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E-commerce Start-up Business Plan

Financial Plan

The statements incorporate two rounds of venture capital investments of $2.6 million total, plus access to additional $1.4 million for cash flow purposes. The statements do not include any funds raised during the proposed IPO. Any revenues from advertising, affinity, consulting, and partnership programs were omitted. Year-end is December 31.

10.1 Projected Cash Flow

The following chart shows monthly cash balance and cash flow. The table shows the expected cash flow for the first twelve months of operation, with yearly estimates thereafter. Capital expenditures include computer equipment and technology & software investment:

  • Computer Equipment: represents 20% of the current fixed corporate costs. In 2000, it represents $80,000 from the fixed corporate costs.
  • Technology & Software Investment: represents 50% of the current fixed technology costs. In 2000, it represents the $1.3 million of the fixed technology costs.
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $0 $4,758,000 $14,859,600
Cash from Receivables $0 $14,274,000 $44,578,800
Subtotal Cash from Operations $0 $19,032,000 $59,438,400
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 $4,110,000 $0 $0
Subtotal Cash Received $4,110,000 $19,032,000 $59,438,400
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $200,000 $1,960,000 $4,105,000
Bill Payments $2,149,150 $11,445,858 $26,737,688
Subtotal Spent on Operations $2,349,150 $13,405,858 $30,842,688
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 $1,380,000 $323,544 $653,822
Dividends $0 $0 $0
Subtotal Cash Spent $3,729,150 $13,729,402 $31,496,510
Net Cash Flow $380,850 $5,302,598 $27,941,890
Cash Balance $427,850 $5,730,448 $33,672,338

10.2 Break-even Analysis

The following table shows our estimated monthly break-even point to be approximately $222,000

Break-even Analysis
Monthly Revenue Break-even $222,417
Assumptions:
Average Percent Variable Cost 0%
Estimated Monthly Fixed Cost $222,417

10.3 Important Assumptions

The table below contains assumptions important to the financial success of the company.

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 25.42% 25.00% 25.42%
Other 0 0 0

10.4 Projected Profit and Loss

The table below shows the profit and loss statement for NoHassleReturn.com. The itemized costs for fixed technology, corporate and advertising are reflected in the sales and marketing row in the table:

  • Fixed Technology Costs: represents a percentage of revenues allocation for all fixed computer and Internet-related developments and charges. In 2000, $800,000 is allocated for the proprietary software development, $300,000 for the website design, and $200,000 for systems integration.
  • Fixed Corporate Costs: represent a percentage of revenues allocation for all fixed corporate cost associated with office related charges. In 2000, $200,000 is allocated for initial sales force hire, $50,000 is allocated for hiring and training expenses, and another $150,000 is allocated for the office setup and purchase/lease of necessary computer equipment and infrastructure.
  • Advertising: represents a percentage of revenues allocation for advertising in all media. In 2000, $250,000 is allocated for the industrial marketing campaign. In the subsequent years, the much larger budgets include allocations for TV advertising.
  • Sales & Marketing: represents a percentage of revenues allocation for marketing and selling activities, including commissions paid on sales. In 2000, $200,000 is allocated for the initial sales and marketing related activities.
  • Research and Development: represents a percentage of revenues allocation for R&D activities. In 2000, $200,000 is allocated for testing and fine-tuning of the computer systems and programs.
  • General & Administrative: represents a percentage of revenues allocation for expenses associated with running a corporation. In 2000, $20,000 is expensed against the initial set-up, legal and accounting fees, etc.
  • Depreciation: represents a depreciation on all capital investment; straight-line depreciation over 20 years.
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $0 $19,032,000 $59,438,400
Direct Cost of Sales $0 $0 $0
Other $0 $0 $0
Total Cost of Sales $0 $0 $0
Gross Margin $0 $19,032,000 $59,438,400
Gross Margin % 0.00% 100.00% 100.00%
Expenses
Payroll $200,000 $1,960,000 $4,105,000
Sales and Marketing and Other Expenses $2,170,000 $9,355,520 $16,379,882
Depreciation $69,000 $85,177 $117,868
Research & Development $200,000 $951,600 $1,783,152
Payroll Taxes $30,000 $294,000 $615,750
Other $0 $0 $0
Total Operating Expenses $2,669,000 $12,646,297 $23,001,652
Profit Before Interest and Taxes ($2,669,000) $6,385,703 $36,436,748
EBITDA ($2,600,000) $6,470,880 $36,554,616
Interest Expense $0 $0 $0
Taxes Incurred $0 $1,596,426 $9,261,007
Net Profit ($2,669,000) $4,789,277 $27,175,741
Net Profit/Sales 0.00% 25.16% 45.72%

