Cellular Providers

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Telecom Wireless Business Plan

Financial Plan

The following sections outline the financial plan for Cellular Providers.

8.1 Use of Funds

Cellular Providers is currently seeking funding in the amount of $100,000 for the purpose of increasing market share, opening up additional retail locations, hiring additional staff, and effectively advertising and promoting its services.

Use and distribution of proceeds: Integrate new services, develop website, and expand into other markets. Produce media relations package(s); further build the brand name through marketing, advertising, and promotion; and acquire additional products. Funding proceeds will also be used to increase Cellular Providers' capabilities, enhance brand name, and extend Cellular Providers' market area. Funds will also be directed into business relations, television advertising, press releases, print advertising, Internet advertising, and website development and maintenance. The initial investment will be used as a "kick off" marketing budget. It is expected that from this point on the company will self finance its expansion and marketing programs.

Use of Funds
Use Amount
Office Furniture and Fixtures $50,000
Marketing $10,000
Inventory $20,000
Miscellaneous (Inventory Control, Service Centers, etc.) $20,000
Total $100,000

8.2 Important Assumptions

Basic assumptions are presented in the table below.

Corporate Tax: Figure is estimated at 30% of profits.

Interest: Figure is estimated at 10% annually.

General Assumptions
2000 2001 2002
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 0.00% 30.00% 30.00%
Other 0 0 0

8.3 Break-even Analysis

The break-even analysis shows the monthly sales revenues needed to break even.

Break-even Analysis
Monthly Revenue Break-even $165,042
Assumptions:
Average Percent Variable Cost 43%
Estimated Monthly Fixed Cost $94,759

8.4 Projected Profit and Loss

The financial projections present the company's expected financial position, results of operations and cash flow for the three years ending December 31, 2004. Accordingly, the forecast reflects its judgment as of April 4, 2000, the date of this forecast, of the expected conditions and its expected course of action. There will usually be differences between forecasted and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material.

Financial projections are based on sales volume at the levels described in the revenue section and presents, to the best of management's knowledge and belief, the company's expected assets, liabilities, capital, revenues, and expenses. Further, the projections reflect management's judgement of the expected conditions and its expected course of action given the hypothetical assumptions.

Revenues are derived from sales of wireless communications services, products, and accessories to businesses and consumers.

Annual Growth: We expect growth to increase by 200% per year on the basis that the company will be stepping up marketing and sales efforts, as well as initiating new partnerships and alliances that will foster growth and extensions of our existing markets. These strategies are aimed to build momentum and critical mass within the company and its overall sales results.

Cost of Goods: Cellular Providers expects that its products will bear a reasonably high markup, which translates to a relatively low cost of goods. Our cost of goods includes consideration cost of products, shipping charges (which may be passed along to the consumer), and sales commissions.

Marketing/Promotion: We group advertising, promotions, and retail outlet marketing under this category.

Retail Outlets: We estimate that each retail location will cost $30,000 to set up and we anticipate opening up 10 new stores.

Other: We estimate that we may need additional funds for other promotions and this is set aside in a special fund.

Rent: It is assumed that rent will be an average $1,500 per month per store.

Repairs and Maintenance: This is an estimated figure which is expected to grow with the setup of service centers.

Salary: Figures are estimated based on the national average for similar positions. They assume however, the hiring of a store manager, a regional manager, a CFO, an HR manager, and acquiring the services of a marketing company.

Utilities: Figures are estimated. Management estimates that utilities will be at $800 per month per store.

Pro Forma Profit and Loss
2000 2001 2002
Sales $2,154,083 $5,760,000 $9,920,000
Direct Cost of Sales $917,309 $2,436,480 $4,212,160
Other $0 $0 $0
Total Cost of Sales $917,309 $2,436,480 $4,212,160
Gross Margin $1,236,774 $3,323,520 $5,707,840
Gross Margin % 57.42% 57.70% 57.54%
Expenses
Payroll $391,658 $951,500 $1,310,500
Marketing/Promotion $473,712 $917,200 $1,476,200
Depreciation $4,992 $5,000 $5,000
Store Set Up Costs $90,000 $60,000 $90,000
Repairs and Maintenance $6,000 $6,000 $6,000
Utilities $22,400 $57,600 $76,800
Insurance $21,600 $50,000 $66,000
Rent $42,000 $78,000 $134,000
Payroll Taxes $58,749 $142,725 $196,575
Legal/Consultants $6,000 $6,000 $6,000
Inventory Control systems $20,000 $0 $0
Total Operating Expenses $1,137,111 $2,274,025 $3,367,075
Profit Before Interest and Taxes $99,663 $1,049,495 $2,340,765
EBITDA $104,655 $1,054,495 $2,345,765
Interest Expense $166,180 $142,460 $99,140
Taxes Incurred $0 $272,111 $672,488
Net Profit ($66,517) $634,925 $1,569,138
Net Profit/Sales -3.09% 11.02% 15.82%

8.5 Projected Cash Flow

The following table and chart shows the projected cash flow of Cellular Providers.

Pro Forma Cash Flow
2000 2001 2002
Cash Received
Cash from Operations
Cash Sales $1,550,940 $4,147,200 $7,142,400
Cash from Receivables $658,468 $1,406,261 $2,539,325
Subtotal Cash from Operations $2,209,408 $5,553,461 $9,681,725
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $100,000 $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 $2,309,408 $5,553,461 $9,681,725
Expenditures 2000 2001 2002
Expenditures from Operations
Cash Spending $391,658 $951,500 $1,310,500
Bill Payments $1,702,342 $4,215,061 $7,014,849
Subtotal Spent on Operations $2,094,000 $5,166,561 $8,325,349
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $33,600 $33,600 $32,800
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $125,000 $300,000 $500,000
Purchase Other Current Assets $37,000 $50,000 $100,000
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $2,289,600 $5,550,161 $8,958,149
Net Cash Flow $19,808 $3,300 $723,576
Cash Balance $194,808 $198,108 $921,684

8.6 Projected Balance Sheet

The following table is the projected balance sheet.

Pro Forma Balance Sheet
2000 2001 2002
Assets
Current Assets
Cash $194,808 $198,108 $921,684
Accounts Receivable $123,381 $329,920 $568,195
Inventory $112,462 $298,712 $516,409
Other Current Assets $40,000 $90,000 $190,000
Total Current Assets $470,651 $916,739 $2,196,288
Long-term Assets
Long-term Assets $50,000 $50,000 $50,000
Accumulated Depreciation $4,992 $9,992 $14,992
Total Long-term Assets $45,008 $40,008 $35,008
Total Assets $515,659 $956,747 $2,231,296
Liabilities and Capital 2000 2001 2002
Current Liabilities
Accounts Payable $218,167 $357,931 $596,142
Current Borrowing $66,400 $32,800 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $284,567 $390,731 $596,142
Long-term Liabilities $1,525,000 $1,225,000 $725,000
Total Liabilities $1,809,567 $1,615,731 $1,321,142
Paid-in Capital $0 $0 $0
Retained Earnings ($1,227,391) ($1,293,908) ($658,983)
Earnings ($66,517) $634,925 $1,569,138
Total Capital ($1,293,908) ($658,983) $910,154
Total Liabilities and Capital $515,659 $956,747 $2,231,296
Net Worth ($1,293,908) ($658,983) $910,154

8.7 Business Ratios

Cellular Providers is a company that is seeking to grow rapidly in order to seize market share in a dynamic industry. As the company is, on average, in the high growth phase of the product life cycle for its telecommunications products, the company is experiencing higher leverage of its assets and a lower ROA than the industry standard.

Ratio Analysis
2000 2001 2002 Industry Profile
Sales Growth 141.08% 167.40% 72.22% 4.80%
Percent of Total Assets
Accounts Receivable 23.93% 34.48% 25.46% 14.30%
Inventory 21.81% 31.22% 23.14% 2.50%
Other Current Assets 7.76% 9.41% 8.52% 46.50%
Total Current Assets 91.27% 95.82% 98.43% 63.30%
Long-term Assets 8.73% 4.18% 1.57% 36.70%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 55.19% 40.84% 26.72% 43.60%
Long-term Liabilities 295.74% 128.04% 32.49% 26.30%
Total Liabilities 350.92% 168.88% 59.21% 69.90%
Net Worth -250.92% -68.88% 40.79% 30.10%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 57.42% 57.70% 57.54% 57.80%
Selling, General & Administrative Expenses 58.41% 45.60% 40.45% 35.50%
Advertising Expenses 10.00% 10.00% 10.00% 1.00%
Profit Before Interest and Taxes 4.63% 18.22% 23.60% 1.90%
Main Ratios
Current 1.65 2.35 3.68 1.17
Quick 1.26 1.58 2.82 0.95
Total Debt to Total Assets 350.92% 168.88% 59.21% 69.90%
Pre-tax Return on Net Worth 5.14% -137.64% 246.29% 4.20%
Pre-tax Return on Assets -12.90% 94.80% 100.46% 14.00%
Additional Ratios 2000 2001 2002
Net Profit Margin -3.09% 11.02% 15.82% n.a
Return on Equity 0.00% 0.00% 172.40% n.a
Activity Ratios
Accounts Receivable Turnover 4.89 4.89 4.89 n.a
Collection Days 61 51 59 n.a
Inventory Turnover 10.91 11.85 10.34 n.a
Accounts Payable Turnover 8.72 12.17 12.17 n.a
Payment Days 27 24 24 n.a
Total Asset Turnover 4.18 6.02 4.45 n.a
Debt Ratios
Debt to Net Worth 0.00 0.00 1.45 n.a
Current Liab. to Liab. 0.16 0.24 0.45 n.a
Liquidity Ratios
Net Working Capital $186,084 $526,009 $1,600,146 n.a
Interest Coverage 0.60 7.37 23.61 n.a
Additional Ratios
Assets to Sales 0.24 0.17 0.22 n.a
Current Debt/Total Assets 55% 41% 27% n.a
Acid Test 0.83 0.74 1.86 n.a
Sales/Net Worth 0.00 0.00 10.90 n.a
Dividend Payout 0.00 0.00 0.00 n.a