Video Documentation Service Business Plan

Safe Keeping

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Financial Plan

The financial plan contains these essential factors:

  • A growth rate in sales of 10% for the year 2004, to total in excess of $116,000 in revenues.
  • An average sales per business day (305 days per year) in excess of $500.00.

Difficulties and Risks

  • Slow sales resulting in less-than projected cash flow.
  • Overly aggressive and debilitating actions by competitors.
  • A parallel entry by a new competitor.

8.1 Important Assumptions

The following critical assumptions will determine the potential for future success.

  • A healthy economy that supports a moderate level of growth in our market.
  • Keeping operating expenses low, particularly in the areas of personnel and ongoing monthly expenses.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 9.00% 9.00% 9.00%
Long-term Interest Rate 7.50% 7.50% 7.50%
Tax Rate 28.17% 28.00% 28.17%
Other 0 0 0

8.2 Projected Profit and Loss

The following represents the projected profit and loss for Safe Keeping based on sales and expense projections for 2004 and beyond. With fairly low operating expenses and with the projected growth we are anticipating a increase in our cash flow.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $116,300 $126,000 $138,000
Direct Cost of Sales $5,480 $6,000 $6,800
Other Costs of Sales $0 $0 $0
Total Cost of Sales $5,480 $6,000 $6,800
Gross Margin $110,820 $120,000 $131,200
Gross Margin % 95.29% 95.24% 95.07%
Expenses
Payroll $66,000 $76,000 $83,000
Sales and Marketing and Other Expenses $2,400 $3,000 $3,600
Depreciation $0 $0 $0
Rent $6,000 $6,500 $7,000
Utilities $1,200 $1,300 $1,400
Insurance $1,200 $1,350 $1,450
Payroll Taxes $9,900 $11,400 $12,450
Other $3,600 $4,000 $4,400
Total Operating Expenses $90,300 $103,550 $113,300
Profit Before Interest and Taxes $20,520 $16,450 $17,900
EBITDA $20,520 $16,450 $17,900
Interest Expense $0 $0 $0
Taxes Incurred $5,718 $4,606 $5,042
Net Profit $14,802 $11,844 $12,858
Net Profit/Sales 12.73% 9.40% 9.32%

8.3 Break-even Analysis

The following table and chart summarize our break-even analysis.

Break-even Analysis
Monthly Revenue Break-even $7,897
Assumptions:
Average Percent Variable Cost 5%
Estimated Monthly Fixed Cost $7,525

8.4 Projected Cash Flow

The cash flow projections are outlined below. These projections are based on our basic assumptions with revenue generation factors carrying the most significant weight regarding the outcome. We are anticipating that we will have a steadily increasing cash flow as the business continues to grow.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $116,300 $126,000 $138,000
Subtotal Cash from Operations $116,300 $126,000 $138,000
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 $116,300 $126,000 $138,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $66,000 $76,000 $83,000
Bill Payments $31,201 $39,317 $41,814
Subtotal Spent on Operations $97,201 $115,317 $124,814
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 $2,000 $3,000
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $97,201 $117,317 $127,814
Net Cash Flow $19,099 $8,683 $10,186
Cash Balance $40,099 $48,782 $58,968

8.5 Projected Balance Sheet

Safe Keeping's balance sheet is outlined below.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $40,099 $48,782 $58,968
Other Current Assets $0 $2,000 $5,000
Total Current Assets $40,099 $50,782 $63,968
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $40,099 $50,782 $63,968
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $4,297 $3,136 $3,464
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $4,297 $3,136 $3,464
Long-term Liabilities $0 $0 $0
Total Liabilities $4,297 $3,136 $3,464
Paid-in Capital $25,000 $25,000 $25,000
Retained Earnings ($4,000) $10,802 $22,646
Earnings $14,802 $11,844 $12,858
Total Capital $35,802 $47,646 $60,504
Total Liabilities and Capital $40,099 $50,782 $63,968
Net Worth $35,802 $47,646 $60,504

8.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) Code 1731-04, Safety and Security Specialization are shown for comparison.

The following will enable us to keep on track. If we fail in any of these areas, we will need to re-evaluate our business model:

  • Gross margins at or above 50%.
  • Month-to-month annual comparisons indicate an increase of 10% or greater.
  • Do not depend on a credit line to meet cash requirements.
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 8.34% 9.52% 4.52%
Percent of Total Assets
Other Current Assets 0.00% 3.94% 7.82% 28.47%
Total Current Assets 100.00% 100.00% 100.00% 86.49%
Long-term Assets 0.00% 0.00% 0.00% 13.51%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 10.72% 6.18% 5.41% 45.17%
Long-term Liabilities 0.00% 0.00% 0.00% 7.51%
Total Liabilities 10.72% 6.18% 5.41% 52.68%
Net Worth 89.28% 93.82% 94.59% 47.32%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 95.29% 95.24% 95.07% 27.36%
Selling, General & Administrative Expenses 82.58% 85.84% 85.73% 12.94%
Advertising Expenses 0.00% 0.00% 0.00% 0.18%
Profit Before Interest and Taxes 17.64% 13.06% 12.97% 3.92%
Main Ratios
Current 9.33 16.19 18.47 1.78
Quick 9.33 16.19 18.47 1.45
Total Debt to Total Assets 10.72% 6.18% 5.41% 56.35%
Pre-tax Return on Net Worth 57.32% 34.53% 29.58% 10.81%
Pre-tax Return on Assets 51.17% 32.39% 27.98% 24.76%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 12.73% 9.40% 9.32% n.a
Return on Equity 41.34% 24.86% 21.25% n.a
Activity Ratios
Accounts Payable Turnover 8.26 12.17 12.17 n.a
Payment Days 27 36 29 n.a
Total Asset Turnover 2.90 2.48 2.16 n.a
Debt Ratios
Debt to Net Worth 0.12 0.07 0.06 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $35,802 $47,646 $60,504 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.34 0.40 0.46 n.a
Current Debt/Total Assets 11% 6% 5% n.a
Acid Test 9.33 16.19 18.47 n.a
Sales/Net Worth 3.25 2.64 2.28 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 9.00% 9.00% 9.00%
Long-term Interest Rate 7.50% 7.50% 7.50%
Tax Rate 28.17% 28.00% 28.17%
Other 0 0 0
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $116,300 $126,000 $138,000
Direct Cost of Sales $5,480 $6,000 $6,800
Other Costs of Sales $0 $0 $0
Total Cost of Sales $5,480 $6,000 $6,800
Gross Margin $110,820 $120,000 $131,200
Gross Margin % 95.29% 95.24% 95.07%
Expenses
Payroll $66,000 $76,000 $83,000
Sales and Marketing and Other Expenses $2,400 $3,000 $3,600
Depreciation $0 $0 $0
Rent $6,000 $6,500 $7,000
Utilities $1,200 $1,300 $1,400
Insurance $1,200 $1,350 $1,450
Payroll Taxes $9,900 $11,400 $12,450
Other $3,600 $4,000 $4,400
Total Operating Expenses $90,300 $103,550 $113,300
Profit Before Interest and Taxes $20,520 $16,450 $17,900
EBITDA $20,520 $16,450 $17,900
Interest Expense $0 $0 $0
Taxes Incurred $5,718 $4,606 $5,042
Net Profit $14,802 $11,844 $12,858
Net Profit/Sales 12.73% 9.40% 9.32%
Break-even Analysis
Monthly Revenue Break-even $7,897
Assumptions:
Average Percent Variable Cost 5%
Estimated Monthly Fixed Cost $7,525
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $116,300 $126,000 $138,000
Subtotal Cash from Operations $116,300 $126,000 $138,000
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 $116,300 $126,000 $138,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $66,000 $76,000 $83,000
Bill Payments $31,201 $39,317 $41,814
Subtotal Spent on Operations $97,201 $115,317 $124,814
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 $2,000 $3,000
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $97,201 $117,317 $127,814
Net Cash Flow $19,099 $8,683 $10,186
Cash Balance $40,099 $48,782 $58,968
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $40,099 $48,782 $58,968
Other Current Assets $0 $2,000 $5,000
Total Current Assets $40,099 $50,782 $63,968
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $40,099 $50,782 $63,968
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $4,297 $3,136 $3,464
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $4,297 $3,136 $3,464
Long-term Liabilities $0 $0 $0
Total Liabilities $4,297 $3,136 $3,464
Paid-in Capital $25,000 $25,000 $25,000
Retained Earnings ($4,000) $10,802 $22,646
Earnings $14,802 $11,844 $12,858
Total Capital $35,802 $47,646 $60,504
Total Liabilities and Capital $40,099 $50,782 $63,968
Net Worth $35,802 $47,646 $60,504
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 8.34% 9.52% 4.52%
Percent of Total Assets
Other Current Assets 0.00% 3.94% 7.82% 28.47%
Total Current Assets 100.00% 100.00% 100.00% 86.49%
Long-term Assets 0.00% 0.00% 0.00% 13.51%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 10.72% 6.18% 5.41% 45.17%
Long-term Liabilities 0.00% 0.00% 0.00% 7.51%
Total Liabilities 10.72% 6.18% 5.41% 52.68%
Net Worth 89.28% 93.82% 94.59% 47.32%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 95.29% 95.24% 95.07% 27.36%
Selling, General & Administrative Expenses 82.58% 85.84% 85.73% 12.94%
Advertising Expenses 0.00% 0.00% 0.00% 0.18%
Profit Before Interest and Taxes 17.64% 13.06% 12.97% 3.92%
Main Ratios
Current 9.33 16.19 18.47 1.78
Quick 9.33 16.19 18.47 1.45
Total Debt to Total Assets 10.72% 6.18% 5.41% 56.35%
Pre-tax Return on Net Worth 57.32% 34.53% 29.58% 10.81%
Pre-tax Return on Assets 51.17% 32.39% 27.98% 24.76%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 12.73% 9.40% 9.32% n.a
Return on Equity 41.34% 24.86% 21.25% n.a
Activity Ratios
Accounts Payable Turnover 8.26 12.17 12.17 n.a
Payment Days 27 36 29 n.a
Total Asset Turnover 2.90 2.48 2.16 n.a
Debt Ratios
Debt to Net Worth 0.12 0.07 0.06 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $35,802 $47,646 $60,504 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.34 0.40 0.46 n.a
Current Debt/Total Assets 11% 6% 5% n.a
Acid Test 9.33 16.19 18.47 n.a
Sales/Net Worth 3.25 2.64 2.28 n.a
Dividend Payout 0.00 0.00 0.00 n.a