Evergreen TV Productions

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Video Television Production Business Plan

Financial Plan

The most important element in the financial plan is the critical need for additional capital to assist in business operations through the remaining start-up process, and to maintain a positive cash balance for the first fiscal quarters. We do not anticipate any changes to our financial plan through accounts receivables or inventory, as our company operates upon the "payment upon receipt" principal for all goods, and our inventory cycle does not meet the standard criteria.

Moving from a home office to a storefront with employees, introduces greater liabilities. During the past seven month start-up process, we have largely committed to EvergreenTV Productions through personal savings, cashed stocks, personal credit lines and personal long-term loan options.

Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table. The key underlying assumptions are:

We assume access to equity capital and financing sufficient to follow and maintain our financial plan as shown in the tables. We anticipate our financing to hold higher long-term interest than our current loan against stock. We assume that as our company grows, we will be able to utilize a larger credit line, decreasing our expenses in cash. Likewise, our short-term credit line will be available with a lower short-term interest rate, making more cash available.

We assume opening and promoting three stores within the Tampa Bay area before reaching saturation. Likewise, we assume relatively quick initial growth within the Home Division, following our plan of two stores open within the first year, and 10 stores statewide within five years.

We assume many tv markets are, or will become, Internet proficient. We assume most colleges and universities are, or will become, Internet proficient. We assume slow initial growth within the B2B Division. However, the majority of our long-term payments are for one time, or long-term purchases which will not need to be replaced in the first five years.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 13.00% 13.00% 13.00%
Long-term Interest Rate 0.80% 0.80% 0.80%
Tax Rate 25.42% 25.00% 25.42%
Other 0 0 0

Key Financial Indicators

The benchmark chart shows the nature of our company. We estimate consistent turns on inventory, as our inventory is available for resale on a constant basis. In our Home Division, we do not keep inventory, but customers bring their photos to us. In our B2B Division, our inventory consists of news stories we will keep on hand for multiple sales. Several stations may purchase the same story, we simply make a copy of that story. Our blank tape inventory will be replenished monthly to avoid keeping a large inventory of tapes.

Our Gross Margin increases with increased sales, but as we have a very low direct cost of sales, this number will only increase fractionally compared to sales.

Sales and Operating Expenses are our closest measurements in this forecast. While sales increase dramatically, operating expenses increase with new stores, additional employees and taxes. However, by maximizing the number of employees within each store, we are also maximizing our location and limiting further expenses that additional storefronts would incur. We are also able to save drastically on advertising expenses, which would naturally increase with each new location.

Break-even Analysis

We assume running costs which include rent, utilities, office expenses, and an average of travel, advertising and miscellaneous costs. Miscellaneous costs are equal to quarterly costs such as business cards, brochures, bulk tape supplies and occasional equipment rental. Payroll increases every other month as we add new employees.

Break-even Analysis
Monthly Units Break-even 51
Monthly Revenue Break-even $10,303
Assumptions:
Average Per-Unit Revenue $203.45
Average Per-Unit Variable Cost $7.06
Estimated Monthly Fixed Cost $9,946

Projected Profit and Loss

Profit and Loss projects look very good, with the usual start-up loss limited to the first two months. The monthly projections for the first year are included in the appendix.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $206,300 $814,116 $1,421,860
Direct Cost of Sales $7,155 $32,770 $59,450
Production Payroll $33,000 $166,500 $385,000
Other $0 $0 $0
Total Cost of Sales $40,155 $199,270 $444,450
Gross Margin $166,145 $614,846 $977,410
Gross Margin % 80.54% 75.52% 68.74%
Operating Expenses
Sales and Marketing Expenses
Sales and Marketing Payroll $7,998 $78,400 $85,000
Advertising/Promotion $20,000 $20,000 $30,000
Travel $6,500 $10,000 $8,000
Miscellaneous $9,500 $7,500 $10,000
Total Sales and Marketing Expenses $43,998 $115,900 $133,000
Sales and Marketing % 21.33% 14.24% 9.35%
General and Administrative Expenses
General and Administrative Payroll $25,800 $75,000 $125,000
Sales and Marketing and Other Expenses $0 $0 $0
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $1,260 $3,600 $6,000
Insurance $1,040 $2,880 $4,800
Rent $9,750 $27,000 $45,000
Payroll Taxes $0 $0 $0
Other General and Administrative Expenses $0 $0 $0
Total General and Administrative Expenses $37,850 $108,480 $180,800
General and Administrative % 18.35% 13.32% 12.72%
Other Expenses:
Other Payroll $37,500 $97,750 $217,250
Consultants $0 $0 $0
Contract/Consultants $0 $0 $0
Total Other Expenses $37,500 $97,750 $217,250
Other % 18.18% 12.01% 15.28%
Total Operating Expenses $119,348 $322,130 $531,050
Profit Before Interest and Taxes $46,797 $292,716 $446,360
EBITDA $46,797 $292,716 $446,360
Interest Expense $423 $141 $0
Taxes Incurred $11,488 $73,144 $113,450
Net Profit $34,886 $219,431 $332,910
Net Profit/Sales 16.91% 26.95% 23.41%

