Phaethon's Chariot Restorations
Financial Plan
The business of Phaethon’s Chariot Restorations does not require substantial outlays for inventory and virtually all sales are on a cash/credit card basis, so increases in sales will not be accompanied by initial cash-flow deficits.
8.1 Start-up Funding
The start-up costs are to be financed by the owner’s personal investment and by a 7-year loan.
| Start-up Funding | |
| Start-up Expenses to Fund | $23,500 |
| Start-up Assets to Fund | $142,000 |
| Total Funding Required | $165,500 |
| Assets | |
| Non-cash Assets from Start-up | $132,000 |
| Cash Requirements from Start-up | $10,000 |
| Additional Cash Raised | $0 |
| Cash Balance on Starting Date | $10,000 |
| Total Assets | $142,000 |
| Liabilities and Capital | |
| Liabilities | |
| Current Borrowing | $0 |
| Long-term Liabilities | $119,000 |
| Accounts Payable (Outstanding Bills) | $6,000 |
| Other Current Liabilities (interest-free) | $5,500 |
| Total Liabilities | $130,500 |
| Capital | |
| Planned Investment | |
| Owner | $35,000 |
| Investor | $0 |
| Additional Investment Requirement | $0 |
| Total Planned Investment | $35,000 |
| Loss at Start-up (Start-up Expenses) | ($23,500) |
| Total Capital | $11,500 |
| Total Capital and Liabilities | $142,000 |
| Total Funding | $165,500 |
8.2 Break-even Analysis
The Break-even Analysis is based on the average of the first-year figures for total sales and average cost of sales, and by the averaged annual monthly operating expenses. These conservative assumptions make for a more accurate estimate of real risk, showing that we need to have the monthly sales shown in the table and chart below.
| Break-even Analysis | |
| Monthly Revenue Break-even | $20,506 |
| Assumptions: | |
| Average Percent Variable Cost | 21% |
| Estimated Monthly Fixed Cost | $16,120 |
8.3 Projected Profit and Loss
As the Profit and Loss table shows, the company expects to continue its steady growth in profitability over the next three years of operations.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $311,044 | $471,406 | $623,707 |
| Direct Cost of Sales | $66,540 | $101,869 | $132,203 |
| Other Costs of Sales | $0 | $0 | $0 |
| Total Cost of Sales | $66,540 | $101,869 | $132,203 |
| Gross Margin | $244,504 | $369,537 | $491,504 |
| Gross Margin % | 78.61% | 78.39% | 78.80% |
| Expenses | |||
| Payroll | $82,143 | $204,200 | $232,800 |
| Marketing/Promotion | $22,500 | $22,500 | $22,500 |
| Depreciation | $19,992 | $20,000 | $20,000 |
| Rent | $21,600 | $15,200 | $24,000 |
| Utilities | $15,200 | $24,000 | $0 |
| Insurance | $24,000 | $0 | $0 |
| Payroll Taxes | $0 | $0 | $0 |
| Fixtures | $8,000 | $0 | $0 |
| Total Operating Expenses | $193,435 | $285,900 | $299,300 |
| Profit Before Interest and Taxes | $51,069 | $83,637 | $192,204 |
| EBITDA | $71,061 | $103,637 | $212,204 |
| Interest Expense | $6,672 | $5,852 | $4,720 |
| Taxes Incurred | $13,319 | $23,335 | $56,245 |
| Net Profit | $31,078 | $54,449 | $131,239 |
| Net Profit/Sales | 9.99% | 11.55% | 21.04% |
8.4 Projected Cash Flow
As can be seen from the Cash Flow chart and table below, Phaethon’s Chariot Restorations has a number of advantages that provide for a large amount of growth in the company’s cash account. Because it is the company’s policy that the clients to provide the parts for the the restoration, the company has a very low cost of goods sold account and therefore a high gross margin. Clients can purchase the parts themselves, or if they prefer to have us make the purchase, we will locate the part, charge the customer’s credit card, and then purchase the part from the supplier/vendor.
