K MAKHAVHU TAX EXECUTIVES AND ACCOUNTANTS, INC 2

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K MAKHAVHU TAX EXECUTIVES & ACCOUNTANTS, INC

BUSINESS PLAN

7/17/2015

K MAKHAVHU

Legal Page

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through other means and that any disclosure or use of same by reader, may cause

serious harm or damage to _________________________.

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This is a business plan. It does not imply an offering of securities.

Table of Contents

Page 1

1.0 Executive Summary .................................................................................................................... 1

Chart: Highlights .......................................................................................................................... 3

1.1 Mission .......................................................................................................................................... 3

1.2 Keys to Success ........................................................................................................................ 4

1.3 Objectives .................................................................................................................................... 4

2.0 Company Summary ..................................................................................................................... 4

2.1 Company History ...................................................................................................................... 5

Table: Past Performance ........................................................................................................... 5

Chart: Past Performance ........................................................................................................... 6

2.2 Company Ownership ............................................................................................................... 7

3.0 Services ............................................................................................................................................ 7

3.1 Service Description .................................................................................................................. 7

3.2 Competitive Comparison ....................................................................................................... 8

3.3 Fulfillment .................................................................................................................................... 8

3.4 Technology .................................................................................................................................. 8

4.0 Market Analysis Summary ........................................................................................................ 9

4.1 Market Segmentation ............................................................................................................. 9

Table: Market Analysis ............................................................................................................... 9

Chart: Market Analysis (Pie) .................................................................................................. 10

4.2 Target Market Segment Strategy .................................................................................... 10

4.2.1 Market Needs ................................................................................................................... 10

4.2.2 Market Trends .................................................................................................................. 11

4.2.3 Market Growth ................................................................................................................. 11

4.3 Service Business Analysis ................................................................................................... 11

4.3.1 Competition and Buying Patterns ............................................................................ 12

5.0 Strategy and Implementation Summary .......................................................................... 12

5.1 Competitive Edge ................................................................................................................... 12

5.2 Sales Strategy ......................................................................................................................... 13

Table: Sales Forecast ............................................................................................................... 13

Chart: Sales Monthly ................................................................................................................ 14

Chart: Sales by Year ................................................................................................................. 14

6.0 Management Summary ............................................................................................................ 15

6.1 Personnel Plan ......................................................................................................................... 15

Table: Personnel ......................................................................................................................... 15

7.0 Financial Plan ............................................................................................................................... 16

7.1 Important Assumptions ....................................................................................................... 16

Table: General Assumptions .................................................................................................. 16

7.2 Key Financial Indicators ....................................................................................................... 17

Chart: Benchmarks .................................................................................................................... 17

7.3 Break-even Analysis .............................................................................................................. 18

Chart: Break-even Analysis ................................................................................................... 18

Table: Break-even Analysis .................................................................................................... 18

7.4 Projected Profit and Loss ..................................................................................................... 19

Table of Contents

Page 2

Table: Profit and Loss ............................................................................................................... 19

Chart: Profit Monthly ................................................................................................................ 20

Chart: Profit Yearly .................................................................................................................... 20

Chart: Gross Margin Monthly ................................................................................................. 21

Chart: Gross Margin Yearly .................................................................................................... 21

7.5 Projected Cash Flow .............................................................................................................. 22

Chart: Cash .................................................................................................................................. 22

Table: Cash Flow ........................................................................................................................ 23

7.6 Projected Balance Sheet ...................................................................................................... 24

Table: Balance Sheet ................................................................................................................ 24

7.7 Business Ratios ....................................................................................................................... 25

Table: Ratios ................................................................................................................................ 25

Table: Sales Forecast ......................................................................................................................... 0

Table: Personnel ................................................................................................................................... 1

Table: Personnel ................................................................................................................................... 1

Table: General Assumptions ............................................................................................................ 1

Table: General Assumptions ............................................................................................................ 1

Table: Profit and Loss ......................................................................................................................... 2

Table: Profit and Loss ......................................................................................................................... 2

Table: Cash Flow .................................................................................................................................. 4

Table: Cash Flow .................................................................................................................................. 4

Table: Balance Sheet .......................................................................................................................... 6


Page 1

1.0 Executive Summary

K Makhavhu Tax Executives & Accountants, Inc (K Makhavhu inc) is in the process of being

formed as an ongoing Private company owned and operated by Khaukanani Makhavhu. This

plan is written as a guide for continued development, and will also serve as the basis for

marketing proposals. The two objectives of K Makhavhu Inc are to generate a profit and to

grow at a challenging and manageable rate.

The mission of K Makhavhu Inc is to provide fast and reliable services in accounting, Tax

advisory, Bookkeeping and Payroll advisory to small and medium businesses (SMB), individuals,

and other organizations.

The keys to success for K Makhavhu Inc are: visibility to generate new business leads,

networking with other professionals, responsiveness, and quality.

The initial primary service offered will be accounting, Tax advisory and Payroll Advisory,

although specialized fields will be considered in future growth.

The overall objective is to focus the activities towards the specialized services (analyses,

investigations, startups, etc.) and to become a leader in the Vhembe district area. The company

projects growth to be ~10% of sales in the next three years.

The most important keys to success for K Makhavhu Inc are developing visibility to generate

new business leads, strong concentration on relationships with clients, and a high level of

quality in our services.

The cooperation between the company and its competitors is flexible--with the objective to

change rapidly if the market demands.

There are four major classes of competition in the actual fiduciary business in South Africa.

These include individual proprietors and small fiduciary and accounting offices and medium

fiduciary offices with between 6 and 25 employees, these offices are available for general

financial and tax consulting. There are also large auditing and consulting companies. These

companies have several hundred employees. They tend to operate more in the lucrative

consulting business. Banks, Assurances and other financial consultants are also new

competitors in this field. Banks are now active in start-up consulting, corporate finance,

mergers and acquisitions, and others.

