R and R Printing

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Print Broker Business Plan

Financial Plan

R & R Printing's financial plan is detailed in following sections. Preliminary estimates suggest that we will experience a steady growth in the first year of operation. Income estimates are based, in part, on anticipated revenues from accounts that were secured by Rob Scott in his prior sales position. R & R Printing also anticipates an increase in gross margin and sales volume. Thus, the overall financial plan presents a conservative but realistic depiction of R & R Printing's financial position.

7.1 Important Assumptions

R & R Printing assumes the following:

  • Market growth projections for the printing industry are accurate.
  • National economic conditions, which are favorable to the printing industry, will not experience significant decline in the next three years.
  • Conditions will remain favorable for service providers and R & R Printing will be able to maintain those relationships.
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 Key Financial Indicators

The following chart indicates R & R Printing's key financial indicators for the first three years of business. R & R Printing anticipates growth in sales with relatively stable operating expenses. Favorable economic conditions and forecasts of continued growth in the printing market support R & R Printing planned financial success.

7.3 Break-even Analysis

The following table details R & R Printing's break-even analysis.

Break-even calculations assume a 25% to 30% gross margin. This is a conservative estimate, and it will be improved as strategic relationships develop and the benefits of R & R Printing offerings are realized by customers.

Break-even Analysis
Monthly Revenue Break-even $10,112
Assumptions:
Average Percent Variable Cost 75%
Estimated Monthly Fixed Cost $2,567

7.4 Projected Profit and Loss

R & R Printing's profit picture improves as operations progress into the second quarter of operation. R & R Printing anticipates improving its gross margin from 25% in year one to 30% in year two. Annual estimates of profit and loss are detailed in the following table.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $750,000 $1,250,000 $1,500,000
Direct Cost of Sales $559,600 $875,000 $1,050,000
Other $0 $0 $0
Total Cost of Sales $559,600 $875,000 $1,050,000
Gross Margin $190,400 $375,000 $450,000
Gross Margin % 25.39% 30.00% 30.00%
Expenses
Payroll $20,004 $20,500 $20,500
Marketing/Promotion $6,000 $6,000 $6,000
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Insurance $4,800 $4,800 $4,800
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $30,804 $31,300 $31,300
Profit Before Interest and Taxes $159,596 $343,700 $418,700
EBITDA $159,596 $343,700 $418,700
Interest Expense $4,533 $3,470 $2,450
Taxes Incurred $46,519 $102,069 $124,875
Net Profit $108,544 $238,161 $291,375
Net Profit/Sales 14.47% 19.05% 19.43%

7.5 Projected Cash Flow

Monthly cash flow is shown in the following illustration. Annual cash flow figures are estimated based on collection days included in the table. Annual cash flow for the first year of operation becomes positive in the second quarter of operation.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $0 $0 $0
Cash from Receivables $594,600 $1,146,400 $1,448,200
Subtotal Cash from Operations $594,600 $1,146,400 $1,448,200
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 $37,000 $0 $0
Subtotal Cash Received $631,600 $1,146,400 $1,448,200
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $20,004 $20,500 $20,500
Bill Payments $560,008 $971,302 $1,171,951
Subtotal Spent on Operations $580,012 $991,802 $1,192,451
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 $10,200 $10,200 $10,200
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $590,212 $1,002,002 $1,202,651
Net Cash Flow $41,388 $144,398 $245,549
Cash Balance $91,388 $235,785 $481,335

7.6 Projected Balance Sheet

The Projected Balance Sheet is quite solid. We do not project any trouble meeting our debt obligations -- as long as we can achieve our specific objectives.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $91,388 $235,785 $481,335
Accounts Receivable $155,400 $259,000 $310,800
Other Current Assets $0 $0 $0
Total Current Assets $246,788 $494,785 $792,135
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $246,788 $494,785 $792,135
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $61,443 $81,480 $97,654
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $61,443 $81,480 $97,654
Long-term Liabilities $39,800 $29,600 $19,400
Total Liabilities $101,243 $111,080 $117,054
Paid-in Capital $52,000 $52,000 $52,000
Retained Earnings ($15,000) $93,544 $331,705
Earnings $108,544 $238,161 $291,375
Total Capital $145,544 $383,705 $675,080
Total Liabilities and Capital $246,788 $494,785 $792,135
Net Worth $145,544 $383,705 $675,080

7.7 Business Ratios

The following table details our primary business ratios. Initial analysis indicates that R & R Printing ratios for profitability, risk, and return are financially favorable and will improve greatly in year two of operation. Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 2752, Commercial Printing, Lithographic, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 66.67% 20.00% 1.00%
Percent of Total Assets
Accounts Receivable 62.97% 52.35% 39.24% 25.80%
Other Current Assets 0.00% 0.00% 0.00% 24.00%
Total Current Assets 100.00% 100.00% 100.00% 57.90%
Long-term Assets 0.00% 0.00% 0.00% 42.10%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 24.90% 16.47% 12.33% 32.20%
Long-term Liabilities 16.13% 5.98% 2.45% 25.40%
Total Liabilities 41.02% 22.45% 14.78% 57.60%
Net Worth 58.98% 77.55% 85.22% 42.40%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 25.39% 30.00% 30.00% 30.00%
Selling, General & Administrative Expenses 9.05% 9.80% 9.62% 15.60%
Advertising Expenses 0.48% 0.29% 0.24% 0.50%
Profit Before Interest and Taxes 21.28% 27.50% 27.91% 2.30%
Main Ratios
Current 4.02 6.07 8.11 1.61
Quick 4.02 6.07 8.11 1.19
Total Debt to Total Assets 41.02% 22.45% 14.78% 57.60%
Pre-tax Return on Net Worth 106.54% 88.67% 61.66% 4.20%
Pre-tax Return on Assets 62.83% 68.76% 52.55% 10.00%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 14.47% 19.05% 19.43% n.a
Return on Equity 74.58% 62.07% 43.16% n.a
Activity Ratios
Accounts Receivable Turnover 4.83 4.83 4.83 n.a
Collection Days 57 61 69 n.a
Accounts Payable Turnover 10.11 12.17 12.17 n.a
Payment Days 27 26 28 n.a
Total Asset Turnover 3.04 2.53 1.89 n.a
Debt Ratios
Debt to Net Worth 0.70 0.29 0.17 n.a
Current Liab. to Liab. 0.61 0.73 0.83 n.a
Liquidity Ratios
Net Working Capital $185,344 $413,305 $694,480 n.a
Interest Coverage 35.21 99.05 170.90 n.a
Additional Ratios
Assets to Sales 0.33 0.40 0.53 n.a
Current Debt/Total Assets 25% 16% 12% n.a
Acid Test 1.49 2.89 4.93 n.a
Sales/Net Worth 5.15 3.26 2.22 n.a
Dividend Payout 0.00 0.00 0.00 n.a