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Table of Contents
1.0 Executive Summary.............................................................................................................................1
1.1 Objectives ...................................................................................................................................1
Chart: Highlights ......................................................................................................................1
1.2 Keys to Success ........................................................................................................................1
1.3 Mission........................................................................................................................................2
2.0 Company Summary.............................................................................................................................2
2.1 Start-up Summary ......................................................................................................................2
Chart: Start-up .........................................................................................................................3
Table: Start-up .........................................................................................................................3
Table: Start-up Funding ..........................................................................................................4
3.0 Services................................................................................................................................................4
3.1 Service Description ...................................................................................................................5
3.2 Competitive Comparison..........................................................................................................5
3.3 Technology..................................................................................................................................5
3.4 Future Services ..........................................................................................................................6
4.0 Market Analysis Summary..................................................................................................................6
4.1 Market Segmentation ................................................................................................................6
Table: Market Analysis ...........................................................................................................6
4.2 Service Business Analysis........................................................................................................6
4.2.1 Competition and Buying Patterns................................................................................6
4.2.2 Main Competitors..........................................................................................................7
4.2.3 Business Participants ...................................................................................................7
5.0 Strategy and Implementation Summary ............................................................................................7
5.1 Competitive Edge ......................................................................................................................7
5.1.1 Positioning Statement ..................................................................................................8
5.2 Marketing Strategy.....................................................................................................................8
5.2.1 Promotion Strategy .......................................................................................................8
5.2.2 Pricing Strategy.............................................................................................................8
5.3 Sales Forecast ...........................................................................................................................9
Chart: Sales Monthly.............................................................................................................10
Chart: Sales by Year.............................................................................................................10
Table: Sales Forecast ..........................................................................................................11
6.0 Management Summary ....................................................................................................................12
6.1 Personnel Plan.........................................................................................................................12
Table: Personnel ...................................................................................................................12
7.0 Financial Plan ....................................................................................................................................13
7.1 Break-even Analysis................................................................................................................13
Table: Break-even Analysis .................................................................................................13
Chart: Break-even Analysis .................................................................................................13
7.2 Projected Profit and Loss .......................................................................................................14
Chart: Profit Monthly .............................................................................................................14
Chart: Profit Yearly................................................................................................................14
Chart: Gross Margin Monthly ...............................................................................................15
Chart: Gross Margin Yearly..................................................................................................15
Table: Profit and Loss ..........................................................................................................16
7.3 Projected Cash Flow...............................................................................................................16
Chart: Cash ...........................................................................................................................17
Page 1
Table of Contents
Table: Cash Flow..................................................................................................................18
7.4 Projected Balance Sheet ........................................................................................................19
Table: Balance Sheet ...........................................................................................................19
7.5 Business Ratios .......................................................................................................................19
Table: Ratios .........................................................................................................................21
Table: Sales Forecast ...............................................................................................................................1
Table: Personnel ........................................................................................................................................2
Table: General Assumptions ....................................................................................................................3
Table: Profit and Loss ...............................................................................................................................4
Table: Cash Flow .......................................................................................................................................5
Table: Balance Sheet ................................................................................................................................6
Page 2
F & R Auto Repair
1.0 Executive Summary
F & R Auto (F & R) is the desire of John Ford and Michael Ronald who together have 30 years
experience as auto mechanics. Both have a dream of starting up their own c ompany and offering
better service to their clients than competitors.
1.1 Objectives
The objectives over the next three years for F & R Auto Repair are the following:
·
·
·
Sales revenues increase steadily through year three.
Institute a program of superior customer service through rigorous evaluation of service
experience.
Hire three more mechanics.
1.2 Keys to Success
In the auto repair industry a company builds its client base one customer at a time and mostly
through word of mouth marketing. With this in mind, the keys to success for F & R Auto Repair
are:
·
·
·
High-quality work.
Constant contac t with c lients so as to keep them informed about the state of their
automobile and the repair job progress.
Knowledgeable mechanics that are friendly, customer oriented, and will take the time to
Page 1
F & R Auto Repair
explain to customer the intricate nature of our business and our work.
1.3 Mission
The mission of F & R Auto Repair is to provide high quality, convenient and comprehensive auto
repair at low cost. The most important aspec t of our business is trust. It is the goal of our firm
to have 100% customer satisfac tion in regards to quality, friendliness, time to completion and
to disc over new ways to exceed the expec tations of our clients.
2.0 Company Summary
The company will be a partnership with John Ford and Michael Ronald eac h owning 50% of the
company. The company will be a limited liability company registered in the state of
Washington. The firm will have fac ilities on 1312 1st Ave NW in Ballard, a neighborhood of
Seattle. The fac ilities will contain a two-bay garage, office space and storage spac e for tools,
parts, etc.
The company is seeking a loan in order to finance the start of operations for the company. Each
of the owners will be putting up some of their own c apital as equity.
2.1 Start-up Summary
The data obtained for the start-up comes from research done in the Seattle area with other
small mechanic shops who have started their own business. Inflation has been taken into
ac count between the estimates of these fellow business owners (and when they started) and
the current prices for expensed items.
Much of the equipment to go into the fac ilities such as tools, air compressors, etc., are currently
owned by the two partners.
Page 2
F & R Auto Repair
Table: Start-up
Start-up
Requirements
Start-up Expenses
Legal
Stationery etc.
