Inspection Connection
Financial Plan
The following sections include the annual estimates for the standard set of financial tables. Detailed monthly pro-forma tables are included in the appendices. The plan is to start with owner investment only, and to pay all expenses and direct costs from the cash flows of the business. The only exception is the fee for the CT license internship, which will be paid with a credit card in March, with a 7% interest rate. This credit card bill will be repaid within two years.
Inspection Connection, will break-even in the seventh month, and generate steady profits thereafter, even as the owner’s salary increases.
8.1 Start-up Funding
The Start-Up Funding table indicates how much Capital will be needed for Inspection Connection to begin providing services. The owner will be funding this venture without outside investments.
Start-up Funding | |
Start-up Expenses to Fund | $4,419 |
Start-up Assets to Fund | $1,581 |
Total Funding Required | $6,000 |
Assets | |
Non-cash Assets from Start-up | $0 |
Cash Requirements from Start-up | $1,581 |
Additional Cash Raised | $0 |
Cash Balance on Starting Date | $1,581 |
Total Assets | $1,581 |
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 | |
Owner | $6,000 |
Investor | $0 |
Additional Investment Requirement | $0 |
Total Planned Investment | $6,000 |
Loss at Start-up (Start-up Expenses) | ($4,419) |
Total Capital | $1,581 |
Total Capital and Liabilities | $1,581 |
Total Funding | $6,000 |
8.2 Important Assumptions
Inspection Connection, assumes a continued reasonable rate of home sales in the selected towns.
General Assumptions | |||
Year 1 | Year 2 | Year 3 | |
Plan Month | 1 | 2 | 3 |
Current Interest Rate | 7.00% | 7.00% | 7.00% |
Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
Tax Rate | 30.00% | 30.00% | 30.00% |
Other | 0 | 0 | 0 |
8.3 Break-even Analysis
Based on the Break Even table and chart, Inspection Connection will reach a break even point after 7 months. It is worth noting that the average unit price of $450 is a conservative figure. Most inspections will include at minimum a radon test, which will increase the unit price significantly. Therefore, there is a good chance that the Break Even point could be reached much earlier that 7 months.

Break-even Analysis | |
Monthly Units Break-even | 18 |
Monthly Revenue Break-even | $7,965 |
Assumptions: | |
Average Per-Unit Revenue | $450.00 |
Average Per-Unit Variable Cost | $45.00 |
Estimated Monthly Fixed Cost | $7,168 |
8.4 Projected Profit and Loss
The following Profit and Loss table is based on an estimated average 19 unit sales per month at a price of $450 per unit. Most sales will be at a rate greater than the minimum of $450; this will help offset slower months where the year-end goal of 31 unit sales may not be attainable.
We will not show a profit in the first year, due in large part to the deductible training expenses for licensing in a second state to expand the business.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $101,250 | $167,400 | $167,400 |
Direct Cost of Sales | $10,125 | $16,740 | $16,740 |
Other Costs of Sales | $0 | $0 | $0 |
Total Cost of Sales | $10,125 | $16,740 | $16,740 |
Gross Margin | $91,125 | $150,660 | $150,660 |
Gross Margin % | 90.00% | 90.00% | 90.00% |
Expenses | |||
Payroll | $28,600 | $61,200 | $61,200 |
Marketing/Promotion | $6,000 | $6,000 | $6,000 |
Depreciation | $0 | $0 | $0 |
Answering Service | $4,800 | $4,800 | $4,800 |
Liability / E&O Insurance | $4,800 | $4,800 | $4,800 |
HealthCare | $9,000 | $9,000 | $9,000 |
Auto Insurance | $1,440 | $1,440 | $1,440 |
Auto Fuel | $2,500 | $3,600 | $3,600 |
Accounting/Legal Fees | $1,800 | $1,800 | $1,800 |
Membership/Licensing Fees | $1,200 | $1,200 | $1,200 |
Vehicle Maintenance | $240 | $240 | $240 |
Local/Toll Free Phone Numbers | $840 | $840 | $840 |
Training/internship | $14,000 | $0 | $0 |
Supplies | $8,400 | $9,600 | $9,600 |
Payroll taxes | $0 | $0 | $0 |
Other | $2,400 | $2,400 | $2,400 |
Total Operating Expenses | $86,020 | $106,920 | $106,920 |
Profit Before Interest and Taxes | $5,105 | $43,740 | $43,740 |
EBITDA | $5,105 | $43,740 | $43,740 |
Interest Expense | $683 | $326 | $0 |
Taxes Incurred | $1,327 | $13,024 | $13,122 |
Net Profit | $3,095 | $30,390 | $30,618 |
Net Profit/Sales | 3.06% | 18.15% | 18.29% |
