Quaestor Services

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Insurance Agency Business Plan

Financial Plan

Quaestor Services' financial plan is based on obtaining a loan by January of 2005 of $15,000 to cover the start-up expenses. In July of 2005 an additional $10,000 in financing will be required to ensure business operations, marketing and stability during the first year of operation. For financial forecasting the loan is a seven year loan at an interest rate of 9.09%. Quaestor will achieve profitability in the second year.

The fiscal year is a calendar year, January through December.

7.1 Start-up Funding

Start-up costs come to $30,000 of which $15,000 is being financed by a direct owner investment. Before the first six months of operation, $15,000 financing is being sought for the start-up costs. In July of 2005 an additional $10,000 in financing will be required to ensure business operations, marketing and stability during the first year of operation.

 

Start-up Funding
Start-up Expenses to Fund $15,000
Start-up Assets to Fund $13,000
Total Funding Required $28,000
Assets
Non-cash Assets from Start-up $3,000
Cash Requirements from Start-up $10,000
Additional Cash Raised $2,000
Cash Balance on Starting Date $12,000
Total Assets $15,000
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $15,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $15,000
Capital
Planned Investment
Owner $15,000
Other $0
Additional Investment Requirement $0
Total Planned Investment $15,000
Loss at Start-up (Start-up Expenses) ($15,000)
Total Capital $0
Total Capital and Liabilities $15,000
Total Funding $30,000

7.2 Important Assumptions

The key underlying assumptions of Quaestor financial plan shown in the following general assumption table are:

  1. We assume access to financing of $30,000 to support our financial plan.
  2. We assume our financial progress is based on a very conservative sales forecast supported by data received and reviewed by Whelnoan Insurance.
  3. We assume that all sales milestones have been achieved.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 9.09% 9.09% 9.09%
Long-term Interest Rate 9.09% 9.09% 9.09%
Tax Rate 20.00% 20.00% 20.00%
Other 0 0 0

7.3 Break-even Analysis

The following table and chart show our Break-even Analysis. The first year due to start-up costs and expenses will not be included in the break-even analysis.

Break-even Analysis
Monthly Revenue Break-even $4,997
Assumptions:
Average Percent Variable Cost 71%
Estimated Monthly Fixed Cost $1,468

7.4 Projected Profit and Loss

Based on the realistic sales projections and efficient cost control measures in place, Quaestor will achieve profitability in the second year of operation. Monthly profitability is first achieved in November 2005, but due to developing a customer base, the first months of operations reflect a loss.

In the second year of operation, sales increased $68,810 or 174%, resulting in a net profit. Significant changes in the second year are the hiring of an agent in January 2006, resulting in additional costs to the direct cost of sales of $34,500 and the set-up of an office outside of the owner's home and Whelnoan Insurance District 15 office, resulting in additional operating costs of $7,120.

In the third year of operation, sales increased $13,800 or 13%. This yields an increase on the bottom line. In the third year of operations, Whelnoan Insurance subsidies are no longer available, resulting in a decrease in Miscellaneous revenue of $36,800 over the prior year. There are no significant changes in the third year of operations.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $39,500 $108,310 $122,110
Direct Cost of Sales $27,900 $63,000 $70,900
Other Costs of Sales $0 $0 $0
Total Cost of Sales $27,900 $63,000 $70,900
Gross Margin $11,600 $45,310 $51,210
Gross Margin % 29.37% 41.83% 41.94%
Expenses
Payroll $0 $0 $0
Marketing/Promotion $4,200 $6,600 $7,200
Depreciation $1,020 $2,520 $3,180
Employee Benefits $2,250 $3,000 $3,000
Rent $3,000 $6,000 $6,000
Utilities $600 $1,500 $1,500
Telephone/DSL/Cell $3,000 $4,050 $4,200
Office Supplies $900 $1,650 $2,150
Professional Services $250 $500 $500
Training/Licensing $290 $250 $0
Insurance $900 $1,200 $1,200
Payroll Taxes $0 $0 $0
Miscellaneous $1,200 $1,200 $1,200
Total Operating Expenses $17,610 $28,470 $30,130
Profit Before Interest and Taxes ($6,010) $16,840 $21,080
EBITDA ($4,990) $19,360 $24,260
Interest Expense $1,719 $1,899 $1,572
Taxes Incurred $0 $2,988 $3,902
Net Profit ($7,729) $11,953 $15,607
Net Profit/Sales -19.57% 11.04% 12.78%