Advertising
Phone
Insurance
$500
$200
$600
$200
$800
Rent
Utilities
Computer
$4,000
$200
$2,000
Other
Total Start-up Expenses
$600
$9,100
Start-up Assets
Cash Required
Start-up Inventory
$2,900
$0
Other Current Assets
Long-term Assets
Total Assets
$0
$20,000
$22,900
Total Requirements
$32,000
Page 3
F & R Auto Repair
Table: Start-up Funding
Start-up Funding
Start-up Expenses to Fund
Start-up Assets to Fund
Total Funding Required
$9,100
$22,900
$32,000
Assets
Non-cash Assets from Start-up
Cash Requirements from Start-up
Additional Cash Raised
Cash Balance on Starting Date
Total Assets
$20,000
$2,900
$0
$2,900
$22,900
Liabilities and Capital
Liabilities
Current Borrowing
Long-term Liabilities
Accounts Payable (Outstanding Bills)
$0
$20,000
$0
Other Current Liabilities (interest-free)
Total Liabilities
$0
$20,000
Capital
Planned Investment
John Ford
Michael Ronald
Other
Additional Investment Requirement
Total Planned Investment
$6,000
$6,000
$0
$0
$12,000
Loss at Start-up (Start-up Expenses)
Total Capital
($9,100)
$2,900
Total Capital and Liabilities
$22,900
Total Funding
$32,000
3.0 Services
F & R Auto offers a wide range of services as outlined in the detailed sections below. It is
ultimately the goal of the company to offer a one- stop fac ility for all auto servicing needs,
including brakes, transmission, wheel alignment, etc. In this way the company can offer
greater perceived value for the customer than many other shops which spec ialize in c ertain
areas.
The industry is highly competitive with suppliers having a great deal of power in setting and
negotiating the prices of their products and services to repair shops. In addition, bec ause the
customers see the service as undifferentiated and a "commodity" with little value separation
between c ompetitors, buyer power is also very high. Finally, the barriers to entry are moderately
low, and the large number of competitors in this field, including substitutes (such as do-ityourself work) mean that the pricing for such services are very competitive. The only way to
Page 4
F & R Auto Repair
have an advantage in this industry is a low cost leadership principal applied aggressively or to
create higher switching costs through the building of strong business to customer ties.
F & R Auto will hire trained and certified mechanics who are able to prove they have superior
customer awareness and interac tion. It is the company's professional people who will fulfill the
firm's contrac ts and goals. The largest part of the company's expenses will be in labor costs.
3.1 Service Description
F & R Auto provides a wide range of auto repair services. These include:
·
·
·
·
·
Sc heduled maintenance.
Wheel alignments, tires and rims.
Brake repair.
Comprehensive engine repair.
Transmission.
Each job or project will be on a reservation basis, although we will ac cept a small percentage
of drive in repair work.
3.2 Competitive Comparison
The auto repair industry is highly competitive. Each c ompany within this field has high
capital costs, low margins, and a high intensity of competition.
Suppliers have a great deal of power in setting and negotiating the prices of their products
and services to repair shops. This is due to the fac t that the suppliers who absorb the
greatest amounts of cash from repair shops are large auto part companies. These companies are
more consolidated that the repair industry, have deeper poc kets, an almost limitless number of
substitute customers, and finally they are the single most important supplier to F & R's
industry. Therefore, these companies can set whatever price they wish to. Furthermore, labor
is a supplier in this industry as well, and salaries for such individuals are well known and not
very flexible.
In addition, bec ause the customers see the service as undifferentiated and a "commodity" with
little value separation between c ompetitors (if they offer a suitable level of quality) buyer
power is also very high. Additionally, the costs of our services are not cheap, and buyers are
willing to search for the most favorable combination of price and ac ceptable service.
The barriers to entry and exit are moderately low in this industry. Switching costs are virtually
non-existent and the costs to entry and exist the market are low. The large number of
competitors in this field including substitutes mean that the pricing for such services are very
competitive. The only way to have an advantage in this industry is a low cost leadership
principal applied aggressively to all aspec ts of the business or to build up customer relations to a
point where the switching costs are raised.
3.3 Technology
Page 5
F & R Auto Repair
The technological revolution in c omputers has enhanced our abilities to diagnose and repair our
clients vehicles. F &R will remain on the cutting edge by instituting the use of computer
diagnostic equipment in its shop. The company will continue to seek new ways to provide a
better service through technology.
3.4 Future Services
The company does not have any plans to create further services at this time.
4.0 Market Analysis Summary
Since F & R will be able to service any vehicle on the road, including motorcycles and campers, it
does not make any sense to segment our market. Our potential customer includes every
household in Seattle that owns one or more vehicles. The industry does not have any
seasonality that affects it.
4.1 Market Segmentation
The following table and chart show the market analysis for F & R Auto Repair.
Table: Market Analysis
Market Analysis
Potential Customers
Number of cars in Seattle
Other
Total
Growth
3%
0%
3.00%
Year 1
Year 2
Year 3
Year 4
Year 5
145,833
0
145,833
150,208
0
150,208
154,714
0
154,714
159,355
0
159,355
164,136
0
164,136
CAGR
3.00%
0.00%
3.00%
4.2 Service Business Analysis
This section is covered in the Competitive Comparison section of the Plan.
