Construction Inspection Business Plan

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Financial Plan

The following sections will outline important financial information.

7.1 Important Assumptions

The following table highlights some important financial assumptions.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

7.2 Break-even Analysis

The Break-even Analysis indicates what is needed in monthly revenue.

Break-even Analysis
Monthly Revenue Break-even $4,049
Assumptions:
Average Percent Variable Cost 5%
Estimated Monthly Fixed Cost $3,847

7.3 Projected Profit and Loss

The following table indicates projected profit and loss.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $51,291 $91,879 $109,830
Direct Cost of Sales $2,565 $4,594 $5,492
Other Production Expenses $0 $0 $0
Total Cost of Sales $2,565 $4,594 $5,492
Gross Margin $48,726 $87,285 $104,339
Gross Margin % 95.00% 95.00% 95.00%
Expenses
Payroll $36,000 $54,000 $62,000
Sales and Marketing and Other Expenses $1,200 $1,200 $1,200
Depreciation $864 $864 $864
Leased Equipment $0 $0 $0
Utilities $0 $0 $0
Insurance $0 $0 $0
License fees and association dues $2,700 $2,700 $2,700
Payroll Taxes $5,400 $8,100 $9,300
Other $0 $0 $0
Total Operating Expenses $46,164 $66,864 $76,064
Profit Before Interest and Taxes $2,562 $20,421 $28,275
EBITDA $3,426 $21,285 $29,139
Interest Expense $250 $250 $250
Taxes Incurred $694 $6,051 $8,407
Net Profit $1,619 $14,120 $19,617
Net Profit/Sales 3.16% 15.37% 17.86%

7.4 Projected Cash Flow

The following chart and table indicates projected cash flow.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $51,291 $91,879 $109,830
Subtotal Cash from Operations $51,291 $91,879 $109,830
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 $51,291 $91,879 $109,830
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $36,000 $54,000 $62,000
Bill Payments $11,225 $22,596 $26,983
Subtotal Spent on Operations $47,225 $76,596 $88,983
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 $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $47,225 $76,596 $88,983
Net Cash Flow $4,066 $15,283 $20,847
Cash Balance $10,166 $25,448 $46,295

7.5 Projected Balance Sheet

The following table will indicate the projected balance sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $10,166 $25,448 $46,295
Other Current Assets $0 $0 $0
Total Current Assets $10,166 $25,448 $46,295
Long-term Assets
Long-term Assets $4,300 $4,300 $4,300
Accumulated Depreciation $864 $1,728 $2,592
Total Long-term Assets $3,436 $2,572 $1,708
Total Assets $13,602 $28,020 $48,003
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $1,583 $1,882 $2,248
Current Borrowing $2,500 $2,500 $2,500
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $4,083 $4,382 $4,748
Long-term Liabilities $0 $0 $0
Total Liabilities $4,083 $4,382 $4,748
Paid-in Capital $10,000 $10,000 $10,000
Retained Earnings ($2,100) ($481) $13,638
Earnings $1,619 $14,120 $19,617
Total Capital $9,519 $23,638 $43,256
Total Liabilities and Capital $13,602 $28,020 $48,003
Net Worth $9,519 $23,638 $43,256

