Amerihall

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Real Estate Website Business Plan

Financial Plan

We want to finance growth mainly through cash flow. We recognize that this means we will have to grow more slowly than we might like. The most important factor in our case is collection days. Our agents are committed to a year lease with a 30-day cancellation agreement. These 30 days are not prorated and payment comes at the first of every month through direct withdrawal from either a major credit card or electronic transfer. If a credit card transaction fails because the agent has exceeded his/her limit or has received an NSF from his/her bank, he/she will be locked out of the members area automatically. This will prohibit him/her from performing any duties as a real estate agent until the problem has been remedied.

6.1 Funding Options

The owner plans to invest $125,000 of his own money (the proceeds of the liquidation of properties and assets of Hall Properties Realty, Inc.). The cash flow projections show that the business will require $65,000 of working capital during the early months of the first year of operations. If a new corporate site is needed for unforeseen growth, additional financing may be necessary. We have identified three options for raising further funds

  1. The sale of equity, perhaps to unknown investors, with a goal to raise between $200,000 and $300,000. This would provide some capital to allow for growth. Any shortfall could be funded either by a line of credit or a bank loan. This option is not needed due to current capital and should only be considered as a term loan with no equity stake.

  2. Approach our bank with a view to raising a medium-term loan of $200,000 and a line of credit of $60,000. David Hall could provide any lender with security for part, if not all, of this facility.

  3. Option: This third option has been added due to the overwhelming response of real estate agents and other professionals in the real estate field. Our national presence should be guaranteed and only capital will set the pace for accomplishing this goal. Our figures to date have been with no financing, and it could take as long as five years to complete. Our belief is that this period of time could leave an area open for competition and should possibly be addressed now. Our figures, though not set in stone, should be placed at $1 million, but that should be considered low end. If you take into account the other untouched markets that have not been addressed in Phase 1 of our plan, we should be ready to seek an additional $1 million for future growth as the need arises .

6.2 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions. From the beginning, we recognize that collection days are critical, but not a factor we can easily influence. 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 unforseen changes in technology to make our products and services immediately obsolete. 
  • We assume that no laws will change to interfere with the real estate market as we see it now.
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 25.42% 25.00% 25.42%
Other 0 0 0

6.3 Break-even Analysis

The following chart and table summarize our Break-even Analysis. With fixed costs of $37,000 per month at the outset (a bare minimum), we need to bill $45,000 to cover our costs.

Break-even Analysis
Monthly Units Break-even 114
Monthly Revenue Break-even $44,342
Assumptions:
Average Per-Unit Revenue $389.71
Average Per-Unit Variable Cost $64.51
Estimated Monthly Fixed Cost $37,002

6.4 Projected Profit and Loss

Our projected profit and loss is shown in the following chart and table, with sales increasing from $7.78 million the first year to more than $77 million in the third, and substantial profits even in the start-up phase of the business.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $7,781,000 $23,343,000 $77,810,000
Direct Cost of Sales $1,287,960 $3,863,880 $12,879,600
Other Production Expenses $0 $0 $0
Total Cost of Sales $1,287,960 $3,863,880 $12,879,600
Gross Margin $6,493,040 $19,479,120 $64,930,400
Gross Margin % 83.45% 83.45% 83.45%
Expenses
Payroll $232,078 $860,000 $2,149,000
Sales and Marketing and Other Expenses $72,940 $143,800 $424,600
Depreciation $2,400 $5,000 $5,000
Website $55,000 $100,000 $100,000
Utilities $9,600 $28,800 $96,000
Insurance $1,200 $2,400 $7,200
Rent $36,000 $50,300 $51,200
Payroll Taxes $34,812 $129,000 $322,350
Other $0 $0 $0
Total Operating Expenses $444,030 $1,319,300 $3,155,350
Profit Before Interest and Taxes $6,049,010 $18,159,820 $61,775,050
EBITDA $6,051,410 $18,164,820 $61,780,050
Interest Expense $0 $0 $0
Taxes Incurred $1,514,143 $4,539,955 $15,701,159
Net Profit $4,534,868 $13,619,865 $46,073,891
Net Profit/Sales 58.28% 58.35% 59.21%

