OutReSources

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Personnel Management Business Plan

Financial Plan

Our main concerns will be aggressive time management, so that our labor costs stay under control, and proper purchasing, keeping costs down.  Secondarily, hiring the best team, training them properly and retaining them will be a critical component to good costs.  A good trainer does not sacrifice quality for quantity, but rather they optimize their time spent.  Growth will be sustained through a contribution to a "roll-over" plan, and from potential future clients.

7.1 Start-up Funding

Total start-up expenses include legal costs, logo design, stationery and related expenses.

Expensed presentation and office equipment include computers and projectors. Start-up assets include initial cash to handle the first few months of consulting operations as accounts receivable play through the cash flow.  Flowstone, Inc. is providing some of their used office furniture, chairs, as Other Current Assets.

Flowstone, Inc. will provide seed capital.  Soren Aboukir and Khallie Locharnold will each invest at start-up, and anticipate loaning the company additional funds during the year.

Start-up Funding
Start-up Expenses to Fund $14,500
Start-up Assets to Fund $25,500
Total Funding Required $40,000
Assets
Non-cash Assets from Start-up $1,000
Cash Requirements from Start-up $24,500
Additional Cash Raised $0
Cash Balance on Starting Date $24,500
Total Assets $25,500
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $0
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $0
Capital
Planned Investment
Flowstone, Inc. $20,000
Khallie Locharnold $10,000
Soren Aboukir $10,000
Additional Investment Requirement $0
Total Planned Investment $40,000
Loss at Start-up (Start-up Expenses) ($14,500)
Total Capital $25,500
Total Capital and Liabilities $25,500
Total Funding $40,000

7.2 Important Assumptions

  • We are assuming steady growth from good management, barring any unforseen local, or state disasters, economic slowdown, or Medicaid budget cuts.
  • We are assuming adequate funding by Flowstone, Inc. and the partners to sustain us during start-up.
  • We are assuming that health care providers will respond to the new concept of outsourced training and value it enough to pay for it.
  • We are assuming that the state will support us by referring health care provider clients.
  • We are assuming that we will be able to market our offerings as high-end services, allowing us to have a large profit potential.
  • We are assuming that this endeavor will not negatively affect those services already provided by Flowstone, Inc.

7.3 Projected Profit and Loss

Outlines in our Profit and Loss table are purely simplistic guesses on an ideal scenario with the assumption that clients will pay what has been estimated, operating /overhead expenses are minimal, and staff are satisfied with their compensation.  Development will take place within the agency of Flowstone, Inc. to minimize overhead expenses since Flowstone would be able to simply absorb the start up expenses as a cost to improve their current services.

Initially, OutReSources will be housed in the Flowstone office spaces and and benefit from the established administrative support system.  In January 2006, we anticipate that OutReSources will move to it's own office when an adjacent suite is due to become available.

As noted earlier, salaries for owner/consultants, training supervisors and trainers are included in Cost of Sales.  To correctly calculate the necessary payroll tax withholding, a formula was entered into the P&L table for a percentage of the combined salaried and hourly wages.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $480,000 $627,900 $822,120
Direct Cost of Sales $234,142 $305,163 $397,880
Other Costs of Sales $7,800 $10,000 $13,000
Total Cost of Sales $241,942 $315,163 $410,880
Gross Margin $238,058 $312,737 $411,240
Gross Margin % 49.60% 49.81% 50.02%
Expenses
Payroll $26,000 $97,000 $97,000
Marketing/Promotion $1,560 $3,000 $4,000
Depreciation $0 $0 $0
Rent $5,000 $12,000 $15,000
Utilities $750 $600 $750
Insurance $1,000 $2,000 $3,000
Payroll Taxes $28,485 $46,592 $56,327
Training Packet Production $3,900 $5,820 $8,000
Office Supplies $2,340 $4,000 $5,500
Total Operating Expenses $69,035 $171,012 $189,577
Profit Before Interest and Taxes $169,023 $141,725 $221,663
EBITDA $169,023 $141,725 $221,663
Interest Expense $0 $0 $0
Taxes Incurred $50,707 $42,517 $66,499
Net Profit $118,316 $99,207 $155,164
Net Profit/Sales 24.65% 15.80% 18.87%

7.4 Break-even Analysis

Our monthly break even figure is based on our anticipated cost of sales, and in-kind administrative support from Flowstone.  Break even currently requires an average monthly sales as shown below.  This will vary if cost of sales increases or decreases, and if overhead expenses such as administrative support is transferred from Flowstone to us sooner than expected.

