GlobeSpan Meeting Planners, Inc.
Financial Plan
As a service or knowledge-based corporation, GlobeSpan Meeting Planners, Inc. will begin with very little start-up costs, and one long-term loan to allow the owners the ability to establish the company. As indicated on the following charts and tables, GlobeSpan will grow to need fewer funds over time to maintain growth. By year five, GlobeSpan will be completely debt-free and working with nearly the same overhead as it did on day one.
8.1 Important Assumptions
The following table of General Assumptions outline our conservative general assumptions on an annual basis. A monthly outline of the important assumptions is included in the appendix. Overall, we are assuming the forecasted business climate as outlined in the Business Climate Section will remain steady. Additionally, we assume our strategic partner, HelmsBriscoe’s positioning within the industry will continue to grow.
General Assumptions | |||
Year 1 | Year 2 | Year 3 | |
Plan Month | 1 | 2 | 3 |
Current Interest Rate | 10.00% | 10.00% | 10.00% |
Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
Tax Rate | 25.42% | 25.00% | 25.42% |
Other | 0 | 0 | 0 |
8.2 Key Financial Indicators
GlobeSpan shows, in the Key Financial Indicators chart which follows, three Benchmarks: Sales, Gross Margin, and Operating Expenses. We expect sales to grow steadily over the next three years while our gross margin remains unchanged and our operating expenses only rise slightly over the next three years.

8.3 Break-even Analysis
The following chart and table summarizes our monthly break-even analysis, with fixed costs at approximately $10,200 and commission needed at the same to break even.

Break-even Analysis | |
Monthly Revenue Break-even | $9,061 |
Assumptions: | |
Average Percent Variable Cost | 0% |
Estimated Monthly Fixed Cost | $9,061 |
8.4 Projected Profit and Loss
GlobeSpan’s projected income statement is shown in the following table. We show a conservative first year with approximately $120,000 in commissions; however, this grows to over $170,000 in 2002, and over $280,000 in 2003. With relatively low operating expenses, our net profits nearly quadruple in the second year, and almost double in the third. We have offered a detailed monthly outline of income in the appendix.
Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $120,416 | $171,250 | $284,750 |
Direct Cost of Sales | $0 | $0 | $0 |
Other | $0 | $0 | $0 |
Total Cost of Sales | $0 | $0 | $0 |
Gross Margin | $120,416 | $171,250 | $284,750 |
Gross Margin % | 100.00% | 100.00% | 100.00% |
Expenses | |||
Payroll | $96,000 | $100,800 | $105,840 |
Sales and Marketing and Other Expenses | $4,600 | $0 | $0 |
Depreciation | $0 | $0 | $0 |
Sales Telephone Cost | $5,808 | $6,098 | $6,403 |
Service Telephone Cost | $1,800 | $1,890 | $1,985 |
Sales On-line Service | $264 | $264 | $264 |
Service On-line Service | $264 | $264 | $264 |
Payroll Taxes | $0 | $0 | $0 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $108,736 | $109,316 | $114,756 |
Profit Before Interest and Taxes | $11,680 | $61,934 | $169,994 |
EBITDA | $11,680 | $61,934 | $169,994 |
Interest Expense | $4,305 | $3,077 | $1,794 |
Taxes Incurred | $1,844 | $14,714 | $42,751 |
Net Profit | $5,531 | $44,143 | $125,449 |
Net Profit/Sales | 4.59% | 25.78% | 44.06% |
8.5 Projected Cash Flow
As demonstrated by the Projected Cash Flow Chart below, GlobeSpan’s cash balance is healthy, with our projected cash flow being negative for our first few months and then a slow recovery during the remainder of the year. Our net cash flow for fiscal year 2001 is -($21,600) with our cash balance at $28,000. Significant to note, in year one our long-term borrowing repayment will amount to over $12,800. A detailed monthly cash flow analysis is provided in the appendix.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $120,416 | $171,250 | $284,750 |
Subtotal Cash from Operations | $120,416 | $171,250 | $284,750 |
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 | $120,416 | $171,250 | $284,750 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $96,000 | $100,800 | $105,840 |
