Technology Investment Business Plan

Center for Technology and Investment

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Financial Plan

Attached is CTI's financial plan for review.

7.1 Important Assumptions

Below is a short list of some general assumptions:

  • The rural economy is growing at 2.5%, much less than the 3-3.5% growth expected for urban areas.
  • Due to the nonprofit status, no taxes are required.
  • Short-term and long-term interest rates are based on Mr. Franklin's credit score.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 5.00% 5.00% 5.00%
Long-term Interest Rate 8.00% 8.00% 8.00%
Tax Rate 0.00% 0.00% 0.00%
Other 0 0 0

7.2 Break-even Analysis

The break-even numbers demonstrate that we will break-even at well below our minimum established for the retainer. Books and other materials are not included in the break-even analysis due to the lower margins, lower revenue projections for those materials, and the fact that the company will not remain a going concern unless it can attract a minimum number of clients on retainer.

Break-even Analysis
Monthly Revenue Break-even $9,352
Assumptions:
Average Percent Variable Cost 1%
Estimated Monthly Fixed Cost $9,270

7.3 Projected Balance Sheet

The attached balance sheet is very straightforward.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $83,950 $176,453 $299,948
Accounts Receivable $37,592 $41,685 $47,329
Inventory $854 $691 $691
Other Current Assets $0 $0 $0
Total Current Assets $122,396 $218,829 $347,968
Long-term Assets
Long-term Assets $30,000 $40,000 $40,000
Accumulated Depreciation $3,600 $3,600 $3,600
Total Long-term Assets $26,400 $36,400 $36,400
Total Assets $148,796 $255,229 $384,368
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $2,678 $3,114 $3,357
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $2,678 $3,114 $3,357
Long-term Liabilities $0 $0 $0
Total Liabilities $2,678 $3,114 $3,357
Paid-in Capital $35,000 $35,000 $35,000
Accumulated Surplus/Deficit ($19,050) $111,119 $217,116
Surplus/Deficit $130,169 $105,997 $128,895
Total Capital $146,119 $252,116 $381,011
Total Liabilities and Capital $148,796 $255,229 $384,368
Net Worth $146,119 $252,116 $381,011

7.4 Projected Surplus or Deficit

We expect to have a surplus in each of the next three years. Bill Franklin requires only a modest salary, thereby pushing up Net Surplus to a range in which the money may be reinvested into additional technology services and products for clients. This might include workstation upgrades, communication tools, demo hardware, and outsourcing of other essential business functions.

Surplus and Deficit
Year 1 Year 2 Year 3
Funding $244,429 $271,042 $307,741
Direct Cost $2,146 $2,146 $2,146
Other Costs of Goods $0 $0 $0
Total Direct Cost $2,146 $2,146 $2,146
Gross Surplus $242,284 $268,897 $305,595
Gross Surplus % 99.12% 99.21% 99.30%
Expenses
Payroll $78,000 $127,000 $138,000
Sales and Marketing and Other Expenses $3,000 $3,200 $3,400
Depreciation $3,600 $0 $0
Rent $9,600 $10,000 $10,700
Utilities $1,800 $2,000 $2,200
Insurance $1,440 $1,500 $1,600
Auto Lease/ Fuel $6,000 $6,500 $7,000
Payroll Taxes $7,800 $12,700 $13,800
Other $0 $0 $0
Total Operating Expenses $111,240 $162,900 $176,700
Surplus Before Interest and Taxes $131,044 $105,997 $128,895
EBITDA $134,644 $105,997 $128,895
Interest Expense $875 $0 $0
Taxes Incurred $0 $0 $0
Net Surplus $130,169 $105,997 $128,895
Net Surplus/Funding 53.25% 39.11% 41.88%

7.5 Projected Cash Flow

Some short-term borrowing is necessary within the first three months of operations. This is simply borrowed off of the CEO's credit card balances in order to maintain a positive cash flow balance in the first several months. After month three or four, sales will stabilize and grow fast enough to supply ample cash for CTI.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Funding $134,436 $149,073 $169,257
Cash from Receivables $72,401 $117,876 $132,839
Subtotal Cash from Operations $206,838 $266,949 $302,097
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $15,000 $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 $0 $0 $0
Subtotal Cash Received $221,838 $266,949 $302,097
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $78,000 $127,000 $138,000
Bill Payments $30,837 $37,446 $40,602
Subtotal Spent on Operations $108,837 $164,446 $178,602
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $25,000 $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 $20,000 $10,000 $0
Dividends $0 $0 $0
Subtotal Cash Spent $153,837 $174,446 $178,602
Net Cash Flow $68,000 $92,503 $123,495
Cash Balance $83,950 $176,453 $299,948