4.2.1 Competition and Buying Patterns
While many customers looking to purchase automotive repair services are concerned with price,
the primary concern is with building a relationship of trust between themselves and their
service provider. A large number of people within the country have experienced or heard of bad
service encounters within this market. As a person's car is usually connected in one way or
another with that individual's livelihood, a dependable automobile is crucial. Therefore, many
clients are willing to pay a little more for a mechanic they feel does a quality job and
understands their needs.
An automotive repair company that can anticipate, meet, and even exceed customer's needs
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F & R Auto Repair
can build a defensible position within the market plac e and ac quire market share at the
expense of other rivals.
4.2.2 Main Competitors
As stated before, the automotive repair market is very fragmented. The chief competitors in
this industry for F & R are the high quality automobile dealerships and licensed service reps.
This includes Toyota, Ford, Chrysler, and other major brand names. Within F & R's immediate
service vicinity, There is Rodham's Toyota, Lester Ford and Woodmark's Chrysler dealerships.
Each of these direct competitors have a service fac ility. These competitors dominate the market
plac e, have the largest market share, and have advantages such as specially trained
personnel, ac cess to lower priced parts and tools, and deep pockets. The other competitors
are mostly "mom & pop" style outfits that make up the majority of the competition. For F & R this
includes Dave's Auto Repair, The Taller Mechanico, Kirkland Auto and Body, and Vancouver Auto.
The advantages of these firms is that they can seek a low cost leadership strategy due to lower
personnel costs. However, they have a much more fluid customer base and higher customer
turnover.
F & R will seek to compete initially in the low cost strategy. At the same time, it will seek to
provide a higher level of customer satisfac tion by having more rigorous quality control and
seeking ways to enhance the entire service experience (not just repairing a person's car). In this
way it will loc k in a loyal customer base who value the client-service provider relationship.
4.2.3 Business Participants
The auto repair industry is highly fragmented. In fac t, there are so many small providers that any
company in this industry is fac ing a purely competitive environment. It is very difficult to
create a differentiation, or niche, strategy in this environment and until F & R is able to establish
a reputation for quality, on time, superior customer service, the company will seek a low cost
role. Once it has ac hieved what management believes to be a sufficient reputation for its
services along with a profitable customer base, the company plans to leverage this advantage
into a differentiation strategy that will be able to charge more for its services.
5.0 Strategy and Implementation Summary
The following section outlines the company's strategic foc us in growing the business.
5.1 Competitive Edge
F & R Auto's competitive edge lies in the vision of its partners, who understand better than many
of their rivals that a service visit does not just include repairing a client's car, it includes the
entire service experience from the first time a client talks to their mechanic until they dec ide
to stop driving. The long-term profitability of a service firm of this type lies in the repeat
customer that finds F & R's services an excellent experience, DESPITE the fac t that they
usually have suffered a inconvenient breakdown. The company will seek to examine ALL
aspec ts of the service experience to seek ways to improve its customer satisfac tion. In addition,
Page 7
F & R Auto Repair
all employees will be rigorously trained and retrained to think about customer satisfac tion in order
to create a self-sustaining company culture that revolves around this issue.
5.1.1 Positioning Statement
It is the express purpose of F & R to bec ome the loc al leader in quality and service experience of
all the small (non-dealerships) automotive repair firms within the Seattle area while maintaining a
low cost plan. Once a reputation for quality and service experience is created, and an ongoing
network of referrals is bringing in new business, the company plans to re-evaluate its strategy
and positioning within the market to see if a differentiation strategy is viable. If so, this will allow
the company to raise prices and increase profit margins in relation to its rivals. This in turn is
expec ted to leverage long-term growth until F & R can reac h a regional sc ope of operations.
5.2 Marketing Strategy
The company has a modest program of marketing its services that include the following:
1.
2.
3.
4.
5.
6.
Flyers.
Direct mailers.
Disc ounts.
Newspaper ads.
Yellow pages.
Referrals through other loc al businesses.
Each of these marketing approaches has the advantage of being low cost and creating service
awareness. The company's long-term marketing goals are to use loc al radio and TV ads similar to
the Les Sc hwab Tire Center ads.
The company is also investigating the possibility of having a grand opening program that would
feature disc ounts, food, a loc al radio disc joc key, and other promotional ideas.
5.2.1 Promotion Strategy
The principal owners of F & R Auto expec t that a significant number of their pre-existing clients
(where Ford and Ronald currently work) will desire to switch to F & R Auto to retain the
services of their personal mechanics. This will provide a sufficient income until F & R can build up
a reputation and see its marketing program take effect.
This promotion strategy will take the form of flyers, direct mailers, price disc ounts, and
advertisements in newspapers and yellow pages. F & R does not desire to spend a large
amount on marketing until the firm is ready to expand either into new fac ilities or open up new
ones. It is estimated this will oc cur sometime after year five.
5.2.2 Pricing Strategy
F & R Auto exists in a purely competitive environment where eac h firm must be a price taker.
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F & R Auto Repair
In other words, the firm has no ability to affect the market price of its services, regardless of
how many automobiles it repairs. In this case, therefore, marginal revenue (the revenue
incurred by producing or servicing one more unit) is equal to the price charged. Furthermore,
bec ause the demand curve is essentially horizontal, F & R can service automobiles at total
capacity without effecting the price.
