MillenniumMart

Start your own business plan »

Convenience Store Business Plan

Financial Plan

The following tables illustrate our financial projections over the next three years. Please note that we expect to be operating at a loss for the first six months before advertising begins to take effect and draw in customers.

As retained earnings increase, a debt retirement fund will be established to encourage early repayment, thus relieving interest expense. Also, a 30-day payment period for purchases will be used to avoid incurring liabilities.

7.1 Important Assumptions

MillenniumMart is basing its assumptions on a stable growth market using average interest rates over the past ten years.

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

7.2 Break-even Analysis

The following table and chart show our Break-even Analysis. Although our break-even point seems quite high, we are expecting to have higher than average fixed costs during the period of this plan due to customer "creation costs," R&D costs, higher rent in a premier spot, higher percentage of payroll costs to overall fixed costs with a small company, and the need to import and pay for the store facilities. We expect to have a more reasonable positive retained earnings point around year 5.

Break-even Analysis
Monthly Revenue Break-even $165,326
Assumptions:
Average Percent Variable Cost 77%
Estimated Monthly Fixed Cost $38,025

7.3 Projected Profit and Loss

The following table explains our itemized costs and determines gross and net margin. Please note that these predictions are weighted toward having higher costs in comparison to revenues in case unexpected hidden costs arise. The charts give a visual representation of the data.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $2,480,106 $3,149,735 $4,000,163
Direct Cost of Sales $1,909,682 $2,425,296 $3,080,125
Other Costs of Goods $0 $0 $0
Total Cost of Sales $1,909,682 $2,425,296 $3,080,125
Gross Margin $570,424 $724,439 $920,037
Gross Margin % 23.00% 23.00% 23.00%
Expenses
Payroll $167,400 $214,000 $238,000
Sales and Marketing and Other Expenses $60,000 $130,000 $130,000
Depreciation $7,200 $7,200 $7,200
Leased equipment $50,000 $60,000 $60,000
Rent $84,000 $84,000 $84,000
Utilities $28,800 $30,000 $30,000
Accounting/bookeeping $6,500 $9,000 $9,000
Insurance $14,400 $14,400 $14,400
Payroll Taxes $0 $0 $0
Other $38,000 $45,000 $45,000
Total Operating Expenses $456,300 $593,600 $617,600
Profit Before Interest and Taxes $114,124 $130,839 $302,437
EBITDA $121,324 $138,039 $309,637
Interest Expense $16,250 $16,400 $14,650
Taxes Incurred $29,362 $34,332 $86,336
Net Profit $68,512 $80,107 $201,451
Net Profit/Sales 2.76% 2.54% 5.04%

7.4 Projected Cash Flow

MillenniumMart will be receiving periodic influxes of cash in order to cover operating expenses during the first two years as it strives toward sustainable profitability. Almost all of this funding has been arranged through lending institutions and private investors already. We do not anticipate any cash flow problems during the next three years.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $2,480,106 $3,149,735 $4,000,163
Subtotal Cash from Operations $2,480,106 $3,149,735 $4,000,163
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $5,000 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $50,000 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $54,000 $78,000 $0
Subtotal Cash Received $2,589,106 $3,227,735 $4,000,163
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $167,400 $214,000 $238,000
Bill Payments $2,177,877 $3,134,865 $3,620,688
Subtotal Spent on Operations $2,345,277 $3,348,865 $3,858,688
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $7,000 $13,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $5,000 $10,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $30,000
Dividends $0 $0 $50,000
Subtotal Cash Spent $2,345,277 $3,360,865 $3,961,688
Net Cash Flow $243,829 ($133,130) $38,475
Cash Balance $357,649 $224,519 $262,994

