Edit This Plan

Make it your own. Use Business Plan Pro to edit this plan or any of 500+ other sample plans.

Benefits Administration Business Plan

Employee Benefits Administrators, LLC

This business plan was created with Business Plan Pro software, the fastest way to prepare a complete business plan.

With Business Plan Pro, you can open this plan (or any of the 500 others included in the product) and quickly customise it to match your business. Or you can use the software's step-by-step wisard to easily create a custom business plan from scratch. Learn more »

Financial Plan

7.0 Financial Plan

Initially, the two principals of Employee Benefits Administrators invested into the business. This investment was used for the majority of start-up expenses. These purchases include IBM laptop computers, software licensing fees of Great Plains Software, computer accessories and a docking station, small business education, seminars on current employee benefit trends, memberships in organisations, rent and security deposit of an office, and various other start-up costs. The current investment totals over £20,000 and continues now that the office is open. Expenses continue to be paid by the principals, including rent, utilities, and other working capital.

Considering the forecasts predict an overall loss for the first year of business, EBA will follow avenues for obtaining a small business loan of £50,000, preferably one guaranteed by the Small Business Association.

EBA is forecasting sales based on their group benefits knowledge, marketing research, and their strategic alliances with brokers and other professional associations.

7.1 Important Assumptions

The financials are based on the following assumptions.

Sales Assumptions:

Projected sales figures are based on the four different services Employee Benefits Administrators provides. Each service has a different "AVERAGE" client.

1. Level One is COBRA and HIPAA administration. This client has an average of 100 employees, however, the average number of employees for which a client will use this service is five.
2. Level Two is Flexible Spending Account administration. This client also has an average of 100 employees. The average number of employees enrolling in a Flexible Spending Account is estimated at ten.
3. Level Three is Basic Benefits administration, including a call centre. This client also has an average of 100 employees, and it is likely that all 100 employees will enroll in one of the company's group benefit plans. The average number of employees enrolling in the Basic Benefits administration is 100.
4. Level Four is All-Inclusive of the first three services. This client also has an average of 100 employees, and it is likely that all 100 employees will enroll in one of the company's group benefit plans.

The sales forecast is based on obtaining:

• One client a month for COBRA and HIPAA administration. COBRA and HIPAA are federal mandates and must be provided to employees after their termination. This is not seasonal.
• One Flexible Spending Account client for the first year, adding three new clients each calendar year (one per quarter, and two at the beginning of each year since that is when Employee Benefits Administrators can obtain clients who are renewing their flex plans.)
• One Basic client added each quarter (100 employees), and two clients in January of each year for those companies whose plan year is the calendar year.
• One All-Inclusive client added each quarter (100 employees), and two clients in January of each year for those companies whose plan year is the calendar year.
• A signed service contract

Cost of Sales:

As EBA attains clients, the only direct cost of goods sold is the data storage fee paid to the Application Service Provider. This is a per employee per month charge and is related to Level One, Level Three and Level Four. (It is not related to Level Two, Flexible Spending Accounts, as it is not necessary to use the same information system to store the data.) This can be tracked in an ad-hoc database created by EBA. It is also forecasted that EBA will purchase a software package designed to track both Flexible Spending and COBRA. The cost of this software in 2000 was approximately £14,000 and is not scheduled to be purchased until the second calendar quarter of 2002. After this software is purchased, COGS will also decline for those clients who are contracted for COBRA and HIPAA administration only.

As stated above, the depreciable expense will be for the computer system/network. The non-depreciable start up expenses will include:

• Advertising
• Fax machine with limited copier capabilities
• Printer
• Professional association membership dues
• Office furniture
• Business insurance
• Internet access
• Software licensing fees and training
• Phone, phone system, and installation
• Postage machine lease
• Professional fees
• Rent with security deposit
• Industry related seminars and meetings
• Software
• Web page design and hosting

Financial Assumptions Definitions and Explanations:

Accounts Payable: EBA will be applying for a working capital loan of which the status is not yet determined.

