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Car Wash Business Plan

Soapy Rides Car Wash

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Financial Plan

The following plan outlines the financial development of Soapy Rides. The business will be initially financed by a personal investment by Mark Deshpande and will finance growth through cash flow. This will mean that the company will grow more slowly than it could, but it will ensure that Mark retains control over the direction of the company. In year three, it is hoped that the company will be able to open a second location. It is envisioned that an outside loan or equity funding will be sought at that time.

7.1 Important Assumptions

The financial projections for Soapy Rides are based on the following assumptions. These assumptions are thought to be quite conservative, as are the financial forecasts.

General Assumptions
FY 2002 FY 2003 FY 2004
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 25.42% 25.00% 25.42%
Other 0 0 0

7.2 Projected Cash Flow

The following Cash Flow table illustrates that if Soapy Rides meets projected sales, it will have positive cash flow after half a year of operations.

Pro Forma Cash Flow
FY 2002 FY 2003 FY 2004
Cash Received
Cash from Operations
Cash Sales £93,330 £132,038 £197,374
Cash from Receivables £13,097 £21,902 £32,470
Subtotal Cash from Operations £106,427 £153,940 £229,843
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 £106,427 £153,940 £229,843
Expenditures FY 2002 FY 2003 FY 2004
Expenditures from Operations
Cash Spending £61,680 £88,312 £113,174
Bill Payments £33,052 £46,837 £67,743
Subtotal Spent on Operations £94,732 £135,149 £180,917
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 £94,732 £135,149 £180,917
Net Cash Flow £11,695 £18,791 £48,927
Cash Balance £20,395 £39,186 £88,112

7.3 Break-even Analysis

The table and chart below show the monthly break-even analysis calculations for Soapy Rides.

Break-even Analysis
Monthly Units Break-even 423
Monthly Revenue Break-even £7,974
Assumptions:
Average Per-Unit Revenue £18.87
Average Per-Unit Variable Cost £0.79
Estimated Monthly Fixed Cost £7,641

7.4 Projected Profit and Loss

The following Profit and Loss table illustrates income and expenses monthly for the first year, and annually for the next two years.

Pro Forma Profit and Loss
FY 2002 FY 2003 FY 2004
Sales £109,800 £155,339 £232,204
Direct Cost of Sales £4,583 £6,994 £11,047
Other £0 £0 £0
Total Cost of Sales £4,583 £6,994 £11,047
Gross Margin £105,218 £148,345 £221,157
Gross Margin % 95.83% 95.50% 95.24%
Expenses
Payroll £61,680 £88,312 £113,174
Sales and Marketing and Other Expenses £2,600 £1,550 £1,700
Depreciation £2,070 £2,070 £2,070
Leased Equipment £0 £0 £0
Utilities £3,325 £3,500 £3,750
Insurance £1,800 £1,800 £1,800
Rent £4,800 £5,500 £6,000
Payroll Taxes £15,420 £22,078 £28,294
Other £0 £0 £0
Total Operating Expenses £91,695 £124,810 £156,788
Profit Before Interest and Taxes £13,523 £23,535 £64,370
EBITDA £15,592 £25,605 £66,440
Interest Expense £0 £0 £0
Taxes Incurred £3,204 £5,884 £16,361
Net Profit £10,318 £17,651 £48,009
Net Profit/Sales 9.40% 11.36% 20.68%

7.5 Projected Balance Sheet

Soapy Rides' balance sheet illustrates a healthy financial position for this new company. The monthly estimates are included in the appendix.

Pro Forma Balance Sheet
FY 2002 FY 2003 FY 2004
Assets
Current Assets
Cash £20,395 £39,186 £88,112
Accounts Receivable £3,373 £4,772 £7,133
Inventory £668 £1,019 £1,609
Other Current Assets £1,000 £1,000 £1,000
Total Current Assets £25,435 £45,976 £97,854
Long-term Assets
Long-term Assets £10,000 £10,000 £10,000
Accumulated Depreciation £2,070 £4,140 £6,210
Total Long-term Assets £7,930 £5,860 £3,790
Total Assets £33,365 £51,836 £101,644
Liabilities and Capital FY 2002 FY 2003 FY 2004
Current Liabilities
Accounts Payable £3,097 £3,917 £5,716
Current Borrowing £0 £0 £0
Other Current Liabilities £0 £0 £0
Subtotal Current Liabilities £3,097 £3,917 £5,716
Long-term Liabilities £0 £0 £0
Total Liabilities £3,097 £3,917 £5,716
Paid-in Capital £30,000 £30,000 £30,000
Retained Earnings (£10,050) £268 £17,919
Earnings £10,318 £17,651 £48,009
Total Capital £30,268 £47,919 £95,929
Total Liabilities and Capital £33,365 £51,836 £101,644
Net Worth £30,268 £47,919 £95,929

7.6 Business Ratios

The following table contains important ratios for the car wash industry, as determined by the Standard Industry Classification (SIC) code, 7542.

