Coffee Distribution Business Plan

The Coffee Warehouse

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Financial Plan

The Coffee Warehouse projects the gross margin to be at approximately 20-25 percent. Sales projections for FY2004 are at $2,229,652 increasing to $2,558,584 in FY2005 and $2,936,137 in FY2006. Cash-flow analysis, balance sheet, business ratio, break-even analysis, and other financial details are shown in the appendix.

7.1 Important Assumptions

General assumptions for this plan are on the following table.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 8.00% 8.00% 8.00%
Long-term Interest Rate 8.00% 8.00% 8.00%
Tax Rate 25.42% 25.00% 25.42%
Other 0 0 0

7.2 Break-even Analysis

The following table and chart illustrate our break-even analysis. With our fixed costs estimate of approximately $15,000 per month, operating on average at a 25% profit margin, we will need to sell 67,666 units to break-even in a month. Fixed costs include our warehouse lease, vehicle leases, utilities, insurance, payroll, and an estimation of other running costs.

Break-even Analysis
Monthly Revenue Break-even $75,055
Assumptions:
Average Percent Variable Cost 79%
Estimated Monthly Fixed Cost $15,993

7.3 Projected Profit and Loss

The following table and charts show the projected profit and loss. Monthly projections are included in the appendix.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $2,229,652 $2,558,584 $2,936,137
Direct Cost of Sales $1,754,550 $2,012,837 $2,309,230
Hidden Row $0 $0 $0
Total Cost of Sales $1,754,550 $2,012,837 $2,309,230
Gross Margin $475,102 $545,747 $626,907
Gross Margin % 21.31% 21.33% 21.35%
Expenses
Payroll $93,757 $102,000 $110,500
Other $0 $0 $0
Depreciation $0 $0 $0
Rent $33,096 $34,260 $35,460
Utilities and Phone $7,200 $7,500 $7,800
Insurance $6,000 $6,300 $6,500
Payroll Burden $14,064 $15,300 $16,575
Leased Equipment (Delivery Vehicles) $12,000 $12,600 $13,200
Leased Equipment (Warehouse) $3,000 $3,000 $3,000
Leased Equipment (Other) $2,400 $2,400 $2,400
Fuel (delivery) $12,000 $12,500 $13,000
Advertising / Promotion $3,600 $3,600 $3,600
Professional Services $2,400 $2,200 $2,600
Miscellaneous (office supplies, etc) $2,400 $2,700 $3,000
Total Operating Expenses $191,917 $204,360 $217,635
Profit Before Interest and Taxes $283,186 $341,387 $409,272
EBITDA $283,186 $341,387 $409,272
Interest Expense $6,560 $4,720 $2,800
Taxes Incurred $69,354 $84,167 $103,312
Other Income
Interest Income $0 $0 $0
Other Income Account Name $0 $0 $0
Total Other Income $0 $0 $0
Other Expense
Account Name $0 $0 $0
Other Expense Account Name $0 $0 $0
Total Other Expense $0 $0 $0
Net Other Income $0 $0 $0
Net Profit $207,271 $252,500 $303,160
Net Profit/Sales 9.30% 9.87% 10.33%

7.4 Projected Cash Flow

The following table shows cash flow for the three years, and the chart illustrates monthly cash flow in the first year. Monthly cash flow projections are included in the appendix.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $2,229,652 $2,558,584 $2,936,137
Subtotal Cash from Operations $2,229,652 $2,558,584 $2,936,137
Additional Cash Received
Non Operating (Other) Income $0 $0 $0
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 $2,229,652 $2,558,584 $2,936,137
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $93,757 $102,000 $110,500
Bill Payments $1,826,094 $2,457,050 $2,556,178
Subtotal Spent on Operations $1,919,851 $2,559,050 $2,666,678
Additional Cash Spent
Non Operating (Other) Expense $0 $0 $0
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $24,000 $24,000 $24,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $1,943,851 $2,583,050 $2,690,678
Net Cash Flow $285,801 ($24,466) $245,459
Cash Balance $295,601 $271,134 $516,594

