Projected Profit and Loss

The gross margin for a service-based business is a reflection of the efficiency at which those services are offered. In the initial year of operations, we have targeted a gross margin of 70%. This is not an unreasonable figure for a consulting business. For the second and third year of operations, we have targeted gross margins of 75% and 80% to indicate overall improved efficiency at service delivery. Net Profit/Sales is determined to be 7.8% the first year, increasing to 9.8% the second year and 11.0% the third year. In order to fulfill the requirements of the mission statement and simultaneously reduce start up costs, we have made arrangements to purchase software on quarterly repayment options:

Staad-Pro Core is a structural engineering design and drafting suite offered through Research Engineers Ltd. This program fulfills the need to carry out three-dimensional analysis and design requirements and is a key feature of the business plan. This program supports Canadian codes and standards. We have contacted the authorized Canadian reseller (Detech Corporation Ltd.) and will made arrangements to purchase this tool on four payments of $1,550 over the first year of operations.

Errors and Omissions Insurance is required for all consultants working on behalf of the Territorial Governments. Through Falconair Insurance, we have received a quotation of $1,200/year for this coverage. The first year's premium payments are included in the start-up costs, with subsequent years indicated at the same annual premium.

Website hosting fees are included as quarterly payments to Internic.com, the Web host. As part of this service, we will have at our disposal file transfer protocol capabilities. This feature permits us to place electronic media on the Internet for our clients and strategic allies.

Pro Forma Profit and Loss	FY 2000	FY 2001	FY 2002
Sales	$117,680	$129,600	$138,000
Direct Cost of Sales	$35,304	$32,400	$27,600
Other	$0	$0	$0
Total Cost of Sales	$35,304	$32,400	$27,600
Gross Margin	$82,376	$97,200	$110,400
Gross Margin %	70.00%	75.00%	80.00%
Expenses:
Payroll	$0	$0	$0
Sales and Marketing and Other Expenses	$9,450	$9,750	$9,750
Depreciation	$1,800	$1,800	$1,800
WebSite Hosting Fees	$380	$380	$380
Telephone/Fax	$2,400	$2,400	$2,400
Software Purchases ( Staad-Pro Core)	$6,200	$300	$300
Utilities	$1,200	$1,200	$1,200
Errors and Omissions Insurance	$0	$1,200	$1,200
Rent	$0	$4,800	$4,800
Payroll Taxes	$7,500	$9,000	$10,500
Other	$0	$0	$0
Total Operating Expenses	$28,930	$30,830	$32,330
Profit Before Interest and Taxes	$53,446	$66,370	$78,070
Interest Expense	$179	$495	$830
Taxes Incurred	$8,319	$9,881	$12,552
Net Profit	$44,949	$55,994	$64,689
Net Profit/Sales	38.20%	43.21%	46.88%

Projected Cash Flow

Cash flow projections are critical to our success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month, and the other the monthly balance. The first few months are critical. It may be necessary to inject additional capital in this time-frame if the need arises. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendices.

Cash

Pro Forma Cash Flow	FY 2000	FY 2001	FY 2002
Cash Received Cash from Operations:
Cash Sales	$0	$0	$0
Cash from Receivables	$102,661	$128,079	$136,928
Subtotal Cash from Operations	$102,661	$128,079	$136,928
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	$3,300	$3,300	$3,400
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	$105,961	$131,379	$140,328

Expenditures	FY 2000	FY 2001	FY 2002
Expenditures from Operations:
Cash Spending	$5,673	$5,516	$5,112
Payment of Accounts Payable	$61,581	$66,393	$66,661
Subtotal Spent on Operations	$67,254	$71,908	$71,773
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	$0	$0	$0
Purchase Other Current Assets	$0	$0	$0
Purchase Long-term Assets	$0	$0	$0
Dividends	$0	$0	$0
Subtotal Cash Spent	$67,254	$71,908	$71,773
Net Cash Flow	$38,707	$59,471	$68,555
Cash Balance	$45,707	$105,178	$173,733

Date: 2016-01-14; view: 583

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