7.5 Projected Cash Flow

Due the fact that Quaestor is a new start-up company, the cash flow for FY2005 is somewhat exaggerated by the instant influx of new capital. Subsequent years however show a healthy growth in cash flow, mainly due to the 84-month repayment of the start-up loan and increased sales.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $33,575 $92,064 $103,794
Subtotal Cash from Operations $38,846 $107,171 $121,882
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 $10,000 $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 $48,846 $107,171 $121,882
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $0 $0 $0
Bill Payments $42,322 $90,012 $102,544
Subtotal Spent on Operations $42,322 $90,012 $102,544
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 $2,387 $3,440 $3,766
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $7,500 $2,000
Dividends $0 $0 $0
Subtotal Cash Spent $44,709 $100,952 $108,310
Net Cash Flow $4,137 $6,219 $13,572
Cash Balance $16,137 $22,356 $35,928

7.6 Projected Balance Sheet

The table below presents the balance sheet for Quaestor Services. This table reflects a positive cash position throughout the period of this financial plan. The negative net worth is created in the first year due to the start-up costs showing as a negative retained earnings. As the balance sheet shows, Quaestor will not have any difficulty meeting their debt obligations as long as the conservative revenue projections are met.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $16,137 $22,356 $35,928
Accounts Receivable $654 $1,793 $2,022
Other Current Assets $0 $0 $0
Total Current Assets $16,791 $24,149 $37,950
Long-term Assets
Long-term Assets $3,000 $10,500 $12,500
Accumulated Depreciation $1,020 $3,540 $6,720
Total Long-term Assets $1,980 $6,960 $5,780
Total Assets $18,771 $31,109 $43,730
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $3,887 $7,713 $8,492
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $3,887 $7,713 $8,492
Long-term Liabilities $22,613 $19,173 $15,407
Total Liabilities $26,500 $26,886 $23,899
Paid-in Capital $15,000 $15,000 $15,000
Retained Earnings ($15,000) ($22,729) ($10,776)
Earnings ($7,729) $11,953 $15,607
Total Capital ($7,729) $4,224 $19,830
Total Liabilities and Capital $18,771 $31,109 $43,730
Net Worth ($7,729) $4,224 $19,830

7.7 Business Ratios

The table below presents common business ratios as a reference. Industry Profile comparisons are for Standard Industrial Classification code 6411.0000, Insurance Agents, Brokers and Service as the majority of our revenue comes from insurance sales. However, since the combined business of accounting/bookkeeping services and insurance sales does not fall underneath any predefined Industry dataset, the Industry ratios are not wholly accurate nor representative for Quaestor Services.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 174.20% 12.74% 8.23%
Percent of Total Assets
Accounts Receivable 3.48% 5.76% 4.62% 24.10%
Other Current Assets 0.00% 0.00% 0.00% 69.87%
Total Current Assets 89.45% 77.63% 86.78% 94.00%
Long-term Assets 10.55% 22.37% 13.22% 6.00%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 20.71% 24.79% 19.42% 36.78%
Long-term Liabilities 120.47% 61.63% 35.23% 9.58%
Total Liabilities 141.17% 86.42% 54.65% 46.36%
Net Worth -41.17% 13.58% 45.35% 53.64%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 29.37% 41.83% 41.94% 100.00%
Selling, General & Administrative Expenses 48.93% 30.80% 29.16% 74.71%
Advertising Expenses 0.00% 0.00% 0.00% 0.48%
Profit Before Interest and Taxes -15.22% 15.55% 17.26% 5.37%
Main Ratios
Current 4.32 3.13 4.47 1.82
Quick 4.32 3.13 4.47 1.62
Total Debt to Total Assets 141.17% 86.42% 54.65% 51.49%
Pre-tax Return on Net Worth 100.00% 353.74% 98.38% 7.25%
Pre-tax Return on Assets -41.17% 48.03% 44.61% 14.94%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -19.57% 11.04% 12.78% n.a
Return on Equity 0.00% 282.99% 78.70% n.a
Activity Ratios
Accounts Receivable Turnover 9.06 9.06 9.06 n.a
Collection Days 29 27 38 n.a
Accounts Payable Turnover 11.89 12.17 12.17 n.a
Payment Days 27 23 29 n.a
Total Asset Turnover 2.10 3.48 2.79 n.a
Debt Ratios
Debt to Net Worth 0.00 6.37 1.21 n.a
Current Liab. to Liab. 0.15 0.29 0.36 n.a
Liquidity Ratios
Net Working Capital $12,904 $16,437 $29,457 n.a
Interest Coverage -3.50 8.87 13.41 n.a
Additional Ratios
Assets to Sales 0.48 0.29 0.36 n.a
Current Debt/Total Assets 21% 25% 19% n.a
Acid Test 4.15 2.90 4.23 n.a
Sales/Net Worth 0.00 25.64 6.16 n.a
Dividend Payout 0.00 0.00 0.00 n.a