8.

Financial Plan
8.0 Financial Plan

QDAR expects to raise $250,000 of its own capital, and to borrow $250,000 guaranteed by the SBA as a ten year loan. This provides the bulk
of the current financing required.

8.1 Break-even Analysis

QDAR's break-even analysis is based on the averages of the first-year figures for total sales by units, and for operating expenses. These are
presented as per-unit revenue, per-unit cost, and fixed costs. These conservative assumptions make for a more accurate estimate of real risk.

Break-even Analysis

Break even 2001

1200000

1000000

800000

Revenue
600000
Total cost
$

Variable cost
400000
Fixed cost

200000

0
0 00 00 00 00 00 00 00 00 0 0
10 20 30 40 50 60 70 80 90
0 00
10

Jobs

Break-even Analysis:2001 2004

Monthly Units Break-even 6,969
Monthly Revenue Break-even 724,211

Assumptions:
Average Per-Unit Revenue 103.92
Average Per-Unit Variable Cost 42.81
Estimated Monthly Fixed Cost 425,871

8.2 Projected Profit and Loss

As the profit and loss table shows, QDAR expects to continue its steady growth in profitability over the next three years of operations.

Pro Forma Profit and Loss

2001 2002 2003 2004
Sales 9,540,000 11,269,125 13,311,654 14,909,052
Direct Costs of Goods 3,930,000 4,642,313 5,483,732 7,450,123
Other 0 0 0 0
------------ ------------ ------------ ------------
Cost of Goods Sold 3,930,000 4,642,313 5,483,732 7,450,123
Gross Margin 5,610,000 6,626,813 7,827,922 7,458,929
Gross Margin % 58.81% 58.81% 58.81% 50.03%
------------ ------------ ------------ ------------
Expenses:
Payroll 4,315,000 4,530,767 4,757,322 6,015,772
Sales and Marketing and Other Expenses 27,000 35,830 72,122 102,122
Depreciation 120,000 138,000 158,700 182,400
Utilities 1,200 1,260 1,323 1,850
Payroll Taxes 647,250 679,615 713,598 954,124
Other 0 0 0 0
------------ ------------ ------------ ------------
Total Operating Expenses 5,110,450 5,385,472 5,703,065 7,256,268
Profit Before Interest and Taxes 499,550 1,241,341 2,124,858 202,661
Interest Expense 26,748 22,467 20,217 27,321
Taxes Incurred 120,157 304,719 534,930 678,452
Net Profit 352,645 914,156 1,569,711 -503,112
Net Profit/Sales 3.70% 8.11% 11.79% -3.37%
8.3 Projected Cash Flow

The cash flow projection shows that provisions for ongoing expenses are adequate to meet QDAR's needs as the business generates cash
flow sufficient to support operations.

The short-term $55,000 loan is expected to be paid out within one year, while a $250,000 SBA loan will be repaid in ten years.

Cash

Pro Forma Cash Flow

2001 2002 2003 2004

Cash Received
Cash from Operations:
Cash Sales 9,540,000 11,269,125 13,311,654 14,909,052
Cash from Receivables 0 0 0 0
Subtotal Cash from Operations 9,540,000 11,269,125 13,311,654 14,909,052

Additional Cash Received

Sales Tax, VAT, HST/GST Received 0 0 0 0
New Current Borrowing 0 0 0 0
New Other Liabilities (interest-free) 0 0 0 0
New Long-term Liabilities 0 0 0 0
Sales of Other Current Assets 0 0 0 0
Sales of Long-term Assets 0 0 0 0
New Investment Received 0 0 0 0
Subtotal Cash Received 9,540,000 11,269,125 13,311,654 14,909,052

Expenditures 2001 2002 2003 2004

Expenditures from Operations:
Cash Spending 492,065 572,595 694,367 780,452
Payment of Accounts Payable 8,516,341 9,648,672 10,875,732 11,542,751
Subtotal Spent on Operations 9,008,406 10,221,266 11,570,099 12,323,203

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out 0 0 0 0
Principal Repayment of Current Borrowing 55,000 0 0 0
Other Liabilities Principal Repayment 0 0 0 0
Long-term Liabilities Principal Repayment 15,335 20,000 25,000 30,000
Purchase Other Current Assets 0 0 0 0
Purchase Long-term Assets 540,000 660,000 770,000 1,102,310
Dividends 0 0 0 0
Subtotal Cash Spent 9,618,740 10,901,266 12,365,099 13,455,513

Net Cash Flow -78,740 367,859 946,555 367,859

Cash Balance 21,260 389,118 1,335,673 1,453,539
8.4 Balance Sheet

QDAR's projected company balance sheet follows.

Pro Forma Balance Sheet

Assets
Current Assets 2001 2002 2003 2004
Cash 21,260 389,118 1,335,673 978,452
Inventory 327,500 386,859 456,978 1,106,871
Other Current Assets 50,000 50,000 50,000 50,000
Total Current Assets 398,760 825,978 1,842,651 2,135,323
Long-term Assets
Long-term Assets 890,000 1,550,000 2,320,000 3,412,542
Accumulated Depreciation 120,000 258,000 416,700 845,456
Total Long-term Assets 770,000 1,292,000 1,903,300 2,567,086
Total Assets 1,168,760 2,117,978 3,745,951 4,702,409

Liabilities and Capital

Current Liabilities 2001 2002 2003 2004
Accounts Payable 336,450 391,512 474,774 1,102,300
Current Borrowing 0 0 0 250,000
Other Current Liabilities 0 0 0 0
Subtotal Current Liabilities 336,450 391,512 474,774 1,352,300

Long-term Liabilities 234,665 214,665 189,665 350,000

Total Liabilities 571,115 606,177 664,439 1,702,300

Paid-in Capital 250,000 250,000 250,000 250,000

Retained Earnings -5,000 347,645 1,261,800 859,684
Earnings 352,645 914,156 1,569,711 1,109,684
Total Capital 597,645 1,511,800 3,081,512 2,219,368

Total Liabilities and Capital 1,168,760 2,117,978 3,745,951 3,921,668

Net Worth 597,645 1,511,800 3,081,512 2,219,368
8.5 Business Ratios

The following table outlines some of the more important business ratios for the auto repair industry, as described by the Standard Industry
Classifications (SIC) Index code 7538, General Automotive Repair Shops.

Ratio Analysis
2001 2002 2003 2004 Industry Profile
Sales Growth 0.00% 18.13% 18.13% 11.99% 7.00%

Percent of Total Assets

Accounts Receivable 0.00% 0.00% 0.00% 0.00% 8.80%
Inventory 28.02% 18.27% 12.20% 23.50% 9.60%
Other Current Assets 4.28% 2.36% 1.33% 1.06% 23.80%
Total Current Assets 34.12% 39.00% 49.19% 45.40% 42.20%
Long-term Assets 65.88% 61.00% 50.81% 72.57% 57.80%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00%

Current Liabilities 28.79% 18.49% 12.67% 23.44% 34.80%

Long-term Liabilities 20.08% 10.14% 5.06% 7.44% 24.70%
Total Liabilities 48.87% 28.62% 17.74% 36.20% 59.50%
Net Worth 51.13% 71.38% 82.26% 47.19% 40.50%

Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 58.81% 58.81% 58.81% 50.03% 0.00%
Selling, General & Administrative Expenses 55.09% 50.69% 46.95% 48.60% 75.20%
Advertising Expenses 0.03% 0.09% 0.34% 0.68% 1.30%
Profit Before Interest and Taxes 5.24% 11.02% 15.96% 2.52% 1.70%

Additional Ratios 2001 2002 2003

Net Profit Margin 3.70% 8.11% 11.79% -3.37% n.a

Activity Ratios
Accounts Receivable Turnover 0 0 0 0 n.a
Collection Days 0 0 0 0 n.a
Inventory Turnover 12 13 13 45 n.a
Accounts Payable Turnover 26.31 24.79 23.08 48 n.a
Payment Days 14 14 14 57 n.a
7.1 Personnel Plan

As the personnel plan shows, QDAR expects to make gradual investments in staffing as several
new facilities are opened over the next ten years.

Personnel Plan
2001 Staffing 2002 2003 2004 Staffing
Owners 320,000 6 336,000 352,800 370,440 4
Managers 135,000 10 141,750 148,838 199,688 14
Mechanics 3,150,000 80 3,307,511 3,472,897 4,549,805 134
Customer Service Associates 270,000 20 283,503 297,681 364,648 28
Sales & Administrative 440,000 4 462,003 485,106 531,191 6
Total People 120 120 136 152 176 186
Total Payroll 4,315,000 4,530,767 4,757,322 6,015,772

Branches 10 11 12 14

Assumptions
1 In 2004 branches went up to 14
2 Each branch has 10 bays for repairs
3 Each branch has 1 manager, minimum 8 Mechanics, 2 Customer reps,
4 Head office has 4 Directors, 6 Sales & Admin staff
5 At 2001 a mechnaic did on average 3.9 jobs perday

Questions
1 Make key observations on 2004 based over the previous years?
2 Review the break even anaylsis is it still correct?
3 What would you do to correct the situation