What all of this means for F & R Auto is that the company must seek to charge its clients at
the market price (or lower). Research has shown that the average price is approximately $400
per vehicle. As long as marginal costs do not exceed revenues, the method to maximize shortrun profits is to service automobiles at maximum capacity. This means that F & R Auto can
expec t an ROA of approximately 4.5%
5.3 Sales Forecast
Since the automotive repair industry is, operationally, a job-shop environment, it is somewhat
difficult to estimate sales. For job-shops, eac h individual product or service is tailored or unique
to that job, and is only initiated once an order is made. However, the sales forecast reflect the
professional opinion of Mr. Ford in how much sales he will make based on the following
assumptions:
1.
2.
3.
4.
The number of clients Ford and Ronald can attrac t from their previous companies.
The effect of planned promotions and word-of-mouth marketing.
Current prices and costs of doing business.
The types of automobiles and jobs that will oc cur in every month.
For the most part, sales for an automobile repair firm are steady year round and reflect little
seasonality.
The table and charts below outline the sales forecast. Three years of annual sales and costs
of sales are shown. Twelve monthly tallies are included in the appendices.
Page 9
F & R Auto Repair
Page 10
F & R Auto Repair
Table: Sales Forecast
Sales Forecast
Sales
Routine maintenance
Small repair jobs
Large repair jobs
Total Sales
Direct Cost of Sales
Routine maintenance
Small repair jobs
Large repair jobs
Subtotal Direct Cost of Sales
Year 1
Year 2
Year 3
$51,000
$57,120
$62,261
$60,000
$67,800
$178,800
$67,200
$75,936
$200,256
$71,904
$81,252
$215,417
Year 1
$5,100
Year 2
$5,712
Year 3
$6,226
$6,000
$6,780
$17,880
$6,720
$7,594
$20,026
$7,190
$8,125
$21,542
Page 11
F & R Auto Repair
6.0 Management Summary
John Ford began working as an apprentice mechanic in his father's shop in 1984. Since that time,
he has worked for a variety of automotive shops and dealerships and has numerous certificates
in automobile repair. During the past two years Mr. Ford has attended Bellevue Community
College where he received an Associates degree in business administration in June of 2000.
Michael Ronald attended ITT Technical Institute where he received a certificate in electronics
repair in 1980. In 1983 Mr. Ronald went to work for Jim Click Ford Dealership in Tucson AZ, where
he worked on automotive electrical and electronic systems. Desiring to expand his skills, Mr.
Ronald received a mechanic's certificate in 1988 and since then has bec ome certified in various
automotive fields. In anticipation of F & R's business needs, Mr. Ronald is taking night classes
at Seattle University in marketing.
6.1 Personnel Plan
F & R's initial staffing will consist of Ford and Ronald, plus Ronald's wife who will ac t as a parttime office manager. The company will seek two entry level mechanics to be hired within a few
months after the company is operating. Ac counting, bookkeeping, and marketing services will
be outsourced. The company's intermediate goal is to have four full time, fully trained mechanics
at the original fac ility, plus a full-time office manager. However, management has dec ided to
await future developments before determining the best time to bring on such personnel.
Table: Personnel
Personnel Plan
Mr. Ford
Mr. Ronald
Year 1
$36,000
$36,000
Year 2
$36,000
$36,000
Year 3
$36,000
$36,000
Office manager (part time)
Apprentice mechanic (part time)
Apprentice mechanic (part time)
Apprentice mechanic (part time)
Total People
$14,400
$6,900
$0
$0
4
$15,000
$15,000
$0
$0
4
$15,000
$15,000
$15,000
$0
5
Total Payroll
$93,300
$102,000
$117,000
Page 12
F & R Auto Repair
7.0 Financial Plan
The following sections outline the financial plan for F & R Auto Repair.
7.1 Break-even Analysis
The company's Break-even Analysis is based on an average company's running costs within this
industry, including payroll, and its fixed costs for such things as rent, utilities, etc.
Table: Break-even Analysis
Break-even Analysis
Monthly Revenue Break-even
$14,564
Assumptions:
Average Percent Variable Cost
Estimated Monthly Fixed Cost
10%
$13,107
Page 13
F & R Auto Repair
7.2 Projected Profit and Loss
The following table and chart show the projected profit and loss for F & R Auto Repair.
Page 14
F & R Auto Repair
Page 15
F & R Auto Repair
Table: Profit and Loss
Pro Forma Profit and Loss
Year 1
$178,800
$17,880
Year 2
$200,256
$20,026
Year 3
$215,417
$21,542
$0
$17,880
$0
$20,026
$0
$21,542
$160,920
90.00%
$180,230
90.00%
$193,875
90.00%
$93,300
$6,000
$1,992
$6,000
$4,800
$7,200
$24,000
$13,995
$0
$102,000
$7,200
$2,000
$1,000
$5,000
$7,400
$24,000
$15,300
$0
$117,000
$7,400
$2,000
$1,000
$5,000
$7,400
$24,000
$17,550
$0
$157,287
$163,900
$181,350
Profit Before Interest and Taxes
EBITDA
Interest Expense
Taxes Incurred
$3,633
$5,625
$1,892
$522
$16,330
$18,330
$1,700
$4,389
$12,525
$14,525
$1,500
$3,308
Net Profit
Net Profit/Sales
$1,219
0.68%
$10,241
5.11%
$7,718
3.58%
Sales
Direct Cost of Sales
Other Production Expenses
Total Cost of Sales
Gross Margin
Gross Margin %
Expenses
Payroll
Sales and Marketing and Other Expenses
Depreciation
Leased Equipment
Utilities
Insurance
Rent
Payroll Taxes
Other
Total Operating Expenses
7.3 Projected Cash Flow
The following table and chart are the projected cash flow figures for F & R.
