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Child Day Care Services
Business Plan
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1.0 Executive Summary
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2.0 Company Summary
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3.0 Services
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4.0 Market Analysis Summary
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5.0 Strategy and Implementation Summary
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6.0 Web Plan Summary
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7.0 Management Summary
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8.0 Financial Plan
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| 8.0 Financial Plan | [back to top] |
- Kid's Community College® will finance growth mainly through cash flow. It is recognized that this means the school will have to grow gradually into the planned four campuses.
- The most important factor in our case is enrollment. We must stay focused on our enrollment plan and maintain budgeted enrollment levels.
- Adequate start-up capital is assumed, along with an SBA 5-year guaranteed loan.
| 8.1 Important Assumptions | [back to top] |
The Kid's Community College® financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions. The monthly assumptions are included in the appendices. From the beginning, it is recognized that total enrollment is critical, which is a factor that must be influenced immediately. Interest rates, tax rates, and personnel burden are based on conservative assumptions.
The most important underlying assumption is that there is a strong need for the business in the Lake St. Charles community.
| General Assumptions | |||
| 2003 | 2004 | 2005 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 7.00% | 7.00% | 7.00% |
| Long-term Interest Rate | 7.00% | 7.00% | 7.00% |
| Tax Rate | 30.00% | 30.00% | 30.00% |
| Other | 0 | 0 | 0 |
| 8.2 Key Financial Indicators | [back to top] |
The following benchmark chart indicates the key financial indicators for the first three years. We foresee a gradual growth in sales (enrollment) and operating expenses into the second and third year.
It is projected that the raw gross margin will remain stable for the first three years since expenses are relatively indirect in the service based course work industry. Operating expenses increase gradually as enrollment increases.
Enrollment is very important. We must maintain an average weekly enrollment of 34 students for fixed cost coverage.
Benchmarks
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| 8.3 Break-even Analysis | [back to top] |
For the break-even analysis, start-up monthly running costs assumptions are shown in the the table below, including a three person payroll, rent, utilities and an estimation of other running costs. Payroll, at median market averages, was presented previously in the Personnel table.
Based on these assumptions, the chart below shows the enrollment of students per month needed to break-even. This represents about 46% of our allowable monthly enrollment based on state and county course work guidelines.
| Break-even Analysis | |
| Monthly Units Break-even | 34 |
| Monthly Revenue Break-even | $12,350 |
| Assumptions: | |
| Average Per-Unit Revenue | $366.51 |
| Average Per-Unit Variable Cost | $9.67 |
| Estimated Monthly Fixed Cost | $12,024 |
Break-even Analysis
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| 8.4 Projected Profit and Loss | [back to top] |
Our projected profit and loss is shown on the following table, with sales increasing from the first year to the third.
In years two and three, we are projecting full enrollment regarding cost of sales and gross margin. The investment return in these years supports the goal of opening another campus at the end of the second year and begin the franchise offering by the end of the third year. Profit from the additional campuses and income from franchising are not included in this business plan.
The detailed monthly projections are included in the appendices.
| Pro Forma Profit and Loss | |||
| 2003 | 2004 | 2005 | |
| Sales | $138,540 | $276,820 | $310,859 |
| Direct Cost of Sales | $3,656 | $7,733 | $8,682 |
| Hidden Row | $0 | $0 | $0 |
| ------------ | ------------ | ------------ | |
| Total Cost of Sales | $3,656 | $7,733 | $8,682 |
| Gross Margin | $134,884 | $269,087 | $302,177 |
| Gross Margin % | 97.36% | 97.21% | 97.21% |
| Expenses | |||
| Payroll | $57,037 | $108,111 | $113,516 |
| Sales and Marketing and Other Expenses | $2,200 | $3,500 | $3,500 |
| Depreciation | $0 | $0 | $0 |
| Rent | $58,800 | $59,500 | $60,000 |
| Utilities | $10,500 | $10,500 | $10,500 |
| Insurance | $7,200 | $7,200 | $7,200 |
| Payroll Taxes | $8,556 | $16,217 | $17,027 |
| Other | $0 | $0 | $0 |
| ------------ | ------------ | ------------ | |
| Total Operating Expenses | $144,293 | $205,027 | $211,744 |
| Profit Before Interest and Taxes | ($9,409) | $64,059 | $90,433 |
| EBITDA | ($9,409) | $64,059 | $90,433 |
| Interest Expense | $3,819 | $3,144 | $2,440 |
| Taxes Incurred | $0 | $18,275 | $26,398 |
| Net Profit | ($13,228) | $42,641 | $61,595 |
| Net Profit/Sales | -9.55% | 15.40% | 19.81% |
Profit Monthly
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Profit Yearly
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Gross Margin Monthly
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Gross Margin Yearly
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| 8.5 Projected Cash Flow | [back to top] |
The following cash flow projections show the annual amounts only, significant for the first year mainly in the amounts projected in cash sales and payables.
Cash flow projections are critical to the success of Kid's Community College®. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month and the other the monthly cash balance. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendices.
Cash
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| Pro Forma Cash Flow | |||
| 2003 | 2004 | 2005 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $138,540 | $276,820 | $310,859 |
| Subtotal Cash from Operations | $138,540 | $276,820 | $310,859 |
| 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 | $138,540 | $276,820 | $310,859 |
| Expenditures | 2003 | 2004 | 2005 |
| Expenditures from Operations | |||
| Cash Spending | $57,037 | $108,111 | $113,516 |
| Bill Payments | $86,777 | $123,660 | $134,952 |
| Subtotal Spent on Operations | $143,814 | $231,771 | $248,468 |
| 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 | $10,057 | $10,057 | $10,057 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| Subtotal Cash Spent | $153,871 | $241,828 | $258,525 |
| Net Cash Flow | ($15,331) | $34,992 | $52,334 |
| Cash Balance | $50,219 | $85,211 | $137,545 |
| 8.6 Projected Balance Sheet | [back to top] |
The balance sheet in the following table shows managed but sufficient growth of net worth, and a gradually sufficient healthy financial position. The monthly estimates are included in the appendices.
| Pro Forma Balance Sheet | |||
| 2003 | 2004 | 2005 | |
| Assets | |||
| Current Assets | |||
| Cash | $50,219 | $85,211 | $137,545 |
| Other Current Assets | $14,130 | $14,130 | $14,130 |
| Total Current Assets | $64,349 | $99,341 | $151,675 |
| Long-term Assets | |||
| Long-term Assets | $0 | $0 | $0 |
| Accumulated Depreciation | $0 | $0 | $0 |
| Total Long-term Assets | $0 | $0 | $0 |
| Total Assets | $64,349 | $99,341 | $151,675 |
| Liabilities and Capital | 2003 | 2004 | 2005 |
| Current Liabilities | |||
| Accounts Payable | $7,954 | $10,362 | $11,157 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $7,954 | $10,362 | $11,157 |
| Long-term Liabilities | $49,943 | $39,886 | $29,829 |
| Total Liabilities | $57,897 | $50,248 | $40,986 |
| Paid-in Capital | $59,130 | $59,130 | $59,130 |
| Retained Earnings | ($39,450) | ($52,678) | ($10,037) |
| Earnings | ($13,228) | $42,641 | $61,595 |
| Total Capital | $6,452 | $49,093 | $110,688 |
| Total Liabilities and Capital | $64,349 | $99,341 | $151,675 |
| Net Worth | $6,452 | $49,093 | $110,688 |
| 8.7 Business Ratios | [back to top] |
The following table shows the projected businesses ratios for our industry: Child Day Care services, SIC code 8351. Kid's Community College® expects to maintain healthy ratios for profitability, risk, and return.
| Ratio Analysis | ||||
| 2003 | 2004 | 2005 | Industry Profile | |
| Sales Growth | 0.00% | 99.81% | 12.30% | 6.98% |
| Percent of Total Assets | ||||
| Other Current Assets | 21.96% | 14.22% | 9.32% | 30.21% |
| Total Current Assets | 100.00% | 100.00% | 100.00% | 60.28% |
| Long-term Assets | 0.00% | 0.00% | 0.00% | 39.72% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 12.36% | 10.43% | 7.36% | 27.78% |
| Long-term Liabilities | 77.61% | 40.15% | 19.67% | 24.23% |
| Total Liabilities | 89.97% | 50.58% | 27.02% | 52.01% |
| Net Worth | 10.03% | 49.42% | 72.98% | 47.99% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 97.36% | 97.21% | 97.21% | 100.00% |
| Selling, General & Administrative Expenses | 113.51% | 78.74% | 72.22% | 81.45% |
| Advertising Expenses | 0.00% | 0.00% | 0.00% | 0.88% |
| Profit Before Interest and Taxes | -6.79% | 23.14% | 29.09% | 1.52% |
| Main Ratios | ||||
| Current | 8.09 | 9.59 | 13.59 | 1.96 |
| Quick | 8.09 | 9.59 | 13.59 | 1.56 |
| Total Debt to Total Assets | 89.97% | 50.58% | 27.02% | 60.93% |
| Pre-tax Return on Net Worth | -205.01% | 124.08% | 79.50% | 2.47% |
| Pre-tax Return on Assets | -20.56% | 61.32% | 58.01% | 6.32% |
| Additional Ratios | 2003 | 2004 | 2005 | |
| Net Profit Margin | -9.55% | 15.40% | 19.81% | n.a |
| Return on Equity | -205.01% | 86.86% | 55.65% | n.a |
| Activity Ratios | ||||
| Accounts Payable Turnover | 11.91 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 27 | 29 | n.a |
| Total Asset Turnover | 2.15 | 2.79 | 2.05 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 8.97 | 1.02 | 0.37 | n.a |
| Current Liab. to Liab. | 0.14 | 0.21 | 0.27 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $56,396 | $88,979 | $140,517 | n.a |
| Interest Coverage | -2.46 | 20.37 | 37.06 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.46 | 0.36 | 0.49 | n.a |
| Current Debt/Total Assets | 12% | 10% | 7% | n.a |
| Acid Test | 8.09 | 9.59 | 13.59 | n.a |
| Sales/Net Worth | 21.47 | 5.64 | 2.81 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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