Furthermore, the custom nature of the business means that there is no inventory cost to speak of or accounts payable. With the ability to generate so much cash flow, it is assumed that the company will seek to use this asset to expand its markets and production capacity in the near future.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $311,044 | $471,406 | $623,707 |
| Subtotal Cash from Operations | $311,044 | $471,406 | $623,707 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $20,716 | $31,396 | $41,539 |
| New Current Borrowing | $5,000 | $7,500 | $5,000 |
| 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 | $336,759 | $510,301 | $670,246 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $82,143 | $204,200 | $232,800 |
| Bill Payments | $176,173 | $209,073 | $244,046 |
| Subtotal Spent on Operations | $258,316 | $413,273 | $476,846 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $20,716 | $31,396 | $41,539 |
| Principal Repayment of Current Borrowing | $3,500 | $6,000 | $7,500 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $16,476 | $17,492 | $18,570 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $2,400 | $4,000 | $4,000 |
| Dividends | $9,000 | $0 | $0 |
| Subtotal Cash Spent | $310,408 | $472,160 | $548,455 |
| Net Cash Flow | $26,352 | $38,141 | $121,792 |
| Cash Balance | $36,352 | $74,493 | $196,284 |
8.5 Projected Balance Sheet
The following table presents the Balance Sheet.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $36,352 | $74,493 | $196,284 |
| Inventory | $17,818 | $27,279 | $35,402 |
| Other Current Assets | $30,000 | $30,000 | $30,000 |
| Total Current Assets | $84,170 | $131,772 | $261,686 |
| Long-term Assets | |||
| Long-term Assets | $102,400 | $106,400 | $110,400 |
| Accumulated Depreciation | $19,992 | $39,992 | $59,992 |
| Total Long-term Assets | $82,408 | $66,408 | $50,408 |
| Total Assets | $166,578 | $198,180 | $312,094 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $23,476 | $16,621 | $20,366 |
| Current Borrowing | $1,500 | $3,000 | $500 |
| Other Current Liabilities | $5,500 | $5,500 | $5,500 |
| Subtotal Current Liabilities | $30,476 | $25,121 | $26,366 |
| Long-term Liabilities | $102,524 | $85,032 | $66,462 |
| Total Liabilities | $133,000 | $110,153 | $92,828 |
| Paid-in Capital | $35,000 | $35,000 | $35,000 |
| Retained Earnings | ($32,500) | ($1,422) | $53,027 |
| Earnings | $31,078 | $54,449 | $131,239 |
| Total Capital | $33,578 | $88,027 | $219,266 |
| Total Liabilities and Capital | $166,578 | $198,180 | $312,094 |
| Net Worth | $33,578 | $88,027 | $219,266 |
8.6 Business Ratios
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Industry Standards, Antique and Classic Automobile Restoration services, SIC code 7532 are shown for comparison.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 51.56% | 32.31% | 1.55% |
| Percent of Total Assets | ||||
| Inventory | 10.70% | 13.76% | 11.34% | 9.44% |
| Other Current Assets | 18.01% | 15.14% | 9.61% | 29.30% |
| Total Current Assets | 50.53% | 66.49% | 83.85% | 52.30% |
| Long-term Assets | 49.47% | 33.51% | 16.15% | 47.70% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 18.30% | 12.68% | 8.45% | 20.70% |
| Long-term Liabilities | 61.55% | 42.91% | 21.30% | 28.94% |
| Total Liabilities | 79.84% | 55.58% | 29.74% | 49.64% |
| Net Worth | 20.16% | 44.42% | 70.26% | 50.36% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 78.61% | 78.39% | 78.80% | 100.00% |
| Selling, General & Administrative Expenses | 68.62% | 66.84% | 57.76% | 73.48% |
| Advertising Expenses | 6.43% | 1.40% | 1.40% | 1.33% |
| Profit Before Interest and Taxes | 16.42% | 17.74% | 30.82% | 0.60% |
| Main Ratios | ||||
| Current | 2.76 | 5.25 | 9.92 | 1.95 |
| Quick | 2.18 | 4.16 | 8.58 | 1.31 |
| Total Debt to Total Assets | 79.84% | 55.58% | 29.74% | 55.95% |
| Pre-tax Return on Net Worth | 132.22% | 88.36% | 85.51% | 1.18% |
| Pre-tax Return on Assets | 26.65% | 39.25% | 60.07% | 2.67% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 9.99% | 11.55% | 21.04% | n.a |
| Return on Equity | 92.55% | 61.86% | 59.85% | n.a |
| Activity Ratios | ||||
| Inventory Turnover | 5.98 | 4.52 | 4.22 | n.a |
| Accounts Payable Turnover | 8.25 | 12.17 | 12.17 | n.a |
| Payment Days | 28 | 36 | 27 | n.a |
| Total Asset Turnover | 1.87 | 2.38 | 2.00 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 3.96 | 1.25 | 0.42 | n.a |
| Current Liab. to Liab. | 0.23 | 0.23 | 0.28 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $53,694 | $106,651 | $235,320 | n.a |
| Interest Coverage | 7.65 | 14.29 | 40.72 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.54 | 0.42 | 0.50 | n.a |
| Current Debt/Total Assets | 18% | 13% | 8% | n.a |
| Acid Test | 2.18 | 4.16 | 8.58 | n.a |
| Sales/Net Worth | 9.26 | 5.36 | 2.84 | n.a |
| Dividend Payout | 0.29 | 0.00 | 0.00 | n.a |
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