Panache Travel Group

Start your own business plan »

Travel Agency - Upscale Business Plan

! « Jump to the beginning of this plan

Financial Plan

The financial plan of Panache Travel Group is detailed in the following sections. Preliminary estimates suggest that PTG will experience rapid growth and will increase in gross margin and sales volume. This is partly due to the vast market, but will be facilitated by increased marketing. Income estimates are based, in part, on anticipated revenues from accounts and clients that are secured by PTG prior to its acquisition of both Barkley Roberts Travel and Panache European Journeys. PTG will need sufficient cash to allow for a possible negative cash flow during start-up. It will also need investment to acquire the assets and liabilities of Barkley Roberts Travel and Panache European Journeys. Thus, the overall financial plan presents a conservative, but realistic, depiction of the financial position of PTG.

7.1 Important Assumptions

Panache Travel Group assumes the following:

  1. Market growth projections for the travel industry and for luxury travel are accurate.
  2. National economic conditions, which are favorable to the travel industry, will not experience significant decline in the next three years.
  3. International conditions will remain favorable for service providers and PTG will be able to maintain those relationships.
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 Key Financial Indicators

The following chart indicates key financial indicators for the first three years for Panache Travel Group. Growth is expected in sales and a proportional increase in operating expenses during expansion.

7.3 Projected Profit and Loss

The profit picture of Panache Travel Group improves as operations move into the second year. PTG anticipates improving its profitability dramatically by 2003. The annual estimates are included in the table below.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $500,000 $1,500,000 $4,500,000
Direct Cost of Sales $346,800 $1,222,500 $3,609,000
Other $0 $0 $0
Total Cost of Sales $346,800 $1,222,500 $3,609,000
Gross Margin $153,200 $277,500 $891,000
Gross Margin % 30.64% 18.50% 19.80%
Expenses
Payroll $52,500 $87,000 $149,000
Sales and Marketing and Other Expenses $11,700 $38,600 $76,000
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $875 $1,574 $1,653
Insurance $700 $1,200 $1,200
Rent $2,100 $3,600 $3,600
Payroll Taxes $2,625 $4,350 $7,450
Other $0 $0 $0
Total Operating Expenses $70,500 $136,324 $238,903
Profit Before Interest and Taxes $82,700 $141,176 $652,097
EBITDA $82,700 $141,176 $652,097
Interest Expense $110 $110 $110
Taxes Incurred $20,647 $35,267 $165,713
Net Profit $61,943 $105,800 $486,274
Net Profit/Sales 12.39% 7.05% 10.81%

7.4 Projected Cash Flow

Cash flow projections are critical to our success. The monthly cash flow for 2001 is shown in the illustration, with one bar representing the cash flow per month and the other representing the monthly balance. The annual cash flow figures are included here in the following table.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $500,000 $1,500,000 $4,500,000
Subtotal Cash from Operations $500,000 $1,500,000 $4,500,000
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 $500,000 $1,500,000 $4,500,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $52,500 $87,000 $149,000
Bill Payments $343,452 $1,241,864 $3,654,519
Subtotal Spent on Operations $395,952 $1,328,864 $3,803,519
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 $395,952 $1,328,864 $3,803,519
Net Cash Flow $104,048 $171,136 $696,481
Cash Balance $204,048 $375,184 $1,071,665

7.5 Projected Balance Sheet

The balance sheet indicates sustained and planned growth. Net worth improves considerably in years two and three and will provide Panache Travel Group with a strong financial position.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $204,048 $375,184 $1,071,665
Other Current Assets $0 $0 $0
Total Current Assets $204,048 $375,184 $1,071,665
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $204,048 $375,184 $1,071,665
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $42,105 $107,441 $317,649
Current Borrowing $1,100 $1,100 $1,100
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $43,205 $108,541 $318,749
Long-term Liabilities $0 $0 $0
Total Liabilities $43,205 $108,541 $318,749
Paid-in Capital $100,000 $100,000 $100,000
Retained Earnings ($1,100) $60,843 $166,642
Earnings $61,943 $105,800 $486,274
Total Capital $160,843 $266,642 $752,916
Total Liabilities and Capital $204,048 $375,184 $1,071,665
Net Worth $160,843 $266,642 $752,916

7.6 Business Ratios

The following table shows the projected business ratios. Panache Travel Group expects to maintain healthy ratios for profitability, risk and return. Industry Profile ratios are also shown, based on Standard Industry Classification (SIC) code 4724, Travel Agencies.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 200.00% 200.00% 4.00%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 38.10%
Total Current Assets 100.00% 100.00% 100.00% 64.00%
Long-term Assets 0.00% 0.00% 0.00% 36.00%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 21.17% 28.93% 29.74% 39.60%
Long-term Liabilities 0.00% 0.00% 0.00% 16.30%
Total Liabilities 21.17% 28.93% 29.74% 55.90%
Net Worth 78.83% 71.07% 70.26% 44.10%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 30.64% 18.50% 19.80% 38.30%
Selling, General & Administrative Expenses 18.25% 11.45% 8.93% 27.50%
Advertising Expenses 1.40% 1.67% 1.11% 0.40%
Profit Before Interest and Taxes 16.54% 9.41% 14.49% 1.30%
Main Ratios
Current 4.72 3.46 3.36 1.44
Quick 4.72 3.46 3.36 1.13
Total Debt to Total Assets 21.17% 28.93% 29.74% 55.90%
Pre-tax Return on Net Worth 51.35% 52.90% 86.59% 3.20%
Pre-tax Return on Assets 40.48% 37.60% 60.84% 7.20%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 12.39% 7.05% 10.81% n.a
Return on Equity 38.51% 39.68% 64.59% n.a
Activity Ratios
Accounts Payable Turnover 9.16 12.17 12.17 n.a
Payment Days 27 21 20 n.a
Total Asset Turnover 2.45 4.00 4.20 n.a
Debt Ratios
Debt to Net Worth 0.27 0.41 0.42 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $160,843 $266,642 $752,916 n.a
Interest Coverage 751.82 1,283.42 5,928.15 n.a
Additional Ratios
Assets to Sales 0.41 0.25 0.24 n.a
Current Debt/Total Assets 21% 29% 30% n.a
Acid Test 4.72 3.46 3.36 n.a
Sales/Net Worth 3.11 5.63 5.98 n.a
Dividend Payout 0.00 0.00 0.00 n.a