CorbelArch Real Estate Inspectors
Financial Plan
The following topics present the financial plan for CorbelArch Real Estate Inspectors. Topics covered include a Break-even Analysis, Cash Flow, P & L, and a Balance Sheet.
7.1 Important Assumptions
We are assuming steady growth from good management, barring any unforseen local, or national disasters such as the economic slowdown seen by most of the country following the September 11th, 2001 tragedies.
7.2 Break-even Analysis
The break-even analysis is based on our average monthly expenses. The total expenses anticipated for the 12-month plan period was divided by twelve to establish the monthly average. The table below shows what we must average in revenue each month. We recognize that our actual revenue and expanses will vary each month.
| Break-even Analysis | |
| Monthly Revenue Break-even | $4,963 |
| Assumptions: | |
| Average Percent Variable Cost | 21% |
| Estimated Monthly Fixed Cost | $3,946 |
7.3 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 | |||
| FY 2005 | FY 2006 | FY 2007 | |
| Sales | $243,000 | $325,000 | $460,000 |
| Direct Cost of Sales | $49,815 | $66,625 | $94,300 |
| Other Costs of Sales | $0 | $0 | $0 |
| Total Cost of Sales | $49,815 | $66,625 | $94,300 |
| Gross Margin | $193,185 | $258,375 | $365,700 |
| Gross Margin % | 79.50% | 79.50% | 79.50% |
| Expenses | |||
| Payroll | $21,000 | $164,000 | $199,000 |
| Marketing/Promotion | $3,000 | $4,000 | $8,000 |
| Depreciation | $0 | $0 | $0 |
| Rent | $6,000 | $9,000 | $9,000 |
| Utilities | $1,200 | $2,000 | $2,400 |
| Insurance | $9,000 | $12,000 | $16,000 |
| Website Hosting and Maintenance | $2,400 | $2,800 | $3,000 |
| Bookkeeping Service | $4,750 | $6,000 | $0 |
| Payroll Taxes | $0 | $0 | $0 |
| Total Operating Expenses | $47,350 | $199,800 | $237,400 |
| Profit Before Interest and Taxes | $145,835 | $58,575 | $128,300 |
| EBITDA | $145,835 | $58,575 | $128,300 |
| Interest Expense | $533 | $436 | $335 |
| Taxes Incurred | $43,591 | $17,442 | $38,389 |
| Net Profit | $101,711 | $40,697 | $89,575 |
| Net Profit/Sales | 41.86% | 12.52% | 19.47% |
7.4 Projected Cash Flow
In years two and three we will purchase company vehicles. In year two we anticipate distributing profit sharing as dividends to all owners and employees.
| Pro Forma Cash Flow | |||
| FY 2005 | FY 2006 | FY 2007 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $72,900 | $97,500 | $138,000 |
| Cash from Receivables | $167,647 | $219,370 | $308,616 |
| Subtotal Cash from Operations | $240,547 | $316,870 | $446,616 |
| 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 | $240,547 | $316,870 | $446,616 |
| Expenditures | FY 2005 | FY 2006 | FY 2007 |
| Expenditures from Operations | |||
| Cash Spending | $21,000 | $164,000 | $199,000 |
| Bill Payments | $113,869 | $118,834 | $167,223 |
| Subtotal Spent on Operations | $134,869 | $282,834 | $366,223 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $1,740 | $1,635 | $1,736 |
| 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 | $30,000 | $45,000 |
| Dividends | $0 | $30,000 | $60,000 |
| Subtotal Cash Spent | $136,609 | $344,469 | $472,959 |
| Net Cash Flow | $103,938 | ($27,599) | ($26,343) |
| Cash Balance | $106,938 | $79,339 | $52,996 |
7.5 Projected Balance Sheet
The balance sheet shows healthy growth of net worth, and strong financial position. The monthly estimates are included in the appendix.
| Pro Forma Balance Sheet | |||
| FY 2005 | FY 2006 | FY 2007 | |
| Assets | |||
| Current Assets | |||
| Cash | $106,938 | $79,339 | $52,996 |
| Accounts Receivable | $24,092 | $32,221 | $45,606 |
| Other Current Assets | $25,000 | $25,000 | $25,000 |
| Total Current Assets | $156,030 | $136,560 | $123,602 |
| Long-term Assets | |||
| Long-term Assets | $15,000 | $45,000 | $90,000 |
| Accumulated Depreciation | $0 | $0 | $0 |
| Total Long-term Assets | $15,000 | $45,000 | $90,000 |
| Total Assets | $171,030 | $181,560 | $213,602 |
| Liabilities and Capital | FY 2005 | FY 2006 | FY 2007 |
| Current Liabilities | |||
| Accounts Payable | $8,419 | $9,888 | $14,090 |
| Current Borrowing | $8,087 | $6,452 | $4,716 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $16,506 | $16,340 | $18,806 |
| Long-term Liabilities | $0 | $0 | $0 |
| Total Liabilities | $16,506 | $16,340 | $18,806 |
| Paid-in Capital | $30,000 | $30,000 | $30,000 |
| Retained Earnings | $22,812 | $94,523 | $75,221 |
| Earnings | $101,711 | $40,697 | $89,575 |
| Total Capital | $154,523 | $165,221 | $194,796 |
| Total Liabilities and Capital | $171,030 | $181,560 | $213,602 |
| Net Worth | $154,523 | $165,221 | $194,796 |
7.6 Business Ratios
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7389.0203, Building Inspection Services, are shown for comparison.
| Ratio Analysis | ||||
| FY 2005 | FY 2006 | FY 2007 | Industry Profile | |
| Sales Growth | 483.59% | 33.74% | 41.54% | 2.53% |
| Percent of Total Assets | ||||
| Accounts Receivable | 14.09% | 17.75% | 21.35% | 23.12% |
| Other Current Assets | 14.62% | 13.77% | 11.70% | 47.86% |
| Total Current Assets | 91.23% | 75.21% | 57.87% | 73.23% |
| Long-term Assets | 8.77% | 24.79% | 42.13% | 26.77% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 9.65% | 9.00% | 8.80% | 34.95% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 11.17% |
| Total Liabilities | 9.65% | 9.00% | 8.80% | 46.12% |
| Net Worth | 90.35% | 91.00% | 91.20% | 53.88% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 79.50% | 79.50% | 79.50% | 100.00% |
| Selling, General & Administrative Expenses | 37.64% | 66.98% | 60.03% | 81.44% |
| Advertising Expenses | 0.00% | 0.00% | 0.00% | 1.41% |
| Profit Before Interest and Taxes | 60.01% | 18.02% | 27.89% | 2.40% |
| Main Ratios | ||||
| Current | 9.45 | 8.36 | 6.57 | 1.54 |
| Quick | 9.45 | 8.36 | 6.57 | 1.23 |
| Total Debt to Total Assets | 9.65% | 9.00% | 8.80% | 56.68% |
| Pre-tax Return on Net Worth | 94.03% | 35.19% | 65.69% | 5.58% |
| Pre-tax Return on Assets | 84.96% | 32.02% | 59.91% | 12.87% |
| Additional Ratios | FY 2005 | FY 2006 | FY 2007 | |
| Net Profit Margin | 41.86% | 12.52% | 19.47% | n.a |
| Return on Equity | 65.82% | 24.63% | 45.98% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 7.06 | 7.06 | 7.06 | n.a |
| Collection Days | 60 | 45 | 44 | n.a |
| Accounts Payable Turnover | 14.29 | 12.17 | 12.17 | n.a |
| Payment Days | 28 | 28 | 26 | n.a |
| Total Asset Turnover | 1.42 | 1.79 | 2.15 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.11 | 0.10 | 0.10 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $139,523 | $120,221 | $104,796 | n.a |
| Interest Coverage | 273.58 | 134.29 | 382.94 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.70 | 0.56 | 0.46 | n.a |
| Current Debt/Total Assets | 10% | 9% | 9% | n.a |
| Acid Test | 7.99 | 6.39 | 4.15 | n.a |
| Sales/Net Worth | 1.57 | 1.97 | 2.36 | n.a |
| Dividend Payout | 0.00 | 0.74 | 0.67 | n.a |
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