PC Repair Business Plan Part II

PC Repair 5.4 Milestones Our milestones, listed in the table below, outline the major events that will promote, as well as insure the success of PC Repair and keep it a going concern well into the future. We will measure our success in meeting these milestones every month, and adjust the plan to keep up with our objectives. Name recognition, in particular, is very important to breaking into this market - we will conduct a survey by calling 200 randomly selected small businesses from the Chamber of Commerce listings on the specified dates and asking them whether they have heard of PC Repair, and if so, what their impression is of our service. If any of the respondents have actually used our services, we will elicit feedback on their experience with us, and suggestions for improvement. We will also ask if they would recommend us to a colleague. Table: Milestones Milestones Milestone Procurement of Start Date 12/1/2004 End Date 2/1/2005 Budget $1,200 Manager JMH Department Department 12/15/2004 2/6/2005 $1,200 JMH Department 1/1/2005 2/7/2005 2/28/2005 1/17/2005 2/8/2005 2/28/2005 $0 $0 $0 JMH JMH JMH Department Department Department market Meet with Leasing 3/1/2005 3/10/2005 $0 JMH Department Agent Interview potential 3/1/2005 4/25/2005 $0 JMH Department Techs Move into Leased 4/1/2005 4/10/2005 $2,000 JMH Department Space Sign on Leased 4/15/2005 4/20/2005 $6,000 JMH Department Vehicle Targeted Ads Begin 1st Tech Starts 4/15/2005 5/1/2005 5/15/2005 5/1/2005 $4,000 $0 JMH JMH Department Department materials for opening Start-up Ad Campaign Get Loan Approved Open Business Name Recognition by 5% of potential 2nd Round Tech 7/1/2005 7/31/2005 $0 JMH Department Interviews Direct marketing to 7/1/2005 9/30/2005 $8,000 JMH Department Small Businesses Increase Name 8/1/2005 8/2/2005 $0 JMH Department 8/1/2005 8/7/2005 $0 $22,400 JMH Department Recognition to 20% 2nd Tech Starts Totals Chart: Milestones 6.0 Management Summary PC Repair will be owned and managed by Jack Hacker. Jack has 10 years of experience in the fields of technical support, networking, and computer training and repair. Jack has also spent the last three years as the manager of a custom computer building and repair store, and understands the computer needs of small businesses. Jack is adept at managing his time, and at quickly responding to multiple customer calls and needs. For the first three months, Jack will be in charge of all aspects of the business. In the third month, when another tech is hired, Jack will shift some of his energy from directly responding to customer needs, to training and managing others to do this work effectively. Jack will maintain direct control over inventory ordering and bookkeeping, and will try to do as many of the on-site calls as possible himself. Part of our brand recognition strategy is to identify PC Repair with Jack's efficiency, friendliness, and technical expertise. The easiest way to associate the two is for Jack to be a major part of many customers' experiences with us. He will delegate technical repairs later in the year to the techs working in the leased office space, and will also train them in his method of direct phone support. Jack has worked extensively with computer technicians and support staff in the past, and knows that they work best when given free rein within a set of mutually-agreed-upon guidelines. The first week of each tech's employment will be dedicated to helping them understand PC Repair's guidelines: the customer needs help, and we're here to help them; the customer is frustrated, upset, or confused - but that doesn't make the customer a problem; the customer needs reassurance as well as solutions. Within this framework, the techs can solve the customer's problem the best way they see fit - Jack is not a micro manager. 6.1 Personnel Plan Jack Hacker will be the only employee for the first few months; his salary is directly related to the success of the business, and will never exceed 18% of sales revenue. In the third month, we will move to a leased office space and hire a second employee, with a third hire planned for August, if projections are on target. We plan to hire additional part-time employees in the second year, to better handle the increasing sales. Our employees will be skilled professionals, with equally strong technical and people skills. It is very important to Jack that they be paid salaries commensurate with their abilities and dedicationhappy tech support people make for happy customers. To that end, our full-time employees will receive health benefits (premiums split between the employee and PC Repair), paid holidays, and sick time. Those benefits are included in the payroll totals listed below. Table: Personnel Personnel Plan Year 1 $33,000 $21,600 $14,400 $0 3 Owner Tech1 Tech2 Part Time Total People Total Payroll 7.0 Financial Plan $69,000 Year 2 $38,000 $30,000 $30,000 $12,000 5 $110,000 Year 3 $40,000 $30,000 $30,000 $15,000 5 $115,000 The following sections include the annual estimates for the standard set of financial tables. Detailed monthly pro-forma tables are included in the appendix. Our financial plan calls for limited growth in the first three months, followed by much higher sales when we move and hire additional employees. These projections are based on sound market research and ratios for comparable businesses. As we grow, we will keep our operating expenses down, and maintain a positive cash balance as we repay our three-year loan. 7.1 Important Assumptions PC Repair's customer base would fluctuate if there was a recess in the economy or other extenuating circumstances that pertain directly to consumer or industry behavior. However, given the steady increase in computer users despite the recent recession, we assume that sales forecasts are unlikely to be dramatically altered by economic events. The table below shows some of our other assumptions. Table: General Assumptions General Assumptions Plan Month Current Interest Rate Long-term Interest Rate Tax Rate Year 1 1 7.00% 10.00% 30.00% Year 2 2 70.00% 10.00% 30.00% Year 3 3 70.00% 10.00% Other 0 0 0 7.2 Break-even Analysis Fixed costs are projected at a monthly average for the first year. This includes payroll, moving expenses and rent, purchase of a company vehicle, and other necessities like cell phones and the answering service. Variable costs (inventory used in repairing or servicing computers) are projected as well. At these levels, what we need to bring in per month to break even is shown in the table and chart below. We will reach our break-even point mid-year, although we expect sales in November and December to dip below this level because of holidays. Chart: Break-even Analysis Table: Break-even Analysis Break-even Analysis Monthly Units Break-even Monthly Revenue Break-even 52 $15,110 Assumptions: Average Per-Unit Revenue Average Per-Unit Variable Cost Estimated Monthly Fixed Cost $291.29 $70.00 $11,479 7.3 Projected Profit and Loss The table below shows our projected profit and loss. There are two lines for direct cost of sales - the second line shows projected inventory costs of fulfilling our maintenance contracts. The marketing/promotion line shows our planned advertising program expenses. Although these are aggressive, we must spend heavily in the first year in order to establish the brand recognition that will help us break in to the local market. This table also shows our projected expense increases as we hire more employees and move into a larger rented space. Before the move, the owner will absorb expenses related to utilities. In years two and three, we have budgeted for additional expensed equipment to expand our diagnostic and repair capabilities to keep up with orders. We are seeking a modest net profit in the first year. As our reputation grows, we will see higher revenues and net profit over the next three years. Chart: Gross Margin Monthly Chart: Gross Margin Yearly Table: Profit and Loss Pro Forma Profit and Loss Sales Direct Cost of Sales Costs of Fulfilling Maintenance Contracts Total Cost of Sales Gross Margin Gross Margin % Expenses Payroll Marketing/Promotion Depreciation Lease Expensed Equipment Insurance Website Answering Service Mileage Vehicles Year 1 $203,030 $42,604 $1,488 Year 2 $276,000 $55,800 $4,320 Year 3 $328,500 $64,350 $6,120 $44,092 $60,120 $70,470 $158,938 78.28% $215,880 78.22% $258,030 78.55% $69,000 $28,000 $0 $10,000 $0 $3,150 $2,080 $200 $2,660 $13,200 $110,000 $6,000 $0 $12,000 $10,000 $1,200 $480 $2,400 $5,400 $15,000 $115,000 $12,000 $0 $12,000 $12,000 $1,200 $480 $2,400 $5,400 $17,000 Cell Phones Utilities Internet Moving Expenses $1,260 $5,000 $1,200 $2,000 $1,260 $6,000 $1,200 $0 $1,260 $7,000 $1,200 $0 $137,750 $170,940 $186,940 Profit Before Interest and Taxes EBITDA Interest Expense Taxes Incurred $21,188 $21,188 $1,097 $6,027 $44,940 $44,940 $6,570 $11,511 $71,090 $71,090 $2,139 $20,685 Net Profit Net Profit/Sales $14,064 6.93% $26,859 9.73% $48,266 14.69% Total Operating Expenses Chart: Profit Monthly Chart: Profit Yearly 7.4 Projected Cash Flow The Cash Flow chart, below, shows our projected cash position for the first year; the table following it shows highlights for the first three years. With the requested start-up funding, we will maintain a positive cash balance throughout, and repay the loan within three years. Chart: Cash Table: Cash Flow Pro Forma Cash Flow Year 1 Year 2 Year 3 Cash from Operations Cash Sales Subtotal Cash from Operations $203,030 $203,030 $276,000 $276,000 $328,500 $328,500 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 $203,030 $0 $0 $0 $0 $0 $0 $0 $276,000 $0 $0 $0 $0 $0 $0 $0 $328,500 Year 1 Year 2 Year 3 Expenditures from Operations Cash Spending Bill Payments Subtotal Spent on Operations $69,000 $110,873 $179,873 $110,000 $142,543 $252,543 $115,000 $163,375 $278,375 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 $0 $6,564 $0 $0 $0 $0 $0 $186,437 $0 $6,550 $0 $0 $0 $0 $0 $259,093 $0 $6,111 $0 $0 $0 $0 $0 $284,486 Net Cash Flow Cash Balance $16,593 $44,593 $16,907 $61,500 $44,014 $105,514 Cash Received Expenditures