Security First Shredding

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Document Shredding Business Plan

Financial Plan

The following is the financial plan for Security First Shredding.

7.1 Break-even Analysis

The monthly break-even point is shown in the table and chart below.

Break-even Analysis
Monthly Revenue Break-even $31,528
Assumptions:
Average Percent Variable Cost 8%
Estimated Monthly Fixed Cost $29,115

7.2 Projected Profit and Loss

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

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $452,000 $460,000 $580,000
Direct Cost of Sales $34,600 $46,000 $58,000
Other Production Expenses $0 $0 $0
Total Cost of Sales $34,600 $46,000 $58,000
Gross Margin $417,400 $414,000 $522,000
Gross Margin % 92.35% 90.00% 90.00%
Expenses
Payroll $265,200 $287,000 $311,000
Sales and Marketing and Other Expenses $12,000 $15,000 $18,000
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $4,800 $0 $0
Insurance $3,600 $0 $0
Rent $24,000 $0 $0
Payroll Taxes $39,780 $43,050 $46,650
Other $0 $0 $0
Total Operating Expenses $349,380 $345,050 $375,650
Profit Before Interest and Taxes $68,020 $68,950 $146,350
EBITDA $68,020 $68,950 $146,350
Interest Expense $9,350 $8,200 $7,000
Taxes Incurred $17,601 $18,225 $41,805
Net Profit $41,069 $42,525 $97,545
Net Profit/Sales 9.09% 9.24% 16.82%

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 $113,000 $115,000 $145,000
Cash from Receivables $242,375 $343,290 $409,347
Subtotal Cash from Operations $355,375 $458,290 $554,347
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $10,000 $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 $10,000 $0 $0
Subtotal Cash Received $375,375 $458,290 $554,347
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $265,200 $287,000 $311,000
Bill Payments $122,728 $142,754 $168,087
Subtotal Spent on Operations $387,928 $429,754 $479,087
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 $12,000 $12,000 $12,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $399,928 $441,754 $491,087
Net Cash Flow ($24,553) $16,536 $63,261
Cash Balance $55,847 $72,383 $135,643

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 $55,847 $72,383 $135,643
Accounts Receivable $96,625 $98,335 $123,988
Other Current Assets $0 $0 $0
Total Current Assets $152,472 $170,718 $259,631
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $152,472 $170,718 $259,631
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $23,003 $10,724 $14,092
Current Borrowing $0 $0 $0
Other Current Liabilities $10,000 $10,000 $10,000
Subtotal Current Liabilities $33,003 $20,724 $24,092
Long-term Liabilities $88,000 $76,000 $64,000
Total Liabilities $121,003 $96,724 $88,092
Paid-in Capital $240,000 $240,000 $240,000
Retained Earnings ($249,600) ($208,531) ($166,006)
Earnings $41,069 $42,525 $97,545
Total Capital $31,469 $73,994 $171,539
Total Liabilities and Capital $152,472 $170,718 $259,631
Net Worth $31,469 $73,994 $171,539

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 7389, Business Services, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 1.77% 26.09% 8.20%
Percent of Total Assets
Accounts Receivable 63.37% 57.60% 47.76% 26.30%
Other Current Assets 0.00% 0.00% 0.00% 44.20%
Total Current Assets 100.00% 100.00% 100.00% 74.30%
Long-term Assets 0.00% 0.00% 0.00% 25.70%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 21.65% 12.14% 9.28% 49.00%
Long-term Liabilities 57.72% 44.52% 24.65% 13.80%
Total Liabilities 79.36% 56.66% 33.93% 62.80%
Net Worth 20.64% 43.34% 66.07% 37.20%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 92.35% 90.00% 90.00% 0.00%
Selling, General & Administrative Expenses 83.26% 80.76% 73.18% 81.40%
Advertising Expenses 2.65% 3.26% 3.10% 1.70%
Profit Before Interest and Taxes 15.05% 14.99% 25.23% 2.10%
Main Ratios
Current 4.62 8.24 10.78 1.49
Quick 4.62 8.24 10.78 1.17
Total Debt to Total Assets 79.36% 56.66% 33.93% 62.80%
Pre-tax Return on Net Worth 186.44% 82.10% 81.24% 4.20%
Pre-tax Return on Assets 38.48% 35.59% 53.67% 11.30%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 9.09% 9.24% 16.82% n.a
Return on Equity 130.51% 57.47% 56.86% n.a
Activity Ratios
Accounts Receivable Turnover 3.51 3.51 3.51 n.a
Collection Days 56 103 93 n.a
Accounts Payable Turnover 6.34 12.17 12.17 n.a
Payment Days 30 47 26 n.a
Total Asset Turnover 2.96 2.69 2.23 n.a
Debt Ratios
Debt to Net Worth 3.85 1.31 0.51 n.a
Current Liab. to Liab. 0.27 0.21 0.27 n.a
Liquidity Ratios
Net Working Capital $119,469 $149,994 $235,539 n.a
Interest Coverage 7.27 8.41 20.91 n.a
Additional Ratios
Assets to Sales 0.34 0.37 0.45 n.a
Current Debt/Total Assets 22% 12% 9% n.a
Acid Test 1.69 3.49 5.63 n.a
Sales/Net Worth 14.36 6.22 3.38 n.a
Dividend Payout 0.00 0.00 0.00 n.a