Financial Plan
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.
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-even | 17,255 |
| 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 |
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 1 | Year 2 | Year 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/Sales | 2.65% | 6.43% | 7.01% |
Projected Cash Flow
meet JJB's needs as the business generates cash flow sufficient to support operations.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 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 |
| Expenditures | Year 1 | Year 2 | Year 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 |
The following is a projected Balance Sheet for JJB.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 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 Capital | Year 1 | Year 2 | Year 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 |
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 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 15.50% | 15.50% | 7.60% |
| Percent of Total Assets | ||||
| Other Current Assets | 6.91% | 5.97% | 5.08% | 35.60% |
| Total Current Assets | 97.12% | 121.90% | 143.74% | 43.70% |
| Long-term Assets | 2.88% | -21.90% | -43.74% | 56.30% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 8.40% | 7.68% | 8.42% | 32.70% |
| Long-term Liabilities | 57.61% | 44.80% | 31.74% | 28.50% |
| Total Liabilities | 66.00% | 52.48% | 40.17% | 61.20% |
| Net Worth | 34.00% | 47.52% | 59.83% | 38.80% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 84.37% | 84.37% | 84.37% | 60.50% |
| Selling, General & Administrative Expenses | 74.74% | 71.43% | 71.39% | 39.80% |
| Advertising Expenses | 0.49% | 1.76% | 6.87% | 3.20% |
| Profit Before Interest and Taxes | 5.32% | 10.24% | 10.66% | 0.70% |
| Main Ratios | ||||
| Current | 11.57 | 15.86 | 17.06 | 0.98 |
| Quick | 11.57 | 15.86 | 17.06 | 0.65 |
| Total Debt to Total Assets | 66.00% | 52.48% | 40.17% | 61.20% |
| Pre-tax Return on Net Worth | 27.33% | 50.90% | 43.55% | 1.70% |
| Pre-tax Return on Assets | 9.29% | 24.18% | 26.06% | 4.30% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 2.65% | 6.43% | 7.01% | n.a |
| Return on Equity | 22.06% | 38.17% | 32.48% | n.a |
| Activity Ratios | ||||
| Accounts Payable Turnover | 10.79 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 29 | 27 | n.a |
| Total Asset Turnover | 2.83 | 2.82 | 2.77 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 1.94 | 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 Coverage | 2.61 | 6.11 | 8.46 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.35 | 0.35 | 0.36 | n.a |
| Current Debt/Total Assets | 8% | 8% | 8% | n.a |
| Acid Test | 11.57 | 15.86 | 17.06 | n.a |
| Sales/Net Worth | 8.32 | 5.94 | 4.63 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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