Our biggest savings of the year
I Tech Solutions
Financial Plan
We want to finance growth mainly through cash flow and equity. We recognize that this means we will have to grow more slowly than we might like. The most important factor in our case is collection days. We can’t push our clients hard on collection days, because they are in larger companies and will normally have marketing authority, not financial authority. Therefore we need to develop a permanent system of receivables financing, using one of the established accounting systems. In turn we intend to ensure that our investors are compatible with our growth plan, management style, and vision. Compatibility in this regard means:
- A fundamental respect for giving our customers value, and for maintaining a healthy and congenial workplace
- Respect for realistic forecasts, conservative cash flow, and financial management
- Cash flow as first priority, growth second, profits third
- Willingness to follow the project objectives and contribute valuable input to strategy and implementation decisions.
Of these, only the last 2 are flexible.
7.1 Break-even Analysis
The following table and chart summarizes our Break-even Analysis. We don’t really expect to reach break-even until several months into the business operation, as illustrated in the financials.
Note: All currency values in the charts and tables are expressed in the Botswana Pula (P).

Break-even Analysis | |
Monthly Revenue Break-even | P47,662 |
Assumptions: | |
Average Percent Variable Cost | 50% |
Estimated Monthly Fixed Cost | P23,831 |
7.2 Important Assumptions
The financial plan depends on important assumptions. From the beginning, we recognize that collection days are critical, but not a factor we can influence easily. Interest rates, tax rates, and personnel burden are based on conservative assumptions.
Some of the more important underlying assumptions are:
- We assume a strong economy, without major recession.
- We assume that there are no unforeseen changes in economic policy to make our products and service immediately obsolete.
Others include 30-day average collection days, sales entirely on invoice basis, including a favorable deposit policy, expenses mainly on a net 30-day basis, 30 days on average for payment of invoices, and present-day interest rates.
General Assumptions | |||
Year 1 | Year 2 | Year 3 | |
Plan Month | 1 | 2 | 3 |
Current Interest Rate | 17.00% | 17.00% | 17.00% |
Long-term Interest Rate | 17.00% | 17.00% | 17.00% |
Tax Rate | 25.42% | 25.00% | 25.42% |
Other | 0 | 0 | 0 |
7.3 Key Financial Indicators
We foresee major growth in sales and operating expenses, and a bump in our collection days as we spread the business during expansion.
Collection days are very important. We do not want to let our average collection days get above 30 under any circumstances. This could cause a serious problem with cash flow, because our working capital situation is chronically tight. However, we recognize that we cannot control this factor easily, because of the relationship with our clients.

7.4 Projected Profit and Loss
Initial marketing and training expenses will be relatively high as we seek to become known on the market and staff get trained in provision of our services. This will be brought about by the development of sales literature, advertising expenses, and function expenses. As our market share increases and capital is generated, further marketing programs and the expansion of those in existence at the time will be undertaken, to ensure market development. However, with time, these programs will start generating revenue for the business, which we shall reinvest.
Our projected Profit and Loss is shown in the appendix, with sales increasing steadily from the first year through the second, and into the third year. We do expect to more than break-even in the first year of operation. Our cost of sales should be much lower, and gross margin higher, than in this projection.
Note: All currency values in the charts and tables are expressed in the Botswana Pula (P).




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | P1,422,225 | P2,528,400 | P3,034,080 |
Direct Cost of Sales | P711,114 | P1,264,200 | P1,517,040 |
Other | P0 | P0 | P0 |
Total Cost of Sales | P711,114 | P1,264,200 | P1,517,040 |
Gross Margin | P711,111 | P1,264,200 | P1,517,040 |
Gross Margin % | 50.00% | 50.00% | 50.00% |
Expenses | |||
Payroll | P149,400 | P199,200 | P237,720 |
Sales and Marketing and Other Expenses | P95,772 | P154,140 | P182,196 |
Depreciation | P0 | P0 | P0 |
Utilities | P3,600 | P3,960 | P4,356 |
Telephone | P6,000 | P6,600 | P7,260 |
Insurance | P14,400 | P15,840 | P17,424 |
Rent | P16,800 | P18,480 | P20,328 |
Insurance | P0 | P0 | P0 |
Payroll Taxes | P0 | P0 | P0 |
Other | P0 | P0 | P0 |
Total Operating Expenses | P285,972 | P398,220 | P469,284 |
Profit Before Interest and Taxes | P425,139 | P865,980 | P1,047,756 |
EBITDA | P425,139 | P865,980 | P1,047,756 |
Interest Expense | P92,497 | P75,684 | P58,140 |
Taxes Incurred | P82,612 | P197,574 | P251,527 |
Net Profit | P250,030 | P592,722 | P738,089 |
Net Profit/Sales | 17.58% | 23.44% | 24.33% |
7.5 Projected Cash Flow
The chart and table below present the cash flow projections for I Tech Solutions.
Note: All currency values in the charts and tables are expressed in the Botswana Pula (P).

