The financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions. The monthly assumptions are included in the appendices. From the beginning, we recognize that collection days are critical. Interest rates, tax rates, and personnel burden are based on worst case scenario assumptions.
Three of the more important underlying assumptions are:
Our projected profit and loss is shown in the following table, with sales increasing from just under $450K the first year to more than $1.2 million the third. Due in part to the nature of our business (service oriented, without the need of expensive production cost or inventory), we expect modest profits for the first year. Although our location is somewhat subject to seasonal shifts, particularly in the senior citizen population, or main target group is year round residents; therefore, we can expect linear growth as opposed to cyclical growth. In other words, our year two earnings are based on growth from the average sales of month 12 in year one, rather than the twelve month average of year one. We anticipate this growth will level out somewhat near the end of year 3, as we reach maximum capacity in terms of case load for our present staff size. Prior to that point, we will review our business plan and determine if space additions are necessary and viable for our present office location, or if we should consider developing an office in a neighboring town.
Marketing/Promotion expenses are estimated at $300 per client for the first year, decreasing over the next two years as word of mouth and corporate affiliations generate sales without extra advertising.
Depreciation of long-term assets is as follows: X-ray equipment over a thirty year period, chiropractic tables over a twenty year period, and computerized diagnostic equipment over a seven year period.
As with the break-even, we are projecting very conservatively regarding fixed cost, cost of sales, and gross margin. Our fixed cost and cost of sales should be slightly lower in reality, and gross margin higher, than in this projection. In determining insurance, printing, and advertising expenses, we purposely projected higher than average costs. We prefer to project conservatively so that we ensure adequate cash flow.
The detailed monthly projections are included in the appendices.
Cash flow projections are critical to our success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month, and the other the monthly cash balance. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendices.
The balance sheet in the following table shows managed but sufficient growth of net worth, and a healthy financial position.
The following table shows the projected businesses ratios. We expect to maintain healthy ratios for profitability, risk, and return.
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 8041, [Offices and Clinics of Chiropractors], are shown for comparison.
The following table outlines some of the more important ratios from the chiropractic industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 8041.