Bakery Business Plan

Jolly's Java and Bakery

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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.

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-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

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 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%

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 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

7.4 Balance Sheet

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

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 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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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
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%
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
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
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