10.5 Projected Balance Sheet

The Balance Sheet shows solid growth in both sales and net worth.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $427,850 $5,730,448 $33,672,338
Accounts Receivable $0 $0 $0
Other Current Assets $0 $0 $0
Total Current Assets $427,850 $5,730,448 $33,672,338
Long-term Assets
Long-term Assets $1,380,000 $1,703,544 $2,357,366
Accumulated Depreciation $69,000 $154,177 $272,045
Total Long-term Assets $1,311,000 $1,549,367 $2,085,321
Total Assets $1,738,850 $7,279,815 $35,757,659
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $250,850 $1,002,538 $2,304,640
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $250,850 $1,002,538 $2,304,640
Long-term Liabilities $0 $0 $0
Total Liabilities $250,850 $1,002,538 $2,304,640
Paid-in Capital $4,160,000 $4,160,000 $4,160,000
Retained Earnings ($3,000) ($2,672,000) $2,117,277
Earnings ($2,669,000) $4,789,277 $27,175,741
Total Capital $1,488,000 $6,277,277 $33,453,018
Total Liabilities and Capital $1,738,850 $7,279,815 $35,757,659
Net Worth $1,488,000 $6,277,277 $33,453,018

10.6 Business Ratios

The following table presents important business ratios for the business services industry, as determined by the Standard Industry Classification (SIC) Index code 7389, Business Services, nec (not elsewhere classified).

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 0.00% 212.31% 8.79%
Percent of Total Assets
Accounts Receivable 0.00% 0.00% 0.00% 28.12%
Other Current Assets 0.00% 0.00% 0.00% 44.18%
Total Current Assets 24.61% 78.72% 94.17% 76.27%
Long-term Assets 75.39% 21.28% 5.83% 23.73%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 14.43% 13.77% 6.45% 38.61%
Long-term Liabilities 0.00% 0.00% 0.00% 13.60%
Total Liabilities 14.43% 13.77% 6.45% 52.21%
Net Worth 85.57% 86.23% 93.55% 47.79%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 0.00% 100.00% 100.00% 100.00%
Selling, General & Administrative Expenses 0.00% 74.84% 54.02% 82.68%
Advertising Expenses 0.00% 1.00% 0.50% 1.66%
Profit Before Interest and Taxes 0.00% 33.55% 61.30% 1.37%
Main Ratios
Current 1.71 5.72 14.61 1.59
Quick 1.71 5.72 14.61 1.22
Total Debt to Total Assets 14.43% 13.77% 6.45% 60.22%
Pre-tax Return on Net Worth -179.37% 101.73% 108.92% 3.09%
Pre-tax Return on Assets -153.49% 87.72% 101.90% 7.76%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 0.00% 25.16% 45.72% n.a
Return on Equity -179.37% 76.30% 81.24% n.a
Activity Ratios
Accounts Receivable Turnover 0.00 0.00 0.00 n.a
Collection Days 0 0 0 n.a
Accounts Payable Turnover 9.57 12.17 12.17 n.a
Payment Days 27 19 22 n.a
Total Asset Turnover 0.00 2.61 1.66 n.a
Debt Ratios
Debt to Net Worth 0.17 0.16 0.07 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $177,000 $4,727,910 $31,367,697 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales n.a. 0.38 0.60 n.a
Current Debt/Total Assets 14% 14% 6% n.a
Acid Test 1.71 5.72 14.61 n.a
Sales/Net Worth 0.00 3.03 1.78 n.a
Dividend Payout 0.00 0.00 0.00 n.a