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Teachers' Employment Agency Business Plan

Financial Plan

We will finance growth through the cash flow produced in the business. This strategy may force slow growth, however, establishing a stable and extensive network will take time and is the key to the success of the company.

Our sales based on a yearly contract with payment in advance would be the key to our cash flow and growth. We realize that we may have to be flexible in accepting less than one year of payment, but feel if we can get a minimum of three-month commitments from each employer, we will meet cash flow needs.

7.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions. We recognize the collection of accounts receivable is critical, but one over which we have little control.

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

The following chart and table summarize our break-even point. Since the cost per unit is a commission being paid to the sales persons who will initially be the owners, we are operating at the minimum, with the bulk of our costs being the compensation of the owners. We are using 25% of revenue, which is high based on the above information.

Break-even Analysis
Monthly Units Break-even 8
Monthly Revenue Break-even $311
Assumptions:
Average Per-Unit Revenue $40.63
Average Per-Unit Variable Cost $14.53
Estimated Monthly Fixed Cost $200

7.3 Projected Profit and Loss

Our profit and loss is shown in the following table. Our sales figures are conservative due to our start-up nature and specific target audience. We still project a small profit the first year while nearly doubling profit in each of the following years. These figures do not take into account the substantial possible profit center of Web advertising revenue from educational tool and resource suppliers, as well as linking with these same suppliers. We expect traffic to be significant enough to begin addressing this large profit center midway through year two and throughout all of three.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $7,800 $14,580 $23,115
Direct Cost of Sales $2,790 $4,833 $8,106
Other $0 $0 $0
Total Cost of Sales $2,790 $4,833 $8,106
Gross Margin $5,010 $9,747 $15,009
Gross Margin % 64.23% 66.85% 64.93%
Expenses
Payroll $2,400 $3,000 $4,000
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 $2,400 $3,000 $4,000
Profit Before Interest and Taxes $2,610 $6,747 $11,009
EBITDA $2,610 $6,747 $11,009
Interest Expense $0 $0 $0
Taxes Incurred $663 $1,687 $2,798
Net Profit $1,947 $5,060 $8,211
Net Profit/Sales 24.96% 34.71% 35.52%

7.4 Projected Cash Flow

Due to our fixed Web hosting costs and the owners being the only employees, our cash flow in the following table remains positive throughout the year. The improvement in the cash flow as the subsequent years progress will allow for the continual updating and maintenance of the site to keep it fresh and viable. The low fixed cost of adding pages (flat fee of approximately $130/page) should be covered by our positive cash flow, thus allowing continuing expansion as necessary.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $7,800 $14,580 $23,115
Subtotal Cash from Operations $7,800 $14,580 $23,115
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 $7,800 $14,580 $23,115
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $2,400 $3,000 $4,000
Bill Payments $3,176 $6,261 $10,544
Subtotal Spent on Operations $5,576 $9,261 $14,544
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 $5,576 $9,261 $14,544
Net Cash Flow $2,224 $5,319 $8,571
Cash Balance $2,224 $7,543 $16,114

7.5 Projected Balance Sheet

The balance sheet in the following table shows a small but continued growth of net worth in just three years, presenting a healthy financial picture. This growth in net worth will also be supplemented significantly with the possibility of Web page advertising and related links income that is not yet projected or contained in the figures.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $2,224 $7,543 $16,114
Other Current Assets $0 $0 $0
Total Current Assets $2,224 $7,543 $16,114
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $2,224 $7,543 $16,114
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $277 $536 $896
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $277 $536 $896
Long-term Liabilities $0 $0 $0
Total Liabilities $277 $536 $896
Paid-in Capital $6,680 $6,680 $6,680
Retained Earnings ($6,680) ($4,733) $327
Earnings $1,947 $5,060 $8,211
Total Capital $1,947 $7,007 $15,218
Total Liabilities and Capital $2,224 $7,543 $16,114
Net Worth $1,947 $7,007 $15,218

7.6 Business Ratios

The following table contains important business ratios from the education services industry, as determined by the Standard Industry Classification (SIC) Index, 8299.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 86.92% 58.54% 9.00%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 43.90%
Total Current Assets 100.00% 100.00% 100.00% 73.60%
Long-term Assets 0.00% 0.00% 0.00% 26.40%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 12.47% 7.10% 5.56% 43.90%
Long-term Liabilities 0.00% 0.00% 0.00% 21.40%
Total Liabilities 12.47% 7.10% 5.56% 65.30%
Net Worth 87.53% 92.90% 94.44% 34.70%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 64.23% 66.85% 64.93% 0.00%
Selling, General & Administrative Expenses 39.13% 32.15% 29.21% 82.20%
Advertising Expenses 0.00% 0.00% 0.00% 1.10%
Profit Before Interest and Taxes 33.46% 46.28% 47.63% 2.40%
Main Ratios
Current 8.02 14.08 17.98 1.51
Quick 8.02 14.08 17.98 1.20
Total Debt to Total Assets 12.47% 7.10% 5.56% 65.30%
Pre-tax Return on Net Worth 134.08% 96.29% 72.34% 4.40%
Pre-tax Return on Assets 117.36% 89.45% 68.32% 12.70%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 24.96% 34.71% 35.52% n.a
Return on Equity 100.00% 72.22% 53.96% n.a
Activity Ratios
Accounts Payable Turnover 12.45 12.17 12.17 n.a
Payment Days 27 23 24 n.a
Total Asset Turnover 3.51 1.93 1.43 n.a
Debt Ratios
Debt to Net Worth 0.14 0.08 0.06 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $1,947 $7,007 $15,218 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.29 0.52 0.70 n.a
Current Debt/Total Assets 12% 7% 6% n.a
Acid Test 8.02 14.08 17.98 n.a
Sales/Net Worth 4.01 2.08 1.52 n.a
Dividend Payout 0.00 0.00 0.00 n.a