We are looking to fund a total package of $836,000 to support our growth plan, management style and vision. This total package has been broken into three phases, which is important to note, since at any time the management may decide that further funding is not necessary.
Our three-year sales projection shown below, profit and loss statement, cash flow analysis and balance sheet herein supports this financial plan.
7.1 Important Assumptions
The table below summarizes key 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 Key Financial Indicators
The following benchmark chart indicates our key financial indicators for the first three years. We project major growth in sales and operating expenses during times of expansion.
7.3 Break-even Analysis
The table below summarizes the break-even analysis. The break-even analysis has been calculated on the "burn rate" of the company. The company feels that this gives the investor a more accurate picture of the actual risk of the venture.
Break-even Analysis
Monthly Revenue Break-even
$55,836
Assumptions:
Average Percent Variable Cost
2%
Estimated Monthly Fixed Cost
$54,976
7.4 Projected Profit and Loss
The table and charts below summarize the profit and loss for the first three fiscal years.
Pro Forma Profit and Loss
Year 1
Year 2
Year 3
Sales
$4,532,000
$3,814,800
$6,982,192
Direct Cost of Sales
$69,765
$112,000
$169,000
Other Production Expenses
$0
$0
$0
Total Cost of Sales
$69,765
$112,000
$169,000
Gross Margin
$4,462,235
$3,702,800
$6,813,192
Gross Margin %
98.46%
97.06%
97.58%
Expenses
Payroll
$352,800
$399,100
$508,600
Sales and Marketing and Other Expenses
$204,000
$214,000
$224,000
Depreciation
$0
$0
$0
Leased Equipment
$30,000
$30,000
$30,000
Utilities
$0
$0
$0
Insurance
$0
$0
$0
Rent
$19,992
$20,000
$20,000
Payroll Taxes
$52,920
$59,865
$76,290
Other
$0
$0
$0
Total Operating Expenses
$659,712
$722,965
$858,890
Profit Before Interest and Taxes
$3,802,523
$2,979,835
$5,954,302
EBITDA
$3,802,523
$2,979,835
$5,954,302
Interest Expense
$0
$0
$0
Taxes Incurred
$1,140,757
$893,951
$1,786,291
Net Profit
$2,661,766
$2,085,885
$4,168,011
Net Profit/Sales
58.73%
54.68%
59.69%
7.5 Projected Cash Flow
Cash flow projections are critical to our success. The monthly cash flow is shown in the illustration, with one bar representing cash flow per month and the other representing the monthly balance. The annual cash flow figures are included here on the following table.
Pro Forma Cash Flow
Year 1
Year 2
Year 3
Cash Received
Cash from Operations
Cash Sales
$4,532,000
$3,814,800
$6,982,192
Subtotal Cash from Operations
$4,532,000
$3,814,800
$6,982,192
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
$4,532,000
$3,814,800
$6,982,192
Expenditures
Year 1
Year 2
Year 3
Expenditures from Operations
Cash Spending
$352,800
$399,100
$508,600
Bill Payments
$1,395,906
$1,342,043
$2,225,381
Subtotal Spent on Operations
$1,748,706
$1,741,143
$2,733,981
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
$1,748,706
$1,741,143
$2,733,981
Net Cash Flow
$2,783,294
$2,073,657
$4,248,211
Cash Balance
$3,087,294
$5,160,951
$9,409,162
7.6 Projected Balance Sheet
The balance sheet shows healthy growth of net worth and strong financial position. The monthly estimates are included in the appendix.
Pro Forma Balance Sheet
Year 1
Year 2
Year 3
Assets
Current Assets
Cash
$3,087,294
$5,160,951
$9,409,162
Other Current Assets
$5,000
$5,000
$5,000
Total Current Assets
$3,092,294
$5,165,951
$9,414,162
Long-term Assets
Long-term Assets
$0
$0
$0
Accumulated Depreciation
$0
$0
$0
Total Long-term Assets
$0
$0
$0
Total Assets
$3,092,294
$5,165,951
$9,414,162
Liabilities and Capital
Year 1
Year 2
Year 3
Current Liabilities
Accounts Payable
$121,528
$109,300
$189,500
Current Borrowing
$0
$0
$0
Other Current Liabilities
$0
$0
$0
Subtotal Current Liabilities
$121,528
$109,300
$189,500
Long-term Liabilities
$0
$0
$0
Total Liabilities
$121,528
$109,300
$189,500
Paid-in Capital
$408,000
$408,000
$408,000
Retained Earnings
($99,000)
$2,562,766
$4,648,651
Earnings
$2,661,766
$2,085,885
$4,168,011
Total Capital
$2,970,766
$5,056,651
$9,224,662
Total Liabilities and Capital
$3,092,294
$5,165,951
$9,414,162
Net Worth
$2,970,766
$5,056,651
$9,224,662
7.7 Business Ratios
The following table shows the projected business ratios. We expect to maintain healthy ratios for profitability, risk, and return. Industry profile ratios based on the Standard Industrial Classification (SIC) code 8742, Management Consulting Services, are shown for comparison.
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