Plynthe Insurance

Start your own business plan »

Personal Insurance Agent Business Plan

Financial Plan

The business will finance its growth from a combination of the free cash flows generated by the business and a loan taken out in the second year to finance the move to a small office space in Peristyle Gardens. Beyond the first three years, growth will be possible by adding more agents and moving to a larger office space when the initial space is no longer adequate (when a third associate must be added).

The business is not well positioned for a sale as it will be built on the expertise of Kolem Plynthe. However, profits may become extensive when the appropriate scale is achieved and the business can expand to additional personal insurance products or financial advisory services.

Start-up Funding

Plynthe Insurance will be launched with Kolem Plynthe's own resources, including credit card debt, personal savings, and some credit extended by vendors providing start-up services.

Start-up Funding
Start-up Expenses to Fund $8,000
Start-up Assets to Fund $24,000
Total Funding Required $32,000
Assets
Non-cash Assets from Start-up $0
Cash Requirements from Start-up $24,000
Additional Cash Raised $0
Cash Balance on Starting Date $24,000
Total Assets $24,000
Liabilities and Capital
Liabilities
Current Borrowing $4,000
Long-term Liabilities $0
Accounts Payable (Outstanding Bills) $1,000
Other Current Liabilities (interest-free) $0
Total Liabilities $5,000
Capital
Planned Investment
Owner $27,000
Investor $0
Additional Investment Requirement $0
Total Planned Investment $27,000
Loss at Start-up (Start-up Expenses) ($8,000)
Total Capital $19,000
Total Capital and Liabilities $24,000
Total Funding $32,000

Important Assumptions

This plan assumes the following:

  • That younger residents of Peristyle Gardens will value the personal attention (coupled by the lure of the best priced insurance) offered by Plynthe Insurance rather than go straight to brand name carriers
  • That enough young residents will remain in Peristyle Gardens (move from renting to owning) and grow families to make the focus on young residents worthwhile in the long run

Break-even Analysis

As shown below a low monthly break even point leads to break even from a profit perspective in the nineth month of operation.

Break-even Analysis
Monthly Units Break-even 86
Monthly Revenue Break-even $8,983
Assumptions:
Average Per-Unit Revenue $104.63
Average Per-Unit Variable Cost $16.74
Estimated Monthly Fixed Cost $7,546

Projected Profit and Loss

Net profit will be on top of a healthy salary for Kolem Plynthe, showing that the business will be well worth the small initial investment to launch. Gross margins are very high (as is standard for the insurance brokerage industry) and overhead is rather low. The main costs will be payroll for the insurance agents. Lower salaries can be paid in the future for new associate agents as less experienced, but malleable, agents are brought into the business.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $151,300 $214,825 $305,725
Direct Cost of Sales $24,208 $32,224 $45,859
Other Costs of Sales $0 $0 $0
Total Cost of Sales $24,208 $32,224 $45,859
Gross Margin $127,092 $182,601 $259,866
Gross Margin % 84.00% 85.00% 85.00%
Expenses
Payroll $49,000 $85,000 $150,000
Marketing/Promotion $24,000 $15,000 $15,000
Depreciation $0 $5,000 $5,000
Rent $2,400 $12,000 $12,600
Utilities $600 $1,800 $1,890
Insurance $2,400 $3,000 $3,500
Payroll Taxes $7,350 $12,750 $22,500
Education $4,800 $5,000 $7,500
Total Operating Expenses $90,550 $139,550 $217,990
Profit Before Interest and Taxes $36,542 $43,051 $41,876
EBITDA $36,542 $48,051 $46,876
Interest Expense $327 $350 $550
Taxes Incurred $10,864 $12,810 $12,398
Net Profit $25,350 $29,891 $28,928
Net Profit/Sales 16.75% 13.91% 9.46%

Projected Cash Flow

The projected cash flow shows the business investing in additional assets (furniture, computers, equipment) in the second year and third year to equip the office. While the cash balance of the business is low, the salary paid to Kolem Plynthe will act as a safety valve and can be reduced if the cash is not currently available.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $0 $0 $0
Cash from Receivables $105,935 $195,778 $278,470
Subtotal Cash from Operations $105,935 $195,778 $278,470
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 $10,000 $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 $105,935 $205,778 $278,470
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $49,000 $85,000 $150,000
Bill Payments $67,097 $97,984 $119,589
Subtotal Spent on Operations $116,097 $182,984 $269,589
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $4,000 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $3,000 $3,000
Purchase Other Current Assets $0 $5,000 $5,000
Purchase Long-term Assets $0 $15,000 $5,000
Dividends $0 $0 $0
Subtotal Cash Spent $120,097 $205,984 $282,589
Net Cash Flow ($14,162) ($206) ($4,119)
Cash Balance $9,838 $9,632 $5,513

Projected Balance Sheet

The balance sheet reflects that assets will not need to be purchased until the second year when the business moves from the home office of Kolem Plynthe to a small commercial office space in Peristyle Gardens.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $9,838 $9,632 $5,513
Accounts Receivable $45,365 $64,412 $91,667
Other Current Assets $0 $5,000 $10,000
Total Current Assets $55,203 $79,044 $107,180
Long-term Assets
Long-term Assets $0 $15,000 $20,000
Accumulated Depreciation $0 $5,000 $10,000
Total Long-term Assets $0 $10,000 $10,000
Total Assets $55,203 $89,044 $117,180
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $10,853 $7,803 $10,011
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $10,853 $7,803 $10,011
Long-term Liabilities $0 $7,000 $4,000
Total Liabilities $10,853 $14,803 $14,011
Paid-in Capital $27,000 $27,000 $27,000
Retained Earnings ($8,000) $17,350 $47,241
Earnings $25,350 $29,891 $28,928
Total Capital $44,350 $74,241 $103,169
Total Liabilities and Capital $55,203 $89,044 $117,180
Net Worth $44,350 $74,241 $103,169

Business Ratios

The business rations for Plynthe Insurance are compared here against insurance agencies and brokerages (NAISC industry code 534210, SIC code 6411) of under $500,000 annual revenue. The accounts receivable ratio for the business is higher than the industry average as all accounts will be paid out of commissions from insurance providers after the policies have been processed and bills put through their systems. Also, the fact that the industry average S G & A expense and Advertising expense is much lower (as a percentage of sales) than that of Plynthe Insurance shows that the business can grow to a much greater scale, spreading its current relatively fixed costs over more agents and becoming more profitable in the process. As the business grows, this will be possible.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 41.99% 42.31% 1.02%
Percent of Total Assets
Accounts Receivable 82.18% 72.34% 78.23% 8.34%
Other Current Assets 0.00% 5.62% 8.53% 76.12%
Total Current Assets 100.00% 88.77% 91.47% 84.46%
Long-term Assets 0.00% 11.23% 8.53% 15.54%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 19.66% 8.76% 8.54% 38.87%
Long-term Liabilities 0.00% 7.86% 3.41% 30.80%
Total Liabilities 19.66% 16.62% 11.96% 69.67%
Net Worth 80.34% 83.38% 88.04% 30.33%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 84.00% 85.00% 85.00% 85.97%
Selling, General & Administrative Expenses 67.25% 71.09% 75.54% 38.55%
Advertising Expenses 15.86% 6.98% 4.91% 1.64%
Profit Before Interest and Taxes 24.15% 20.04% 13.70% 17.53%
Main Ratios
Current 5.09 10.13 10.71 1.27
Quick 5.09 10.13 10.71 1.27
Total Debt to Total Assets 19.66% 16.62% 11.96% 69.67%
Pre-tax Return on Net Worth 81.66% 57.52% 40.06% 260.25%
Pre-tax Return on Assets 65.60% 47.96% 35.27% 78.92%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 16.75% 13.91% 9.46% n.a
Return on Equity 57.16% 40.26% 28.04% n.a
Activity Ratios
Accounts Receivable Turnover 3.34 3.34 3.34 n.a
Collection Days 55 93 93 n.a
Accounts Payable Turnover 7.09 12.17 12.17 n.a
Payment Days 28 36 27 n.a
Total Asset Turnover 2.74 2.41 2.61 n.a
Debt Ratios
Debt to Net Worth 0.24 0.20 0.14 n.a
Current Liab. to Liab. 1.00 0.53 0.71 n.a
Liquidity Ratios
Net Working Capital $44,350 $71,241 $97,169 n.a
Interest Coverage 111.60 123.00 76.14 n.a
Additional Ratios
Assets to Sales 0.36 0.41 0.38 n.a
Current Debt/Total Assets 20% 9% 9% n.a
Acid Test 0.91 1.88 1.55 n.a
Sales/Net Worth 3.41 2.89 2.96 n.a
Dividend Payout 0.00 0.00 0.00 n.a