Technology is, of course, very important to the success of K Makhavhu Inc. It is imperative that

the company stay up-to-date on technological developments and it will be important to devote

a reasonable portion of each year's revenues toward upgrading the equipment and software

used in normal operations.


Page 2

K Makhavhu Inc will adopt a focused market strategy. Logical segmentation breaks the market

down into the following: Individuals, Investors, Small Businesses, Medium Businesses, Large

Businesses, and Authorities and Public Organizations. For our further development, we consider

Individual persons and Investors plus Small and Medium Businesses to be crucial.

For our business, we do not have main competitors. We have a lot of widely-sized competitors

in a vast market of services. This market environment gives ample opportunity for K Makhavhu

Inc to create and expand a niche in the chosen market fields. Finally, worth noting is the

growth trend for the general market, estimated between 5% and 10%, annually.

There are three different major opportunities (needs) in the fiduciary business over the next

years:

Bookkeeping and other services related to the operative financial management (payroll,

cost-accounting, accounting for pension funds, etc.).

Consulting and special mandates such as financial planning, business

evaluation, merger and acquisition valuation, special audits, etc.

Legal Auditing (incl. IAS, IFRS and other standards) as an independent and responsible institution.

In addition, the company sees three primary market trends which seem to be most important in

our business.

1. Rapid growth in the complexity of business that requires rapid adaptation in the strategy

and structures of companies.

2. More litigation due to higher percentages of unsuccessful ventures.

3. The growth of outsourced financial consulting.

All of this provides continuing opportunities for a dynamic company such as K Makhavhu Inc.

We believe our business is in a grand change. The competitors must be generalists and

specialists at the same time. For small and medium fiduciary businesses, a focus of one primary

segment of business is necessary. For example, if the "core" business is accounting, the other

fiduciary businesses like tax, auditing, consulting must be reduced to a general level. In the

core business, the company must be current with the services, while having the capacity to

innovate (like new accounting services related to the Internet).

K Makhavhu Inc's competitive edge is in the well-established reputation of Khaukanani

Makhavhu who has been in the consulting business for five years, and the company's ability to

focus in this niche market.


Page 3

The company's sales strategy will be based on building long-term customer relationships, which

will result in repeat sales. The company estimates that revenues will be approximately

R232,000 by Year 3, yielding profits. The company will manage its assets and create profits

with no debt financing. It does not anticipate any cash flow problems.

Khaukanani Makhavhu, the majority owner of K Makhavhu Tax Executives & Accountants, will

assume strategic management functions. Kedibone Thulare will be in charge of market research

and customer support. Since no major increases in personnel are expected in the next three

years, Mr. Makhavhu will retain his managerial functions throughout these years.

Chart: Highlights

1.1 Mission

K Makhavhu Inc's mission is simple and straightforward:

1. Purpose – K makhavhu Inc exists to provide complete, reliable and high quality services to

SMBs, individuals, lawyers, and authorities. Services must give solutions and results!

2. Vision - By providing innovative services, K Makhavhu Inc generates a name in the district

and the surrounding area.

Sales

Gross Margin

Net Profit

R0

R30,000

R60,000

R90,000

R120,000

R150,000

R180,000

R210,000

R240,000

2015 2016 2017

Highlights


Page 4

1.2 Keys to Success

The keys to success for K Makhavhu Inc are:

Developing visibility to generate new business leads.

Relationships with clients (developing loyal, respectful, and intensive contact with both

clients and potential clients).

Marketing/strategy and networking with other professionals.

Responsiveness to clients (fast response time for special problems).

Quality (especially in reporting information).

Excellence in fulfilling the promise. Openness: languages and willpower for creating interregional and international contacts.

1.3 Objectives

The objectives of this business plan are:

1. To provide a written guide for managing this business; a strategic framework for developing

a comprehensive tactical marketing philosophy.

2. This plan is not intended to obtain financing; it is purely for internal improvements.

3. The scope of this plan is to provide detailed monthly projections for the current plan year, as well as yearly summaries for the following two years.

The objectives of K Makhavhu Tax Executives & Accountants, Inc are:

1. The overall objective is to focus the activities towards the specialized services (analyses,

Accounting, Tax, Payroll, startups, etc.) and to become a leader in this niche in the Vhembe

district area.

2. Cash flow - To generate sufficient cash flow to finance future growth and development and

to provide the resources needed to achieve the other objectives of the company and its

owners.

3. Growth - To expand the business at a rate that is both challenging and manageable, serving

the market with innovation and adaptability. (Growth projected at 10% of sales in the next

three years.)

2.0 Company Summary

K Makhavhu Inc will be an ongoing company with the following characteristics:

1. The goal will be to continue the activities on a larger personal and organizational basis, still

with no debt financing.

2. K Makhavhu Inc will assume operations one of the divisions of the company.

3. The cooperation between other Firms and K Makhavhu Inc is flexible--with the objective to change rapidly if the market demands.


Page 5

2.1 Company History

The sole proprietorship company K Makhavhu Tax Executives & Accountants, Inc was founded 8

March 2015. In the first 4-month period, the company generated sales of R15,000.

In the time of general recession, between 2014 and 2015, with a concentrated basis work, the

owner created and assured his independent existence. The name K Makhavhu Inc was made

known, and he has established a good professional reputation in the District area.

Before starting his own business, Khaukanani Makhavhu acquired extensive professional

experience as listed below:

1. 3 years Collins Sebola, Inc, Limpopo Area.

2. 2 years Boston Business College, Gauteng area.

