Our financial plan is based on conservative estimates and assumptions. We will need initial investment to make the financials work, but the owner is prepared to contribute that funding.
We can minimize risk factors by:
Obtaining initial capitalization of the company to sustain operations through year one
Maintaining low overhead through the use of shared office space and home-based office through year one
Developing a strong customer base through aggressive marketing
Creating strong community ties and involvement
Eliminating collection costs, by establishing cash/credit/debit card only facilities
7.1 Start-up Funding
The start-up costs are to be financed by the owners' personal funds.
Start-up Funding
Start-up Expenses to Fund
$22,250
Start-up Assets to Fund
$10,500
Total Funding Required
$32,750
Assets
Non-cash Assets from Start-up
$2,500
Cash Requirements from Start-up
$8,000
Additional Cash Raised
$950
Cash Balance on Starting Date
$8,950
Total Assets
$11,450
Liabilities and Capital
Liabilities
Current Borrowing
$0
Long-term Liabilities
$0
Other Current Liabilities (interest-free)
$0
Total Liabilities
$0
Capital
Planned Investment
Owner
$33,700
Investor
$0
Additional Investment Requirement
$0
Total Planned Investment
$33,700
Loss at Start-up (Start-up Expenses)
($22,250)
Total Capital
$11,450
Total Capital and Liabilities
$11,450
Total Funding
$33,700
7.2 Projected Profit and Loss
The following table and chart shows the projected Profit and Loss for Coaching Company. The majority of our operating expenses are the owner's payroll, benefits and taxes. This includes a standard PPO health plan, since the owner is sole provider of services; if he gets sick, sales stop. The second largest category is Marketing and Promotion, necessary for establishing brand recognition and generating new business, as a start-up.
The moving expenses in December and increased rent starting at the same time reflect the planned move into an office space, and out of the owner's home.
Pro Forma Profit and Loss
Year 1
Year 2
Year 3
Sales
$81,467
$120,604
$147,315
Direct Cost of Sales
$10,654
$13,486
$16,339
Other Costs of Sales
$0
$0
$0
Total Cost of Sales
$10,654
$13,486
$16,339
Gross Margin
$70,813
$107,118
$130,976
Gross Margin %
86.92%
88.82%
88.91%
Expenses
Payroll
$27,000
$70,000
$92,000
Marketing/Promotion
$4,800
$5,400
$6,400
Depreciation
$0
$0
$0
Rent
$2,335
$10,000
$10,000
Utilities
$480
$528
$580
Insurance
$972
$1,020
$1,072
Payroll Taxes
$4,050
$10,500
$13,800
Moving Expenses
$1,000
$0
$0
Other
$0
$0
$0
Total Operating Expenses
$40,637
$97,448
$123,852
Profit Before Interest and Taxes
$30,176
$9,670
$7,124
EBITDA
$30,176
$9,670
$7,124
Interest Expense
$0
$0
$0
Taxes Incurred
$9,053
$2,901
$2,137
Net Profit
$21,123
$6,769
$4,987
Net Profit/Sales
25.93%
5.61%
3.39%
7.3 Break-even Analysis
Break-even data is presented in the chart and table below.
Break-even Analysis
Monthly Revenue Break-even
$3,896
Assumptions:
Average Percent Variable Cost
13%
Estimated Monthly Fixed Cost
$3,386
7.4 Projected Cash Flow
The following table and chart show the Cash Flow for Coaching Company. After the first six months, cash flow should be positive for all months. We expect an initial period of decreasing cash balance, until sales reach mid-year targets.
Pro Forma Cash Flow
Year 1
Year 2
Year 3
Cash Received
Cash from Operations
Cash Sales
$81,467
$120,604
$147,315
Subtotal Cash from Operations
$81,467
$120,604
$147,315
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
$81,467
$120,604
$147,315
Expenditures
Year 1
Year 2
Year 3
Expenditures from Operations
Cash Spending
$60,344
$113,835
$142,328
Subtotal Spent on Operations
$60,344
$113,835
$142,328
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
$60,344
$113,835
$142,328
Net Cash Flow
$21,123
$6,769
$4,987
Cash Balance
$30,073
$36,842
$41,829
7.5 Projected Balance Sheet
The following table presents the Balance Sheet for Coaching Company. It shows our projected steady increase in Net Worth over the next three years. As a consulting company, we do not need a great deal in the way of assets, so the largest factor in the Balance Sheet is our cash balance.
Pro Forma Balance Sheet
Year 1
Year 2
Year 3
Assets
Current Assets
Cash
$30,073
$36,842
$41,829
Other Current Assets
$2,500
$2,500
$2,500
Total Current Assets
$32,573
$39,342
$44,329
Long-term Assets
Long-term Assets
$0
$0
$0
Accumulated Depreciation
$0
$0
$0
Total Long-term Assets
$0
$0
$0
Total Assets
$32,573
$39,342
$44,329
Liabilities and Capital
Year 1
Year 2
Year 3
Current Liabilities
Current Borrowing
$0
$0
$0
Other Current Liabilities
$0
$0
$0
Subtotal Current Liabilities
$0
$0
$0
Long-term Liabilities
$0
$0
$0
Total Liabilities
$0
$0
$0
Paid-in Capital
$33,700
$33,700
$33,700
Retained Earnings
($22,250)
($1,127)
$5,642
Earnings
$21,123
$6,769
$4,987
Total Capital
$32,573
$39,342
$44,329
Total Liabilities and Capital
$32,573
$39,342
$44,329
Net Worth
$32,573
$39,342
$44,329
7.6 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 Management Consulting Services, SIC code 8742.
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