Margarita Momma

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Beverage Machine Rental Business Plan

Financial Plan

We want to finance growth mainly through cash flow. We recognize that this means we will have to grow slowly, adding machines one at a time, not in bulk. The most important indicator in our case is that minimal inventory will have to be stored for these rentals; this translates into very low overhead.

There are some seasonal variations, with the months of March through September being the hottest months in Texas. This will, as expected, mean a high rate of rentals for events such as pool parties, Fourth of July celebrations, and barbecues. However, we expect the winter months to be just as lucrative due to the number of holiday parties, football gatherings, and fundraising events. We expect a light seasonal variation, with sales increasing slightly during the cooler months. For the most part, Margarita Momma will experience a high rate of sales, regardless of weather variations.

7.1 Important Assumptions

The financial assumptions for Margarita Momma are included in the following table.

General Assumptions
Year 1 Year 2 Year 3
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 25.42% 25.00% 25.42%
Other 0 0 0

7.2 Key Financial Indicators

This topic was not included in the original business plan, but is included here as a placeholder for others using this plan as a guide.  Please remember that the default outline is flexible on purpose, because every business plan is unique, so many excellent plans omit topics included in the standard outline and many add additional topics.  The outline is a suggestion, not a checklist.  You can add and delete topics easily.  Make it your plan, not the software's plan.

7.3 Break-even Analysis

The following table and chart summarize our break-even analysis. With estimated fixed costs as shown in the following table, we need to have 16 rentals by the end of the year to cover our costs.

Break-even Analysis
Monthly Units Break-even 14
Monthly Revenue Break-even $1,052
Assumptions:
Average Per-Unit Revenue $74.51
Average Per-Unit Variable Cost $6.76
Estimated Monthly Fixed Cost $957

7.4 Projected Profit and Loss

We expect net profits, and gross margins for FY 2001 through FY2003 as shown in the following table.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $60,875 $69,500 $80,250
Direct Cost of Sales $5,523 $6,380 $7,380
Other $0 $0 $0
Total Cost of Sales $5,523 $6,380 $7,380
Gross Margin $55,352 $63,120 $72,870
Gross Margin % 90.93% 90.82% 90.80%
Expenses
Payroll $11,050 $11,800 $12,500
Sales and Marketing and Other Expenses $280 $300 $250
Depreciation $150 $150 $150
Leased Equipment $0 $0 $0
Utilities $0 $0 $0
Insurance $0 $0 $0
Rent $0 $0 $0
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $11,480 $12,250 $12,900
Profit Before Interest and Taxes $43,872 $50,870 $59,970
EBITDA $44,022 $51,020 $60,120
Interest Expense $1,031 $916 $796
Taxes Incurred $10,803 $12,489 $15,040
Net Profit $32,038 $37,466 $44,134
Net Profit/Sales 52.63% 53.91% 55.00%

7.5 Projected Cash Flow

The following cash flow projections show the annual amounts only. For a monthly breakdown, please see the appendix at the end of the business plan.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $60,875 $69,500 $80,250
Subtotal Cash from Operations $60,875 $69,500 $80,250
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 $60,875 $69,500 $80,250
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $11,050 $11,800 $12,500
Bill Payments $16,121 $20,595 $23,399
Subtotal Spent on Operations $27,171 $32,395 $35,899
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 $1,200 $1,200 $1,200
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $28,371 $33,595 $37,099
Net Cash Flow $32,504 $35,905 $43,151
Cash Balance $33,343 $69,249 $112,400

7.6 Projected Balance Sheet

The following table represents our financial position at the end of each of the three upcoming fiscal years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $33,343 $69,249 $112,400
Inventory $1,177 $1,359 $1,572
Other Current Assets $1,260 $1,260 $1,260
Total Current Assets $35,780 $71,868 $115,233
Long-term Assets
Long-term Assets $9,000 $9,000 $9,000
Accumulated Depreciation $150 $300 $450
Total Long-term Assets $8,851 $8,701 $8,551
Total Assets $44,631 $80,569 $123,783
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $1,993 $1,666 $1,946
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $1,993 $1,666 $1,946
Long-term Liabilities $9,760 $8,560 $7,360
Total Liabilities $11,753 $10,226 $9,306
Paid-in Capital $1,000 $1,000 $1,000
Retained Earnings ($161) $31,877 $69,343
Earnings $32,038 $37,466 $44,134
Total Capital $32,877 $70,343 $114,477
Total Liabilities and Capital $44,631 $80,569 $123,783
Net Worth $32,877 $70,343 $114,477

7.7 Business Ratios

The following table shows standard ratios and industry comparison for SIC code 7359, rental businesses.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 14.17% 15.47% 7.90%
Percent of Total Assets
Inventory 2.64% 1.69% 1.27% 3.40%
Other Current Assets 2.82% 1.56% 1.02% 45.10%
Total Current Assets 80.17% 89.20% 93.09% 74.30%
Long-term Assets 19.83% 10.80% 6.91% 25.70%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 4.47% 2.07% 1.57% 42.00%
Long-term Liabilities 21.87% 10.62% 5.95% 15.70%
Total Liabilities 26.33% 12.69% 7.52% 57.70%
Net Worth 73.67% 87.31% 92.48% 42.30%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 90.93% 90.82% 90.80% 0.00%
Selling, General & Administrative Expenses 38.15% 36.91% 35.50% 82.90%
Advertising Expenses 0.46% 0.43% 0.31% 1.00%
Profit Before Interest and Taxes 72.07% 73.19% 74.73% 2.60%
Main Ratios
Current 17.95 43.14 59.21 1.68
Quick 17.36 42.33 58.40 1.33
Total Debt to Total Assets 26.33% 12.69% 7.52% 57.70%
Pre-tax Return on Net Worth 130.31% 71.01% 51.69% 4.80%
Pre-tax Return on Assets 95.99% 62.00% 47.80% 11.40%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 52.63% 53.91% 55.00% n.a
Return on Equity 97.45% 53.26% 38.55% n.a
Activity Ratios
Inventory Turnover 5.89 5.03 5.03 n.a
Accounts Payable Turnover 9.09 12.17 12.17 n.a
Payment Days 27 33 28 n.a
Total Asset Turnover 1.36 0.86 0.65 n.a
Debt Ratios
Debt to Net Worth 0.36 0.15 0.08 n.a
Current Liab. to Liab. 0.17 0.16 0.21 n.a
Liquidity Ratios
Net Working Capital $33,787 $70,202 $113,286 n.a
Interest Coverage 42.55 55.53 75.34 n.a
Additional Ratios
Assets to Sales 0.73 1.16 1.54 n.a
Current Debt/Total Assets 4% 2% 2% n.a
Acid Test 17.36 42.33 58.40 n.a
Sales/Net Worth 1.85 0.99 0.70 n.a
Dividend Payout 0.00 0.00 0.00 n.a