Bed and Breakfast - Caribbean - Business Plan

Vette Kat Harbour Bed and Breakfast

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Financial Plan

The following sections will detail important financial information.

8.1 Important Assumptions

The following table highlights some of the important financial assumptions for the Vette Kat Harbour Bed & Breakfast.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 6.00% 6.00% 6.00%
Long-term Interest Rate 6.00% 6.00% 6.00%
Tax Rate 13.00% 13.00% 13.00%
Other 0 0 0

8.2 Break-even Analysis

The Break-even Analysis indicates the monthly revenue we must exceed to break even.  This will fluctuate as the business plan is recalculated in the first twelve months of usage of utilities and advertising costs.

Break-even Analysis
Monthly Revenue Break-even $1,820
Assumptions:
Average Percent Variable Cost 10%
Estimated Monthly Fixed Cost $1,642

8.3 Projected Profit and Loss

The following table indicates projected, modest profits.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $94,219 $103,184 $113,043
Direct Cost of Sales $9,240 $9,698 $10,177
Other $10,320 $12,320 $14,320
Total Cost of Sales $19,560 $22,018 $24,497
Gross Margin $74,659 $81,166 $88,546
Gross Margin % 79.24% 78.66% 78.33%
Expenses
Payroll $0 $0 $0
Sales & Marketing & Other Expenses $6,500 $10,000 $10,000
Depreciation $1,200 $1,200 $1,200
Annual web and Assoc fees $1,200 $1,600 $1,700
Utilities $7,200 $7,600 $7,800
Payroll Tax $0 $0 $0
Insurance $3,600 $4,800 $5,000
Total Operating Expenses $19,700 $25,200 $25,700
Profit Before Interest and Taxes $54,959 $55,966 $62,846
EBITDA $56,159 $57,166 $64,046
Interest Expense $4,639 $4,225 $3,793
Taxes Incurred $6,542 $6,726 $7,677
Net Profit $43,779 $45,015 $51,376
Net Profit/Sales 46.46% 43.63% 45.45%

8.4 Projected Cash Flow

The following chart and table will indicate projected cash flow.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $94,219 $103,184 $113,043
Subtotal Cash from Operations $94,219 $103,184 $113,043
Additional Cash Received
Sales Tax, VAT, HST/GST Received $12,248 $13,414 $14,696
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 $106,468 $116,598 $127,739
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $0 $0 $0
Bill Payments $45,254 $56,845 $60,357
Subtotal Spent on Operations $45,254 $56,845 $60,357
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $12,248 $13,414 $14,696
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $7,200 $7,200 $7,200
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $64,703 $77,459 $82,253
Net Cash Flow $41,765 $39,139 $45,486
Cash Balance $65,765 $104,904 $150,390

8.5 Projected Balance Sheet

The following table will indicate the projected balance sheet.  Bankers and CPA's will notice that excessive funds are reported being raised, initially.  This is a contingency and prudent safety fund.  It may prove cost effective and intelligent to place that into the SBA PE bank's savings fund or mutually accessible program yielding a good rate.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $65,765 $104,904 $150,390
Inventory $847 $889 $933
Other Current Assets $13,667 $13,667 $13,667
Total Current Assets $80,279 $119,460 $164,990
Long-term Assets
Long-term Assets $56,000 $56,000 $56,000
Accumulated Depreciation $1,200 $2,400 $3,600
Total Long-term Assets $54,800 $53,600 $52,400
Total Assets $135,079 $173,060 $217,390
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $2,333 $2,499 $2,653
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $2,333 $2,499 $2,653
Long-term Liabilities $74,010 $66,810 $59,610
Total Liabilities $76,343 $69,309 $62,263
Paid-in Capital $24,840 $24,840 $24,840
Retained Earnings ($9,883) $33,896 $78,911
Earnings $43,779 $45,015 $51,376
Total Capital $58,736 $103,751 $155,128
Total Liabilities and Capital $135,079 $173,060 $217,390
Net Worth $58,736 $103,751 $155,128

8.6 Business Ratios

The business ratios reflect both a cross-sectional analysis and time-series analysis of the company's risk and profitability.  The cross-sectional analysis consists of a comparison of our firm's ratios and those of the hotel and motel industry, NAICS code 72110, averages.  The reader will note that there are some significant differences in the ratios, especially in regards to the way our company is leveraged.  This is due to the fact that industry averages also include very large hotel chains that usually have much higher capital costs and investments in long-term assets.  Furthermore, the Vette Kat Harbour B & B has lower SG&A costs than other hotels and motels since B & Bs usually provide fewer services than larger competitors.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 9.52% 9.55% 7.24%
Percent of Total Assets
Inventory 0.63% 0.51% 0.43% 1.35%
Other Current Assets 10.12% 7.90% 6.29% 24.20%
Total Current Assets 59.43% 69.03% 75.90% 29.12%
Long-term Assets 40.57% 30.97% 24.10% 70.88%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 1.73% 1.44% 1.22% 16.94%
Long-term Liabilities 54.79% 38.61% 27.42% 26.60%
Total Liabilities 56.52% 40.05% 28.64% 43.54%
Net Worth 43.48% 59.95% 71.36% 56.46%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 79.24% 78.66% 78.33% 100.00%
Selling, General & Administrative Expenses 138.22% 42.64% 43.67% 75.85%
Advertising Expenses 5.03% 1.22% 1.09% 2.17%
Profit Before Interest and Taxes 58.33% 54.24% 55.59% 0.35%
Main Ratios
Current 34.41 47.80 62.20 0.98
Quick 34.05 47.45 61.85 0.75
Total Debt to Total Assets 56.52% 40.05% 28.64% 58.28%
Pre-tax Return on Net Worth 85.67% 49.87% 38.07% 0.29%
Pre-tax Return on Assets 37.25% 29.90% 27.16% 0.70%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 46.46% 43.63% 45.45% n.a
Return on Equity 74.54% 43.39% 33.12% n.a
Activity Ratios
Inventory Turnover 9.94 11.17 11.17 n.a
Accounts Payable Turnover 20.40 22.81 22.81 n.a
Payment Days 14 15 16 n.a
Total Asset Turnover 0.70 0.60 0.52 n.a
Debt Ratios
Debt to Net Worth 1.30 0.67 0.40 n.a
Current Liab. to Liab. 0.03 0.04 0.04 n.a
Liquidity Ratios
Net Working Capital $77,946 $116,961 $162,338 n.a
Interest Coverage 11.85 13.25 16.57 n.a
Additional Ratios
Assets to Sales 1.43 1.68 1.92 n.a
Current Debt/Total Assets 2% 1% 1% n.a
Acid Test 34.05 47.45 61.85 n.a
Sales/Net Worth 1.60 0.99 0.73 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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