Southeast Health Plans

Start your own business plan »

Health Plan Administration Business Plan

Financial Plan

The financial plan for rapid, but controlled growth for Southeast Health Plans, Inc. is presented in detail in the following sections.

Initial capitalization (after $300 thousand founder's seed funding) is pegged at $1 million (with cash streaming in from April through September).

The company will be debt free at that point (barring any interim management decisions to accelerate growth further). The company will also have significant IPO potential in the future and/or be an acquisition candidate in an industry that traditionally undergoes consolidation.

7.1 Important Assumptions

The financial assumptions upon which this plan is based are outlined in the following table:

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 8.00% 8.00% 8.00%
Long-term Interest Rate 8.00% 8.00% 8.00%
Tax Rate 33.00% 33.00% 33.00%
Other 0 0 0

7.2 Key Financial Indicators

Key financial indicators are increasing sales volume coupled with maintenance and improvement of margins. On-going cost control is paramount to success.

7.3 Break-even Analysis

Monthly break-even, based upon fixed initial market overheads, will be attained prior to the end of year two.

Cost control and market maturation will then accelerate profitability which increases disproportionately as market development costs are offset with a critical mass of baseline business in each new market.

Break-even Analysis
Monthly Revenue Break-even $72,637
Assumptions:
Average Percent Variable Cost 20%
Estimated Monthly Fixed Cost $58,291

7.4 Projected Profit and Loss

Southeast Health Plans, Inc. projects over-all profitability in year three.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $288,599 $1,399,223 $3,067,966
Direct Cost of Sales $57,000 $201,000 $427,500
Other Costs of Sales $0 $0 $0
Total Cost of Sales $57,000 $201,000 $427,500
Gross Margin $231,599 $1,198,223 $2,640,466
Gross Margin % 80.25% 85.63% 86.07%
Expenses
Payroll $441,492 $757,000 $981,000
Marketing/Promotion $180,000 $288,000 $456,000
Depreciation $0 $0 $0
Rent $30,000 $90,000 $120,000
Telephone/Utilities $12,000 $24,000 $30,000
Payroll Taxes $0 $0 $0
Contract/Consultants $36,000 $0 $0
Total Operating Expenses $699,492 $1,159,000 $1,587,000
Profit Before Interest and Taxes ($467,893) $39,223 $1,053,466
EBITDA ($467,893) $39,223 $1,053,466
Interest Expense $0 $0 $0
Taxes Incurred $0 $12,944 $347,644
Net Profit ($467,893) $26,279 $705,822
Net Profit/Sales -162.13% 1.88% 23.01%

7.5 Projected Cash Flow

Cash flow is the most critical indicator of business success.

At no point does our business model run out of cash. Significant margin for error is included. Initial and second round investment is procured prior to need and allowing for potential time lag to close.

All future growth is based upon a debt-free internally funded model. Attainment of targeted sales revenues will ensure the accumulation of required cash to execute expansion plans as presented.

Plans can always be curtailed or postponed in the event of future sales shortfalls.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $288,599 $1,399,223 $3,067,966
Subtotal Cash from Operations $288,599 $1,399,223 $3,067,966
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 $1,000,000 $0 $0
Subtotal Cash Received $1,288,599 $1,399,223 $3,067,966
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $441,492 $757,000 $981,000
Bill Payments $286,967 $593,351 $1,318,251
Subtotal Spent on Operations $728,459 $1,350,351 $2,299,251
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 $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $728,459 $1,350,351 $2,299,251
Net Cash Flow $560,140 $48,872 $768,715
Cash Balance $832,640 $881,512 $1,650,227

7.6 Projected Balance Sheet

Projected Balance Sheet follows.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $832,640 $881,512 $1,650,227
Other Current Assets $0 $0 $0
Total Current Assets $832,640 $881,512 $1,650,227
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $832,640 $881,512 $1,650,227
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $28,033 $50,626 $113,519
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $28,033 $50,626 $113,519
Long-term Liabilities $0 $0 $0
Total Liabilities $28,033 $50,626 $113,519
Paid-in Capital $1,300,000 $1,300,000 $1,300,000
Retained Earnings ($27,500) ($495,393) ($469,114)
Earnings ($467,893) $26,279 $705,822
Total Capital $804,607 $830,886 $1,536,709
Total Liabilities and Capital $832,640 $881,512 $1,650,227
Net Worth $804,607 $830,886 $1,536,709

7.7 Business Ratios

These business ratios are only partially relevant as long as the business is able to remain debt free. Industry profile ratios based on the Standard Industrial Classification (SIC) code 6411, Insurance Agencies and Brokerages, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 384.83% 119.26% 3.95%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 93.54%
Total Current Assets 100.00% 100.00% 100.00% 93.54%
Long-term Assets 0.00% 0.00% 0.00% 6.46%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 3.37% 5.74% 6.88% 35.88%
Long-term Liabilities 0.00% 0.00% 0.00% 9.61%
Total Liabilities 3.37% 5.74% 6.88% 45.49%
Net Worth 96.63% 94.26% 93.12% 54.51%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 80.25% 85.63% 86.07% 100.00%
Selling, General & Administrative Expenses 242.38% 83.76% 63.06% 59.40%
Advertising Expenses 0.00% 0.00% 0.00% 1.23%
Profit Before Interest and Taxes -162.13% 2.80% 34.34% 6.74%
Main Ratios
Current 29.70 17.41 14.54 1.91
Quick 29.70 17.41 14.54 1.64
Total Debt to Total Assets 3.37% 5.74% 6.88% 54.69%
Pre-tax Return on Net Worth -58.15% 4.72% 68.55% 7.55%
Pre-tax Return on Assets -56.19% 4.45% 63.84% 16.65%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -162.13% 1.88% 23.01% n.a
Return on Equity -58.15% 3.16% 45.93% n.a
Activity Ratios
Accounts Payable Turnover 11.24 12.17 12.17 n.a
Payment Days 27 23 22 n.a
Total Asset Turnover 0.35 1.59 1.86 n.a
Debt Ratios
Debt to Net Worth 0.03 0.06 0.07 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $804,607 $830,886 $1,536,709 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 2.89 0.63 0.54 n.a
Current Debt/Total Assets 3% 6% 7% n.a
Acid Test 29.70 17.41 14.54 n.a
Sales/Net Worth 0.36 1.68 2.00 n.a
Dividend Payout 0.00 0.00 0.00 n.a