This financial plan is based on acquiring a loan for $225,000 secured by the owner's home. The owner will provide $20,000 of start-up investment personally as well as $80,000 down payment for purchasing a church or similar building.
The Center will achieve profitability in just over two years and reach annual net profit of approximately $196,000 in the Center's fourth year of operation, with subsequent increases annually due to inflation. These figures are conservative because they anticipate a slow market penetration as the Center builds its reputation and reaches full market share in year four.
Our start-up expenses of $19,700 and asset purchases of $197,000 are to be financed partially by the direct owner investment of $20,000 and financing in the amount of $225,000. The details are included in the following table and chart.
The financial plan assumes interest rates at eight percent raising to 10 percent by 2010. The key underlying assumptions are:
For our break-even analysis, we assume first-year fixed expenses of $13,606 per month, which includes our full payroll, mortgage payments, utilities and an estimation of other running costs. Payroll alone, during the first year, is only $5,000 per month.
Industry standard margins of 65 percent are assumed.
The initial break-even point is realized in March of 2006 with sales of only four funerals a month.
While profitability is realized in March 2006, the second fiscal year shows a slight profit margin because of the need to hire staff and train them ahead of the growth curve. When first hiring staff, it is anticipated that for the first few months, the time it takes to train each employee may exceed the amount of time it would take for the owner to just "do it himself." However, having staff in place and ready to make good on the promises of service we make in all our marketing efforts is critical to our growth strategy.
Month-by-month assumptions for profit and loss are included in the appendix.
A cash reserve is built into the plan to allow for unforeseen contingencies. Our minimum credit line available projected during this five-year period is over $45,000.
The company's estimated cash flow analysis is outlined in the following table.
The table below presents the balance sheet for the Evergreen Life Memorial Center. This table reflects dramatic growth in net worth, reaching nearly $425,000 in FY 2010. Our Projected Balance Sheet shows we will not have any difficulty meeting our debt obligations so long as our revenue projections are met.
This is a more profitably run business than average in its industry because of our value-added services, slightly higher prices and lean operation.
Sales expenses are constant throughout the five-year period. While they are a high percentage in the early years against lower sales, they are low after maturity because nonprofit activities will provide more than adequate publicity that will reduce advertising expenses.
The ratios for long-term liabilities do not reflect the loan for real estate purchase, which is not included as part of this plan.
The company's projected business ratios are provided in the table below. The final column, Industry Profile, shows significant ratios for the funeral service industry for comparison.
The long-term plan is for the Evergreen Life Memorial Center to achieve market share and hold it. This will be an expanding market over the next 35 years as the Baby Boom generation nearly doubles mortality rates from 11 percent per decade to over 18 percent by 2040. Keeping up with this growth, plus population increases in the Lane County area, will provide plenty of business for the Center for generations to come.