Key assumptions for Southeast Racing Parts are:
The key indicators in our plan illustrate increasing sales, control of costs, and increasing profit margins.
For our break-even analysis, we assume per month running costs which includes payroll, rent, utilities, and an estimation of other running costs.
Based on our anticipated margin, what we need to sell per month to break even is shown in the chart and table below.
Our sales forecast indicates that monthly sales are expected to be much greater than the break-even point mentioned in the table.
The detailed monthly pro-forma income statement is included in the appendix. The annual estimates are included on the following page. We expect a modest by acceptable profit at the end of the first year of business. It should almost double by the third year as the reputation of our business, employees, and services become apparent to the local racers. Second year revenues anticipate the addition of one part-time employee, along with one full-time employee in the third year.
The credit card surcharge expense was based upon 50% of sales being paid for with plastic, and assuming a 2% service fee. The inbound freight charges were based upon 2% of cost of goods for year one, 1.75% for year two, and 1.5% for year three. Depreciation was figured upon $29,000 in expensed equipment at the rate of seven years.
Cash flow projections are critical to our success. The following table shows cash flow for the first three years, and the chart illustrates monthly cash flow in the first year. Monthly cash flow projections are included in the appendix.
The table shows the annual balance sheet results, with a healthy projected increase in net worth. Detailed monthly projections are in the appendix.
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5531, Auto and Home Supply Stores, are shown for comparison.