Financial Assumptions - ACT Technical Services

Income Statement Items:

Revenue

The projected revenue is $142,446 in year 1, $170,674 in year 2 and $203,758 in year 3. This represents a 20% increase each year.

These sales projections are felt to be attainable. ACT Technical Services currently has a letter of intent from BCB Technologies in Michigan to provide training to clients such as GM, Ford, Daimler Chrysler, and Amercian Chowel Welding Industries. The value of the contract could reach as high as $100,000 US for each of the next 3 years.

A copy of the Letter of Intent from BCB Technologies can be found in appendix C.

Revenue is earned from the following activities:

  1. Direct Training
  2. Training (sub-contracting)
  3. Manual Development
  4. Other Revenue

When performing training, Floyd Duncani (owner) bills out his services at $911 CAD per day ($743 per diem + $168 for travel expense). When developing manuals, Floyd Duncani's rate is $743 CAD per day. His rates are considered to be competitive.

Floyd Duncani is estimating that in the first year of operation he will spend approximately 155 days workign on direct training and manual development. The rest of his time will be spent attracting new customers and working on administrative duties.

Expenses

• Owner's Wages:

Floyd Duncani will draw a total of $45,000 from the business in the first year of operation. This is felt to be sufficient to cover his personal expenses.

• Sub-Contractors:

$38,978 is the cost of hiring sub-contractors to perform the excess work that Floyd will not have time to do on his own.

• Training Supplies:

$4,273 will be spent on materials to develop the client training manuals.

• Travel:

A total of $5,000 has been allocated towards travel. This is equivalent to driving approximately 41,000 kilomtres per year at a cost of $.12/KM.

• Accommodations:

$5,500 will be spent on overnight accommodations while Floyd Duncani in on travel status.

• Advertising:

$5,000 is the cost of the periodic advertising that will be carried out.

• Promotion:

$2,500 is the cost for various promotional activities.

• Brochures/CD's:

$5,000 will be spent in the first year of operations on producing professional looking company brochures and CD's..

• Web Site:

$1,800 has been allocated for monthly internet access and web hosting fees.

• Office Supplies:

$1,200 has been allocated for various paper and office supply products.

• Insurance:

$1,200 will provide the appropriate insurance coverage for a home office and automobile.

• Telephone:

$2,400 has been budgeted for a single business phone line, a fax line and a cellular phone. It also includes long distance calls.

• Accounting:

$2,500 is the annual cost of compiling financial statements and issuing an income tax return.

• Rent

There will be no rent paid in the first year of operation, as the business will be operated out of Floyd Duncani's house.

• Bank Charges:

$300 represents the cost of maintaining a business chequing account.

• Postage/Courier

$300 has been budgeted for postage and courier expenses.

• Miscellaneous:

$1,000 has been budgeted for any unforseen expenses that may occur during the first year of operations.

• Depreciation

All fixed assets are depreciated straight line over a 10 year useful life.

Cash Flow Items:

Cash In

• Revenue:

$142,446 is the projected gross annual sales for ACT Technical Services in the first year of operations. The montly distribution of sales peaks between the months of April and August.

• Cash From Sales:

All of ACT Technical Services' revenue will be collected within 90 days of the work being performed. The company will have a $20,016 receivable at year-end.

• ADPC

$76,365 is the amount of the non-repayable contribution requested from ADPC. ACPC does not normally fund more than $75,000 towards a project. This applies to the total of the capital and marketing projects. The business support component can bring the ADPC contribution above the $75,000 level.

• Commercial Loans:

$28,620 is the amount requested from a commercial bank for the start up of ACT Technical Services.

• Cash Equity:

$11,665 is the cash equity investment required by mr. Floyd Duncani towards the start up of ACT Technical Services.

Cash Out

• Purchases:

There is a total of $99,650 in start up capital purchases. This includes all start up capital, marketing and business support costs.

• Expenses:

As described in the previous section.

• Interest Payment:

$1,913 represents the annual payment of loan interest to the Commercial Bank during the first year. The terms of the loan are 7.25% interest repayable over a period of 10 years. Please refer to the amortization table in the financial plan.

• Principle Payment:

$4,928 represents the annual repayment of loan principle to the Commercial Bank during the first year of operations.

All financial assumptions have been completed. Here are the rest of the financial plan (in order):

Sample cost and financing for ACT Technical Services

Projected 3 year income statement

12 Month projected cash flow statement

Projected 3 year cash flow statement

3 year projected balance sheet


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