Some entrepreneurs think that the financial assumptions section of a car wash business plan is as simple as their monthly budget for their home or office. But come to think of it, if these assumptions were that easy, then, why do some startups fail to get the attention and approval of investors? It is because financial assumptions, though based on predictions, must have a rock solid foundation.
The financial assumptions of your car wash business plan must contain three important presentations: the projected income statement, the balance sheet and the cash flow. Can’t you just create one presentation that contains all three, you ask? Yes, you can, if your purpose is to grab first place in the Guinness Book of World Records for the most disorganized financial assumptions presentation.
Although they are related to each other, each of the three presentations shows specific and detailed predictions of your financial standing for the next three to five years, depending on the investors’ requirements. Below is an in- depth discussion of the elements of financial assumptions.
Also known as profit and loss statement, this presentation is as important to your investors as it is to you. It will show your expected profits against your expenditures for a specific time frame, usually three to five years.
Experts agree that listing down your expenditure first before computing your profits is the easier way to do it. They say that knowing your expenses gives you a clearer view of what you have to earn in order to be profitable.
Your statement must include net sales, gross profits, net income after tax and working capital. Where will you get the figures needed to create the projected income statement? If you have an existing business, you can refer to your historical financial information. If you are just starting out, it would help to do some research from different sources (internet, libraries, competitors) to get an idea of current market prices.
Here are some of the terms that you should know when creating this section of your car wash business plan:
Net sales. The net sales is the sum of all the receipts you issued within a given period. Take note that any discounts given to customers are to be subtracted from it.
Gross profits. This is what remains after you’ve subtracted the cost of a product or service from the sales.
Net income after tax. This is your actual profit. You can compute this by subtracting all expenses, discounts and taxes from your sales.
Operating expenses. Your operating expenses show how much available funds you have to run your business smoothly. You can get this by subtracting your current liabilities from your current assets.
Here’s a filled-up sample of a projected income statement:
|Start up||Year 1||Year 2||Year 3|
|4 Self Service Bays||60,000||76,800||86,400|
|1 Automatic Bay||18,000||24,000||30,000|
|Total Annual Sales||92,400||122,400||145,200|
|Chemical and vending||4,240||5440||6,880|
|Real Estate Taxes||4,000||4,500||5,000|
|Water & Sewer||2560||3,280||4,160|
|Gas and Electric||5,120||6,560||8,240|
|Accounting & Legal||500||300||400||500|
|Repairs & Maintenance||1,680||2,160||2,720|
|Bank loan costs||8,200||0||0||0|
|Advertising and promotions||1,600||1,840||2,000||2,000|
|Total Operating Expenses||33,500||61,740||68,480||75,960|
NOTE: The figures presented here are for illustration purposes only.
To investors, this means that you have the means to repay them based on the profits you are about to make. You can also use this to measure your current financial standing. Did you reach your projected income? How much did you actually gain? Is it time to open a new car wash or time to call it quits?
Simply put, your balance sheet shows how much your business is worth at a specific moment in time. To compute this, sum up all the monetary value of all your assets then subtract your liabilities. The result is what you call equity.
Here are some of the terms that you must be aware of in order to create a comprehensive balance sheet:
Current assets. This must show how much cash you have, accounts you are about to receive and inventory. Government and marketable securities also fall under this category.
Cash. This refers to any money that is at hand, in banks or checking accounts.
Accounts receivable. This is where you key in any credits made by your customers.
Fixed assets. This refers to real estate and equipment. Understand that real estate will depreciate over 20 years while equipment over seven years.
Long-Term Debt. This will show the long-term loans you have incurred when you were just starting up. You also have to take into consideration the percentages of fixed amortizations over the number of years you agreed to pay your bank loan and equipment loan.
Here’s a template that you may use for your car wash business plan:
|ASSETS||Year 1||Year 2||Year 3|
|Net fixed assets|
|Other Current Assets/Deposits|
|Current Long Term Debt - Bank|
|Curr. Port Long Term Debt - Seller|
|Long Term Debt - Bank|
|Long Term Debt - Seller|
The purpose of the cash flow statement is to provide relevant data about your company’s cash receipts and cash payments. This statement links the two other statements- projected income and balance sheet.
The cash flow tracks the movement of your money in and out of your business. For startups, we recommend that you create cash flow statements every month to carefully assess your company’s growth.
It is divided into three important components: operating activities, investing activities and financing activities.
Here’s a template for this section of the car wash business plan:
|Month 1||Month 2||Month 3|
|CASH FLOW FROM |
|Net income (loss)|
|Increase/decrease in accounts payable|
|Increase/decrease in other assets|
|NET CASH IN |
|CASH FLOW FROM|
|Purchase of Equip. & Real Estate|
|NET CASH IN INVESTMENT ACTIVITIES|
|CASH FLOW FROM FINANCING ACTIVITIES|
|Increase/(Decrease) in CPLTD|
|Incr/(Decr) in Long Term Debt|
|Increase - Paid in Capital|
|NET CASH FROM FINANCING ACTIVITIES|
|Net Change in Cash|
The financial assumptions section of the car wash business plan is not that easy to prepare. Should you seek professional help? Yes, that is a good idea, especially if you are not that good with numbers. Better yet, consider a car wash franchise like DetailXPerts. We can assist you in all your car wash business needs every step of the way.
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