Strategy of The City Track Compan - Coursework Example

Business Plan Contents 0 Executive summary 3 1 Vision 4 2 Mission 4 3 Keys to Success 5 2.0 The company 5 2.1 Company ownership 5 2.2 History of the company 5 2.3 Startup summary 6 3.0 Product/services 8 4.0 Market analysis and summary 9 4.1 Market 9 4.3 SWOT analysis 11 4.4 Marketing 11 4.5 Competition 12 4.6 Sales strategy 13 5.0 Strategy and implementation summary 13 5.1 Sales forecast 13 5.2 Summary of website development 14 6.0 Management 15 6.1 Team 16 6.2 Management summary 18 7.0 Financial plan 18 7.1 Break even analysis 18 7.2 Projected Cash Flow 21 7.3 Projected Balance Sheet 23 7.4 Business ratios 24 Appendix 26 1.0 Executive summary For several years, there has been congestion in the public transport within the city. This has been caused by few public transport. People have moved away from the public transport and invest on private vehicles. However, most of the people live within the poverty level, and they cannot afford private vehicles. This has called high demand for expansion of the industry to meet the rising demands. The city track bus service plans to offer transport services to passengers within and outside the city. However, since there is high demand of people residing outside the city, the bus track service will major on people outside the side the city. This will be on peak hours of the day, that is, mornings and evenings from Monday to Saturday. During the day time, the buses will ferry passengers within the city. The buses will make as many trips as possible. The operation starts from 5.00 am to 11.00pm. This is because many city residents work at extreme times of the day and all should be accommodated. This will assure the company stable market all the time. It is approximated that 18,000 people accessing the town every day. Some of them use personal cars, others buses and taxis while the majority on foot. The available transport vehicles have taken the opportunity of scarcity and escalated the fares making the ordinary citizens walk to and fro the city daily. Nevertheless, their condition is pathetic. In order to reach many customers, the city track bus service will prepare business cards and brochures showing the services offered and the location of the company. To reach many customers, the company will introduce online services. This include creation of the company website, use of Facebook and twitter and even internet. This will enable other customers, especially those who want to hire for private use or other functions, to access the services. There will be a central office where the company manages its operations. The long distant travelers will book for their tickets to facilitate effective service. The company will fix bus stations on all routes. The passengers gather at the bus stops for easy service delivery. As the company grows, the buses will be fixed with modern flat-screen TV sets. This will entertain the passengers as the travel. Apart from this, music systems shall be amalgamated. This strategy has not been employed by the existing companies. The city track company will have centralized management system with the manager having full control over them. The central office located within the town will include the company management and service delivery. The general manager will be the owner and will employ other management staff. He is a potential, opportunistic and ambitious businessman. The company expects to maximize profits within the first three years of inception. Summary of the Sales forecast 1.1 Vision To be the best transporter for customer choices and raise the customer expectations above the ordinary levels. 1.2 Mission The mission of the city track bus company is to offer safe, quality and convenient transport service to all esteemed customers. 1.3 Keys to Success City track chauffeurs are professional, experienced, commercially certified drivers and conductors. The management staff is professional, friendly and loyal to all the customers. City track bus Service Company cares and strives to offer its time and resources to local schools, the poor and other organizations. 2.0 The company The city track company is one of the transport companies that offers transportation to passengers within and outside the city. It offers public transport, service delivery and hire both for private and commercial functions with a vast range of competitive prices. As the city is the most populous town in the country, several people need mobility from one point to another. The company seeks to fill the gaps that have been left open by the existing companies. This will help the customers to move with ease and reduce congestion of people in the streets. As a matter of fact, many people have relocated to the outskirts of the city and need constant transportation. 