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Art School Gallery Business Plan

Financial Plan

The following subtopics present our financial plan.

7.1 Break-even Analysis

The following table and chart summarize our break-even analysis.

Break-even Analysis
Monthly Revenue Break-even $6,673
Assumptions:
Average Percent Variable Cost 11%
Estimated Monthly Fixed Cost $5,942

7.2 Projected Profit and Loss

Our projected profit and loss is shown in the following table and charts.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $129,920 $232,048 $250,848
Direct Cost of Sales $14,230 $27,666 $29,766
Other $0 $0 $0
Total Cost of Sales $14,230 $27,666 $29,766
Gross Margin $115,690 $204,382 $221,082
Gross Margin % 89.05% 88.08% 88.13%
Expenses
Payroll $36,000 $52,800 $52,030
Sales and Marketing and Other Expenses $11,129 $21,626 $23,876
Depreciation $1,892 $2,067 $2,067
Leased Equipment $0 $0 $0
Utilities (Gas & Elec.) $1,642 $1,642 $1,642
Insurance $540 $540 $540
Rent $14,700 $14,700 $14,700
Payroll Taxes $5,400 $7,920 $7,805
Other $0 $0 $0
Total Operating Expenses $71,303 $101,295 $102,660
Profit Before Interest and Taxes $44,387 $103,087 $118,423
EBITDA $46,279 $105,154 $120,490
Interest Expense $0 $0 $0
Taxes Incurred $15,508 $36,080 $40,954
Net Profit $28,879 $67,007 $77,468
Net Profit/Sales 22.23% 28.88% 30.88%

7.3 Projected Cash Flow

The following chart and table show our projected cash flow.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $129,920 $232,048 $250,848
Subtotal Cash from Operations $129,920 $232,048 $250,848
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 $129,920 $232,048 $250,848
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $36,000 $52,800 $52,030
Bill Payments $57,136 $111,363 $119,017
Subtotal Spent on Operations $93,136 $164,163 $171,047
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 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $93,136 $164,163 $171,047
Net Cash Flow $36,784 $67,885 $79,801
Cash Balance $36,784 $104,669 $184,470

7.4 Projected Balance Sheet

The following table outlines our projected balance sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $36,784 $104,669 $184,470
Inventory $2,267 $4,407 $4,741
Other Current Assets $0 $0 $0
Total Current Assets $39,050 $109,076 $189,211
Long-term Assets
Long-term Assets $6,200 $6,200 $6,200
Accumulated Depreciation $1,892 $3,959 $6,026
Total Long-term Assets $4,308 $2,241 $174
Total Assets $43,358 $111,317 $189,385
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $8,280 $9,231 $9,832
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $8,280 $9,231 $9,832
Long-term Liabilities $0 $0 $0
Total Liabilities $8,280 $9,231 $9,832
Paid-in Capital $8,265 $8,265 $8,265
Retained Earnings ($2,065) $26,814 $93,820
Earnings $28,879 $67,007 $77,468
Total Capital $35,079 $102,085 $179,553
Total Liabilities and Capital $43,358 $111,317 $189,385
Net Worth $35,079 $102,085 $179,553

7.5 Business Ratios

The following table compares computed standard business rations for this plan against averaged ratios for the Fine Arts Schools industry, NAICS code 611610.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 78.61% 8.10% 4.59%
Percent of Total Assets
Inventory 5.23% 3.96% 2.50% 2.25%
Other Current Assets 0.00% 0.00% 0.00% 36.99%
Total Current Assets 90.06% 97.99% 99.91% 44.98%
Long-term Assets 9.94% 2.01% 0.09% 55.02%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 19.10% 8.29% 5.19% 23.64%
Long-term Liabilities 0.00% 0.00% 0.00% 33.36%
Total Liabilities 19.10% 8.29% 5.19% 57.00%
Net Worth 80.90% 91.71% 94.81% 43.00%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 89.05% 88.08% 88.13% 100.00%
Selling, General & Administrative Expenses 66.84% 59.20% 57.45% 63.44%
Advertising Expenses 2.10% 1.24% 1.15% 4.51%
Profit Before Interest and Taxes 34.16% 44.42% 47.21% 3.46%
Main Ratios
Current 4.72 11.82 19.25 1.20
Quick 4.44 11.34 18.76 0.82
Total Debt to Total Assets 19.10% 8.29% 5.19% 59.16%
Pre-tax Return on Net Worth 126.54% 100.98% 65.95% 4.27%
Pre-tax Return on Assets 102.37% 92.61% 62.53% 10.46%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 22.23% 28.88% 30.88% n.a
Return on Equity 82.33% 65.64% 43.14% n.a
Activity Ratios
Inventory Turnover 9.47 8.29 6.51 n.a
Accounts Payable Turnover 7.90 12.17 12.17 n.a
Payment Days 27 28 29 n.a
Total Asset Turnover 3.00 2.08 1.32 n.a
Debt Ratios
Debt to Net Worth 0.24 0.09 0.05 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $30,771 $99,844 $179,379 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.33 0.48 0.75 n.a
Current Debt/Total Assets 19% 8% 5% n.a
Acid Test 4.44 11.34 18.76 n.a
Sales/Net Worth 3.70 2.27 1.40 n.a
Dividend Payout 0.00 0.00 0.00 n.a