3. 3 years UNISA Degree in Bcompt, Limpopo area

Table: Past Performance

Past Performance

2015 2016 2017

Sales R111,182 R146,505 R162,140 Gross Margin R111,182 R145,347 R138,977 Gross Margin % 100.00% 99.21% 85.71% Operating Expenses R43,430 R46,325 R49,221 Collection Period (days) 27 17 19

Balance Sheet

2015 2016 2017

Current Assets Cash R5,211 R22,583 R92,651 Accounts Receivable R8,107 R5,211 R11,581 Other Current Assets R579 R1,158 R1,158 Total Current Assets R13,897 R28,952 R105,390

Long-term Assets Long-term Assets R5,211 R5,211 R6,948 Accumulated Depreciation R0 R0 R0 Total Long-term Assets R5,211 R5,211 R6,948

Total Assets R19,108 R34,163 R112,338


Page 6

Current Liabilities Accounts Payable R9,256 R9,844 R11,581 Current Borrowing R4,053 R1,158 R2,895 Other Current Liabilities (interest free) R0 R0 R0 Total Current Liabilities R13,309 R11,002 R14,476

Long-term Liabilities R0 R0 R0 Total Liabilities R13,309 R11,002 R14,476

Paid-in Capital R5,000 R5,000 R5,000 Retained Earnings R799 R18,161 R92,862 Earnings R0 R0 R0 Total Capital R5,799 R23,161 R97,862

Total Capital and Liabilities R19,108 R34,163 R112,338

Other Inputs Payment Days 45 45 45 Sales on Credit R111,182 R146,505 R162,140 Receivables Turnover 13.71 28.11 14.00

Chart: Past Performance

Sales

Gross

Net

R0

R20,000

R40,000

R60,000

R80,000

R100,000

R120,000

R140,000

R160,000

2015 2016 2017

Past Performance


Page 7

2.2 Company Ownership

K Makhavhu Tax Executives & Accountants, Inc will be incorporated in the city of Makhado by

Khaukanani Makhavhu, who will be the majority owner.

3.0 Services

K Makhavhu Inc will be the number one company in the Vhembe district area for

specialized and investigative services in the modern business environment. K Makhavhu Inc

also offers classic Payroll, auditing, Accounting and general consulting services.

1. K Makhavhu Inc will offer three main services - Accounting, Tax Advisory, and Payroll

Advisory.

2. There appear to be four main classes of competition, as indicated under section 3.2.

3. Fulfillment of services will be provided in the future by Khaukanani Makhavhu and other

equally qualified professionals. 4. It's important to be current with the classic and special business software.

Detailed descriptions of these points are found in the sections below.

3.1 Service Description

K Makhavhu Tax Executives & Accountants, Inc offers three main services:

1. Accounting - Financial data must be checked and confirmed, we consider this normal, as a

service related to auditing. Most of these services are legal audits in the sense of Swiss

company law. A Legal Audit is the most comprehensive assessment of the presentation of

financial data. By contrast, a Review is generally prepared for the assurance of the

management and as a minimum requirement of financial institutions for the propose of

extending credit. Finally an Analysis is limited on the plausibility and the ratios. An Analysis

is normally based on audited or reviewed financial statements.

An essential part of all audit activities understands the business environment in which a

company operates and to evaluate the risks of financial losses. In fact it's necessary to

check past financial statements, but the key for a modern audit is to have time to move

from an accounting approach to a planning approach--from present to future.

2. Tax Advisory - Includes business tax planning, business tax evaluation, tax audits, etc.

3. Payroll Advisory – Payroll training. Payroll implementations together with referrals, Monthly Payroll processing, printing of payslips to acquire credit at financial institutions.


Page 8

3.2 Competitive Comparison

There seems to be four major classes of competition in the actual fiduciary business in South

Africa:

1. Individual proprietors and small fiduciary and accounting offices. The primary

business of these competitors is accounting and tax compliance (for individuals and

companies). These offices normally employ between 1 and 5 people. These offices deal in a

large spectrum on a general level, but without specialization. These offices are often

members of the SAIPA and SAIT.

2. Medium fiduciary offices with between 6 and 25 or more employees. These offices are

also dealing in a large and general spectrum. If there are several partners--with different

formation and specialties--these offices are available for general financial and tax

consulting. This offices are member of the SAIPA or/and the SAIT.

3. Large auditing and consulting companies. These companies have several hundred

employees. They tend to operate more in the lucrative consulting business. Public

companies are normally audited by these companies. Large companies are normally not

interested in dealing with small and medium business. All large companies have an

international network.

4. Banks, Assurances and other Financial Consultants are new competitors. Financial

services are "in." Banks are active in start-up consulting, corporate finance, mergers and

acquisitions, and others.

3.3 Fulfillment

The fulfillment of services was provided in the past by the owner himself. The

ultimate delivery was the owner's expertise and problem solving capability, coupled with an

open mind and ease of communication. The end result is an established trust with complete

customer confidence and satisfaction.

In the future, the clients must also accept the work of other qualified personnel--it is necessary

to transfer and expand the established personal goodwill into company goodwill. This will only

be possible with qualified and motivated employees.

3.4 Technology

Technology is, of course, very important to the success of K Makhavhu Tax Executives &

Accountants, Inc. It is imperative that the company stay up-to-date on the technological

developments in the classic business software like MS-Office, Payroll, Audit, Accounting

sofwares, Tax softwares etc. as well as in the special software and tools for auditing, financial

planning, business planning, etc.


Page 9

In addition, it will be important to devote a reasonable portion of each year's revenues toward

upgrading the equipment and software used by K Makhavhu Inc in its normal operations.