Break-even Analysis
Monthly Revenue Break-even $11,232
Assumptions:
Average Percent Variable Cost 49%
Estimated Monthly Fixed Cost $5,753

7.5 Projected Cash Flow

The Cash Flow table is based on ideal numbers.  The numbers where set as explained previously by basic business principles to permit room for adjustment as the company grows.  As seen in the chart as the months go by the Cash Balance remains  positive.  This is dependent upon reaching sales forecasts each month and keeping our expenses in line.  Over time we are assured to make adjustments as stated in the explanation of the forecasting.  The key components we will need to monitor that will adjust the overall true numbers are:

  • The Demand for Service
  • Cost of Service (The service may be desired, but must be priced right for clients to see the benefit)
  • Quality of Service (A fine balance of quality vs quantity)
  • Quality Cost (Salaries will be the primary factor.  Can we hire quality trainers and charge a quality price while still receiving a quality profit)

The founding partners anticipate loaning the company additional monies as a short-term loan in mid-year.  If sales exceed forecast this may not be necessary.  Additional computers and presentation equipment will need to be purchased as new trainers and supervisors are hired.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $0 $0 $0
Cash from Receivables $341,008 $585,073 $765,880
Subtotal Cash from Operations $341,008 $585,073 $765,880
Additional Cash Received
Sales Tax, VAT, HST/GST Received $28,800 $37,674 $49,327
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 $369,808 $622,747 $815,208
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $26,000 $97,000 $97,000
Bill Payments $285,781 $446,114 $558,592
Subtotal Spent on Operations $311,781 $543,114 $655,592
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $28,800 $37,674 $49,327
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 $4,000 $4,000 $6,000
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $344,581 $584,788 $710,919
Net Cash Flow $25,228 $37,959 $104,288
Cash Balance $49,728 $87,686 $191,975

7.6 Projected Balance Sheet

The balance sheet is not a key factor at this point since OutReSources, Inc. will be operating as a company within a company and utilizing Flowstone, Inc.'s assets.  Given that any start-up cost or realized loss can be deemed as an assets expense for Flowstone there is truly little to no liability or risk thereof.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $49,728 $87,686 $191,975
Accounts Receivable $138,992 $181,818 $238,058
Other Current Assets $5,000 $9,000 $15,000
Total Current Assets $193,719 $278,505 $445,033
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $193,719 $278,505 $445,033
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $49,903 $35,482 $46,846
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $49,903 $35,482 $46,846
Long-term Liabilities $0 $0 $0
Total Liabilities $49,903 $35,482 $46,846
Paid-in Capital $40,000 $40,000 $40,000
Retained Earnings ($14,500) $103,816 $203,023
Earnings $118,316 $99,207 $155,164
Total Capital $143,816 $243,023 $398,187
Total Liabilities and Capital $193,719 $278,505 $445,033
Net Worth $143,816 $243,023 $398,187

7.7 Business Ratios

The following table shows the projected business ratios.  We expect to maintain healthy ratios for profitability, risk, and return.  The industry comparisons are for SIC 8742.0200, Human Resources Consulting, part of the larger Management Consulting Services category.  The most noteworthy catagory is the percent of sales.  You will notice that OutReSources, Inc. and Industry Standards are comparable until gross profit margin wherein OutReSources falls back by 50% from industry standards.  This is primarily due to the majority of our expenses coming from staff compensation.  However, OutReSources more than compensates in general administrative expenses.  Though the numbers are based on ideal assumptions and are subject to change, OutReSources' owner and management structure will continue to minimize general admin costs.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 30.81% 30.93% 6.61%
Percent of Total Assets
Accounts Receivable 71.75% 65.28% 53.49% 18.68%
Other Current Assets 2.58% 3.23% 3.37% 49.64%
Total Current Assets 100.00% 100.00% 100.00% 71.06%
Long-term Assets 0.00% 0.00% 0.00% 28.94%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 25.76% 12.74% 10.53% 35.28%
Long-term Liabilities 0.00% 0.00% 0.00% 15.95%
Total Liabilities 25.76% 12.74% 10.53% 51.23%
Net Worth 74.24% 87.26% 89.47% 48.77%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 49.60% 49.81% 50.02% 100.00%
Selling, General & Administrative Expenses 24.95% 34.01% 31.15% 83.35%
Advertising Expenses 0.00% 0.00% 0.00% 1.13%
Profit Before Interest and Taxes 35.21% 22.57% 26.96% 2.92%
Main Ratios
Current 3.88 7.85 9.50 1.49
Quick 3.88 7.85 9.50 1.25
Total Debt to Total Assets 25.76% 12.74% 10.53% 60.96%
Pre-tax Return on Net Worth 117.53% 58.32% 55.67% 7.36%
Pre-tax Return on Assets 87.25% 50.89% 49.81% 18.86%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 24.65% 15.80% 18.87% n.a
Return on Equity 82.27% 40.82% 38.97% n.a
Activity Ratios
Accounts Receivable Turnover 3.45 3.45 3.45 n.a
Collection Days 55 93 93 n.a
Accounts Payable Turnover 6.73 12.17 12.17 n.a
Payment Days 27 36 26 n.a
Total Asset Turnover 2.48 2.25 1.85 n.a
Debt Ratios
Debt to Net Worth 0.35 0.15 0.12 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $143,816 $243,023 $398,187 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.40 0.44 0.54 n.a
Current Debt/Total Assets 26% 13% 11% n.a
Acid Test 1.10 2.72 4.42 n.a
Sales/Net Worth 3.34 2.58 2.06 n.a
Dividend Payout 0.00 0.00 0.00 n.a