"Auto Parts Store" Business Plan:
1.0 Executive Summary
2.0 Company Summary
3.0 Products
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 Key Financial Indicators
7.3 Break-even Analysis
7.4 Projected Profit and Loss
7.5 Projected Cash Flow
7.6 Projected Balance Sheet
 7.7 Business Ratios
Business Ideas applicable for this business plan:
Wheels and Tires Hotel
Import alloy wheel, rims for cars, SUV and trucks from China
Silent partner needed for motorcycle store
This business plan was originally published
by Palo Alto Software, Inc. All rights reserved.
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7.0 Financial Plan
- Salaries and rent are the two major expenses, while
depreciation is another significant cost that will increase as the company
develops.
- We want to finance growth mainly through cash flow. We
recognize that this means we will have to grow slowly.
- It should be noted that the owners of Southeast Racing Parts do
not intend to take any profits out of the business until the long-term debt has
been satisfied. Whatever profits remain after the debt payments will be used to
finance growth, mainly through the acquisition of additional inventory.
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7.1 Important Assumptions
Key assumptions for Southeast Racing Parts are:
- We do not sell anything on credit.
- We assume the continued popularity of auto racing in America.
- Monthly sales are the largest indicator for this business.
There are some seasonal variations, with the months January through June being
the highest sales months.
- We assume access to capital and financing sufficient to
maintain our financial plan as shown in the tables.
|
| General Assumptions |
| |
2001 |
2002 |
2003 |
| 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 |
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7.2 Key Financial Indicators
The key indicators in our plan illustrate increasing sales, control
of costs, and increasing profit margins.
Break-even Analysis
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7.3 Break-even Analysis
For our break-even analysis, we assume running costs of
approximately $6,000 per month, which includes payroll, rent, utilities, and an
estimation of other running costs.
Based on a 30% margin, we need to sell about $20,000 per month
to break even, according to our assumptions.
Our sales forecast indicates that monthly sales are expected to
be much greater than the break-even point mentioned in the table.
Break-even Analysis
|
| Break-even Analysis: |
| Monthly Units Break-even |
20,000 |
| Monthly Revenue Break-even |
$20,000 |
| |
| Assumptions: |
| Average Per-Unit Revenue |
$1.00 |
| Average Per-Unit Variable Cost |
$0.70 |
| Estimated Monthly Fixed Cost |
$6,000 |
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7.4 Projected Profit and Loss
The detailed monthly pro-forma income statement is included in
the appendix. The annual estimates are included on the following page. We expect
income to hit $36,000 at the end of the first year of business. It should
increase to around $60,000 by the third year as the reputation of our business,
its employees, and services become apparent to the local racers. Second year
revenues anticipate the addition of one part-time employee, along with one
full-time employee in the third year.
The credit card surcharge expense was based upon 50% of sales
being paid for with plastic, and assuming a 2% service fee. The inbound freight
charges were based upon 2% of cost of goods for year one, 1.75% for year two,
and 1.5% for year three. Depreciation was figured upon $29,000 in expensed
equipment at the rate of seven years.
|
| Pro Forma Profit and Loss |
| |
2001 |
2002 |
2003 |
| Sales |
$367,019 |
$472,085 |
$608,670 |
| Direct Cost of Goods |
$245,154 |
$314,147 |
$402,472 |
| Speedingticket.net |
$0 |
$0 |
$0 |
|
|
------------ |
------------ |
------------ |
| Cost of Goods Sold |
$245,154 |
$314,147 |
$402,472 |
| Gross Margin |
$121,865 |
$157,938 |
$206,198 |
| Gross Margin % |
33.20% |
33.46% |
33.88% |
| Expenses: |
| Payroll |
$26,400 |
$39,680 |
$66,016 |
| Sales and Marketing and Other Expenses |
$13,404 |
$15,734 |
$18,489 |
| Depreciation |
$2,650 |
$3,445 |
$4,478 |
| Office Supplies |
$600 |
$780 |
$1,014 |
| Utilities |
$2,400 |
$2,400 |
$2,400 |
| Security/alarm |
$360 |
$360 |
$360 |
| Insurance |
$840 |
$840 |
$840 |
| Rent |
$19,200 |
$19,200 |
$19,200 |
| Depreciation |
$4,140 |
$4,140 |
$4,140 |
| Leased Equipment |
$0 |
$0 |
$0 |
| Payroll Taxes |
$3,960 |
$5,962 |
$9,902 |
| Other |
$0 |
$0 |
$0 |
| |
------------ |
------------ |
------------ |
| Total Operating Expenses |
$73,954 |
$92,531 |
$126,839 |
| Profit Before Interest and Taxes |
$47,911 |
$65,407 |
$79,359 |
| Interest Expense |
$0 |
$0 |
$0 |
| Taxes Incurred |
$11,999 |
$16,352 |
$20,170 |
| Net Profit |
$35,912 |
$49,055 |
$59,188 |
| Net Profit/Sales |
9.78% |
10.39% |
9.72% |
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7.5 Projected Cash Flow
Cash flow projections are critical to our success. The following
table shows cash flow for the first three years, and the chart illustrates
monthly cash flow in the first year. Monthly cash flow projections are included
in the appendix.
Cash
|
| Pro Forma Cash Flow |
| |
2001 |
2002 |
2003 |
| |
| Cash from Operations: |
| Cash Sales |
$367,019 |
$472,085 |
$608,670 |
| Cash from Receivables |
$0 |
$0 |
$0 |
| Subtotal Cash from Operations |
$367,019 |
$472,085 |
$608,670 |
| |
| 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 |
$367,019 |
$472,085 |
$608,670 |
| Expenditures |
2001 |
2002 |
2003 |
| Expenditures from Operations: |
| Cash Spending |
$27,427 |
$38,133 |
$47,819 |
| Payment of Accounts Payable |
$254,471 |
$379,163 |
$497,880 |
| Subtotal Spent on Operations |
$281,899 |
$417,295 |
$545,699 |
| |
| 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 |
$21,000 |
| Long-term Liabilities Principal Repayment |
$2,584 |
$7,750 |
$7,750 |
| Purchase Other Current Assets |
$0 |
$0 |
$0 |
| Purchase Long-term Assets |
$0 |
$0 |
$0 |
| Dividends |
$0 |
$0 |
$0 |
| Subtotal Cash Spent |
$281,899 |
$417,295 |
$545,699 |
| |
| Net Cash Flow |
$85,120 |
$54,790 |
$62,971 |
| Cash Balance |
$86,120 |
$140,910 |
$203,881 |
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7.6 Projected Balance Sheet
The table shows the annual balance sheet results, with a healthy
projected increase in net worth. Detailed monthly projections are in the appendix.
|
| Pro Forma Balance Sheet |
| |
| Assets |
| Current Assets |
2001 |
2002 |
2003 |
| Cash |
$86,120 |
$140,910 |
$203,881 |
| Inventory |
$26,196 |
$33,568 |
$43,006 |
| Other Current Assets |
$0 |
$0 |
$0 |
| Total Current Assets |
$112,316 |
$174,478 |
$246,887 |
| Long-term Assets |
| Long-term Assets |
$29,000 |
$29,000 |
$29,000 |
| Accumulated Depreciation |
$2,650 |
$6,095 |
$10,573 |
| Total Long-term Assets |
$26,350 |
$22,905 |
$18,427 |
| Total Assets |
$138,666 |
$197,383 |
$265,314 |
| |
| Liabilities and Capital |
| Current Liabilities |
2001 |
2002 |
2003 |
| Accounts Payable |
$24,754 |
$34,416 |
$43,158 |
| Current Borrowing |
$0 |
$0 |
$0 |
| Other Current Liabilities |
$0 |
$0 |
$0 |
| Subtotal Current Liabilities |
$24,754 |
$34,416 |
$43,158 |
| |
Long-term Liabilities |
$0 |
$0 |
$0 |
| Total Liabilities |
$24,754 |
$34,416 |
$43,158 |
| |
| Paid-in Capital |
$80,625 |
$80,625 |
$80,625 |
| Retained Earnings |
($2,625) |
$33,287 |
$82,343 |
| Earnings |
$35,912 |
$49,055 |
$59,188 |
| Total Capital |
$113,912 |
$162,968 |
$222,156 |
| Total Liabilities and Capital |
$138,666 |
$197,383 |
$265,314 |
| Net Worth |
$113,912 |
$162,968 |
$222,156 |
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7.7 Business Ratios
Business ratios for the years of this plan are shown below.
Industry profile ratios based on the Standard Industrial Classification (SIC)
code 5531, Auto and Home Supply Stores, are shown for comparison.
| |
| Ratio Analysis |
| |
2001 |
2002 |
2003 |
Industry Profile |
| Sales Growth |
0.00% |
28.63% |
28.93% |
4.90% |
| |
| Percent of Total Assets |
| Accounts Receivable |
0.0% |
0.0% |
0.0% |
14.5% |
| Inventory |
18.89% |
17.01% |
16.21% |
47.50% |
| Other Current Assets |
0.00% |
0.00% |
0.00% |
14.40% |
| Total Current Assets |
81.00% |
88.40% |
93.05% |
76.40% |
| Long-term Assets |
19.00% |
11.60% |
6.95% |
23.60% |
| Total Assets |
100.00% |
100.00% |
100.00% |
100.00% |
| |
| Current Liabilities |
17.85% |
17.44% |
16.27% |
39.20% |
| Long-term Liabilities |
0.00% |
0.00% |
0.00 |
15.50% |
| Total Liabilities |
17.85% |
17.44% |
16.27% |
54.70% |
| Net Worth |
82.15% |
82.56% |
83.73% |
45.30% |
| |
| Percent of Sales |
| Sales |
100.00% |
100.00% |
100.00% |
100.00% |
| Gross Margin |
33.20% |
33.46% |
33.88% |
32.00% |
| Selling, General & Administrative Expenses |
13.41% |
23.06% |
24.10% |
19.60% |
| Advertising Expenses |
0.49% |
0.50% |
0.50% |
1.40% |
| Profit Before Interest and Taxes |
13.05% |
13.85% |
13.04% |
1.50% |
| |
| Main Ratios |
| Current |
4.54 |
5.07 |
5.72 |
2.03 |
| Quick |
3.48 |
4.09 |
4.72 |
0.59 |
| Total Debt to Total Assets |
17.85% |
17.44% |
16.27% |
54.70% |
| Pre-tax Return on Net Worth |
42.06% |
40.13% |
35.72% |
3.50% |
| Pre-tax Return on Assets |
34.55% |
33.14% |
29.91% |
7.60% |
| |
| Additional Ratios |
2001 |
2002 |
2003 |
|
| Net Profit Margin |
9.78% |
10.39% |
9.72% |
n.a |
| Return on Equity |
31.53% |
30.10% |
26.64% |
n.a |
| |
| Activity Ratios |
| Accounts Receivable Turnover |
0.00 |
0.00 |
0.00 |
n.a |
| Collection Days |
0 |
0 |
0 |
n.a |
| Inventory Turnover |
10.42 |
10.51 |
11.74 |
n.a |
| Accounts Payable Turnover |
11.20 |
11.30 |
11.74 |
n.a |
| Payment Days |
24 |
28 |
28 |
n.a |
| Total Asset Turnover |
2.65 |
2.39 |
2.29 |
n.a |
| |
| Debt Ratios |
| Debt to Net Worth |
0.22 |
0.21 |
0.19 |
n.a |
| Current Liab. to Liab. |
1.00 |
1.00 |
1.00 |
n.a |
| |
| Liquidity Ratios |
| Net Working Capital |
$87,562 |
$140,063 |
$203,729 |
n.a |
| Interest Coverage |
-9.7 |
-2.98 |
36.17 |
n.a |
| |
| Additional Ratios |
| Assets to Sales |
0.38 |
0.42 |
0.44 |
n.a |
| Current Debt/Total Assets |
18% |
17% |
16% |
n.a |
| Acid Test |
3.48 |
4.09 |
4.72 |
n.a |
| Sales/Net Worth |
3.22 |
2.90 |
2.74 |
n.a |
| Dividend Payout |
0.00 |
0.00 |
0.00 |
n.a |
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