SOHO Computer Consulting Business Plan

Creative Concepts Computer Design

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Financial Plan

The following sections include the annual estimates for the standard set of financial tables. Detailed monthly pro-forma tables are included in the appendix.

7.1 Important Assumptions

Creative Concepts customer base would fluctuate if there was a recess in the economy or other extenuating circumstances that pertain directly to consumer or industry behavior.

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

7.2 Break-even Analysis

Fixed costs have been set at a reasonably accurate monthly level. This should allow for equipment maintenance and purchase or replacement of basic tools used in performing our services. Variable costs have been set per unit to allow for additional expenses such as gas or other travel costs specific to each job.

Break-even Analysis
Monthly Units Break-even 28
Monthly Revenue Break-even $834
Assumptions:
Average Per-Unit Revenue $29.98
Average Per-Unit Variable Cost $5.70
Estimated Monthly Fixed Cost $675

7.3 Projected Profit and Loss

The profit and loss shown for this company is a source of inspiration. For the first year of operation the books show a modest net profit. This should allow for great flexibility and survival in the start-up phase in case of unexpected problems or expenses. The profit margin declines incrementally in the following two years as greater payroll allocations are made. These increased allocations will be contingent upon the continued success of this going concern. Additionally, since this business is operated out of the home, expenses such as rent, utilities, and insurance are sunk costs and not reflective of the business venture.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $18,289 $24,142 $31,868
Direct Cost of Sales $3,476 $5,677 $9,063
Other $0 $0 $0
Total Cost of Sales $3,476 $5,677 $9,063
Gross Margin $14,814 $18,465 $22,804
Gross Margin % 80.99% 76.48% 71.56%
Expenses
Payroll $8,102 $12,071 $15,934
Sales and Marketing and Other Expenses $0 $0 $0
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $0 $0 $0
Insurance $0 $0 $0
Rent $0 $0 $0
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $8,102 $12,071 $15,934
Profit Before Interest and Taxes $6,711 $6,394 $6,870
EBITDA $6,711 $6,394 $6,870
Interest Expense $0 $0 $0
Taxes Incurred $1,702 $1,598 $1,746
Net Profit $5,009 $4,795 $5,124
Net Profit/Sales 27.39% 19.86% 16.08%

7.4 Projected Cash Flow

This information is presented in the chart and table below.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $0 $0 $0
Cash from Receivables $12,657 $22,340 $29,488
Subtotal Cash from Operations $12,657 $22,340 $29,488
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 $12,657 $22,340 $29,488
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $8,102 $12,071 $15,934
Bill Payments $4,391 $7,464 $10,519
Subtotal Spent on Operations $12,493 $19,535 $26,453
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 $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $12,493 $19,535 $26,453
Net Cash Flow $164 $2,804 $3,035
Cash Balance $444 $3,248 $6,283

7.5 Projected Balance Sheet

This information is presented in the table below.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $444 $3,248 $6,283
Accounts Receivable $5,633 $7,435 $9,815
Other Current Assets $0 $0 $0
Total Current Assets $6,076 $10,683 $16,098
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $6,076 $10,683 $16,098
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $787 $598 $888
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $787 $598 $888
Long-term Liabilities $0 $0 $0
Total Liabilities $787 $598 $888
Paid-in Capital $1,000 $1,000 $1,000
Retained Earnings ($720) $4,289 $9,085
Earnings $5,009 $4,795 $5,124
Total Capital $5,289 $10,085 $15,209
Total Liabilities and Capital $6,076 $10,683 $16,098
Net Worth $5,289 $10,085 $15,209

