Doggie Pause
Financial Plan
We want to finance the start-up of our company mainly through personal investment and a short-term business loan. We think this is a good risk/return situation and we will provide the necessary personal guarantees to secure the business loan. We will finance growth through the collection of the fees for our services. We understand that without these payments we will not be able to be a profitable business.
7.1 Important Assumptions
Our important financial assumptions are shown below.
| 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 Break-even Analysis
According to our break-even projections, we need more than $12,000 in monthly sales to break even. We think this is a manageable sales amount. Furthermore, a significant portion of our fixed cost is our own salaries, so that reduces risk as well.
| Break-even Analysis | |
| Monthly Revenue Break-even | $12,197 |
| Assumptions: | |
| Average Percent Variable Cost | 12% |
| Estimated Monthly Fixed Cost | $10,687 |
7.3 Projected Profit and Loss
The projections show how we intend to almost break even in the first year (a loss of less than $1,000), make a small profit in the second year and show profit of 9% on sales in the third year. We are confident that even though we have a loss in the first months after opening, we will be profitable in the future as years go on and business increases.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $149,729 | $180,000 | $216,000 |
| Direct Cost of Sales | $18,535 | $22,250 | $26,600 |
| Other | $0 | $0 | $0 |
| Total Cost of Sales | $18,535 | $22,250 | $26,600 |
| Gross Margin | $131,194 | $157,750 | $189,400 |
| Gross Margin % | 87.62% | 87.64% | 87.69% |
| Expenses | |||
| Payroll | $64,800 | $91,800 | $101,800 |
| Sales and Marketing and Other Expenses | $15,000 | $9,000 | $6,000 |
| Depreciation | $0 | $0 | $0 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $2,725 | $3,000 | $3,000 |
| Insurance | $6,000 | $6,000 | $6,000 |
| Rent | $30,000 | $30,000 | $30,000 |
| Payroll Taxes | $9,720 | $13,770 | $15,270 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $128,245 | $153,570 | $162,070 |
| Profit Before Interest and Taxes | $2,949 | $4,180 | $27,330 |
| EBITDA | $2,949 | $4,180 | $27,330 |
| Interest Expense | $3,324 | $2,032 | $666 |
| Taxes Incurred | $0 | $537 | $6,777 |
| Net Profit | ($375) | $1,611 | $19,887 |
| Net Profit/Sales | -0.25% | 0.89% | 9.21% |
7.4 Projected Cash Flow
For Doggie Pause to be successful we need a steady growth in clientele. Without customers bringing in their canines we have no cash flow, no profit, and no business. The cash flow depends on a bridge loan in mid-year from the founders, to be repaid at the end of the year.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $149,729 | $180,000 | $216,000 |
| Subtotal Cash from Operations | $149,729 | $180,000 | $216,000 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $10,000 | $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 | $159,729 | $180,000 | $216,000 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $64,800 | $91,800 | $101,800 |
| Bill Payments | $77,005 | $87,772 | $93,678 |
| Subtotal Spent on Operations | $141,805 | $179,572 | $195,478 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $12,673 | $14,004 | $13,322 |
| Other Liabilities Principal Repayment | $10,000 | $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 | $164,478 | $193,576 | $208,800 |
| Net Cash Flow | ($4,749) | ($13,576) | $7,200 |
| Cash Balance | $15,251 | $1,675 | $8,874 |
7.5 Projected Balance Sheet
The projected balance sheet shows stability and a gradual increase of net worth.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $15,251 | $1,675 | $8,874 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $15,251 | $1,675 | $8,874 |
| Long-term Assets | |||
| Long-term Assets | $7,500 | $7,500 | $7,500 |
| Accumulated Depreciation | $0 | $0 | $0 |
| Total Long-term Assets | $7,500 | $7,500 | $7,500 |
| Total Assets | $22,751 | $9,175 | $16,374 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $8,299 | $7,117 | $7,752 |
| Current Borrowing | $27,327 | $13,322 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $35,626 | $20,439 | $7,752 |
| Long-term Liabilities | $0 | $0 | $0 |
| Total Liabilities | $35,626 | $20,439 | $7,752 |
| Paid-in Capital | $20,000 | $20,000 | $20,000 |
| Retained Earnings | ($32,500) | ($32,875) | ($31,265) |
| Earnings | ($375) | $1,611 | $19,887 |
| Total Capital | ($12,875) | ($11,265) | $8,622 |
| Total Liabilities and Capital | $22,751 | $9,175 | $16,374 |
| Net Worth | ($12,875) | ($11,265) | $8,622 |
7.6 Business Ratios
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 20.22% | 20.00% | -2.90% |
| Percent of Total Assets | ||||
| Other Current Assets | 0.00% | 0.00% | 0.00% | 31.90% |
| Total Current Assets | 67.03% | 18.25% | 54.20% | 55.90% |
| Long-term Assets | 32.97% | 81.75% | 45.80% | 44.10% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 156.59% | 222.78% | 47.34% | 32.70% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 19.90% |
| Total Liabilities | 156.59% | 222.78% | 47.34% | 52.60% |
| Net Worth | -56.59% | -122.78% | 52.66% | 47.40% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 87.62% | 87.64% | 87.69% | 42.50% |
| Selling, General & Administrative Expenses | 88.01% | 86.83% | 78.47% | 26.40% |
| Advertising Expenses | 10.02% | 5.00% | 2.78% | 0.50% |
| Profit Before Interest and Taxes | 1.97% | 2.32% | 12.65% | 2.40% |
| Main Ratios | ||||
| Current | 0.43 | 0.08 | 1.14 | 2.19 |
| Quick | 0.43 | 0.08 | 1.14 | 1.48 |
| Total Debt to Total Assets | 156.59% | 222.78% | 47.34% | 52.60% |
| Pre-tax Return on Net Worth | 2.92% | -19.06% | 309.25% | 4.50% |
| Pre-tax Return on Assets | -1.65% | 23.41% | 162.84% | 9.40% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | -0.25% | 0.89% | 9.21% | n.a |
| Return on Equity | 0.00% | 0.00% | 230.65% | n.a |
| Activity Ratios | ||||
| Accounts Payable Turnover | 10.28 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 32 | 29 | n.a |
| Total Asset Turnover | 6.58 | 19.62 | 13.19 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.00 | 0.00 | 0.90 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | ($20,375) | ($18,765) | $1,122 | n.a |
| Interest Coverage | 0.89 | 2.06 | 41.03 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.15 | 0.05 | 0.08 | n.a |
| Current Debt/Total Assets | 157% | 223% | 47% | n.a |
| Acid Test | 0.43 | 0.08 | 1.14 | n.a |
| Sales/Net Worth | 0.00 | 0.00 | 25.05 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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