Visigoth Imports, Inc.

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Import Export Business Plan

Financial Plan

Our financial plan anticipates one year of negative profits as we gain sales volume. We have enough investment to cover these losses, and have an additional credit line available if sales do not match predictions.

7.1 Important Assumptions

We are assuming approximately 50% sales on credit and average interest rates of 10%. These are considered to be conservative in case our predictions are erroneous.

Since Visigoth is an import/export broker, the firm has no variable costs associated with it.

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

7.2 Break-even Analysis

Our break-even analysis is based on the assumptions that our gross margin is 100%. In other words, we will have insignificant direct cost of sales. Since each market segment is so completely different, it is difficult to assign an average per unit revenue figure. However, it is believed that during the first three years, average revenue per unit per month will be about $4.00, due to the fact that, initially, we may be working with smaller companies projects. We expect that about 3,500 units per month will guarantee break even.

Break-even Analysis
Monthly Revenue Break-even $14,067
Assumptions:
Average Percent Variable Cost 0%
Estimated Monthly Fixed Cost $14,067

7.3 Projected Profit and Loss

The following table itemizes our revenues and associated costs. We expect to be paying higher costs in marketing and advertising than other companies as we attempt to build sales volume. We expect monthly profits to begin in April 2004 and yearly profits to occur in 2005.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $160,000 $201,000 $266,000
Direct Cost of Sales $0 $0 $0
Other Costs of Sales $0 $0 $0
Total Cost of Sales $0 $0 $0
Gross Margin $160,000 $201,000 $266,000
Gross Margin % 100.00% 100.00% 100.00%
Expenses
Payroll $96,000 $108,000 $126,000
Sales and Marketing and Other Expenses $8,400 $8,000 $8,000
Depreciation $0 $0 $0
Rent $12,000 $12,000 $13,000
Utilities $3,600 $3,600 $4,000
Insurance $3,000 $3,000 $3,000
Payroll Taxes $14,400 $16,200 $18,900
Travel $24,200 $12,000 $10,000
Other $7,200 $8,000 $10,000
Total Operating Expenses $168,800 $170,800 $192,900
Profit Before Interest and Taxes ($8,800) $30,200 $73,100
EBITDA ($8,800) $30,200 $73,100
Interest Expense $2,035 $1,820 $1,600
Taxes Incurred $0 $8,514 $21,450
Net Profit ($10,835) $19,866 $50,050
Net Profit/Sales -6.77% 9.88% 18.82%

7.4 Projected Cash Flow

The following is our cash flow table and chart. We do not expect to have any short-term cash flow problems even though we will be operating at a loss for the first year. Our short-term loan will be repaid in three equal payments in 2004-2006. Our long-term loan will be paid off in ten years.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $80,000 $100,500 $133,000
Cash from Receivables $62,767 $96,084 $125,999
Subtotal Cash from Operations $142,767 $196,584 $258,999
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 $0 $0 $0
Subtotal Cash Received $142,767 $196,584 $258,999
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $96,000 $108,000 $126,000
Bill Payments $70,247 $73,711 $88,568
Subtotal Spent on Operations $166,247 $181,711 $214,568
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $2,000 $0
Other Liabilities Principal Repayment $0 $1,000 $1,000
Long-term Liabilities Principal Repayment $1,200 $1,200 $1,200
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $4,000 $10,000 $42,000
Subtotal Cash Spent $171,447 $195,911 $258,768
Net Cash Flow ($28,680) $673 $231
Cash Balance $9,869 $10,543 $10,774

7.5 Projected Balance Sheet

The following table is the Project Balance Sheet for Visigoth Imports.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $9,869 $10,543 $10,774
Accounts Receivable $17,233 $21,649 $28,650
Other Current Assets $15,000 $15,000 $15,000
Total Current Assets $42,103 $47,192 $54,424
Long-term Assets
Long-term Assets $10,000 $10,000 $10,000
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $10,000 $10,000 $10,000
Total Assets $52,103 $57,192 $64,424
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $6,588 $6,011 $7,393
Current Borrowing $9,000 $7,000 $7,000
Other Current Liabilities $8,000 $7,000 $6,000
Subtotal Current Liabilities $23,588 $20,011 $20,393
Long-term Liabilities $10,800 $9,600 $8,400
Total Liabilities $34,388 $29,611 $28,793
Paid-in Capital $53,750 $53,750 $53,750
Retained Earnings ($25,200) ($46,035) ($68,169)
Earnings ($10,835) $19,866 $50,050
Total Capital $17,715 $27,581 $35,631
Total Liabilities and Capital $52,103 $57,192 $64,424
Net Worth $17,715 $27,581 $35,631

7.6 Business Ratios

We have included industry standard ratios from the trade consultant industry for comparison. Our NAICS industry class is currently Miscellaneous Nondurable Goods Merchant Wholesale - 424990. Our projections indicate a healthy company that will be able to obtain and retain long-term profitability.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 25.63% 32.34% 6.98%
Percent of Total Assets
Accounts Receivable 33.08% 37.85% 44.47% 26.80%
Other Current Assets 28.79% 26.23% 23.28% 43.95%
Total Current Assets 80.81% 82.52% 84.48% 75.76%
Long-term Assets 19.19% 17.48% 15.52% 24.24%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 45.27% 34.99% 31.65% 31.78%
Long-term Liabilities 20.73% 16.79% 13.04% 17.26%
Total Liabilities 66.00% 51.77% 44.69% 49.04%
Net Worth 34.00% 48.23% 55.31% 50.96%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 100.00% 100.00% 100.00% 100.00%
Selling, General & Administrative Expenses 106.77% 90.12% 81.18% 85.31%
Advertising Expenses 0.00% 0.00% 0.00% 1.02%
Profit Before Interest and Taxes -5.50% 15.02% 27.48% 1.90%
Main Ratios
Current 1.78 2.36 2.67 1.88
Quick 1.78 2.36 2.67 1.48
Total Debt to Total Assets 66.00% 51.77% 44.69% 3.41%
Pre-tax Return on Net Worth -61.16% 102.90% 200.67% 55.78%
Pre-tax Return on Assets -20.80% 49.62% 110.98% 7.72%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -6.77% 9.88% 18.82% n.a
Return on Equity -61.16% 72.03% 140.47% n.a
Activity Ratios
Accounts Receivable Turnover 4.64 4.64 4.64 n.a
Collection Days 56 71 69 n.a
Accounts Payable Turnover 11.36 12.17 12.17 n.a
Payment Days 28 31 27 n.a
Total Asset Turnover 3.07 3.51 4.13 n.a
Debt Ratios
Debt to Net Worth 1.94 1.07 0.81 n.a
Current Liab. to Liab. 0.69 0.68 0.71 n.a
Liquidity Ratios
Net Working Capital $18,515 $27,181 $34,031 n.a
Interest Coverage -4.32 16.59 45.69 n.a
Additional Ratios
Assets to Sales 0.33 0.28 0.24 n.a
Current Debt/Total Assets 45% 35% 32% n.a
Acid Test 1.05 1.28 1.26 n.a
Sales/Net Worth 9.03 7.29 7.47 n.a
Dividend Payout 0.00 0.50 0.84 n.a