4.0 Market Analysis Summary

K Makhavhu Tax Executives & Accountants, Inc will adopt a focused market strategy.

Logical segmentation breaks the market down into the following: Individuals, Investors,

Small Businesses, Medium Businesses, Large Businesses, and Authorities and Public

Organizations. Descriptions are provided below.

The largest and most logical target markets for K Makhavhu Inc at the present are small

and medium businesses. In a new "Financial Industry" Individuals and Investors become an

important market segment.

For our business, we do not have main competitors. We have a lot of widely-sized

competitors in a vast market of services. This market environment gives ample opportunity

for K Makhavhu Inc to create and expand a niche in the chosen market fields.

Finally, worth noting is the growth trend for the general market, estimated between 5%

and 10%, annually.

4.1 Market Segmentation

The following chart and table reflect the estimated market segmentation and growth for this

business.

Individual persons and Investors

Small Businesses - Defined as businesses with 1 to 24 employees, this is the second largest

and fastest growing segment in our region.

Medium Businesses - 25 to 499 employees.

Large Businesses - 500 or more employees.

Authorities and Public Organizations

Table: Market Analysis

Market Analysis

2015 2016 2017 2018 2019 Potential Customers Growth CAGR Individuals and Investors

20% 3 4 5 6 7 23.59%

Small Businesses 10% 20 22 24 26 29 9.73% Medium Businesses 10% 33 36 40 44 48 9.82% Large Businesses 5% 34 36 38 40 42 5.42% Authorities and Public Organisations

5% 10 11 12 13 14 8.78%


Page 10

Total 8.78% 100 109 119 129 140 8.78%

Chart: Market Analysis (Pie)

4.2 Target Market Segment Strategy

For our further development, we consider the following market segments to be very important:

Individual persons and Investors.

Small and Medium Businesses.

K Makhavhu Inc will focus its marketing strategy primarily on these market segments.

4.2.1 Market Needs

There are three different major opportunities (needs) in the fiduciary business over the next

years:

1. Bookkeeping and other services related to the operative financial management (payroll,

cost-accounting, accounting for pension funds, etc.).

2. Consulting and special mandates.

o Financial-Planning

o Business-Planning

o Business-Evaluation

o Merger & Acquisition

o Startup-Planning


Page 11

o Restructuring

o Business Succession-Planning

o Coaching in Financial-Managing

o Recovery

o Special Audits, Reviews

o Analyses

o Investigation, Forensic Services

o Other

3. Legal Accounting and Tax (incl. IFRS and other standards) as an independent and responsible institution.

We think that the need for consulting and other specialized fields has a strong growth potential.

4.2.2 Market Trends

Three primary market trends seem to be most important in our business:

Trend 1- (most important) Rapid growth in complexity of business in an ever-changing

market and competitive environment needs continuous and rapid adaptation in both

strategy and structures of companies.

Trend 2- (moderately important) In the future there will be a percentage of unsuccessful

ventures resulting in more litigation, which, in turn, will emphasize the need for specialized

audits, investigation, restructuring, etc.

Trend 3- (least important) Predicted continued growth in consulting because companies will

be unwilling to pay fixed costs of salaries, choosing instead to treat specialized financial knowledge and needs as variable costs from external sources.

Economically it is more expedient to acquire specialized services from a consulting firm that has

its own specialized employees.

4.2.3 Market Growth

As noted in the previous section, several factors are predicted to continue well into the next

decade, not the least of which we estimate the annual market growth rate between 5% and

10%.

4.3 Service Business Analysis

The fiduciary and consulting business for the local area is already well established, yet still

allows ample opportunity for us. This is supported by the following points:

Already in existence are a large number of firms - we think that most of the small and

medium firms are operating in a limited spectrum of traditional fiduciary services

(accounting and tax) and they do not have enough knowledge and/or time for entering the


Page 12

field of specialized services - so we have new participants like banks, assurances, lawyers,

and others entering the market.

Customers in the fiduciary business tend to be loyal, relying on the same consultant for

future needs once a relationship has been established - this fact requires establishing a

good and intensive personal relationship with client. This, in the large, "big 4," firms,

is often not realizable because of staff turnover and inaccessibility of personnel.

The globalization of markets will increase the demands for expansion of new services related to our business.

We believe our business is in a in a period of grand change. The competitors must be

generalists and specialists at the same time. For small and medium fiduciary businesses, a

focus of one primary segment of business is necessary. For example, if the "core" business is

accounting, the other fiduciary businesses like tax, auditing, consulting must be reduced to a

general level. In the core business, the company must be current with the services, while

having the capacity to innovate (like new accounting services related to the Internet).

For our business, we do not have main competitors: We have many competitors in diversified

services. More important than the competitors, is the need to get established in the right

market and to develop this market with a strong and flexible strategy.

4.3.1 Competition and Buying Patterns

Competition in the general field of business consulting in the Luzern area is quite intense.

Although numerous established companies offer a variety of services to different customer

segments, K Makhavhu Tax Executives & Accountants, Inc considers competition in our focus

market niche of small and medium businesses to be modest. Customers in this segment

strongly rely on the consultant's professional qualifications and the ability to come up with

viable solutions in a time- and cost-effective manner.

5.0 Strategy and Implementation Summary

K Makhavhu Inc will offer Accounting, auditing, consulting, and investigation services to small

and medium businesses in the area. The company will focus on providing excellent customer

service, and that will generate favorable client referrals and increase customer retention.

5.1 Competitive Edge

K Makhavhu Auditing & Consulting's competitive edge is in the well-established reputation of

Khaukanani Makhavhu who has been in the consulting business for over five years. Combining

his professional expertise with the financial, marketing, and technical support of the firm, the

company is positioned to further entrench itself in the growing market of small and medium

business consulting in the Vhembe district area.


