|
Property Management - Development
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
Download PDF Version
View an Adobe PDF version of this sample plan.
 | ||||
| 7.0 Financial Plan | [back to top] |
We want to finance growth mainly through cash flow. We recognize that this means we will have to grow more slowly than we might like.
The most important factor in our case is collection days. We can't push our clients hard on collection days. Therefore, we need to develop a permanent system of receivables financing, using one of the established financial companies in that business.
| 7.1 Important Assumptions | [back to top] |
MSN's plan depends on the assumptions that are made in the following table. These are annual and monthly assumptions that show the consistent growth of the company. Since we operate on a monthly collection basis, we are assuming that the majority of the collections will be timely and in full.
Some of the underlying assumptions are:
- We assume a healthy growth trend in the local real estate market, along with a continued strong local economy.
- We assume that we stay in line with the continuing advances in technology and housing.
| General Assumptions | |||
| 1999 | 2000 | 2001 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 8.00% | 8.00% | 8.00% |
| Long-term Interest Rate | 6.00% | 6.00% | 6.00% |
| Tax Rate | 25.42% | 25.00% | 25.42% |
| Other | 0 | 0 | 0 |
| 7.2 Key Financial Indicators | [back to top] |
The following chart indicates our key financial indicators for the first three years. MSN foresees growth in both unit rentals as well as increasing the percentage of growth margin.
MSN's cash flow depends on the monthly collection from the renters. We allow for a 25-day grace period, after which unpaid accounts will inhibit our cash flow. However, since we collect on a monthly basis, cash flow should maintain at a steady level.
Benchmarks
Click to Enlarge
| 7.3 Break-even Analysis | [back to top] |
The following table and chart summarize our break-even analysis. With fixed costs of $12,000 per month and a variable per-unit cost of $375, we will need to rent out 29 units at $820 per unit, to cover our monthly costs. MSN's first housing complex will consist of 40 units. According to the calculations, we will break-even within our first year of operation.
The break-even assumes that all units will be occupied and that all rent will be paid in a timely manner. This assumption is probably unrealistic; therefore our initial break-even per unit will most likely be higher.
Break-even Analysis
Click to Enlarge
| Break-even Analysis: | |
| Monthly Units Break-even | 29 |
| Monthly Revenue Break-even | $24,139 |
| Assumptions: | |
| Average Per-Unit Revenue | $820.00 |
| Average Per-Unit Variable Cost | $375.00 |
| Estimated Monthly Fixed Cost | $13,100 |
| 7.4 Projected Profit and Loss | [back to top] |
The projected profit and loss for MSN is shown on the following table. Sales are increasing from about $440,000 in 1999 to over $600,000 after the third year. We show a net profit in 2000. We are projecting a gross margin of about 48% for the first year. This is an aggressive projection that will help our efforts to keep total cost of sales low while increasing gross margin. We will also have very low marketing costs, due to the public exposure to the units, and good word of mouth around the university area.
The planned projections are included in the attached Profit and Loss Table.
| Pro Forma Profit and Loss | |||
| 1999 | 2000 | 2001 | |
| Sales | $437,380 | $538,498 | $612,756 |
| Direct Cost of Sales | $230,009 | $255,740 | $273,136 |
| Other | $0 | $0 | $0 |
| ------------ | ------------ | ------------ | |
| Total Cost of Sales | $230,009 | $255,740 | $273,136 |
| Gross Margin | $207,371 | $282,758 | $339,620 |
| Gross Margin % | 47.41% | 52.51% | 55.42% |
| Expenses: | |||
| Payroll | $90,600 | $105,000 | $128,000 |
| Sales and Marketing and Other Expenses | $13,800 | $14,000 | $17,700 |
| Depreciation | $12,221 | $13,000 | $19,333 |
| Leased Equipment | $2,400 | $2,600 | $2,800 |
| Utilities | $7,200 | $8,200 | $8,500 |
| Insurance | $14,400 | $15,500 | $1,600 |
| Maintenance | $0 | $12,000 | $15,000 |
| Rent | $3,000 | $4,000 | $5,000 |
| Payroll Taxes | $13,590 | $15,750 | $19,200 |
| Other | $0 | $0 | $0 |
| ------------ | ------------ | ------------ | |
| Total Operating Expenses | $157,211 | $190,050 | $217,133 |
| Profit Before Interest and Taxes | $50,160 | $92,708 | $122,487 |
| Interest Expense | $66,014 | $83,294 | $100,922 |
| Taxes Incurred | $0 | $2,354 | $5,481 |
| Net Profit | ($15,854) | $7,061 | $16,084 |
| Net Profit/Sales | -3.62% | 1.31% | 2.62% |
| 7.5 Projected Cash Flow | [back to top] |
The following cash flow projections are a key part of MSN's early 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 annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendices.
