Telephone Sales Business Plan

University Telephones

Financial Plan

The following is the financial plan for University Telephones.

7.1 Break-even Analysis

The monthly break-even point is approximately $28,300.

Telephone sales business plan, financial plan chart image

Break-even Analysis


Monthly Revenue Break-even	$28,318

Assumptions:
Average Percent Variable Cost	47%
Estimated Monthly Fixed Cost	$15,050

7.2 Projected Balance Sheet

The following table highlights the projected balance sheet for the next three years.

Pro Forma Balance Sheet
	Year 1	Year 2	Year 3
Assets

Current Assets
Cash	$21,509	$18,733	$37,092
Inventory	$14,960	$15,214	$15,589
Other Current Assets	$0	$0	$0
Total Current Assets	$36,469	$33,946	$52,682

Long-term Assets
Long-term Assets	$50,000	$50,000	$50,000
Accumulated Depreciation	$2,400	$4,800	$7,200
Total Long-term Assets	$47,600	$45,200	$42,800
Total Assets	$84,069	$79,146	$95,482

Liabilities and Capital	Year 1	Year 2	Year 3

Current Liabilities
Accounts Payable	$17,184	$16,817	$17,913
Current Borrowing	$0	$0	$0
Other Current Liabilities	$0	$0	$0
Subtotal Current Liabilities	$17,184	$16,817	$17,913

Long-term Liabilities	$39,200	$28,400	$17,600
Total Liabilities	$56,384	$45,217	$35,513

Paid-in Capital	$40,000	$40,000	$40,000
Retained Earnings	($8,000)	($12,315)	($6,071)
Earnings	($4,315)	$6,244	$26,040
Total Capital	$27,685	$33,929	$59,969
Total Liabilities and Capital	$84,069	$79,146	$95,482

Net Worth	$27,685	$33,929	$59,969

7.3 Projected Profit and Loss

The following table and charts highlight the projected profit and loss for the next three years.

Pro Forma Profit and Loss
	Year 1	Year 2	Year 3
Sales	$340,000	$359,000	$404,000
Direct Cost of Sales	$159,300	$162,000	$166,000
Other Production Expenses	$0	$0	$0
Total Cost of Sales	$159,300	$162,000	$166,000

Gross Margin	$180,700	$197,000	$238,000
Gross Margin %	53.15%	54.87%	58.91%


Expenses
Payroll	$132,000	$146,000	$158,000
Sales and Marketing and Other Expenses	$0	$0	$0
Depreciation	$2,400	$2,400	$2,400
Leased Equipment	$0	$0	$0
Utilities	$2,400	$2,400	$2,400
Insurance	$0	$0	$0
Rent	$24,000	$12,000	$12,000
Payroll Taxes	$19,800	$21,900	$23,700
Other	$0	$0	$0

Total Operating Expenses	$180,600	$184,700	$198,500

Profit Before Interest and Taxes	$100	$12,300	$39,500
EBITDA	$2,500	$14,700	$41,900
Interest Expense	$4,415	$3,380	$2,300
Taxes Incurred	$0	$2,676	$11,160

Net Profit	($4,315)	$6,244	$26,040
Net Profit/Sales	-1.27%	1.74%	6.45%

7.4 Projected Cash Flow

The following table and chart highlight the projected cash flow for the next three years.

Pro Forma Cash Flow
	Year 1	Year 2	Year 3
Cash Received

Cash from Operations
Cash Sales	$340,000	$359,000	$404,000
Subtotal Cash from Operations	$340,000	$359,000	$404,000

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	$0	$0	$0
Subtotal Cash Received	$340,000	$359,000	$404,000

Expenditures	Year 1	Year 2	Year 3

Expenditures from Operations
Cash Spending	$132,000	$146,000	$158,000
Bill Payments	$177,691	$204,976	$216,840
Subtotal Spent on Operations	$309,691	$350,976	$374,840

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	$10,800	$10,800	$10,800
Purchase Other Current Assets	$0	$0	$0
Purchase Long-term Assets	$0	$0	$0
Dividends	$0	$0	$0
Subtotal Cash Spent	$320,491	$361,776	$385,640

Net Cash Flow	$19,509	($2,776)	$18,360
Cash Balance	$21,509	$18,733	$37,092

7.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 3661, Telephone Equipment, are shown for comparison.

Ratio Analysis
	Year 1	Year 2	Year 3	Industry Profile
Sales Growth	0.00%	5.59%	12.53%	10.50%

Percent of Total Assets
Inventory	17.79%	19.22%	16.33%	26.50%
Other Current Assets	0.00%	0.00%	0.00%	31.10%
Total Current Assets	43.38%	42.89%	55.17%	83.50%
Long-term Assets	56.62%	57.11%	44.83%	16.50%
Total Assets	100.00%	100.00%	100.00%	100.00%

Current Liabilities	20.44%	21.25%	18.76%	48.90%
Long-term Liabilities	46.63%	35.88%	18.43%	13.30%
Total Liabilities	67.07%	57.13%	37.19%	62.20%
Net Worth	32.93%	42.87%	62.81%	37.80%

Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	53.15%	54.87%	58.91%	41.50%
Selling, General & Administrative Expenses	54.42%	53.14%	52.47%	26.80%
Advertising Expenses	0.00%	0.00%	0.00%	1.00%
Profit Before Interest and Taxes	0.03%	3.43%	9.78%	2.60%

Main Ratios
Current	2.12	2.02	2.94	1.71
Quick	1.25	1.11	2.07	0.97
Total Debt to Total Assets	67.07%	57.13%	37.19%	62.20%
Pre-tax Return on Net Worth	-15.59%	26.29%	62.03%	3.00%
Pre-tax Return on Assets	-5.13%	11.27%	38.96%	7.80%

Additional Ratios	Year 1	Year 2	Year 3
Net Profit Margin	-1.27%	1.74%	6.45%	n.a
Return on Equity	-15.59%	18.40%	43.42%	n.a

Activity Ratios
Inventory Turnover	10.34	10.74	10.78	n.a
Accounts Payable Turnover	11.34	12.17	12.17	n.a
Payment Days	27	30	29	n.a
Total Asset Turnover	4.04	4.54	4.23	n.a

Debt Ratios
Debt to Net Worth	2.04	1.33	0.59	n.a
Current Liab. to Liab.	0.30	0.37	0.50	n.a

Liquidity Ratios
Net Working Capital	$19,285	$17,129	$34,769	n.a
Interest Coverage	0.02	3.64	17.17	n.a

Additional Ratios
Assets to Sales	0.25	0.22	0.24	n.a
Current Debt/Total Assets	20%	21%	19%	n.a
Acid Test	1.25	1.11	2.07	n.a
Sales/Net Worth	12.28	10.58	6.74	n.a
Dividend Payout	0.00	0.00	0.00	n.a