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, Building Inspection Services, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 79.13% 19.54% 10.93%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 48.08%
Total Current Assets 74.74% 90.82% 96.44% 77.44%
Long-term Assets 25.26% 9.18% 3.56% 22.56%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 30.02% 15.64% 9.89% 39.19%
Long-term Liabilities 0.00% 0.00% 0.00% 17.22%
Total Liabilities 30.02% 15.64% 9.89% 56.41%
Net Worth 69.98% 84.36% 90.11% 43.59%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 95.00% 95.00% 95.00% 100.00%
Selling, General & Administrative Expenses 91.50% 79.44% 76.98% 74.57%
Advertising Expenses 2.34% 1.31% 1.09% 2.60%
Profit Before Interest and Taxes 5.00% 22.23% 25.74% 1.43%
Main Ratios
Current 2.49 5.81 9.75 1.48
Quick 2.49 5.81 9.75 1.17
Total Debt to Total Assets 30.02% 15.64% 9.89% 64.55%
Pre-tax Return on Net Worth 24.29% 85.33% 64.79% 3.55%
Pre-tax Return on Assets 17.00% 71.99% 58.38% 10.01%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 3.16% 15.37% 17.86% n.a
Return on Equity 17.01% 59.73% 45.35% n.a
Activity Ratios
Accounts Payable Turnover 8.09 12.17 12.17 n.a
Payment Days 27 28 28 n.a
Total Asset Turnover 3.77 3.28 2.29 n.a
Debt Ratios
Debt to Net Worth 0.43 0.19 0.11 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $6,083 $21,066 $41,548 n.a
Interest Coverage 10.25 81.68 113.10 n.a
Additional Ratios
Assets to Sales 0.27 0.30 0.44 n.a
Current Debt/Total Assets 30% 16% 10% n.a
Acid Test 2.49 5.81 9.75 n.a
Sales/Net Worth 5.39 3.89 2.54 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0
Break-even Analysis
Monthly Revenue Break-even $4,049
Assumptions:
Average Percent Variable Cost 5%
Estimated Monthly Fixed Cost $3,847
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $51,291 $91,879 $109,830
Direct Cost of Sales $2,565 $4,594 $5,492
Other Production Expenses $0 $0 $0
Total Cost of Sales $2,565 $4,594 $5,492
Gross Margin $48,726 $87,285 $104,339
Gross Margin % 95.00% 95.00% 95.00%
Expenses
Payroll $36,000 $54,000 $62,000
Sales and Marketing and Other Expenses $1,200 $1,200 $1,200
Depreciation $864 $864 $864
Leased Equipment $0 $0 $0
Utilities $0 $0 $0
Insurance $0 $0 $0
License fees and association dues $2,700 $2,700 $2,700
Payroll Taxes $5,400 $8,100 $9,300
Other $0 $0 $0
Total Operating Expenses $46,164 $66,864 $76,064
Profit Before Interest and Taxes $2,562 $20,421 $28,275
EBITDA $3,426 $21,285 $29,139
Interest Expense $250 $250 $250
Taxes Incurred $694 $6,051 $8,407
Net Profit $1,619 $14,120 $19,617
Net Profit/Sales 3.16% 15.37% 17.86%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $51,291 $91,879 $109,830
Subtotal Cash from Operations $51,291 $91,879 $109,830
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 $51,291 $91,879 $109,830
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $36,000 $54,000 $62,000
Bill Payments $11,225 $22,596 $26,983
Subtotal Spent on Operations $47,225 $76,596 $88,983
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 $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $47,225 $76,596 $88,983
Net Cash Flow $4,066 $15,283 $20,847
Cash Balance $10,166 $25,448 $46,295
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $10,166 $25,448 $46,295
Other Current Assets $0 $0 $0
Total Current Assets $10,166 $25,448 $46,295
Long-term Assets
Long-term Assets $4,300 $4,300 $4,300
Accumulated Depreciation $864 $1,728 $2,592
Total Long-term Assets $3,436 $2,572 $1,708
Total Assets $13,602 $28,020 $48,003
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $1,583 $1,882 $2,248
Current Borrowing $2,500 $2,500 $2,500
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $4,083 $4,382 $4,748
Long-term Liabilities $0 $0 $0
Total Liabilities $4,083 $4,382 $4,748
Paid-in Capital $10,000 $10,000 $10,000
Retained Earnings ($2,100) ($481) $13,638
Earnings $1,619 $14,120 $19,617
Total Capital $9,519 $23,638 $43,256
Total Liabilities and Capital $13,602 $28,020 $48,003
Net Worth $9,519 $23,638 $43,256
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 79.13% 19.54% 10.93%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 48.08%
Total Current Assets 74.74% 90.82% 96.44% 77.44%
Long-term Assets 25.26% 9.18% 3.56% 22.56%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 30.02% 15.64% 9.89% 39.19%
Long-term Liabilities 0.00% 0.00% 0.00% 17.22%
Total Liabilities 30.02% 15.64% 9.89% 56.41%
Net Worth 69.98% 84.36% 90.11% 43.59%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 95.00% 95.00% 95.00% 100.00%
Selling, General & Administrative Expenses 91.50% 79.44% 76.98% 74.57%
Advertising Expenses 2.34% 1.31% 1.09% 2.60%
Profit Before Interest and Taxes 5.00% 22.23% 25.74% 1.43%
Main Ratios
Current 2.49 5.81 9.75 1.48
Quick 2.49 5.81 9.75 1.17
Total Debt to Total Assets 30.02% 15.64% 9.89% 64.55%
Pre-tax Return on Net Worth 24.29% 85.33% 64.79% 3.55%
Pre-tax Return on Assets 17.00% 71.99% 58.38% 10.01%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 3.16% 15.37% 17.86% n.a
Return on Equity 17.01% 59.73% 45.35% n.a
Activity Ratios
Accounts Payable Turnover 8.09 12.17 12.17 n.a
Payment Days 27 28 28 n.a
Total Asset Turnover 3.77 3.28 2.29 n.a
Debt Ratios
Debt to Net Worth 0.43 0.19 0.11 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $6,083 $21,066 $41,548 n.a
Interest Coverage 10.25 81.68 113.10 n.a
Additional Ratios
Assets to Sales 0.27 0.30 0.44 n.a
Current Debt/Total Assets 30% 16% 10% n.a
Acid Test 2.49 5.81 9.75 n.a
Sales/Net Worth 5.39 3.89 2.54 n.a
Dividend Payout 0.00 0.00 0.00 n.a