Revenues:

We anticipate an additional £18,360 of sales in the next year directly related to the development of the website. This is based on reports from other locally focused service businesses which implemented websites to enhance visibility and promote sales through online discounts.

8.2 Break-even Analysis

The following table and chart show our break-even analysis with the website in place.

Break-even Analysis
Monthly Revenue Break-even £40,547
Assumptions:
Average Percent Variable Cost 4%
Estimated Monthly Fixed Cost £38,925

8.3 Projected Profit and Loss

This table outlines additions to the standard operating expenses for developing and maintaining the website. Detailed monthly numbers can be found in the appendix.

Pro Forma Profit and Loss
FY 2006 FY 2007 FY 2008
Sales £822,360 £843,080 £871,482
Direct Cost of Sales £32,894 £33,723 £34,859
Other Costs of Sales £0 £0 £0
Total Cost of Sales £32,894 £33,723 £34,859
Gross Margin £789,466 £809,357 £836,622
Gross Margin % 96.00% 96.00% 96.00%
Expenses
Payroll £402,000 £405,000 £407,000
Other Expense Account Name £0 £0 £0
Depreciation £4,800 £4,800 £4,800
Standard Operating Expenses £0 £190,000 £196,000
Website Infrastructure £0 £0 £0
Website Development £0 £0 £0
Website Maintenance £0 £1,500 £1,500
Expensed Equipment £0 £2,000 £1,200
Payroll Taxes (National Insurance, etc.) £60,300 £60,750 £61,050
Other £0 £0 £0
Total Operating Expenses £467,100 £470,550 £472,850
Profit Before Interest and Taxes £322,366 £338,807 £363,772
EBITDA £327,166 £343,607 £368,572
Interest Expense £74,800 £73,600 £71,200
Taxes Incurred £74,270 £79,562 £87,772
Net Profit £173,296 £185,645 £204,801
Net Profit/Sales 21.07% 22.02% 23.50%

8.4 Projected Cash Flow

Mad Keen Motors is in a strong cash position right now, and can afford the relatively small expenses to start up the website. The following table and chart show our projected cash flow and cash balance.

Pro Forma Cash Flow
FY 2006 FY 2007 FY 2008
Cash Received
Cash from Operations
Cash Sales £822,360 £843,080 £871,482
Subtotal Cash from Operations £822,360 £843,080 £871,482
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 £822,360 £843,080 £871,482
Expenditures FY 2006 FY 2007 FY 2008
Expenditures from Operations
Cash Spending £402,000 £405,000 £407,000
Bill Payments £233,402 £246,915 £254,378
Subtotal Spent on Operations £635,402 £651,915 £661,378
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 £24,000 £24,000
Purchase Other Current Assets £0 £0 £0
Purchase Long-term Assets £0 £0 £0
Dividends £0 £0 £0
Subtotal Cash Spent £637,402 £675,915 £685,378
Net Cash Flow £184,958 £167,165 £186,103
Cash Balance £388,446 £555,611 £741,714

8.5 Projected Balance Sheet

Our Net Worth will continue to grow as we pay off the mortgage for the two newest Mad Keen Motors locations.

Pro Forma Balance Sheet
FY 2006 FY 2007 FY 2008
Assets
Current Assets
Cash £388,446 £555,611 £741,714
Inventory £2,748 £2,817 £2,912
Other Current Assets £70,000 £70,000 £70,000
Total Current Assets £461,194 £628,428 £814,626
Long-term Assets
Long-term Assets £1,250,000 £1,250,000 £1,250,000
Accumulated Depreciation £19,800 £24,600 £29,400
Total Long-term Assets £1,230,200 £1,225,400 £1,220,600
Total Assets £1,691,394 £1,853,828 £2,035,226
Liabilities and Capital FY 2006 FY 2007 FY 2008
Current Liabilities
Accounts Payable £19,570 £20,359 £20,957
Current Borrowing £0 £0 £0
Other Current Liabilities £0 £0 £0
Subtotal Current Liabilities £19,570 £20,359 £20,957
Long-term Liabilities £748,000 £724,000 £700,000
Total Liabilities £767,570 £744,359 £720,957
Paid-in Capital £400,000 £400,000 £400,000
Retained Earnings £350,528 £523,824 £709,469
Earnings £173,296 £185,645 £204,801
Total Capital £923,824 £1,109,469 £1,314,269
Total Liabilities and Capital £1,691,394 £1,853,828 £2,035,226
Net Worth £923,824 £1,109,469 £1,314,269

8.6 Business Ratios

The following table outlines some of the more important ratios from the General Automotive Repair Shop industry. The final column, Industry Profile, details specific ratios based on the industry.

