University Patents, Inc.

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Educational Research Business Plan

Financial Plan

The following is the Financial Plan for University Patents.

7.1 Important Assumptions

  • University Patents will operate with regional offices out of the founders' homes, without a formal brick and mortar location, into Year 4.
  • The founders will be the only employees and work on a part-time basis during Years 1-3.
  • The average license value to University Patents will be $12,750 (15% of the predicted $85,000 average revenue to the university).
  • There will be a 10% loss of revenue from year to year due to un-renewed licenses.
General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0

7.2 Break-even Analysis

The break-even point for University Patents is shown below.

Break-even Analysis
Monthly Revenue Break-even $9,232
Assumptions:
Average Percent Variable Cost 32%
Estimated Monthly Fixed Cost $6,263

7.3 Projected Profit and Loss

The following is the Projected Profit and Loss for University Patents.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $51,000 $102,000 $204,000 $369,750 $510,000
Direct Cost of Sales $16,400 $32,800 $49,200 $73,800 $98,400
Other $0 $0 $0 $0 $0
Total Cost of Sales $16,400 $32,800 $49,200 $73,800 $98,400
Gross Margin $34,600 $69,200 $154,800 $295,950 $411,600
Gross Margin % 67.84% 67.84% 75.88% 80.04% 80.71%
Expenses
Payroll $60,000 $63,000 $66,150 $210,000 $255,500
Sales and Marketing and Other Expenses $1,500 $1,500 $1,500 $1,500 $1,500
Depreciation $0 $0 $0 $0 $0
Computer Equipment $0 $0 $0 $0 $600
Utilities $1,000 $1,050 $1,103 $1,158 $1,216
Insurance $1,000 $1,050 $1,103 $1,158 $1,216
Payroll Taxes $9,000 $9,450 $9,923 $31,500 $38,325
ISP Access $2,160 $2,268 $2,381 $2,500 $2,625
Information Services $500 $525 $551 $579 $608
Total Operating Expenses $75,160 $78,843 $82,711 $248,395 $301,590
Profit Before Interest and Taxes ($40,560) ($9,643) $72,089 $47,555 $110,010
EBITDA ($40,560) ($9,643) $72,089 $47,555 $110,010
Interest Expense $0 $0 $0 $0 $0
Taxes Incurred $0 $0 $21,627 $14,267 $33,003
Net Profit ($40,560) ($9,643) $50,462 $33,289 $77,007
Net Profit/Sales -79.53% -9.45% 24.74% 9.00% 15.10%

7.4 Projected Cash Flow

The following is the Projected Cash Flow for University Patents.

Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $12,750 $25,500 $51,000 $92,438 $127,500
Cash from Receivables $19,444 $57,694 $115,388 $216,192 $330,783
Subtotal Cash from Operations $32,194 $83,194 $166,388 $308,630 $458,283
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0
New Investment Received $30,000 $30,000 $0 $0 $0
Subtotal Cash Received $62,194 $113,194 $166,388 $308,630 $458,283
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $60,000 $63,000 $66,150 $210,000 $255,500
Bill Payments $27,360 $48,845 $84,203 $123,250 $173,299
Subtotal Spent on Operations $87,360 $111,845 $150,353 $333,250 $428,799
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0
Subtotal Cash Spent $87,360 $111,845 $150,353 $333,250 $428,799
Net Cash Flow ($25,166) $1,349 $16,034 ($24,620) $29,484
Cash Balance $31,084 $32,433 $48,467 $23,847 $53,331

7.5 Projected Balance Sheet

The following is the Projected Balance Sheet for University Patents.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $31,084 $32,433 $48,467 $23,847 $53,331
Accounts Receivable $18,806 $37,613 $75,225 $136,345 $188,063
Other Current Assets $0 $0 $0 $0 $0
Total Current Assets $49,890 $70,045 $123,692 $160,192 $241,393
Long-term Assets
Long-term Assets $0 $0 $0 $0 $0
Accumulated Depreciation $0 $0 $0 $0 $0
Total Long-term Assets $0 $0 $0 $0 $0
Total Assets $49,890 $70,045 $123,692 $160,192 $241,393
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $4,200 $3,998 $7,183 $10,394 $14,588
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $4,200 $3,998 $7,183 $10,394 $14,588
Long-term Liabilities $0 $0 $0 $0 $0
Total Liabilities $4,200 $3,998 $7,183 $10,394 $14,588
Paid-in Capital $100,000 $130,000 $130,000 $130,000 $130,000
Retained Earnings ($13,750) ($54,310) ($63,953) ($13,491) $19,798
Earnings ($40,560) ($9,643) $50,462 $33,289 $77,007
Total Capital $45,690 $66,047 $116,509 $149,798 $226,805
Total Liabilities and Capital $49,890 $70,045 $123,692 $160,192 $241,393
Net Worth $45,690 $66,047 $116,509 $149,798 $226,805

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 8748, [Business Consulting, nec], are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 100.00% 100.00% 81.25% 37.93% 8.18%
Percent of Total Assets
Accounts Receivable 37.70% 53.70% 60.82% 85.11% 77.91% 29.59%
Other Current Assets 0.00% 0.00% 0.00% 0.00% 0.00% 41.37%
Total Current Assets 100.00% 100.00% 100.00% 100.00% 100.00% 75.36%
Long-term Assets 0.00% 0.00% 0.00% 0.00% 0.00% 24.64%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 8.42% 5.71% 5.81% 6.49% 6.04% 31.49%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 16.85%
Total Liabilities 8.42% 5.71% 5.81% 6.49% 6.04% 48.34%
Net Worth 91.58% 94.29% 94.19% 93.51% 93.96% 51.66%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 67.84% 67.84% 75.88% 80.04% 80.71% 100.00%
Selling, General & Administrative Expenses 147.37% 77.30% 51.15% 71.04% 65.61% 82.59%
Advertising Expenses #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! 1.16%
Profit Before Interest and Taxes -79.53% -9.45% 35.34% 12.86% 21.57% 1.47%
Main Ratios
Current 11.88 17.52 17.22 15.41 16.55 1.93
Quick 11.88 17.52 17.22 15.41 16.55 1.50
Total Debt to Total Assets 8.42% 5.71% 5.81% 6.49% 6.04% 3.09%
Pre-tax Return on Net Worth -88.77% -14.60% 61.87% 31.75% 48.50% 59.56%
Pre-tax Return on Assets -81.30% -13.77% 58.28% 29.69% 45.57% 7.63%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin -79.53% -9.45% 24.74% 9.00% 15.10% n.a
Return on Equity -88.77% -14.60% 43.31% 22.22% 33.95% n.a
Activity Ratios
Accounts Receivable Turnover 2.03 2.03 2.03 2.03 2.03 n.a
Collection Days 52 135 135 139 155 n.a
Accounts Payable Turnover 7.51 12.17 12.17 12.17 12.17 n.a
Payment Days 27 31 23 25 26 n.a
Total Asset Turnover 1.02 1.46 1.65 2.31 2.11 n.a
Debt Ratios
Debt to Net Worth 0.09 0.06 0.06 0.07 0.06 n.a
Current Liab. to Liab. 1.00 1.00 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $45,690 $66,047 $116,509 $149,798 $226,805 n.a
Interest Coverage 0.00 0.00 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.98 0.69 0.61 0.43 0.47 n.a
Current Debt/Total Assets 8% 6% 6% 6% 6% n.a
Acid Test 7.40 8.11 6.75 2.29 3.66 n.a
Sales/Net Worth 1.12 1.54 1.75 2.47 2.25 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a