Plan Outline
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SIC 8111 Legal Services - Legal services
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Law Firm Business Plan
Wy'East Law Firm
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Financial Plan
The following sections will outline important financial information.
7.1 Important Assumptions
The following table details important 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 | 25.42% | 25.00% | 25.42% |
| Other | 0 | 0 | 0 |
7.2 Projected Profit and Loss
The following table and charts present the projected profit and loss.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $190,935 | $212,103 | $220,294 |
| Direct Cost of Sales | $0 | $0 | $0 |
| Other | $0 | $0 | $0 |
| Total Cost of Sales | $0 | $0 | $0 |
| Gross Margin | $190,935 | $212,103 | $220,294 |
| Gross Margin % | 100.00% | 100.00% | 100.00% |
| Expenses | |||
| Payroll | $112,150 | $123,500 | $127,500 |
| Sales and Marketing and Other Expenses | $2,160 | $2,160 | $2,160 |
| Depreciation | $1,668 | $1,666 | $1,666 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $1,500 | $1,500 | $1,500 |
| Rent | $2,400 | $2,400 | $2,400 |
| Payroll Taxes | $16,823 | $18,525 | $19,125 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $136,701 | $149,751 | $154,351 |
| Profit Before Interest and Taxes | $54,235 | $62,352 | $65,943 |
| EBITDA | $55,903 | $64,018 | $67,609 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $13,210 | $15,588 | $16,761 |
| Net Profit | $41,024 | $46,764 | $49,182 |
| Net Profit/Sales | 21.49% | 22.05% | 22.33% |
7.3 Break-even Analysis
The Break-even Analysis indicates what WLF will need in hours and revenue a month to reach the break-even point.
| Break-even Analysis | |
| Monthly Revenue Break-even | $11,392 |
| Assumptions: | |
| Average Percent Variable Cost | 0% |
| Estimated Monthly Fixed Cost | $11,392 |
7.4 Projected Cash Flow
The following chart and table show anticipated cash flow.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $47,734 | $53,026 | $55,074 |
| Cash from Receivables | $112,707 | $155,697 | $163,912 |
| Subtotal Cash from Operations | $160,441 | $208,722 | $218,986 |
| 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 | $160,441 | $208,722 | $218,986 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $112,150 | $123,500 | $127,500 |
| Bill Payments | $31,394 | $41,570 | $41,800 |
| Subtotal Spent on Operations | $143,544 | $165,070 | $169,300 |
| 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 | $143,544 | $165,070 | $169,300 |
| Net Cash Flow | $16,898 | $43,652 | $49,686 |
| Cash Balance | $35,648 | $79,300 | $128,986 |
7.5 Projected Balance Sheet
The following table displays the projected balance sheet.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $35,648 | $79,300 | $128,986 |
| Accounts Receivable | $30,494 | $33,874 | $35,183 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $66,141 | $113,174 | $164,168 |
| Long-term Assets | |||
| Long-term Assets | $5,000 | $5,000 | $5,000 |
| Accumulated Depreciation | $1,668 | $3,334 | $5,000 |
| Total Long-term Assets | $3,332 | $1,666 | $0 |
| Total Assets | $69,473 | $114,840 | $164,168 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $4,699 | $3,302 | $3,448 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $4,699 | $3,302 | $3,448 |
| Long-term Liabilities | $0 | $0 | $0 |
| Total Liabilities | $4,699 | $3,302 | $3,448 |
| Paid-in Capital | $25,000 | $25,000 | $25,000 |
| Retained Earnings | ($1,250) | $39,774 | $86,538 |
| Earnings | $41,024 | $46,764 | $49,182 |
| Total Capital | $64,774 | $111,538 | $160,721 |
| Total Liabilities and Capital | $69,473 | $114,840 | $164,168 |
| Net Worth | $64,774 | $111,538 | $160,721 |
7.6 Business Ratios
Industry profile ratios based on the NAICS code 541110, Offices of Lawyers, are shown in the table below.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 11.09% | 3.86% | 8.50% |
| Percent of Total Assets | ||||
| Accounts Receivable | 43.89% | 29.50% | 21.43% | 8.60% |
| Other Current Assets | 0.00% | 0.00% | 0.00% | 66.90% |
| Total Current Assets | 95.20% | 98.55% | 100.00% | 75.50% |
| Long-term Assets | 4.80% | 1.45% | 0.00% | 24.50% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 6.76% | 2.88% | 2.10% | 50.20% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 12.90% |
| Total Liabilities | 6.76% | 2.88% | 2.10% | 63.10% |
| Net Worth | 93.24% | 97.12% | 97.90% | 36.90% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 100.00% | 100.00% | 100.00% | 0.00% |
| Selling, General & Administrative Expenses | 78.70% | 77.95% | 77.55% | 58.20% |
| Advertising Expenses | 0.13% | 0.11% | 0.11% | 0.50% |
| Profit Before Interest and Taxes | 28.40% | 29.40% | 29.93% | 3.40% |
| Main Ratios | ||||
| Current | 14.08 | 34.28 | 47.62 | 1.54 |
| Quick | 14.08 | 34.28 | 47.62 | 1.09 |
| Total Debt to Total Assets | 6.76% | 2.88% | 2.10% | 63.10% |
| Pre-tax Return on Net Worth | 83.73% | 55.90% | 41.03% | 12.30% |
| Pre-tax Return on Assets | 78.07% | 54.29% | 40.17% | 33.40% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 21.49% | 22.05% | 22.33% | n.a |
| Return on Equity | 63.33% | 41.93% | 30.60% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 4.70 | 4.70 | 4.70 | n.a |
| Collection Days | 57 | 74 | 76 | n.a |
| Accounts Payable Turnover | 7.68 | 12.17 | 12.17 | n.a |
| Payment Days | 34 | 36 | 29 | n.a |
| Total Asset Turnover | 2.75 | 1.85 | 1.34 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.07 | 0.03 | 0.02 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $61,442 | $109,872 | $160,721 | n.a |
| Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.36 | 0.54 | 0.75 | n.a |
| Current Debt/Total Assets | 7% | 3% | 2% | n.a |
| Acid Test | 7.59 | 24.02 | 37.41 | n.a |
| Sales/Net Worth | 2.95 | 1.90 | 1.37 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
