EcoAquatics
Financial Plan
The main financial problem is working capital for the first few months before business clients pay, and I support that by not paying myself. I don’t foresee the kind of client relationships that will cause long-term problems getting paid, but I also have to be able to support their occasional delays because this won’t be important to them.
7.1 Important Assumptions
The following table outlines the general assumptions for EcoAquatics.
| 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 | 30.00% | 30.00% | 30.00% |
| Other | 0 | 0 | 0 |
7.2 Break-even Analysis
The break-even is based on a very realistic assessment of the present hobbyist nature of this business.
| Break-even Analysis | |
| Monthly Revenue Break-even | $201 |
| Assumptions: | |
| Average Percent Variable Cost | 2% |
| Estimated Monthly Fixed Cost | $197 |
7.3 Projected Profit and Loss
As the Profit and Loss table shows, we have a small hobbyist business here with very few expenses. The website hosting is an estimate, because it may actually be free.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $2,400 | $7,200 | $9,000 |
| Direct Cost of Sales | $48 | $144 | $180 |
| Other Costs of Sales | $0 | $0 | $0 |
| Total Cost of Sales | $48 | $144 | $180 |
| Gross Margin | $2,352 | $7,056 | $8,820 |
| Gross Margin % | 98.00% | 98.00% | 98.00% |
| Expenses | |||
| Payroll | $1,800 | $5,400 | $6,750 |
| Sales and Marketing and Other Expenses | $200 | $300 | $300 |
| Depreciation | $0 | $0 | $0 |
| Website hosting | $360 | $400 | $500 |
| Utilities | $0 | $0 | $0 |
| Insurance | $0 | $0 | $0 |
| Payroll Taxes | $0 | $0 | $0 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $2,360 | $6,100 | $7,550 |
| Profit Before Interest and Taxes | ($8) | $956 | $1,270 |
| EBITDA | ($8) | $956 | $1,270 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $0 | $287 | $381 |
| Net Profit | ($8) | $669 | $889 |
| Net Profit/Sales | -0.33% | 9.29% | 9.88% |
7.4 Projected Cash Flow
The cash flow involves a loan from founders, which is essentially equivalent to not paying myself for the first two months plus a smaller loan from parents, to support the working capital requirements. Otherwise I would show a negative balance.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $0 | $0 | $0 |
| Cash from Receivables | $2,007 | $6,413 | $8,705 |
| Subtotal Cash from Operations | $2,007 | $6,413 | $8,705 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $500 | $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 | $2,507 | $6,413 | $8,705 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $1,800 | $5,400 | $6,750 |
| Bill Payments | $478 | $1,167 | $1,342 |
| Subtotal Spent on Operations | $2,278 | $6,567 | $8,092 |
| 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 | $500 |
| 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 | $2,278 | $6,567 | $8,592 |
| Net Cash Flow | $228 | ($154) | $113 |
| Cash Balance | $228 | $74 | $187 |
7.5 Projected Balance Sheet
The balance sheet seems acceptable for a low-key hobbyist business. The loans carried are mainly the first two months of sacrificed compensation to myself.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $228 | $74 | $187 |
| Accounts Receivable | $393 | $1,180 | $1,475 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $622 | $1,254 | $1,662 |
| Long-term Assets | |||
| Long-term Assets | $0 | $0 | $0 |
| Accumulated Depreciation | $0 | $0 | $0 |
| Total Long-term Assets | $0 | $0 | $0 |
| Total Assets | $622 | $1,254 | $1,662 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $130 | $93 | $112 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $500 | $500 | $0 |
| Subtotal Current Liabilities | $630 | $593 | $112 |
| Long-term Liabilities | $0 | $0 | $0 |
| Total Liabilities | $630 | $593 | $112 |
| Paid-in Capital | $50 | $50 | $50 |
| Retained Earnings | ($50) | ($58) | $611 |
| Earnings | ($8) | $669 | $889 |
| Total Capital | ($8) | $661 | $1,550 |
| Total Liabilities and Capital | $622 | $1,254 | $1,662 |
| Net Worth | ($8) | $661 | $1,550 |
7.6 Business Ratios
My guess is that what I am doing is not going to be equivalent to the kinds of real businesses whose numbers were contained in the financial databases shown in the rightmost column here. Furthermore, I am not intending to seek bank loan or investment.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 200.00% | 25.00% | 8.79% |
| Percent of Total Assets | ||||
| Accounts Receivable | 63.28% | 94.09% | 88.75% | 28.12% |
| Other Current Assets | 0.00% | 0.00% | 0.00% | 44.18% |
| Total Current Assets | 100.00% | 100.00% | 100.00% | 76.27% |
| Long-term Assets | 0.00% | 0.00% | 0.00% | 23.73% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 101.29% | 47.28% | 6.73% | 38.61% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 13.60% |
| Total Liabilities | 101.29% | 47.28% | 6.73% | 52.21% |
| Net Worth | -1.29% | 52.72% | 93.27% | 47.79% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 98.00% | 98.00% | 98.00% | 100.00% |
| Selling, General & Administrative Expenses | 98.33% | 88.71% | 88.12% | 82.68% |
| Advertising Expenses | 0.00% | 0.00% | 0.00% | 1.66% |
| Profit Before Interest and Taxes | -0.33% | 13.28% | 14.11% | 1.37% |
| Main Ratios | ||||
| Current | 0.99 | 2.12 | 14.86 | 1.59 |
| Quick | 0.99 | 2.12 | 14.86 | 1.22 |
| Total Debt to Total Assets | 101.29% | 47.28% | 6.73% | 60.22% |
| Pre-tax Return on Net Worth | 100.00% | 144.59% | 81.92% | 3.09% |
| Pre-tax Return on Assets | -1.29% | 76.23% | 76.41% | 7.76% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | -0.33% | 9.29% | 9.88% | n.a |
| Return on Equity | 0.00% | 101.21% | 57.35% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 6.10 | 6.10 | 6.10 | n.a |
| Collection Days | 57 | 40 | 54 | n.a |
| Accounts Payable Turnover | 4.69 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 36 | 27 | n.a |
| Total Asset Turnover | 3.86 | 5.74 | 5.41 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.00 | 0.90 | 0.07 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | ($8) | $661 | $1,550 | n.a |
| Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.26 | 0.17 | 0.18 | n.a |
| Current Debt/Total Assets | 101% | 47% | 7% | n.a |
| Acid Test | 0.36 | 0.13 | 1.67 | n.a |
| Sales/Net Worth | 0.00 | 10.89 | 5.81 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
By 
