Mining Software Business Plan

Rekayasa Tambang Indonesia

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Financial Plan

The following table shows the projected revenue of RTI over the period of 2001-2005. The most important elements in the financial plan can be listed as follows:

  1. The company must keep a high gross margin.

  2. In order to take advantage of the market demand growth to increase the yearly sales as well as the profit margin, the company must increase the frequency of business visits to the prospective clients' sites by 10%. This will result in steady increases in net profits from sales in 2001 through 2005.

7.1 Important Assumptions

The accompanying table lists the main assumptions of RTI for developing its financial projections. The most sensitive assumption is collection days. RTI would like to improve collection days to take pressure off of its working capital.

General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 8.50% 8.50% 8.50% 8.50% 8.50%
Long-term Interest Rate 9.00% 9.00% 9.00% 9.00% 9.00%
Tax Rate 25.42% 25.00% 25.42% 25.00% 25.42%
Other 0 0 0 0 0

7.2 Business Ratios

The following table contains important business ratios for the prepackaged software industry, as determined by the Standard Industry Classification (SIC) Index, 7372.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 16.89% 16.89% 16.89% 16.89% 9.70%
Percent of Total Assets
Accounts Receivable 20.92% 13.57% 10.29% 8.41% 7.20% 21.50%
Other Current Assets 6.40% 3.55% 2.30% 1.61% 1.18% 45.70%
Total Current Assets 100.00% 100.00% 100.00% 100.00% 100.00% 70.20%
Long-term Assets 0.00% 0.00% 0.00% 0.00% 0.00% 29.80%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 11.86% 7.86% 5.94% 4.80% 4.10% 42.40%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 19.20%
Total Liabilities 11.86% 7.86% 5.94% 4.80% 4.10% 61.60%
Net Worth 88.14% 92.14% 94.06% 95.20% 95.90% 38.40%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 66.33% 66.33% 66.22% 66.22% 66.22% 100.00%
Selling, General & Administrative Expenses 41.70% 40.22% 38.80% 37.49% 36.25% 79.40%
Advertising Expenses 0.48% 0.45% 0.42% 0.40% 0.37% 1.30%
Profit Before Interest and Taxes 32.85% 34.82% 36.56% 38.31% 39.95% 2.20%
Main Ratios
Current 8.43 12.72 16.83 20.81 24.40 1.51
Quick 8.43 12.72 16.83 20.81 24.40 1.16
Total Debt to Total Assets 11.86% 7.86% 5.94% 4.80% 4.10% 61.60%
Pre-tax Return on Net Worth 95.13% 62.57% 48.83% 41.29% 36.59% 3.50%
Pre-tax Return on Assets 83.85% 57.65% 45.93% 39.30% 35.09% 9.20%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin 24.48% 26.11% 27.27% 28.73% 29.80% n.a
Return on Equity 70.90% 46.92% 36.42% 30.96% 27.29% n.a
Activity Ratios
Accounts Receivable Turnover 6.10 6.10 6.10 6.10 6.10 n.a
Collection Days 57 55 55 55 55 n.a
Accounts Payable Turnover 12.57 12.17 12.17 12.17 12.17 n.a
Payment Days 27 28 28 28 28 n.a
Total Asset Turnover 2.55 1.66 1.26 1.03 0.88 n.a
Debt Ratios
Debt to Net Worth 0.13 0.09 0.06 0.05 0.04 n.a
Current Liab. to Liab. 1.00 1.00 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $435,030 $819,646 $1,289,086 $1,867,265 $2,568,205 n.a
Interest Coverage 0.00 0.00 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.39 0.60 0.80 0.97 1.14 n.a
Current Debt/Total Assets 12% 8% 6% 5% 4% n.a
Acid Test 6.67 11.00 15.10 19.06 22.65 n.a
Sales/Net Worth 2.90 1.80 1.34 1.08 0.92 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a

7.3 Break-even Analysis

The following table and chart summarize the Break-even Analysis, including the assumed monthly running costs and sales break-even points.

