Bridal Shop Business Plan

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Financial Plan

Moms, Maids, and More expects to be profitable by the end of its second year of operations. To get the business up and running, we will need to obtain financing. The initial market share will be modest; however, significant growth in market share is expected due to the unique niche that the shop is targeting. The market share is expected to grow at a more modest rate after year three.

8.1 Important Assumptions

The following assumptions are key to understanding the profit and loss projections.

  • We do not sell anything on credit - all items must be paid in full before they are taken from the store. 

  • We are estimating that 80% of the purchases will be made with credit cards. The credit card fees are calculated as 80% of the sales, times 1.8 percent (the fee rate). 

  • Cost of sales for the clothing items has a two month delay. This is because most clothing items will be custom ordered and, as a result, Moms, Maids, and More will not have to pay for them until they arrive about two months after they are ordered.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 6.25% 6.25% 6.25%
Long-term Interest Rate 6.25% 6.25% 6.25%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

8.2 Break-even Analysis

For the break-even analysis, the following assumptions were used:

  1. Fixed costs per month are estimated as total first year operating expenses divided by 12.
  2. For each item sold, there is a variable price equal to about 43% of the retail price of the item.
Break-even Analysis
Monthly Revenue Break-even $21,445
Assumptions:
Average Percent Variable Cost 43%
Estimated Monthly Fixed Cost $12,149

8.3 Projected Profit and Loss

We expect losses in the first year, because it will take time for the store to build momentum and generate traffic. However, once sales increase, the results are positive because many of the other expenses will remain fixed. In fact, we expect that sample inventory costs will actually go down in years to come. Some designers will provide sample inventory at deep discounts and/or provide the samples free of charge once good credit terms are established. As a result, the annual expenditures for sample inventory should decrease.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $252,788 $394,373 $622,855
Direct Cost of Sales $109,581 $172,183 $271,404
Credit Card Fees $3,640 $3,155 $4,983
Total Cost of Sales $113,221 $175,338 $276,387
Gross Margin $139,567 $219,034 $346,468
Gross Margin % 55.21% 55.54% 55.63%
Expenses
Payroll $30,720 $41,000 $45,000
Sales and Marketing and Other Expenses $11,900 $12,000 $12,000
Depreciation $2,160 $2,160 $2,160
Rent including triple nets $52,800 $54,750 $66,900
Utilities $9,000 $9,500 $10,000
Insurance $4,200 $4,600 $5,100
Payroll Taxes $4,608 $6,150 $6,750
Supplies $3,600 $4,000 $4,300
Repairs and Maintenance $2,400 $2,600 $2,800
Professional Fees $3,300 $3,500 $4,000
Taxes and Licenses $1,100 $1,100 $1,100
New Sample Inventory $20,000 $15,000 $14,000
Total Operating Expenses $145,788 $156,360 $174,110
Profit Before Interest and Taxes ($6,221) $62,674 $172,358
EBITDA ($4,061) $64,834 $174,518
Interest Expense $3,622 $2,843 $2,030
Taxes Incurred $0 $17,950 $51,098
Net Profit ($9,842) $41,882 $119,230
Net Profit/Sales -3.89% 10.62% 19.14%

8.4 Projected Cash Flow

The cash flow of Moms, Maids, and More is somewhat unique. For items that are sold off the floor, the cash flow and revenue recognition is traditional, in that full payment is received at the time of the sale, and the customer takes possession of the item at that time. This is how most of the shoe sales will take place, as well as some of the other accessory purchases.

However, most of the other items in the store have a different flow. Let's use a dress as an example. The customer will try on a sample in the store, and when she decides to purchase the item, she will most likely have to order it in the size and color of her choosing. For this process to begin, the customer must provide a deposit of at least 50% of the total price of the item (note: while some customers may choose to pay the full amount at the time the order is placed, these illustrations assume that everyone will choose the 50% option). The remaining balance will be due within thirty days of when the item arrives in our store.