Page 16
F & R Auto Repair
Page 17
F & R Auto Repair
Table: Cash Flow
Pro Forma Cash Flow
Year 1
Year 2
Year 3
Cash from Operations
Cash Sales
Cash from Receivables
Subtotal Cash from Operations
$160,920
$14,635
$175,555
$180,230
$19,636
$199,867
$193,875
$21,267
$215,142
Additional Cash Received
Sales Tax, VAT, HST/GST Received
New Current Borrowing
New Other Liabilities (interest-free)
New Long-term Liabilities
Sales of Other Current Assets
Sales of Long-term Assets
New Investment Received
Subtotal Cash Received
$0
$0
$0
$0
$0
$0
$0
$175,555
$0
$0
$0
$0
$0
$0
$0
$199,867
$0
$0
$0
$0
$0
$0
$0
$215,142
Year 1
Year 2
Year 3
$93,300
$77,017
$170,317
$102,000
$86,254
$188,254
$117,000
$88,561
$205,561
$0
$0
$0
$2,000
$0
$0
$0
$2,000
$0
$0
$0
$2,000
$0
$0
$0
$0
$0
$0
$0
$0
$0
$172,317
$190,254
$207,561
$3,238
$6,138
$9,613
$15,751
$7,581
$23,332
Cash Received
Expenditures
Expenditures from Operations
Cash Spending
Bill Payments
Subtotal Spent on Operations
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out
Principal Repayment of Current Borrowing
Other Liabilities Principal Repayment
Long-term Liabilities Principal Repayment
Purchase Other Current Assets
Purchase Long-term Assets
Dividends
Subtotal Cash Spent
Net Cash Flow
Cash Balance
Page 18
F & R Auto Repair
7.4 Projected Balance Sheet
The following table shows the projected balance sheet.
Table: Balance Sheet
Pro Forma Balance Sheet
Year 1
Year 2
Year 3
Current Assets
Cash
Accounts Receivable
$6,138
$3,245
$15,751
$3,634
$23,332
$3,910
Inventory
Other Current Assets
Total Current Assets
$1,815
$0
$11,198
$2,056
$0
$21,442
$2,124
$0
$29,366
Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets
$20,000
$1,992
$18,008
$29,206
$20,000
$3,992
$16,008
$37,450
$20,000
$5,992
$14,008
$43,374
Liabilities and Capital
Year 1
Year 2
Year 3
Current Liabilities
Accounts Payable
Current Borrowing
Other Current Liabilities
Subtotal Current Liabilities
$7,088
$0
$0
$7,088
$7,090
$0
$0
$7,090
$7,296
$0
$0
$7,296
Long-term Liabilities
Total Liabilities
$18,000
$25,088
$16,000
$23,089
$14,000
$21,296
Paid-in Capital
Retained Earnings
Earnings
$12,000
($9,100)
$1,219
$12,000
($7,881)
$10,241
$12,000
$2,360
$7,718
Total Capital
Total Liabilities and Capital
$4,119
$29,206
$14,360
$37,450
$22,078
$43,374
$4,119
$14,360
$22,078
Assets
Net Worth
7.5 Business Ratios
The Business ratios give an overall idea of how profitable and at what risk level F & R Auto will
operate at. The ratio table gives both time series analysis and cross-sectional analysis by
including industry average ratios. As can be seen from the comparison between industry
standards and F&R's own ratios, there is some differences. Most of these are due to the fac t
that there is a very large variance in assets, liabilities, financing, and net income between
companies in this industry due to the vast differences in c ompany size.
Overall the company's projections show a company that fac es the usual risks of companies in
this industry and one that will be profitable in the long-run. The company shows that it has
Page 19
F & R Auto Repair
higher SG&A costs than other competitors, however management has deliberately overstated
costs and minimized profits in order to create a "safe" or "buffer" zone in c ase of hard times or
other unforeseeable problems. Pre-tax return on net worth and pre-tax return on assets appears
to be very high, especially within the first two years, however this is due to the fac t that the
company will be operating with fewer assets than most companies in the first few years until it
can build up enough c ash to ac quire the tools and fac ilities that are desired and go beyond the
"adequate" level.
Page 20
F & R Auto Repair
Table: Ratios
Ratio Analysis
Year 1
n.a.
Year 2
12.00%
Year 3
7.57%
Industry Profile
7.00%
11.11%
6.21%
0.00%
38.34%
61.66%
100.00%
9.70%
5.49%
0.00%
57.25%
42.75%
100.00%
9.01%
4.90%
0.00%
67.70%
32.30%
100.00%
8.80%
9.60%
23.80%
42.20%
57.80%
100.00%
24.27%
61.63%
85.90%
14.10%
18.93%
42.72%
61.65%
38.35%
16.82%
32.28%
49.10%
50.90%
34.80%
24.70%
59.50%
40.50%
100.00%
100.00%
100.00%
100.00%
90.00%
89.32%
1.34%
2.03%
90.00%
84.89%
1.50%
8.15%
90.00%
86.42%
1.39%
5.81%
n.a.
