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Ideal Business Support Services
Financial Plan
The following sections will outline the important financial assumptions, key financial indicators, break-even analysis, profit and loss, cash flow, and the balance sheet.
7.1 Break-even Analysis
The break-even analysis indicates what is needed in monthly revenue to break even.
| Break-even Analysis | |
| Monthly Revenue Break-even | $13,445 |
| Assumptions: | |
| Average Percent Variable Cost | 15% |
| Estimated Monthly Fixed Cost | $11,428 |
7.2 Important Assumptions
The following table highlights some of the important financial assumptions for Ideal.
| 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 |
7.3 Projected Profit and Loss
The following table will indicate projected profit and loss.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $110,861 | $238,293 | $256,203 |
| Direct Cost of Sales | $16,629 | $35,744 | $38,430 |
| Other | $0 | $0 | $0 |
| Total Cost of Sales | $16,629 | $35,744 | $38,430 |
| Gross Margin | $94,232 | $202,549 | $217,773 |
| Gross Margin % | 85.00% | 85.00% | 85.00% |
| Expenses | |||
| Payroll | $102,960 | $122,160 | $122,160 |
| Sales and Marketing and Other Expenses | $3,000 | $2,500 | $2,500 |
| Depreciation | $2,832 | $2,832 | $2,832 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $1,500 | $1,500 | $1,500 |
| Insurance | $1,800 | $1,800 | $1,800 |
| Rent | $9,600 | $9,600 | $9,600 |
| Payroll Taxes | $15,444 | $18,324 | $18,324 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $137,136 | $158,716 | $158,716 |
| Profit Before Interest and Taxes | ($42,904) | $43,833 | $59,057 |
| EBITDA | ($40,072) | $46,665 | $61,889 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $0 | $10,958 | $15,010 |
| Net Profit | ($42,904) | $32,875 | $44,046 |
| Net Profit/Sales | -38.70% | 13.80% | 17.19% |
7.4 Projected Cash Flow
The following chart and table indicates projected cash flow.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $38,801 | $83,403 | $89,671 |
| Cash from Receivables | $48,735 | $128,079 | $162,764 |
| Subtotal Cash from Operations | $87,536 | $211,482 | $252,435 |
| 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 | $3,000 | $0 | $0 |
| Subtotal Cash Received | $90,536 | $211,482 | $252,435 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $102,960 | $122,160 | $122,160 |
| Bill Payments | $42,443 | $79,346 | $86,611 |
| Subtotal Spent on Operations | $145,403 | $201,506 | $208,771 |
| 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 | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| Subtotal Cash Spent | $145,403 | $201,506 | $208,771 |
| Net Cash Flow | ($54,867) | $9,976 | $43,664 |
| Cash Balance | $2,533 | $12,509 | $56,173 |
7.5 Projected Balance Sheet
The following table indicates the projected balance sheet.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $2,533 | $12,509 | $56,173 |
| Accounts Receivable | $23,325 | $50,136 | $53,904 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $25,858 | $62,645 | $110,077 |
| Long-term Assets | |||
| Long-term Assets | $8,500 | $8,500 | $8,500 |
| Accumulated Depreciation | $2,832 | $5,664 | $8,496 |
| Total Long-term Assets | $5,668 | $2,836 | $4 |
| Total Assets | $31,526 | $65,481 | $110,081 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $5,530 | $6,610 | $7,164 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $5,530 | $6,610 | $7,164 |
| Long-term Liabilities | $0 | $0 | $0 |
| Total Liabilities | $5,530 | $6,610 | $7,164 |
| Paid-in Capital | $70,000 | $70,000 | $70,000 |
| Retained Earnings | ($1,100) | ($44,004) | ($11,129) |
| Earnings | ($42,904) | $32,875 | $44,046 |
| Total Capital | $25,996 | $58,871 | $102,917 |
| Total Liabilities and Capital | $31,526 | $65,481 | $110,081 |
| Net Worth | $25,996 | $58,871 | $102,917 |
7.6 Business Ratios
Business ratios for the years of this plan are shown below. Industry profile ratios based on the NAICS code 524298, Other Insurance Related Activities, are shown for comparison.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 114.95% | 7.52% | 3.95% |
| Percent of Total Assets | ||||
| Accounts Receivable | 73.99% | 76.57% | 48.97% | 24.53% |
| Other Current Assets | 0.00% | 0.00% | 0.00% | 69.49% |
| Total Current Assets | 82.02% | 95.67% | 100.00% | 94.07% |
| Long-term Assets | 17.98% | 4.33% | 0.00% | 5.93% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 17.54% | 10.10% | 6.51% | 29.76% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 9.55% |
| Total Liabilities | 17.54% | 10.10% | 6.51% | 39.31% |
| Net Worth | 82.46% | 89.90% | 93.49% | 60.69% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 85.00% | 85.00% | 85.00% | 100.00% |
| Selling, General & Administrative Expenses | 123.70% | 71.20% | 67.71% | 60.33% |
| Advertising Expenses | 1.62% | 0.55% | 0.51% | 1.26% |
| Profit Before Interest and Taxes | -38.70% | 18.39% | 23.05% | 6.43% |
| Main Ratios | ||||
| Current | 4.68 | 9.48 | 15.36 | 2.23 |
| Quick | 4.68 | 9.48 | 15.36 | 2.00 |
| Total Debt to Total Assets | 17.54% | 10.10% | 6.51% | 49.79% |
| Pre-tax Return on Net Worth | -165.04% | 74.46% | 57.38% | 7.52% |
| Pre-tax Return on Assets | -136.09% | 66.94% | 53.65% | 14.98% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | -38.70% | 13.80% | 17.19% | n.a |
| Return on Equity | -165.04% | 55.84% | 42.80% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 3.09 | 3.09 | 3.09 | n.a |
| Collection Days | 55 | 87 | 114 | n.a |
| Accounts Payable Turnover | 8.68 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 28 | 29 | n.a |
| Total Asset Turnover | 3.52 | 3.64 | 2.33 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.21 | 0.11 | 0.07 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $20,328 | $56,035 | $102,913 | n.a |
| Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.28 | 0.27 | 0.43 | n.a |
| Current Debt/Total Assets | 18% | 10% | 7% | n.a |
| Acid Test | 0.46 | 1.89 | 7.84 | n.a |
| Sales/Net Worth | 4.26 | 4.05 | 2.49 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |