Clothing Retail Business Plan

Mahogany Western Wear

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Financial Plan

The growth of Mahogany Western Wear will be moderate and the cash balance will always be positive. Being a retail environment we will not be selling on credit. We will accept cash, checks, and all major credit cards. TeleCheck Services will be used as the check guaranty system to help reduce the percentage of loss on bad checks. Marketing and advertising will remain at or below 5% of sales. We will continue to reinvest residual profits into company expansion, and personnel.

7.1 Important Assumptions

Mahogany Western Wear does not sell on credit nor do we offer layaways at this time. We accept cash and checks, Visa, MasterCard, Discover and American Express. All sales paid via credit cards will be deposited in our business checking account within 48 hours. Our business checking account will be with Washington Mutual. They have reported the interest rate as those listed below.

7.2 Key Financial Indicators

The following chart shows the benchmark figures for Mahogany Western Wear.

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 30.00% 30.00% 30.00%
Other 0 0 0

7.3 Break-even Analysis

A break-even analysis table has been completed on the basis of average costs/prices. With fixed costs of $5,800, ~$47 in average sales, and $23 in an average variable costs, we need $11,700 per month in sales to break even.

Break-even Analysis
Monthly Units Break-even 248
Monthly Revenue Break-even $11,712
Assumptions:
Average Per-Unit Revenue $47.21
Average Per-Unit Variable Cost $23.60
Estimated Monthly Fixed Cost $5,856

7.4 Projected Profit and Loss

The following chart and table will indicate projected profit and loss.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $284,200 $369,460 $480,290
Direct Cost of Sales $142,100 $184,730 $240,145
Other Production Expenses $0 $0 $0
Total Cost of Sales $142,100 $184,730 $240,145
Gross Margin $142,100 $184,730 $240,145
Gross Margin % 50.00% 50.00% 50.00%
Expenses
Payroll $44,115 $48,527 $53,379
Sales and Marketing and Other Expenses $15,448 $15,523 $15,834
Depreciation $0 $0 $0
Telephone / Pagers/ Cell $1,800 $1,800 $1,836
Utilities $4,500 $4,800 $4,896
Payroll Taxes $4,412 $4,853 $5,338
Other $0 $0 $0
Total Operating Expenses $70,275 $75,502 $81,283
Profit Before Interest and Taxes $71,826 $109,228 $158,862
EBITDA $71,826 $109,228 $158,862
Interest Expense $1,491 $1,175 $845
Taxes Incurred $21,100 $32,416 $47,405
Net Profit $49,234 $75,637 $110,612
Net Profit/Sales 17.32% 20.47% 23.03%

7.5 Projected Cash Flow

The following table explains projected cash flow.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $284,200 $369,460 $480,290
Subtotal Cash from Operations $284,200 $369,460 $480,290
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 $284,200 $369,460 $480,290
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $44,115 $48,527 $53,379
Bill Payments $174,454 $244,577 $315,576
Subtotal Spent on Operations $218,569 $293,103 $368,955
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 $3,300 $3,300 $3,300
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $221,869 $296,403 $372,255
Net Cash Flow $62,331 $73,057 $108,035
Cash Balance $62,715 $135,771 $243,806

7.6 Projected Balance Sheet

The following table explains the projected balance sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $62,715 $135,771 $243,806
Inventory $13,365 $17,375 $22,586
Other Current Assets $0 $0 $0
Total Current Assets $76,080 $153,146 $266,393
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $76,080 $153,146 $266,393
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $15,762 $20,491 $26,426
Current Borrowing $0 $0 $0
Other Current Liabilities $2,000 $2,000 $2,000
Subtotal Current Liabilities $17,762 $22,491 $28,426
Long-term Liabilities $13,400 $10,100 $6,800
Total Liabilities $31,162 $32,591 $35,226
Paid-in Capital $5,100 $5,100 $5,100
Retained Earnings ($9,416) $39,818 $115,455
Earnings $49,234 $75,637 $110,612
Total Capital $44,918 $120,555 $231,167
Total Liabilities and Capital $76,080 $153,146 $266,393
Net Worth $44,918 $120,555 $231,167

