Satellite Communications Business Plan

Blue Sky Satellite Communications

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Financial Plan

The most important element of the financial plan is to have enough cash to be able to implement all the concepts of Blue Sky. This is not like any other conventional business, where stock turnover is the key factor. Here we look at selling as much hardware as possible to be able to increase the amount of airtime sold. The main revenue comes from the margins on the airtime.

7.1 Important Assumptions

The assumptions in the following table are thought to be key to the success of Blue Sky.

General Assumptions
2001 2002 2003
Plan Month 1 2 3
Current Interest Rate 5.00% 5.00% 5.00%
Long-term Interest Rate 5.00% 5.00% 5.00%
Tax Rate 32.75% 33.00% 32.75%
Other 0 0 0

7.2 Key Financial Indicators

The chart below shows the benchmarks for the company.

7.3 Projected Profit and Loss

Blue Sky's projected profit and loss statement is found in the table below. For a monthly projection, please see appendix.

Pro Forma Profit and Loss
2001 2002 2003
Sales $22,349,400 $36,643,340 $62,212,882
Direct Cost of Sales $16,234,151 $24,939,040 $42,507,546
Other $0 $0 $0
Total Cost of Sales $16,234,151 $24,939,040 $42,507,546
Gross Margin $6,115,249 $11,704,300 $19,705,336
Gross Margin % 27.36% 31.94% 31.67%
Expenses
Payroll $110,040 $110,040 $110,040
Sales and Marketing and Other Expenses $74,000 $574,000 $831,000
Depreciation $4,350 $4,350 $4,350
Leased Equipment $8,500 $20,000 $40,000
Utilities $3,600 $4,000 $4,200
Insurance $8,400 $9,000 $9,600
Rent $16,200 $16,800 $17,200
Payroll Taxes $2,201 $2,201 $2,201
Other $0 $0 $0
Total Operating Expenses $227,291 $740,391 $1,018,591
Profit Before Interest and Taxes $5,887,958 $10,963,909 $18,686,746
EBITDA $5,892,308 $10,968,259 $18,691,096
Interest Expense $446,688 $261,250 $143,750
Taxes Incurred $1,795,983 $3,531,878 $6,072,831
Net Profit $3,645,287 $7,170,782 $12,470,165
Net Profit/Sales 16.31% 19.57% 20.04%

7.4 Projected Cash Flow

The cash flow projections for Blue Sky are found in the chart and table below. We will use a $3,000,000 line of credit to finance inventory purchases.

Pro Forma Cash Flow
2001 2002 2003
Cash Received
Cash from Operations
Cash Sales $2,234,940 $3,664,334 $6,221,288
Cash from Receivables $19,206,566 $32,328,895 $54,828,651
Subtotal Cash from Operations $21,441,506 $35,993,229 $61,049,939
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $3,700,000 $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 $3,500,000 $0 $0
Subtotal Cash Received $28,641,506 $35,993,229 $61,049,939
Expenditures 2001 2002 2003
Expenditures from Operations
Cash Spending $110,040 $110,040 $110,040
Bill Payments $18,468,456 $28,321,992 $48,877,891
Subtotal Spent on Operations $18,578,496 $28,432,032 $48,987,931
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $3,005,000 $350,000 $350,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $300,000 $2,000,000 $2,000,000
Purchase Other Current Assets $500,000 $0 $0
Purchase Long-term Assets $6,000,000 $200,000 $0
Dividends $0 $0 $9,000,000
Subtotal Cash Spent $28,383,496 $30,982,032 $60,337,931
Net Cash Flow $258,010 $5,011,197 $712,009
Cash Balance $288,786 $5,299,984 $6,011,992

7.5 Projected Balance Sheet

The table below shows Blue Sky's balance sheet.

Pro Forma Balance Sheet
2001 2002 2003
Assets
Current Assets
Cash $288,786 $5,299,984 $6,011,992
Accounts Receivable $1,016,486 $1,666,596 $2,829,539
Inventory $882,664 $1,355,956 $2,311,170
Other Current Assets $532,800 $532,800 $532,800
Total Current Assets $2,720,736 $8,855,336 $11,685,501
Long-term Assets
Long-term Assets $6,043,586 $6,243,586 $6,243,586
Accumulated Depreciation $11,600 $15,950 $20,300
Total Long-term Assets $6,031,986 $6,227,636 $6,223,286
Total Assets $8,752,722 $15,082,972 $17,908,787
Liabilities and Capital 2001 2002 2003
Current Liabilities
Accounts Payable $942,433 $2,451,901 $4,157,551
Current Borrowing $700,000 $350,000 $0
Other Current Liabilities $10,000 $10,000 $10,000
Subtotal Current Liabilities $1,652,433 $2,811,901 $4,167,551
Long-term Liabilities $5,700,000 $3,700,000 $1,700,000
Total Liabilities $7,352,433 $6,511,901 $5,867,551
Paid-in Capital $3,640,000 $3,640,000 $3,640,000
Retained Earnings ($5,884,998) ($2,239,711) ($4,068,929)
Earnings $3,645,287 $7,170,782 $12,470,165
Total Capital $1,400,289 $8,571,071 $12,041,235
Total Liabilities and Capital $8,752,722 $15,082,972 $17,908,787
Net Worth $1,400,289 $8,571,071 $12,041,235

7.6 Business Ratios

The following table contains ratios from the communication services (4899) industry, as determined by the Standard Industry Classification (SIC) Index.

