Computer Engineering Business Plan

Todd, West, and Associates

Financial Plan

The following is the financial plan for Todd, West, and Associates.

7.1 Break-even Analysis

The monthly break-even point is shown in the table and chart below.

Computer engineering business plan, financial plan chart image

Break-even Analysis


Monthly Revenue Break-even	$25,450

Assumptions:
Average Percent Variable Cost	0%
Estimated Monthly Fixed Cost	$25,450

7.2 Projected Profit and Loss

The following table and charts highlight the projected profit and loss for the next three years.

Pro Forma Profit and Loss
	Year 1	Year 2	Year 3
Sales	$340,577	$388,000	$430,000
Direct Cost of Sales	$0	$0	$0
Other Production Expenses	$0	$0	$0
Total Cost of Sales	$0	$0	$0

Gross Margin	$340,577	$388,000	$430,000
Gross Margin %	100.00%	100.00%	100.00%


Expenses
Payroll	$252,000	$264,000	$276,000
Sales and Marketing and Other Expenses	$0	$0	$0
Depreciation	$0	$0	$0
Leased Equipment	$0	$0	$0
Utilities	$3,600	$3,600	$3,600
Insurance	$0	$0	$0
Rent	$12,000	$12,000	$12,000
Payroll Taxes	$37,800	$39,600	$41,400
Other	$0	$0	$0

Total Operating Expenses	$305,400	$319,200	$333,000

Profit Before Interest and Taxes	$35,177	$68,800	$97,000
EBITDA	$35,177	$68,800	$97,000
Interest Expense	$2,883	$2,676	$2,460
Taxes Incurred	$9,688	$19,837	$28,362

Net Profit	$22,606	$46,287	$66,178
Net Profit/Sales	6.64%	11.93%	15.39%

7.3 Projected Cash Flow

The following table and chart highlight the projected cash flow for the next three years.

Pro Forma Cash Flow
	Year 1	Year 2	Year 3
Cash Received

Cash from Operations
Cash Sales	$85,144	$97,000	$107,500
Cash from Receivables	$209,420	$284,593	$316,826
Subtotal Cash from Operations	$294,565	$381,593	$424,326

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	$294,565	$381,593	$424,326

Expenditures	Year 1	Year 2	Year 3

Expenditures from Operations
Cash Spending	$252,000	$264,000	$276,000
Bill Payments	$60,773	$76,524	$86,991
Subtotal Spent on Operations	$312,773	$340,524	$362,991

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	$3,600	$3,600	$3,600
Purchase Other Current Assets	$0	$0	$0
Purchase Long-term Assets	$0	$0	$0
Dividends	$0	$0	$0
Subtotal Cash Spent	$316,373	$344,124	$366,591

Net Cash Flow	($21,809)	$37,469	$57,735
Cash Balance	$39,191	$76,661	$134,395

7.4 Projected Balance Sheet

The following table highlights the projected balance sheet for the next three years.

Pro Forma Balance Sheet
	Year 1	Year 2	Year 3
Assets

Current Assets
Cash	$39,191	$76,661	$134,395
Accounts Receivable	$46,013	$52,419	$58,094
Other Current Assets	$0	$0	$0
Total Current Assets	$85,204	$129,080	$192,489

Long-term Assets
Long-term Assets	$0	$0	$0
Accumulated Depreciation	$0	$0	$0
Total Long-term Assets	$0	$0	$0
Total Assets	$85,204	$129,080	$192,489

Liabilities and Capital	Year 1	Year 2	Year 3

Current Liabilities
Accounts Payable	$5,198	$6,387	$7,218
Current Borrowing	$0	$0	$0
Other Current Liabilities	$0	$0	$0
Subtotal Current Liabilities	$5,198	$6,387	$7,218

Long-term Liabilities	$46,400	$42,800	$39,200
Total Liabilities	$51,598	$49,187	$46,418

Paid-in Capital	$20,000	$20,000	$20,000
Retained Earnings	($9,000)	$13,606	$59,893
Earnings	$22,606	$46,287	$66,178
Total Capital	$33,606	$79,893	$146,071
Total Liabilities and Capital	$85,204	$129,080	$192,489

Net Worth	$33,606	$79,893	$146,071

7.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the NAISC code 541614, Process, Physical Distribution, and Logistics Consulting, are shown for comparison.

Ratio Analysis
	Year 1	Year 2	Year 3	Industry Profile
Sales Growth	0.00%	13.92%	10.82%	7.23%

Percent of Total Assets
Accounts Receivable	54.00%	40.61%	30.18%	19.37%
Other Current Assets	0.00%	0.00%	0.00%	50.13%
Total Current Assets	100.00%	100.00%	100.00%	70.99%
Long-term Assets	0.00%	0.00%	0.00%	29.01%
Total Assets	100.00%	100.00%	100.00%	100.00%

Current Liabilities	6.10%	4.95%	3.75%	34.21%
Long-term Liabilities	54.46%	33.16%	20.36%	15.24%
Total Liabilities	60.56%	38.11%	24.11%	49.45%
Net Worth	39.44%	61.89%	75.89%	50.55%

Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	100.00%	100.00%	100.00%	23.92%
Selling, General & Administrative Expenses	93.80%	88.49%	85.02%	11.77%
Advertising Expenses	0.00%	0.00%	0.00%	0.57%
Profit Before Interest and Taxes	10.33%	17.73%	22.56%	0.85%

Main Ratios
Current	16.39	20.21	26.67	1.60
Quick	16.39	20.21	26.67	1.31
Total Debt to Total Assets	60.56%	38.11%	24.11%	56.90%
Pre-tax Return on Net Worth	96.10%	82.77%	64.72%	2.82%
Pre-tax Return on Assets	37.90%	51.23%	49.11%	6.54%

Additional Ratios	Year 1	Year 2	Year 3
Net Profit Margin	6.64%	11.93%	15.39%	n.a
Return on Equity	67.27%	57.94%	45.31%	n.a

Activity Ratios
Accounts Receivable Turnover	5.55	5.55	5.55	n.a
Collection Days	57	62	63	n.a
Accounts Payable Turnover	12.69	12.17	12.17	n.a
Payment Days	27	27	28	n.a
Total Asset Turnover	4.00	3.01	2.23	n.a

Debt Ratios
Debt to Net Worth	1.54	0.62	0.32	n.a
Current Liab. to Liab.	0.10	0.13	0.16	n.a

Liquidity Ratios
Net Working Capital	$80,006	$122,693	$185,271	n.a
Interest Coverage	12.20	25.71	39.43	n.a

Additional Ratios
Assets to Sales	0.25	0.33	0.45	n.a
Current Debt/Total Assets	6%	5%	4%	n.a
Acid Test	7.54	12.00	18.62	n.a
Sales/Net Worth	10.13	4.86	2.94	n.a
Dividend Payout	0.00	0.00	0.00	n.a