Our biggest savings of the year
Truckbay
Financial Plan
The business of Truckbay does not require substantial outlays for inventory and all sales are on a cash basis, so increases in sales will not be accompanied by initial cash-flow deficits. Once the new listing services are put in place, we expect rapid growth through aggressive, proactive selling by our commissioned sales team. Our financial plan is dependent upon a major change in focus and marketing, to switch from a dealer-based network to a retail one. It also relies on increasing our accessibility with a network of 10 related websites, all driving traffic to the main paid listings. With the advice of Mr. Y and Mr. X, we are confident that we can turn around the financial history of the company, to create a very profitable business. The financial projections are as follows.
8.1 Valuation
We understand that an investor’s concern is to recoup his investment with a high profit in a short period of time. Based on the experience of Company X, and with the help of its founders, we conservatively estimate an earnings-based valuation of $5,500,000 for Truckbay in 2007. For an investor contributing $475,000 now, that works out to an ending valuation of $1,043,000, with an IRR of 109%. This valuation is based on an exit strategy of selling the company within 3-5 years to a related corporation (such as eBay). Details of the Investment Analysis can be found below.
Investment Analysis | ||||
Start | 2005 | 2006 | 2007 | |
Initial Investment | ||||
Investment | $0 | $475,000 | $0 | $0 |
Dividends | $0 | $0 | $300,000 | $300,000 |
Ending Valuation | $0 | $0 | $0 | $1,138,100 |
Combination as Income Stream | $0 | ($475,000) | $300,000 | $1,438,100 |
Percent Equity Acquired | 19% | |||
Net Present Value (NPV) | $815,074 | |||
Internal Rate of Return (IRR) | 108% | |||
Assumptions | ||||
Discount Rate | 10.00% | |||
Valuation Earnings Multiple | 10 | 10 | 10 | |
Valuation Sales Multiple | 2 | 2 | 2 | |
Investment (calculated) | $55,000 | $475,000 | $0 | $0 |
Dividends | $0 | $300,000 | $300,000 | |
Calculated Earnings-based Valuation | $1,820,000 | $4,360,000 | $5,990,000 | |
Calculated Sales-based Valuation | $1,650,000 | $2,580,000 | $3,320,000 | |
Calculated Average Valuation | $1,735,000 | $3,470,000 | $4,655,000 |
8.2 Important Assumptions
NOTES FOR PROJECTIONS
All sales projections/assumptions are based on historical data referenced from the first three years of Company X.
Other Assumptions:
- We can find adequate office space to rent below $11 per square foot – full service in the Atlanta market.
- We can recruit a highly skilled Web Developer for $78,000 salary plus bonus incentives.
- The website development is completed by March 1, 2005.
- Truckbay’s success will be based on the participation level of Mr. Y and Mr. Z.

General Assumptions | |||
2005 | 2006 | 2007 | |
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 | 30.00% | 30.00% | 30.00% |
Other | 0 | 0 | 0 |
8.3 Break-even Analysis
The following table shows the break-even analysis for Truckbay’s new websites and sales strategy. The table shows that we need to sell roughly $29,000 of listings each month to break even in the next year. Truckbay will reach its break-even point in April.

Break-even Analysis | |
Monthly Revenue Break-even | $23,478 |
Assumptions: | |
Average Percent Variable Cost | 15% |
Estimated Monthly Fixed Cost | $20,063 |
8.4 Projected Profit and Loss
The following table and charts shows our projected Profit and Loss for the next three years. Monthly details can be found in the Appendix. Our sales team salaries are counted as part of our direct cost of sales, for the purpose of calculating our gross margin.




Pro Forma Profit and Loss | |||
2005 | 2006 | 2007 | |
Sales | $824,870 | $1,291,500 | $1,662,000 |
Direct Cost of Sales | $120,000 | $150,000 | $250,000 |
Sales Team Payroll | $203,928 | $270,050 | $307,100 |
Other Costs of Sales | $0 | $0 | $0 |
Total Cost of Sales | $323,928 | $420,050 | $557,100 |
Gross Margin | $500,942 | $871,450 | $1,104,900 |
Gross Margin % | 60.73% | 67.48% | 66.48% |
Operating Expenses | |||
Development Expenses | |||
Development Payroll | $108,000 | $113,000 | $113,000 |
Training | $4,000 | $6,000 | $6,000 |
Other Development Expenses | $0 | $0 | $0 |
Total Development Expenses | $112,000 | $119,000 | $119,000 |
Development % | 13.58% | 9.21% | 7.16% |
General and Administrative Expenses | |||
General and Administrative Payroll | $60,000 | $60,000 | $60,000 |
Marketing/Promotion | $5,000 | $5,000 | $5,000 |
Depreciation | $2,400 | $2,400 | $2,400 |
Rent | $19,200 | $19,200 | $19,200 |
Utilities | $6,000 | $6,000 | $6,000 |
Insurance | $3,000 | $3,000 | $3,000 |
Payroll Taxes | $0 | $0 | $0 |
Other | $12,000 | $12,000 | $12,000 |
Total General and Administrative Expenses | $107,600 | $107,600 | $107,600 |
General and Administrative % | 13.04% | 8.33% | 6.47% |
Other Expenses: | |||
Other Payroll | $0 | $0 | $0 |
Meals and Entertainment | $4,000 | $6,000 | $6,000 |
Trade Shows and Association Dues | $4,000 | $4,000 | $4,000 |
Subscriptions | $150 | $150 | $150 |
Business Travel | $13,000 | $12,000 | $12,000 |
Total Other Expenses | $21,150 | $22,150 | $22,150 |
Other % | 2.56% | 1.72% | 1.33% |
Total Operating Expenses | $240,750 | $248,750 | $248,750 |
Profit Before Interest and Taxes | $260,191 | $622,700 | $856,150 |
EBITDA | $262,591 | $625,100 | $858,550 |
Interest Expense | $510 | $175 | $0 |
Taxes Incurred | $77,904 | $186,757 | $256,845 |
Net Profit | $181,777 | $435,768 | $599,305 |
Net Profit/Sales | 22.04% | 33.74% | 36.06% |
8.5 Projected Cash Flow
The cash flow projection shows that provisions for ongoing expenses are adequate to meet the needs of the company as the business generates sufficient cash flow to support operations. We will collect all fees up front from our customers and pay commissions at the end of each month.

Pro Forma Cash Flow | |||
2005 | 2006 | 2007 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $824,870 | $1,291,500 | $1,662,000 |
Subtotal Cash from Operations | $824,870 | $1,291,500 | $1,662,000 |
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 | $475,000 | $0 | $0 |
Subtotal Cash Received | $1,299,870 | $1,291,500 | $1,662,000 |
Expenditures | 2005 | 2006 | 2007 |
Expenditures from Operations | |||
Cash Spending | $371,928 | $443,050 | $480,100 |
Bill Payments | $240,028 | $405,298 | $566,230 |
Subtotal Spent on Operations | $611,956 | $848,348 | $1,046,330 |
Additional Cash Spent | |||
Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
Principal Repayment of Current Borrowing | $3,500 | $3,500 | $0 |
Other Liabilities Principal Repayment | $0 | $0 | $0 |
Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
Purchase Other Current Assets | $10,000 | $0 | $0 |
Purchase Long-term Assets | $0 | $0 | $0 |
Dividends | $0 | $300,000 | $300,000 |
Subtotal Cash Spent | $625,456 | $1,151,848 | $1,346,330 |
Net Cash Flow | $674,414 | $139,652 | $315,670 |
Cash Balance | $678,414 | $818,066 | $1,133,737 |
8.6 Projected Balance Sheet
The following table shows our projected Balance Sheet. We plan to repay our current credit card debt within two years. With the help help of Company X’s founders, we should increase the net worth of the business significantly over the next three years.
Pro Forma Balance Sheet | |||
2005 | 2006 | 2007 | |
Assets | |||
Current Assets | |||
Cash | $678,414 | $818,066 | $1,133,737 |
Other Current Assets | $10,001 | $10,001 | $10,001 |
Total Current Assets | $688,415 | $828,067 | $1,143,738 |
Long-term Assets | |||
Long-term Assets | $26,000 | $26,000 | $26,000 |
Accumulated Depreciation | $13,400 | $15,800 | $18,200 |
Total Long-term Assets | $12,600 | $10,200 | $7,800 |
Total Assets | $701,015 | $838,267 | $1,151,538 |
Liabilities and Capital | 2005 | 2006 | 2007 |
Current Liabilities | |||
Accounts Payable | $28,737 | $33,722 | $47,687 |
Current Borrowing | $3,500 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $32,237 | $33,722 | $47,687 |
Long-term Liabilities | $0 | $0 | $0 |
Total Liabilities | $32,237 | $33,722 | $47,687 |
Paid-in Capital | $530,000 | $530,000 | $530,000 |
Retained Earnings | ($42,999) | ($161,222) | ($25,455) |
Earnings | $181,777 | $435,768 | $599,305 |
Total Capital | $668,778 | $804,545 | $1,103,850 |
Total Liabilities and Capital | $701,015 | $838,267 | $1,151,538 |
Net Worth | $668,778 | $804,545 | $1,103,850 |
8.7 Business Ratios
Truckbay’s ratios can be seen in the table below. For comparison, we have included standard business ratios for the Electronic media advertising representatives industry, SIC Code 7313.01.
Ratio Analysis | ||||
2005 | 2006 | 2007 | Industry Profile | |
Sales Growth | 1818.30% | 56.57% | 28.69% | 2.79% |
Percent of Total Assets | ||||
Other Current Assets | 1.43% | 1.19% | 0.87% | 42.87% |
Total Current Assets | 98.20% | 98.78% | 99.32% | 78.45% |
Long-term Assets | 1.80% | 1.22% | 0.68% | 21.55% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 4.60% | 4.02% | 4.14% | 34.05% |
Long-term Liabilities | 0.00% | 0.00% | 0.00% | 5.29% |
Total Liabilities | 4.60% | 4.02% | 4.14% | 39.34% |
Net Worth | 95.40% | 95.98% | 95.86% | 60.66% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 60.73% | 67.48% | 66.48% | 100.00% |
Selling, General & Administrative Expenses | 38.69% | 33.73% | 30.42% | 77.34% |
Advertising Expenses | 0.29% | 0.19% | 0.14% | 5.22% |
Profit Before Interest and Taxes | 31.54% | 48.22% | 51.51% | 3.09% |
Main Ratios | ||||
Current | 21.35 | 24.56 | 23.98 | 1.94 |
Quick | 21.35 | 24.56 | 23.98 | 1.52 |
Total Debt to Total Assets | 4.60% | 4.02% | 4.14% | 44.15% |
Pre-tax Return on Net Worth | 38.83% | 77.38% | 77.56% | 11.73% |
Pre-tax Return on Assets | 37.04% | 74.26% | 74.35% | 21.00% |
Additional Ratios | 2005 | 2006 | 2007 | |
Net Profit Margin | 22.04% | 33.74% | 36.06% | n.a |
Return on Equity | 27.18% | 54.16% | 54.29% | n.a |
Activity Ratios | ||||
Accounts Payable Turnover | 9.35 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 28 | 26 | n.a |
Total Asset Turnover | 1.18 | 1.54 | 1.44 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.05 | 0.04 | 0.04 | n.a |
Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $656,178 | $794,345 | $1,096,050 | n.a |
Interest Coverage | 509.95 | 3,558.29 | 0.00 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.85 | 0.65 | 0.69 | n.a |
Current Debt/Total Assets | 5% | 4% | 4% | n.a |
Acid Test | 21.35 | 24.56 | 23.98 | n.a |
Sales/Net Worth | 1.23 | 1.61 | 1.51 | n.a |
Dividend Payout | 0.00 | 0.69 | 0.50 | n.a |