Solar Water Heater Distributor Business Plan

Sun Heat

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Financial Plan

The following sections will outline important financial information.

8.1 Important Assumptions

The following table details important Financial Assumptions.

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

8.2 Break-even Analysis

The Break-even Analysis indicates what will be needed in monthly revenue to reach the break-even point.

Break-even Analysis
Monthly Revenue Break-even $29,872
Assumptions:
Average Percent Variable Cost 45%
Estimated Monthly Fixed Cost $16,430

8.3 Projected Profit and Loss

The following table will indicate Projected Profit and Loss.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $240,309 $403,967 $523,389
Direct Cost of Sales $108,139 $181,785 $235,525
Other Costs of Goods $0 $0 $0
Total Cost of Sales $108,139 $181,785 $235,525
Gross Margin $132,170 $222,182 $287,864
Gross Margin % 55.00% 55.00% 55.00%
Expenses
Payroll $118,400 $141,600 $151,600
Sales and Marketing and Other Expenses $5,400 $5,400 $5,400
Depreciation $12,396 $1,033 $1,033
Rent $24,000 $25,000 $26,000
Utilities $9,000 $750 $750
Insurance $7,800 $7,800 $7,800
Payroll Taxes $17,760 $21,240 $22,740
Other $2,400 $2,400 $2,400
Total Operating Expenses $197,156 $205,223 $217,723
Profit Before Interest and Taxes ($64,986) $16,959 $70,141
EBITDA ($52,590) $17,992 $71,174
Interest Expense $0 $0 $0
Taxes Incurred $0 $5,088 $21,042
Net Profit ($64,986) $11,871 $49,099
Net Profit/Sales -27.04% 2.94% 9.38%

8.4 Projected Cash Flow

The following chart and table will indicate Projected Cash Flow.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $60,077 $100,992 $130,847
Cash from Receivables $136,262 $273,031 $370,691
Subtotal Cash from Operations $196,340 $374,022 $501,538
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 $196,340 $374,022 $501,538
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $118,400 $141,600 $151,600
Bill Payments $155,929 $247,529 $315,723
Subtotal Spent on Operations $274,329 $389,129 $467,323
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 $274,329 $389,129 $467,323
Net Cash Flow ($77,989) ($15,107) $34,215
Cash Balance $16,011 $904 $35,119

8.5 Projected Balance Sheet

The following table will indicate the Projected Balance Sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $16,011 $904 $35,119
Accounts Receivable $43,969 $73,914 $95,765
Other Current Assets $0 $0 $0
Total Current Assets $59,980 $74,818 $130,883
Long-term Assets
Long-term Assets $62,000 $62,000 $62,000
Accumulated Depreciation $12,396 $13,429 $14,462
Total Long-term Assets $49,604 $48,571 $47,538
Total Assets $109,584 $123,389 $178,421
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $18,570 $20,504 $26,438
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $18,570 $20,504 $26,438
Long-term Liabilities $0 $0 $0
Total Liabilities $18,570 $20,504 $26,438
Paid-in Capital $165,000 $165,000 $165,000
Retained Earnings ($9,000) ($73,986) ($62,115)
Earnings ($64,986) $11,871 $49,099
Total Capital $91,014 $102,885 $151,984
Total Liabilities and Capital $109,584 $123,389 $178,421
Net Worth $91,014 $102,885 $151,984

8.6 Business Ratios

The following table details important Business Ratios specific to Sun Heat as well as industry ratios for the Other Electric Power Generation industry, NAICS code 221119.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 68.10% 29.56% 10.72%
Percent of Total Assets
Accounts Receivable 40.12% 59.90% 53.67% 10.41%
Other Current Assets 0.00% 0.00% 0.00% 40.72%
Total Current Assets 54.73% 60.64% 73.36% 51.79%
Long-term Assets 45.27% 39.36% 26.64% 48.21%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 16.95% 16.62% 14.82% 12.65%
Long-term Liabilities 0.00% 0.00% 0.00% 40.12%
Total Liabilities 16.95% 16.62% 14.82% 52.77%
Net Worth 83.05% 83.38% 85.18% 47.23%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 55.00% 55.00% 55.00% 47.48%
Selling, General & Administrative Expenses 82.04% 52.06% 45.62% 13.69%
Advertising Expenses 0.00% 0.00% 0.00% 0.03%
Profit Before Interest and Taxes -27.04% 4.20% 13.40% 9.26%
Main Ratios
Current 3.23 3.65 4.95 2.10
Quick 3.23 3.65 4.95 1.69
Total Debt to Total Assets 16.95% 16.62% 14.82% 60.03%
Pre-tax Return on Net Worth -71.40% 16.48% 46.15% 7.72%
Pre-tax Return on Assets -59.30% 13.74% 39.31% 19.31%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -27.04% 2.94% 9.38% n.a
Return on Equity -71.40% 11.54% 32.31% n.a
Activity Ratios
Accounts Receivable Turnover 4.10 4.10 4.10 n.a
Collection Days 56 71 79 n.a
Accounts Payable Turnover 9.40 12.17 12.17 n.a
Payment Days 27 29 27 n.a
Total Asset Turnover 2.19 3.27 2.93 n.a
Debt Ratios
Debt to Net Worth 0.20 0.20 0.17 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $41,410 $54,314 $104,446 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.46 0.31 0.34 n.a
Current Debt/Total Assets 17% 17% 15% n.a
Acid Test 0.86 0.04 1.33 n.a
Sales/Net Worth 2.64 3.93 3.44 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 30.00% 30.00% 30.00%
Other 0 0 0
Break-even Analysis
Monthly Revenue Break-even $29,872
Assumptions:
Average Percent Variable Cost 45%
Estimated Monthly Fixed Cost $16,430
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $240,309 $403,967 $523,389
Direct Cost of Sales $108,139 $181,785 $235,525
Other Costs of Goods $0 $0 $0
Total Cost of Sales $108,139 $181,785 $235,525
Gross Margin $132,170 $222,182 $287,864
Gross Margin % 55.00% 55.00% 55.00%
Expenses
Payroll $118,400 $141,600 $151,600
Sales and Marketing and Other Expenses $5,400 $5,400 $5,400
Depreciation $12,396 $1,033 $1,033
Rent $24,000 $25,000 $26,000
Utilities $9,000 $750 $750
Insurance $7,800 $7,800 $7,800
Payroll Taxes $17,760 $21,240 $22,740
Other $2,400 $2,400 $2,400
Total Operating Expenses $197,156 $205,223 $217,723
Profit Before Interest and Taxes ($64,986) $16,959 $70,141
EBITDA ($52,590) $17,992 $71,174
Interest Expense $0 $0 $0
Taxes Incurred $0 $5,088 $21,042
Net Profit ($64,986) $11,871 $49,099
Net Profit/Sales -27.04% 2.94% 9.38%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $60,077 $100,992 $130,847
Cash from Receivables $136,262 $273,031 $370,691
Subtotal Cash from Operations $196,340 $374,022 $501,538
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 $196,340 $374,022 $501,538
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $118,400 $141,600 $151,600
Bill Payments $155,929 $247,529 $315,723
Subtotal Spent on Operations $274,329 $389,129 $467,323
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 $274,329 $389,129 $467,323
Net Cash Flow ($77,989) ($15,107) $34,215
Cash Balance $16,011 $904 $35,119
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $16,011 $904 $35,119
Accounts Receivable $43,969 $73,914 $95,765
Other Current Assets $0 $0 $0
Total Current Assets $59,980 $74,818 $130,883
Long-term Assets
Long-term Assets $62,000 $62,000 $62,000
Accumulated Depreciation $12,396 $13,429 $14,462
Total Long-term Assets $49,604 $48,571 $47,538
Total Assets $109,584 $123,389 $178,421
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $18,570 $20,504 $26,438
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $18,570 $20,504 $26,438
Long-term Liabilities $0 $0 $0
Total Liabilities $18,570 $20,504 $26,438
Paid-in Capital $165,000 $165,000 $165,000
Retained Earnings ($9,000) ($73,986) ($62,115)
Earnings ($64,986) $11,871 $49,099
Total Capital $91,014 $102,885 $151,984
Total Liabilities and Capital $109,584 $123,389 $178,421
Net Worth $91,014 $102,885 $151,984
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 68.10% 29.56% 10.72%
Percent of Total Assets
Accounts Receivable 40.12% 59.90% 53.67% 10.41%
Other Current Assets 0.00% 0.00% 0.00% 40.72%
Total Current Assets 54.73% 60.64% 73.36% 51.79%
Long-term Assets 45.27% 39.36% 26.64% 48.21%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 16.95% 16.62% 14.82% 12.65%
Long-term Liabilities 0.00% 0.00% 0.00% 40.12%
Total Liabilities 16.95% 16.62% 14.82% 52.77%
Net Worth 83.05% 83.38% 85.18% 47.23%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 55.00% 55.00% 55.00% 47.48%
Selling, General & Administrative Expenses 82.04% 52.06% 45.62% 13.69%
Advertising Expenses 0.00% 0.00% 0.00% 0.03%
Profit Before Interest and Taxes -27.04% 4.20% 13.40% 9.26%
Main Ratios
Current 3.23 3.65 4.95 2.10
Quick 3.23 3.65 4.95 1.69
Total Debt to Total Assets 16.95% 16.62% 14.82% 60.03%
Pre-tax Return on Net Worth -71.40% 16.48% 46.15% 7.72%
Pre-tax Return on Assets -59.30% 13.74% 39.31% 19.31%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -27.04% 2.94% 9.38% n.a
Return on Equity -71.40% 11.54% 32.31% n.a
Activity Ratios
Accounts Receivable Turnover 4.10 4.10 4.10 n.a
Collection Days 56 71 79 n.a
Accounts Payable Turnover 9.40 12.17 12.17 n.a
Payment Days 27 29 27 n.a
Total Asset Turnover 2.19 3.27 2.93 n.a
Debt Ratios
Debt to Net Worth 0.20 0.20 0.17 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $41,410 $54,314 $104,446 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.46 0.31 0.34 n.a
Current Debt/Total Assets 17% 17% 15% n.a
Acid Test 0.86 0.04 1.33 n.a
Sales/Net Worth 2.64 3.93 3.44 n.a
Dividend Payout 0.00 0.00 0.00 n.a