Educational Software K-12 Business Plan

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Financial Plan

CCS expects to raise its own capital, and to acquire a guaranteed the SBA 10-year loan. This provides the bulk of the current financing required.

7.1 Break-even Analysis

CCS's Break-even Analysis is based on the average of the first-year figures for total sales by units, and by operating expenses. These are presented as per-unit revenue, per-unit cost, and fixed costs. These conservative assumptions make for a more accurate estimate of real risk.

Break-even Analysis
Monthly Units Break-even 27
Monthly Revenue Break-even $466,023
Assumptions:
Average Per-Unit Revenue $17,000.00
Average Per-Unit Variable Cost $5,200.00
Estimated Monthly Fixed Cost $323,475

7.2 Projected Profit and Loss

The projected Profit and Loss for CCS is presented in the accompanying table. The three yearly totals are shown here, with year one monthlies in the appendix.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $10,200,000 $11,730,000 $13,489,500
Direct Cost of Sales $3,120,000 $3,588,000 $4,126,200
Other $0 $0 $0
Total Cost of Sales $3,120,000 $3,588,000 $4,126,200
Gross Margin $7,080,000 $8,142,000 $9,363,300
Gross Margin % 69.41% 69.41% 69.41%
Expenses
Payroll $3,270,000 $3,433,500 $3,605,175
Sales and Marketing and Other Expenses $96,000 $150,000 $265,000
Depreciation $24,000 $27,600 $31,740
Utilities $1,200 $1,500 $1,700
Payroll Taxes $490,500 $515,025 $540,776
Other $0 $0 $0
Total Operating Expenses $3,881,700 $4,127,625 $4,444,391
Profit Before Interest and Taxes $3,198,300 $4,014,375 $4,918,909
EBITDA $3,222,300 $4,041,975 $4,950,649
Interest Expense $18,700 $16,400 $14,000
Taxes Incurred $808,144 $999,494 $1,246,664
Net Profit $2,371,456 $2,998,481 $3,658,244
Net Profit/Sales 23.25% 25.56% 27.12%

7.3 Projected Cash Flow

The cash flow projection shows that provisions for ongoing expenses are adequate to meet CCS's needs as the business generates cash flow sufficient to support operations.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $3,468,000 $3,988,200 $4,586,430
Cash from Receivables $5,628,700 $7,576,305 $8,712,751
Subtotal Cash from Operations $9,096,700 $11,564,505 $13,299,181
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 $190,000 $0 $0
Subtotal Cash Received $9,286,700 $11,564,505 $13,299,181
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $3,270,000 $3,433,500 $3,605,175
Bill Payments $4,171,394 $5,201,383 $6,118,402
Subtotal Spent on Operations $7,441,394 $8,634,883 $9,723,577
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $12,000 $12,000 $12,000
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 $135,000 $225,000 $295,000
Dividends $0 $0 $0
Subtotal Cash Spent $7,600,394 $8,883,883 $10,042,577
Net Cash Flow $1,686,306 $2,680,622 $3,256,604
Cash Balance $1,866,306 $4,546,928 $7,803,532

7.4 Projected Balance Sheet

Following is the projected Balance Sheet for CCS. Again, three years of annuals are shown below, with first year monthlies in the appendix.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $1,866,306 $4,546,928 $7,803,532
Accounts Receivable $1,103,300 $1,268,795 $1,459,114
Other Current Assets $75,000 $75,000 $75,000
Total Current Assets $3,044,606 $5,890,723 $9,337,646
Long-term Assets
Long-term Assets $235,000 $460,000 $755,000
Accumulated Depreciation $24,000 $51,600 $83,340
Total Long-term Assets $211,000 $408,400 $671,660
Total Assets $3,255,606 $6,299,123 $10,009,306
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $364,149 $433,185 $509,124
Current Borrowing $38,000 $26,000 $14,000
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $402,149 $459,185 $523,124
Long-term Liabilities $138,000 $126,000 $114,000
Total Liabilities $540,149 $585,185 $637,124
Paid-in Capital $368,000 $368,000 $368,000
Retained Earnings ($24,000) $2,347,456 $5,345,938
Earnings $2,371,456 $2,998,481 $3,658,244
Total Capital $2,715,456 $5,713,938 $9,372,182
Total Liabilities and Capital $3,255,606 $6,299,123 $10,009,306
Net Worth $2,715,456 $5,713,938 $9,372,182

7.5 Business Ratios

The following table represents business ratios for the educational support software industry. These numbers are determined by the Standard Industry Classification (SIC) Index code 7372, Software Publishing Prepackaged.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 15.00% 15.00% 9.70%
Percent of Total Assets
Accounts Receivable 33.89% 20.14% 14.58% 21.50%
Other Current Assets 2.30% 1.19% 0.75% 45.70%
Total Current Assets 93.52% 93.52% 93.29% 70.20%
Long-term Assets 6.48% 6.48% 6.71% 29.80%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 12.35% 7.29% 5.23% 42.40%
Long-term Liabilities 4.24% 2.00% 1.14% 19.20%
Total Liabilities 16.59% 9.29% 6.37% 61.60%
Net Worth 83.41% 90.71% 93.63% 38.40%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 69.41% 69.41% 69.41% 100.00%
Selling, General & Administrative Expenses 46.04% 43.87% 42.17% 79.40%
Advertising Expenses 0.59% 0.85% 1.48% 1.30%
Profit Before Interest and Taxes 31.36% 34.22% 36.46% 2.20%
Main Ratios
Current 7.57 12.83 17.85 1.51
Quick 7.57 12.83 17.85 1.16
Total Debt to Total Assets 16.59% 9.29% 6.37% 61.60%
Pre-tax Return on Net Worth 117.09% 69.97% 52.33% 3.50%
Pre-tax Return on Assets 97.67% 63.47% 49.00% 9.20%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 23.25% 25.56% 27.12% n.a
Return on Equity 87.33% 52.48% 39.03% n.a
Activity Ratios
Accounts Receivable Turnover 6.10 6.10 6.10 n.a
Collection Days 57 56 56 n.a
Accounts Payable Turnover 12.45 12.17 12.17 n.a
Payment Days 27 28 28 n.a
Total Asset Turnover 3.13 1.86 1.35 n.a
Debt Ratios
Debt to Net Worth 0.20 0.10 0.07 n.a
Current Liab. to Liab. 0.74 0.78 0.82 n.a
Liquidity Ratios
Net Working Capital $2,642,456 $5,431,538 $8,814,522 n.a
Interest Coverage 171.03 244.78 351.35 n.a
Additional Ratios
Assets to Sales 0.32 0.54 0.74 n.a
Current Debt/Total Assets 12% 7% 5% n.a
Acid Test 4.83 10.07 15.06 n.a
Sales/Net Worth 3.76 2.05 1.44 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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Break-even Analysis
Monthly Units Break-even 27
Monthly Revenue Break-even $466,023
Assumptions:
Average Per-Unit Revenue $17,000.00
Average Per-Unit Variable Cost $5,200.00
Estimated Monthly Fixed Cost $323,475
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $10,200,000 $11,730,000 $13,489,500
Direct Cost of Sales $3,120,000 $3,588,000 $4,126,200
Other $0 $0 $0
Total Cost of Sales $3,120,000 $3,588,000 $4,126,200
Gross Margin $7,080,000 $8,142,000 $9,363,300
Gross Margin % 69.41% 69.41% 69.41%
Expenses
Payroll $3,270,000 $3,433,500 $3,605,175
Sales and Marketing and Other Expenses $96,000 $150,000 $265,000
Depreciation $24,000 $27,600 $31,740
Utilities $1,200 $1,500 $1,700
Payroll Taxes $490,500 $515,025 $540,776
Other $0 $0 $0
Total Operating Expenses $3,881,700 $4,127,625 $4,444,391
Profit Before Interest and Taxes $3,198,300 $4,014,375 $4,918,909
EBITDA $3,222,300 $4,041,975 $4,950,649
Interest Expense $18,700 $16,400 $14,000
Taxes Incurred $808,144 $999,494 $1,246,664
Net Profit $2,371,456 $2,998,481 $3,658,244
Net Profit/Sales 23.25% 25.56% 27.12%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $3,468,000 $3,988,200 $4,586,430
Cash from Receivables $5,628,700 $7,576,305 $8,712,751
Subtotal Cash from Operations $9,096,700 $11,564,505 $13,299,181
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 $190,000 $0 $0
Subtotal Cash Received $9,286,700 $11,564,505 $13,299,181
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $3,270,000 $3,433,500 $3,605,175
Bill Payments $4,171,394 $5,201,383 $6,118,402
Subtotal Spent on Operations $7,441,394 $8,634,883 $9,723,577
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $12,000 $12,000 $12,000
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 $135,000 $225,000 $295,000
Dividends $0 $0 $0
Subtotal Cash Spent $7,600,394 $8,883,883 $10,042,577
Net Cash Flow $1,686,306 $2,680,622 $3,256,604
Cash Balance $1,866,306 $4,546,928 $7,803,532
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $1,866,306 $4,546,928 $7,803,532
Accounts Receivable $1,103,300 $1,268,795 $1,459,114
Other Current Assets $75,000 $75,000 $75,000
Total Current Assets $3,044,606 $5,890,723 $9,337,646
Long-term Assets
Long-term Assets $235,000 $460,000 $755,000
Accumulated Depreciation $24,000 $51,600 $83,340
Total Long-term Assets $211,000 $408,400 $671,660
Total Assets $3,255,606 $6,299,123 $10,009,306
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $364,149 $433,185 $509,124
Current Borrowing $38,000 $26,000 $14,000
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $402,149 $459,185 $523,124
Long-term Liabilities $138,000 $126,000 $114,000
Total Liabilities $540,149 $585,185 $637,124
Paid-in Capital $368,000 $368,000 $368,000
Retained Earnings ($24,000) $2,347,456 $5,345,938
Earnings $2,371,456 $2,998,481 $3,658,244
Total Capital $2,715,456 $5,713,938 $9,372,182
Total Liabilities and Capital $3,255,606 $6,299,123 $10,009,306
Net Worth $2,715,456 $5,713,938 $9,372,182
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 15.00% 15.00% 9.70%
Percent of Total Assets
Accounts Receivable 33.89% 20.14% 14.58% 21.50%
Other Current Assets 2.30% 1.19% 0.75% 45.70%
Total Current Assets 93.52% 93.52% 93.29% 70.20%
Long-term Assets 6.48% 6.48% 6.71% 29.80%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 12.35% 7.29% 5.23% 42.40%
Long-term Liabilities 4.24% 2.00% 1.14% 19.20%
Total Liabilities 16.59% 9.29% 6.37% 61.60%
Net Worth 83.41% 90.71% 93.63% 38.40%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 69.41% 69.41% 69.41% 100.00%
Selling, General & Administrative Expenses 46.04% 43.87% 42.17% 79.40%
Advertising Expenses 0.59% 0.85% 1.48% 1.30%
Profit Before Interest and Taxes 31.36% 34.22% 36.46% 2.20%
Main Ratios
Current 7.57 12.83 17.85 1.51
Quick 7.57 12.83 17.85 1.16
Total Debt to Total Assets 16.59% 9.29% 6.37% 61.60%
Pre-tax Return on Net Worth 117.09% 69.97% 52.33% 3.50%
Pre-tax Return on Assets 97.67% 63.47% 49.00% 9.20%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 23.25% 25.56% 27.12% n.a
Return on Equity 87.33% 52.48% 39.03% n.a
Activity Ratios
Accounts Receivable Turnover 6.10 6.10 6.10 n.a
Collection Days 57 56 56 n.a
Accounts Payable Turnover 12.45 12.17 12.17 n.a
Payment Days 27 28 28 n.a
Total Asset Turnover 3.13 1.86 1.35 n.a
Debt Ratios
Debt to Net Worth 0.20 0.10 0.07 n.a
Current Liab. to Liab. 0.74 0.78 0.82 n.a
Liquidity Ratios
Net Working Capital $2,642,456 $5,431,538 $8,814,522 n.a
Interest Coverage 171.03 244.78 351.35 n.a
Additional Ratios
Assets to Sales 0.32 0.54 0.74 n.a
Current Debt/Total Assets 12% 7% 5% n.a
Acid Test 4.83 10.07 15.06 n.a
Sales/Net Worth 3.76 2.05 1.44 n.a
Dividend Payout 0.00 0.00 0.00 n.a