This timing issue has also been taken into consideration for the costs of goods sold. The store will be billed for items when the items are shipped, thus cash outflow for the cost of the item will closely match the cash inflow of the customer paying the balance on the item.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $252,788 $394,373 $622,855
Subtotal Cash from Operations $252,788 $394,373 $622,855
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 $252,788 $394,373 $622,855
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $30,720 $41,000 $45,000
Bill Payments $194,477 $302,314 $450,411
Subtotal Spent on Operations $225,197 $343,314 $495,411
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 $13,020 $13,000 $13,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $238,217 $356,314 $508,411
Net Cash Flow $14,571 $38,058 $114,444
Cash Balance $36,471 $74,529 $188,973

8.5 Projected Balance Sheet

Moms, Maids, and More maintains a strong current ratio throughout. While the net worth of the business is negative in year one, it makes steady gains and becomes positive in year two. By the end of year three, retained earnings is also close to being positive.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $36,471 $74,529 $188,973
Inventory $6,878 $10,808 $17,036
Other Current Assets $1,000 $1,000 $1,000
Total Current Assets $44,349 $86,337 $207,009
Long-term Assets
Long-term Assets $8,500 $8,500 $8,500
Accumulated Depreciation $2,160 $4,320 $6,480
Total Long-term Assets $6,340 $4,180 $2,020
Total Assets $50,689 $90,517 $209,029
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $14,802 $25,747 $38,030
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $14,802 $25,747 $38,030
Long-term Liabilities $51,980 $38,980 $25,980
Total Liabilities $66,782 $64,727 $64,010
Paid-in Capital $30,000 $30,000 $30,000
Retained Earnings ($36,250) ($46,092) ($4,210)
Earnings ($9,842) $41,882 $119,230
Total Capital ($16,092) $25,790 $145,020
Total Liabilities and Capital $50,689 $90,517 $209,029
Net Worth ($16,092) $25,790 $145,020

8.6 Business Ratios

The following table breaks down some of the key financial ratios. Where available, industry averages for Bridal Shops - SIC code 5621.0102, are shown for comparison.
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 56.01% 57.94% -0.02%
Percent of Total Assets
Inventory 13.57% 11.94% 8.15% 50.91%
Other Current Assets 1.97% 1.10% 0.48% 24.44%
Total Current Assets 87.49% 95.38% 99.03% 85.49%
Long-term Assets 12.51% 4.62% 0.97% 14.51%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 29.20% 28.44% 18.19% 29.49%
Long-term Liabilities 102.55% 43.06% 12.43% 11.18%
Total Liabilities 131.75% 71.51% 30.62% 40.67%
Net Worth -31.75% 28.49% 69.38% 59.33%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 55.21% 55.54% 55.63% 40.07%
Selling, General & Administrative Expenses 59.10% 44.92% 36.48% 21.95%
Advertising Expenses 0.00% 0.00% 0.00% 2.92%
Profit Before Interest and Taxes -2.46% 15.89% 27.67% 2.90%
Main Ratios
Current 3.00 3.35 5.44 2.64
Quick 2.53 2.93 5.00 0.74
Total Debt to Total Assets 131.75% 71.51% 30.62% 5.31%
Pre-tax Return on Net Worth 61.16% 232.00% 117.45% 47.92%
Pre-tax Return on Assets -19.42% 66.10% 81.49% 10.20%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -3.89% 10.62% 19.14% n.a
Return on Equity 0.00% 162.40% 82.22% n.a
Activity Ratios
Inventory Turnover 6.78 19.47 19.49 n.a
Accounts Payable Turnover 14.07 12.17 12.17 n.a
Payment Days 27 24 25 n.a
Total Asset Turnover 4.99 4.36 2.98 n.a
Debt Ratios
Debt to Net Worth 0.00 2.51 0.44 n.a
Current Liab. to Liab. 0.22 0.40 0.59 n.a
Liquidity Ratios
Net Working Capital $29,548 $60,590 $168,980 n.a
Interest Coverage -1.72 22.05 84.91 n.a
Additional Ratios
Assets to Sales 0.20 0.23 0.34 n.a
Current Debt/Total Assets 29% 28% 18% n.a
Acid Test 2.53 2.93 5.00 n.a
Sales/Net Worth 0.00 15.29 4.29 n.a
Dividend Payout 0.00 0.00 0.00 n.a