Break-even Analysis
Monthly Revenue Break-even $53,010
Assumptions:
Average Percent Variable Cost 34%
Estimated Monthly Fixed Cost $35,163

7.4 Projected Profit and Loss

The most important and strategic component in the Projected Profit and Loss statement is the net profit, which is planned and targeted to increase. Month-by-month assumptions for profit and loss are included in the appendix.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $1,260,000 $1,472,814 $1,721,572 $2,012,346 $2,352,231
Direct Cost of Sales $424,192 $495,837 $581,584 $679,812 $794,632
Other $0 $0 $0 $0 $0
Total Cost of Sales $424,192 $495,837 $581,584 $679,812 $794,632
Gross Margin $835,808 $976,977 $1,139,988 $1,332,534 $1,557,599
Gross Margin % 66.33% 66.33% 66.22% 66.22% 66.22%
Expenses
Payroll $216,000 $237,600 $261,360 $287,496 $316,246
Sales and Marketing and Other Expenses $122,200 $134,420 $147,862 $162,648 $178,913
Depreciation $0 $0 $0 $0 $0
Leased Equipment $0 $0 $0 $0 $0
Utilities $7,200 $7,920 $8,712 $9,583 $10,541
Insurance $2,160 $2,376 $2,614 $2,875 $3,163
Rent $42,000 $46,200 $50,820 $55,902 $61,492
Payroll Taxes $32,400 $35,640 $39,204 $43,124 $47,437
Other $0 $0 $0 $0 $0
Total Operating Expenses $421,960 $464,156 $510,572 $561,629 $617,791
Profit Before Interest and Taxes $413,848 $512,821 $629,417 $770,905 $939,807
EBITDA $413,848 $512,821 $629,417 $770,905 $939,807
Interest Expense $0 $0 $0 $0 $0
Taxes Incurred $105,406 $128,205 $159,977 $192,726 $238,868
Net Profit $308,443 $384,616 $469,440 $578,179 $700,940
Net Profit/Sales 24.48% 26.11% 27.27% 28.73% 29.80%

7.5 Projected Cash Flow

Cash flow projections are critical to RTI's success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month and the other representing the monthly balance. The annual cash flow figures are included here in the following table. Detailed monthly numbers are included in the appendix.

Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $630,000 $736,407 $860,786 $1,006,173 $1,176,116
Cash from Receivables $526,750 $718,968 $840,402 $982,346 $1,148,264
Subtotal Cash from Operations $1,156,750 $1,455,375 $1,701,188 $1,988,519 $2,324,379
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0
Subtotal Cash Received $1,156,750 $1,455,375 $1,701,188 $1,988,519 $2,324,379
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $216,000 $237,600 $261,360 $287,496 $316,246
Bill Payments $682,028 $839,215 $979,251 $1,133,858 $1,319,563
Subtotal Spent on Operations $898,028 $1,076,815 $1,240,611 $1,421,354 $1,635,809
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0
Subtotal Cash Spent $898,028 $1,076,815 $1,240,611 $1,421,354 $1,635,809
Net Cash Flow $258,722 $378,560 $460,577 $567,165 $688,571
Cash Balance $358,722 $737,282 $1,197,859 $1,765,024 $2,453,595

7.6 Projected Balance Sheet

The following Balance Sheet shows healthy growth of Net Worth and a strong financial position. The monthly estimates are included in the appendix.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $358,722 $737,282 $1,197,859 $1,765,024 $2,453,595
Accounts Receivable $103,250 $120,689 $141,073 $164,901 $192,752
Other Current Assets $31,588 $31,588 $31,588 $31,588 $31,588
Total Current Assets $493,559 $889,558 $1,370,519 $1,961,512 $2,677,934
Long-term Assets
Long-term Assets $0 $0 $0 $0 $0
Accumulated Depreciation $0 $0 $0 $0 $0
Total Long-term Assets $0 $0 $0 $0 $0
Total Assets $493,559 $889,558 $1,370,519 $1,961,512 $2,677,934
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $58,529 $69,912 $81,433 $94,247 $109,730
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $58,529 $69,912 $81,433 $94,247 $109,730
Long-term Liabilities $0 $0 $0 $0 $0
Total Liabilities $58,529 $69,912 $81,433 $94,247 $109,730
Paid-in Capital $195,675 $195,675 $195,675 $195,675 $195,675
Retained Earnings ($69,088) $239,355 $623,971 $1,093,411 $1,671,590
Earnings $308,443 $384,616 $469,440 $578,179 $700,940
Total Capital $435,030 $819,646 $1,289,086 $1,867,265 $2,568,205
Total Liabilities and Capital $493,559 $889,558 $1,370,519 $1,961,512 $2,677,934
Net Worth $435,030 $819,646 $1,289,086 $1,867,265 $2,568,205
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General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 8.50% 8.50% 8.50% 8.50% 8.50%
Long-term Interest Rate 9.00% 9.00% 9.00% 9.00% 9.00%
Tax Rate 25.42% 25.00% 25.42% 25.00% 25.42%
Other 0 0 0 0 0
Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 16.89% 16.89% 16.89% 16.89% 9.70%
Percent of Total Assets
Accounts Receivable 20.92% 13.57% 10.29% 8.41% 7.20% 21.50%
Other Current Assets 6.40% 3.55% 2.30% 1.61% 1.18% 45.70%
Total Current Assets 100.00% 100.00% 100.00% 100.00% 100.00% 70.20%
Long-term Assets 0.00% 0.00% 0.00% 0.00% 0.00% 29.80%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 11.86% 7.86% 5.94% 4.80% 4.10% 42.40%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 19.20%
Total Liabilities 11.86% 7.86% 5.94% 4.80% 4.10% 61.60%
Net Worth 88.14% 92.14% 94.06% 95.20% 95.90% 38.40%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 66.33% 66.33% 66.22% 66.22% 66.22% 100.00%
Selling, General & Administrative Expenses 41.70% 40.22% 38.80% 37.49% 36.25% 79.40%
Advertising Expenses 0.48% 0.45% 0.42% 0.40% 0.37% 1.30%
Profit Before Interest and Taxes 32.85% 34.82% 36.56% 38.31% 39.95% 2.20%
Main Ratios
Current 8.43 12.72 16.83 20.81 24.40 1.51
Quick 8.43 12.72 16.83 20.81 24.40 1.16
Total Debt to Total Assets 11.86% 7.86% 5.94% 4.80% 4.10% 61.60%
Pre-tax Return on Net Worth 95.13% 62.57% 48.83% 41.29% 36.59% 3.50%
Pre-tax Return on Assets 83.85% 57.65% 45.93% 39.30% 35.09% 9.20%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin 24.48% 26.11% 27.27% 28.73% 29.80% n.a
Return on Equity 70.90% 46.92% 36.42% 30.96% 27.29% n.a
Activity Ratios
Accounts Receivable Turnover 6.10 6.10 6.10 6.10 6.10 n.a
Collection Days 57 55 55 55 55 n.a
Accounts Payable Turnover 12.57 12.17 12.17 12.17 12.17 n.a
Payment Days 27 28 28 28 28 n.a
Total Asset Turnover 2.55 1.66 1.26 1.03 0.88 n.a
Debt Ratios
Debt to Net Worth 0.13 0.09 0.06 0.05 0.04 n.a
Current Liab. to Liab. 1.00 1.00 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $435,030 $819,646 $1,289,086 $1,867,265 $2,568,205 n.a
Interest Coverage 0.00 0.00 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.39 0.60 0.80 0.97 1.14 n.a
