Real Estate Brokerage Business Plan

RJ Wagner & Associates Realty

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Financial Plan

7.0 Financial Plan

• We want to finance growth mainly through cash flow. We recognise that this means we will have to grow more slowly than we might like.
• The most important factor for R.J. Wagner & Associates Realty is the closing sales days. These dates will be determined ultimately by the seller and the buyer and a move out/move in schedule will be complied with. Immediately following the closing sale commission will be disbursed by the title company conducting the closing.

7.1 Important Assumptions

The 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, we recognise that collection days are critical, but not a factor we can influence easily. At least we are planning on the problem, and dealing with it. Interest rates, tax rates, and personnel burden are based on conservative assumptions.

Some of the more important underlying assumptions are:

• We assume a strong economy, without major recession.
• We assume that there are no unforeseen changes in the economy that would change our estimations.

General Assumptions

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%
Sales on Credit %	10.00%	10.00%	10.00%
Other	0	0	0

7.2 Break-even Analysis

The following table and chart will summarise our break-even analysis.

Most of our cost of fulfilment is actually the sales of the agents as well as the sales of the active broker.

We don't expect to reach break-even until a few months into the business operation.

Break-even Analysis

Break-even Analysis:
Monthly Units Break-even	3
Monthly Revenue Break-even	£3,658
Assumptions:
Average Per-Unit Revenue	£1,125.00
Average Per-Unit Variable Cost	£1.00
Estimated Monthly Fixed Cost	£3,655

Break-even Analysis



7.3 Projected Profit and Loss

Our projected profit and loss is shown on the following table.

As with the break-even, we are projecting very conservatively regarding cost of sales and gross margin. Initially, we will depend on our associates for most fulfilment, which is why costs should be lower than shown. We prefer to project conservatively so that we make sure we have enough cash.

We are spending less on marketing expenses due to our paid memberships with the associations. This broker has a published real estate book and organisational programmes placed in the Houston Association of Realtors and also the Dallas Association of Realtors. The associations advertise these marketing tools free to this broker.

The detailed monthly projections are included in the appendices.

Profit and Loss

Pro Forma Profit and Loss
	FY 2002	FY 2003	FY 2004
Sales	£135,394	£259,510	£459,510
Direct Cost of Sales	£19,970	£108,990	£228,840
Other	£0	£0	£0
	------------	------------	------------
Total Cost of Sales	£19,970	£108,990	£228,840
Gross Margin	£115,425	£150,520	£230,670
Gross Margin %	85.25%	58.00%	50.20%
Expenses:
Payroll	£0	£0	£0
Sales and Marketing and Other Expenses	£8,100	£1,000	£1,000
Depreciation	£1,270	£970	£970
Depreciation	£1,800	£1,950	£1,950
Depreciation	£15,600	£15,600	£15,600
Depreciation	£0	£0	£0
Office Supplies	£2,900	£3,200	£3,200
Business Software	£1,000	£1,000	£1,000
Leased Equipment	£3,000	£3,000	£3,000
Payroll Taxes (National Insurance)	£0	£0	£0
Other	£0	£0	£0
	------------	------------	------------
Total Operating Expenses	£33,670	£26,720	£26,720
Profit Before Interest and Taxes	£81,755	£123,800	£203,950
Interest Expense	£325	£831	£1,220
Taxes Incurred	£20,417	£30,742	£51,527
Net Profit	£61,013	£92,227	£151,203
Net Profit/Sales	45.06%	35.54%	32.91%

7.4 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 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
	FY 2002	FY 2003	FY 2004
Cash Received
Cash from Operations:
Cash Sales	£121,855	£233,559	£413,559
Cash from Receivables	£10,142	£22,836	£40,932
Subtotal Cash from Operations	£131,996	£256,395	£454,491
Additional Cash Received
VAT, VAT, HST/GST Received	£0	£0	£0
New Current Borrowing	£6,000	£4,620	£3,150
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	£137,996	£261,015	£457,641
Expenditures	FY 2002	FY 2003	FY 2004
Expenditures from Operations:
Cash Spending	£6,405	£15,131	£28,149
Payment of Accounts Payable	£68,450	£139,934	£262,408
Subtotal Spent on Operations	£74,855	£155,065	£290,557
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	£0	£0	£0
Purchase Other Current Assets	£0	£0	£0
Purchase Fixed assets	£0	£0	£0
Dividends	£0	£0	£0
Subtotal Cash Spent	£74,855	£155,065	£290,557
Net Cash Flow	£63,141	£105,950	£167,084
Cash Balance	£72,897	£178,847	£345,931

7.5 Projected Balance Sheet

The balance sheet in the following table shows managed but sufficient growth of net worth, and a sufficiently healthy financial position. The monthly estimates are included in the appendices.

Balance Sheet

Pro Forma Balance Sheet
Assets
Current Assets	FY 2002	FY 2003	FY 2004
Cash	£72,897	£178,847	£345,931
Accounts Receivable	£3,398	£6,513	£11,532
Other Current Assets	£20,000	£20,000	£20,000
Total Current Assets	£96,295	£205,360	£377,463
Fixed assets
Fixed assets	£7,000	£7,000	£7,000
Accumulated Depreciation	£1,270	£2,240	£3,210
Total Fixed assets	£5,730	£4,760	£3,790
Total Assets	£102,025	£210,120	£381,253
Liabilities and Capital
Current Liabilities	FY 2002	FY 2003	FY 2004
Accounts Payable	£8,256	£19,504	£36,284
Current Borrowing	£6,000	£10,620	£13,770
Other Current Liabilities	£0	£0	£0
Subtotal Current Liabilities	£14,256	£30,124	£50,054
Fixed liabilities	£0	£0	£0
Total Liabilities	£14,256	£30,124	£50,054
Paid-in Capital	£50,000	£50,000	£50,000
Retained Earnings	(£23,244)	£37,769	£129,996
Earnings	£61,013	£92,227	£151,203
Total Capital	£87,769	£179,996	£331,199
Total Liabilities and Capital	£102,025	£210,120	£381,253
Net Worth	£87,769	£179,996	£331,199