Financial Plan
Financing Requirements
Hill Country Home Health Care is also requesting a loan amortization over 10 years with a local
bank in San Antonio, Texas to cover the remaining part of startup costs and working capital
needs. The debt would be secured with all business assets, including receivables, and office
equipment. To assist with first year cash flow, the loan will be structured as interest only for the
first one year is paid at year end. While these repayment structures do not affect the profitability
of the business significantly, some of the more relaxed terms allow for a larger cash reserve to
cover unforeseeable operating expenses.
Source of funds
In order for Hill country Home Health Care agency to become a reality, a combination of
personal investment and long term financing is needed. The owners will contribute $100,000 of
investment and the remaining $200,000 will be financed by a long-term debt from a local bank.
Use of funds
There will be equipment, supplies, and deposits necessary to start operations. These are subject
to change but representational of the items needed to begin serving clients.
Item
$
Computer Desktops
5,000
Copier
2,000
Phone System
5,000
Laser Printer
2,000
Uniforms or badges
7,000
Marketing/advertising budget 40,000
Office supplies
10,000
Medical supplies
40,000
Legal/Bank fees
10,000
Lease/Rent Deposit
10,000
Company vehicles
50,000
Insurance premiums
15,000
Workers Comp. Deposit
22,000
Miscellaneous
20,000
Total estimated startup cost $300,000
Financial Projections
A five year projection of the financial operations of the home care business is below. The
financial projections are based on several assumptions.
Pro forma Income Statement
Revenues
COGS
Gross margin
Gross margin %
Operating
expenses
Operating margin
Operating margin
%
Interest expense
Income before tax
Income tax
Net income
Net profit margin
Y1
$55,000
0
55,000
100%
81,000
Y2
$73,000
0
73,000
100%
103,000
Y3
$135,000
0
135,000
100%
110,000
Y4
$189,000
0
189,000
100%
127,000
Y5
$225,000
0
225,000
100%
138,000
(26,000)
-47%
(30,000)
-43%
25,000
19%
62,000
33%
87,000
39%
10,000
-36,000
0
-36,000
-65$
10,100
-40,100
0
-40,100
-55%
10,500
14,500
435
14,065
10%
9,450
52,550
15,560
36,785
19%
9,850
77,150
23,145
54,005
24%
Assumptions
The revenue forecasts are entirely based on average levels of startup businesses seen in the last
three years. This is a conservative projection as the probability to grow is far bigger and level of
competition is by far less.
Pro forma Cash flow Statement
Calendar year is the same as business year
Net Profit
Y1
-$36,000
Y2
-$40,100
Y3
$14,065
Y4
$36,785
Y5
$54,005
Depreciation and Amortization
Change in accounts receivable
Change in accounts payable
Net cash flows from operations
Investing & Financing activities
Assets purchased
Change in long-term debt
Net cash flows from investing
and financing activities
Cash at the beginning of the
period
Net change in cash during the
period
Cash at the end of the period
2,000
(40,000)
6,000
(68,000)
2,000
(20,000)
4,000
(54,100)
2,000
(23,000)
3,000
(3,935)
2,000
(45,000)
5,000
(1,215)
2,000
(22,000)
9,000
43,005
(59,000)
200,000
141,000
0
0
(54,100)
0
0
(3,935)
0
0
(1,215)
(10,000)
0
33,005
0
73,000
18,900
14,965
13,750
73,000
(54,100)
(3,935)
(1,215)
33,005
73,000
18,900
14,965
13,750
46,755
Cash flow Assumptions
About 90% of sales are on credit. The remaining 10% is cash received beforehand. 40% of costs
will be paid 1 month in arrears for items like medical supplies and office rent.