Ratio Analysis
2001 2002 2003 Industry Profile
Sales Growth 1178.09% 63.96% 69.78% 4.80%
Percent of Total Assets
Accounts Receivable 11.61% 11.05% 15.80% 14.30%
Inventory 10.08% 8.99% 12.91% 2.50%
Other Current Assets 6.09% 3.53% 2.98% 46.50%
Total Current Assets 31.08% 58.71% 65.25% 63.30%
Long-term Assets 68.92% 41.29% 34.75% 36.70%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 18.88% 18.64% 23.27% 43.60%
Long-term Liabilities 65.12% 24.53% 9.49% 26.30%
Total Liabilities 84.00% 43.17% 32.76% 69.90%
Net Worth 16.00% 56.83% 67.24% 30.10%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 27.36% 31.94% 31.67% 57.80%
Selling, General & Administrative Expenses 10.68% 12.46% 11.85% 35.50%
Advertising Expenses 0.04% 1.36% 1.21% 1.00%
Profit Before Interest and Taxes 26.35% 29.92% 30.04% 1.90%
Main Ratios
Current 1.65 3.15 2.80 1.17
Quick 1.11 2.67 2.25 0.95
Total Debt to Total Assets 84.00% 43.17% 32.76% 69.90%
Pre-tax Return on Net Worth 388.58% 124.87% 154.00% 4.20%
Pre-tax Return on Assets 62.17% 70.96% 103.54% 14.00%
Additional Ratios 2001 2002 2003
Net Profit Margin 16.31% 19.57% 20.04% n.a
Return on Equity 260.32% 83.66% 103.56% n.a
Activity Ratios
Accounts Receivable Turnover 19.79 19.79 19.79 n.a
Collection Days 59 15 15 n.a
Inventory Turnover 7.57 22.28 23.18 n.a
Accounts Payable Turnover 20.56 12.17 12.17 n.a
Payment Days 27 21 24 n.a
Total Asset Turnover 2.55 2.43 3.47 n.a
Debt Ratios
Debt to Net Worth 5.25 0.76 0.49 n.a
Current Liab. to Liab. 0.22 0.43 0.71 n.a
Liquidity Ratios
Net Working Capital $1,068,303 $6,043,435 $7,517,949 n.a
Interest Coverage 13.18 41.97 129.99 n.a
Additional Ratios
Assets to Sales 0.39 0.41 0.29 n.a
Current Debt/Total Assets 19% 19% 23% n.a
Acid Test 0.50 2.07 1.57 n.a
Sales/Net Worth 15.96 4.28 5.17 n.a
Dividend Payout 0.00 0.00 0.72 n.a
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General Assumptions
2001 2002 2003
Plan Month 1 2 3
Current Interest Rate 5.00% 5.00% 5.00%
Long-term Interest Rate 5.00% 5.00% 5.00%
Tax Rate 32.75% 33.00% 32.75%
Other 0 0 0
Pro Forma Profit and Loss
2001 2002 2003
Sales $22,349,400 $36,643,340 $62,212,882
Direct Cost of Sales $16,234,151 $24,939,040 $42,507,546
Other $0 $0 $0
Total Cost of Sales $16,234,151 $24,939,040 $42,507,546
Gross Margin $6,115,249 $11,704,300 $19,705,336
Gross Margin % 27.36% 31.94% 31.67%
Expenses
Payroll $110,040 $110,040 $110,040
Sales and Marketing and Other Expenses $74,000 $574,000 $831,000
Depreciation $4,350 $4,350 $4,350
Leased Equipment $8,500 $20,000 $40,000
Utilities $3,600 $4,000 $4,200
Insurance $8,400 $9,000 $9,600
Rent $16,200 $16,800 $17,200
Payroll Taxes $2,201 $2,201 $2,201
Other $0 $0 $0
Total Operating Expenses $227,291 $740,391 $1,018,591
Profit Before Interest and Taxes $5,887,958 $10,963,909 $18,686,746
EBITDA $5,892,308 $10,968,259 $18,691,096
Interest Expense $446,688 $261,250 $143,750
Taxes Incurred $1,795,983 $3,531,878 $6,072,831
Net Profit $3,645,287 $7,170,782 $12,470,165
Net Profit/Sales 16.31% 19.57% 20.04%
Pro Forma Cash Flow
2001 2002 2003
Cash Received
Cash from Operations
Cash Sales $2,234,940 $3,664,334 $6,221,288
Cash from Receivables $19,206,566 $32,328,895 $54,828,651
Subtotal Cash from Operations $21,441,506 $35,993,229 $61,049,939
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $3,700,000 $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 $3,500,000 $0 $0
Subtotal Cash Received $28,641,506 $35,993,229 $61,049,939
Expenditures 2001 2002 2003
Expenditures from Operations
Cash Spending $110,040 $110,040 $110,040
