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Sunapto

Financial Plan

Sunapto desires to finance growth through a combination of equity investment and internally generated cash flow. Because of the cost of initial product development and marketing costs of establishing a market presence, the business will be financed primarily by investment in the early stages and is expected to burn cash.

The company intends to raise an amount of seed capital before launch and an secure additional outside investment after prototype development.

8.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table. The important underlying assumptions are:

  • A recovering economy.
  • No changes in technology to make products immediately obsolete.
  • Access to equity capital and financing sufficient to maintain Sunapto’s financial plan as shown in the tables.
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 34.58% 35.00% 34.58%
Other 0 0 0

8.2 Break-even Analysis

Sunapto’s break-even analysis assumes approximate running costs per month based o the average of Year 2 and Year 3 expenses, which includes their full payroll, rent, utilities, and an estimation of other running costs.

Margins are harder to assume. Sunapto’s overall average is based on projected total sales in Year 2 and Year 3.

The chart shows what Sunapto needs to sell per month to break-even, according to these assumptions.

Medicine dispenser business plan, financial plan chart image

Break-even Analysis
Monthly Units Break-even 624
Monthly Revenue Break-even $412,750
Assumptions:
Average Per-Unit Revenue $661.00
Average Per-Unit Variable Cost $384.00
Estimated Monthly Fixed Cost $172,968

8.3 Projected Profit and Loss

Barring any unforeseen circumstances, Sunapto is anticipated to break-even by Year 2 of operations. Profits for the company in subsequent years will accelerate with the increase in anticipated sales volume, yielding good net profit in Year 2 and better in Year 3.

Medicine dispenser business plan, financial plan chart image

Medicine dispenser business plan, financial plan chart image

Medicine dispenser business plan, financial plan chart image

Medicine dispenser business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $0 $7,987,523 $9,862,072
Direct Cost of Sales $0 $4,675,726 $5,682,932
Production Payroll $192,665 $276,572 $284,869
Research and Development $175,000 $180,250 $185,658
Other Production Expenses $0 $0 $0
Total Cost of Sales $367,665 $5,132,548 $6,153,459
Gross Margin ($367,665) $2,854,975 $3,708,613
Gross Margin % 0.00% 35.74% 37.60%
Operating Expenses
Sales and Marketing Expenses
Sales and Marketing Payroll $85,920 $88,498 $91,153
Contract Sales Organization $50,000 $273,000 $312,000
Advertising/Promotions $143,775 $177,517 $216,284
Travel $6,000 $7,800 $10,140
Sales Commissions $0 $116,309 $140,900
Legal $12,000 $12,360 $12,731
Miscellaneous $2,400 $2,472 $2,546
Total Sales and Marketing Expenses $300,095 $677,955 $785,753
Sales and Marketing % 0.00% 8.49% 7.97%
General and Administrative Expenses
General and Administrative Payroll $212,936 $275,943 $308,646
Sales and Marketing and Other Expenses $0 $0 $0
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $36,000 $37,080 $38,192
Insurance $12,000 $12,360 $12,731
Office Equipment $30,000 $9,000 $9,000
Office Supplies $6,000 $6,180 $6,365
Rent $60,000 $61,800 $63,654
Payroll Taxes $154,287 $238,105 $280,063
Other General and Administrative Expenses $0 $0 $0
Total General and Administrative Expenses $511,223 $640,468 $718,652
General and Administrative % 0.00% 8.02% 7.29%
Other Expenses:
Other Payroll $22,770 $152,671 $248,876
Consultants $0 $0 $0
Contract/Consultants $0 $0 $0
Total Other Expenses $22,770 $152,671 $248,876
Other % 0.00% 1.91% 2.52%
Total Operating Expenses $834,089 $1,471,094 $1,753,281
Profit Before Interest and Taxes ($1,201,754) $1,383,881 $1,955,332
EBITDA ($1,201,754) $1,383,881 $1,955,332
Interest Expense $0 $0 $0
Taxes Incurred $0 $484,358 $676,219
Net Profit ($1,201,754) $899,523 $1,279,113
Net Profit/Sales 0.00% 11.26% 12.97%

8.4 Projected Cash Flow

It should be noted that the company’s cash flow will be steadily declining for the first year of operations. This is expected due to large capital investments and no sales. Sunapto anticipates having negative net cash flows throughout Year 1 as they incur expenses for prototype development during the first half and as they get ready for production by their contract manufacturer during the second half. Two infusions of capital will get Sunapto through the cash flow drain as they build up for production and sales to begin in Year 2. A monthly breakdown of Year 1 cash flow may be found in the appendix.

Medicine dispenser business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $0 $7,188,771 $8,875,865
Subtotal Cash from Operations $0 $7,987,523 $9,862,072
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 $710,000 $0 $0
Subtotal Cash Received $710,000 $7,987,523 $9,862,072
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $514,291 $793,684 $933,544
Bill Payments $637,885 $5,826,554 $7,538,037
Subtotal Spent on Operations $1,152,176 $6,620,237 $8,471,581
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 $0 $0 $0
Subtotal Cash Spent $1,152,176 $6,620,237 $8,471,581
Net Cash Flow ($442,176) $1,367,286 $1,390,491
Cash Balance $27,824 $1,395,110 $2,785,601

8.5 Projected Balance Sheet

The table below presents the Balance Sheet for Sunapto.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $27,824 $1,395,110 $2,785,601
Accounts Receivable $0 $0 $0
Inventory $0 $0 $0
Other Current Assets $0 $0 $0
Total Current Assets $27,824 $1,395,110 $2,785,601
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $27,824 $1,395,110 $2,785,601
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $49,578 $517,341 $628,719
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $49,578 $517,341 $628,719
Long-term Liabilities $0 $0 $0
Total Liabilities $49,578 $517,341 $628,719
Paid-in Capital $1,182,713 $1,182,713 $1,182,713
Retained Earnings ($2,713) ($1,204,467) ($304,944)
Earnings ($1,201,754) $899,523 $1,279,113
Total Capital ($21,754) $877,769 $2,156,882
Total Liabilities and Capital $27,824 $1,395,110 $2,785,601
Net Worth ($21,754) $877,769 $2,156,882

8.6 Business Ratios

The table follows with Sunapto’s main business ratios. The Industry figures come from the Standard Industry Classification (SIC) Index Code 3845, Electromedical Equipment.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 0.00% 23.47% 2.30%
Percent of Total Assets
Accounts Receivable 0.00% 0.00% 0.00% 26.40%
Inventory 0.00% 0.00% 0.00% 13.10%
Other Current Assets 0.00% 0.00% 0.00% 47.70%
Total Current Assets 100.00% 100.00% 100.00% 87.20%
Long-term Assets 0.00% 0.00% 0.00% 12.80%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 178.18% 37.08% 22.57% 38.10%
Long-term Liabilities 0.00% 0.00% 0.00% 18.70%
Total Liabilities 178.18% 37.08% 22.57% 56.80%
Net Worth -78.18% 62.92% 77.43% 43.20%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 0.00% 35.74% 37.60% 53.30%
Selling, General & Administrative Expenses 0.00% 23.43% 22.90% 34.50%
Advertising Expenses 0.00% 3.42% 3.16% 1.80%
Profit Before Interest and Taxes 0.00% 17.33% 19.83% 4.70%
Main Ratios
Current 0.56 2.70 4.43 1.97
Quick 0.56 2.70 4.43 1.34
Total Debt to Total Assets 178.18% 37.08% 22.57% 56.80%
Pre-tax Return on Net Worth 5524.36% 157.66% 90.66% 4.10%
Pre-tax Return on Assets -4319.14% 99.20% 70.19% 9.40%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 0.00% 11.26% 12.97% n.a
Return on Equity 0.00% 102.48% 59.30% n.a
Activity Ratios
Accounts Receivable Turnover 0.00 0.00 0.00 n.a
Collection Days 0 0 0 n.a
Inventory Turnover 0.00 0.00 0.00 n.a
Accounts Payable Turnover 13.87 12.17 12.17 n.a
Payment Days 27 16 27 n.a
Total Asset Turnover 0.00 5.73 3.54 n.a
Debt Ratios
Debt to Net Worth 0.00 0.59 0.29 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital ($21,754) $877,769 $2,156,882 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales n.a. 0.17 0.28 n.a
Current Debt/Total Assets 178% 37% 23% n.a
Acid Test 0.56 2.70 4.43 n.a
Sales/Net Worth 0.00 9.10 4.57 n.a
Dividend Payout 0.00 0.00 0.00 n.a

8.7 Exit Strategy

Sunapto is in business to earn a higher than normal return for its business partners. They intend to seek a fair, yet aggressive profit, which will allow the company to be financially healthy for the long term as well as provide compensation to both owners and investors for their money and risk. Sunapto’s founders intend to be part of the ownership and management of Sunapto. Sunapto recognizes that all of its investors will eventually want to reap the rewards of their investments. The following exit strategies are possible ways that Sunapto may choose to reward its early round investors.

  • An IPO.
  • A sale to a strategic buyer.
  • A leveraged recapitalization.
  • A new round of financing.