Buy The Time
Financial Plan
Growth will occur according to the number of clients and cash flow.
With approximately half of our services provided on credit, collection will be essential. With this still being a service that is not essential to everyday living, we will show that payments are necessary immediately. With a concrete system for cash flow, we will be able to keep debt to a minimum, while still providing a high level of sales.
7.1 Important Assumptions
The following assumptions are made responding to growth, and are based on economic trends from the preceding two years.
- A strong economy is expected to continue in the future.
- Many people have annual dates on which purchases are made.
- It is assumed that people are willing to pay for a service if it is an agreeable and convenient experience.
The table below outlines some business assumptions that are the basis for Buy The Time’s growth, including tax rate and payment days.
| 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 |
7.2 Break-even Analysis
Our break-even analysis is shown in further detail in the following chart and table.
This is a conservative figure since contacts have been made, and have already generated many orders for our services. Buy the Time’s goal is to generate twice as much as the break-even point for a monthly standard.
| Break-even Analysis | |
| Monthly Revenue Break-even | $1,916 |
| Assumptions: | |
| Average Percent Variable Cost | 35% |
| Estimated Monthly Fixed Cost | $1,250 |
7.3 Projected Profit and Loss
Buy the Time’s projected profit and loss is indicated in the following table. Gross margin should remain between 50-70% the first year, with highest profits due near the end of the year. This should prove to be accurate, since that is a time when many clients increase their spending.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $32,365 | $66,000 | $83,000 |
| Direct Cost of Sales | $11,250 | $27,750 | $37,500 |
| Other | $0 | $0 | $0 |
| Total Cost of Sales | $11,250 | $27,750 | $37,500 |
| Gross Margin | $21,115 | $38,250 | $45,500 |
| Gross Margin % | 65.24% | 57.95% | 54.82% |
| Expenses | |||
| Payroll | $15,000 | $30,000 | $37,000 |
| Sales and Marketing and Other Expenses | $0 | $0 | $0 |
| Depreciation | $0 | $0 | $0 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $0 | $0 | $0 |
| Insurance | $0 | $0 | $0 |
| Rent | $0 | $0 | $0 |
| Payroll Taxes | $0 | $0 | $0 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $15,000 | $30,000 | $37,000 |
| Profit Before Interest and Taxes | $6,115 | $8,250 | $8,500 |
| EBITDA | $6,115 | $8,250 | $8,500 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $1,528 | $2,063 | $2,160 |
| Net Profit | $4,587 | $6,188 | $6,340 |
| Net Profit/Sales | 14.17% | 9.38% | 7.64% |
7.4 Projected Cash Flow
The following chart and table outline the cash flow for fiscal years 2002, 2003, and 2004. For a monthly analysis, please see the attached appendix.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $17,801 | $36,300 | $45,650 |
| Cash from Receivables | $11,759 | $26,785 | $35,877 |
| Subtotal Cash from Operations | $29,560 | $63,085 | $81,527 |
| 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 | $29,560 | $63,085 | $81,527 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $15,000 | $30,000 | $37,000 |
| Bill Payments | $11,630 | $28,509 | $38,851 |
| Subtotal Spent on Operations | $26,630 | $58,509 | $75,851 |
| 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 | $26,630 | $58,509 | $75,851 |
| Net Cash Flow | $2,929 | $4,575 | $5,676 |
| Cash Balance | $4,179 | $8,755 | $14,430 |
7.5 Projected Balance Sheet
The Balance Sheet table for fiscal years 2002, 2003, and 2004 follows. For a monthly analysis, please see the attached appendix.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $4,179 | $8,755 | $14,430 |
| Accounts Receivable | $2,805 | $5,721 | $7,194 |
| Other Current Assets | $400 | $400 | $400 |
| Total Current Assets | $7,385 | $14,875 | $22,024 |
| Long-term Assets | |||
| Long-term Assets | $2,000 | $2,000 | $2,000 |
| Accumulated Depreciation | $0 | $0 | $0 |
| Total Long-term Assets | $2,000 | $2,000 | $2,000 |
| Total Assets | $9,385 | $16,875 | $24,024 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $1,147 | $2,450 | $3,260 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $1,147 | $2,450 | $3,260 |
| Long-term Liabilities | $0 | $0 | $0 |
| Total Liabilities | $1,147 | $2,450 | $3,260 |
| Paid-in Capital | $4,900 | $4,900 | $4,900 |
| Retained Earnings | ($1,250) | $3,337 | $9,525 |
| Earnings | $4,587 | $6,188 | $6,340 |
| Total Capital | $8,237 | $14,425 | $20,764 |
| Total Liabilities and Capital | $9,385 | $16,875 | $24,024 |
| Net Worth | $8,237 | $14,425 | $20,764 |
7.6 Business Ratios
The following table provides significant ratios for the personal services industry. The final column, Industry Profile, shows ratios for this industry as it is determined by the Standard Industrial Classification (SIC) Index 7299, “miscellaneous personal services.”
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 103.92% | 25.76% | -8.50% |
| Percent of Total Assets | ||||
| Accounts Receivable | 29.89% | 33.90% | 29.95% | 6.70% |
| Other Current Assets | 4.26% | 2.37% | 1.66% | 26.40% |
| Total Current Assets | 78.69% | 88.15% | 91.68% | 43.50% |
| Long-term Assets | 21.31% | 11.85% | 8.32% | 56.50% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 12.23% | 14.52% | 13.57% | 19.50% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 21.40% |
| Total Liabilities | 12.23% | 14.52% | 13.57% | 40.90% |
| Net Worth | 87.77% | 85.48% | 86.43% | 59.10% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 65.24% | 57.95% | 54.82% | 50.80% |
| Selling, General & Administrative Expenses | 51.07% | 54.26% | 47.14% | 34.40% |
| Advertising Expenses | 0.00% | 0.00% | 0.00% | 0.20% |
| Profit Before Interest and Taxes | 18.89% | 12.50% | 10.24% | 1.50% |
| Main Ratios | ||||
| Current | 6.44 | 6.07 | 6.76 | 2.09 |
| Quick | 6.44 | 6.07 | 6.76 | 1.03 |
| Total Debt to Total Assets | 12.23% | 14.52% | 13.57% | 40.90% |
| Pre-tax Return on Net Worth | 74.24% | 57.19% | 40.94% | 1.10% |
| Pre-tax Return on Assets | 65.16% | 48.89% | 35.38% | 1.90% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 14.17% | 9.38% | 7.64% | n.a |
| Return on Equity | 55.69% | 42.90% | 30.53% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 5.19 | 5.19 | 5.19 | n.a |
| Collection Days | 57 | 52 | 63 | n.a |
| Accounts Payable Turnover | 11.14 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 22 | 26 | n.a |
| Total Asset Turnover | 3.45 | 3.91 | 3.45 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.14 | 0.17 | 0.16 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $6,237 | $12,425 | $18,764 | n.a |
| Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.29 | 0.26 | 0.29 | n.a |
| Current Debt/Total Assets | 12% | 15% | 14% | n.a |
| Acid Test | 3.99 | 3.74 | 4.55 | n.a |
| Sales/Net Worth | 3.93 | 4.58 | 4.00 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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