The most important element in the financial plan is the critical need for improving several of the key factors that impact cash flow:
Our financial plan seems agressive when compared to our past performance; however, it really isn't. We must use our sales force, and the dealers and consultants that have signed with us, to jointly sell the S.E.A.T. Management program to its fullest potential. This program officially started on July 1, 2003, and we have already closed sales in companies that we have not been able to sell to in the past.
The financial plan depends on important assumptions, most of which are shown in the following table. The key underlying assumptions are:
For our break-even analysis, we assume fixed costs and margins based on projections for the coming year. We hope to attain high margin in the future. The chart shows what we need our divisions to produce in revenueper month to break even, according to these assumptions.
The most important assumption in the Projected Profit and Loss statement is the Gross Margin, which is supposed to increase over the last year's performance. The increase in Gross Margin is based on changing our sales and marketing mix, and it is critical.
DCH is housed in the corporate administrative offices of KMCI, and does not have to pay rent, utilities, office equipment depreciation and other insurance other than normal FICA, Social Security, and Medicare on its employees. Month-by-month assumptions for profit and loss are included in the appendices.
The cash flow depends on assumptions of sales by the KMCI sales team, and on servicing our existing clients. Our projected 60 day collection days is critical, and it is also reasonable. We do need to assume somewhat standard receivables-based credit line, but aside from that, which is supported entirely by receivables, we are not assuming any new borrowing, or funding to support the KMCI operation. KMCI is self supporting.
We have not included the revenue of the proposed acquisition of the software company. The software company does have, and has maintained a strong profit margin; however, we are too early into the acquisition process to begin to forecast additional revenues coming from this proposed acquisition.
The balance sheet is quite solid. We do not project any real trouble meeting our debt obligations--as long as we can achieve our specific objectives.
The following table outlines some of the more important ratios from the Office Computer Automation Systems Integration industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 7373.0202.
We expect to increase our KMCI sales substantially by 2008, while also increasing gross margin. To achieve this will require the sales force to sell reasonable numbers of units each month. In the past our greatest problem was simply that our sales force was not effective. We have designed and implemented programs to correct this problem, and it has been working.