Projected Cash Flow

Cash flow projections are good, as shown in the annual table below, and the monthly table in the appendix. There are only two months of negative cash flow the foreseen the first year, and the all important cash balance shows steady increases.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $206,300 $814,116 $1,421,860
Subtotal Cash from Operations $206,300 $814,116 $1,421,860
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $5,000 $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 $211,300 $814,116 $1,421,860
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $104,298 $417,650 $812,250
Bill Payments $59,036 $189,141 $264,923
Subtotal Spent on Operations $163,334 $606,791 $1,077,173
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $2,830 $2,170 $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 $166,164 $608,961 $1,077,173
Net Cash Flow $45,136 $205,155 $344,687
Cash Balance $59,236 $264,391 $609,079

Projected Balance Sheet

The balance sheet below and in the appendix show steady increase in net worth over the life of the plan.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $59,236 $264,391 $609,079
Inventory $1,480 $19,672 $14,136
Other Current Assets $500 $500 $500
Total Current Assets $61,216 $284,563 $623,715
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $61,216 $284,563 $623,715
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $9,960 $16,046 $22,287
Current Borrowing $2,170 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $12,130 $16,046 $22,287
Long-term Liabilities $0 $0 $0
Total Liabilities $12,130 $16,046 $22,287
Paid-in Capital $15,000 $15,000 $15,000
Retained Earnings ($800) $34,086 $253,517
Earnings $34,886 $219,431 $332,910
Total Capital $49,086 $268,517 $601,427
Total Liabilities and Capital $61,216 $284,563 $623,715
Net Worth $49,086 $268,517 $601,427

Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7812, Motion Picture and Video Production, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 294.63% 74.65% 14.20%
Percent of Total Assets
Inventory 2.42% 6.91% 2.27% 3.40%
Other Current Assets 0.82% 0.18% 0.08% 46.90%
Total Current Assets 100.00% 100.00% 100.00% 68.40%
Long-term Assets 0.00% 0.00% 0.00% 31.60%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 19.82% 5.64% 3.57% 41.60%
Long-term Liabilities 0.00% 0.00% 0.00% 17.20%
Total Liabilities 19.82% 5.64% 3.57% 58.80%
Net Worth 80.18% 94.36% 96.43% 41.20%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 80.54% 75.52% 68.74% 0.00%
Selling, General & Administrative Expenses 63.71% 46.92% 43.99% 74.80%
Advertising Expenses 9.69% 2.46% 2.11% 1.60%
Profit Before Interest and Taxes 22.68% 35.96% 31.39% 1.60%
Main Ratios
Current 5.05 17.73 27.98 1.67
Quick 4.92 16.51 27.35 1.12
Total Debt to Total Assets 19.82% 5.64% 3.57% 58.80%
Pre-tax Return on Net Worth 94.48% 108.96% 74.22% 1.80%
Pre-tax Return on Assets 75.76% 102.82% 71.56% 4.50%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 16.91% 26.95% 23.41% n.a
Return on Equity 71.07% 81.72% 55.35% n.a
Activity Ratios
Inventory Turnover 7.63 3.10 3.52 n.a
Accounts Payable Turnover 6.89 12.17 12.17 n.a
Payment Days 27 24 26 n.a
Total Asset Turnover 3.37 2.86 2.28 n.a
Debt Ratios
Debt to Net Worth 0.25 0.06 0.04 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $49,086 $268,517 $601,427 n.a
Interest Coverage 110.63 2,075.26 0.00 n.a
Additional Ratios
Assets to Sales 0.30 0.35 0.44 n.a
Current Debt/Total Assets 20% 6% 4% n.a
Acid Test 4.92 16.51 27.35 n.a
Sales/Net Worth 4.20 3.03 2.36 n.a
Dividend Payout 0.00 0.00 0.00 n.a