The financial plan which follows summarizes information regarding the following items:
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 appendix.
Some of the more important underlying assumptions are:
The following benchmark chart indicates our key financial indicators for the first three years. We foresee modest growth in sales and a marginal reduction in operating expenses for the years presented.
The following table and chart summarize our break-even analysis. With our estimated monthly fixed costs, the table and chart below show the number of billing targets per month we will need to cover our costs. We don't really expect to reach break-even until a few months into the business operation.
The break-even assumes unit variable costs at 30 percent of unit revenue. The unit revenue value of $60/hour is an aggregate measure for all the types of services which will be offered.
The gross margin for a service-based business is a reflection of the efficiency at which those services are offered. In the initial year of operations, we have targeted a high gross margin. This is not an unreasonable figure for a consulting business. For the second and third year of operations, we have targeted slightly increased gross margins to indicate overall improved efficiency at service delivery. Net Profit/Sales is determined to be modest the first year, again increasing slightly in the second year and the third year. In order to fulfill the requirements of the mission statement and simultaneously reduce start up costs, we have made arrangements to purchase software on quarterly repayment options:
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 balance. The first few months are critical. It may be necessary to inject additional capital in this time-frame if the need arises. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendix.
The balance sheet in the following table shows managed but sufficient growth of net worth and a sufficiently healthy financial position. The monthly estimates are included in the appendix.
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 8711, Engineering Services, are shown for comparison.