8.5 Projected Cash Flow
The following Cash Flow chart and table indicate that there will be sufficient cash flow to maintain operations while allowing room for growth and periods where sales are slower. It also shows the projected credit card debt and repayment for the internship.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $101,250 | $167,400 | $167,400 |
Subtotal Cash from Operations | $101,250 | $167,400 | $167,400 |
Additional Cash Received | |||
Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
New Current Borrowing | $14,000 | $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 | $115,250 | $167,400 | $167,400 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $42,600 | $61,200 | $61,200 |
Bill Payments | $48,720 | $76,414 | $75,601 |
Subtotal Spent on Operations | $91,320 | $137,614 | $136,801 |
Additional Cash Spent | |||
Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
Principal Repayment of Current Borrowing | $4,680 | $9,320 | $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 | $0 | $0 | $0 |
Subtotal Cash Spent | $96,000 | $146,934 | $136,801 |
Net Cash Flow | $19,250 | $20,466 | $30,599 |
Cash Balance | $20,831 | $41,297 | $71,896 |
8.6 Projected Balance Sheet
The Balance Sheet shows that Inspection Connection will steadily increase its Net Worth even without a large asset base, as a service-oriented business.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $20,831 | $41,297 | $71,896 |
Other Current Assets | $0 | $0 | $0 |
Total Current Assets | $20,831 | $41,297 | $71,896 |
Long-term Assets | |||
Long-term Assets | $0 | $0 | $0 |
Accumulated Depreciation | $0 | $0 | $0 |
Total Long-term Assets | $0 | $0 | $0 |
Total Assets | $20,831 | $41,297 | $71,896 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $6,835 | $6,231 | $6,212 |
Current Borrowing | $9,320 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $16,155 | $6,231 | $6,212 |
Long-term Liabilities | $0 | $0 | $0 |
Total Liabilities | $16,155 | $6,231 | $6,212 |
Paid-in Capital | $6,000 | $6,000 | $6,000 |
Retained Earnings | ($4,419) | ($1,324) | $29,066 |
Earnings | $3,095 | $30,390 | $30,618 |
Total Capital | $4,676 | $35,066 | $65,684 |
Total Liabilities and Capital | $20,831 | $41,297 | $71,896 |
Net Worth | $4,676 | $35,066 | $65,684 |
8.7 Business Ratios
The following table shows standard ratios for our business, and a comparison with standard ratios for the Building Inspection Services Industry, SIC Code 7389.0203.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 65.33% | 0.00% | 2.53% |
Percent of Total Assets | ||||
Other Current Assets | 0.00% | 0.00% | 0.00% | 47.92% |
Total Current Assets | 100.00% | 100.00% | 100.00% | 75.32% |
Long-term Assets | 0.00% | 0.00% | 0.00% | 24.68% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 77.55% | 15.09% | 8.64% | 34.42% |
Long-term Liabilities | 0.00% | 0.00% | 0.00% | 11.16% |
Total Liabilities | 77.55% | 15.09% | 8.64% | 45.58% |
Net Worth | 22.45% | 84.91% | 91.36% | 54.42% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 90.00% | 90.00% | 90.00% | 100.00% |
Selling, General & Administrative Expenses | 86.94% | 71.85% | 71.71% | 79.94% |
Advertising Expenses | 0.00% | 0.00% | 0.00% | 1.94% |
Profit Before Interest and Taxes | 5.04% | 26.13% | 26.13% | 1.74% |
Main Ratios | ||||
Current | 1.29 | 6.63 | 11.57 | 1.56 |
Quick | 1.29 | 6.63 | 11.57 | 1.24 |
Total Debt to Total Assets | 77.55% | 15.09% | 8.64% | 54.75% |
Pre-tax Return on Net Worth | 94.56% | 123.81% | 66.59% | 3.65% |
Pre-tax Return on Assets | 21.23% | 105.13% | 60.84% | 8.07% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 3.06% | 18.15% | 18.29% | n.a |
Return on Equity | 66.19% | 86.66% | 46.61% | n.a |
Activity Ratios | ||||
Accounts Payable Turnover | 8.13 | 12.17 | 12.17 | n.a |
Payment Days | 31 | 31 | 30 | n.a |
Total Asset Turnover | 4.86 | 4.05 | 2.33 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 3.45 | 0.18 | 0.09 | n.a |
Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $4,676 | $35,066 | $65,684 | n.a |
Interest Coverage | 7.47 | 134.09 | 0.00 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.21 | 0.25 | 0.43 | n.a |
Current Debt/Total Assets | 78% | 15% | 9% | n.a |
Acid Test | 1.29 | 6.63 | 11.57 | n.a |
Sales/Net Worth | 21.65 | 4.77 | 2.55 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |