UK High Tech Consulting Business Plan

Acme Consulting--UK

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Financial Plan

Our financial plan is based on conservative estimates and assumptions. We will need to plan on initial investment to make the financials work.

7.1 Important Assumptions

The General Assumptions table summarises key financial assumptions, including sales entirely on invoice basis, payroll burden, and present-day interest and taxation rates.

We also assume 45-day average collection days, expenses mainly on net 30 basis and 35 days on average for payment of invoices.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 8.00% 8.00% 8.00%
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 benchmark chart indicates our key financial indicators for the first three years. We foresee major growth in sales and operating expenses, and a bump in our collection days as we spread the business during expansion.

7.3 Break-even Analysis

The following table and chart summarise the break-even analysis, including monthly units and sales break-even points.

Break-even Analysis
Monthly Revenue Break-even £30,098
Assumptions:
Average Percent Variable Cost 20%
Estimated Monthly Fixed Cost £23,988

7.4 Projected Profit and Loss

The detailed monthly pro-forma income statement for the first year is included in the appendix. The annual estimates are included here.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales £532,000 £875,000 £1,100,000
Direct Cost of Sales £108,000 £219,000 £289,000
Other £0 £0 £0
Total Cost of Sales £108,000 £219,000 £289,000
Gross Margin £424,000 £656,000 £811,000
Gross Margin % 79.70% 74.97% 73.73%
Expenses
Payroll £132,500 £369,000 £423,000
Sales and Marketing and Other Expenses £108,600 £137,000 £195,000
Depreciation £0 £0 £0
Leased Equipment £3,600 £7,000 £7,000
Utilities £9,000 £12,000 £12,000
Insurance £3,600 £2,000 £2,000
Rent £12,000 £0 £0
Other £0 £0 £0
Payroll Taxes (National Insurance, etc) £18,550 £51,660 £59,220
Other £0 £0 £0
Total Operating Expenses £287,850 £578,660 £698,220
Profit Before Interest and Taxes £136,150 £77,340 £112,780
EBITDA £136,150 £77,340 £112,780
Interest Expense £6,800 £11,400 £15,400
Taxes Incurred £31,516 £16,485 £24,751
Net Profit £97,834 £49,455 £72,629
Net Profit/Sales 18.39% 5.65% 6.60%

7.5 Projected Cash Flow

Cash flow projections are critical to our success. The monthly cash flow 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 below. Detailed monthly numbers are included in the appendix.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales £399,000 £656,250 £825,000
Cash from Receivables £100,450 £197,764 £261,234
Subtotal Cash from Operations £499,450 £854,014 £1,086,234
Additional Cash Received
Sales Tax, VAT, HST/GST Received £0 £0 £0
New Current Borrowing £30,000 £100,000 £0
New Other Liabilities (interest-free) £0 £0 £0
New Long-term Liabilities £50,000 £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 £579,450 £954,014 £1,086,234
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending £132,500 £369,000 £423,000
Bill Payments £274,773 £446,264 £592,221
Subtotal Spent on Operations £407,273 £815,264 £1,015,221
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 £407,273 £815,264 £1,015,221
Net Cash Flow £172,177 £138,750 £71,013
Cash Balance £197,177 £335,927 £406,940

7.6 Projected Balance Sheet

The balance sheet shows healthy growth of net worth, and strong financial position. The monthly estimates are included in the appendix.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash £197,177 £335,927 £406,940
Accounts Receivable £32,550 £53,536 £67,303
Other Current Assets £7,000 £7,000 £7,000
Total Current Assets £236,727 £396,464 £481,243
Long-term Assets
Long-term Assets £0 £0 £0
Accumulated Depreciation £0 £0 £0
Total Long-term Assets £0 £0 £0
Total Assets £236,727 £396,464 £481,243
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable £27,243 £37,524 £49,674
Current Borrowing £30,000 £130,000 £130,000
Other Current Liabilities £0 £0 £0
Subtotal Current Liabilities £57,243 £167,524 £179,674
Long-term Liabilities £50,000 £50,000 £50,000
Total Liabilities £107,243 £217,524 £229,674
Paid-in Capital £50,000 £50,000 £50,000
Retained Earnings (£18,350) £79,484 £128,939
Earnings £97,834 £49,455 £72,629
Total Capital £129,484 £178,939 £251,569
Total Liabilities and Capital £236,727 £396,464 £481,243
Net Worth £129,484 £178,939 £251,569

7.7 Business Ratios

The following table shows the projected business ratios. We expect to maintain healthy ratios for profitability, risk, and return. The industry profile comparisons are for the Management Consulting Services.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 64.47% 25.71% 8.52%
Percent of Total Assets
Accounts Receivable 13.75% 13.50% 13.99% 21.99%
Other Current Assets 2.96% 1.77% 1.45% 50.95%
Total Current Assets 100.00% 100.00% 100.00% 75.87%
Long-term Assets 0.00% 0.00% 0.00% 24.13%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 24.18% 42.25% 37.34% 34.32%
Long-term Liabilities 21.12% 12.61% 10.39% 17.09%
Total Liabilities 45.30% 54.87% 47.73% 51.41%
Net Worth 54.70% 45.13% 52.27% 48.59%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 79.70% 74.97% 73.73% 100.00%
Selling, General & Administrative Expenses 61.46% 69.32% 67.09% 80.54%
Advertising Expenses 4.51% 4.57% 4.00% 1.54%
Profit Before Interest and Taxes 25.59% 8.84% 10.25% 2.69%
Main Ratios
Current 4.14 2.37 2.68 1.63
Quick 4.14 2.37 2.68 1.31
Total Debt to Total Assets 45.30% 54.87% 47.73% 60.47%
Pre-tax Return on Net Worth 99.90% 36.85% 38.71% 4.80%
Pre-tax Return on Assets 54.64% 16.63% 20.24% 12.14%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 18.39% 5.65% 6.60% n.a
Return on Equity 75.56% 27.64% 28.87% n.a
Activity Ratios
Accounts Receivable Turnover 4.09 4.09 4.09 n.a
Collection Days 57 72 80 n.a
Accounts Payable Turnover 11.07 12.17 12.17 n.a
Payment Days 27 26 26 n.a
Total Asset Turnover 2.25 2.21 2.29 n.a
Debt Ratios
Debt to Net Worth 0.83 1.22 0.91 n.a
Current Liab. to Liab. 0.53 0.77 0.78 n.a
Liquidity Ratios
Net Working Capital £179,484 £228,939 £301,569 n.a
Interest Coverage 20.02 6.78 7.32 n.a
Additional Ratios
Assets to Sales 0.44 0.45 0.44 n.a
Current Debt/Total Assets 24% 42% 37% n.a
Acid Test 3.57 2.05 2.30 n.a
Sales/Net Worth 4.11 4.89 4.37 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 8.00% 8.00% 8.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 25.42% 25.00% 25.42%
Other 0 0 0
Break-even Analysis
Monthly Revenue Break-even £30,098
Assumptions:
Average Percent Variable Cost 20%
Estimated Monthly Fixed Cost £23,988
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales £532,000 £875,000 £1,100,000
Direct Cost of Sales £108,000 £219,000 £289,000
Other £0 £0 £0
Total Cost of Sales £108,000 £219,000 £289,000
Gross Margin £424,000 £656,000 £811,000
Gross Margin % 79.70% 74.97% 73.73%
Expenses
Payroll £132,500 £369,000 £423,000
Sales and Marketing and Other Expenses £108,600 £137,000 £195,000
Depreciation £0 £0 £0
Leased Equipment £3,600 £7,000 £7,000
Utilities £9,000 £12,000 £12,000
Insurance £3,600 £2,000 £2,000
Rent £12,000 £0 £0
Other £0 £0 £0
Payroll Taxes (National Insurance, etc) £18,550 £51,660 £59,220
Other £0 £0 £0
Total Operating Expenses £287,850 £578,660 £698,220
Profit Before Interest and Taxes £136,150 £77,340 £112,780
EBITDA £136,150 £77,340 £112,780
Interest Expense £6,800 £11,400 £15,400
Taxes Incurred £31,516 £16,485 £24,751
Net Profit £97,834 £49,455 £72,629
Net Profit/Sales 18.39% 5.65% 6.60%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales £399,000 £656,250 £825,000
Cash from Receivables £100,450 £197,764 £261,234
Subtotal Cash from Operations £499,450 £854,014 £1,086,234
Additional Cash Received
Sales Tax, VAT, HST/GST Received £0 £0 £0
New Current Borrowing £30,000 £100,000 £0
New Other Liabilities (interest-free) £0 £0 £0
New Long-term Liabilities £50,000 £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 £579,450 £954,014 £1,086,234
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending £132,500 £369,000 £423,000
Bill Payments £274,773 £446,264 £592,221
Subtotal Spent on Operations £407,273 £815,264 £1,015,221
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 £407,273 £815,264 £1,015,221
Net Cash Flow £172,177 £138,750 £71,013
Cash Balance £197,177 £335,927 £406,940
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash £197,177 £335,927 £406,940
Accounts Receivable £32,550 £53,536 £67,303
Other Current Assets £7,000 £7,000 £7,000
Total Current Assets £236,727 £396,464 £481,243
Long-term Assets
Long-term Assets £0 £0 £0
Accumulated Depreciation £0 £0 £0
Total Long-term Assets £0 £0 £0
Total Assets £236,727 £396,464 £481,243
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable £27,243 £37,524 £49,674
Current Borrowing £30,000 £130,000 £130,000
Other Current Liabilities £0 £0 £0
Subtotal Current Liabilities £57,243 £167,524 £179,674
Long-term Liabilities £50,000 £50,000 £50,000
Total Liabilities £107,243 £217,524 £229,674
Paid-in Capital £50,000 £50,000 £50,000
Retained Earnings (£18,350) £79,484 £128,939
Earnings £97,834 £49,455 £72,629
Total Capital £129,484 £178,939 £251,569
Total Liabilities and Capital £236,727 £396,464 £481,243
Net Worth £129,484 £178,939 £251,569
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 64.47% 25.71% 8.52%
Percent of Total Assets
Accounts Receivable 13.75% 13.50% 13.99% 21.99%
Other Current Assets 2.96% 1.77% 1.45% 50.95%
Total Current Assets 100.00% 100.00% 100.00% 75.87%
Long-term Assets 0.00% 0.00% 0.00% 24.13%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 24.18% 42.25% 37.34% 34.32%
Long-term Liabilities 21.12% 12.61% 10.39% 17.09%
Total Liabilities 45.30% 54.87% 47.73% 51.41%
Net Worth 54.70% 45.13% 52.27% 48.59%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 79.70% 74.97% 73.73% 100.00%
Selling, General & Administrative Expenses 61.46% 69.32% 67.09% 80.54%
Advertising Expenses 4.51% 4.57% 4.00% 1.54%
Profit Before Interest and Taxes 25.59% 8.84% 10.25% 2.69%
Main Ratios
Current 4.14 2.37 2.68 1.63
Quick 4.14 2.37 2.68 1.31
Total Debt to Total Assets 45.30% 54.87% 47.73% 60.47%
Pre-tax Return on Net Worth 99.90% 36.85% 38.71% 4.80%
Pre-tax Return on Assets 54.64% 16.63% 20.24% 12.14%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 18.39% 5.65% 6.60% n.a
Return on Equity 75.56% 27.64% 28.87% n.a
Activity Ratios
Accounts Receivable Turnover 4.09 4.09 4.09 n.a
Collection Days 57 72 80 n.a
Accounts Payable Turnover 11.07 12.17 12.17 n.a
Payment Days 27 26 26 n.a
Total Asset Turnover 2.25 2.21 2.29 n.a
Debt Ratios
Debt to Net Worth 0.83 1.22 0.91 n.a
Current Liab. to Liab. 0.53 0.77 0.78 n.a
Liquidity Ratios
Net Working Capital £179,484 £228,939 £301,569 n.a
Interest Coverage 20.02 6.78 7.32 n.a
Additional Ratios
Assets to Sales 0.44 0.45 0.44 n.a
Current Debt/Total Assets 24% 42% 37% n.a
Acid Test 3.57 2.05 2.30 n.a
Sales/Net Worth 4.11 4.89 4.37 n.a
Dividend Payout 0.00 0.00 0.00 n.a