"West Pacific Marketing" Business Plan:
1.0 Executive Summary
2.0 Company Summary
3.0 Services
4.0 Market Analysis Summary
5.0 Strategy and Implementation Summary
6.0 Management Summary
7.0 Financial Plan
 7.1 Important Assumptions
7.2 Break-even Analysis
7.3 Projected Profit and Loss Important Assumptions
7.4 Projected Cash Flow
7.5 Projected Balance Sheet
 7.6 Business Ratios
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This business plan was originally published
by Palo Alto Software, Inc. All rights reserved.
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7.0 Financial Plan
The financial picture is quite encouraging. West Pacific
Marketing Consultants does not foresee a debt situation.
The company does expect to be able to take some money out as
dividends. The owners don't take overly generous salaries, so some draw is
appropriate.
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7.1 Important Assumptions
The accompanying table lists West Pacific Marketing Consultants'
main assumptions for developing its financial projections. The most sensitive
assumption is the collection days. West Pacific Marketing Consultants would like
to improve collection days to take pressure off of its working
capital.
|
| General Assumptions |
| |
2001 |
2002 |
2003 |
2004 |
2005 |
| Plan Month |
1 |
2 |
3 |
4 |
5 |
| Current Interest Rate |
9.00% |
9.00% |
9.00% |
9.00% |
9.00% |
| Long-term Interest Rate |
9.00% |
9.00% |
9.00% |
9.00% |
9.00% |
| Tax Rate |
25.00% |
25.00% |
25.00% |
25.00% |
25.00% |
| Sales on Credit % |
50.00% |
50.00% |
50.00% |
50.00% |
50.00% |
| Other |
0 |
0 |
0 |
0 |
0 |
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7.2 Break-even Analysis
The following chart and table summarize the break-even analysis,
including monthly units and sales break-even points.
Break-even Analysis
|
| Break-even Analysis: |
| Monthly Units Break-even |
$46,214 |
| Monthly Revenue Break-even |
$46,214 |
| |
| Assumptions: |
| Average Per-Unit Revenue |
$1.00 |
| Average Per-Unit Variable Cost |
$0.20 |
| Estimated Monthly Fixed Cost |
$37,053 |
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7.3 Projected Profit and Loss
The detailed monthly pro-forma income statement for the first year
is included in the appendix. The annual estimates are included here.
|
| Pro Forma Profit and Loss |
| |
2001 |
2002 |
2003 |
2004 |
2005 |
| Sales |
$2,080,000 |
$2,496,000 |
$2,995,200 |
$3,594,240 |
$4,313,088 |
| Direct Cost of Sales |
$0 |
$0 |
$0 |
$0 |
$0 |
| Other |
$0 |
$0 |
$0 |
$0 |
$0 |
|
|
------------ |
------------ |
------------ |
------------ |
------------ |
| Total Cost of Sales |
$0 |
$0 |
$0 |
$0 |
$0 |
|
Gross Margin |
$2,080,000 |
$2,496,000 |
$2,995,200 |
$3,594,240 |
$4,313,088 |
| Gross Margin % |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
| Expenses: |
| Payroll |
$271,200 |
$298,320 |
$328,152 |
$360,967 |
$397,064 |
| Sales and Marketing and Other Expenses |
$85,000 |
$102,000 |
$122,320 |
$146,784 |
$176,141 |
| Depreciation |
$0 |
$0 |
$0 |
$0 |
$0 |
| Leased Equipment |
$0 |
$0 |
$0 |
$0 |
$0 |
| Utilities |
$7,200 |
$8,640 |
$10,368 |
$12,442 |
$14,930 |
| Insurance |
$2,160 |
$2,592 |
$3,110 |
$3,732 |
$4,479 |
| Office Rent |
$38,400 |
$46,080 |
$55,296 |
$66,355 |
$79,626 |
| Payroll Taxes |
$40,680 |
$44,748 |
$49,223 |
$54,145 |
$59,560 |
| Other |
$0 |
$0 |
$0 |
$0 |
$0 |
| |
------------ |
------------ |
------------ |
------------ |
------------ |
| Total Operating Expenses |
$444,640 |
$502,380 |
$568,469 |
$644,426 |
$731,799 |
| Profit Before Interest and Taxes |
$1,635,360 |
$1,993,620 |
$2,426,731 |
$2,949,814 |
$3,581,289 |
| Interest Expense |
$0 |
$0 |
$0 |
$0 |
$0 |
| Taxes Incurred |
$408,840 |
$498,405 |
$606,683 |
$737,454 |
$895,322 |
| Net Profit |
$1,226,520 |
$1,495,215 |
$1,820,048 |
$2,212,361 |
$2,685,966 |
| Net Profit/Sales |
58.97% |
59.90% |
60.77% |
61.55% |
62.27% |
Profit Monthly
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7.4 Projected Cash Flow
Cash flow projections are critical to West Pacific Marketing
Consultants' success. The monthly cash flow 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 below in the
following chart and table. Detailed monthly numbers are included in the
appendix. Cash
|
| Pro Forma Cash Flow |
| |
2001 |
2002 |
2003 |
2004 |
2005 |
| |
| Net Profit/Sales |
| Cash from Operations: |
| Cash Sales |
$1,040,000 |
$1,248,000 |
$1,497,600 |
$1,797,120 |
$2,156,544 |
| Cash from Receivables |
$1,030,105 |
$1,222,333 |
$1,466,800 |
$1,760,160 |
$2,112,192 |
| Subtotal Cash from Operations |
$2,070,105 |
$2,470,333 |
$2,964,400 |
$3,557,280 |
$4,268,736 |
| |
| Additional Cash Received |
| Sales Tax, VAT, HST/GST Received |
$0 |
$0 |
$0 |
$0 |
$0 |
| New Current Borrowing |
$0 |
$0 |
$0 |
$0 |
$0 |
| New Other Liabilities (interest-free) |
$0 |
$0 |
$0 |
$0 |
$0 |
| New Long-term Liabilities |
$0 |
$0 |
$0 |
$0 |
$0 |
| Sales of Other Current Assets |
$0 |
$0 |
$0 |
$0 |
$0 |
| Sales of Long-term Assets |
$0 |
$0 |
$0 |
$0 |
$0 |
| New Investment Received |
$0 |
$0 |
$0 |
$0 |
$0 |
| Subtotal Cash Received |
$2,070,105 |
$2,470,333 |
$2,964,400 |
$3,557,280 |
$4,268,736 |
| Expenditures |
2001 |
2002 |
2003 |
2004 |
2005 |
| Expenditures from Operations: |
| Cash Spending |
$85,084 |
$102,881 |
$124,308 |
$150,113 |
$181,174 |
| Payment of Accounts Payable |
$712,707 |
$885,211 |
$1,035,560 |
$1,213,359 |
$1,423,793 |
| Subtotal Spent on Operations |
$797,791 |
$988,091 |
$1,159,868 |
$1,363,473 |
$1,604,967 |
| |
| Additional Cash Spent |
| Sales Tax, VAT, HST/GST Paid Out |
$0 |
$0 |
$0 |
$0 |
$0 |
| Principal Repayment of Current Borrowing |
$0 |
$0 |
$0 |
$0 |
$0 |
| Other Liabilities Principal Repayment |
$0 |
$0 |
$0 |
$0 |
$0 |
| Long-term Liabilities Principal Repayment |
$0 |
$0 |
$0 |
$0 |
$0 |
| Purchase Other Current Assets |
$0 |
$0 |
$0 |
$0 |
$0 |
| Purchase Long-term Assets |
$0 |
$0 |
$0 |
$0 |
$0 |
| Dividends |
$0 |
$0 |
$0 |
$0 |
$0 |
| Subtotal Cash Spent |
$797,791 |
$988,091 |
$1,159,868 |
$1,363,473 |
$1,604,967 |
| |
| Net Cash Flow |
$1,272,314 |
$1,482,242 |
$1,804,532 |
$2,193,807 |
$2,663,769 |
| Cash Balance |
$1,928,400 |
$3,410,642 |
$5,215,174 |
$7,408,981 |
$10,072,750 |
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7.5 Projected Balance Sheet
The following balance sheet shows healthy growth of net worth,
and strong financial position. The monthly estimates are included in the
appendix.
|
| Pro Forma Balance Sheet |
| |
| Assets |
| Current Assets |
2001 |
2002 |
2003 |
2004 |
2005 |
| Cash |
$1,928,400 |
$3,410,642 |
$5,215,174 |
$7,408,981 |
$10,072,750 |
| Accounts Receivable |
$128,333 |
$154,000 |
$184,800 |
$221,760 |
$266,112 |
| Other Current Assets |
$0 |
$0 |
$0 |
$0 |
$0 |
| Total Current Assets |
$2,056,733 |
$3,564,642 |
$5,399,974 |
$7,630,741 |
$10,338,862 |
| Long-term Assets |
| Long-term Assets |
$126,588 |
$126,588 |
$126,588 |
$126,588 |
$126,588 |
| Accumulated Depreciation |
$0 |
$0 |
$0 |
$0 |
$0 |
| Total Long-term Assets |
$126,588 |
$126,588 |
$126,588 |
$126,588 |
$126,588 |
| Total Assets |
$2,183,321 |
$3,691,229 |
$5,526,562 |
$7,757,329 |
$10,465,450 |
| |
| Liabilities and Capital |
| Current Liabilities |
2001 |
2002 |
2003 |
2004 |
2005 |
| Accounts Payable |
$60,689 |
$73,383 |
$88,667 |
$107,073 |
$129,228 |
| Current Borrowing |
$0 |
$0 |
$0 |
$0 |
$0 |
| Other Current Liabilities |
$0 |
$0 |
$0 |
$0 |
$0 |
| Subtotal Current Liabilities |
$60,689 |
$73,383 |
$88,667 |
$107,073 |
$129,228 |
| |
Long-term Liabilities |
$0 |
$0 |
$0 |
$0 |
$0 |
| Total Liabilities |
$60,689 |
$73,383 |
$88,667 |
$107,073 |
$129,228 |
| |
| Paid-in Capital |
$37,800 |
$37,800 |
$37,800 |
$37,800 |
$37,800 |
| Retained Earnings |
$858,312 |
$2,084,832 |
$3,580,047 |
$5,400,095 |
$7,612,455 |
| Earnings |
$1,226,520 |
$1,495,215 |
$1,820,048 |
$2,212,361 |
$2,685,966 |
| Total Capital |
$2,122,632 |
$3,617,847 |
$5,437,895 |
$7,650,255 |
$10,336,222 |
| Total Liabilities and Capital |
$2,183,321 |
$3,691,229 |
$5,526,562 |
$7,757,329 |
$10,465,450 |
| Net Worth |
$2,122,632 |
$3,617,847 |
$5,437,895 |
$7,650,255 |
$10,336,222 |
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7.6 Business Ratios
The following table presents significant business
ratios for West Pacific Marketing Consultants. The last column, Industry
Profiles, contains ratios based on the management consulting services industry,
as defined by the Standard Industry Classification (SIC) Index code 8742.
| |
| Ratio Analysis |
| |
2001 |
2002 |
2003 |
2004 |
2005 |
Industry Profile |
| Sales Growth |
9.76% |
20.00% |
20.00% |
20.00% |
20.00% |
8.60% |
| |
| Percent of Total Assets |
| Accounts Receivable |
5.88% |
4.17% |
3.34% |
2.86% |
2.54% |
24.40% |
| Inventory |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
3.80% |
| Other Current Assets |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
46.70% |
| Total Current Assets |
94.20% |
96.57% |
97.71% |
98.37% |
98.79% |
74.90% |
| Long-term Assets |
5.80% |
3.43% |
2.29% |
1.63% |
1.21% |
25.10% |
| Total Assets |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
| |
| Current Liabilities |
2.78% |
1.99% |
1.60% |
1.38% |
1.23% |
42.80% |
| Long-term Liabilities |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
17.20% |
| Total Liabilities |
2.78% |
1.99% |
1.60% |
1.38% |
1.23% |
60.00% |
| Net Worth |
97.22% |
98.01% |
98.40% |
98.62% |
98.77% |
40.00% |
| |
| Percent of Sales |
| Sales |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
| Gross Margin |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
0.00% |
| Selling, General & Administrative Expenses |
36.08% |
35.14% |
34.28% |
33.49% |
32.77% |
83.50% |
| Advertising Expenses |
1.27% |
1.27% |
1.27% |
1.27% |
1.27% |
1.20% |
| Profit Before Interest and Taxes |
78.62% |
79.87% |
81.02% |
82.07% |
83.03% |
2.60% |
| |
| Main Ratios |
| Current |
33.89 |
48.58 |
60.90 |
71.27 |
80.00 |
1.59 |
| Quick |
33.89 |
48.58 |
60.90 |
71.27 |
80.00 |
1.26 |
| Total Debt to Total Assets |
2.78% |
1.99% |
1.60% |
1.38% |
1.23% |
60.00% |
| Pre-tax Return on Net Worth |
77.04% |
55.11% |
44.63% |
38.56% |
34.65% |
4.40% |
| Pre-tax Return on Assets |
74.90% |
54.01% |
43.91% |
38.03% |
34.22% |
10.90% |
| |
| Additional Ratios |
2001 |
2002 |
2003 |
2004 |
2005 |
|
| Net Profit Margin |
58.97% |
59.90% |
60.77% |
61.55% |
62.27% |
n.a |
| Return on Equity |
57.78% |
41.33% |
33.47% |
28.92% |
25.99% |
n.a |
| |
| Activity Ratios |
| Accounts Receivable Turnover |
8.10 |
8.10 |
8.10 |
8.10 |
8.10 |
n.a |
| Collection Days |
45 |
41 |
41 |
41 |
41 |
n.a |
| Inventory Turnover |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
n.a |
| Accounts Payable Turnover |
12.66 |
12.24 |
11.85 |
11.50 |
11.19 |
n.a |
| Payment Days |
27 |
27 |
28 |
29 |
30 |
n.a |
| Total Asset Turnover |
0.95 |
0.68 |
0.54 |
0.46 |
0.41 |
n.a |
| |
| Debt Ratios |
| Debt to Net Worth |
0.03 |
0.02 |
0.02 |
0.01 |
0.01 |
n.a |
| Current Liab. to Liab. |
1.00 |
1.00 |
1.00 |
1.00 |
1.00 |
n.a |
| |
| Liquidity Ratios |
| Net Working Capital |
$1,996,044 |
$3,491,259 |
$5,311,307 |
$7,523,668 |
$10,209,634 |
n.a |
| Interest Coverage |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
n.a |
| |
| Additional Ratios |
| Assets to Sales |
1.05 |
1.48 |
1.85 |
2.16 |
2.43 |
n.a |
| Current Debt/Total Assets |
3% |
2% |
2% |
1% |
1% |
n.a |
| Acid Test |
31.78 |
46.48 |
58.82 |
69.20 |
77.95 |
n.a |
| Sales/Net Worth |
0.98 |
0.69 |
0.55 |
0.47 |
0.42 |
n.a |
| Dividend Payout |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
n.a |
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