CorbelArch Real Estate Inspectors

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Business Property Inspection Business Plan

Financial Plan

The following topics present the financial plan for CorbelArch Real Estate Inspectors. Topics covered include a Break-even Analysis, Cash Flow, P & L, and a Balance Sheet.

7.1 Important Assumptions

We are assuming steady growth from good management, barring any unforseen local, or national disasters such as the economic slowdown seen by most of the country following the September 11th, 2001 tragedies.

7.2 Break-even Analysis

The break-even analysis is based on our average monthly expenses. The total expenses anticipated for the 12-month plan period was divided by twelve to establish the monthly average. The table below shows what we must average in revenue each month. We recognize that our actual revenue and expanses will vary each month.

Break-even Analysis
Monthly Revenue Break-even $4,963
Assumptions:
Average Percent Variable Cost 21%
Estimated Monthly Fixed Cost $3,946

7.3 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
FY 2005 FY 2006 FY 2007
Sales $243,000 $325,000 $460,000
Direct Cost of Sales $49,815 $66,625 $94,300
Other Costs of Sales $0 $0 $0
Total Cost of Sales $49,815 $66,625 $94,300
Gross Margin $193,185 $258,375 $365,700
Gross Margin % 79.50% 79.50% 79.50%
Expenses
Payroll $21,000 $164,000 $199,000
Marketing/Promotion $3,000 $4,000 $8,000
Depreciation $0 $0 $0
Rent $6,000 $9,000 $9,000
Utilities $1,200 $2,000 $2,400
Insurance $9,000 $12,000 $16,000
Website Hosting and Maintenance $2,400 $2,800 $3,000
Bookkeeping Service $4,750 $6,000 $0
Payroll Taxes $0 $0 $0
Total Operating Expenses $47,350 $199,800 $237,400
Profit Before Interest and Taxes $145,835 $58,575 $128,300
EBITDA $145,835 $58,575 $128,300
Interest Expense $533 $436 $335
Taxes Incurred $43,591 $17,442 $38,389
Net Profit $101,711 $40,697 $89,575
Net Profit/Sales 41.86% 12.52% 19.47%

7.4 Projected Cash Flow

In years two and three we will purchase company vehicles. In year two we anticipate distributing profit sharing as dividends to all owners and employees.

Pro Forma Cash Flow
FY 2005 FY 2006 FY 2007
Cash Received
Cash from Operations
Cash Sales $72,900 $97,500 $138,000
Cash from Receivables $167,647 $219,370 $308,616
Subtotal Cash from Operations $240,547 $316,870 $446,616
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 $240,547 $316,870 $446,616
Expenditures FY 2005 FY 2006 FY 2007
Expenditures from Operations
Cash Spending $21,000 $164,000 $199,000
Bill Payments $113,869 $118,834 $167,223
Subtotal Spent on Operations $134,869 $282,834 $366,223
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $1,740 $1,635 $1,736
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 $0 $30,000 $45,000
Dividends $0 $30,000 $60,000
Subtotal Cash Spent $136,609 $344,469 $472,959
Net Cash Flow $103,938 ($27,599) ($26,343)
Cash Balance $106,938 $79,339 $52,996

7.5 Projected Balance Sheet

The balance sheet shows healthy growth of net worth, and strong financial position. The monthly estimates are included in the appendix.

Pro Forma Balance Sheet
FY 2005 FY 2006 FY 2007
Assets
Current Assets
Cash $106,938 $79,339 $52,996
Accounts Receivable $24,092 $32,221 $45,606
Other Current Assets $25,000 $25,000 $25,000
Total Current Assets $156,030 $136,560 $123,602
Long-term Assets
Long-term Assets $15,000 $45,000 $90,000
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $15,000 $45,000 $90,000
Total Assets $171,030 $181,560 $213,602
Liabilities and Capital FY 2005 FY 2006 FY 2007
Current Liabilities
Accounts Payable $8,419 $9,888 $14,090
Current Borrowing $8,087 $6,452 $4,716
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $16,506 $16,340 $18,806
Long-term Liabilities $0 $0 $0
Total Liabilities $16,506 $16,340 $18,806
Paid-in Capital $30,000 $30,000 $30,000
Retained Earnings $22,812 $94,523 $75,221
Earnings $101,711 $40,697 $89,575
Total Capital $154,523 $165,221 $194,796
Total Liabilities and Capital $171,030 $181,560 $213,602
Net Worth $154,523 $165,221 $194,796

7.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7389.0203, Building Inspection Services, are shown for comparison.

Ratio Analysis
FY 2005 FY 2006 FY 2007 Industry Profile
Sales Growth 483.59% 33.74% 41.54% 2.53%
Percent of Total Assets
Accounts Receivable 14.09% 17.75% 21.35% 23.12%
Other Current Assets 14.62% 13.77% 11.70% 47.86%
Total Current Assets 91.23% 75.21% 57.87% 73.23%
Long-term Assets 8.77% 24.79% 42.13% 26.77%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 9.65% 9.00% 8.80% 34.95%
Long-term Liabilities 0.00% 0.00% 0.00% 11.17%
Total Liabilities 9.65% 9.00% 8.80% 46.12%
Net Worth 90.35% 91.00% 91.20% 53.88%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 79.50% 79.50% 79.50% 100.00%
Selling, General & Administrative Expenses 37.64% 66.98% 60.03% 81.44%
Advertising Expenses 0.00% 0.00% 0.00% 1.41%
Profit Before Interest and Taxes 60.01% 18.02% 27.89% 2.40%
Main Ratios
Current 9.45 8.36 6.57 1.54
Quick 9.45 8.36 6.57 1.23
Total Debt to Total Assets 9.65% 9.00% 8.80% 56.68%
Pre-tax Return on Net Worth 94.03% 35.19% 65.69% 5.58%
Pre-tax Return on Assets 84.96% 32.02% 59.91% 12.87%
Additional Ratios FY 2005 FY 2006 FY 2007
Net Profit Margin 41.86% 12.52% 19.47% n.a
Return on Equity 65.82% 24.63% 45.98% n.a
Activity Ratios
Accounts Receivable Turnover 7.06 7.06 7.06 n.a
Collection Days 60 45 44 n.a
Accounts Payable Turnover 14.29 12.17 12.17 n.a
Payment Days 28 28 26 n.a
Total Asset Turnover 1.42 1.79 2.15 n.a
Debt Ratios
Debt to Net Worth 0.11 0.10 0.10 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $139,523 $120,221 $104,796 n.a
Interest Coverage 273.58 134.29 382.94 n.a
Additional Ratios
Assets to Sales 0.70 0.56 0.46 n.a
Current Debt/Total Assets 10% 9% 9% n.a
Acid Test 7.99 6.39 4.15 n.a
Sales/Net Worth 1.57 1.97 2.36 n.a
Dividend Payout 0.00 0.74 0.67 n.a