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Panache Travel Group
Financial Plan
The financial plan of Panache Travel Group is detailed in the following sections. Preliminary estimates suggest that PTG will experience rapid growth and will increase in gross margin and sales volume. This is partly due to the vast market, but will be facilitated by increased marketing. Income estimates are based, in part, on anticipated revenues from accounts and clients that are secured by PTG prior to its acquisition of both Barkley Roberts Travel and Panache European Journeys. PTG will need sufficient cash to allow for a possible negative cash flow during start-up. It will also need investment to acquire the assets and liabilities of Barkley Roberts Travel and Panache European Journeys. Thus, the overall financial plan presents a conservative, but realistic, depiction of the financial position of PTG.
7.1 Important Assumptions
Panache Travel Group assumes the following:
- Market growth projections for the travel industry and for luxury travel are accurate.
- National economic conditions, which are favorable to the travel industry, will not experience significant decline in the next three years.
- International conditions will remain favorable for service providers and PTG will be able to maintain those relationships.
| 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 Key Financial Indicators
The following chart indicates key financial indicators for the first three years for Panache Travel Group. Growth is expected in sales and a proportional increase in operating expenses during expansion.
7.3 Projected Profit and Loss
The profit picture of Panache Travel Group improves as operations move into the second year. PTG anticipates improving its profitability dramatically by 2003. The annual estimates are included in the table below.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $500,000 | $1,500,000 | $4,500,000 |
| Direct Cost of Sales | $346,800 | $1,222,500 | $3,609,000 |
| Other | $0 | $0 | $0 |
| Total Cost of Sales | $346,800 | $1,222,500 | $3,609,000 |
| Gross Margin | $153,200 | $277,500 | $891,000 |
| Gross Margin % | 30.64% | 18.50% | 19.80% |
| Expenses | |||
| Payroll | $52,500 | $87,000 | $149,000 |
| Sales and Marketing and Other Expenses | $11,700 | $38,600 | $76,000 |
| Depreciation | $0 | $0 | $0 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $875 | $1,574 | $1,653 |
| Insurance | $700 | $1,200 | $1,200 |
| Rent | $2,100 | $3,600 | $3,600 |
| Payroll Taxes | $2,625 | $4,350 | $7,450 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $70,500 | $136,324 | $238,903 |
| Profit Before Interest and Taxes | $82,700 | $141,176 | $652,097 |
| EBITDA | $82,700 | $141,176 | $652,097 |
| Interest Expense | $110 | $110 | $110 |
| Taxes Incurred | $20,647 | $35,267 | $165,713 |
| Net Profit | $61,943 | $105,800 | $486,274 |
| Net Profit/Sales | 12.39% | 7.05% | 10.81% |
7.4 Projected Cash Flow
Cash flow projections are critical to our success. The monthly cash flow for 2001 is shown in the illustration, with one bar representing the cash flow per month and the other representing the monthly balance. The annual cash flow figures are included here in the following table.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $500,000 | $1,500,000 | $4,500,000 |
| Subtotal Cash from Operations | $500,000 | $1,500,000 | $4,500,000 |
| 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 | $500,000 | $1,500,000 | $4,500,000 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $52,500 | $87,000 | $149,000 |
| Bill Payments | $343,452 | $1,241,864 | $3,654,519 |
| Subtotal Spent on Operations | $395,952 | $1,328,864 | $3,803,519 |
| 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 | $395,952 | $1,328,864 | $3,803,519 |
| Net Cash Flow | $104,048 | $171,136 | $696,481 |
| Cash Balance | $204,048 | $375,184 | $1,071,665 |
7.5 Projected Balance Sheet
The balance sheet indicates sustained and planned growth. Net worth improves considerably in years two and three and will provide Panache Travel Group with a strong financial position.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $204,048 | $375,184 | $1,071,665 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $204,048 | $375,184 | $1,071,665 |
| Long-term Assets | |||
| Long-term Assets | $0 | $0 | $0 |
| Accumulated Depreciation | $0 | $0 | $0 |
| Total Long-term Assets | $0 | $0 | $0 |
| Total Assets | $204,048 | $375,184 | $1,071,665 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $42,105 | $107,441 | $317,649 |
| Current Borrowing | $1,100 | $1,100 | $1,100 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $43,205 | $108,541 | $318,749 |
| Long-term Liabilities | $0 | $0 | $0 |
| Total Liabilities | $43,205 | $108,541 | $318,749 |
| Paid-in Capital | $100,000 | $100,000 | $100,000 |
| Retained Earnings | ($1,100) | $60,843 | $166,642 |
| Earnings | $61,943 | $105,800 | $486,274 |
| Total Capital | $160,843 | $266,642 | $752,916 |
| Total Liabilities and Capital | $204,048 | $375,184 | $1,071,665 |
| Net Worth | $160,843 | $266,642 | $752,916 |
7.6 Business Ratios
The following table shows the projected business ratios. Panache Travel Group expects to maintain healthy ratios for profitability, risk and return. Industry Profile ratios are also shown, based on Standard Industry Classification (SIC) code 4724, Travel Agencies.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 200.00% | 200.00% | 4.00% |
| Percent of Total Assets | ||||
| Other Current Assets | 0.00% | 0.00% | 0.00% | 38.10% |
| Total Current Assets | 100.00% | 100.00% | 100.00% | 64.00% |
| Long-term Assets | 0.00% | 0.00% | 0.00% | 36.00% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 21.17% | 28.93% | 29.74% | 39.60% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 16.30% |
| Total Liabilities | 21.17% | 28.93% | 29.74% | 55.90% |
| Net Worth | 78.83% | 71.07% | 70.26% | 44.10% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 30.64% | 18.50% | 19.80% | 38.30% |
| Selling, General & Administrative Expenses | 18.25% | 11.45% | 8.93% | 27.50% |
| Advertising Expenses | 1.40% | 1.67% | 1.11% | 0.40% |
| Profit Before Interest and Taxes | 16.54% | 9.41% | 14.49% | 1.30% |
| Main Ratios | ||||
| Current | 4.72 | 3.46 | 3.36 | 1.44 |
| Quick | 4.72 | 3.46 | 3.36 | 1.13 |
| Total Debt to Total Assets | 21.17% | 28.93% | 29.74% | 55.90% |
| Pre-tax Return on Net Worth | 51.35% | 52.90% | 86.59% | 3.20% |
| Pre-tax Return on Assets | 40.48% | 37.60% | 60.84% | 7.20% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 12.39% | 7.05% | 10.81% | n.a |
| Return on Equity | 38.51% | 39.68% | 64.59% | n.a |
| Activity Ratios | ||||
| Accounts Payable Turnover | 9.16 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 21 | 20 | n.a |
| Total Asset Turnover | 2.45 | 4.00 | 4.20 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.27 | 0.41 | 0.42 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $160,843 | $266,642 | $752,916 | n.a |
| Interest Coverage | 751.82 | 1,283.42 | 5,928.15 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.41 | 0.25 | 0.24 | n.a |
| Current Debt/Total Assets | 21% | 29% | 30% | n.a |
| Acid Test | 4.72 | 3.46 | 3.36 | n.a |
| Sales/Net Worth | 3.11 | 5.63 | 5.98 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |