Acme Consulting

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High-Tech Marketing Business Plan

Financial Plan

Our financial plan is based on conservative estimates and assumptions. We will need to plan on initial investment to make the financials work.

7.1 Key Financial Indicators

The following benchmark chart indicates our key financial indicators for the first three years. We foresee major growth in sales and operating expenses, and a bump in our collection days as we spread the business during expansion.

7.2 Important Assumptions

Table 7.1 summarizes key financial assumptions. In addition, we plan for 45-day average collection days, sales entirely on invoice basis, expenses mainly on net 30 basis, and present-day interest rates.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

7.3 Break-even Analysis

Table 7.3 summarizes the break-even analysis, including monthly sales break-even points.

Break-even Analysis
Monthly Revenue Break-even $45,158
Assumptions:
Average Percent Variable Cost 27%
Estimated Monthly Fixed Cost $33,029

7.4 Projected Profit and Loss

The detailed monthly pro-forma income statement for the first year is included in the appendix. The annual estimates are included here.

 

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $592,000 $875,000 $1,100,000
Direct Cost of Sales $159,000 $219,000 $289,000
Other Costs of Sales $0 $0 $0
Total Cost of Sales $159,000 $219,000 $289,000
Gross Margin $433,000 $656,000 $811,000
Gross Margin % 73.14% 74.97% 73.73%
Expenses
Payroll $194,750 $377,000 $432,000
Marketing/Promotion $162,000 $137,000 $195,000
Depreciation $0 $0 $0
Leased Equipment $6,000 $7,000 $7,000
Utilities $12,000 $12,000 $12,000
Insurance $3,600 $2,000 $2,000
Rent $18,000 $52,780 $60,480
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $396,350 $587,780 $708,480
Profit Before Interest and Taxes $36,650 $68,220 $102,520
EBITDA $36,650 $68,220 $102,520
Interest Expense $7,222 $10,940 $10,940
Taxes Incurred $8,828 $17,184 $27,474
Net Profit $20,600 $40,096 $64,106
Net Profit/Sales 3.48% 4.58% 5.83%

7.5 Projected Cash Flow

Cash flow projections are critical to our success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month and the other representing the monthly balance. The annual cash flow figures are included here as Table 7.5. Detailed monthly numbers are included in the appendix.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $0 $0 $0
Cash from Receivables $495,000 $828,630 $1,063,133
Subtotal Cash from Operations $495,000 $828,630 $1,063,133
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $30,000 $100,000 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $50,000 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $8,000 $0 $0
Subtotal Cash Received $583,000 $928,630 $1,063,133
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $194,750 $377,000 $432,000
Bill Payments $344,281 $452,988 $591,895
Subtotal Spent on Operations $539,031 $829,988 $1,023,895
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $30,000 $50,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $600 $10,000 $10,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $539,631 $869,988 $1,083,895
Net Cash Flow $43,369 $58,642 ($20,761)
Cash Balance $93,719 $152,362 $131,600

7.6 Projected Balance Sheet

The balance sheet shows healthy growth of net worth, and strong financial position. The monthly estimates are included in the appendix.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $93,719 $152,362 $131,600
Accounts Receivable $97,000 $143,370 $180,236
Other Current Assets $0 $0 $0
Total Current Assets $190,719 $295,731 $311,837
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $190,719 $295,731 $311,837
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $32,720 $37,636 $49,635
Current Borrowing $30,000 $100,000 $50,000
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $62,720 $137,636 $99,635
Long-term Liabilities $49,400 $39,400 $29,400
Total Liabilities $112,120 $177,036 $129,035
Paid-in Capital $58,000 $58,000 $58,000
Retained Earnings $0 $20,600 $60,696
Earnings $20,600 $40,096 $64,106
Total Capital $78,600 $118,696 $182,802
Total Liabilities and Capital $190,719 $295,731 $311,837
Net Worth $78,600 $118,696 $182,802

7.7 Business Ratios

The following table shows the projected business ratios. We expect to maintain healthy ratios for profitability, risk, and return. The industry comparisons are for SIC 8742, management consulting services.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 47.80% 25.71% 6.98%
Percent of Total Assets
Accounts Receivable 50.86% 48.48% 57.80% 26.80%
Other Current Assets 0.00% 0.00% 0.00% 48.96%
Total Current Assets 100.00% 100.00% 100.00% 75.76%
Long-term Assets 0.00% 0.00% 0.00% 24.24%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 32.89% 46.54% 31.95% 31.78%
Long-term Liabilities 25.90% 13.32% 9.43% 17.26%
Total Liabilities 58.79% 59.86% 41.38% 49.04%
Net Worth 41.21% 40.14% 58.62% 50.96%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 73.14% 74.97% 73.73% 100.00%
Selling, General & Administrative Expenses 69.66% 70.39% 67.90% 85.31%
Advertising Expenses 0.00% 0.00% 0.00% 1.02%
Profit Before Interest and Taxes 6.19% 7.80% 9.32% 1.90%
Main Ratios
Current 3.04 2.15 3.13 1.88
Quick 3.04 2.15 3.13 1.48
Total Debt to Total Assets 58.79% 59.86% 41.38% 3.41%
Pre-tax Return on Net Worth 37.44% 48.26% 50.10% 55.78%
Pre-tax Return on Assets 15.43% 19.37% 29.37% 7.72%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 3.48% 4.58% 5.83% n.a
Return on Equity 26.21% 33.78% 35.07% n.a
Activity Ratios
Accounts Receivable Turnover 6.10 6.10 6.10 n.a
Collection Days 43 50 54 n.a
Accounts Payable Turnover 11.51 12.17 12.17 n.a
Payment Days 27 28 26 n.a
Total Asset Turnover 3.10 2.96 3.53 n.a
Debt Ratios
Debt to Net Worth 1.43 1.49 0.71 n.a
Current Liab. to Liab. 0.56 0.78 0.77 n.a
Liquidity Ratios
Net Working Capital $128,000 $158,096 $212,202 n.a
Interest Coverage 5.07 6.24 9.37 n.a
Additional Ratios
Assets to Sales 0.32 0.34 0.28 n.a
Current Debt/Total Assets 33% 47% 32% n.a
Acid Test 1.49 1.11 1.32 n.a
Sales/Net Worth 7.53 7.37 6.02 n.a
Dividend Payout 0.00 0.00 0.00 n.a