Mirabile Dictu Advertising
Financial Plan
The plan of Mirabile Dictu is based on conservative estimates and assumptions. While the firm shows strong financials, the capital investment is needed to make the financials work.
7.1 Start-up Funding
Mirabile Dictu Advertising, LLC start-up costs are detailed above, in the Start-up Table. The following table shows how these start-up costs will be funded by owner and investor capital.
| Start-up Funding | |
| Start-up Expenses to Fund | $52,000 |
| Start-up Assets to Fund | $103,000 |
| Total Funding Required | $155,000 |
| Assets | |
| Non-cash Assets from Start-up | $0 |
| Cash Requirements from Start-up | $103,000 |
| Additional Cash Raised | $145,000 |
| Cash Balance on Starting Date | $248,000 |
| Total Assets | $248,000 |
| Liabilities and Capital | |
| Liabilities | |
| Current Borrowing | $0 |
| Long-term Liabilities | $0 |
| Accounts Payable (Outstanding Bills) | $0 |
| Other Current Liabilities (interest-free) | $0 |
| Total Liabilities | $0 |
| Capital | |
| Planned Investment | |
| Bossard | $50,000 |
| Hearndon | $50,000 |
| Investor | $200,000 |
| Additional Investment Requirement | $0 |
| Total Planned Investment | $300,000 |
| Loss at Start-up (Start-up Expenses) | ($52,000) |
| Total Capital | $248,000 |
| Total Capital and Liabilities | $248,000 |
| Total Funding | $300,000 |
7.2 The Investment Offering
Mirabile Dictu is offering up to 40% ownership of the company to one outside investor/owner with an investment of a minimum $200,000 in investment capital. This owner/investor will share in the annual dividends. Mirabile Dictu Advertising, LLC will be created as a Nebraska LLC based in Creighton County, owned by its principal operators and sole principal investor.
| Investment Offering | |||||
| Proposed Year: | 2005 | 2006 | 2007 | 2010 | |
| Valuation, Investment, Shares | |||||
| Investment Amount | $200,000 | $0 | $0 | ||
| Equity Share Offering Percentage | 40.00% | 0.00% | 0.00% | ||
| Valuation | $500,000 | $0 | $0 | $3,500,000 | |
| Investor Exit Payout | $1,400,000 | $0 | $0 | ||
| Investor Years Until Exit | 5 | 4 | 3 | ||
| Investor IRR | 47.58% | 0.00% | 0.00% | ||
| Share Ownership | Year 2005 | Year 2006 | Year 2007 | Year 2010 | |
| Founders’ Shares | 200,000 | 200,000 | 200,000 | 200,000 | |
| Stock Split Multiple | 0 | 0 | 0 | ||
| Stock Options Issued | 0 | 0 | 0 | 0 | |
| Investor Shares Issued | 133,333 | 0 | 0 | ||
| Price per share | $1.50 | $0.00 | $0.00 | $10.50 | |
| Options Holders’ Shares | 0 | 0 | 0 | 0 | |
| Year 2005 Investors’ Shares | 133,333 | 133,333 | 133,333 | 133,333 | |
| Year 2006 Investors’ Shares | 0 | 0 | 0 | ||
| Year 2007 Investors’ Shares | 0 | 0 | |||
| Total Shares Outstanding | 333,333 | 333,333 | 333,333 | 333,333 | |
| Equity Ownership Percentage | Year 2005 | Year 2006 | Year 2007 | Year 2010 | |
| Founders’ Equity | 60.00% | 60.00% | 60.00% | 60.00% | |
| Option Holders’ Equity | 0.00% | 0.00% | 0.00% | 0.00% | |
| Year 2005 Investors’ Equity | 40.00% | 40.00% | 40.00% | 40.00% | |
| Year 2006 Investors’ Equity | 0.00% | 0.00% | 0.00% | ||
| Year 2007 Investors’ Equity | 0.00% | 0.00% | |||
| Total Equity | 100.00% | 100.00% | 100.00% | 100.00% | |
| Investors’ Equity | 40.00% | 40.00% | 40.00% | 40.00% | |
| Founders’ & Employees’ Equity | 60.00% | 60.00% | 60.00% | 60.00% | |
7.3 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.
- We are assuming adequate infusion of owner/investor funding to sustain the firm during start-up.
- The owner/investor will be making a capital investment for a percentage of the firm and will receive annual dividend payments.
7.4 Break-even Analysis
The Break-even Analysis is based on the average of the first-year figures for total sales by promotion, and by operating expenses. These are presented as verage percent variable cost, estimated monthly fixed costs, and monthly revenue break-even. These conservative assumptions make for a more accurate estimate of real risk.
| Break-even Analysis | |
| Monthly Revenue Break-even | $83,600 |
| Assumptions: | |
| Average Percent Variable Cost | 50% |
| Estimated Monthly Fixed Cost | $41,800 |
7.5 Projected Profit and Loss
Projected annual estimates of cumulative Profit and Loss of the firm are included here. The detailed monthly pro-forma income statement for the first year is included in the appendix.
The total “Direct Cost of Sales” as Advertising Printing and Distribution costs is estimated at 50% of revenue. There is no risk in assuming these costs without having sufficient revenue on-hand to cover expenses.
Marketing Expenses are estimated at 10% of sales revenue or less.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $1,300,000 | $2,550,000 | $3,400,000 |
| Direct Cost of Sales | $650,000 | $1,275,000 | $1,700,000 |
| Other Costs of Sales | $0 | $0 | $0 |
| Total Cost of Sales | $650,000 | $1,275,000 | $1,700,000 |
| Gross Margin | $650,000 | $1,275,000 | $1,700,000 |
| Gross Margin % | 50.00% | 50.00% | 50.00% |
| Expenses | |||
| Payroll | $332,000 | $390,000 | $475,000 |
| Marketing/Promotion | $130,000 | $255,000 | $340,000 |
| Depreciation | $0 | $0 | $0 |
| Rent | $9,000 | $66,000 | $66,000 |
| Utilities | $3,600 | $4,000 | $4,000 |
| Insurance | $3,000 | $4,500 | $6,000 |
| Payroll Taxes | $0 | $0 | $0 |
| Travel | $24,000 | $35,000 | $45,000 |
| Total Operating Expenses | $501,600 | $754,500 | $936,000 |
| Profit Before Interest and Taxes | $148,400 | $520,500 | $764,000 |
| EBITDA | $148,400 | $520,500 | $764,000 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $0 | $0 | $0 |
| Net Profit | $148,400 | $520,500 | $764,000 |
| Net Profit/Sales | 11.42% | 20.41% | 22.47% |
7.6 Projected Cash Flow
The cash flow projection shows that provisions for ongoing expenses are adequate to meet the needs of the firm as the business generates sufficient cash flow to support operations. Clients pay within 60 day after their promotion.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $0 | $0 | $0 |
| Cash from Receivables | $1,040,000 | $2,300,000 | $3,230,000 |
| Subtotal Cash from Operations | $1,040,000 | $2,300,000 | $3,230,000 |
| 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 | $1,040,000 | $2,300,000 | $3,230,000 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $332,000 | $390,000 | $475,000 |
| Bill Payments | $657,110 | $1,532,483 | $2,075,274 |
| Subtotal Spent on Operations | $989,110 | $1,922,483 | $2,550,274 |
| 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 | $30,000 | $100,000 | $200,000 |
| Subtotal Cash Spent | $1,019,110 | $2,022,483 | $2,750,274 |
| Net Cash Flow | $20,890 | $277,517 | $479,726 |
| Cash Balance | $268,890 | $546,407 | $1,026,133 |
7.7 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 | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $268,890 | $546,407 | $1,026,133 |
| Accounts Receivable | $260,000 | $510,000 | $680,000 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $528,890 | $1,056,407 | $1,706,133 |
| Long-term Assets | |||
| Long-term Assets | $0 | $0 | $0 |
| Accumulated Depreciation | $0 | $0 | $0 |
| Total Long-term Assets | $0 | $0 | $0 |
| Total Assets | $528,890 | $1,056,407 | $1,706,133 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $162,490 | $269,507 | $355,233 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $162,490 | $269,507 | $355,233 |
| Long-term Liabilities | $0 | $0 | $0 |
| Total Liabilities | $162,490 | $269,507 | $355,233 |
| Paid-in Capital | $300,000 | $300,000 | $300,000 |
| Retained Earnings | ($82,000) | ($33,600) | $286,900 |
| Earnings | $148,400 | $520,500 | $764,000 |
| Total Capital | $366,400 | $786,900 | $1,350,900 |
| Total Liabilities and Capital | $528,890 | $1,056,407 | $1,706,133 |
| Net Worth | $366,400 | $786,900 | $1,350,900 |
7.8 Business Ratios
The company’s projected business ratios are provided in the table below. The final column, Industry Profile, shows significant ratios for the Sales and Promotions Industry, as determined by the Standard Industry Classification (SIC) code 8743.9904.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 96.15% | 33.33% | 6.42% |
| Percent of Total Assets | ||||
| Accounts Receivable | 49.16% | 48.28% | 39.86% | 22.51% |
| Other Current Assets | 0.00% | 0.00% | 0.00% | 48.43% |
| Total Current Assets | 100.00% | 100.00% | 100.00% | 73.42% |
| Long-term Assets | 0.00% | 0.00% | 0.00% | 26.58% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 30.72% | 25.51% | 20.82% | 26.78% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 13.27% |
| Total Liabilities | 30.72% | 25.51% | 20.82% | 40.05% |
| Net Worth | 69.28% | 74.49% | 79.18% | 59.95% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 50.00% | 50.00% | 50.00% | 100.00% |
| Selling, General & Administrative Expenses | 38.58% | 29.59% | 27.53% | 80.13% |
| Advertising Expenses | 0.00% | 0.00% | 0.00% | 1.19% |
| Profit Before Interest and Taxes | 11.42% | 20.41% | 22.47% | 2.46% |
| Main Ratios | ||||
| Current | 3.25 | 3.92 | 4.80 | 2.06 |
| Quick | 3.25 | 3.92 | 4.80 | 1.71 |
| Total Debt to Total Assets | 30.72% | 25.51% | 20.82% | 52.88% |
| Pre-tax Return on Net Worth | 40.50% | 66.15% | 56.55% | 5.19% |
| Pre-tax Return on Assets | 28.06% | 49.27% | 44.78% | 11.01% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 11.42% | 20.41% | 22.47% | n.a |
| Return on Equity | 40.50% | 66.15% | 56.55% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 5.00 | 5.00 | 5.00 | n.a |
| Collection Days | 54 | 55 | 64 | n.a |
| Accounts Payable Turnover | 5.04 | 6.08 | 6.08 | n.a |
| Payment Days | 50 | 48 | 53 | n.a |
| Total Asset Turnover | 2.46 | 2.41 | 1.99 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.44 | 0.34 | 0.26 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $366,400 | $786,900 | $1,350,900 | n.a |
| Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.41 | 0.41 | 0.50 | n.a |
| Current Debt/Total Assets | 31% | 26% | 21% | n.a |
| Acid Test | 1.65 | 2.03 | 2.89 | n.a |
| Sales/Net Worth | 3.55 | 3.24 | 2.52 | n.a |
| Dividend Payout | 0.20 | 0.19 | 0.26 | n.a |
7.9 Use of Funds
The table below briefly outlines the intended uses for the funds acquired through investment. The Start-up expenses are listed in more detail in the Start-up table. The largest portion is earmarked to cover operations expenses for the first few months as the company gains market share and contracts, and builds accounts receivable. The delay between invoicing of AR and the receipt of the Accounts Payables creates a cash flow lag which this investment cash reserve will cover.
| Use of Funds | |
| Use | Amount |
| Start-up Expenses | $52,000 |
| Working Capital Reserves | $103,000 |
| Establish Office Space (Month 6+) | $15,000 |
| Computer and Data/Communications Additions | $30,000 |
| Total | $200,000 |
7.10 Payback
As the table below shows, the initial owner/investor will find that the payback period on that investment will be three years. Our desire is to find an investor who recognizes the potential for long-term gain, again, as shown in the table, and is willing to keep their investment in Mirabile Dictu for at least three additional years.
| Payback | ||||||
| Projected Payback Calculation | ||||||
| Investment | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Investment | $500,000 | |||||
| Cash Returns by Year | $100,000 | $100,000 | $100,000 | $100,000 | $100,000 | |
| Combination as Income Stream | ($500,000) | $100,000 | $100,000 | $100,000 | $100,000 | $100,000 |
| Cumulative Net Cash Flow to Investors | ($500,000) | ($400,000) | ($300,000) | ($200,000) | ($100,000) | $0 |
| Payback Period | 5 years | |||||
7.11 Exit Strategy
The principal owners of Mirabile Dictu Advertising, founders McKenzie Bossard and Fernando Hearndon, believe in their business model, and in their experience-based view of the future. They foresee the business growing steadily for many years, and plan to be active participants in the business. By the end of year six the original principal investor will have been repaid several times over.
At that time, they envision several of their employees becoming full partners with concomitant investment. If our original investor wishes to exit the company, this will be the time.
By 
