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PMS Financial Plan - Essay Example

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PMS Financial Plan

The most important factor in our case is the continuous occupancy of the properties. Therefore, there is a need to develop an effective strategy to deliver the services such as repairs and maintenance.The following table details the assumptions that are made .These figures are annual and monthly assumptions that show the consistent growth of the company.Since the operation is on a monthly collection basis, it is assumed that the majority of the collections will be timely and in full.The following chart indicates our financial indicators for the first two years of operation. PMS foresees growth in both in customers who want their property to be managed as well as increase in the growth margin percentage.PMS cash flow depends on the monthly collection from property owners. A 25-day grace period is provided after which unpaid accounts will inhibit our cash flow. However, the monthly basis of cash flow should maintain the steady level of cash flow.The following table and the accompanying chart details the break-even analysis for this project. The projected fixed costs will be $6,000 per month with a variable per-unit cost of $200 which shall be ideally accounted for by 28 properties that is rented at $3,000 per month. The payment scheme of PMS using this rent figure will then be $1500 for the 1st month that the unit is occupied by a tenant or 50% of the rent. A 10% rent management commission or $300 fee starting from the first month until the tenant occupies the unit shall also be collected. To account for the fact that the $1500 will only be paid on the first month and that the break-even analysis is on a per month basis, the total fee collected by the PMS for each month would be $300 plus $ 125 ( $1500 / 12 months). Thus the total fee is $425 per month.
The break-even assumes that all rent shall be paid in a timely manner such that the owner of the property can pay PMS also on time. This situation is ideal and as such, it is expected that the initial break-even per unit will likely be higher.


Break-even Analysis:
Monthly Units Break-even
10
Monthly Revenue Break-even
$16,380


Assumptions:

Average Per-Unit Revenue
$200.00
Average Per-Unit Variable Cost
$425.00
Estimated Monthly Fixed Cost
$6,000


The projected profit and loss for PMS is shown on the following table. Management fees are increasing from about $624,000 in 2006 to above $701,000 after the second year. The net profit for the first year alone amounts to $160,000. The projected gross margin will be about 69% for the first year. The net profit for the second year is seen to be above 20%
The planned projections are included in the attached Profit and Loss Table.
Pro Forma Profit and Loss

2006
2007
Professional Fees
$624,000
$701,000
Direct Cost of Fees
$192,000
$205,000
Other
$0
$0

------------
------------
Total Cost of Property Managing
$192,000
$205,000
Gross Margin
$432,000
$496,800
Gross Margin %
69.23%
70.87%
Expenses:


Payroll
$120,000
$135,000
Sales and Marketing and Other Expenses
$15,600
$16,000
Depreciation
$3,815
$6,500
Leased Equipment
$15,000
$15,000
Utilities
$8,000
$9,000
Insurance
$9,000
$10,500
Maintenance
$8,500
$9775
Rent
$3,000
$4,000
Payroll Taxes
$18,000
$19,700
Other
$0
$0

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The most important factor in our case is the continuous occupancy of the properties. Therefore, there is a need to develop an effective strategy to deliver the services such as repairs and maintenance.The following table details the assumptions that are made …
Author : pamela01
PMS Financial Plan essay example
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