75.20%
1.30%
1.70%
Current
Quick
Total Debt to Total Assets
Pre-tax Return on Net Worth
Pre-tax Return on Assets
1.58
1.32
85.90%
42.28%
5.96%
3.02
2.73
61.65%
101.88%
39.07%
4.02
3.73
49.10%
49.94%
25.42%
1.17
0.65
59.50%
1.80%
4.60%
Additional Ratios
Net Profit Margin
Return on Equity
Year 1
0.68%
29.59%
Year 2
5.11%
71.32%
Year 3
3.58%
34.96%
n.a
n.a
5.51
57
10.91
11.87
5.51
63
10.35
12.17
5.51
64
10.31
12.17
n.a
n.a
n.a
n.a
Payment Days
Total Asset Turnover
27
6.12
30
5.35
30
4.97
n.a
n.a
Debt Ratios
Debt to Net Worth
Current Liab. to Liab.
6.09
0.28
1.61
0.31
0.96
0.34
n.a
n.a
$4,111
$14,352
$22,070
n.a
1.92
9.61
8.35
n.a
0.16
24%
0.87
43.41
0.19
19%
2.22
13.95
0.20
17%
3.20
9.76
n.a
n.a
n.a
n.a
Sales Growth
Percent of Total Assets
Accounts Receivable
Inventory
Other Current Assets
Total Current Assets
Long-term Assets
Total Assets
Current Liabilities
Long-term Liabilities
Total Liabilities
Net Worth
Percent of Sales
Sales
Gross Margin
Selling, General & Administrative Expenses
Advertising Expenses
Profit Before Interest and Taxes
Main Ratios
Activity Ratios
Accounts Receivable Turnover
Collection Days
Inventory Turnover
Accounts Payable Turnover
Liquidity Ratios
Net Working Capital
Interest Coverage
Additional Ratios
Assets to Sales
Current Debt/Total Assets
Acid Test
Sales/Net Worth
Page 21
F & R Auto Repair
Dividend Payout
0.00
0.00
0.00
n.a
Page 22
Appendix
Table: Sales Forecast
Sales Forecast
Sales
Routine maintenance
Small repair jobs
Large repair jobs
Total Sales
Direct Cost of Sales
Routine maintenance
Small repair jobs
Large repair jobs
Subtotal Direct Cost of Sales
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
Month 7
Month 8
Month 9
Month 10
Month 11
Month 12
0%
$4,000
$4,000
$4,000
$4,000
$4,000
$4,000
$4,500
$4,500
$4,500
$4,500
$4,500
$4,500
0%
$4,500
$4,500
$4,500
$4,500
$4,500
$4,500
$5,500
$5,500
$5,500
$5,500
$5,500
$5,500
0%
$4,800
$13,300
$4,800
$13,300
$4,800
$13,300
$4,800
$13,300
$4,800
$13,300
$4,800
$13,300
$6,500
$16,500
$6,500
$16,500
$6,500
$16,500
$6,500
$16,500
$6,500
$16,500
$6,500
$16,500
Month 1
$400
Month 2
$400
Month 3
$400
Month 4
$400
Month 5
$400
Month 6
$400
Month 7
$450
Month 8
$450
Month 9
$450
Month 10
$450
Month 11
$450
Month 12
$450
$450
$480
$450
$480
$450
$480
$450
$480
$450
$480
$450
$480
$550
$650
$550
$650
$550
$650
$550
$650
$550
$650
$550
$650
$1,330
$1,330
$1,330
$1,330
$1,330
$1,330
$1,650
$1,650
$1,650
$1,650
$1,650
$1,650
Page 1
Appendix
Table: Personnel
Personnel Plan
Mr. Ford
Mr. Ronald
0%
0%
Month 1
$3,000
$3,000
Month 2
$3,000
$3,000
Month 3
$3,000
$3,000
Month 4
$3,000
$3,000
Month 5
$3,000
$3,000
Month 6
$3,000
$3,000
Month 7
$3,000
$3,000
Month 8
$3,000
$3,000
Month 9
$3,000
$3,000
Month 10
$3,000
$3,000
Month 11
$3,000
$3,000
Month 12
$3,000
$3,000
Office manager (part time)
Apprentice mechanic (part time)
Apprentice mechanic (part time)
0%
0%
0%
$1,200
$0
$0
$1,200
$0
$0
$1,200
$0
$0
$1,200
$0
$0
$1,200
$0
$0
$1,200
$0
$0
$1,200
$1,150
$0
$1,200
$1,150
$0
$1,200
$1,150
$0
$1,200
$1,150
$0
$1,200
$1,150
$0
$1,200
$1,150
$0
Apprentice mechanic (part time)
Total People
0%
$0
3
$0
3
$0
3
$0
3
$0
3
$0
3
$0
4
$0
4
$0
4
$0
4
$0
4
$0
4
$7,200
$7,200
$7,200
$7,200
$7,200
$7,200
$8,350
$8,350
$8,350
$8,350
$8,350
$8,350
Total Payroll
Page 2
Appendix
Table: General Assumptions
General Assumptions
Plan Month
Current Interest Rate
Month 1
1
10.00%
Month 2
2
10.00%
Month 3
3
10.00%
Month 4
4
10.00%
Month 5
5
10.00%
Month 6
6
10.00%
Month 7
7
10.00%
Month 8
8
10.00%
Month 9
9
10.00%
Month 10
10
10.00%
Month 11
11
10.00%
Month 12
12
10.00%
Long-term Interest Rate
10.00%
10.00%
10.00%
10.00%
10.00%
10.00%
10.00%
10.00%
10.00%
10.00%
10.00%
10.00%
Tax Rate
Other
30.00%
0
30.00%
0
30.00%
0
30.00%
0
30.00%
0
30.00%
0
30.00%
0
30.00%
0
30.00%
0
30.00%
0
30.00%
0
30.00%
0
Page 3
Appendix
Table: Profit and Loss
Pro Forma Profit and Loss
Month 1
$13,300
$1,330
Sales
Direct Cost of Sales
Other Production Expenses
Month 2
$13,300
$1,330
Month 3
$13,300
$1,330
Month 4
$13,300
$1,330
Month 5
$13,300
$1,330
Month 6
$13,300
$1,330
Month 7
$16,500
$1,650
Month 8
$16,500
$1,650
Month 9
$16,500
$1,650
Month 10
$16,500
$1,650
Month 11
$16,500
$1,650
Month 12
$16,500
$1,650
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$1,330
$1,330
$1,330
$1,330
$1,330
$1,330
$1,650
$1,650
$1,650
$1,650
$1,650
$1,650
$11,970
90.00%
$11,970
90.00%
$11,970
90.00%
$11,970
90.00%
$11,970
90.00%
$11,970
90.00%
$14,850
90.00%
$14,850
90.00%
$14,850
90.00%
$14,850
90.00%
$14,850
90.00%
$14,850
90.00%
$7,200
$7,200
$7,200
$7,200
$7,200
$7,200
$8,350
$8,350
$8,350
$8,350
$8,350
$8,350
$500
$500
$500
$500
$500
$500
$500
$500
$500
$500
$500
$500
$166
$500
$166
$500
$166
$500
$166
$500
$166
$500
$166
$500
$166
$500
$166
$500
$166
$500
$166
$500
$166
$500
$166
$500
$400
$600
$2,000
$400
$600
$2,000
$400
$600
$2,000
$400
$600
$2,000
$400
$600
$2,000
$400
$600
$2,000
$400
$600
$2,000
$400
$600
$2,000
$400
$600
$2,000
$400
$600
$2,000
$400
$600
$2,000
$400
$600
$2,000
$1,080
$1,080
$1,080
$1,080
$1,080
$1,080
$1,253
$1,253
$1,253
$1,253
$1,253
$1,253
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$12,446
$12,446
$12,446
$12,446
$12,446
$12,446
$13,769
$13,769
$13,769
$13,769
$13,769
$13,769
Profit Before Interest and Taxes
($476)
($476)
($476)
($476)
($476)
($476)
$1,082
$1,082
$1,082
$1,082
$1,082
$1,082
EBITDA
Interest Expense
($310)
$165
($310)
$164
($310)
$162
($310)
$161
($310)
$160
($310)
$158
$1,248
$157
$1,248
$156
$1,248
$154
$1,248
$153
$1,248
$151
$1,248
$150
Taxes Incurred
($192)
($192)
($192)
($191)
($191)
($190)
$277
$278
$278
$279
$279
$279
($449)
-3.38%
($448)
-3.37%
($447)
-3.36%
($446)
-3.35%
($445)
-3.35%
($444)
-3.34%
$647
3.92%
$648
3.93%
$649
3.93%
$650
3.94%
$651
3.95%
$652
3.95%
Total Cost of Sales
Gross Margin
Gross Margin %
Expenses
Payroll
Sales and Marketing and Other
Expenses
Depreciation
Leased Equipment
Utilities
Insurance
Rent
Payroll Taxes
Other
Total Operating Expenses
Net Profit
Net Profit/Sales
15%
Page 4
Appendix
Table: Cash Flow
Pro Forma Cash Flow
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
Month 7
Month 8
Month 9
Month 10
Month 11
Month 12
Cash from Operations
Cash Sales
Cash from Receivables
$11,970
$0
$11,970
$44
$11,970
$1,330
$11,970
$1,330
$11,970
$1,330
$11,970
$1,330
$14,850
$1,330
$14,850
$1,341
$14,850
$1,650
$14,850
$1,650
$14,850
$1,650
$14,850
$1,650
Subtotal Cash from Operations
$11,970
$12,014
$13,300
$13,300
$13,300
$13,300
$16,180
$16,191
$16,500
$16,500
$16,500
$16,500
Cash Received
Additional Cash Received
Sales Tax, VAT, HST/GST Received
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
New Current Borrowing
New Other Liabilities (interest-free)
0.00%
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
New Long-term Liabilities
Sales of Other Current Assets
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Sales of Long-term Assets
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
New Investment Received
Subtotal Cash Received
$0
$11,970
$0
$12,014
$0
$13,300
$0
$13,300
$0
$13,300
$0
$13,300
$0
$16,180
$0
$16,191
$0
$16,500
$0
$16,500
$0
$16,500
$0
$16,500
Expenditures
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
Month 7
Month 8
Month 9
Month 10
Month 11
Month 12
Cash Spending
Bill Payments
$7,200
$262
$7,200
$7,797
$7,200
$6,382
$7,200
$6,381
$7,200
$6,380
$7,200
$6,379
$8,350
$6,422
$8,350
$7,677
$8,350
$7,336
$8,350
$7,335
$8,350
$7,334
$8,350
$7,333
Subtotal Spent on Operations
$7,462
$14,997
$13,582
$13,581
$13,580
$13,579
$14,772
$16,027
$15,686
$15,685
$15,684
$15,683
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Principal Repayment of Current Borrowing
Other Liabilities Principal Repayment
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Long-term Liabilities Principal Repayment
Expenditures from Operations
$167
$167
$167
$167
$167
$167
$167
$167
$167
$167
$167
$167
Purchase Other Current Assets
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Purchase Long-term Assets
Dividends
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Subtotal Cash Spent
$7,628
$15,164
$13,749
$13,748
$13,747
$13,746
$14,938
$16,194
$15,852
$15,852
$15,851
$15,850
Net Cash Flow
$4,342
($3,149)
($449)
($448)
($447)
($446)
$1,242
($3)
$648
$648
$649
$650
Cash Balance
$7,242
$4,092
$3,644
$3,196
$2,750
$2,304
$3,546
$3,543
$4,190
$4,839
$5,488
$6,138
Page 5
Appendix
Table: Balance Sheet
Pro Forma Balance Sheet
Assets
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
Month 7
Month 8
Month 9
Month 10
Month 11
Month 12
Starting Balances
Current Assets
Cash
Accounts Receivable
$2,900
$0
$7,242
$1,330
$4,092
$2,616
$3,644
$2,616
$3,196
$2,616
$2,750
$2,616
$2,304
$2,616
$3,546
$2,936
$3,543
$3,245
$4,190
$3,245
$4,839
$3,245
$5,488
$3,245
$6,138
$3,245
Inventory
Other Current Assets
Total Current Assets
$0
$0
$2,900
$1,463
$0
$10,035
$1,463
$0
$8,171
$1,463
$0
$7,722
$1,463
$0
$7,275
$1,463
$0
$6,828
$1,463
$0
$6,383
$1,815
$0
$8,296
$1,815
$0
$8,603
$1,815
$0
$9,250
$1,815
$0
$9,899
$1,815
$0
$10,548
$1,815
$0
$11,198
Long-term Assets
Long-term Assets
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
Accumulated Depreciation
Total Long-term Assets
$0
$20,000
$166
$19,834
$332
$19,668
$498
$19,502
$664
$19,336
$830
$19,170
$996
$19,004
$1,162
$18,838
$1,328
$18,672
$1,494
$18,506
$1,660
$18,340
$1,826
$18,174
$1,992
$18,008
Total Assets
$22,900
$29,869
$27,839
$27,224
$26,611
$25,998
$25,387
$27,134
$27,275
$27,756
$28,239
$28,722
$29,206
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
Month 7
Month 8
Month 9
Month 10
Month 11
Month 12
Liabilities and Capital
Current Liabilities
Accounts Payable
Current Borrowing
$0
$0
$7,584
$0
$6,169
$0
$6,168
$0
$6,167
$0
$6,166
$0
$6,165
$0
$7,433
$0
$7,091
$0
$7,090
$0
$7,089
$0
$7,088
$0
$7,088
$0
Other Current Liabilities
Subtotal Current Liabilities
$0
$0
$0
$7,584
$0
$6,169
$0
$6,168
$0
$6,167
$0
$6,166
$0
$6,165
$0
$7,433
$0
$7,091
$0
$7,090
$0
$7,089
$0
$7,088
$0
$7,088
Long-term Liabilities
$20,000
$19,833
$19,667
$19,500
$19,333
$19,167
$19,000
$18,833
$18,667
$18,500
$18,333
$18,167
$18,000
Total Liabilities
$20,000
$27,418
$25,836
$25,668
$25,501
$25,333
$25,165
$26,266
$25,758
$25,590
$25,423
$25,255
$25,088
Paid-in Capital
Retained Earnings
$12,000
($9,100)
$12,000
($9,100)
$12,000
($9,100)
$12,000
($9,100)
$12,000
($9,100)
$12,000
($9,100)
$12,000
($9,100)
$12,000
($9,100)
$12,000
($9,100)
$12,000
($9,100)
$12,000
($9,100)
$12,000
($9,100)
$12,000
($9,100)
$1,219
Earnings
Total Capital
Total Liabilities and Capital
Net Worth
$0
($449)
($897)
($1,344)
($1,790)
($2,235)
($2,679)
($2,032)
($1,383)
($734)
($84)
$567
$2,900
$2,451
$2,003
$1,556
$1,110
$665
$221
$868
$1,517
$2,166
$2,816
$3,467
$4,119
$22,900
$29,869
$27,839
$27,224
$26,611
$25,998
$25,387
$27,134
$27,275
$27,756
$28,239
$28,722
$29,206
$2,900
$2,451
$2,003
$1,556
$1,110
$665
$221
$868
$1,517
$2,166
$2,816
$3,467
$4,119
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