7.7 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5699, Miscellaneous Apparel and Accessory stores.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 30.00% 30.00% 0.20%
Percent of Total Assets
Inventory 17.57% 11.35% 8.48% 49.00%
Other Current Assets 0.00% 0.00% 0.00% 23.00%
Total Current Assets 100.00% 100.00% 100.00% 81.40%
Long-term Assets 0.00% 0.00% 0.00% 18.60%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 23.35% 14.69% 10.67% 40.70%
Long-term Liabilities 17.61% 6.60% 2.55% 15.20%
Total Liabilities 40.96% 21.28% 13.22% 55.90%
Net Worth 59.04% 78.72% 86.78% 44.10%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 50.00% 50.00% 50.00% 38.30%
Selling, General & Administrative Expenses 32.72% 29.62% 27.09% 22.10%
Advertising Expenses 0.00% 0.02% 0.02% 2.10%
Profit Before Interest and Taxes 25.27% 29.56% 33.08% 0.70%
Main Ratios
Current 4.28 6.81 9.37 2.22
Quick 3.53 6.04 8.58 0.62
Total Debt to Total Assets 40.96% 21.28% 13.22% 55.90%
Pre-tax Return on Net Worth 156.58% 89.63% 68.36% 1.70%
Pre-tax Return on Assets 92.45% 70.56% 59.32% 3.80%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 17.32% 20.47% 23.03% n.a
Return on Equity 109.61% 62.74% 47.85% n.a
Activity Ratios
Inventory Turnover 10.91 12.02 12.02 n.a
Accounts Payable Turnover 12.07 12.17 12.17 n.a
Payment Days 27 27 27 n.a
Total Asset Turnover 3.74 2.41 1.80 n.a
Debt Ratios
Debt to Net Worth 0.69 0.27 0.15 n.a
Current Liab. to Liab. 0.57 0.69 0.81 n.a
Liquidity Ratios
Net Working Capital $58,318 $130,655 $237,967 n.a
Interest Coverage 48.16 92.96 188.00 n.a
Additional Ratios
Assets to Sales 0.27 0.41 0.55 n.a
Current Debt/Total Assets 23% 15% 11% n.a
Acid Test 3.53 6.04 8.58 n.a
Sales/Net Worth 6.33 3.06 2.08 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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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 30.00% 30.00% 30.00%
Other 0 0 0
Break-even Analysis
Monthly Units Break-even 248
Monthly Revenue Break-even $11,712
Assumptions:
Average Per-Unit Revenue $47.21
Average Per-Unit Variable Cost $23.60
Estimated Monthly Fixed Cost $5,856
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $284,200 $369,460 $480,290
Direct Cost of Sales $142,100 $184,730 $240,145
Other Production Expenses $0 $0 $0
Total Cost of Sales $142,100 $184,730 $240,145
Gross Margin $142,100 $184,730 $240,145
Gross Margin % 50.00% 50.00% 50.00%
Expenses
Payroll $44,115 $48,527 $53,379
Sales and Marketing and Other Expenses $15,448 $15,523 $15,834
Depreciation $0 $0 $0
Telephone / Pagers/ Cell $1,800 $1,800 $1,836
Utilities $4,500 $4,800 $4,896
Payroll Taxes $4,412 $4,853 $5,338
Other $0 $0 $0
Total Operating Expenses $70,275 $75,502 $81,283
Profit Before Interest and Taxes $71,826 $109,228 $158,862
EBITDA $71,826 $109,228 $158,862
Interest Expense $1,491 $1,175 $845
Taxes Incurred $21,100 $32,416 $47,405
Net Profit $49,234 $75,637 $110,612
Net Profit/Sales 17.32% 20.47% 23.03%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $284,200 $369,460 $480,290
Subtotal Cash from Operations $284,200 $369,460 $480,290
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 $284,200 $369,460 $480,290
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $44,115 $48,527 $53,379
Bill Payments $174,454 $244,577 $315,576
Subtotal Spent on Operations $218,569 $293,103 $368,955
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 $3,300 $3,300 $3,300
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $221,869 $296,403 $372,255
Net Cash Flow $62,331 $73,057 $108,035
Cash Balance $62,715 $135,771 $243,806
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $62,715 $135,771 $243,806
Inventory $13,365 $17,375 $22,586
Other Current Assets $0 $0 $0
Total Current Assets $76,080 $153,146 $266,393
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $76,080 $153,146 $266,393
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $15,762 $20,491 $26,426
Current Borrowing $0 $0 $0
Other Current Liabilities $2,000 $2,000 $2,000
Subtotal Current Liabilities $17,762 $22,491 $28,426
Long-term Liabilities $13,400 $10,100 $6,800
Total Liabilities $31,162 $32,591 $35,226
Paid-in Capital $5,100 $5,100 $5,100
Retained Earnings ($9,416) $39,818 $115,455
Earnings $49,234 $75,637 $110,612
Total Capital $44,918 $120,555 $231,167
Total Liabilities and Capital $76,080 $153,146 $266,393
Net Worth $44,918 $120,555 $231,167
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 30.00% 30.00% 0.20%
Percent of Total Assets
Inventory 17.57% 11.35% 8.48% 49.00%
Other Current Assets 0.00% 0.00% 0.00% 23.00%
Total Current Assets 100.00% 100.00% 100.00% 81.40%
Long-term Assets 0.00% 0.00% 0.00% 18.60%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 23.35% 14.69% 10.67% 40.70%
Long-term Liabilities 17.61% 6.60% 2.55% 15.20%
Total Liabilities 40.96% 21.28% 13.22% 55.90%
Net Worth 59.04% 78.72% 86.78% 44.10%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 50.00% 50.00% 50.00% 38.30%
Selling, General & Administrative Expenses 32.72% 29.62% 27.09% 22.10%
Advertising Expenses 0.00% 0.02% 0.02% 2.10%
Profit Before Interest and Taxes 25.27% 29.56% 33.08% 0.70%
Main Ratios
Current 4.28 6.81 9.37 2.22
Quick 3.53 6.04 8.58 0.62
Total Debt to Total Assets 40.96% 21.28% 13.22% 55.90%
Pre-tax Return on Net Worth 156.58% 89.63% 68.36% 1.70%
Pre-tax Return on Assets 92.45% 70.56% 59.32% 3.80%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 17.32% 20.47% 23.03% n.a
Return on Equity 109.61% 62.74% 47.85% n.a
Activity Ratios
Inventory Turnover 10.91 12.02 12.02 n.a
Accounts Payable Turnover 12.07 12.17 12.17 n.a
Payment Days 27 27 27 n.a
Total Asset Turnover 3.74 2.41 1.80 n.a
Debt Ratios
Debt to Net Worth 0.69 0.27 0.15 n.a
Current Liab. to Liab. 0.57 0.69 0.81 n.a
Liquidity Ratios
Net Working Capital $58,318 $130,655 $237,967 n.a
Interest Coverage 48.16 92.96 188.00 n.a
Additional Ratios
Assets to Sales 0.27 0.41 0.55 n.a
Current Debt/Total Assets 23% 15% 11% n.a
Acid Test 3.53 6.04 8.58 n.a
Sales/Net Worth 6.33 3.06 2.08 n.a
Dividend Payout 0.00 0.00 0.00 n.a