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Shaved Ice Beverage Business Plan

Ice Dreams

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Financial Plan

  • We want to finance growth mainly through cash flow. We recognized that this means we will have to grow slowly.
  • The most important indicator in our case is that minimal inventory will have to be stored for these products.

7.2 Important Assumptions

Monthly sales are the largest indicator for this business. There are some seasonal variations with the months of March through September being the highest sales months.

General Assumptions
1997 1998 1999
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 30.00% 30.00% 30.00%
Other 0 0 0

7.3 Key Financial Indicators

The following Benchmark chart shows our key financial indicators.

7.4 Break-even Analysis

The following table and chart show the current break-even analysis.

Break-even Analysis
Monthly Revenue Break-even $1,685
Assumptions:
Average Percent Variable Cost 23%
Estimated Monthly Fixed Cost $1,294

7.5 Projected Profit and Loss

We expect significant profits in all three years.

Pro Forma Profit and Loss
1997 1998 1999
Sales $52,217 $77,383 $104,446
Direct Cost of Sales $12,114 $17,772 $24,227
Other Costs of Sales $0 $0 $0
Total Cost of Sales $12,114 $17,772 $24,227
Gross Margin $40,103 $59,611 $80,219
Gross Margin % 76.80% 77.03% 76.80%
Expenses
Payroll $10,800 $11,232 $11,681
Marketing/Promotion $1,410 $1,466 $1,525
Depreciation $400 $400 $400
Utilities $1,720 $1,789 $1,861
Insurance $1,200 $1,248 $1,298
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $15,530 $16,135 $16,765
Profit Before Interest and Taxes $24,573 $43,476 $63,454
EBITDA $24,973 $43,876 $63,854
Interest Expense $3,632 $2,626 $1,576
Taxes Incurred $6,282 $12,255 $18,563
Net Profit $14,659 $28,595 $43,315
Net Profit/Sales 28.07% 36.95% 41.47%

7.6 Projected Cash Flow

Projected cash flow is estimated for the next three years as shown in the table below.

Pro Forma Cash Flow
1997 1998 1999
Cash Received
Cash from Operations
Cash Sales $52,217 $77,383 $104,446
Subtotal Cash from Operations $52,217 $77,383 $104,446
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 $52,217 $77,383 $104,446
Expenditures 1997 1998 1999
Expenditures from Operations
Cash Spending $10,800 $11,232 $11,681
Bill Payments $25,459 $34,970 $48,550
Subtotal Spent on Operations $36,259 $46,202 $60,231
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $10,500 $10,500 $10,500
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $46,759 $56,702 $70,731
Net Cash Flow $5,458 $20,681 $33,715
Cash Balance $15,458 $36,139 $69,854

7.7 Projected Balance Sheet

The balance sheet shows a slow but steady upward growth in net worth after initial start-up.

Pro Forma Balance Sheet
1997 1998 1999
Assets
Current Assets
Cash $15,458 $36,139 $69,854
Inventory $905 $1,328 $1,810
Other Current Assets $675 $675 $675
Total Current Assets $17,038 $38,142 $72,339
Long-term Assets
Long-term Assets $4,000 $4,000 $4,000
Accumulated Depreciation $400 $800 $1,200
Total Long-term Assets $3,600 $3,200 $2,800
Total Assets $20,638 $41,342 $75,139
Liabilities and Capital 1997 1998 1999
Current Liabilities
Accounts Payable $480 $3,089 $4,071
Current Borrowing $31,510 $21,010 $10,510
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $31,990 $24,099 $14,581
Long-term Liabilities $0 $0 $0
Total Liabilities $31,990 $24,099 $14,581
Paid-in Capital $10,000 $10,000 $10,000
Retained Earnings ($36,010) ($21,351) $7,244
Earnings $14,659 $28,595 $43,315
Total Capital ($11,351) $17,244 $60,558
Total Liabilities and Capital $20,638 $41,342 $75,139
Net Worth ($11,351) $17,244 $60,558

7.8 Business Ratios

Standard business ratios are included in the table that follows. The ratios show a plan for balanced, healthy growth. The standard industry indicators shown are for SIC 5812, eating places.

Ratio Analysis
1997 1998 1999 Industry Profile
Sales Growth 0.00% 48.20% 34.97% 7.60%
Percent of Total Assets
Inventory 4.39% 3.21% 2.41% 3.60%
Other Current Assets 3.27% 1.63% 0.90% 40.10%
Total Current Assets 82.56% 92.26% 96.27% 43.70%
Long-term Assets 17.44% 7.74% 3.73% 56.30%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 155.00% 58.29% 19.41% 32.70%
Long-term Liabilities 0.00% 0.00% 0.00% 28.50%
Total Liabilities 155.00% 58.29% 19.41% 61.20%
Net Worth -55.00% 41.71% 80.59% 38.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 76.80% 77.03% 76.80% 60.50%
Selling, General & Administrative Expenses 48.73% 40.08% 35.33% 39.80%
Advertising Expenses 0.77% 0.52% 0.38% 3.20%
Profit Before Interest and Taxes 47.06% 56.18% 60.75% 0.70%
Main Ratios
Current 0.53 1.58 4.96 0.98
Quick 0.50 1.53 4.84 0.65
Total Debt to Total Assets 155.00% 58.29% 19.41% 61.20%
Pre-tax Return on Net Worth -184.48% 236.90% 102.18% 1.70%
Pre-tax Return on Assets 101.47% 98.81% 82.35% 4.30%
Additional Ratios 1997 1998 1999
Net Profit Margin 28.07% 36.95% 41.47% n.a
Return on Equity 0.00% 165.83% 71.53% n.a
Activity Ratios
Inventory Turnover 9.70 15.92 15.44 n.a
Accounts Payable Turnover 54.09 12.17 12.17 n.a
Payment Days 27 17 26 n.a
Total Asset Turnover 2.53 1.87 1.39 n.a
Debt Ratios
Debt to Net Worth 0.00 1.40 0.24 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital ($14,951) $14,044 $57,758 n.a
Interest Coverage 6.77 16.56 40.26 n.a
Additional Ratios
Assets to Sales 0.40 0.53 0.72 n.a
Current Debt/Total Assets 155% 58% 19% n.a
Acid Test 0.50 1.53 4.84 n.a
Sales/Net Worth 0.00 4.49 1.72 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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General Assumptions
1997 1998 1999
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 30.00% 30.00% 30.00%
Other 0 0 0
Break-even Analysis
Monthly Revenue Break-even $1,685
Assumptions:
Average Percent Variable Cost 23%
Estimated Monthly Fixed Cost $1,294
Pro Forma Profit and Loss
1997 1998 1999
Sales $52,217 $77,383 $104,446
Direct Cost of Sales $12,114 $17,772 $24,227
Other Costs of Sales $0 $0 $0
Total Cost of Sales $12,114 $17,772 $24,227
Gross Margin $40,103 $59,611 $80,219
Gross Margin % 76.80% 77.03% 76.80%
Expenses
Payroll $10,800 $11,232 $11,681
Marketing/Promotion $1,410 $1,466 $1,525
Depreciation $400 $400 $400
Utilities $1,720 $1,789 $1,861
Insurance $1,200 $1,248 $1,298
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $15,530 $16,135 $16,765
Profit Before Interest and Taxes $24,573 $43,476 $63,454
EBITDA $24,973 $43,876 $63,854
Interest Expense $3,632 $2,626 $1,576
Taxes Incurred $6,282 $12,255 $18,563
Net Profit $14,659 $28,595 $43,315
Net Profit/Sales 28.07% 36.95% 41.47%
Pro Forma Cash Flow
1997 1998 1999
Cash Received
Cash from Operations
Cash Sales $52,217 $77,383 $104,446
Subtotal Cash from Operations $52,217 $77,383 $104,446
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 $52,217 $77,383 $104,446
Expenditures 1997 1998 1999
Expenditures from Operations
Cash Spending $10,800 $11,232 $11,681
Bill Payments $25,459 $34,970 $48,550
Subtotal Spent on Operations $36,259 $46,202 $60,231
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $10,500 $10,500 $10,500
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $46,759 $56,702 $70,731
Net Cash Flow $5,458 $20,681 $33,715
Cash Balance $15,458 $36,139 $69,854
Pro Forma Balance Sheet
1997 1998 1999
Assets
Current Assets
Cash $15,458 $36,139 $69,854
Inventory $905 $1,328 $1,810
Other Current Assets $675 $675 $675
Total Current Assets $17,038 $38,142 $72,339
Long-term Assets
Long-term Assets $4,000 $4,000 $4,000
Accumulated Depreciation $400 $800 $1,200
Total Long-term Assets $3,600 $3,200 $2,800
Total Assets $20,638 $41,342 $75,139
Liabilities and Capital 1997 1998 1999
Current Liabilities
Accounts Payable $480 $3,089 $4,071
Current Borrowing $31,510 $21,010 $10,510
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $31,990 $24,099 $14,581
Long-term Liabilities $0 $0 $0
Total Liabilities $31,990 $24,099 $14,581
Paid-in Capital $10,000 $10,000 $10,000
Retained Earnings ($36,010) ($21,351) $7,244
Earnings $14,659 $28,595 $43,315
Total Capital ($11,351) $17,244 $60,558
Total Liabilities and Capital $20,638 $41,342 $75,139
Net Worth ($11,351) $17,244 $60,558
Ratio Analysis
1997 1998 1999 Industry Profile
Sales Growth 0.00% 48.20% 34.97% 7.60%
Percent of Total Assets
Inventory 4.39% 3.21% 2.41% 3.60%
Other Current Assets 3.27% 1.63% 0.90% 40.10%
Total Current Assets 82.56% 92.26% 96.27% 43.70%
Long-term Assets 17.44% 7.74% 3.73% 56.30%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 155.00% 58.29% 19.41% 32.70%
Long-term Liabilities 0.00% 0.00% 0.00% 28.50%
Total Liabilities 155.00% 58.29% 19.41% 61.20%
Net Worth -55.00% 41.71% 80.59% 38.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 76.80% 77.03% 76.80% 60.50%
Selling, General & Administrative Expenses 48.73% 40.08% 35.33% 39.80%
Advertising Expenses 0.77% 0.52% 0.38% 3.20%
Profit Before Interest and Taxes 47.06% 56.18% 60.75% 0.70%
Main Ratios
Current 0.53 1.58 4.96 0.98
Quick 0.50 1.53 4.84 0.65
Total Debt to Total Assets 155.00% 58.29% 19.41% 61.20%
Pre-tax Return on Net Worth -184.48% 236.90% 102.18% 1.70%
Pre-tax Return on Assets 101.47% 98.81% 82.35% 4.30%
Additional Ratios 1997 1998 1999
Net Profit Margin 28.07% 36.95% 41.47% n.a
Return on Equity 0.00% 165.83% 71.53% n.a
Activity Ratios
Inventory Turnover 9.70 15.92 15.44 n.a
Accounts Payable Turnover 54.09 12.17 12.17 n.a
Payment Days 27 17 26 n.a
Total Asset Turnover 2.53 1.87 1.39 n.a
Debt Ratios
Debt to Net Worth 0.00 1.40 0.24 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital ($14,951) $14,044 $57,758 n.a
Interest Coverage 6.77 16.56 40.26 n.a
Additional Ratios
Assets to Sales 0.40 0.53 0.72 n.a
Current Debt/Total Assets 155% 58% 19% n.a
Acid Test 0.50 1.53 4.84 n.a
Sales/Net Worth 0.00 4.49 1.72 n.a
Dividend Payout 0.00 0.00 0.00 n.a