7.5 Projected Balance Sheet

The following table shows the Projected Balance Sheet for MillenniumMart.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $357,649 $224,519 $262,994
Inventory $371,402 $471,680 $599,034
Other Current Assets $8,000 $8,000 $8,000
Total Current Assets $737,050 $704,199 $870,027
Long-term Assets
Long-term Assets $72,000 $72,000 $102,000
Accumulated Depreciation $7,200 $14,400 $21,600
Total Long-term Assets $64,800 $57,600 $80,400
Total Assets $801,850 $761,799 $950,427
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $428,518 $242,359 $302,537
Current Borrowing $20,000 $13,000 $0
Other Current Liabilities $10,000 $10,000 $10,000
Subtotal Current Liabilities $458,518 $265,359 $312,537
Long-term Liabilities $150,000 $145,000 $135,000
Total Liabilities $608,518 $410,359 $447,537
Paid-in Capital $374,000 $452,000 $452,000
Retained Earnings ($249,180) ($180,668) ($150,561)
Earnings $68,512 $80,107 $201,451
Total Capital $193,332 $351,439 $502,891
Total Liabilities and Capital $801,850 $761,799 $950,427
Net Worth $193,332 $351,439 $502,891

7.6 Business Ratios

We are using the industry standard business ratios for independent convenience store chains as a comparison to our own. There are some significant differences between the two since we have a completely different storefront than our competitors. First of all our accounts receivable are very different as we expect to have higher sales using credit cards than other stores, due to the convenience of using credit cards and cash cards at our facility. There is generally a three day waiting period to receive funds from the credit card company. This is a short period of time compared to a normal collection day period of 30 days, but it is still something we need to factor for.

In addition, we expect higher percentages in inventory as we will be operating only one store initially and even many independent convenience store owners often have two or more facilities. Our long-term assets are low since we are only renting our facilities.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 27.00% 27.00% 2.27%
Percent of Total Assets
Inventory 46.32% 61.92% 63.03% 22.18%
Other Current Assets 1.00% 1.05% 0.84% 26.81%
Total Current Assets 91.92% 92.44% 91.54% 56.12%
Long-term Assets 8.08% 7.56% 8.46% 43.88%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 57.18% 34.83% 32.88% 26.39%
Long-term Liabilities 18.71% 19.03% 14.20% 24.87%
Total Liabilities 75.89% 53.87% 47.09% 51.26%
Net Worth 24.11% 46.13% 52.91% 48.74%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 23.00% 23.00% 23.00% 23.55%
Selling, General & Administrative Expenses 20.26% 20.10% 17.78% 16.21%
Advertising Expenses 0.00% 0.00% 0.00% 0.85%
Profit Before Interest and Taxes 4.60% 4.15% 7.56% 1.02%
Main Ratios
Current 1.61 2.65 2.78 1.68
Quick 0.80 0.88 0.87 0.71
Total Debt to Total Assets 75.89% 53.87% 47.09% 4.63%
Pre-tax Return on Net Worth 50.63% 32.56% 57.23% 57.28%
Pre-tax Return on Assets 12.21% 15.02% 30.28% 10.83%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 2.76% 2.54% 5.04% n.a
Return on Equity 35.44% 22.79% 40.06% n.a
Activity Ratios
Inventory Turnover 10.91 5.75 5.75 n.a
Accounts Payable Turnover 6.06 12.17 12.17 n.a
Payment Days 27 42 27 n.a
Total Asset Turnover 3.09 4.13 4.21 n.a
Debt Ratios
Debt to Net Worth 3.15 1.17 0.89 n.a
Current Liab. to Liab. 0.75 0.65 0.70 n.a
Liquidity Ratios
Net Working Capital $278,532 $438,839 $557,491 n.a
Interest Coverage 7.02 7.98 20.64 n.a
Additional Ratios
Assets to Sales 0.32 0.24 0.24 n.a
Current Debt/Total Assets 57% 35% 33% n.a
Acid Test 0.80 0.88 0.87 n.a
Sales/Net Worth 12.83 8.96 7.95 n.a
Dividend Payout 0.00 0.00 0.25 n.a