Mad Keen Motors
Financial Plan
Website Expenses and Costs:
We expect to spend £6,200 over the next year on developing and then maintaining the website, with regular updates. We project another £6,200 will be needed for the same areas over the following two years.
In addition, we will have a slightly lower price/cost spread for website-related sales, once online coupons and other discounts are included. These have been factored in to the cost of sales. We will track this amount with a special record for “website coupons” in our sales and customer database.
Website Revenues:
We anticipate an additional £18,360 of sales in the next year directly related to the development of the website. This is based on reports from other locally focused service businesses which implemented websites to enhance visibility and promote sales through online discounts.
8.2 Break-even Analysis
The following table and chart show our break-even analysis with the website in place.
| Break-even Analysis | |
| Monthly Revenue Break-even | £40,547 |
| Assumptions: | |
| Average Percent Variable Cost | 4% |
| Estimated Monthly Fixed Cost | £38,925 |
8.3 Projected Profit and Loss
This table outlines additions to the standard operating expenses for developing and maintaining the website. Detailed monthly numbers can be found in the appendix.
| Pro Forma Profit and Loss | |||
| FY 2006 | FY 2007 | FY 2008 | |
| Sales | £822,360 | £843,080 | £871,482 |
| Direct Cost of Sales | £32,894 | £33,723 | £34,859 |
| Other Costs of Sales | £0 | £0 | £0 |
| Total Cost of Sales | £32,894 | £33,723 | £34,859 |
| Gross Margin | £789,466 | £809,357 | £836,622 |
| Gross Margin % | 96.00% | 96.00% | 96.00% |
| Expenses | |||
| Payroll | £402,000 | £405,000 | £407,000 |
| Other Expense Account Name | £0 | £0 | £0 |
| Depreciation | £4,800 | £4,800 | £4,800 |
| Standard Operating Expenses | £0 | £190,000 | £196,000 |
| Website Infrastructure | £0 | £0 | £0 |
| Website Development | £0 | £0 | £0 |
| Website Maintenance | £0 | £1,500 | £1,500 |
| Expensed Equipment | £0 | £2,000 | £1,200 |
| Payroll Taxes (National Insurance, etc.) | £60,300 | £60,750 | £61,050 |
| Other | £0 | £0 | £0 |
| Total Operating Expenses | £467,100 | £470,550 | £472,850 |
| Profit Before Interest and Taxes | £322,366 | £338,807 | £363,772 |
| EBITDA | £327,166 | £343,607 | £368,572 |
| Interest Expense | £74,800 | £73,600 | £71,200 |
| Taxes Incurred | £74,270 | £79,562 | £87,772 |
| Net Profit | £173,296 | £185,645 | £204,801 |
| Net Profit/Sales | 21.07% | 22.02% | 23.50% |
8.4 Projected Cash Flow
Mad Keen Motors is in a strong cash position right now, and can afford the relatively small expenses to start up the website. The following table and chart show our projected cash flow and cash balance.
| Pro Forma Cash Flow | |||
| FY 2006 | FY 2007 | FY 2008 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | £822,360 | £843,080 | £871,482 |
| Subtotal Cash from Operations | £822,360 | £843,080 | £871,482 |
| 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 | £822,360 | £843,080 | £871,482 |
| Expenditures | FY 2006 | FY 2007 | FY 2008 |
| Expenditures from Operations | |||
| Cash Spending | £402,000 | £405,000 | £407,000 |
| Bill Payments | £233,402 | £246,915 | £254,378 |
| Subtotal Spent on Operations | £635,402 | £651,915 | £661,378 |
| 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 | £2,000 | £24,000 | £24,000 |
| Purchase Other Current Assets | £0 | £0 | £0 |
| Purchase Long-term Assets | £0 | £0 | £0 |
| Dividends | £0 | £0 | £0 |
| Subtotal Cash Spent | £637,402 | £675,915 | £685,378 |
| Net Cash Flow | £184,958 | £167,165 | £186,103 |
| Cash Balance | £388,446 | £555,611 | £741,714 |
8.5 Projected Balance Sheet
Our Net Worth will continue to grow as we pay off the mortgage for the two newest Mad Keen Motors locations.