Page 13

5.2 Sales Strategy

The company's sales strategy will be based on building long-term customer relationships, which

will result in repeat sales. Customer service and 'face time' with clients will be aimed to

maintain a high level of customer retention. The charts and table below outline the Sales

Forecast for the next three years.

Table: Sales Forecast

Sales Forecast

2015 2016 2017 Sales Accounting services R80,492 R96,590 R115,908 Tax Advisory services R48,291 R57,949 R69,539 Payroll services R32,194 R38,633 R46,359 Total Sales R160,977 R193,172 R231,807

Direct Cost of Sales

2015 2016 2017

Accounting services R12,077 R13,889 R15,972 Tax Advisory services R7,243 R8,329 R9,579 Payroll services R6,438 R7,404 R8,514 Subtotal Direct Cost of Sales R25,758 R29,622 R34,065


Page 14

Chart: Sales Monthly

Chart: Sales by Year

Accounting services

Tax Advisory services

Payroll services

R0

R30,000

R60,000

R90,000

R120,000

R150,000

R180,000

R210,000

R240,000

2015 2016 2017

Sales by Year

Accounting services

Tax Advisory services

Payroll services

R0

R2,000

R4,000

R6,000

R8,000

R10,000

R12,000

R14,000

R16,000

R18,000

R20,000

J a n F e b

M a r A p r

M a y J u n

J u l A u g

S e p O c t

N o v D e c

Sales Monthly


Page 15

6.0 Management Summary

Khaukanani Makhavhu, the majority owner of K Makhavhu Inc, will assume strategic

management functions. Kedibone Thulare will be in charge of market research and customer

support. No major increases in personnel are expected in the next three years.

6.1 Personnel Plan

The following table outlines the two-person management system of K Makhavhu Inc.

Table: Personnel

Personnel Plan

2015 2016 2017 Khaukanani Makhavhu R48,000 R51,000 R56,000 Kedibone Thulare R24,000 R26,000 R30,000 Total People 2 2 2

Total Payroll R72,000 R77,000 R86,000


Page 16

7.0 Financial Plan

The following sections include the annual estimates for the standard set of financial tables.

Detailed monthly pro-forma tables are included in the appendix.

7.1 Important Assumptions

This information is presented in the table below.

Table: General Assumptions

General Assumptions

2015 2016 2017 Plan Month 1 2 3 Current Interest Rate 10.00% 10.00% 10.00% Long-term Interest Rate 10.00% 10.00% 10.00% Tax Rate 25.00% 25.00% 25.00% Other 0 0 0


Page 17

7.2 Key Financial Indicators

The Benchmark chart below uses index values to compare past and future financial indicators.

The bars show relative change, not absolute values.

Chart: Benchmarks

2015

2016

2017

2018

2019

2020

0.0

1.0

2.0

3.0

Sales Gross Margin%

Operating Expenses Collection Days

Benchmarks


Page 18

7.3 Break-even Analysis

With our average monthly fixed costs, Makhavhu will surpass break even consistently

throughout the next year of operations.

Chart: Break-even Analysis

Table: Break-even Analysis

Break-even Analysis

Monthly Revenue Break-even R9,744

Assumptions: Average Percent Variable Cost 16% Estimated Monthly Fixed Cost R8,185

R0

R2,000

R4,000

R6,000

R8,000

R10,000

(R2,000)

(R4,000)

(R6,000)

(R8,000) R0

R2,000 R4,000

R6,000 R8,000

R10,000 R12,000

R14,000 R16,000

R18,000 R20,000

R22,000

Break-even Analysis


Page 19

7.4 Projected Profit and Loss

The projected profit and loss information is presented in the table and charts below.

Table: Profit and Loss

Pro Forma Profit and Loss

2015 2016 2017 Sales R160,977 R193,172 R231,807 Direct Cost of Sales R25,758 R29,622 R34,065 Other R0 R0 R0 Total Cost of Sales R25,758 R29,622 R34,065

Gross Margin R135,219 R163,551 R197,742 Gross Margin % 84.00% 84.67% 85.30%

Expenses Payroll R72,000 R77,000 R86,000 Sales and Marketing and Other Expenses

R6,897 R9,500 R13,000

Depreciation R2,400 R2,500 R2,500 Leased Equipment (incl. office rental) R2,400 R2,500 R3,000 Utilities (incl. office furniture, etc.) R1,800 R2,000 R2,500 Insurance R1,200 R1,500 R2,000 Rent R0 R0 R0 Payroll Taxes R11,520 R12,320 R13,760 Other R0 R0 R0

Total Operating Expenses R98,217 R107,320 R122,760

Profit Before Interest and Taxes R37,003 R56,231 R74,982 Interest Expense R0 R0 R0 Taxes Incurred R9,251 R14,058 R18,745

Net Profit R27,752 R42,173 R56,236 Net Profit/Sales 17.24% 21.83% 24.26%


Page 20

Chart: Profit Monthly

Chart: Profit Yearly

R0

R10,000

R20,000

R30,000

R40,000

R50,000

R60,000

2015 2016 2017

Profit Yearly

R0

R1,000

R2,000

R3,000

R4,000

R5,000

R6,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Profit Monthly


Page 21

Chart: Gross Margin Monthly

Chart: Gross Margin Yearly

R0

R20,000

R40,000

R60,000

R80,000

R100,000

R120,000

140,000

R160,000

R180,000

R200,000

2015 2016 2017

Gross Margin Yearly

R0

R2,000

R4,000

R6,000

R8,000

R10,000

R12,000

R14,000

R16,000


Gross Margin Monthly


Page 22

7.5 Projected Cash Flow

The projected cash flow and cash balance information is presented in the chart and table below.

Chart: Cash

Net Cash Flow

Cash Balance

R0

R10,000

R20,000

R30,000

R40,000

R50,000

R60,000

R70,000

R80,000

(R10,000)

J a n F e b

M a r A p r

M a y J u n

J u l A u g

S e p O c t

N o v D e c

Cash


Page 23

Table: Cash Flow

Pro Forma Cash Flow

2015 2016 2017

Cash Received Cash from Operations Cash Sales R0 R0 R0 Cash from Receivables R149,782 R188,617 R226,341 Subtotal Cash from Operations R149,782 R188,617 R226,341

Additional Cash Received Sales Tax, VAT, HST/GST Received R0 R0 R0 New Current Borrowing R0 R0 R0 New Other Liabilities (interest-free) R0 R0 R0 New Long-term Liabilities R0 R0 R0 Sales of Other Current Assets R0 R0 R0 Sales of Long-term Assets R0 R0 R0 New Investment Received R0 R0 R0 Subtotal Cash Received R149,782 R188,617 R226,341

Expenditures 2015 2016 2017

Expenditures from Operations Cash Spending R72,000 R77,000 R86,000 Bill Payments R66,312 R69,717 R85,791 Subtotal Spent on Operations R138,312 R146,717 R171,791

Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out R0 R0 R0 Principal Repayment of Current Borrowing R2,895 R0 R0 Other Liabilities Principal Repayment R0 R0 R0 Long-term Liabilities Principal Repayment R0 R0 R0 Purchase Other Current Assets R0 R0 R0 Purchase Long-term Assets R24,000 R0 R0 Dividends R0 R0 R0 Subtotal Cash Spent R165,207 R146,717 R171,791

Net Cash Flow (R15,425) R41,901 R54,550 Cash Balance R77,226 R119,126 R173,676


Page 24

7.6 Projected Balance Sheet

The projected balance sheet information is presented in the table below.

Table: Balance Sheet

Pro Forma Balance Sheet

2015 2016 2017 Assets Current Assets Cash R77,226 R119,126 R173,676 Accounts Receivable R22,776 R27,331 R32,797 Other Current Assets R1,158 R1,158 R1,158 Total Current Assets R101,160 R147,616 R207,632

Long-term Assets Long-term Assets R30,948 R30,948 R30,948 Accumulated Depreciation R2,400 R4,900 R7,400 Total Long-term Assets R28,548 R26,048 R23,548 Total Assets R129,708 R173,664 R231,180

Liabilities and Capital 2015 2016 2017

Current Liabilities Accounts Payable R4,094 R5,877 R7,156 Current Borrowing R0 R0 R0 Other Current Liabilities R0 R0 R0 Subtotal Current Liabilities R4,094 R5,877 R7,156

Long-term Liabilities R0 R0 R0 Total Liabilities R4,094 R5,877 R7,156

Paid-in Capital R5,000 R5,000 R5,000 Retained Earnings R92,862 R120,614 R162,787 Earnings R27,752 R42,173 R56,236 Total Capital R125,614 R167,787 R224,023 Total Liabilities and Capital R129,708 R173,664 R231,180

Net Worth R125,614 R167,787 R224,023


Page 25

7.7 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the

Standard Industrial Classification (SIC) code 8721.01 - Auditing services, are shown for

comparison.

Table: Ratios

Ratio Analysis

2015 2016 2017 Industry Profile

Sales Growth -0.72% 20.00% 20.00% 8.60%

Percent of Total Assets Accounts Receivable 17.56% 15.74% 14.19% 24.40% Other Current Assets 0.89% 0.67% 0.50% 46.70% Total Current Assets 77.99% 85.00% 89.81% 74.90% Long-term Assets 22.01% 15.00% 10.19% 25.10% Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 3.16% 3.38% 3.10% 42.80% Long-term Liabilities 0.00% 0.00% 0.00% 17.20% Total Liabilities 3.16% 3.38% 3.10% 60.00% Net Worth 96.84% 96.62% 96.90% 40.00%

Percent of Sales Sales 100.00% 100.00% 100.00% 100.00% Gross Margin 84.00% 84.67% 85.30% 0.00% Selling, General & Administrative Expenses

66.89% 62.95% 61.14% 83.50%

Advertising Expenses 2.05% 2.07% 2.59% 1.20% Profit Before Interest and Taxes 22.99% 29.11% 32.35% 2.60%

Main Ratios Current 24.71 25.12 29.01 1.59 Quick 24.71 25.12 29.01 1.26 Total Debt to Total Assets 3.16% 3.38% 3.10% 60.00% Pre-tax Return on Net Worth 29.46% 33.51% 33.47% 4.40% Pre-tax Return on Assets 28.53% 32.38% 32.43% 10.90%

Additional Ratios

2015 2016 2017

Net Profit Margin 17.24% 21.83% 24.26% n.a Return on Equity 22.09% 25.13% 25.10% n.a

Activity Ratios


Page 26

Accounts Receivable Turnover 7.07 7.07 7.07 n.a Collection Days 59 47 47 n.a Accounts Payable Turnover 14.37 12.17 12.17 n.a Payment Days 33 25 27 n.a Total Asset Turnover 1.24 1.11 1.00 n.a

Debt Ratios Debt to Net Worth 0.03 0.04 0.03 n.a Current Liab. to Liab. 1.00 1.00 1.00 n.a

Liquidity Ratios Net Working Capital R97,066 R141,739 R200,475 n.a Interest Coverage 0.00 0.00 0.00 n.a