7.6 Standard Ratios

Net working capital is very healthy, and interest coverage easily argues that by year two CTI could leverage itself with more borrowing if expansion is necessary. See attached table.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Funding Growth n.a. 10.89% 13.54% 0.00%
Percent of Total Assets
Accounts Receivable 25.26% 16.33% 12.31% 0.00%
Inventory 0.57% 0.27% 0.18% 0.00%
Other Current Assets 0.00% 0.00% 0.00% 100.00%
Total Current Assets 82.26% 85.74% 90.53% 100.00%
Long-term Assets 17.74% 14.26% 9.47% 0.00%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 1.80% 1.22% 0.87% 0.00%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00%
Total Liabilities 1.80% 1.22% 0.87% 0.00%
Net Worth 98.20% 98.78% 99.13% 100.00%
Percent of Funding
Funding 100.00% 100.00% 100.00% 100.00%
Gross Surplus 99.12% 99.21% 99.30% 0.00%
Selling, General & Administrative Expenses 46.00% 60.56% 57.82% 0.00%
Advertising Expenses 0.00% 0.00% 0.00% 0.00%
Surplus Before Interest and Taxes 53.61% 39.11% 41.88% 0.00%
Main Ratios
Current 45.71 70.28 103.65 0.00
Quick 45.39 70.06 103.44 0.00
Total Debt to Total Assets 1.80% 1.22% 0.87% 0.00%
Pre-tax Return on Net Worth 89.08% 42.04% 33.83% 0.00%
Pre-tax Return on Assets 87.48% 41.53% 33.53% 0.00%
Additional Ratios Year 1 Year 2 Year 3
Net Surplus Margin 53.25% 39.11% 41.88% n.a
Return on Equity 89.08% 42.04% 33.83% n.a
Activity Ratios
Accounts Receivable Turnover 2.93 2.93 2.93 n.a
Collection Days 54 119 117 n.a
Inventory Turnover 3.10 2.78 3.10 n.a
Accounts Payable Turnover 12.52 12.17 12.17 n.a
Payment Days 27 28 29 n.a
Total Asset Turnover 1.64 1.06 0.80 n.a
Debt Ratios
Debt to Net Worth 0.02 0.01 0.01 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $119,719 $215,716 $344,611 n.a
Interest Coverage 149.76 0.00 0.00 n.a
Additional Ratios
Assets to Funding 0.61 0.94 1.25 n.a
Current Debt/Total Assets 2% 1% 1% n.a
Acid Test 31.35 56.67 89.35 n.a
Funding/Net Worth 1.67 1.08 0.81 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 5.00% 5.00% 5.00%
Long-term Interest Rate 8.00% 8.00% 8.00%
Tax Rate 0.00% 0.00% 0.00%
Other 0 0 0
Break-even Analysis
Monthly Revenue Break-even $9,352
Assumptions:
Average Percent Variable Cost 1%
Estimated Monthly Fixed Cost $9,270
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $83,950 $176,453 $299,948
Accounts Receivable $37,592 $41,685 $47,329
Inventory $854 $691 $691
Other Current Assets $0 $0 $0
Total Current Assets $122,396 $218,829 $347,968
Long-term Assets
Long-term Assets $30,000 $40,000 $40,000
Accumulated Depreciation $3,600 $3,600 $3,600
Total Long-term Assets $26,400 $36,400 $36,400
Total Assets $148,796 $255,229 $384,368
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $2,678 $3,114 $3,357
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $2,678 $3,114 $3,357
Long-term Liabilities $0 $0 $0
Total Liabilities $2,678 $3,114 $3,357
Paid-in Capital $35,000 $35,000 $35,000
Accumulated Surplus/Deficit ($19,050) $111,119 $217,116
Surplus/Deficit $130,169 $105,997 $128,895
Total Capital $146,119 $252,116 $381,011
Total Liabilities and Capital $148,796 $255,229 $384,368
Net Worth $146,119 $252,116 $381,011
Surplus and Deficit
Year 1 Year 2 Year 3
Funding $244,429 $271,042 $307,741
Direct Cost $2,146 $2,146 $2,146
Other Costs of Goods $0 $0 $0