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | P426,668 | P758,520 | P910,224 |
Cash from Receivables | P763,507 | P1,589,396 | P2,041,349 |
Subtotal Cash from Operations | P1,190,174 | P2,347,916 | P2,951,573 |
Additional Cash Received | |||
Sales Tax, VAT, HST/GST Received | P0 | P0 | P0 |
New Current Borrowing | P0 | P0 | P0 |
New Other Liabilities (interest-free) | P0 | P0 | P0 |
New Long-term Liabilities | P0 | P0 | P0 |
Sales of Other Current Assets | P0 | P0 | P0 |
Sales of Long-term Assets | P0 | P0 | P0 |
New Investment Received | P0 | P0 | P0 |
Subtotal Cash Received | P1,190,174 | P2,347,916 | P2,951,573 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | P149,400 | P199,200 | P237,720 |
Bill Payments | P1,002,379 | P1,773,057 | P2,068,003 |
Subtotal Spent on Operations | P1,151,779 | P1,972,257 | P2,305,723 |
Additional Cash Spent | |||
Sales Tax, VAT, HST/GST Paid Out | P0 | P0 | P0 |
Principal Repayment of Current Borrowing | P0 | P0 | P0 |
Other Liabilities Principal Repayment | P0 | P0 | P0 |
Long-term Liabilities Principal Repayment | P103,200 | P103,200 | P103,200 |
Purchase Other Current Assets | P141,200 | P0 | P0 |
Purchase Long-term Assets | P240,000 | P0 | P0 |
Dividends | P0 | P0 | P0 |
Subtotal Cash Spent | P1,636,179 | P2,075,457 | P2,408,923 |
Net Cash Flow | (P446,005) | P272,459 | P542,650 |
Cash Balance | P46,246 | P318,705 | P861,356 |
7.6 Projected Balance Sheet
The balance sheet shows healthy growth of net worth, and strong financial position. The three-year estimates are included in the appendix.
Note: All currency values in the charts and tables are expressed in the Botswana Pula (P).
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | P46,246 | P318,705 | P861,356 |
Accounts Receivable | P232,051 | P412,535 | P495,042 |
Inventory | P92,708 | P164,814 | P197,777 |
Other Current Assets | P141,200 | P141,200 | P141,200 |
Total Current Assets | P512,205 | P1,037,254 | P1,695,374 |
Long-term Assets | |||
Long-term Assets | P240,000 | P240,000 | P240,000 |
Accumulated Depreciation | P0 | P0 | P0 |
Total Long-term Assets | P240,000 | P240,000 | P240,000 |
Total Assets | P752,205 | P1,277,254 | P1,935,374 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | P113,124 | P148,651 | P171,882 |
Current Borrowing | P0 | P0 | P0 |
Other Current Liabilities | P0 | P0 | P0 |
Subtotal Current Liabilities | P113,124 | P148,651 | P171,882 |
Long-term Liabilities | P496,800 | P393,600 | P290,400 |
Total Liabilities | P609,924 | P542,251 | P462,282 |
Paid-in Capital | P100,000 | P100,000 | P100,000 |
Retained Earnings | (P207,749) | P42,281 | P635,003 |
Earnings | P250,030 | P592,722 | P738,089 |
Total Capital | P142,281 | P735,003 | P1,473,092 |
Total Liabilities and Capital | P752,205 | P1,277,254 | P1,935,374 |
Net Worth | P142,281 | P735,003 | P1,473,092 |
7.7 Business Ratios
The following table shows important ratios from the computer related services industry, as determined by the Standard Industry Classification (SIC) Index #7379, Computer Related Services.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 77.78% | 20.00% | 7.20% |
Percent of Total Assets | ||||
Accounts Receivable | 30.85% | 32.30% | 25.58% | 21.70% |
Inventory | 12.32% | 12.90% | 10.22% | 3.50% |
Other Current Assets | 18.77% | 11.05% | 7.30% | 46.70% |
Total Current Assets | 68.09% | 81.21% | 87.60% | 71.90% |
Long-term Assets | 31.91% | 18.79% | 12.40% | 28.10% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 15.04% | 11.64% | 8.88% | 51.40% |
Long-term Liabilities | 66.05% | 30.82% | 15.00% | 19.10% |
Total Liabilities | 81.08% | 42.45% | 23.89% | 70.50% |
Net Worth | 18.92% | 57.55% | 76.11% | 29.50% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 50.00% | 50.00% | 50.00% | 0.00% |
Selling, General & Administrative Expenses | 32.96% | 27.34% | 26.62% | 80.70% |
Advertising Expenses | 0.97% | 0.42% | 0.38% | 1.20% |
Profit Before Interest and Taxes | 29.89% | 34.25% | 34.53% | 1.70% |
Main Ratios | ||||
Current | 4.53 | 6.98 | 9.86 | 1.27 |
Quick | 3.71 | 5.87 | 8.71 | 1.01 |
Total Debt to Total Assets | 81.08% | 42.45% | 23.89% | 70.50% |
Pre-tax Return on Net Worth | 233.79% | 107.52% | 67.18% | 3.50% |
Pre-tax Return on Assets | 44.22% | 61.87% | 51.13% | 11.80% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 17.58% | 23.44% | 24.33% | n.a |
Return on Equity | 175.73% | 80.64% | 50.10% | n.a |
Activity Ratios | ||||
Accounts Receivable Turnover | 4.29 | 4.29 | 4.29 | n.a |
Collection Days | 56 | 66 | 78 | n.a |
Inventory Turnover | 10.91 | 9.82 | 8.37 | n.a |
Accounts Payable Turnover | 9.86 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 26 | 28 | n.a |
Total Asset Turnover | 1.89 | 1.98 | 1.57 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 4.29 | 0.74 | 0.31 | n.a |
Current Liab. to Liab. | 0.19 | 0.27 | 0.37 | n.a |
Liquidity Ratios | ||||
Net Working Capital | P399,081 | P888,603 | P1,523,492 | n.a |
Interest Coverage | 4.60 | 11.44 | 18.02 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.53 | 0.51 | 0.64 | n.a |
Current Debt/Total Assets | 15% | 12% | 9% | n.a |
Acid Test | 1.66 | 3.09 | 5.83 | n.a |
Sales/Net Worth | 10.00 | 3.44 | 2.06 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |