Recycled Riding Dreams

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Motorcycle Shop Business Plan

Financial Plan

The following is the financial plan for Recycled Riding Dreams.

7.1 Break-even Analysis

The monthly break-even point is approximately $16,000.

Break-even Analysis
Monthly Revenue Break-even $16,638
Assumptions:
Average Percent Variable Cost 46%
Estimated Monthly Fixed Cost $9,027

7.2 Projected Profit and Loss

The following table and charts shows projected profit and loss for three years.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $235,000 $252,000 $271,000
Direct Cost of Sales $107,500 $117,000 $127,000
Other Production Expenses $0 $0 $0
Total Cost of Sales $107,500 $117,000 $127,000
Gross Margin $127,500 $135,000 $144,000
Gross Margin % 54.26% 53.57% 53.14%
Expenses
Payroll $69,600 $74,000 $79,000
Sales and Marketing and Other Expenses $6,000 $6,000 $6,000
Depreciation $4,284 $4,284 $4,284
Leased Equipment $0 $0 $0
Utilities $2,400 $2,400 $2,400
Insurance $0 $0 $0
Rent $15,600 $15,600 $15,600
Payroll Taxes $10,440 $11,100 $11,850
Other $0 $0 $0
Total Operating Expenses $108,324 $113,384 $119,134
Profit Before Interest and Taxes $19,176 $21,616 $24,866
EBITDA $23,460 $25,900 $29,150
Interest Expense $2,000 $2,000 $2,000
Taxes Incurred $5,153 $5,885 $6,860
Net Profit $12,023 $13,731 $16,006
Net Profit/Sales 5.12% 5.45% 5.91%

7.3 Projected Cash Flow

The table and chart show the projected cash flow for three years.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $94,000 $100,800 $108,400
Cash from Receivables $116,820 $149,451 $160,645
Subtotal Cash from Operations $210,820 $250,251 $269,045
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 $210,820 $250,251 $269,045
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $69,600 $74,000 $79,000
Bill Payments $108,864 $153,470 $171,723
Subtotal Spent on Operations $178,464 $227,470 $250,723
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 $178,464 $227,470 $250,723
Net Cash Flow $32,356 $22,780 $18,322
Cash Balance $36,356 $59,137 $77,459

7.4 Projected Balance Sheet

The table shows the projected balance sheet for three years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $36,356 $59,137 $77,459
Accounts Receivable $24,180 $25,929 $27,884
Inventory $10,550 $11,482 $12,464
Other Current Assets $0 $0 $0
Total Current Assets $71,086 $96,548 $117,806
Long-term Assets
Long-term Assets $15,000 $15,000 $15,000
Accumulated Depreciation $4,284 $8,568 $12,852
Total Long-term Assets $10,716 $6,432 $2,148
Total Assets $81,802 $102,980 $119,954
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $5,779 $13,226 $14,194
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $5,779 $13,226 $14,194
Long-term Liabilities $20,000 $20,000 $20,000
Total Liabilities $25,779 $33,226 $34,194
Paid-in Capital $55,000 $55,000 $55,000
Retained Earnings ($11,000) $1,023 $14,754
Earnings $12,023 $13,731 $16,006
Total Capital $56,023 $69,754 $85,761
Total Liabilities and Capital $81,802 $102,980 $119,954
Net Worth $56,023 $69,754 $85,761

7.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5015, Motor Vehicle Parts Used, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 7.23% 7.54% 12.20%
Percent of Total Assets
Accounts Receivable 29.56% 25.18% 23.25% 28.00%
Inventory 12.90% 11.15% 10.39% 38.90%
Other Current Assets 0.00% 0.00% 0.00% 16.40%
Total Current Assets 86.90% 93.75% 98.21% 83.30%
Long-term Assets 13.10% 6.25% 1.79% 16.70%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 7.06% 12.84% 11.83% 38.90%
Long-term Liabilities 24.45% 19.42% 16.67% 12.30%
Total Liabilities 31.51% 32.26% 28.51% 51.20%
Net Worth 68.49% 67.74% 71.49% 48.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 54.26% 53.57% 53.14% 23.10%
Selling, General & Administrative Expenses 49.14% 48.12% 47.23% 14.00%
Advertising Expenses 2.55% 2.38% 2.21% 0.70%
Profit Before Interest and Taxes 8.16% 8.58% 9.18% 2.00%
Main Ratios
Current 12.30 7.30 8.30 2.16
Quick 10.47 6.43 7.42 0.96
Total Debt to Total Assets 31.51% 32.26% 28.51% 51.20%
Pre-tax Return on Net Worth 30.66% 28.12% 26.66% 5.30%
Pre-tax Return on Assets 21.00% 19.05% 19.06% 10.90%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 5.12% 5.45% 5.91% n.a
Return on Equity 21.46% 19.69% 18.66% n.a
Activity Ratios
Accounts Receivable Turnover 5.83 5.83 5.83 n.a
Collection Days 57 60 60 n.a
Inventory Turnover 6.76 10.62 10.61 n.a
Accounts Payable Turnover 19.84 12.17 12.17 n.a
Payment Days 27 22 29 n.a
Total Asset Turnover 2.87 2.45 2.26 n.a
Debt Ratios
Debt to Net Worth 0.46 0.48 0.40 n.a
Current Liab. to Liab. 0.22 0.40 0.42 n.a
Liquidity Ratios
Net Working Capital $65,307 $83,322 $103,613 n.a
Interest Coverage 9.59 10.81 12.43 n.a
Additional Ratios
Assets to Sales 0.35 0.41 0.44 n.a
Current Debt/Total Assets 7% 13% 12% n.a
Acid Test 6.29 4.47 5.46 n.a
Sales/Net Worth 4.19 3.61 3.16 n.a
Dividend Payout 0.00 0.00 0.00 n.a