Cash
Click to Enlarge
| Pro Forma Cash Flow | |||
| 1999 | 2000 | 2001 | |
| Cash Received | |||
| Cash from Operations: | |||
| Cash Sales | $437,380 | $538,498 | $612,756 |
| Cash from Receivables | $0 | $0 | $0 |
| Subtotal Cash from Operations | $437,380 | $538,498 | $612,756 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $8,400 | $15,000 | $12,000 |
| New Other Liabilities (interest-free) | $1,802 | $2,500 | $2,000 |
| New Long-term Liabilities | $4,500 | $513,000 | $2,500 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $5,862 | $6,000 | $4,000 |
| Subtotal Cash Received | $457,944 | $1,074,998 | $633,256 |
| Expenditures | 1999 | 2000 | 2001 |
| Expenditures from Operations: | |||
| Cash Spending | $28,677 | $33,047 | $34,991 |
| Payment of Accounts Payable | $386,726 | $480,894 | $540,349 |
| Subtotal Spent on Operations | $415,403 | $513,941 | $575,340 |
| 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 | $650 | $0 | $0 |
| Long-term Liabilities Principal Repayment | ($12,127) | ($14,470) | ($21,646) |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $1,080,000 | $570,000 | $0 |
| Dividends | $0 | $0 | $0 |
| Subtotal Cash Spent | $1,483,926 | $1,069,471 | $553,694 |
| Net Cash Flow | ($1,025,982) | $5,527 | $79,562 |
| Cash Balance | $85,348 | $90,875 | $170,436 |
| 7.6 Projected Balance Sheet | [back to top] |
The balance sheet in the following table shows varying but managed net worth, and a sufficiently healthy financial position. The monthly estimates are included in the appendices and are a good indicator of MSN's annual value.
| Pro Forma Balance Sheet | |||
| Assets | |||
| Current Assets | 1999 | 2000 | 2001 |
| Cash | $85,348 | $90,875 | $170,436 |
| Other Current Assets | $12,000 | $12,000 | $12,000 |
| Total Current Assets | $97,348 | $102,875 | $182,436 |
| Long-term Assets | |||
| Long-term Assets | $1,200,000 | $1,770,000 | $1,770,000 |
| Accumulated Depreciation | $12,221 | $25,221 | $44,554 |
| Total Long-term Assets | $1,187,779 | $1,744,779 | $1,725,446 |
| Total Assets | $1,285,127 | $1,847,654 | $1,907,882 |
| Liabilities and Capital | |||
| Current Liabilities | 1999 | 2000 | 2001 |
| Accounts Payable | $29,501 | $33,997 | $35,996 |
| Current Borrowing | $13,400 | $28,400 | $40,400 |
| Other Current Liabilities | $1,152 | $3,652 | $5,652 |
| Subtotal Current Liabilities | $44,053 | $66,049 | $82,048 |
| Long-term Liabilities | $1,096,627 | $1,624,097 | $1,648,242 |
| Total Liabilities | $1,140,679 | $1,690,145 | $1,730,290 |
| Paid-in Capital | $251,862 | $257,862 | $261,862 |
| Retained Earnings | ($91,560) | ($107,414) | ($100,354) |
| Earnings | ($15,854) | $7,061 | $16,084 |
| Total Capital | $144,448 | $157,508 | $177,592 |
| Total Liabilities and Capital | $1,285,127 | $1,847,654 | $1,907,882 |
| Net Worth | $144,448 | $157,508 | $177,592 |
| 7.7 Business Ratios | [back to top] |
The business ratios for the years of this plan are shown below. They point out MSN's liquidity, debt, performance and some other important aspects. We expect to generate acceptable ratios for our profitability and return. Industry profile ratios based on the Standard Industrial Classification (SIC) Index code 6531, Real Estate Agents and Managers, are shown for comparison.
