Crest Systems

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Computers Reseller Business Plan

Financial Plan

The following is the financial plan for Crest Systems.

7.1 Break-even Analysis

The monthly break-even point is shown below.

Break-even Analysis
Monthly Revenue Break-even $143,373
Assumptions:
Average Percent Variable Cost 67%
Estimated Monthly Fixed Cost $47,311

7.2 Projected Profit and Loss

The following table and charts will highlight projected profit and loss for the next three years.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $2,488,000 $3,080,000 $3,720,000
Direct Cost of Sales $1,667,000 $1,970,000 $2,330,000
Other Production Expenses $0 $0 $0
Total Cost of Sales $1,667,000 $1,970,000 $2,330,000
Gross Margin $821,000 $1,110,000 $1,390,000
Gross Margin % 33.00% 36.04% 37.37%
Expenses
Payroll $367,000 $414,000 $460,000
Sales and Marketing and Other Expenses $120,000 $160,000 $200,000
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $1,680 $1,680 $1,680
Insurance $0 $0 $0
Rent $24,000 $24,000 $24,000
Payroll Taxes $55,050 $62,100 $69,000
Other $0 $0 $0
Total Operating Expenses $567,730 $661,780 $754,680
Profit Before Interest and Taxes $253,270 $448,220 $635,320
EBITDA $253,270 $448,220 $635,320
Interest Expense $8,903 $6,962 $4,936
Taxes Incurred $73,310 $132,378 $189,115
Net Profit $171,057 $308,881 $441,269
Net Profit/Sales 6.88% 10.03% 11.86%

7.3 Projected Cash Flow

The following table and chart highlight the projected cash flow for three years.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $622,000 $770,000 $930,000
Cash from Receivables $1,330,125 $2,182,493 $2,652,154
Subtotal Cash from Operations $1,952,125 $2,952,493 $3,582,154
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 $66,000 $0 $0
Subtotal Cash Received $2,018,125 $2,952,493 $3,582,154
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $367,000 $414,000 $460,000
Bill Payments $1,632,460 $2,480,866 $2,780,790
Subtotal Spent on Operations $1,999,460 $2,894,866 $3,240,790
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 $20,256 $20,256 $20,256
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $2,019,716 $2,915,122 $3,261,046
Net Cash Flow ($1,591) $37,370 $321,108
Cash Balance $132,109 $169,480 $490,587

7.4 Projected Balance Sheet

The following table highlights the projected balance sheet for three years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $132,109 $169,480 $490,587
Accounts Receivable $535,875 $663,382 $801,228
Other Current Assets $0 $0 $0
Total Current Assets $667,984 $832,862 $1,291,815
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $667,984 $832,862 $1,291,815
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $317,483 $193,736 $231,677
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $317,483 $193,736 $231,677
Long-term Liabilities $79,744 $59,488 $39,232
Total Liabilities $397,227 $253,224 $270,909
Paid-in Capital $116,000 $116,000 $116,000
Retained Earnings ($16,300) $154,757 $463,638
Earnings $171,057 $308,881 $441,269
Total Capital $270,757 $579,638 $1,020,907
Total Liabilities and Capital $667,984 $832,862 $1,291,815
Net Worth $270,757 $579,638 $1,020,907

7.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5045, Computers, peripherals and software, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 23.79% 20.78% 5.80%
Percent of Total Assets
Accounts Receivable 80.22% 79.65% 62.02% 29.30%
Other Current Assets 0.00% 0.00% 0.00% 21.50%
Total Current Assets 100.00% 100.00% 100.00% 86.80%
Long-term Assets 0.00% 0.00% 0.00% 13.20%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 47.53% 23.26% 17.93% 43.70%
Long-term Liabilities 11.94% 7.14% 3.04% 11.20%
Total Liabilities 59.47% 30.40% 20.97% 54.90%
Net Worth 40.53% 69.60% 79.03% 45.10%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 33.00% 36.04% 37.37% 24.80%
Selling, General & Administrative Expenses 26.12% 26.01% 25.50% 15.60%
Advertising Expenses 2.41% 2.60% 2.69% 0.50%
Profit Before Interest and Taxes 10.18% 14.55% 17.08% 2.70%
Main Ratios
Current 2.10 4.30 5.58 1.93
Quick 2.10 4.30 5.58 0.92
Total Debt to Total Assets 59.47% 30.40% 20.97% 54.90%
Pre-tax Return on Net Worth 90.25% 76.13% 61.75% 5.50%
Pre-tax Return on Assets 36.58% 52.98% 48.80% 12.20%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 6.88% 10.03% 11.86% n.a
Return on Equity 63.18% 53.29% 43.22% n.a
Activity Ratios
Accounts Receivable Turnover 3.48 3.48 3.48 n.a
Collection Days 55 95 96 n.a
Accounts Payable Turnover 6.14 12.17 12.17 n.a
Payment Days 27 40 28 n.a
Total Asset Turnover 3.72 3.70 2.88 n.a
Debt Ratios
Debt to Net Worth 1.47 0.44 0.27 n.a
Current Liab. to Liab. 0.80 0.77 0.86 n.a
Liquidity Ratios
Net Working Capital $350,501 $639,126 $1,060,139 n.a
Interest Coverage 28.45 64.38 128.71 n.a
Additional Ratios
Assets to Sales 0.27 0.27 0.35 n.a
Current Debt/Total Assets 48% 23% 18% n.a
Acid Test 0.42 0.87 2.12 n.a
Sales/Net Worth 9.19 5.31 3.64 n.a
Dividend Payout 0.00 0.00 0.00 n.a