Additional Ratios Assets to Sales 0.81 0.90 1.00 n.a Current Debt/Total Assets 3% 3% 3% n.a Acid Test 19.15 20.47 24.43 n.a Sales/Net Worth 1.28 1.15 1.03 n.a Dividend Payout 0.00 0.00 0.00 n.a

Table: Sales Forecast

Sales Forecast

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sales Audit services

0%

R4,343

R5,791

R5,791

R5,791

R7,238

R9,844

R8,686

R9,844

R5,791

R5,791

R5,791

R5,791

Consulting services

0%

R2,606

R3,474

R3,474

R3,474

R4,343

R5,906

R5,212

R5,906

R3,474

R3,474

R3,474

R3,474

Investigation services

0%

R1,737

R2,316

R2,316

R2,316

R2,895

R3,938

R3,474

R3,938

R2,316

R2,316

R2,316

R2,316

Total Sales

R8,686

R11,581

R11,581

R11,581

R14,476

R19,688

R17,372

R19,688

R11,581

R11,581

R11,581

R11,581



Audit services

R651

R869 R869 R869 R1,086

R1,477

R1,303

R1,477

R869 R869 R869 R869

Consulting services

R391

R521 R521 R521 R651 R886 R782 R886 R521 R521 R521 R521

Investigation services

R347

R463 R463 R463 R579 R788 R695 R788 R463 R463 R463 R463

Subtotal Direct Cost of Sales

R1,389

R1,853

R1,853

R1,853

R2,316

R3,151

R2,780

R3,151

R1,853

R1,853

R1,853

R1,853


Table: Personnel

Personnel Plan


Khaukanani Makhavhu

0%

R4,000

R4,000

R4,000

R4,000

R4,000

R4,000

R4,000

R4,000

R4,000

R4,000

R4,000

R4,000

Kedibone Thulare

0%

R2,000

R2,000

R2,000

R2,000

R2,000

R2,000

R2,000

R2,000

R2,000

R2,000

R2,000

R2,000

Total People

2 2 2 2 2 2 2 2 2 2 2 2

Total Payroll

R6,000

R6,000

R6,000

R6,000

R6,000

R6,000

R6,000

R6,000

R6,000

R6,000

R6,000

R6,000

Table: General Assumptions

General Assumptions


Plan Month

1 2 3 4 5 6 7 8 9 10 11 12

Current Interest Rate

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

Long-term Interest Rate

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

Tax Rate 25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

Other 0 0 0 0 0 0 0 0 0 0 0 0


Table: Profit and Loss

Pro Forma Profit and Loss

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sales R8,6

86 R11,581

R11,581

R11,581

R14,476

R19,688

R17,372

R19,688

R11,581

R11,581

R11,581

R11,581


R1,389

R1,853

R1,853

R1,853

R2,316

R3,151

R2,780

R3,151

R1,853

R1,853

R1,853

R1,853

Other R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 Total Cost of Sales

R1,389

R1,853

R1,853

R1,853

R2,316

R3,151

R2,780

R3,151

R1,853

R1,853

R1,853

R1,853

Gross Margin

R7,297

R9,728

R9,728

R9,728

R12,160

R16,537

R14,592

R16,537

R9,728

R9,728

R9,728

R9,728

Gross Margin %

84.01%

84.00%

84.00%

84.00%

84.00%

84.00%

84.00%

84.00%

84.00%

84.00%

84.00%

84.00%

Expenses Payroll R6,0

00 R6,0

00 R6,0

00 R6,0

00 R6,0

00 R6,0

00 R6,0

00 R6,0

00 R6,0

00 R6,0

00 R6,0

00 R6,0

00 Sales and Marketing and Other Expenses

R400 R590 R590 R590 R590 R599 R590 R590 R590 R590 R590 R590

Depreciation

R200 R200 R200 R200 R200 R200 R200 R200 R200 R200 R200 R200

Leased Equipment (incl. office rental)

R200 R200 R200 R200 R200 R200 R200 R200 R200 R200 R200 R200

Utilities (incl. office furniture, etc.)

R150 R150 R150 R150 R150 R150 R150 R150 R150 R150 R150 R150

Insurance R100 R100 R100 R100 R100 R100 R100 R100 R100 R100 R100 R100 Rent R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

Payroll Taxes

16%

R960 R960 R960 R960 R960 R960 R960 R960 R960 R960 R960 R960

Other R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0


Total Operating Expenses

R8,010

R8,200

R8,200

R8,200

R8,200

R8,209

R8,200

R8,200

R8,200

R8,200

R8,200

R8,200

Profit Before Interest and Taxes

(R713)

R1,528

R1,528

R1,528

R3,961

R8,329

R6,393

R8,338

R1,529

R1,528

R1,528

R1,528

EBITDA (R513)

R1,728

R1,728

R1,728

R4,161

R8,529

R6,593

R8,538

R1,729

R1,728

R1,728

R1,728

Interest Expense

R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

Taxes Incurred

(R178)

R382 R382 R382 R990 R2,082

R1,598

R2,084

R382 R382 R382 R382

Net Profit (R53

5) R1,1

46 R1,1

46 R1,1

46 R2,9

70 R6,2

46 R4,7

94 R6,2

53 R1,1

46 R1,1

46 R1,1

46 R1,1

46

Net Profit/Sales

-6.16

%

9.90%

9.90%

9.90%

20.52%

31.73%

27.60%

31.76%

9.90%

9.90%

9.90%

9.90%


Table: Cash Flow

Pro Forma Cash Flow


Cash Received

Cash from Operations

Cash Sales R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 Cash from Receivables

R5,791

R6,080

R8,783

R11,581

R11,581

R11,678

R14,650

R19,611

R17,449

R19,418

R11,581

R11,581

Subtotal Cash from Operations

R5,791

R6,080

R8,783

R11,581

R11,581

R11,678

R14,650

R19,611

R17,449

R19,418

R11,581

R11,581

Additional Cash Received

Sales Tax, VAT, HST/GST Received

0.00%

R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

New Current Borrowing

R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

New Other Liabilities (interest-free)

R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

New Long-term Liabilities

R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

Sales of Other Current Assets

R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

Sales of Long-term Assets

R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

New Investment Received

R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0


Subtotal Cash Received

R5,791

R6,080

R8,783

R11,581

R11,581

R11,678

R14,650

R19,611

R17,449

R19,418

R11,581

R11,581

Expenditures


Expenditures from Operations

Cash Spending

R6,000

R6,000

R6,000

R6,000

R6,000

R6,000

R6,000

R6,000

R6,000

R6,000

R6,000

R6,000

Bill Payments

R11,682

R3,061

R4,235

R4,235

R4,271

R5,370

R7,213

R6,406

R7,135

R4,235

R4,235

R4,235

Subtotal Spent on Operations

R17,682

R9,061

R10,235

R10,235

R10,271

R11,370

R13,213

R12,406

R13,135

R10,235

R10,235

R10,235

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out

R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

Principal Repayment of Current Borrowing

R2,895

R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

Other Liabilities Principal Repayment

R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

Long-term Liabilities Principal Repayment

R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

Purchase Other Current Assets

R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

Purchase Long-term Assets

R2,000

R2,000

R2,000

R2,000

R2,000

R2,000

R2,000

R2,000

R2,000

R2,000

R2,000

R2,000

Dividends R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

Subtotal Cash Spent

R22,577

R11,061

R12,235

R12,235

R12,271

R13,370

R15,213

R14,406

R15,135

R12,235

R12,235

R12,235


Net Cash Flow

(R16,786)

(R4,981)

(R3,453)

(R654)

(R690)

(R1,693)

(R563)

R5,205

R2,314

R7,183

(R654)

(R654)

Cash Balance

R75,865

R70,884

R67,431

R66,777

R66,087

R64,395

R63,832

R69,036

R71,351

R78,534

R77,880

R77,226

Table: Balance Sheet

Pro Forma Balance Sheet


Assets Starting Balances

Current Assets

Cash R92,651

R75,865

R70,884

R67,431

R66,777

R66,087

R64,395

R63,832

R69,036

R71,351

R78,534

R77,880

R77,226

Accounts Receivable

R11,581

R14,477

R19,977

R22,776

R22,776

R25,671

R33,681

R36,404

R36,481

R30,613

R22,776

R22,776

R22,776

Other Current Assets

R1,158

R1,158

R1,158

R1,158

R1,158

R1,158

R1,158

R1,158

R1,158

R1,158

R1,158

R1,158

R1,158

Total Current Assets

R105,390

R91,499

R92,019

R91,365

R90,711

R92,916

R99,234

R101,393

R106,675

R103,121

R102,468

R101,814

R101,160

Long-term Assets

Long-term Assets

R6,948

R8,948

R10,948

R12,948

R14,948

R16,948

R18,948

R20,948

R22,948

R24,948

R26,948

R28,948

R30,948

Accum R0 R200 R400 R600 R800 R1,0 R1,2 R1,4 R1,6 R1,8 R2,0 R2,2 R2,4


ulated Depreciation

00 00 00 00 00 00 00 00

Total Long-term Assets

R6,948

R8,748

R10,548

R12,348

R14,148

R15,948

R17,748

R19,548

R21,348

R23,148

R24,948

R26,748

R28,548

Total Assets

R112,338

R100,247

R102,567

R103,713

R104,859

R108,864

R116,982

R120,941

R128,023

R126,269

R127,416

R128,562

R129,708

Liabilities and Capital


Current Liabilities

Accounts Payable

R11,581

R2,920

R4,094

R4,094

R4,094

R5,129

R7,000

R6,165

R6,994

R4,093

R4,094

R4,094

R4,094

Current Borrowing

R2,895

R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

Other Current Liabilities

R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

Subtotal Current Liabilities

R14,476

R2,920

R4,094

R4,094

R4,094

R5,129

R7,000

R6,165

R6,994

R4,093

R4,094

R4,094

R4,094

Long-term Liabilities

R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0 R0

Total Liabilities

R14,476

R2,920

R4,094

R4,094

R4,094

R5,129

R7,000

R6,165

R6,994

R4,093

R4,094

R4,094

R4,094

Paid-in Capital

R5,000 R5,000 R5,000 R5,000 R5,000 R5,000 R5,000 R5,000 R5,000 R5,000 R5,000 R5,000 R5,000


Retained Earnings

R92,862

R92,862

R92,862

R92,862

R92,862

R92,862

R92,862

R92,862

R92,862

R92,862

R92,862

R92,862

R92,862

Earnings

R0 (R535)

R611 R1,757

R2,903

R5,874

R12,120

R16,914

R23,168

R24,314

R25,460

R26,606

R27,752

Total Capital

R97,862

R97,327

R98,473

R99,619

R100,765

R103,736

R109,982

R114,776

R121,030

R122,176

R123,322

R124,468

R125,614

Total Liabilities and Capital

R112,338

R100,247

R102,567

R103,713

R104,859

R108,864

R116,982

R120,941

R128,023

R126,269

R127,416

R128,562

R129,708

Net Worth

R97,862

R97,327

R98,473

R99,619

R100,765

R103,736

R109,982

R114,776

R121,030

R122,176

R123,322

R124,468

R125,614

K MAKHAVHU TAX EXECUTIVES AND ACCOUNTANTS, INC 2

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Transcript of K MAKHAVHU TAX EXECUTIVES AND ACCOUNTANTS, INC 2