Ratio Analysis
FY 2006 FY 2007 FY 2008 Industry Profile
Sales Growth 3.05% 2.52% 3.37% 5.37%
Percent of Total Assets
Inventory 0.16% 0.15% 0.14% 8.50%
Other Current Assets 4.14% 3.78% 3.44% 24.67%
Total Current Assets 27.27% 33.90% 40.03% 45.07%
Long-term Assets 72.73% 66.10% 59.97% 54.93%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 1.16% 1.10% 1.03% 22.43%
Long-term Liabilities 44.22% 39.05% 34.39% 26.48%
Total Liabilities 45.38% 40.15% 35.42% 48.91%
Net Worth 54.62% 59.85% 64.58% 51.09%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 96.00% 96.00% 96.00% 100.00%
Selling, General & Administrative Expenses 74.93% 73.98% 72.50% 71.18%
Advertising Expenses 0.00% 0.00% 0.00% 1.75%
Profit Before Interest and Taxes 39.20% 40.19% 41.74% 2.37%
Main Ratios
Current 23.57 30.87 38.87 1.48
Quick 23.43 30.73 38.73 0.91
Total Debt to Total Assets 45.38% 40.15% 35.42% 54.67%
Pre-tax Return on Net Worth 26.80% 23.90% 22.26% 3.63%
Pre-tax Return on Assets 14.64% 14.31% 14.38% 8.00%
Additional Ratios FY 2006 FY 2007 FY 2008
Net Profit Margin 21.07% 22.02% 23.50% n.a
Return on Equity 18.76% 16.73% 15.58% n.a
Activity Ratios
Inventory Turnover 8.86 12.12 12.17 n.a
Accounts Payable Turnover 11.90 12.17 12.17 n.a
Payment Days 30 29 30 n.a
Total Asset Turnover 0.49 0.45 0.43 n.a
Debt Ratios
Debt to Net Worth 0.83 0.67 0.55 n.a
Current Liab. to Liab. 0.03 0.03 0.03 n.a
Liquidity Ratios
Net Working Capital £441,624 £608,069 £793,669 n.a
Interest Coverage 4.31 4.60 5.11 n.a
Additional Ratios
Assets to Sales 2.06 2.20 2.34 n.a
Current Debt/Total Assets 1% 1% 1% n.a
Acid Test 23.43 30.73 38.73 n.a
Sales/Net Worth 0.89 0.76 0.66 n.a
Dividend Payout 0.00 0.00 0.00 n.a

8.7 Financial Risks and Contingencies-2

Risks and Assumptions
The key risk with this website for Mad Keen Motors is that people will get information on their cars from other places. Since it is not typical for small garages to have this much content on their sites, Backwater Downs locals may not think to search for car and garage information on the Web. As cars and components become more specialized and car owners may tend to trust dealerships more, they will be less likely to use their local garage. This is a risk to the business as a whole, though we hope that the website will help to reduce Mad Keen Motors' exposure to this risk.

If the site is not supported properly and people do not get quick answers to their questions, they may assume that service from the garage itself is lacking too. Therefore, emails must be answered promptly, the site must be updated regularly and the garage workers should also be aware of information and features on the website, and be educated about it when they speak to customers.

Contingency Plan
Since there will be minimal integration between the website and Mad Keen Motors' core business, a contingency plan is not a huge concern. If use of the site falls well below forecasted levels and it proves not to be cost effective to continue the site in its current format, the site will be changed to essentially a business card site, where people can get information about the garage, location, hours, ownership information, etc.