Fargo Medical Laboratories

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Laboratory Business Plan

Financial Plan

The following sections will outline important financial information.

7.1 Important Assumptions

The following table includes important financial assumptions.

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

The Break-even Analysis indicates what will be needed in monthly revenue to reach the break even point.

Break-even Analysis
Monthly Revenue Break-even $15,388
Assumptions:
Average Percent Variable Cost 35%
Estimated Monthly Fixed Cost $10,002

7.3 Business Ratios

The following chart provides business ratios for Fargo Medical Laboratories as well as for the blood-related health industry, SIC Code 8099.01. Fargo Medical Laboratories' ratios are consistent with the industry, with the exception of liabilities because it is a start-up organization that is relying on financing for its start-up costs.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 157.46% 10.45% 7.73%
Percent of Total Assets
Accounts Receivable 28.45% 57.95% 60.94% 28.59%
Other Current Assets 0.00% 0.00% 0.00% 42.01%
Total Current Assets 35.47% 61.72% 75.71% 72.68%
Long-term Assets 64.53% 38.28% 24.29% 27.32%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 11.14% 10.18% 10.66% 36.54%
Long-term Liabilities 174.60% 127.62% 111.54% 22.81%
Total Liabilities 185.74% 137.80% 122.20% 59.35%
Net Worth -85.74% -37.80% -22.20% 40.65%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 65.00% 65.00% 65.00% 100.00%
Selling, General & Administrative Expenses 138.75% 61.53% 58.82% 81.83%
Advertising Expenses 0.00% 0.00% 0.00% 1.10%
Profit Before Interest and Taxes -57.31% 10.73% 13.50% 0.61%
Main Ratios
Current 3.18 6.06 7.10 1.64
Quick 3.18 6.06 7.10 1.32
Total Debt to Total Assets 185.74% 137.80% 122.20% 0.81%
Pre-tax Return on Net Worth 93.56% -27.56% -88.79% 66.74%
Pre-tax Return on Assets -80.22% 10.42% 19.71% 2.43%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -73.97% 3.30% 5.94% n.a
Return on Equity 0.00% 0.00% 0.00% n.a
Activity Ratios
Accounts Receivable Turnover 2.86 2.86 2.86 n.a
Collection Days 54 89 122 n.a
Accounts Payable Turnover 7.99 12.17 12.17 n.a
Payment Days 27 28 29 n.a
Total Asset Turnover 1.08 2.21 2.32 n.a
Debt Ratios
Debt to Net Worth 0.00 0.00 0.00 n.a
Current Liab. to Liab. 0.06 0.07 0.09 n.a
Liquidity Ratios
Net Working Capital $22,012 $58,961 $78,141 n.a
Interest Coverage -3.44 1.78 2.69 n.a
Additional Ratios
Assets to Sales 0.92 0.45 0.43 n.a
Current Debt/Total Assets 11% 10% 11% n.a
Acid Test 0.63 0.37 1.38 n.a
Sales/Net Worth 0.00 0.00 0.00 n.a
Dividend Payout 0.00 0.00 0.00 n.a

7.4 Projected Profit and Loss

The following table will show annual projected profit and loss. A net loss will occur the first year, with well developed profit in year two and year three.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $98,134 $252,654 $279,054
Direct Cost of Sales $34,347 $88,429 $97,669
Other Costs of Sales $0 $0 $0
Total Cost of Sales $34,347 $88,429 $97,669
Gross Margin $63,787 $164,225 $181,385
Gross Margin % 65.00% 65.00% 65.00%
Expenses
Payroll $75,500 $88,000 $92,000
Sales and Marketing and Other Expenses $2,400 $3,000 $3,500
Depreciation $14,604 $14,604 $14,604
Rent $12,000 $13,500 $14,500
Utilities $1,800 $1,800 $1,800
Insurance $2,400 $3,000 $3,500
Payroll Taxes $11,325 $13,200 $13,800
Other $0 $0 $0
Total Operating Expenses $120,029 $137,104 $143,704
Profit Before Interest and Taxes ($56,242) $27,121 $37,681
EBITDA ($41,638) $41,725 $52,285
Interest Expense $16,350 $15,200 $14,000
Taxes Incurred $0 $3,576 $7,104
Net Profit ($72,592) $8,345 $16,577
Net Profit/Sales -73.97% 3.30% 5.94%

7.5 Projected Cash Flow

The following chart and table describe the projected cash flow. Because we will have a large starting balance because of our initial bank loan, our cash flow should be strong enough to cover our expenses as the business becomes established. The only concern will be to monitor the accounts receivable balances, since the majority of our revenue will be in receivables.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $24,533 $63,164 $69,764
Cash from Receivables $47,853 $148,948 $202,364
Subtotal Cash from Operations $72,386 $212,112 $272,127
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 $26,000 $0
Subtotal Cash Received $72,386 $238,112 $272,127
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $75,500 $88,000 $92,000
Bill Payments $70,537 $140,143 $154,709
Subtotal Spent on Operations $146,037 $228,143 $246,709
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 $12,000 $12,000 $12,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $158,037 $240,143 $258,709
Net Cash Flow ($85,651) ($2,031) $13,419
Cash Balance $6,349 $4,318 $17,737

7.6 Projected Balance Sheet

The following table will indicate the projected balance sheet. We will achieve positive Net Worth in the second and third years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $6,349 $4,318 $17,737
Accounts Receivable $25,748 $66,290 $73,216
Other Current Assets $0 $0 $0
Total Current Assets $32,097 $70,608 $90,953
Long-term Assets
Long-term Assets $73,000 $73,000 $73,000
Accumulated Depreciation $14,604 $29,208 $43,812
Total Long-term Assets $58,396 $43,792 $29,188
Total Assets $90,493 $114,400 $120,141
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $10,085 $11,647 $12,811
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $10,085 $11,647 $12,811
Long-term Liabilities $158,000 $146,000 $134,000
Total Liabilities $168,085 $157,647 $146,811
Paid-in Capital $0 $26,000 $26,000
Retained Earnings ($5,000) ($77,592) ($69,247)
Earnings ($72,592) $8,345 $16,577
Total Capital ($77,592) ($43,247) ($26,671)
Total Liabilities and Capital $90,493 $114,400 $120,141
Net Worth ($77,592) ($43,247) ($26,671)