Stroll Net
Financial Plan
Sales: Stroll Net is basing their projected Internet usage sales on the financial snapshot information provided to them by Supplier One, Inc. Internet usage was estimated by calculating the average number of minutes each customer will spend accessing the Internet and then generating a conservative estimate as to how many transactions will be made per day.
Cost of Goods Sold: The cost of goods sold was determined by the “retail profit analysis” we obtained from Supplier One, Inc. The cost of prepaid calling cards is 20% of the selling price. The cost of Internet access is $50 per month, paid to Supplier Two for networking fees. The cost of terminal placement is 20% of total internet access sales.
Salaries Expense: The founders of Stroll Net, Cam Piotr and Bob Green, will receive a salary of $24,000 in year one, $26,400 in year two, and $29,040 in year three.
Payroll Expense: Stroll Net intends to hire eight full-time employees at $10.00/hour and a full-time technician at $12.00/hour. The total cost of employing nine people at these rates for the first year is $14,720/month.
Rent Expense: Stroll Net is looking to purchase a 2200 square foot facility at $104.74/sq. foot.
Utilities Expense: Stroll Net is responsible for the payment of utilities including electric, water and garbage disposal. The basic monthly service charge for utilities expense will be $168.04. The phone bill will generated by five phone lines; one will be dedicated to a modem and four for business purposes. The basic monthly service charge for each line provided by Bellsouth is $59.95/month. Therefore, the total cost associated with the five phone lines is estimated at $299.75/month.
Marketing Expense: Stroll Net will allocate $50,000 for promotional expenses at the time of start-up. These dollars will be used for advertising on television, radio, the Internet and the local newspapers in order to build consumer awareness. For additional information, please refer to section 5.0 of the business plan.
Insurance Expense: Stroll Net has allocated $1,500 for insurance for the first year. As revenue increases in the second and third year of business, Stroll Net intends to invest more money for additional insurance coverage.
Legal and Consulting Fees: The cost of obtaining legal consultation in order to draw up the paper work necessary for client contracts is $1,500.
Depreciation: In depreciating our capital equipment, we used the Modified Accelerated Cost Recovery Method. We depreciated our terminals over a three-year time period.
Taxes: Stroll Net is an LLC and, as an entity, it is not taxed. However, there is a 10% payroll burden.
7.1 Important Assumptions
Basic assumptions are presented in the table below.
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 | 11.50% | 10.00% | 10.00% |
Tax Rate | 25.00% | 25.00% | 25.42% |
Other | 0 | 0 | 0 |
7.2 Break-even Analysis
Break-even data is presented in the chart and table below. With estimated monthly operating expenses at approximately $37,400, including everything from payroll to rent and insurance to maintenance of the kiosks, and average direct costs at roughly 90ยข for every $7.46 of sales, we reach break-even at approximately 5,700 sales per month. We project reaching the break-even point in the seventh month.

Break-even Analysis | |
Monthly Units Break-even | 5,166 |
Monthly Revenue Break-even | $38,557 |
Assumptions: | |
Average Per-Unit Revenue | $7.46 |
Average Per-Unit Variable Cost | $0.90 |
Estimated Monthly Fixed Cost | $33,925 |
7.3 Projected Profit and Loss
The following table contains our projections for profit and loss data. We anticipate a net profit of approximately $134,300 in the first year, as the Stroll Net idea catches on and sales increase. With a net profit margin of 18%, these projections are well within a reasonable range.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $727,071 | $908,806 | $1,136,007 |
Direct Cost of Sales | $87,343 | $109,176 | $136,470 |
Other | $0 | $0 | $0 |
Total Cost of Sales | $87,343 | $109,176 | $136,470 |
Gross Margin | $639,728 | $799,630 | $999,537 |
Gross Margin % | 87.99% | 87.99% | 87.99% |
Expenses | |||
Payroll | $284,498 | $309,440 | $397,952 |
Sales and Marketing and Other Expenses | $53,598 | $59,174 | $68,279 |
Depreciation | $44,676 | $45,000 | $45,000 |
Utilities | $5,613 | $6,174 | $6,792 |
Insurance | $1,500 | $6,000 | $7,500 |
Maintenence/Repairs | $3,500 | $4,200 | $5,800 |
Travel | $13,717 | $24,652 | $29,961 |
Payroll Taxes | $0 | $0 | $0 |
Total Operating Expenses | $407,102 | $454,640 | $561,284 |
Profit Before Interest and Taxes | $232,626 | $344,990 | $438,253 |
EBITDA | $277,302 | $389,990 | $483,253 |
Interest Expense | $10,877 | $8,500 | $7,500 |
Taxes Incurred | $55,437 | $84,122 | $109,483 |
Net Profit | $166,311 | $252,367 | $321,270 |
Net Profit/Sales | 22.87% | 27.77% | 28.28% |
7.4 Projected Cash Flow
Cash flow data for the first three years is presented in the chart and table below. The table shows anticipated repayment of the long-term loan, as well as projected dividends which will be paid to investors in years two and three. In year three, we will purchase two more paykiosks terminals for new locations. The more detailed monthly cash flow data can be found in the appendix.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $727,071 | $908,806 | $1,136,007 |
Subtotal Cash from Operations | $727,071 | $908,806 | $1,136,007 |
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 | $727,071 | $908,806 | $1,136,007 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $284,498 | $309,440 | $397,952 |
Bill Payments | $184,060 | $327,202 | $366,049 |
Subtotal Spent on Operations | $468,558 | $636,642 | $764,001 |
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 | $10,000 | $10,000 | $10,000 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $0 | $0 | $40,000 |
Dividends | $0 | $100,000 | $200,000 |
Subtotal Cash Spent | $478,558 | $746,642 | $1,014,001 |
Net Cash Flow | $248,513 | $162,163 | $122,006 |
Cash Balance | $308,513 | $470,676 | $592,682 |
7.5 Projected Balance Sheet
Our projected balance sheet is presented in the table below. As sales increase, and we repay our long-term loan, the net worth of the company will increase from $281,710 at start-up to over $610,000 by year three.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $308,513 | $470,676 | $592,682 |
Other Current Assets | $11,400 | $11,400 | $11,400 |
Total Current Assets | $319,913 | $482,076 | $604,082 |
Long-term Assets | |||
Long-term Assets | $312,810 | $312,810 | $352,810 |
Accumulated Depreciation | $44,676 | $89,676 | $134,676 |
Total Long-term Assets | $268,134 | $223,134 | $218,134 |
Total Assets | $588,047 | $705,210 | $822,216 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $50,026 | $24,822 | $30,558 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $50,026 | $24,822 | $30,558 |
Long-term Liabilities | $90,000 | $80,000 | $70,000 |
Total Liabilities | $140,026 | $104,822 | $100,558 |
Paid-in Capital | $310,171 | $310,171 | $310,171 |
Retained Earnings | ($28,461) | $37,850 | $90,217 |
Earnings | $166,311 | $252,367 | $321,270 |
Total Capital | $448,021 | $600,388 | $721,658 |
Total Liabilities and Capital | $588,047 | $705,210 | $822,216 |
Net Worth | $448,021 | $600,388 | $721,658 |
7.6 Business Ratios
The following table outlines some of the more important ratios from the Data communications services industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 4899.9901.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 25.00% | 25.00% | 1.63% |
Percent of Total Assets | ||||
Other Current Assets | 1.94% | 1.62% | 1.39% | 53.65% |
Total Current Assets | 54.40% | 68.36% | 73.47% | 74.50% |
Long-term Assets | 45.60% | 31.64% | 26.53% | 25.50% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 8.51% | 3.52% | 3.72% | 24.78% |
Long-term Liabilities | 15.30% | 11.34% | 8.51% | 18.28% |
Total Liabilities | 23.81% | 14.86% | 12.23% | 43.06% |
Net Worth | 76.19% | 85.14% | 87.77% | 56.94% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 87.99% | 87.99% | 87.99% | 52.82% |
Selling, General & Administrative Expenses | 73.78% | 60.22% | 59.71% | 30.92% |
Advertising Expenses | 6.14% | 4.95% | 3.96% | 0.82% |
Profit Before Interest and Taxes | 31.99% | 37.96% | 38.58% | 6.18% |
Main Ratios | ||||
Current | 6.39 | 19.42 | 19.77 | 1.84 |
Quick | 6.39 | 19.42 | 19.77 | 1.60 |
Total Debt to Total Assets | 23.81% | 14.86% | 12.23% | 54.39% |
Pre-tax Return on Net Worth | 49.50% | 56.05% | 59.69% | 8.03% |
Pre-tax Return on Assets | 37.71% | 47.71% | 52.39% | 17.61% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 22.87% | 27.77% | 28.28% | n.a |
Return on Equity | 37.12% | 42.03% | 44.52% | n.a |
Activity Ratios | ||||
Accounts Payable Turnover | 4.63 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 45 | 27 | n.a |
Total Asset Turnover | 1.24 | 1.29 | 1.38 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.31 | 0.17 | 0.14 | n.a |
Current Liab. to Liab. | 0.36 | 0.24 | 0.30 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $269,887 | $457,254 | $573,524 | n.a |
Interest Coverage | 21.39 | 40.59 | 58.43 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.81 | 0.78 | 0.72 | n.a |
Current Debt/Total Assets | 9% | 4% | 4% | n.a |
Acid Test | 6.39 | 19.42 | 19.77 | n.a |
Sales/Net Worth | 1.62 | 1.51 | 1.57 | n.a |
Dividend Payout | 0.00 | 0.40 | 0.62 | n.a |