Bill Payments | $16,524 | $26,506 | $51,229 |
Subtotal Spent on Operations | $112,524 | $127,306 | $157,069 |
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 | $12,822 | $12,822 | $12,822 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $0 | $0 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $125,346 | $140,128 | $169,891 |
Net Cash Flow | ($4,930) | $31,122 | $114,859 |
Cash Balance | $45,070 | $76,192 | $191,050 |
8.6 Projected Balance Sheet
GlobeSpan has planned for success as outlined, this is evident in the projected balance sheet below. Our net worth will be a -($11,800) in year one to almost $127,000 in year three. We have outlined monthly estimates in the appendix.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $45,070 | $76,192 | $191,050 |
Other Current Assets | $0 | $0 | $0 |
Total Current Assets | $45,070 | $76,192 | $191,050 |
Long-term Assets | |||
Long-term Assets | $0 | $0 | $0 |
Accumulated Depreciation | $0 | $0 | $0 |
Total Long-term Assets | $0 | $0 | $0 |
Total Assets | $45,070 | $76,192 | $191,050 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $2,361 | $2,162 | $4,394 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $2,361 | $2,162 | $4,394 |
Long-term Liabilities | $37,178 | $24,356 | $11,534 |
Total Liabilities | $39,539 | $26,518 | $15,928 |
Paid-in Capital | $4,800 | $4,800 | $4,800 |
Retained Earnings | ($4,800) | $731 | $44,874 |
Earnings | $5,531 | $44,143 | $125,449 |
Total Capital | $5,531 | $49,674 | $175,123 |
Total Liabilities and Capital | $45,070 | $76,192 | $191,050 |
Net Worth | $5,531 | $49,674 | $175,123 |
8.7 Business Ratios
GlobeSpan’s projected business ratios are illustrated in the following chart. It is noteworthy that our net working capital will quadruple by year three and our debt to net worth ratio shrinks to an impressive 0.57 by year three. We look forward to healthy ratios for profitability, risk and return. The final column, Industry Profile, contains ratios based on the personal services industry, as defined by the Standard Industry Classification (SIC) Index code 7299.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 42.22% | 66.28% | 17.90% |
Percent of Total Assets | ||||
Other Current Assets | 0.00% | 0.00% | 0.00% | 37.10% |
Total Current Assets | 100.00% | 100.00% | 100.00% | 52.80% |
Long-term Assets | 0.00% | 0.00% | 0.00% | 47.20% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 5.24% | 2.84% | 2.30% | 33.90% |
Long-term Liabilities | 82.49% | 31.97% | 6.04% | 28.00% |
Total Liabilities | 87.73% | 34.80% | 8.34% | 61.90% |
Net Worth | 12.27% | 65.20% | 91.66% | 38.10% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 100.00% | 100.00% | 100.00% | 0.00% |
Selling, General & Administrative Expenses | 96.27% | 75.91% | 57.39% | 72.70% |
Advertising Expenses | 1.74% | 0.00% | 0.00% | 2.20% |
Profit Before Interest and Taxes | 9.70% | 36.17% | 59.70% | 4.00% |
Main Ratios | ||||
Current | 19.09 | 35.24 | 43.48 | 1.81 |
Quick | 19.09 | 35.24 | 43.48 | 1.33 |
Total Debt to Total Assets | 87.73% | 34.80% | 8.34% | 61.90% |
Pre-tax Return on Net Worth | 133.33% | 118.49% | 96.05% | 6.30% |
Pre-tax Return on Assets | 16.36% | 77.25% | 88.04% | 16.60% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 4.59% | 25.78% | 44.06% | n.a |
Return on Equity | 100.00% | 88.87% | 71.63% | n.a |
Activity Ratios | ||||
Accounts Payable Turnover | 8.00 | 12.17 | 12.17 | n.a |
Payment Days | 31 | 31 | 22 | n.a |
Total Asset Turnover | 2.67 | 2.25 | 1.49 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 7.15 | 0.53 | 0.09 | n.a |
Current Liab. to Liab. | 0.06 | 0.08 | 0.28 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $42,709 | $74,030 | $186,656 | n.a |
Interest Coverage | 2.71 | 20.13 | 94.73 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.37 | 0.44 | 0.67 | n.a |
Current Debt/Total Assets | 5% | 3% | 2% | n.a |
Acid Test | 19.09 | 35.24 | 43.48 | n.a |
Sales/Net Worth | 21.77 | 3.45 | 1.63 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |