Mortgage Broker Business Plan

Claremont Funding

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Financial Plan

  • We want to finance growth mainly through cash flow.
  • The most important factor for Claremont Funding is the closing sales days. These dates will be determined ultimately by the Seller and the Buyer and a move out/move in schedule will be complied with.

7.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions. The monthly assumptions are included in the appendix. From the beginning, we recognize that collection days are critical, but not a factor we can influence easily. At least we are planning on the problem, and dealing with it. Interest rates, tax rates, and personnel burden are based on conservative assumptions. Some of the more important underlying assumptions are:

  • We assume a strong economy, without major recession.
  • We assume, of course, that there are no unforeseen changes in the economy that would change our estimations.
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 following table and chart will summarize our break-even analysis.

Break-even Analysis
Monthly Revenue Break-even $19,975
Assumptions:
Average Percent Variable Cost 0%
Estimated Monthly Fixed Cost $19,975

7.3 Projected Profit and Loss

Our projected profit and loss is shown on the following table.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $264,847 $365,000 $445,000
Direct Cost of Sales $0 $0 $0
Other Production Expenses $0 $0 $0
Total Cost of Sales $0 $0 $0
Gross Margin $264,847 $365,000 $445,000
Gross Margin % 100.00% 100.00% 100.00%
Expenses
Payroll $166,000 $220,000 $260,000
Sales and Marketing and Other Expenses $7,800 $13,000 $19,000
Depreciation $0 $0 $0
Leased Equipment $200 $0 $0
Utilities $2,400 $2,400 $2,400
Insurance $2,400 $2,400 $2,400
Rent $36,000 $36,000 $36,000
Payroll Taxes $24,900 $33,000 $39,000
Other $0 $0 $0
Total Operating Expenses $239,700 $306,800 $358,800
Profit Before Interest and Taxes $25,147 $58,200 $86,200
EBITDA $25,147 $58,200 $86,200
Interest Expense $2,950 $2,550 $2,250
Taxes Incurred $6,659 $16,695 $25,185
Net Profit $15,538 $38,955 $58,765
Net Profit/Sales 5.87% 10.67% 13.21%

7.4 Projected Cash Flow

Cash flow projections are critical to our success. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendix.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $66,212 $91,250 $111,250
Cash from Receivables $187,004 $269,352 $330,237
Subtotal Cash from Operations $253,216 $360,602 $441,487
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $4,500 $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 $12,000 $0 $0
Subtotal Cash Received $269,716 $360,602 $441,487
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $166,000 $220,000 $260,000
Bill Payments $90,879 $99,759 $124,576
Subtotal Spent on Operations $256,879 $319,759 $384,576
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $4,500 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $3,000 $3,000 $3,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $264,379 $322,759 $387,576
Net Cash Flow $5,337 $37,842 $53,911
Cash Balance $45,287 $83,129 $137,040

7.5 Projected Balance Sheet

The balance sheet in the following table shows managed but sufficient growth of net worth, and a sufficiently healthy financial position. The monthly estimates are included in the appendix.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $45,287 $83,129 $137,040
Accounts Receivable $11,631 $16,030 $19,543
Other Current Assets $20,000 $20,000 $20,000
Total Current Assets $76,918 $119,159 $176,583
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $76,918 $119,159 $176,583
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $2,430 $8,716 $10,375
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $2,430 $8,716 $10,375
Long-term Liabilities $27,000 $24,000 $21,000
Total Liabilities $29,430 $32,716 $31,375
Paid-in Capital $52,000 $52,000 $52,000
Retained Earnings ($20,050) ($4,512) $34,443
Earnings $15,538 $38,955 $58,765
Total Capital $47,488 $86,443 $145,208
Total Liabilities and Capital $76,918 $119,159 $176,583
Net Worth $47,488 $86,443 $145,208

7.6 Business Ratios

The following table provides important ratios for the industry, as determined by the Standard Industry Classification (SIC) Index, 7389, Business Services.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 37.82% 21.92% 8.50%
Percent of Total Assets
Accounts Receivable 15.12% 13.45% 11.07% 20.90%
Other Current Assets 26.00% 16.78% 11.33% 55.70%
Total Current Assets 100.00% 100.00% 100.00% 81.60%
Long-term Assets 0.00% 0.00% 0.00% 18.40%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 3.16% 7.31% 5.88% 48.20%
Long-term Liabilities 35.10% 20.14% 11.89% 15.50%
Total Liabilities 38.26% 27.46% 17.77% 63.70%
Net Worth 61.74% 72.54% 82.23% 36.30%
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 94.18% 89.41% 86.91% 82.60%
Advertising Expenses 2.27% 2.74% 3.37% 0.60%
Profit Before Interest and Taxes 9.49% 15.95% 19.37% 1.50%
Main Ratios
Current 31.65 13.67 17.02 1.57
Quick 31.65 13.67 17.02 1.13
Total Debt to Total Assets 38.26% 27.46% 17.77% 63.70%
Pre-tax Return on Net Worth 46.74% 64.38% 57.81% 1.90%
Pre-tax Return on Assets 28.86% 46.70% 47.54% 5.20%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 5.87% 10.67% 13.21% n.a
Return on Equity 32.72% 45.06% 40.47% n.a
Activity Ratios
Accounts Receivable Turnover 17.08 17.08 17.08 n.a
Collection Days 59 18 19 n.a
Accounts Payable Turnover 34.28 12.17 12.17 n.a
Payment Days 31 19 28 n.a
Total Asset Turnover 3.44 3.06 2.52 n.a
Debt Ratios
Debt to Net Worth 0.62 0.38 0.22 n.a
Current Liab. to Liab. 0.08 0.27 0.33 n.a
Liquidity Ratios
Net Working Capital $74,488 $110,443 $166,208 n.a
Interest Coverage 8.52 22.82 38.31 n.a
Additional Ratios
Assets to Sales 0.29 0.33 0.40 n.a
Current Debt/Total Assets 3% 7% 6% n.a
Acid Test 26.86 11.83 15.14 n.a
Sales/Net Worth 5.58 4.22 3.06 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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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
Break-even Analysis
Monthly Revenue Break-even $19,975
Assumptions:
Average Percent Variable Cost 0%
Estimated Monthly Fixed Cost $19,975
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $264,847 $365,000 $445,000
Direct Cost of Sales $0 $0 $0
Other Production Expenses $0 $0 $0
Total Cost of Sales $0 $0 $0
Gross Margin $264,847 $365,000 $445,000
Gross Margin % 100.00% 100.00% 100.00%
Expenses
Payroll $166,000 $220,000 $260,000
Sales and Marketing and Other Expenses $7,800 $13,000 $19,000
Depreciation $0 $0 $0
Leased Equipment $200 $0 $0
Utilities $2,400 $2,400 $2,400
Insurance $2,400 $2,400 $2,400
Rent $36,000 $36,000 $36,000
Payroll Taxes $24,900 $33,000 $39,000
Other $0 $0 $0
Total Operating Expenses $239,700 $306,800 $358,800
Profit Before Interest and Taxes $25,147 $58,200 $86,200
EBITDA $25,147 $58,200 $86,200
Interest Expense $2,950 $2,550 $2,250
Taxes Incurred $6,659 $16,695 $25,185
Net Profit $15,538 $38,955 $58,765
Net Profit/Sales 5.87% 10.67% 13.21%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $66,212 $91,250 $111,250
Cash from Receivables $187,004 $269,352 $330,237
Subtotal Cash from Operations $253,216 $360,602 $441,487
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $4,500 $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 $12,000 $0 $0
Subtotal Cash Received $269,716 $360,602 $441,487
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $166,000 $220,000 $260,000
Bill Payments $90,879 $99,759 $124,576
Subtotal Spent on Operations $256,879 $319,759 $384,576
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $4,500 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $3,000 $3,000 $3,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $264,379 $322,759 $387,576
Net Cash Flow $5,337 $37,842 $53,911
Cash Balance $45,287 $83,129 $137,040
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $45,287 $83,129 $137,040
Accounts Receivable $11,631 $16,030 $19,543
Other Current Assets $20,000 $20,000 $20,000
Total Current Assets $76,918 $119,159 $176,583
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $76,918 $119,159 $176,583
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $2,430 $8,716 $10,375
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $2,430 $8,716 $10,375
Long-term Liabilities $27,000 $24,000 $21,000
Total Liabilities $29,430 $32,716 $31,375
Paid-in Capital $52,000 $52,000 $52,000
Retained Earnings ($20,050) ($4,512) $34,443
Earnings $15,538 $38,955 $58,765
Total Capital $47,488 $86,443 $145,208
Total Liabilities and Capital $76,918 $119,159 $176,583
Net Worth $47,488 $86,443 $145,208
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 37.82% 21.92% 8.50%
Percent of Total Assets
Accounts Receivable 15.12% 13.45% 11.07% 20.90%
Other Current Assets 26.00% 16.78% 11.33% 55.70%
Total Current Assets 100.00% 100.00% 100.00% 81.60%
Long-term Assets 0.00% 0.00% 0.00% 18.40%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 3.16% 7.31% 5.88% 48.20%
Long-term Liabilities 35.10% 20.14% 11.89% 15.50%
Total Liabilities 38.26% 27.46% 17.77% 63.70%
Net Worth 61.74% 72.54% 82.23% 36.30%
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 94.18% 89.41% 86.91% 82.60%
Advertising Expenses 2.27% 2.74% 3.37% 0.60%
Profit Before Interest and Taxes 9.49% 15.95% 19.37% 1.50%
Main Ratios
Current 31.65 13.67 17.02 1.57
Quick 31.65 13.67 17.02 1.13
Total Debt to Total Assets 38.26% 27.46% 17.77% 63.70%
Pre-tax Return on Net Worth 46.74% 64.38% 57.81% 1.90%
Pre-tax Return on Assets 28.86% 46.70% 47.54% 5.20%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 5.87% 10.67% 13.21% n.a
Return on Equity 32.72% 45.06% 40.47% n.a
Activity Ratios
Accounts Receivable Turnover 17.08 17.08 17.08 n.a
Collection Days 59 18 19 n.a
Accounts Payable Turnover 34.28 12.17 12.17 n.a
Payment Days 31 19 28 n.a
Total Asset Turnover 3.44 3.06 2.52 n.a
Debt Ratios
Debt to Net Worth 0.62 0.38 0.22 n.a
Current Liab. to Liab. 0.08 0.27 0.33 n.a
Liquidity Ratios
Net Working Capital $74,488 $110,443 $166,208 n.a
Interest Coverage 8.52 22.82 38.31 n.a
Additional Ratios
Assets to Sales 0.29 0.33 0.40 n.a
Current Debt/Total Assets 3% 7% 6% n.a
Acid Test 26.86 11.83 15.14 n.a
Sales/Net Worth 5.58 4.22 3.06 n.a
Dividend Payout 0.00 0.00 0.00 n.a