7.5 Projected Balance Sheet

The projected balance sheet is shown in the following table, with monthly projections in the appendix.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $295,601 $271,134 $516,594
Inventory $358,198 $410,929 $471,438
Other Current Assets $18,750 $18,750 $18,750
Total Current Assets $672,549 $700,813 $1,006,782
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $672,549 $700,813 $1,006,782
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $385,728 $185,492 $212,300
Current Borrowing $71,000 $47,000 $23,000
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $456,728 $232,492 $235,300
Long-term Liabilities $0 $0 $0
Total Liabilities $456,728 $232,492 $235,300
Paid-in Capital $25,000 $25,000 $25,000
Retained Earnings ($16,450) $190,821 $443,321
Earnings $207,271 $252,500 $303,160
Total Capital $215,821 $468,321 $771,482
Total Liabilities and Capital $672,549 $700,813 $1,006,782
Net Worth $215,821 $468,321 $771,482

7.6 Business Ratios

The table shows projected business ratios.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 14.75% 14.76% 0.00%
Percent of Total Assets
Inventory 53.26% 58.64% 46.83% 0.00%
Other Current Assets 2.79% 2.68% 1.86% 100.00%
Total Current Assets 100.00% 100.00% 100.00% 100.00%
Long-term Assets 0.00% 0.00% 0.00% 0.00%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 67.91% 33.17% 23.37% 0.00%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00%
Total Liabilities 67.91% 33.17% 23.37% 0.00%
Net Worth 32.09% 66.83% 76.63% 100.00%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 21.31% 21.33% 21.35% 0.00%
Selling, General & Administrative Expenses 8.61% 8.17% 7.51% 0.00%
Advertising Expenses 0.00% 0.00% 0.00% 0.00%
Profit Before Interest and Taxes 12.70% 13.34% 13.94% 0.00%
Main Ratios
Current 1.47 3.01 4.28 0.00
Quick 0.69 1.25 2.28 0.00
Total Debt to Total Assets 67.91% 33.17% 23.37% 0.00%
Pre-tax Return on Net Worth 128.17% 71.89% 52.69% 0.00%
Pre-tax Return on Assets 41.13% 48.04% 40.37% 0.00%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 9.30% 9.87% 10.33% n.a
Return on Equity 96.04% 53.92% 39.30% n.a
Activity Ratios
Inventory Turnover 10.91 5.23 5.23 n.a
Accounts Payable Turnover 5.73 12.17 12.17 n.a
Payment Days 27 46 28 n.a
Total Asset Turnover 3.32 3.65 2.92 n.a
Debt Ratios
Debt to Net Worth 2.12 0.50 0.30 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $215,821 $468,321 $771,482 n.a
Interest Coverage 43.17 72.33 146.17 n.a
Additional Ratios
Assets to Sales 0.30 0.27 0.34 n.a
Current Debt/Total Assets 68% 33% 23% n.a
Acid Test 0.69 1.25 2.28 n.a
Sales/Net Worth 10.33 5.46 3.81 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 8.00% 8.00% 8.00%
Long-term Interest Rate 8.00% 8.00% 8.00%
Tax Rate 25.42% 25.00% 25.42%
Other 0 0 0
Break-even Analysis
Monthly Revenue Break-even $75,055
Assumptions:
Average Percent Variable Cost 79%
Estimated Monthly Fixed Cost $15,993
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $2,229,652 $2,558,584 $2,936,137
Direct Cost of Sales $1,754,550 $2,012,837 $2,309,230
Hidden Row $0 $0 $0
Total Cost of Sales $1,754,550 $2,012,837 $2,309,230
Gross Margin $475,102 $545,747 $626,907
Gross Margin % 21.31% 21.33% 21.35%
Expenses
Payroll $93,757 $102,000 $110,500
Other $0 $0 $0
Depreciation $0 $0 $0
Rent $33,096 $34,260 $35,460
Utilities and Phone $7,200 $7,500 $7,800
Insurance $6,000 $6,300 $6,500
Payroll Burden $14,064 $15,300 $16,575
Leased Equipment (Delivery Vehicles) $12,000 $12,600 $13,200
Leased Equipment (Warehouse) $3,000 $3,000 $3,000
Leased Equipment (Other) $2,400 $2,400 $2,400
Fuel (delivery) $12,000 $12,500 $13,000
Advertising / Promotion $3,600 $3,600 $3,600
Professional Services $2,400 $2,200 $2,600
Miscellaneous (office supplies, etc) $2,400 $2,700 $3,000
Total Operating Expenses $191,917 $204,360 $217,635
Profit Before Interest and Taxes $283,186 $341,387 $409,272
EBITDA $283,186 $341,387 $409,272
Interest Expense $6,560 $4,720 $2,800
Taxes Incurred $69,354 $84,167 $103,312
Other Income
Interest Income $0 $0 $0
Other Income Account Name $0 $0 $0
Total Other Income $0 $0 $0
Other Expense
Account Name $0 $0 $0
Other Expense Account Name $0 $0 $0
Total Other Expense $0 $0 $0
Net Other Income $0 $0 $0
Net Profit $207,271 $252,500 $303,160
Net Profit/Sales 9.30% 9.87% 10.33%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $2,229,652 $2,558,584 $2,936,137
Subtotal Cash from Operations $2,229,652 $2,558,584 $2,936,137
Additional Cash Received
Non Operating (Other) Income $0 $0 $0
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 $2,229,652 $2,558,584 $2,936,137
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $93,757 $102,000 $110,500
Bill Payments $1,826,094 $2,457,050 $2,556,178
Subtotal Spent on Operations $1,919,851 $2,559,050 $2,666,678
Additional Cash Spent
Non Operating (Other) Expense $0 $0 $0
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $24,000 $24,000 $24,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $1,943,851 $2,583,050 $2,690,678
Net Cash Flow $285,801 ($24,466) $245,459
Cash Balance $295,601 $271,134 $516,594
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $295,601 $271,134 $516,594
Inventory $358,198 $410,929 $471,438
Other Current Assets $18,750 $18,750 $18,750
Total Current Assets $672,549 $700,813 $1,006,782
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $672,549 $700,813 $1,006,782
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $385,728 $185,492 $212,300
Current Borrowing $71,000 $47,000 $23,000
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $456,728 $232,492 $235,300
Long-term Liabilities $0 $0 $0
Total Liabilities $456,728 $232,492 $235,300
Paid-in Capital $25,000 $25,000 $25,000
Retained Earnings ($16,450) $190,821 $443,321
Earnings $207,271 $252,500 $303,160
Total Capital $215,821 $468,321 $771,482
Total Liabilities and Capital $672,549 $700,813 $1,006,782
Net Worth $215,821 $468,321 $771,482
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 14.75% 14.76% 0.00%
Percent of Total Assets
Inventory 53.26% 58.64% 46.83% 0.00%
Other Current Assets 2.79% 2.68% 1.86% 100.00%
Total Current Assets 100.00% 100.00% 100.00% 100.00%
Long-term Assets 0.00% 0.00% 0.00% 0.00%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 67.91% 33.17% 23.37% 0.00%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00%
Total Liabilities 67.91% 33.17% 23.37% 0.00%
Net Worth 32.09% 66.83% 76.63% 100.00%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 21.31% 21.33% 21.35% 0.00%
Selling, General & Administrative Expenses 8.61% 8.17% 7.51% 0.00%
Advertising Expenses 0.00% 0.00% 0.00% 0.00%
Profit Before Interest and Taxes 12.70% 13.34% 13.94% 0.00%
Main Ratios
Current 1.47 3.01 4.28 0.00
Quick 0.69 1.25 2.28 0.00
Total Debt to Total Assets 67.91% 33.17% 23.37% 0.00%
Pre-tax Return on Net Worth 128.17% 71.89% 52.69% 0.00%
Pre-tax Return on Assets 41.13% 48.04% 40.37% 0.00%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 9.30% 9.87% 10.33% n.a
Return on Equity 96.04% 53.92% 39.30% n.a
Activity Ratios
Inventory Turnover 10.91 5.23 5.23 n.a
Accounts Payable Turnover 5.73 12.17 12.17 n.a
Payment Days 27 46 28 n.a
Total Asset Turnover 3.32 3.65 2.92 n.a
Debt Ratios
Debt to Net Worth 2.12 0.50 0.30 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $215,821 $468,321 $771,482 n.a
Interest Coverage 43.17 72.33 146.17 n.a
Additional Ratios
Assets to Sales 0.30 0.27 0.34 n.a
Current Debt/Total Assets 68% 33% 23% n.a
Acid Test 0.69 1.25 2.28 n.a
Sales/Net Worth 10.33 5.46 3.81 n.a
Dividend Payout 0.00 0.00 0.00 n.a