Bill Payments $18,468,456 $28,321,992 $48,877,891
Subtotal Spent on Operations $18,578,496 $28,432,032 $48,987,931
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $3,005,000 $350,000 $350,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $300,000 $2,000,000 $2,000,000
Purchase Other Current Assets $500,000 $0 $0
Purchase Long-term Assets $6,000,000 $200,000 $0
Dividends $0 $0 $9,000,000
Subtotal Cash Spent $28,383,496 $30,982,032 $60,337,931
Net Cash Flow $258,010 $5,011,197 $712,009
Cash Balance $288,786 $5,299,984 $6,011,992
Pro Forma Balance Sheet
2001 2002 2003
Assets
Current Assets
Cash $288,786 $5,299,984 $6,011,992
Accounts Receivable $1,016,486 $1,666,596 $2,829,539
Inventory $882,664 $1,355,956 $2,311,170
Other Current Assets $532,800 $532,800 $532,800
Total Current Assets $2,720,736 $8,855,336 $11,685,501
Long-term Assets
Long-term Assets $6,043,586 $6,243,586 $6,243,586
Accumulated Depreciation $11,600 $15,950 $20,300
Total Long-term Assets $6,031,986 $6,227,636 $6,223,286
Total Assets $8,752,722 $15,082,972 $17,908,787
Liabilities and Capital 2001 2002 2003
Current Liabilities
Accounts Payable $942,433 $2,451,901 $4,157,551
Current Borrowing $700,000 $350,000 $0
Other Current Liabilities $10,000 $10,000 $10,000
Subtotal Current Liabilities $1,652,433 $2,811,901 $4,167,551
Long-term Liabilities $5,700,000 $3,700,000 $1,700,000
Total Liabilities $7,352,433 $6,511,901 $5,867,551
Paid-in Capital $3,640,000 $3,640,000 $3,640,000
Retained Earnings ($5,884,998) ($2,239,711) ($4,068,929)
Earnings $3,645,287 $7,170,782 $12,470,165
Total Capital $1,400,289 $8,571,071 $12,041,235
Total Liabilities and Capital $8,752,722 $15,082,972 $17,908,787
Net Worth $1,400,289 $8,571,071 $12,041,235
Ratio Analysis
2001 2002 2003 Industry Profile
Sales Growth 1178.09% 63.96% 69.78% 4.80%
Percent of Total Assets
Accounts Receivable 11.61% 11.05% 15.80% 14.30%
Inventory 10.08% 8.99% 12.91% 2.50%
Other Current Assets 6.09% 3.53% 2.98% 46.50%
Total Current Assets 31.08% 58.71% 65.25% 63.30%
Long-term Assets 68.92% 41.29% 34.75% 36.70%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 18.88% 18.64% 23.27% 43.60%
Long-term Liabilities 65.12% 24.53% 9.49% 26.30%
Total Liabilities 84.00% 43.17% 32.76% 69.90%
Net Worth 16.00% 56.83% 67.24% 30.10%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 27.36% 31.94% 31.67% 57.80%
Selling, General & Administrative Expenses 10.68% 12.46% 11.85% 35.50%
Advertising Expenses 0.04% 1.36% 1.21% 1.00%
Profit Before Interest and Taxes 26.35% 29.92% 30.04% 1.90%
Main Ratios
Current 1.65 3.15 2.80 1.17
Quick 1.11 2.67 2.25 0.95
Total Debt to Total Assets 84.00% 43.17% 32.76% 69.90%
Pre-tax Return on Net Worth 388.58% 124.87% 154.00% 4.20%
Pre-tax Return on Assets 62.17% 70.96% 103.54% 14.00%
Additional Ratios 2001 2002 2003
Net Profit Margin 16.31% 19.57% 20.04% n.a
Return on Equity 260.32% 83.66% 103.56% n.a
Activity Ratios
Accounts Receivable Turnover 19.79 19.79 19.79 n.a
Collection Days 59 15 15 n.a
Inventory Turnover 7.57 22.28 23.18 n.a
Accounts Payable Turnover 20.56 12.17 12.17 n.a
Payment Days 27 21 24 n.a
Total Asset Turnover 2.55 2.43 3.47 n.a
Debt Ratios
Debt to Net Worth 5.25 0.76 0.49 n.a
Current Liab. to Liab. 0.22 0.43 0.71 n.a
Liquidity Ratios
Net Working Capital $1,068,303 $6,043,435 $7,517,949 n.a
Interest Coverage 13.18 41.97 129.99 n.a
Additional Ratios
Assets to Sales 0.39 0.41 0.29 n.a
Current Debt/Total Assets 19% 19% 23% n.a
Acid Test 0.50 2.07 1.57 n.a
Sales/Net Worth 15.96 4.28 5.17 n.a
Dividend Payout 0.00 0.00 0.72 n.a