| Pro Forma Balance Sheet | |||
| FY 2006 | FY 2007 | FY 2008 | |
| Assets | |||
| Current Assets | |||
| Cash | £388,446 | £555,611 | £741,714 |
| Inventory | £2,748 | £2,817 | £2,912 |
| Other Current Assets | £70,000 | £70,000 | £70,000 |
| Total Current Assets | £461,194 | £628,428 | £814,626 |
| Long-term Assets | |||
| Long-term Assets | £1,250,000 | £1,250,000 | £1,250,000 |
| Accumulated Depreciation | £19,800 | £24,600 | £29,400 |
| Total Long-term Assets | £1,230,200 | £1,225,400 | £1,220,600 |
| Total Assets | £1,691,394 | £1,853,828 | £2,035,226 |
| Liabilities and Capital | FY 2006 | FY 2007 | FY 2008 |
| Current Liabilities | |||
| Accounts Payable | £19,570 | £20,359 | £20,957 |
| Current Borrowing | £0 | £0 | £0 |
| Other Current Liabilities | £0 | £0 | £0 |
| Subtotal Current Liabilities | £19,570 | £20,359 | £20,957 |
| Long-term Liabilities | £748,000 | £724,000 | £700,000 |
| Total Liabilities | £767,570 | £744,359 | £720,957 |
| Paid-in Capital | £400,000 | £400,000 | £400,000 |
| Retained Earnings | £350,528 | £523,824 | £709,469 |
| Earnings | £173,296 | £185,645 | £204,801 |
| Total Capital | £923,824 | £1,109,469 | £1,314,269 |
| Total Liabilities and Capital | £1,691,394 | £1,853,828 | £2,035,226 |
| Net Worth | £923,824 | £1,109,469 | £1,314,269 |
8.6 Business Ratios
The following table outlines some of the more important ratios from the General Automotive Repair Shop industry. The final column, Industry Profile, details specific ratios based on the industry.
| Ratio Analysis | ||||
| FY 2006 | FY 2007 | FY 2008 | Industry Profile | |
| Sales Growth | 3.05% | 2.52% | 3.37% | 5.37% |
| Percent of Total Assets | ||||
| Inventory | 0.16% | 0.15% | 0.14% | 8.50% |
| Other Current Assets | 4.14% | 3.78% | 3.44% | 24.67% |
| Total Current Assets | 27.27% | 33.90% | 40.03% | 45.07% |
| Long-term Assets | 72.73% | 66.10% | 59.97% | 54.93% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 1.16% | 1.10% | 1.03% | 22.43% |
| Long-term Liabilities | 44.22% | 39.05% | 34.39% | 26.48% |
| Total Liabilities | 45.38% | 40.15% | 35.42% | 48.91% |
| Net Worth | 54.62% | 59.85% | 64.58% | 51.09% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 96.00% | 96.00% | 96.00% | 100.00% |
| Selling, General & Administrative Expenses | 74.93% | 73.98% | 72.50% | 71.18% |
| Advertising Expenses | 0.00% | 0.00% | 0.00% | 1.75% |
| Profit Before Interest and Taxes | 39.20% | 40.19% | 41.74% | 2.37% |
| Main Ratios | ||||
| Current | 23.57 | 30.87 | 38.87 | 1.48 |
| Quick | 23.43 | 30.73 | 38.73 | 0.91 |
| Total Debt to Total Assets | 45.38% | 40.15% | 35.42% | 54.67% |
| Pre-tax Return on Net Worth | 26.80% | 23.90% | 22.26% | 3.63% |
| Pre-tax Return on Assets | 14.64% | 14.31% | 14.38% | 8.00% |
| Additional Ratios | FY 2006 | FY 2007 | FY 2008 | |
| Net Profit Margin | 21.07% | 22.02% | 23.50% | n.a |
| Return on Equity | 18.76% | 16.73% | 15.58% | n.a |
| Activity Ratios | ||||
| Inventory Turnover | 8.86 | 12.12 | 12.17 | n.a |
| Accounts Payable Turnover | 11.90 | 12.17 | 12.17 | n.a |
| Payment Days | 30 | 29 | 30 | n.a |
| Total Asset Turnover | 0.49 | 0.45 | 0.43 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.83 | 0.67 | 0.55 | n.a |
| Current Liab. to Liab. | 0.03 | 0.03 | 0.03 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | £441,624 | £608,069 | £793,669 | n.a |
| Interest Coverage | 4.31 | 4.60 | 5.11 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 2.06 | 2.20 | 2.34 | n.a |
| Current Debt/Total Assets | 1% | 1% | 1% | n.a |
| Acid Test | 23.43 | 30.73 | 38.73 | n.a |
| Sales/Net Worth | 0.89 | 0.76 | 0.66 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
8.7 Financial Risks and Contingencies-2
Risks and Assumptions
The key risk with this website for Mad Keen Motors is that people will get information on their cars from other places. Since it is not typical for small garages to have this much content on their sites, Backwater Downs locals may not think to search for car and garage information on the Web. As cars and components become more specialized and car owners may tend to trust dealerships more, they will be less likely to use their local garage. This is a risk to the business as a whole, though we hope that the website will help to reduce Mad Keen Motors’ exposure to this risk.
If the site is not supported properly and people do not get quick answers to their questions, they may assume that service from the garage itself is lacking too. Therefore, emails must be answered promptly, the site must be updated regularly and the garage workers should also be aware of information and features on the website, and be educated about it when they speak to customers.
Contingency Plan
Since there will be minimal integration between the website and Mad Keen Motors’ core business, a contingency plan is not a huge concern. If use of the site falls well below forecasted levels and it proves not to be cost effective to continue the site in its current format, the site will be changed to essentially a business card site, where people can get information about the garage, location, hours, ownership information, etc.
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