Claremont Funding
Financial Plan
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We want to finance growth mainly through cash flow.
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The most important factor for Claremont Funding is the closing sales days. These dates will be determined ultimately by the Seller and the Buyer and a move out/move in schedule will be complied with.
7.1 Important Assumptions
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. From the beginning, we recognize that collection days are critical, but not a factor we can influence easily. At least we are planning on the problem, and dealing with it. Interest rates, tax rates, and personnel burden are based on conservative assumptions. Some of the more important underlying assumptions are:
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We assume a strong economy, without major recession.
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We assume, of course, that there are no unforeseen changes in the economy that would change our estimations.
| 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 | 30.00% | 30.00% | 30.00% |
| Other | 0 | 0 | 0 |
7.2 Break-even Analysis
The following table and chart will summarize our break-even analysis.
| Break-even Analysis | |
| Monthly Revenue Break-even | $19,975 |
| Assumptions: | |
| Average Percent Variable Cost | 0% |
| Estimated Monthly Fixed Cost | $19,975 |
7.3 Projected Profit and Loss
Our projected profit and loss is shown on the following table.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $264,847 | $365,000 | $445,000 |
| Direct Cost of Sales | $0 | $0 | $0 |
| Other Production Expenses | $0 | $0 | $0 |
| Total Cost of Sales | $0 | $0 | $0 |
| Gross Margin | $264,847 | $365,000 | $445,000 |
| Gross Margin % | 100.00% | 100.00% | 100.00% |
| Expenses | |||
| Payroll | $166,000 | $220,000 | $260,000 |
| Sales and Marketing and Other Expenses | $7,800 | $13,000 | $19,000 |
| Depreciation | $0 | $0 | $0 |
| Leased Equipment | $200 | $0 | $0 |
| Utilities | $2,400 | $2,400 | $2,400 |
| Insurance | $2,400 | $2,400 | $2,400 |
| Rent | $36,000 | $36,000 | $36,000 |
| Payroll Taxes | $24,900 | $33,000 | $39,000 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $239,700 | $306,800 | $358,800 |
| Profit Before Interest and Taxes | $25,147 | $58,200 | $86,200 |
| EBITDA | $25,147 | $58,200 | $86,200 |
| Interest Expense | $2,950 | $2,550 | $2,250 |
| Taxes Incurred | $6,659 | $16,695 | $25,185 |
| Net Profit | $15,538 | $38,955 | $58,765 |
| Net Profit/Sales | 5.87% | 10.67% | 13.21% |
7.4 Projected Cash Flow
Cash flow projections are critical to our success. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendix.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $66,212 | $91,250 | $111,250 |
| Cash from Receivables | $187,004 | $269,352 | $330,237 |
| Subtotal Cash from Operations | $253,216 | $360,602 | $441,487 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $4,500 | $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 | $12,000 | $0 | $0 |
| Subtotal Cash Received | $269,716 | $360,602 | $441,487 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $166,000 | $220,000 | $260,000 |
| Bill Payments | $90,879 | $99,759 | $124,576 |
| Subtotal Spent on Operations | $256,879 | $319,759 | $384,576 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $4,500 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $3,000 | $3,000 | $3,000 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| Subtotal Cash Spent | $264,379 | $322,759 | $387,576 |
| Net Cash Flow | $5,337 | $37,842 | $53,911 |
| Cash Balance | $45,287 | $83,129 | $137,040 |
7.5 Projected Balance Sheet
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.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $45,287 | $83,129 | $137,040 |
| Accounts Receivable | $11,631 | $16,030 | $19,543 |
| Other Current Assets | $20,000 | $20,000 | $20,000 |
| Total Current Assets | $76,918 | $119,159 | $176,583 |
| Long-term Assets | |||
| Long-term Assets | $0 | $0 | $0 |
| Accumulated Depreciation | $0 | $0 | $0 |
| Total Long-term Assets | $0 | $0 | $0 |
| Total Assets | $76,918 | $119,159 | $176,583 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $2,430 | $8,716 | $10,375 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $2,430 | $8,716 | $10,375 |
| Long-term Liabilities | $27,000 | $24,000 | $21,000 |
| Total Liabilities | $29,430 | $32,716 | $31,375 |
| Paid-in Capital | $52,000 | $52,000 | $52,000 |
| Retained Earnings | ($20,050) | ($4,512) | $34,443 |
| Earnings | $15,538 | $38,955 | $58,765 |
| Total Capital | $47,488 | $86,443 | $145,208 |
| Total Liabilities and Capital | $76,918 | $119,159 | $176,583 |
| Net Worth | $47,488 | $86,443 | $145,208 |
7.6 Business Ratios
The following table provides important ratios for the industry, as determined by the Standard Industry Classification (SIC) Index, 7389, Business Services.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 37.82% | 21.92% | 8.50% |
| Percent of Total Assets | ||||
| Accounts Receivable | 15.12% | 13.45% | 11.07% | 20.90% |
| Other Current Assets | 26.00% | 16.78% | 11.33% | 55.70% |
| Total Current Assets | 100.00% | 100.00% | 100.00% | 81.60% |
| Long-term Assets | 0.00% | 0.00% | 0.00% | 18.40% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 3.16% | 7.31% | 5.88% | 48.20% |
| Long-term Liabilities | 35.10% | 20.14% | 11.89% | 15.50% |
| Total Liabilities | 38.26% | 27.46% | 17.77% | 63.70% |
| Net Worth | 61.74% | 72.54% | 82.23% | 36.30% |
| 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 | 94.18% | 89.41% | 86.91% | 82.60% |
| Advertising Expenses | 2.27% | 2.74% | 3.37% | 0.60% |
| Profit Before Interest and Taxes | 9.49% | 15.95% | 19.37% | 1.50% |
| Main Ratios | ||||
| Current | 31.65 | 13.67 | 17.02 | 1.57 |
| Quick | 31.65 | 13.67 | 17.02 | 1.13 |
| Total Debt to Total Assets | 38.26% | 27.46% | 17.77% | 63.70% |
| Pre-tax Return on Net Worth | 46.74% | 64.38% | 57.81% | 1.90% |
| Pre-tax Return on Assets | 28.86% | 46.70% | 47.54% | 5.20% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 5.87% | 10.67% | 13.21% | n.a |
| Return on Equity | 32.72% | 45.06% | 40.47% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 17.08 | 17.08 | 17.08 | n.a |
| Collection Days | 59 | 18 | 19 | n.a |
| Accounts Payable Turnover | 34.28 | 12.17 | 12.17 | n.a |
| Payment Days | 31 | 19 | 28 | n.a |
| Total Asset Turnover | 3.44 | 3.06 | 2.52 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.62 | 0.38 | 0.22 | n.a |
| Current Liab. to Liab. | 0.08 | 0.27 | 0.33 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $74,488 | $110,443 | $166,208 | n.a |
| Interest Coverage | 8.52 | 22.82 | 38.31 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.29 | 0.33 | 0.40 | n.a |
| Current Debt/Total Assets | 3% | 7% | 6% | n.a |
| Acid Test | 26.86 | 11.83 | 15.14 | n.a |
| Sales/Net Worth | 5.58 | 4.22 | 3.06 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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