6.5 Projected Cash Flow

The company's projected cash flow analysis for FY2001-2003 is provided below.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $7,781,000 $23,343,000 $77,810,000
Subtotal Cash from Operations $7,781,000 $23,343,000 $77,810,000
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 $7,781,000 $23,343,000 $77,810,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $232,078 $860,000 $2,149,000
Bill Payments $2,578,130 $8,563,593 $27,878,768
Subtotal Spent on Operations $2,810,208 $9,423,593 $30,027,768
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 $100,000 $120,000 $130,000
Dividends $0 $0 $0
Subtotal Cash Spent $2,910,208 $9,543,593 $30,157,768
Net Cash Flow $4,870,792 $13,799,407 $47,652,232
Cash Balance $4,935,792 $18,735,199 $66,387,430

6.6 Projected Balance Sheet

The following table shows managed but sufficient growth of net worth, and a sufficiently healthy financial position.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $4,935,792 $18,735,199 $66,387,430
Other Current Assets $0 $0 $0
Total Current Assets $4,935,792 $18,735,199 $66,387,430
Long-term Assets
Long-term Assets $100,000 $220,000 $350,000
Accumulated Depreciation $2,400 $7,400 $12,400
Total Long-term Assets $97,600 $212,600 $337,600
Total Assets $5,033,392 $18,947,799 $66,725,030
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $433,524 $728,066 $2,431,406
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $433,524 $728,066 $2,431,406
Long-term Liabilities $0 $0 $0
Total Liabilities $433,524 $728,066 $2,431,406
Paid-in Capital $125,050 $125,050 $125,050
Retained Earnings ($60,050) $4,474,818 $18,094,683
Earnings $4,534,868 $13,619,865 $46,073,891
Total Capital $4,599,868 $18,219,733 $64,293,624
Total Liabilities and Capital $5,033,392 $18,947,799 $66,725,030
Net Worth $4,599,868 $18,219,733 $64,293,624

6.7 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 6531, Real Estate Agents and Managers, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 200.00% 233.33% 3.60%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 49.90%
Total Current Assets 98.06% 98.88% 99.49% 57.30%
Long-term Assets 1.94% 1.12% 0.51% 42.70%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 8.61% 3.84% 3.64% 28.50%
Long-term Liabilities 0.00% 0.00% 0.00% 27.20%
Total Liabilities 8.61% 3.84% 3.64% 55.70%
Net Worth 91.39% 96.16% 96.36% 44.30%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 83.45% 83.45% 83.45% 100.00%
Selling, General & Administrative Expenses 25.14% 25.10% 23.90% 67.40%
Advertising Expenses 0.73% 0.49% 0.44% 3.60%
Profit Before Interest and Taxes 77.74% 77.80% 79.39% 3.90%
Main Ratios
Current 11.39 25.73 27.30 1.87
Quick 11.39 25.73 27.30 1.11
Total Debt to Total Assets 8.61% 3.84% 3.64% 55.70%
Pre-tax Return on Net Worth 131.50% 99.67% 96.08% 1.70%
Pre-tax Return on Assets 120.18% 95.84% 92.58% 3.80%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 58.28% 58.35% 59.21% n.a
Return on Equity 98.59% 74.75% 71.66% n.a
Activity Ratios
Accounts Payable Turnover 6.95 12.17 12.17 n.a
Payment Days 27 24 19 n.a
Total Asset Turnover 1.55 1.23 1.17 n.a
Debt Ratios
Debt to Net Worth 0.09 0.04 0.04 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $4,502,268 $18,007,133 $63,956,024 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.65 0.81 0.86 n.a
Current Debt/Total Assets 9% 4% 4% n.a
Acid Test 11.39 25.73 27.30 n.a
Sales/Net Worth 1.69 1.28 1.21 n.a
Dividend Payout 0.00 0.00 0.00 n.a