Average Client:

• Level One is COBRA and HIPAA administration. This client has an average of 100 employees, however, the average number of employees for which a client will use this service is five.
• Level Two is Flexible Spending Account administration. This client also has an average of 100 employees. The average number of employees enrolling in a Flexible Spending Account is estimated at ten.
• Level Three is Basic Benefits administration, including a call centre. This client also has an average of 100 employees, and it is likely that all 100 employees will enroll in one of the company's group benefit plans. The average number of employees enrolling in the Basic Benefits administration is 100.
• Level Four is All-Inclusive of the first three services. This client also has an average of 100 employees, and it is likely that all 100 employees will enroll in one of the company's group benefit plans.

Depreciation: EBA is using straight line depreciation for their computer and other equipment.

Insurance Expense: Liability (Errors and Omissions) Insurance has been purchased and the cost is £100 per month.

Legal and Accounting Fees: Employee Benefits Administrators has retained legal counsel. The hourly rate for counsel is £250, and hourly legal assistance is £60. Accounting will be handled by a local Accountant yet to be determined.

Loan Expenses: The amounts noted in the financial statements are based on a £50,000 loan for five years at 9% interest.

Payroll Expense: Besides the two principals, the following additions to staff are planned:

• Jan 2002, Hire, Part-time Administrative Assistant at £13,000
• July 2002, Hire, Part-time Marketer at £25,000
• Oct 2002, Hire, Benefits Administrator at £25,000
• Mar 2003, Hire, Part-time Receptionist at £13,000
• July 2003, Hire, Benefits Administrator at £25,000

Rent Expense: Employee Benefits Administrators is leasing a 500 square foot office in Morgantown, PA. The monthly rental is £600.

Salaries Expense: Each of the two principals of Employee Benefits Administrators will receive a yearly salary of £30,000.

Start-up Fee: A one time fee for transfer of employee data into the Human Resources Information System. Each COBRA/HIPAA client will pay £500; each Flexible Spending Account client will pay £500; each Basic Benefits and All-Inclusive client will pay £2,000.

Taxes: EBA is an LLC and as an entity is not taxed. However there is a payroll tax burden to include the employer's portion of Social Security and Medicare as well as state and federal unemployment.

Utilities Expense: The monthly electric expense is projected to be £200. The monthly phone expense is projected to be £200.

General Assumptions

General Assumptions
	FY 2002	FY 2003	FY 2004
Plan Month	1	2	3
Current Interest Rate	9.00%	9.00%	9.00%
Long-term Interest Rate	8.00%	8.00%	8.00%
Tax Rate	25.42%	25.00%	25.42%
Sales on Credit %	100.00%	100.00%	100.00%
Other	0	0	0

7.2 Key Financial Indicators

The following chart represents key financial indicators. The factors are Sales, Gross, Operating Expense, and Accounts Receivable.

Benchmarks



7.3 Break-even Analysis

The break-even point is based on other estimates and the projections contained in the financials. Based on an average fixed monthly cost of £8,500, the break-even point is 773 units, based on an average charge of £12 per unit with a variable of £1. It should be noted that based in the fixed monthly cost is the cost of goods sold which, of course, increases with the number of units sold.

Break-even Analysis



Break-even Analysis

Break-even Analysis:
Monthly Units Break-even	773
Monthly Revenue Break-even	£9,273
Assumptions:
Average Per-Unit Revenue	£12.00
Average Per-Unit Variable Cost	£1.00
Estimated Monthly Fixed Cost	£8,500

7.4 Projected Profit and Loss

The projected Profit and Loss for the first three years is shown on the following table.

For the first year in business, EBA is expecting a loss of just under £9,000. Please note that this first twelve months shows no sales in the first three months as the company is becoming established. Year two shows a net profit of £74,000 and year three is a net profit of £166,000. These projections are conservative considering this is a service business and can greatly depend on the economy and the level of benefits employers can afford.

Profit and Loss

Pro Forma Profit and Loss
	FY 2002	FY 2003	FY 2004
Sales	£92,940	£291,103	£485,683
Direct Cost of Sales	£12,540	£47,603	£82,583
Production Payroll	£0	£0	£0
Other	£0	£0	£0
	------------	------------	------------
Total Cost of Sales	£12,540	£47,603	£82,583
Gross Margin	£80,400	£243,500	£403,100
Gross Margin %	86.51%	83.65%	83.00%
Operating Expenses:
Sales and Marketing Expenses:
Sales and Marketing Payroll	£0	£18,750	£25,000
Advertising/Promotion	£1,200	£1,200	£1,200
Travel	£0	£0	£0
Miscellaneous	£600	£600	£600
	------------	------------	------------
Total Sales and Marketing Expenses	£1,800	£20,550	£26,800
Sales and Marketing %	1.94%	7.06%	5.52%
General and Administrative Expenses:
General and Administrative Payroll	£63,252	£79,250	£120,250
Sales and Marketing and Other Expenses	£0	£0	£0
Depreciation	£1,020	£1,020	£1,020
Dues and Subscriptions	£1,800	£1,800	£1,800
Professional Fees	£600	£600	£600
Rent	£7,200	£7,200	£7,200
Software Purchases	£0	£14,000	£0
Insurance	£1,200	£1,200	£1,200
Telephone and Internet Access	£2,400	£2,400	£2,400
Utilities	£2,400	£2,400	£2,400
Miscellaneous	£2,400	£2,400	£2,400
Payroll Taxes (National Insurance)	£5,060	£7,840	£11,620
Other General and Administrative Expenses	£0	£0	£0
	------------	------------	------------
Total General and Administrative Expenses	£87,332	£120,110	£150,890
General and Administrative %	93.97%	41.26%	31.07%
Other Expenses:
Other Payroll	£0	£0	£0
Contract/Consultants	£0	£0	£0
	------------	------------	------------
Total Other Expenses	£0	£0	£0
Other %	0.00%	0.00%	0.00%
	------------	------------	------------
Total Operating Expenses	£89,132	£140,660	£177,690
Profit Before Interest and Taxes	(£8,732)	£102,840	£225,410
Interest Expense	£3,897	£3,947	£3,947
Taxes Incurred	£0	£24,723	£56,289
Net Profit	(£12,629)	£74,170	£165,175
Net Profit/Sales	-13.59%	25.48%	34.01%

7.5 Projected Cash Flow

Cash flow projections are demonstrated by the following table and charts.

Operating capital is needed and shown as a £50,000 working capital loan. Cash flow is negative until the loan is received and projected in June.

Cash



Cash Flow

Pro Forma Cash Flow
	FY 2002	FY 2003	FY 2004
Cash Received
Cash from Operations:
Cash Sales	£0	£0	£0
Cash from Receivables	£73,074	£248,746	£444,092
Subtotal Cash from Operations	£73,074	£248,746	£444,092
Additional Cash Received
VAT, VAT, HST/GST Received	£0	£0	£0
New Current Borrowing	£50,000	£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	£123,074	£248,746	£444,092
Expenditures	FY 2002	FY 2003	FY 2004
Expenditures from Operations:
Cash Spending	£3,624	£11,007	£16,169
Payment of Accounts Payable	£97,146	£197,205	£297,934
Subtotal Spent on Operations	£100,770	£208,212	£314,104
Additional Cash Spent
VAT, VAT, HST/GST Paid Out	£0	£0	£0
Principal Repayment of Current Borrowing	£6,150	£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	£106,920	£208,212	£314,104
Net Cash Flow	£16,155	£40,534	£129,988
Cash Balance	£27,155	£67,689	£197,677

7.6 Projected Balance Sheet

The projected balance sheet follows.

Balance Sheet

Pro Forma Balance Sheet
Assets
Current Assets	FY 2002	FY 2003	FY 2004
Cash	£27,155	£67,689	£197,677
Accounts Receivable	£19,866	£62,222	£103,813
Other Current Assets	£0	£0	£0
Total Current Assets	£47,020	£129,911	£301,490
Fixed assets
Fixed assets	£0	£0	£0
Accumulated Depreciation	£1,020	£2,040	£3,060
Total Fixed assets	(£1,020)	(£2,040)	(£3,060)
Total Assets	£46,000	£127,871	£298,430
Liabilities and Capital
Current Liabilities	FY 2002	FY 2003	FY 2004
Accounts Payable	£3,779	£11,480	£16,863
Current Borrowing	£43,850	£43,850	£43,850
Other Current Liabilities	£0	£0	£0
Subtotal Current Liabilities	£47,629	£55,330	£60,713
Fixed liabilities	£0	£0	£0
Total Liabilities	£47,629	£55,330	£60,713
Paid-in Capital	£31,428	£31,428	£31,428
Retained Earnings	(£20,428)	(£33,057)	£41,113
Earnings	(£12,629)	£74,170	£165,175
Total Capital	(£1,629)	£72,541	£237,716
Total Liabilities and Capital	£46,000	£127,871	£298,430
Net Worth	(£1,629)	£72,541	£237,716

7.7 Business Ratios

Table of business ratios follows. A comparison of Industry standard ratios is provided based on Standard Industrial Classification code, 8741, Management Services.

Ratios

Ratio Analysis
	FY 2002	FY 2003	FY 2004	Industry Profile
Sales Growth	0.00%	213.22%	66.84%	8.50%
Percent of Total Assets
Accounts Receivable	43.19%	48.66%	34.79%	25.80%
Stock	0.00%	0.00%	0.00%	4.00%
Other Current Assets	0.00%	0.00%	0.00%	46.60%
Total Current Assets	102.22%	101.60%	101.03%	76.40%
Fixed assets	-2.22%	-1.60%	-1.03%	23.60%
Total Assets	100.00%	100.00%	100.00%	100.00%
Current Liabilities	103.54%	43.27%	20.34%	44.00%
Fixed liabilities	0.00%	0.00%	0.00%	17.30%
Total Liabilities	103.54%	43.27%	20.34%	61.30%
Net Worth	-3.54%	56.73%	79.66%	38.70%
Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	86.51%	83.65%	83.00%	0.00%
Selling, General & Administrative Expenses	100.10%	58.17%	48.80%	82.30%
Advertising Expenses	1.29%	0.41%	0.25%	1.30%
Profit Before Interest and Taxes	-9.40%	35.33%	46.41%	2.40%
Main Ratios
Current	0.99	2.35	4.97	1.56
Quick	0.99	2.35	4.97	1.21
Total Debt to Total Assets	103.54%	43.27%	20.34%	61.30%
Pre-tax Return on Net Worth	775.34%	136.33%	93.16%	3.90%
Pre-tax Return on Assets	-27.45%	77.34%	74.21%	10.20%
Additional Ratios	FY 2002	FY 2003	FY 2004
Net Profit Margin	-13.59%	25.48%	34.01%	n.a
Return on Equity	0.00%	102.25%	69.48%	n.a
Activity Ratios
Accounts Receivable Turnover	4.68	4.68	4.68	n.a
Collection Days	43	51	62	n.a
Stock Turnover	0.00	0.00	0.00	n.a
Accounts Payable Turnover	26.71	17.85	17.99	n.a
Payment Days	9	14	17	n.a
Total Asset Turnover	2.02	2.28	1.63	n.a
Debt Ratios
Debt to Net Worth	0.00	0.76	0.26	n.a
Current Liab. to Liab.	1.00	1.00	1.00	n.a
Liquidity Ratios
Net Working Capital	(£609)	£74,581	£240,776	n.a
Interest Coverage	-2.24	26.06	57.12	n.a
Additional Ratios
Assets to Sales	0.49	0.44	0.61	n.a
Current Debt/Total Assets	104%	43%	20%	n.a
Acid Test	0.57	1.22	3.26	n.a
Sales/Net Worth	0.00	4.01	2.04	n.a
Dividend Payout	0.00	0.00	0.00	n.a