| Ratio Analysis | ||||
| 1999 | 2000 | 2001 | Industry Profile | |
| Sales Growth | 0.00% | 23.12% | 13.79% | 5.63% |
| Percent of Total Assets | ||||
| Accounts Receivable | 0.00% | 0.00% | 0.00% | 7.77% |
| Inventory | 0.00% | 0.00% | 0.00% | 0.72% |
| Other Current Assets | 0.93% | 0.65% | 0.63% | 56.54% |
| Total Current Assets | 7.57% | 5.57% | 9.56% | 65.03% |
| Long-term Assets | 92.43% | 94.43% | 90.44% | 34.97% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 3.43% | 3.57% | 4.30% | 14.92% |
| Long-term Liabilities | 85.33% | 87.90% | 86.39% | 26.55% |
| Total Liabilities | 88.76% | 91.48% | 90.69% | 41.47% |
| Net Worth | 11.24% | 8.52% | 9.31% | 58.53% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 47.41% | 52.51% | 55.42% | 100.00% |
| Selling, General & Administrative Expenses | 51.04% | 51.20% | 52.79% | 61.47% |
| Advertising Expenses | 0.00% | 0.00% | 0.00% | 2.83% |
| Profit Before Interest and Taxes | 11.47% | 17.22% | 19.99% | 9.09% |
| Main Ratios | ||||
| Current | 2.21 | 1.56 | 2.22 | 1.93 |
| Quick | 2.21 | 1.56 | 2.22 | 1.10 |
| Total Debt to Total Assets | 88.76% | 91.48% | 90.69% | 4.56% |
| Pre-tax Return on Net Worth | -10.98% | 5.98% | 12.14% | 55.36% |
| Pre-tax Return on Assets | -1.23% | 0.51% | 1.13% | 10.22% |
| Additional Ratios | 1999 | 2000 | 2001 | |
| Net Profit Margin | -3.62% | 1.31% | 2.62% | n.a |
| Return on Equity | -10.98% | 4.48% | 9.06% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 0.00 | 0.00 | 0.00 | n.a |
| Collection Days | 0 | 0 | 0 | n.a |
| Inventory Turnover | 0.00 | 0.00 | 0.00 | n.a |
| Accounts Payable Turnover | 13.98 | 14.28 | 15.07 | n.a |
| Payment Days | 17 | 24 | 24 | n.a |
| Total Asset Turnover | 0.34 | 0.29 | 0.32 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 7.90 | 10.73 | 9.74 | n.a |
| Current Liab. to Liab. | 0.04 | 0.04 | 0.05 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $53,295 | $36,826 | $100,388 | n.a |
| Interest Coverage | 0.76 | 1.11 | 1.21 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 2.94 | 3.43 | 3.11 | n.a |
| Current Debt/Total Assets | 3% | 4% | 4% | n.a |
| Acid Test | 2.21 | 1.56 | 2.22 | n.a |
| Sales/Net Worth | 3.03 | 3.42 | 3.45 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
|
Copyright ©2012 Palo Alto Software Inc. All rights reserved.
Go to Bplans.com