Bed and Breakfast Business Plan

Coach House Bed and Breakfast

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Financial Plan

Coach House will be acquired via a small business administration (SBA) loan (CDC 504 Loan Program) with the buyers supplying 20% down, Ameribank supplying 50%, and SBA supplying 30%. The bank mortgage is for 20 years at ten percent and the SBA 504 loan is for ten years, also at ten percent. We are assuming some initial start-up capital for operating expenses. In addition to the start-up money available from Mr. Maesch's retirement, Mr. Williams will contributing additional investment by September 15, 2000.

7.1 Break-even Analysis

We estimate average monthly fixed costs to be approximately $8,000 for expenses plus interest payments. Peak and off-season will have significant impact on the monthly earnings. For the first year, on-season revenues will offset off-season losses. As Coach House B&B builds its market position among the local patrons, we anticipate that off-season revenues will be enough to break even during that season. Further, a rate increase may be considered in Fiscal Year 2001.

Break-even Analysis
Monthly Revenue Break-even $3,486
Assumptions:
Average Percent Variable Cost 0%
Estimated Monthly Fixed Cost $3,486

7.2 Projected Profit and Loss

Below is the Coach House's projected income statement for the next three years. As mentioned above, earnings are subject to seasonal fluctuations. The new ownership will, however, strengthen Coach House's market position among the local community who will patronize the establishment during the low season, and thus offset the negative impact of the season.

Pro Forma Profit and Loss
2000 2001 2002
Sales $124,718 $130,953 $137,501
Direct Cost of Sales $0 $0 $0
Other $0 $0 $0
Total Cost of Sales $0 $0 $0
Gross Margin $124,718 $130,953 $137,501
Gross Margin % 100.00% 100.00% 100.00%
Expenses
Payroll $15,000 $35,000 $40,000
Sales and Marketing and Other Expenses $2,775 $3,900 $4,095
Depreciation $4,440 $4,500 $473
Insurance $2,580 $2,600 $210
Telephone $2,400 $2,500 $10,500
Security $420 $450 $368
Duties & Subscriptions $175 $200 $2,100
Rent $9,996 $10,000 $10,000
Room/Housecleaning $300 $350 $2,730
Groceries $1,500 $2,000 $2,625
Payroll Taxes $2,250 $5,250 $6,000
Other $0 $0 $0
Total Operating Expenses $41,836 $66,750 $79,100
Profit Before Interest and Taxes $82,882 $64,203 $58,401
EBITDA $87,322 $68,703 $58,874
Interest Expense $52,500 $51,750 $50,150
Taxes Incurred $7,480 $3,113 $2,097
Net Profit $22,902 $9,340 $6,154
Net Profit/Sales 18.36% 7.13% 4.48%

7.3 Projected Cash Flow

The table below outlines the projected cash flow and shows that the company will have enough cash reserves to cover the off-season's low sales. These projections are realistic in terms of the historical market of Tybee Island and operations, based on current pricing research and the addition of a fourth rental unit.

Pro Forma Cash Flow
2000 2001 2002
Cash Received
Cash from Operations
Cash Sales $31,179 $32,738 $34,375
Cash from Receivables $88,704 $97,773 $102,662
Subtotal Cash from Operations $119,883 $130,512 $137,037
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 $525,000 $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 $644,883 $130,512 $137,037
Expenditures 2000 2001 2002
Expenditures from Operations
Cash Spending $15,000 $35,000 $40,000
Bill Payments $97,015 $80,725 $90,155
Subtotal Spent on Operations $112,015 $115,725 $130,155
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 $15,000 $17,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $500,000 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $612,015 $130,725 $147,155
Net Cash Flow $32,869 ($214) ($10,117)
Cash Balance $44,869 $44,655 $34,538

7.4 Projected Balance Sheet

The table below outlines the projected balance sheet of Coach House for Fiscal Year 2000-2002.

Pro Forma Balance Sheet
2000 2001 2002
Assets
Current Assets
Cash $44,869 $44,655 $34,538
Accounts Receivable $8,834 $9,276 $9,740
Other Current Assets $1,000 $1,000 $1,000
Total Current Assets $54,703 $54,931 $45,277
Long-term Assets
Long-term Assets $700,000 $700,000 $700,000
Accumulated Depreciation $34,440 $38,940 $39,413
Total Long-term Assets $665,560 $661,060 $660,588
Total Assets $720,263 $715,991 $705,865
Liabilities and Capital 2000 2001 2002
Current Liabilities
Accounts Payable $5,361 $6,749 $7,469
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $5,361 $6,749 $7,469
Long-term Liabilities $525,000 $510,000 $493,000
Total Liabilities $530,361 $516,749 $500,469
Paid-in Capital $50,000 $50,000 $50,000
Retained Earnings $117,000 $139,902 $149,242
Earnings $22,902 $9,340 $6,154
Total Capital $189,902 $199,242 $205,396
Total Liabilities and Capital $720,263 $715,991 $705,865
Net Worth $189,902 $199,242 $205,396

7.5 Business Ratios

The following table provides industry information for Coach House B&B based on the Standard Industry Classification (SIC) Index, 7011.

Ratio Analysis
2000 2001 2002 Industry Profile
Sales Growth 340.39% 5.00% 5.00% 5.90%
Percent of Total Assets
Accounts Receivable 1.23% 1.30% 1.38% 5.00%
Other Current Assets 0.14% 0.14% 0.14% 26.00%
Total Current Assets 7.59% 7.67% 6.41% 32.00%
Long-term Assets 92.41% 92.33% 93.59% 68.00%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 0.74% 0.94% 1.06% 19.40%
Long-term Liabilities 72.89% 71.23% 69.84% 34.60%
Total Liabilities 73.63% 72.17% 70.90% 54.00%
Net Worth 26.37% 27.83% 29.10% 46.00%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 100.00% 100.00% 100.00% 0.00%
Selling, General & Administrative Expenses 81.73% 92.87% 95.50% 75.10%
Advertising Expenses 1.60% 2.29% 2.29% 1.90%
Profit Before Interest and Taxes 66.46% 49.03% 42.47% 2.50%
Main Ratios
Current 10.20 8.14 6.06 1.45
Quick 10.20 8.14 6.06 1.05
Total Debt to Total Assets 73.63% 72.17% 70.90% 54.00%
Pre-tax Return on Net Worth 16.00% 6.25% 4.02% 1.70%
Pre-tax Return on Assets 4.22% 1.74% 1.17% 3.70%
Additional Ratios 2000 2001 2002
Net Profit Margin 18.36% 7.13% 4.48% n.a
Return on Equity 12.06% 4.69% 3.00% n.a
Activity Ratios
Accounts Receivable Turnover 10.59 10.59 10.59 n.a
Collection Days 59 34 34 n.a
Accounts Payable Turnover 15.37 12.17 12.17 n.a
Payment Days 34 27 29 n.a
Total Asset Turnover 0.17 0.18 0.19 n.a
Debt Ratios
Debt to Net Worth 2.79 2.59 2.44 n.a
Current Liab. to Liab. 0.01 0.01 0.01 n.a
Liquidity Ratios
Net Working Capital $49,342 $48,182 $37,808 n.a
Interest Coverage 1.58 1.24 1.16 n.a
Additional Ratios
Assets to Sales 5.78 5.47 5.13 n.a
Current Debt/Total Assets 1% 1% 1% n.a
Acid Test 8.56 6.76 4.76 n.a
Sales/Net Worth 0.66 0.66 0.67 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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Break-even Analysis
Monthly Revenue Break-even $3,486
Assumptions:
Average Percent Variable Cost 0%
Estimated Monthly Fixed Cost $3,486
Pro Forma Profit and Loss
2000 2001 2002
Sales $124,718 $130,953 $137,501
Direct Cost of Sales $0 $0 $0
Other $0 $0 $0
Total Cost of Sales $0 $0 $0
Gross Margin $124,718 $130,953 $137,501
Gross Margin % 100.00% 100.00% 100.00%
Expenses
Payroll $15,000 $35,000 $40,000
Sales and Marketing and Other Expenses $2,775 $3,900 $4,095
Depreciation $4,440 $4,500 $473
Insurance $2,580 $2,600 $210
Telephone $2,400 $2,500 $10,500
Security $420 $450 $368
Duties & Subscriptions $175 $200 $2,100
Rent $9,996 $10,000 $10,000
Room/Housecleaning $300 $350 $2,730
Groceries $1,500 $2,000 $2,625
Payroll Taxes $2,250 $5,250 $6,000
Other $0 $0 $0
Total Operating Expenses $41,836 $66,750 $79,100
