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7.0 Financial Plan

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Administrator


JJB expects to raise $110,000 of its own capital, and to borrow $100,000 guaranteed by the SBA as a ten-year loan. This provides the bulk of the current financing required.


7.1 Break-even Analysis


JJB's Break-even Analysis is based on the average of the first-year figures for total sales by units, and by operating expenses. These are presented as per-unit revenue, per-unit cost, and fixed costs. These conservative assumptions make for a more accurate estimate of real risk. JJB should break even by the fourth month of its operation as it steadily increases its sales.





Break-even Analysis
Monthly Units Break-even17,255
Monthly Revenue Break-even$38,336
Assumptions:
Average Per-Unit Revenue$2.22
Average Per-Unit Variable Cost$0.35
Estimated Monthly Fixed Cost$32,343


7.2 Projected Profit and Loss


As the Profit and Loss table shows, JJB expects to continue its steady growth in profitability over the next three years of operations.
Pro Forma Profit and Loss
Year 1Year 2Year 3
Sales$491,000 $567,105 $655,006
Direct Cost of Sales$76,750 $88,646 $102,386
Other$0 $0 $0
Total Cost of Sales$76,750 $88,646 $102,386
Gross Margin$414,250 $478,459 $552,620
Gross Margin %84.37% 84.37% 84.37%
Expenses
Payroll$260,800 $273,840 $287,532
Sales and Marketing and Other Expenses$27,000 $35,200 $71,460
Depreciation$60,000 $69,000 $79,350
Utilities$1,200 $1,260 $1,323
Payroll Taxes$39,120 $41,076 $43,130
Other$0 $0 $0
Total Operating Expenses$388,120 $420,376 $482,795
Profit Before Interest and Taxes$26,130 $58,083 $69,825
EBITDA$86,130 $127,083 $149,175
Interest Expense$10,000 $9,500 $8,250
Taxes Incurred$3,111 $12,146 $15,650
Net Profit$13,019 $36,437 $45,925
Net Profit/Sales2.65% 6.43% 7.01%

 

7.3 Projected Cash Flow


The cash flow projection shows that provisions for ongoing expenses are adequate to meet JJB's needs as the business generates cash flow sufficient to support operations.


Pro Forma Cash Flow
Year 1Year 2Year 3
Cash Received
Cash from Operations
Cash Sales$491,000 $567,105 $655,006
Subtotal Cash from Operations$491,000 $567,105 $655,006
Additional Cash Received
Sales Tax, VAT, HST/GST Received$0 $0 $0
New Current Borrowing$0 $0 $0
New Other Liabilities (interest-free)$0 $0 $0
New Long-term Liabilities$0 $0 $0
Sales of Other Current Assets$0 $0 $0
Sales of Long-term Assets$0 $0 $0
New Investment Received$0 $0 $0
Subtotal Cash Received$491,000 $567,105 $655,006
ExpendituresYear 1Year 2Year 3
Expenditures from Operations
Cash Spending$260,800 $273,840 $287,532
Bill Payments$143,607 $186,964 $237,731
Subtotal Spent on Operations$404,407 $460,804 $525,263
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out$0 $0 $0
Principal Repayment of Current Borrowing$0 $0 $0
Other Liabilities Principal Repayment$0 $0 $0
Long-term Liabilities Principal Repayment$0 $10,000 $15,000
Purchase Other Current Assets$0 $0 $0
Purchase Long-term Assets$0 $20,000 $20,000
Dividends$0 $0 $0
Subtotal Cash Spent$404,407 $490,804 $560,263
Net Cash Flow$86,593 $76,301 $94,744
Cash Balance$156,593 $232,894 $327,637

7.4 Balance Sheet


The following is a projected Balance Sheet for JJB.
Pro Forma Balance Sheet
Year 1Year 2Year 3
Assets
Current Assets
Cash$156,593 $232,894 $327,637
Other Current Assets$12,000 $12,000 $12,000
Total Current Assets$168,593 $244,894 $339,637
Long-term Assets
Long-term Assets$65,000 $85,000 $105,000
Accumulated Depreciation$60,000 $129,000 $208,350
Total Long-term Assets$5,000 ($44,000)($103,350)
Total Assets$173,593 $200,894 $236,287
Liabilities and CapitalYear 1Year 2Year 3
Current Liabilities
Accounts Payable$14,574 $15,438 $19,907
Current Borrowing$0 $0 $0
Other Current Liabilities$0 $0 $0
Subtotal Current Liabilities$14,574 $15,438 $19,907
Long-term Liabilities$100,000 $90,000 $75,000
Total Liabilities$114,574 $105,438 $94,907
Paid-in Capital$110,000 $110,000 $110,000
Retained Earnings($64,000)($50,981)($14,544)
Earnings$13,019 $36,437 $45,925
Total Capital$59,019 $95,456 $141,381
Total Liabilities and Capital$173,593 $200,894 $236,287
Net Worth$59,019 $95,456 $141,381

7.5 Business Ratios


The following table represents key ratios for the retail bakery and coffee shop industry. These ratios are determined by the Standard Industry Classification (SIC) Index code 5812, Eating Places.
Ratio Analysis
Year 1Year 2Year 3Industry Profile
Sales Growth0.00% 15.50% 15.50% 7.60%
Percent of Total Assets
Other Current Assets6.91% 5.97% 5.08% 35.60%
Total Current Assets97.12% 121.90% 143.74% 43.70%
Long-term Assets2.88% -21.90% -43.74% 56.30%
Total Assets100.00% 100.00% 100.00% 100.00%
Current Liabilities8.40% 7.68% 8.42% 32.70%
Long-term Liabilities57.61% 44.80% 31.74% 28.50%
Total Liabilities66.00% 52.48% 40.17% 61.20%
Net Worth34.00% 47.52% 59.83% 38.80%
Percent of Sales
Sales100.00% 100.00% 100.00% 100.00%
Gross Margin84.37% 84.37% 84.37% 60.50%
Selling, General & Administrative Expenses74.74% 71.43% 71.39% 39.80%
Advertising Expenses0.49% 1.76% 6.87% 3.20%
Profit Before Interest and Taxes5.32% 10.24% 10.66% 0.70%
Main Ratios
Current11.57 15.86 17.06 0.98
Quick11.57 15.86 17.06 0.65
Total Debt to Total Assets66.00% 52.48% 40.17% 61.20%
Pre-tax Return on Net Worth27.33% 50.90% 43.55% 1.70%
Pre-tax Return on Assets9.29% 24.18% 26.06% 4.30%
Additional RatiosYear 1Year 2Year 3
Net Profit Margin2.65% 6.43% 7.01% n.a
Return on Equity22.06% 38.17% 32.48% n.a
Activity Ratios
Accounts Payable Turnover10.79 12.17 12.17 n.a
Payment Days27 29 27 n.a
Total Asset Turnover2.83 2.82 2.77 n.a
Debt Ratios
Debt to Net Worth1.94 1.10 0.67 n.a
Current Liab. to Liab.0.13 0.15 0.21 n.a
Liquidity Ratios
Net Working Capital$154,019 $229,456 $319,731 n.a
Interest Coverage2.61 6.11 8.46 n.a
Additional Ratios
Assets to Sales0.35 0.35 0.36 n.a
Current Debt/Total Assets8% 8% 8% n.a
Acid Test 11.57 15.86 17.06 n.a
Sales/Net Worth8.32 5.94 4.63 n.a
Dividend Payout0.00 0.00 0.00 n.a