Total Direct Cost $2,146 $2,146 $2,146
Gross Surplus $242,284 $268,897 $305,595
Gross Surplus % 99.12% 99.21% 99.30%
Expenses
Payroll $78,000 $127,000 $138,000
Sales and Marketing and Other Expenses $3,000 $3,200 $3,400
Depreciation $3,600 $0 $0
Rent $9,600 $10,000 $10,700
Utilities $1,800 $2,000 $2,200
Insurance $1,440 $1,500 $1,600
Auto Lease/ Fuel $6,000 $6,500 $7,000
Payroll Taxes $7,800 $12,700 $13,800
Other $0 $0 $0
Total Operating Expenses $111,240 $162,900 $176,700
Surplus Before Interest and Taxes $131,044 $105,997 $128,895
EBITDA $134,644 $105,997 $128,895
Interest Expense $875 $0 $0
Taxes Incurred $0 $0 $0
Net Surplus $130,169 $105,997 $128,895
Net Surplus/Funding 53.25% 39.11% 41.88%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Funding $134,436 $149,073 $169,257
Cash from Receivables $72,401 $117,876 $132,839
Subtotal Cash from Operations $206,838 $266,949 $302,097
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $15,000 $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 $0 $0 $0
Subtotal Cash Received $221,838 $266,949 $302,097
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $78,000 $127,000 $138,000
Bill Payments $30,837 $37,446 $40,602
Subtotal Spent on Operations $108,837 $164,446 $178,602
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $25,000 $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 $20,000 $10,000 $0
Dividends $0 $0 $0
Subtotal Cash Spent $153,837 $174,446 $178,602
Net Cash Flow $68,000 $92,503 $123,495
Cash Balance $83,950 $176,453 $299,948
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Funding Growth n.a. 10.89% 13.54% 0.00%
Percent of Total Assets
Accounts Receivable 25.26% 16.33% 12.31% 0.00%
Inventory 0.57% 0.27% 0.18% 0.00%
Other Current Assets 0.00% 0.00% 0.00% 100.00%
Total Current Assets 82.26% 85.74% 90.53% 100.00%
Long-term Assets 17.74% 14.26% 9.47% 0.00%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 1.80% 1.22% 0.87% 0.00%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00%
Total Liabilities 1.80% 1.22% 0.87% 0.00%
Net Worth 98.20% 98.78% 99.13% 100.00%
Percent of Funding
Funding 100.00% 100.00% 100.00% 100.00%
Gross Surplus 99.12% 99.21% 99.30% 0.00%
Selling, General & Administrative Expenses 46.00% 60.56% 57.82% 0.00%
Advertising Expenses 0.00% 0.00% 0.00% 0.00%
Surplus Before Interest and Taxes 53.61% 39.11% 41.88% 0.00%
Main Ratios
Current 45.71 70.28 103.65 0.00
Quick 45.39 70.06 103.44 0.00
Total Debt to Total Assets 1.80% 1.22% 0.87% 0.00%
Pre-tax Return on Net Worth 89.08% 42.04% 33.83% 0.00%
Pre-tax Return on Assets 87.48% 41.53% 33.53% 0.00%
Additional Ratios Year 1 Year 2 Year 3
Net Surplus Margin 53.25% 39.11% 41.88% n.a
Return on Equity 89.08% 42.04% 33.83% n.a
Activity Ratios
Accounts Receivable Turnover 2.93 2.93 2.93 n.a
Collection Days 54 119 117 n.a
Inventory Turnover 3.10 2.78 3.10 n.a
Accounts Payable Turnover 12.52 12.17 12.17 n.a
Payment Days 27 28 29 n.a
Total Asset Turnover 1.64 1.06 0.80 n.a
Debt Ratios
Debt to Net Worth 0.02 0.01 0.01 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $119,719 $215,716 $344,611 n.a
Interest Coverage 149.76 0.00 0.00 n.a
Additional Ratios
Assets to Funding 0.61 0.94 1.25 n.a
Current Debt/Total Assets 2% 1% 1% n.a
Acid Test 31.35 56.67 89.35 n.a
Funding/Net Worth 1.67 1.08 0.81 n.a
Dividend Payout 0.00 0.00 0.00 n.a