Child Day Care Services Business Plan

Kid's Community College

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Financial Plan

8.0 Financial Plan

• Kid's Community College® will finance growth mainly through cash flow. It is recognised 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

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 recognised 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

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

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



8.3 Break-even Analysis

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

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



8.4 Projected Profit and Loss

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.

Profit and Loss

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 (National Insurance)	£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



Profit Yearly



Gross Margin Monthly



Gross Margin Yearly



8.5 Projected Cash Flow

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



Cash Flow

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
VAT, VAT, HST/GST Received	£0	£0	£0
New Current Borrowing	£0	£0	£0
New Other Liabilities (interest-free)	£0	£0	£0
New Fixed liabilities	£0	£0	£0
Sales of Other Current Assets	£0	£0	£0
Sales of Fixed 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
VAT, VAT, HST/GST Paid Out	£0	£0	£0
Principal Repayment of Current Borrowing	£0	£0	£0
Other Liabilities Principal Repayment	£0	£0	£0
Fixed liabilities Principal Repayment	£10,057	£10,057	£10,057
Purchase Other Current Assets	£0	£0	£0
Purchase Fixed 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

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.

Balance Sheet

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
Fixed assets
Fixed assets	£0	£0	£0
Accumulated Depreciation	£0	£0	£0
Total Fixed 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
Fixed 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

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.

Ratios

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%
Fixed 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%
Fixed 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