Profit Before Interest and Taxes $82,882 $64,203 $58,401
EBITDA $87,322 $68,703 $58,874
Interest Expense $52,500 $51,750 $50,150
Taxes Incurred $7,480 $3,113 $2,097
Net Profit $22,902 $9,340 $6,154
Net Profit/Sales 18.36% 7.13% 4.48%
Pro Forma Cash Flow
2000 2001 2002
Cash Received
Cash from Operations
Cash Sales $31,179 $32,738 $34,375
Cash from Receivables $88,704 $97,773 $102,662
Subtotal Cash from Operations $119,883 $130,512 $137,037
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 $525,000 $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 $644,883 $130,512 $137,037
Expenditures 2000 2001 2002
Expenditures from Operations
Cash Spending $15,000 $35,000 $40,000
Bill Payments $97,015 $80,725 $90,155
Subtotal Spent on Operations $112,015 $115,725 $130,155
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 $15,000 $17,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $500,000 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $612,015 $130,725 $147,155
Net Cash Flow $32,869 ($214) ($10,117)
Cash Balance $44,869 $44,655 $34,538
Pro Forma Balance Sheet
2000 2001 2002
Assets
Current Assets
Cash $44,869 $44,655 $34,538
Accounts Receivable $8,834 $9,276 $9,740
Other Current Assets $1,000 $1,000 $1,000
Total Current Assets $54,703 $54,931 $45,277
Long-term Assets
Long-term Assets $700,000 $700,000 $700,000
Accumulated Depreciation $34,440 $38,940 $39,413
Total Long-term Assets $665,560 $661,060 $660,588
Total Assets $720,263 $715,991 $705,865
Liabilities and Capital 2000 2001 2002
Current Liabilities
Accounts Payable $5,361 $6,749 $7,469
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $5,361 $6,749 $7,469
Long-term Liabilities $525,000 $510,000 $493,000
Total Liabilities $530,361 $516,749 $500,469
Paid-in Capital $50,000 $50,000 $50,000
Retained Earnings $117,000 $139,902 $149,242
Earnings $22,902 $9,340 $6,154
Total Capital $189,902 $199,242 $205,396
Total Liabilities and Capital $720,263 $715,991 $705,865
Net Worth $189,902 $199,242 $205,396
Ratio Analysis
2000 2001 2002 Industry Profile
Sales Growth 340.39% 5.00% 5.00% 5.90%
Percent of Total Assets
Accounts Receivable 1.23% 1.30% 1.38% 5.00%
Other Current Assets 0.14% 0.14% 0.14% 26.00%
Total Current Assets 7.59% 7.67% 6.41% 32.00%
Long-term Assets 92.41% 92.33% 93.59% 68.00%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 0.74% 0.94% 1.06% 19.40%
Long-term Liabilities 72.89% 71.23% 69.84% 34.60%
Total Liabilities 73.63% 72.17% 70.90% 54.00%
Net Worth 26.37% 27.83% 29.10% 46.00%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 100.00% 100.00% 100.00% 0.00%
Selling, General & Administrative Expenses 81.73% 92.87% 95.50% 75.10%
Advertising Expenses 1.60% 2.29% 2.29% 1.90%
Profit Before Interest and Taxes 66.46% 49.03% 42.47% 2.50%
Main Ratios
Current 10.20 8.14 6.06 1.45
Quick 10.20 8.14 6.06 1.05
Total Debt to Total Assets 73.63% 72.17% 70.90% 54.00%
Pre-tax Return on Net Worth 16.00% 6.25% 4.02% 1.70%
Pre-tax Return on Assets 4.22% 1.74% 1.17% 3.70%
Additional Ratios 2000 2001 2002
Net Profit Margin 18.36% 7.13% 4.48% n.a
Return on Equity 12.06% 4.69% 3.00% n.a
Activity Ratios
Accounts Receivable Turnover 10.59 10.59 10.59 n.a
Collection Days 59 34 34 n.a
Accounts Payable Turnover 15.37 12.17 12.17 n.a
Payment Days 34 27 29 n.a
Total Asset Turnover 0.17 0.18 0.19 n.a
Debt Ratios
Debt to Net Worth 2.79 2.59 2.44 n.a
Current Liab. to Liab. 0.01 0.01 0.01 n.a
Liquidity Ratios
Net Working Capital $49,342 $48,182 $37,808 n.a
Interest Coverage 1.58 1.24 1.16 n.a
Additional Ratios
Assets to Sales 5.78 5.47 5.13 n.a
Current Debt/Total Assets 1% 1% 1% n.a
Acid Test 8.56 6.76 4.76 n.a
Sales/Net Worth 0.66 0.66 0.67 n.a
Dividend Payout 0.00 0.00 0.00 n.a