7.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7379, Computer Related Services NEC, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 32.00% 32.00% 7.20%
Percent of Total Assets
Accounts Receivable 92.70% 69.60% 60.97% 21.70%
Other Current Assets 0.00% 0.00% 0.00% 46.70%
Total Current Assets 100.00% 100.00% 100.00% 71.90%
Long-term Assets 0.00% 0.00% 0.00% 28.10%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 12.95% 5.60% 5.52% 51.40%
Long-term Liabilities 0.00% 0.00% 0.00% 19.10%
Total Liabilities 12.95% 5.60% 5.52% 70.50%
Net Worth 87.05% 94.40% 94.48% 29.50%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 80.99% 76.48% 71.56% 0.00%
Selling, General & Administrative Expenses 38.70% 65.72% 64.96% 80.70%
Advertising Expenses 0.00% 0.00% 0.00% 1.20%
Profit Before Interest and Taxes 36.69% 26.48% 21.56% 1.70%
Main Ratios
Current 7.72 17.86 18.12 1.27
Quick 7.72 17.86 18.12 1.01
Total Debt to Total Assets 12.95% 5.60% 5.52% 70.50%
Pre-tax Return on Net Worth 126.88% 63.40% 45.17% 3.50%
Pre-tax Return on Assets 110.45% 59.85% 42.68% 11.80%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 27.39% 19.86% 16.08% n.a
Return on Equity 94.71% 47.55% 33.69% n.a
Activity Ratios
Accounts Receivable Turnover 3.25 3.25 3.25 n.a
Collection Days 55 99 99 n.a
Accounts Payable Turnover 6.58 12.17 12.17 n.a
Payment Days 27 35 25 n.a
Total Asset Turnover 3.01 2.26 1.98 n.a
Debt Ratios
Debt to Net Worth 0.15 0.06 0.06 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $5,289 $10,085 $15,209 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.33 0.44 0.51 n.a
Current Debt/Total Assets 13% 6% 6% n.a
Acid Test 0.56 5.43 7.07 n.a
Sales/Net Worth 3.46 2.39 2.10 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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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
Break-even Analysis
Monthly Units Break-even 28
Monthly Revenue Break-even $834
Assumptions:
Average Per-Unit Revenue $29.98
Average Per-Unit Variable Cost $5.70
Estimated Monthly Fixed Cost $675
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $18,289 $24,142 $31,868
Direct Cost of Sales $3,476 $5,677 $9,063
Other $0 $0 $0
Total Cost of Sales $3,476 $5,677 $9,063
Gross Margin $14,814 $18,465 $22,804
Gross Margin % 80.99% 76.48% 71.56%
Expenses
Payroll $8,102 $12,071 $15,934
Sales and Marketing and Other Expenses $0 $0 $0
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $0 $0 $0
Insurance $0 $0 $0
Rent $0 $0 $0
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $8,102 $12,071 $15,934
Profit Before Interest and Taxes $6,711 $6,394 $6,870
EBITDA $6,711 $6,394 $6,870
Interest Expense $0 $0 $0
Taxes Incurred $1,702 $1,598 $1,746
Net Profit $5,009 $4,795 $5,124
Net Profit/Sales 27.39% 19.86% 16.08%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $0 $0 $0
Cash from Receivables $12,657 $22,340 $29,488
Subtotal Cash from Operations $12,657 $22,340 $29,488
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 $12,657 $22,340 $29,488
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $8,102 $12,071 $15,934
Bill Payments $4,391 $7,464 $10,519
Subtotal Spent on Operations $12,493 $19,535 $26,453
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 $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $12,493 $19,535 $26,453
Net Cash Flow $164 $2,804 $3,035
Cash Balance $444 $3,248 $6,283
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $444 $3,248 $6,283
Accounts Receivable $5,633 $7,435 $9,815
Other Current Assets $0 $0 $0
Total Current Assets $6,076 $10,683 $16,098
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $6,076 $10,683 $16,098
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $787 $598 $888
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $787 $598 $888
Long-term Liabilities $0 $0 $0
Total Liabilities $787 $598 $888
Paid-in Capital $1,000 $1,000 $1,000
Retained Earnings ($720) $4,289 $9,085
Earnings $5,009 $4,795 $5,124
Total Capital $5,289 $10,085 $15,209
Total Liabilities and Capital $6,076 $10,683 $16,098
Net Worth $5,289 $10,085 $15,209
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 32.00% 32.00% 7.20%
Percent of Total Assets
Accounts Receivable 92.70% 69.60% 60.97% 21.70%
Other Current Assets 0.00% 0.00% 0.00% 46.70%
Total Current Assets 100.00% 100.00% 100.00% 71.90%
Long-term Assets 0.00% 0.00% 0.00% 28.10%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 12.95% 5.60% 5.52% 51.40%
Long-term Liabilities 0.00% 0.00% 0.00% 19.10%
Total Liabilities 12.95% 5.60% 5.52% 70.50%
Net Worth 87.05% 94.40% 94.48% 29.50%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 80.99% 76.48% 71.56% 0.00%
Selling, General & Administrative Expenses 38.70% 65.72% 64.96% 80.70%
Advertising Expenses 0.00% 0.00% 0.00% 1.20%
Profit Before Interest and Taxes 36.69% 26.48% 21.56% 1.70%
Main Ratios
Current 7.72 17.86 18.12 1.27
Quick 7.72 17.86 18.12 1.01
Total Debt to Total Assets 12.95% 5.60% 5.52% 70.50%
Pre-tax Return on Net Worth 126.88% 63.40% 45.17% 3.50%
Pre-tax Return on Assets 110.45% 59.85% 42.68% 11.80%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 27.39% 19.86% 16.08% n.a
Return on Equity 94.71% 47.55% 33.69% n.a
Activity Ratios
Accounts Receivable Turnover 3.25 3.25 3.25 n.a
Collection Days 55 99 99 n.a
Accounts Payable Turnover 6.58 12.17 12.17 n.a
Payment Days 27 35 25 n.a
Total Asset Turnover 3.01 2.26 1.98 n.a
Debt Ratios
Debt to Net Worth 0.15 0.06 0.06 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $5,289 $10,085 $15,209 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.33 0.44 0.51 n.a
Current Debt/Total Assets 13% 6% 6% n.a
Acid Test 0.56 5.43 7.07 n.a
Sales/Net Worth 3.46 2.39 2.10 n.a
Dividend Payout 0.00 0.00 0.00 n.a