Current Debt/Total Assets 12% 8% 6% 5% 4% n.a
Acid Test 6.67 11.00 15.10 19.06 22.65 n.a
Sales/Net Worth 2.90 1.80 1.34 1.08 0.92 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a
Break-even Analysis
Monthly Revenue Break-even $53,010
Assumptions:
Average Percent Variable Cost 34%
Estimated Monthly Fixed Cost $35,163
Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $1,260,000 $1,472,814 $1,721,572 $2,012,346 $2,352,231
Direct Cost of Sales $424,192 $495,837 $581,584 $679,812 $794,632
Other $0 $0 $0 $0 $0
Total Cost of Sales $424,192 $495,837 $581,584 $679,812 $794,632
Gross Margin $835,808 $976,977 $1,139,988 $1,332,534 $1,557,599
Gross Margin % 66.33% 66.33% 66.22% 66.22% 66.22%
Expenses
Payroll $216,000 $237,600 $261,360 $287,496 $316,246
Sales and Marketing and Other Expenses $122,200 $134,420 $147,862 $162,648 $178,913
Depreciation $0 $0 $0 $0 $0
Leased Equipment $0 $0 $0 $0 $0
Utilities $7,200 $7,920 $8,712 $9,583 $10,541
Insurance $2,160 $2,376 $2,614 $2,875 $3,163
Rent $42,000 $46,200 $50,820 $55,902 $61,492
Payroll Taxes $32,400 $35,640 $39,204 $43,124 $47,437
Other $0 $0 $0 $0 $0
Total Operating Expenses $421,960 $464,156 $510,572 $561,629 $617,791
Profit Before Interest and Taxes $413,848 $512,821 $629,417 $770,905 $939,807
EBITDA $413,848 $512,821 $629,417 $770,905 $939,807
Interest Expense $0 $0 $0 $0 $0
Taxes Incurred $105,406 $128,205 $159,977 $192,726 $238,868
Net Profit $308,443 $384,616 $469,440 $578,179 $700,940
Net Profit/Sales 24.48% 26.11% 27.27% 28.73% 29.80%
Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $630,000 $736,407 $860,786 $1,006,173 $1,176,116
Cash from Receivables $526,750 $718,968 $840,402 $982,346 $1,148,264
Subtotal Cash from Operations $1,156,750 $1,455,375 $1,701,188 $1,988,519 $2,324,379
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0
Subtotal Cash Received $1,156,750 $1,455,375 $1,701,188 $1,988,519 $2,324,379
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $216,000 $237,600 $261,360 $287,496 $316,246
Bill Payments $682,028 $839,215 $979,251 $1,133,858 $1,319,563
Subtotal Spent on Operations $898,028 $1,076,815 $1,240,611 $1,421,354 $1,635,809
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0
Subtotal Cash Spent $898,028 $1,076,815 $1,240,611 $1,421,354 $1,635,809
Net Cash Flow $258,722 $378,560 $460,577 $567,165 $688,571
Cash Balance $358,722 $737,282 $1,197,859 $1,765,024 $2,453,595
Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $358,722 $737,282 $1,197,859 $1,765,024 $2,453,595
Accounts Receivable $103,250 $120,689 $141,073 $164,901 $192,752
Other Current Assets $31,588 $31,588 $31,588 $31,588 $31,588
Total Current Assets $493,559 $889,558 $1,370,519 $1,961,512 $2,677,934
Long-term Assets
Long-term Assets $0 $0 $0 $0 $0
Accumulated Depreciation $0 $0 $0 $0 $0
Total Long-term Assets $0 $0 $0 $0 $0
Total Assets $493,559 $889,558 $1,370,519 $1,961,512 $2,677,934
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $58,529 $69,912 $81,433 $94,247 $109,730
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $58,529 $69,912 $81,433 $94,247 $109,730
Long-term Liabilities $0 $0 $0 $0 $0
Total Liabilities $58,529 $69,912 $81,433 $94,247 $109,730
Paid-in Capital $195,675 $195,675 $195,675 $195,675 $195,675
Retained Earnings ($69,088) $239,355 $623,971 $1,093,411 $1,671,590
Earnings $308,443 $384,616 $469,440 $578,179 $700,940
Total Capital $435,030 $819,646 $1,289,086 $1,867,265 $2,568,205
Total Liabilities and Capital $493,559 $889,558 $1,370,519 $1,961,512 $2,677,934
Net Worth $435,030 $819,646 $1,289,086 $1,867,265 $2,568,205