Ratio Analysis
FY 2002 FY 2003 FY 2004 Industry Profile
Sales Growth 0.00% 41.47% 49.48% 3.00%
Percent of Total Assets
Accounts Receivable 10.11% 9.21% 7.02% 8.70%
Inventory 2.00% 1.97% 1.58% 9.50%
Other Current Assets 3.00% 1.93% 0.98% 26.40%
Total Current Assets 76.23% 88.69% 96.27% 44.60%
Long-term Assets 23.77% 11.31% 3.73% 55.40%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 9.28% 7.56% 5.62% 29.30%
Long-term Liabilities 0.00% 0.00% 0.00% 27.80%
Total Liabilities 9.28% 7.56% 5.62% 57.10%
Net Worth 90.72% 92.44% 94.38% 42.90%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 95.83% 95.50% 95.24% 0.00%
Selling, General & Administrative Expenses 86.59% 84.13% 74.45% 68.20%
Advertising Expenses 0.91% 0.74% 0.56% 1.50%
Profit Before Interest and Taxes 12.32% 15.15% 27.72% 2.70%
Main Ratios
Current 8.21 11.74 17.12 1.53
Quick 8.00 11.48 16.84 0.88
Total Debt to Total Assets 9.28% 7.56% 5.62% 57.10%
Pre-tax Return on Net Worth 44.68% 49.11% 67.10% 3.40%
Pre-tax Return on Assets 40.53% 45.40% 63.33% 8.00%
Additional Ratios FY 2002 FY 2003 FY 2004
Net Profit Margin 9.40% 11.36% 20.68% n.a
Return on Equity 34.09% 36.83% 50.05% n.a
Activity Ratios
Accounts Receivable Turnover 4.88 4.88 4.88 n.a
Collection Days 57 64 62 n.a
Inventory Turnover 5.45 8.30 8.41 n.a
Accounts Payable Turnover 11.67 12.17 12.17 n.a
Payment Days 27 27 25 n.a
Total Asset Turnover 3.29 3.00 2.28 n.a
Debt Ratios
Debt to Net Worth 0.10 0.08 0.06 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital £22,338 £42,059 £92,139 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.30 0.33 0.44 n.a
Current Debt/Total Assets 9% 8% 6% n.a
Acid Test 6.91 10.26 15.59 n.a
Sales/Net Worth 3.63 3.24 2.42 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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General Assumptions
FY 2002 FY 2003 FY 2004
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 25.42% 25.00% 25.42%
Other 0 0 0
Pro Forma Cash Flow
FY 2002 FY 2003 FY 2004
Cash Received
Cash from Operations
Cash Sales £93,330 £132,038 £197,374
Cash from Receivables £13,097 £21,902 £32,470
Subtotal Cash from Operations £106,427 £153,940 £229,843
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 £106,427 £153,940 £229,843
Expenditures FY 2002 FY 2003 FY 2004
Expenditures from Operations
Cash Spending £61,680 £88,312 £113,174
Bill Payments £33,052 £46,837 £67,743
Subtotal Spent on Operations £94,732 £135,149 £180,917
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 £94,732 £135,149 £180,917
Net Cash Flow £11,695 £18,791 £48,927
Cash Balance £20,395 £39,186 £88,112
Break-even Analysis
Monthly Units Break-even 423
Monthly Revenue Break-even £7,974
Assumptions:
Average Per-Unit Revenue £18.87
Average Per-Unit Variable Cost £0.79
Estimated Monthly Fixed Cost £7,641
Pro Forma Profit and Loss
FY 2002 FY 2003 FY 2004
Sales £109,800 £155,339 £232,204
Direct Cost of Sales £4,583 £6,994 £11,047
Other £0 £0 £0
Total Cost of Sales £4,583 £6,994 £11,047
Gross Margin £105,218 £148,345 £221,157
Gross Margin % 95.83% 95.50% 95.24%
Expenses
Payroll £61,680 £88,312 £113,174
Sales and Marketing and Other Expenses £2,600 £1,550 £1,700
Depreciation £2,070 £2,070 £2,070
Leased Equipment £0 £0 £0
Utilities £3,325 £3,500 £3,750
Insurance £1,800 £1,800 £1,800
Rent £4,800 £5,500 £6,000
Payroll Taxes £15,420 £22,078 £28,294
Other £0 £0 £0
Total Operating Expenses £91,695 £124,810 £156,788
Profit Before Interest and Taxes £13,523 £23,535 £64,370
EBITDA £15,592 £25,605 £66,440
Interest Expense £0 £0 £0
Taxes Incurred £3,204 £5,884 £16,361
Net Profit £10,318 £17,651 £48,009
Net Profit/Sales 9.40% 11.36% 20.68%
Pro Forma Balance Sheet
FY 2002 FY 2003 FY 2004
Assets
Current Assets
Cash £20,395 £39,186 £88,112
Accounts Receivable £3,373 £4,772 £7,133
Inventory £668 £1,019 £1,609
Other Current Assets £1,000 £1,000 £1,000
Total Current Assets £25,435 £45,976 £97,854
Long-term Assets
Long-term Assets £10,000 £10,000 £10,000
Accumulated Depreciation £2,070 £4,140 £6,210
Total Long-term Assets £7,930 £5,860 £3,790
Total Assets £33,365 £51,836 £101,644
Liabilities and Capital FY 2002 FY 2003 FY 2004
Current Liabilities
Accounts Payable £3,097 £3,917 £5,716
Current Borrowing £0 £0 £0
Other Current Liabilities £0 £0 £0
Subtotal Current Liabilities £3,097 £3,917 £5,716
Long-term Liabilities £0 £0 £0
Total Liabilities £3,097 £3,917 £5,716
Paid-in Capital £30,000 £30,000 £30,000
Retained Earnings (£10,050) £268 £17,919
Earnings £10,318 £17,651 £48,009
Total Capital £30,268 £47,919 £95,929
Total Liabilities and Capital £33,365 £51,836 £101,644
Net Worth £30,268 £47,919 £95,929
Ratio Analysis
FY 2002 FY 2003 FY 2004 Industry Profile
Sales Growth 0.00% 41.47% 49.48% 3.00%
Percent of Total Assets
Accounts Receivable 10.11% 9.21% 7.02% 8.70%
Inventory 2.00% 1.97% 1.58% 9.50%
Other Current Assets 3.00% 1.93% 0.98% 26.40%
Total Current Assets 76.23% 88.69% 96.27% 44.60%
Long-term Assets 23.77% 11.31% 3.73% 55.40%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 9.28% 7.56% 5.62% 29.30%
Long-term Liabilities 0.00% 0.00% 0.00% 27.80%
Total Liabilities 9.28% 7.56% 5.62% 57.10%
Net Worth 90.72% 92.44% 94.38% 42.90%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 95.83% 95.50% 95.24% 0.00%
Selling, General & Administrative Expenses 86.59% 84.13% 74.45% 68.20%
Advertising Expenses 0.91% 0.74% 0.56% 1.50%
Profit Before Interest and Taxes 12.32% 15.15% 27.72% 2.70%
Main Ratios
Current 8.21 11.74 17.12 1.53
Quick 8.00 11.48 16.84 0.88
Total Debt to Total Assets 9.28% 7.56% 5.62% 57.10%
Pre-tax Return on Net Worth 44.68% 49.11% 67.10% 3.40%
Pre-tax Return on Assets 40.53% 45.40% 63.33% 8.00%
Additional Ratios FY 2002 FY 2003 FY 2004
Net Profit Margin 9.40% 11.36% 20.68% n.a
Return on Equity 34.09% 36.83% 50.05% n.a
Activity Ratios
Accounts Receivable Turnover 4.88 4.88 4.88 n.a
Collection Days 57 64 62 n.a
Inventory Turnover 5.45 8.30 8.41 n.a
Accounts Payable Turnover 11.67 12.17 12.17 n.a
Payment Days 27 27 25 n.a
Total Asset Turnover 3.29 3.00 2.28 n.a
Debt Ratios
Debt to Net Worth 0.10 0.08 0.06 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital £22,338 £42,059 £92,139 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.30 0.33 0.44 n.a
Current Debt/Total Assets 9% 8% 6% n.a
Acid Test