2.1 Company ownership The Company is owned by Mark Henry. Although he is the owner, he will partner with other companies, which have already shown interest in the same industry. The other partners will be passive most managerial functions thus taking a quarter of the shares of the company. 2.2 History of the company In December 2013, twelve bus operators within the city withdrew their vehicles from the road. The total number of the buses operating reduced by almost half at that time. This was because of poor management and strict traffic rules. The managers opted to hold their vehicles till accommodative policies were put in place. In January 2014, within the same city, most of the fourteen-passenger vans were converted to eleven-passenger. Prior to conversion, the 14 passenger vans were very flexible to carry big luggage, which the 11 passenger vehicle could not. Therefore, the conversion had worsened the situation by disregarding passengers with big luggage. It was then that the owner if the city track company concealed the idea and opportunity to start a company to curb on this. The city track intends to travel up to 500 kilometers per day per vehicle ferrying up to 6000 passengers. To accommodate the needs of this large population, the company plans to buy four new 40-passenger buses. These buses will all be fixed with safety belts as well as the back reclinable seats purposely for safety and comfort. 2.3 Startup summary City Track Company will begin its operation with a set of machinery and expenses which may be called fixed assets. The list is shown below. Office furniture Computers Cash receipt books Tool and first aid kits Fire security installation Insurance covers The owner will begin with two buses as he settles down other expenses. Past Performance   2015 2016 2017 Sales $0 $0 $0 Gross Margin $0 $0 $0 Gross Margin % 0.00% 0.00% 0.00% Operating Expenses $750,000 $900,000 $1,200,000 Balance Sheet       Current Assets       Cash $200,000 $300,000 $500,000 Other Current Assets $0 $0 $0 Total Current Assets $200,000 $300,000 $500,000 Long-term Assets Long-term Assets $600,000 $600,000 $1,300,000 Accumulated Depreciation $80,000 $160,000 $240,000 Total Long-term Assets $520,000 $440,000 $1,060,000 Total Assets $720,000 $740,000 $1,560,000 Current Liabilities Accounts Payable $100,000 $140,000 $160,000 Current Borrowing $0 $0 $0 Other Current Liabilities (interest free) $0 $0 $0 Total Current Liabilities $100,000 $140,000 $160,000 Long-term Liabilities $200,000 $100,000 $80,000 Total Liabilities $300,000 $240,000 $960,000 Paid-in Capital $0 $0 $0 Retained Earnings $330,000 $384,000 $455,000 Earnings $90,000 $116,000 $145,000 Total Capital $420,000 $500,000 $600,000 Total Capital and Liabilities $520,000 $640,000 $760,000 Other Inputs 0 0 0 Payment Days 0 0 0 Other basic requirements at startup are as follows Prediction of Profit and loss Year 1 Expenditure   Overheads (electricity, water, communication, other bills and fuel) $26,000.00 Salaries $496,000.00 Legal $4,000.00 Insurance $3,000.00 Maintenance and repairs $8,000.00 Other transport products and products   Broadband and landline $10,000.00 Website development and management $9,000.00 Marketing and other expenses $17,000.00 Non-current assets in form of cash and money in bank $730,000.00 Total requirements $1,303,000.00 3.0 Product/services City track Bus Company will offer a variety of services to the customers ranging from transportation to service delivery. Service delivery will include and not limited to transportation of customers’ parcels to their destinations. However, door-to-door delivery may not be provided unless on special appeal. The buses, which ferry passengers far away from the city, will have to book for their tickets online if they cannot access the office. On the other hand, the company will offer telephone numbers so that it is convenient to all the people. Customers making online booking or making phone calls for any service will be required to provide full credentials to reduce burglary and mischief. However, only limited buses will operate on long distance while more on within-the-city service. Frequent users of the buses will be issued with loyalty cards so that at the end of the month, they redeem their loyalty points. These passengers will be ferried at a subsidized price. However, the company will assure its customers full safety and integrity in service. Other services the company provides are: providing subsidized transport cost on public holidays, offering free transport to disabled, young and the aged. This will ensure fairness to all travelers. Issuing counterfoil receipts will facilitate accountability for all the buses. The table below show the bus charges ($) between various bus stations and city. 12 13 10 14 13 9 16 14 11 7 Children, aged and the disabled are absolutely free! 4.0 Market analysis and summary Several factors are anticipated to affect the day-to-day operation of buses. Some of these factors increase the demand of the city bus track services within and outside the town. The city has several bus stops for dropping and collecting passengers. It is also concentrated with various offices and industries with several employees. Even though other buses are in operational, most of them are inefficient during their service delivery. The city has been growing steadily for the last three years. Most People have migrated to the city for employment and business deals. Interestingly, the city market has grown to be an international market attracting several investors. Parking fee within the town has of late reduced by half within the central business district. This is very favorable for city Track Company. 4.1 Market The target market for city Track Company may be divided into local passengers, who are the daily travelers and the long distance travelers. Daily travelers form the largest part of the market share of the company as they need the services daily. Since they form a larger part of the market, the company will adopt solid strategies to penetrate and remain competitive in the market. 4.2 Market segmentation City Track Company will focus on two main customer groups. These are: Employees, business people and ordinary citizens Hire groups The pie chart below shows the market segmentation for the two groups. Market Analysis     2015 2016 2017 2018 2019   Potential Customers Growth CAGR Employees, business people and ordinary citizens 15% 180,000 207,000 238,050 273,760 314,820 15.00% Hire groups 10% 100,000 110,000 121,000 133,100 146,410 10.00% Total 13.29% 280,000 317,000 359,050 406,860 461,230 13.29% 4.3 SWOT analysis Strengths Weaknesses Very Low bus fares New in the market and faces stiff competition New buses Few buses at its time of inception Professional management team Integrity of the drivers and turn-boys may be compromised Flexible for both long and short distant journeys Offer discount fares to special groups Special groups may be opportunistic to the offer Delivery of parcels Opportunities Threats Growing market in the city Substituting competitors Growing technology services awareness and loyalty Rigidity of the customers to use the buses Many employees without personal vehicles Jealousy of the competitors Withdrawal of other companies from the operation Congestion as the city grows 4.4 Marketing The city track company will target all the city residents and other travelers who wish to hire the buses. In order to reach at these potential customers, the company will make use of the local newspapers, journals and advertisement over the radio and television. However, travelers will be issued with business card at the bus stops. This will be done to minimize the production costs. However, these are not enough: buses will be fixed with stickers on the sides as a way of marketing the company services. Above all, a company website will be designed to attract the internet users. It has been realized that most of the city dwellers have internet mobile phones where they can access internet services any time. Facebook and twitter accounts shall be fully utilized. In fact, most people have these accounts, and they access almost daily. Company profile will be created there with all the services enlisted. The company will upload pictures and movies to these sites for customers to witness the company’s services. 4.5 Competition Stiff competition will be expected from the current City Hooper bus company which is currently one of the dominant companies within the city. However, this is not the only company. There are other small companies. These are: Best ways safaris- this is one of the companies that has been in operation for several years. They operate within the city only. It has a fleet of vehicles, but most have been grounded due to poor management and maintenance. They charge very high prices with poor services in turn. City Hopper- this is one of the companies that serve most of customers in the city. It has put in place bus stations at strategic places within the outskirts of the town. However, the number of buses operating are very few. In most cases, it takes the opportunity by escalating the fares especially at rush hours and rainy season. This company would have done so well if it had reasonable prices at peak time. Financially stable people end up using them alone leaving the others. Modern bus- this in one of the companies also that offers competitive services to its customers. It has embraced all the modern facilities with fully integrated internet systems fixed on them. It is mainly a classical bus that ferries only a class of people. Most ordinary people cannot afford these buses due to notoriously high prices. 4.6 Sales strategy For the company to maintain high integrity and with its customers, it will provide competitive prices to its customers. This includes slightly reducing the bus fares as compared with its competitors. This will attract many customers to use the buses. This will give the company upper hand upon other companies. Offering the hire services for the company vehicles will also boost the sales. At the moment, none of the companies allow their buses for hire for unknown reasons. In rare cases do you see city buses being hired for transportation outside the town. 5.0 Strategy and implementation summary The company has put in place a stable customer support both within the city and bus stations. Some office sites have been identified in key areas like uplands, Fig Towers and park yard. This is in response with the high demand of the transport service in the city and the need for extra buses to meet the customer needs. To facilitate high company sales, the buses will pick and deliver passengers at the bus stops in all the stations within the city. For best services, customers will be assured full safety especially those operating late hours. 5.1 Sales forecast The figure below is city Track Company’s sales forecast for three years. Sales Forecast   2015 2016 2017 Sales       Bus Tickets $5,500,000 $5,950,000 $6,500,000 Other $0 $0 $0 Total Sales $5,500,000 $5,950,000 $6,500,000 Direct Cost of Sales 2015 2016 2017 Bus Tickets $670,000 $730,000 $780,000 Other $0 $0 $0 Subtotal Direct Cost of Sales $670,000 $730,000 $780,000 5.2 Summary of website development Website is one of the best sources of advertisement and information of product and services. It provides all the details of the company, products and services as well as the management level. The city track bus company will design a website that provides all these information. The company website will be designed by E-World Design Company, which is the best web designer in town. This design company has experienced professionals who make very nice designs at affordable prices. 6.0 Management The general manager of City Track Company is an experienced, ambitious young man who has managed fleet of vehicles for his family. This managerial skills have enabled him to enrich his knowledge on how to start and maintain business. He has been exposed directly to big organization that hold key positions in the city. He holds a bachelor degree in business management from Michigan University. He also holds a master’s degree in strategic management from the same university. During his studies at the university, he encountered several challenges especially when he attended his classes. He rarely got a vehicle to ferry him to the campus. If he got during the day, he had to pay dearly. It was even worst when he returned late in the evening. It was then the he approached his father to start a bus company where he was given capital. He partnered with other people who were likeminded. Therefore, he becomes the general manager of the company. To facilitate effective management of the company, city track will have other staff members. These are the assistant manager, drivers, mechanics, cashier/accountant, secretary and the turn boys/conductors. All employees are under the general manager. This hierarchy is shown below. City track organization structure. The different fill colours show the level of responsibility. 6.1 Team The bus company will commence with the following employees: An assistant manager 4 drivers 4 turn boys A mechanic A secretary An accountant Training of employees will be done on work ethics and responsibilities including the use of company facilities and resources. This will ensure that the company operates at commendable standards. Further on-job training will be conducted in accordance to the law. This will ensure the company meets the international standards. The table below shows the remuneration for the personnel for one year. List of personnel and their salaries in the year 1 Personnel Quantity Monthly salaries No. of months Total Assistant manager 1 $900.00 11 $9,900.00 Drivers 1 $6,500.00 11 $71,500.00 Turn boys 1 $400.00 6 $2,400.00 Mechanic 1 $500.00 12 $6,000.00 secretary 1 $300.00 12 $3,600.00 Accountant 1 $450.00 12 $5,400.00 Total payroll   $9,050.00   $98,800.00 Personnel and salaries for the first 3 years Personnel Year one Year Two Year Three Assistant manager $9,900.00 $10,900.00 $12,900.00 Drivers $71,500.00 $74,500.00 $79,000.00 Turn boys $2,400.00 $2,700.00 $3,400.00 Mechanic $6,000.00 $7,000.00 $8,000.00 secretary $3,600.00 $4,600.00 $5,600.00 Accountant $5,400.00 $5,900.00 $6,400.00 Total Personnel 12 15 18 Total payroll $98,800.00 $105,600.00 $115,300.00 6.2 Management summary Assistant manager will assist the manager in the operations. He will foresee the operations in absence of the manager. He will also work on delegated responsibilities. Above all, he will ensure smooth operation of the other workers. In some occasions, he will assign duties to the other workers. Drivers and the touts will be in charge of the buses while the accountant will issue and receive receipts and money collected from the bus operations. The mechanic will ensure the maintenance and service of the company vehicles. The secretary will maintain company records. 7.0 Financial plan The following financial plan belongs to city track Bus Company 7.1 Break even analysis The table and chart below show the break even analysis for city Track Company Break-even Analysis Annual Revenue Break-even $4,939,320 Assumptions: Average Percent Variable Cost 15% Estimated Annual Fixed Cost $433,764 Pro Forma Profit and Loss   2015 2016 2017 Sales $5,500,000 $5,950,000 $6,500,000 Direct Cost of Sales $670,000 $730,000 $780,000 Other Production Expenses $0 $0 $0 Total Cost of Sales $670,000 $730,000 $780,000 Gross Margin $4,830,000 $5,220,000 $5,720,000 Gross Margin % 87.82% 87.73% 88.00% Expenses       Payroll $98,800.00 $105,600.00 $115,300.00 Sales and Marketing and Other Expenses $240,000 $270,000 $300,000 Depreciation $185,640 $185,640 $185,640 Leased Equipment $0 $0 $0 Utilities $0 $0 $0 Insurance $120,000 $120,000 $120,000 Rent $480,000 $480,000 $480,000 Payroll Taxes $432,000 $453,000 $477,000 Other $0 $0 $0 Total Operating Expenses $1,556,440 $1,614,240 $1,677,940 Profit Before Interest and Taxes $3,273,560 $3,605,760 $4,042,060 EBITDA $67,800 $87,700 $116,300 Interest Expense $70,900 $66,800 $74,000 Taxes Incurred $126,440 $187,370 $271,010 Net Profit $3,076,220 $3,351,590 $3,697,050 Net Profit/Sales 55.93% 56.33% 56.88% 7.2 Projected Cash Flow The following chart and table are the projected cash flow for three years. Pro Forma Cash Flow   2015 2016 2017 Cash Received       Cash from Operations       Cash Sales $5,500,000 $5,950,000 $6,500,000 Subtotal Cash from Operations $5,500,000 $5,950,000 $6,500,000 Additional Cash Received       Sales Tax, VAT, HST/GST Received $0 $0 $0 New Current Borrowing $0 $0 $0 New Other Liabilities (interest-free) $240,000 $240,000 $240,000 New Long-term Liabilities $0 $24,000 $24,000 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 $5,740,000 $6,190,000 $6,740,000 Expenditures 2015 2016 2017 Expenditures from Operations       Cash Spending $2,880,000 $3,020,000 $3,180,000 Bill Payments $2,112,530 $2,304,340 $2,485,990 Subtotal Spent on Operations $4,992,530 $5,324,340 $5,665,990 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 $16,800 $16,800 $16,800 Purchase Other Current Assets $24,000 $24,000 $24,000 Purchase Long-term Assets $240,000 $240,000 $240,000 Dividends $0 $0 $0 Subtotal Cash Spent $5,273,330 $5,605,140 $5,946,790 Net Cash Flow $226,670 $344,860 $553,210 Cash Balance $599,470 $1,057,120 $1,723,130 7.3 Projected Balance Sheet The table below shows the company’s projected balance sheet for three years. Pro Forma Balance Sheet   2015 2016 2017 Assets Current Assets       Cash $599,470 $1,057,120 $1,723,130 Other Current Assets $240,000 $480,000 $720,000 Total Current Assets $839,470 $1,537,120 $2,443,130 Long-term Assets       Long-term Assets $1,540,000 $1,780,000 $2,020,000 Accumulated Depreciation $425,640 $611,280 $796,920 Total Long-term Assets $1,114,360 $1,168,720 $1,223,080 Total Assets $1,953,830 $2,705,840 $3,666,210 Liabilities and Capital 2015 2016 2017 Current Liabilities       Accounts Payable $186,800 $189,630 $205,640 Current Borrowing $0 $0 $0 Other Current Liabilities $240,000 $480,000 $720,000 Subtotal Current Liabilities $426,800 $669,630 $925,640 Long-term Liabilities $63,200 $70,400 $77,600 Total Liabilities $490,000 $740,030 $1,003,240 Paid-in Capital $0 $0 $0 Retained Earnings $600,000 $895,020 $1,332,210 Earnings $295,020 $437,190 $632,350 Total Capital $895,020 $1,332,210 $1,964,560 Total Liabilities and Capital $1,953,830 $2,705,840 $3,666,210 Net Worth $895,020 $1,332,210 $1,964,560 7.4 Business ratios Below are the business ratios for subsequent years. These ratios will be based on the Local Passenger Transportation and Standard Industrial Classification. Ratio Analysis           2015 2016 2017 Industry Profile Sales Growth 87.66% 8.28% 9.44% 4.70% Percent of Total Assets         Other Current Assets 11.29% 15.75% 19.84% 47.00% Total Current Assets 42.97% 56.81% 66.64% 64.90% Long-term Assets 58.03% 44.19% 35.34% 37.10% Total Assets 100.00% 100.00% 100.00% 100.00% Current Liabilities 22.84% 25.75% 24.25% 30.00% Long-term Liabilities 34.35% 25.02% 22.17% 27.20% Total Liabilities 55.19% 51.77% 44.41% 55.20% Net Worth 46.81% 50.23% 54.59% 44.80% Percent of Sales         Sales 100.00% 100.00% 100.00% 100.00% Gross Margin 87.72% 87.63% 88.00% 79.20% Selling, General & Administrative Expenses 83.45% 80.48% 79.27% 56.40% Advertising Expenses 1.19% 1.74% 1.04% 0.80% Profit Before Interest and Taxes 8.35% 13.62% 16.04% 2.80% Main Ratios         Current 1.87 2.4 2.69 1.92 Quick 1.95 2.4 2.68 1.71 Total Debt to Total Assets 58.19% 53.77% 47.41% 57.20% Pre-tax Return on Net Worth 47.09% 45.80% 46.88% 3.65% Pre-tax Return on Assets 22.55% 24.18% 25.04% 8.90% Additional Ratios 2015 2016 2017   Net Profit Margin 5.56% 7.15% 9.83% 0 Return on Equity 32.96% 32.82% 32.19% 0 Activity Ratios       0 Accounts Payable Turnover 11.65 12.27 12.07 0 Payment Days 28 29 30 0 Total Asset Turnover 2.82 2.12 1.67 0 Debt Ratios       0 Debt to Net Worth 1.08 1.13 0.97 0 Current Liabilities to Liabilities 0.4 0.5 0.57 0 Liquidity Ratios       0 Net Working Capital $4,126,600 $8,674,900 $15,174,900 0 Interest Coverage 6.84 11.35 14.21 0 Additional Ratios       0 Assets to Sales 0.46 0.55 0.66 0 Current Debt/Total Assets 23% 27% 21% 0 Acid Test 1.87 2.4 2.62 0 Sales/Net Worth 6.25 4.57 3.61 0 Dividend Payout 0 0 0 0 Appendix   Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sales                         Bus tickets $400,000 $400,000 $450,000 $450,000 $500,000 $500,000 $500,000 $400,000 $500,000 $400,000 $500,000 $500,000 Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Sales $400,000 $400,000 $450,000 $450,000 $500,000 $500,000 $500,000 $400,000 $500,000 $400,000 $500,000 $500,000 Direct Cost of Sales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Bus tickets $0 $500,000 $600,000 $600,000 $700,000 $700,000 $700,000 $600,000 $600,000 $500,000 $600,000 $600,000 Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Direct Cost of Sales $0 $500,000 $600,000 $600,000 $700,000 $700,000 $700,000 $600,000 $600,000 $500,000 $600,000 $600,000   Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Assistant Manager $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 Accountant & Secretary $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 Drivers and Touts $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 Mechanics $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 Total People 12 12 12 12 12 12 12 12 12 12 12 12 Total Payroll $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 General assumptions Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Plan Month 1 2 3 4 5 6 7 8 9 10 11 12 Current Interest Rate 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% Long-term Interest Rate 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% Tax Rate 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% Other 0 0 0 0 0 0 0 0 0 0 0 0 Pro Forma Profit and Loss     Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sales   $400,000 $400,000 $450,000 $450,000 $500,000 $500,000 $500,000 $400,000 $500,000 $400,000 $500,000 $500,000 Direct Cost of Sales   $0 $50,000 $60,000 $60,000 $70,000 $70,000 $70,000 $60,000 $60,000 $50,000 $60,000 $60,000 Other Production Expenses   $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Cost of Sales   $0 $50,000 $60,000 $60,000 $70,000 $70,000 $70,000 $60,000 $60,000 $50,000 $60,000 $60,000 Gross Margin   $400,000 $350,000 $390,000 $390,000 $430,000 $430,000 $430,000 $340,000 $440,000 $350,000 $440,000 $440,000 Gross Margin %   100.00% 87.50% 86.67% 86.67% 86.00% 86.00% 86.00% 85.00% 88.00% 87.50% 88.00% 88.00% Expenses                           Payroll   $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 Sales and Marketing and Other Expenses   $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 Depreciation   $15,470 $15,470 $15,470 $15,470 $15,470 $15,470 $15,470 $15,470 $15,470 $15,470 $15,470 $15,470 Leased Equipment   $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Utilities   $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Insurance   $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 Rent   $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 Payroll Taxes 15% $14,700 $14,700 $14,700 $14,700 $14,700 $14,700 $14,700 $14,700 $14,700 $14,700 $14,700 $14,700 Other   $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Operating Expenses   $162,170 $162,170 $162,170 $162,170 $162,170 $162,170 $162,170 $162,170 $162,170 $162,170 $162,170 $162,170 Profit Before Interest and Taxes   $237,830 $237,830 $287,830 $287,830 $337,830 $337,830 $337,830 $237,830 $337,830 $237,830 $337,830 $337,830 EBITDA   $5,400 $4,000 $4,400 $4,400 $8,400 $8,400 $8,400 $8,900 $9,400 $400 $9,400 $9,400 Interest Expense   $6,550 $6,430 $6,320 $6,200 $6,080 $5,970 $5,850 $5,730 $5,620 $5,500 $538 $5,270 Taxes Incurred   $9,590 $5,357 $6,660 $6,700 $18,730 $18,770 $18,800 $8,160 $21,870 $5,020 $9,940 $8,980 Net Profit   $221,690 $226,043 $274,850 $274,930 $313,020 $313,090 $313,180 $223,940 $310,340 $227,310 $327,352 $323,580 Net Profit/Sales   55.42% 56.51% 61.08% 61.10% 62.60% 62.62% 62.64% 55.99% 62.07% 56.83% 65.47% 64.72% Pro Forma Balance Sheet     Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Assets Starting Balances                         Current Assets                           Cash $50,000 $46,193 $46,462 $48,283 $47,985 $52,622 $55,141 $57,667 $50,325 $56,468 $49,843 $56,679 $59,947 Other Current Assets $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 $22,000 $24,000 Total Current Assets $500,000 $481,930 $504,620 $542,830 $559,850 $626,220 $671,410 $716,670 $663,250 $744,680 $698,430 $786,790 $839,470 Long-term Assets                           Long-term Assets $1,300,000 $1,320,000 $1,340,000 $1,360,000 $1,380,000 $1,400,000 $1,420,000 $1,440,000 $1,460,000 $1,480,000 $1,500,000 $1,520,000 $1,540,000 Accumulated Depreciation $240,000 $255,470 $270,940 $286,410 $301,880 $317,350 $332,820 $348,290 $363,760 $379,230 $394,700 $410,170 $425,640 Total Long-term Assets $1,060,000 $1,064,530 $1,069,060 $1,073,590 $1,078,120 $1,082,650 $1,087,180 $1,091,710 $1,096,240 $1,100,770 $1,105,300 $1,109,830 $1,114,360 Total Assets $1,560,000 $1,546,460 $1,573,680 $1,616,420 $1,637,970 $1,708,870 $1,758,590 $1,808,380 $1,759,490 $1,845,450 $1,803,730 $1,896,620 $195,383 Liabilities and Capital   Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Current Liabilities                           Accounts Payable $160,000 $118,070 $151,830 $173,010 $172,940 $194,120 $194,040 $193,970 $158,120 $187,040 $151,200 $186,880 $186,800 Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Other Current Liabilities $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 $22,000 $24,000 Subtotal Current Liabilities $160,000 $120,070 $155,830 $179,010 $180,940 $204,120 $206,040 $207,970 $174,120 $205,040 $171,200 $208,880 $210,800 Long-term Liabilities $800,000 $786,000 $772,000 $758,000 $744,000 $730,000 $716,000 $702,000 $688,000 $674,000 $660,000 $646,000 $632,000 Total Liabilities $960,000 $906,070 $927,830 $937,010 $924,940 $934,120 $922,040 $909,970 $862,120 $879,040 $831,200 $854,880 $842,800 Paid-in Capital $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Retained Earnings $455,000 $600,000 $600,000 $600,000 $600,000 $600,000 $600,000 $600,000 $600,000 $600,000 $600,000 $600,000 $60,000 Earnings $145,000 $123,900 $98,500 $154,000 $110,300 $847,500 $128,540 $172,420 $153,370 $174,410 $192,530 $243,740 $29,502 Total Capital $600,000 $723,900 $698,500 $754,000 $710,300 $1,447,500 $728,540 $772,420 $753,370 $774,410 $792,530 $843,740 $89,502 Total Liabilities and Capital $1,506,070 $1,651,730 $1,635,510 $1,678,940 $1,644,420 $2,369,540 $1,638,510 $1,634,540 $1,632,410 $1,605,610 $1,647,410 $1,686,540 $89,502 Net Worth $600,000 $723,900 $698,500 $754,000 $710,300 $1,447,500 $728,540 $772,420 $753,370 $774,410 $792,530 $843,740 $89,502 References Abrams, R. & Abrams, R. M., 2003. The Successful Business Plan: Secrets & Strategies. revised ed. London: The Planning Shop. Read More