Cosmetic Herbal Sundries Business Plan

Gentle Touch Creations

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Financial Plan

The following topics cover the financial plan for Gentle Touch Products. The tables show annual figures. Monthly numbers for the first year are in the appendix. 

7.1 Break-even Analysis

The monthly break-even point is approximately $17,000.

Break-even Analysis
Monthly Revenue Break-even $17,188
Assumptions:
Average Percent Variable Cost 50%
Estimated Monthly Fixed Cost $8,594

7.2 Projected Profit and Loss

The following table and charts highlight the projected profit and loss for three years.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $282,000 $340,000 $420,000
Direct Cost of Sales $141,000 $170,000 $200,000
Other Production Expenses $0 $0 $0
Total Cost of Sales $141,000 $170,000 $200,000
Gross Margin $141,000 $170,000 $220,000
Gross Margin % 50.00% 50.00% 52.38%
Expenses
Payroll $70,800 $76,000 $105,000
Sales and Marketing and Other Expenses $4,260 $7,200 $8,500
Depreciation $4,800 $4,800 $4,800
Leased Equipment $0 $0 $0
Utilities $4,800 $5,300 $6,000
Insurance $650 $780 $900
Rent $7,200 $7,800 $8,500
Payroll Taxes $10,620 $11,400 $15,750
Other $0 $0 $0
Total Operating Expenses $103,130 $113,280 $149,450
Profit Before Interest and Taxes $37,870 $56,720 $70,550
EBITDA $42,670 $61,520 $75,350
Interest Expense $5,158 $4,340 $3,050
Taxes Incurred $9,814 $15,714 $20,250
Net Profit $22,899 $36,666 $47,250
Net Profit/Sales 8.12% 10.78% 11.25%

7.3 Projected Cash Flow

The following table and chart highlights the projected cash flow for three years.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $70,500 $85,000 $105,000
Cash from Receivables $161,300 $244,675 $300,759
Subtotal Cash from Operations $231,800 $329,675 $405,759
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $12,000 $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 $243,800 $329,675 $405,759
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $70,800 $76,000 $105,000
Bill Payments $173,564 $232,719 $263,829
Subtotal Spent on Operations $244,364 $308,719 $368,829
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $3,000 $6,000 $3,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $8,400 $8,400 $8,400
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $255,764 $323,119 $380,229
Net Cash Flow ($11,964) $6,556 $25,530
Cash Balance $21,436 $27,993 $53,522

7.4 Projected Balance Sheet

The following table highlights the projected balance sheet for three years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $21,436 $27,993 $53,522
Accounts Receivable $50,200 $60,525 $74,766
Inventory $19,800 $23,872 $28,085
Other Current Assets $5,000 $5,000 $5,000
Total Current Assets $96,436 $117,390 $161,373
Long-term Assets
Long-term Assets $15,000 $15,000 $15,000
Accumulated Depreciation $4,800 $9,600 $14,400
Total Long-term Assets $10,200 $5,400 $600
Total Assets $106,636 $122,790 $161,973
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $24,738 $18,625 $21,959
Current Borrowing $9,000 $3,000 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $33,738 $21,625 $21,959
Long-term Liabilities $41,600 $33,200 $24,800
Total Liabilities $75,338 $54,825 $46,759
Paid-in Capital $50,000 $50,000 $50,000
Retained Earnings ($41,600) ($18,701) $17,965
Earnings $22,899 $36,666 $47,250
Total Capital $31,299 $67,965 $115,215
Total Liabilities and Capital $106,636 $122,790 $161,973
Net Worth $31,299 $67,965 $115,215

7.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5122, Drug, Proprietaries, and Sundries, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 20.57% 23.53% 16.90%
Percent of Total Assets
Accounts Receivable 47.08% 49.29% 46.16% 28.90%
Inventory 18.57% 19.44% 17.34% 31.30%
Other Current Assets 4.69% 4.07% 3.09% 28.80%
Total Current Assets 90.43% 95.60% 99.63% 89.00%
Long-term Assets 9.57% 4.40% 0.37% 11.00%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 31.64% 17.61% 13.56% 49.00%
Long-term Liabilities 39.01% 27.04% 15.31% 12.60%
Total Liabilities 70.65% 44.65% 28.87% 61.60%
Net Worth 29.35% 55.35% 71.13% 38.40%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 50.00% 50.00% 52.38% 25.20%
Selling, General & Administrative Expenses 41.73% 39.09% 41.11% 15.50%
Advertising Expenses 0.85% 0.88% 0.95% 1.00%
Profit Before Interest and Taxes 13.43% 16.68% 16.80% 1.80%
Main Ratios
Current 2.86 5.43 7.35 1.67
Quick 2.27 4.32 6.07 0.86
Total Debt to Total Assets 70.65% 44.65% 28.87% 61.60%
Pre-tax Return on Net Worth 104.52% 77.07% 58.59% 5.70%
Pre-tax Return on Assets 30.68% 42.66% 41.67% 14.90%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 8.12% 10.78% 11.25% n.a
Return on Equity 73.16% 53.95% 41.01% n.a
Activity Ratios
Accounts Receivable Turnover 4.21 4.21 4.21 n.a
Collection Days 56 79 78 n.a
Inventory Turnover 10.57 7.79 7.70 n.a
Accounts Payable Turnover 8.02 12.17 12.17 n.a
Payment Days 27 35 28 n.a
Total Asset Turnover 2.64 2.77 2.59 n.a
Debt Ratios
Debt to Net Worth 2.41 0.81 0.41 n.a
Current Liab. to Liab. 0.45 0.39 0.47 n.a
Liquidity Ratios
Net Working Capital $62,699 $95,765 $139,415 n.a
Interest Coverage 7.34 13.07 23.13 n.a
Additional Ratios
Assets to Sales 0.38 0.36 0.39 n.a
Current Debt/Total Assets 32% 18% 14% n.a
Acid Test 0.78 1.53 2.67 n.a
Sales/Net Worth 9.01 5.00 3.65 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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Break-even Analysis
Monthly Revenue Break-even $17,188
Assumptions:
Average Percent Variable Cost 50%
Estimated Monthly Fixed Cost $8,594
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $282,000 $340,000 $420,000
Direct Cost of Sales $141,000 $170,000 $200,000
Other Production Expenses $0 $0 $0
Total Cost of Sales $141,000 $170,000 $200,000
Gross Margin $141,000 $170,000 $220,000
Gross Margin % 50.00% 50.00% 52.38%
Expenses
Payroll $70,800 $76,000 $105,000
Sales and Marketing and Other Expenses $4,260 $7,200 $8,500
Depreciation $4,800 $4,800 $4,800
Leased Equipment $0 $0 $0
Utilities $4,800 $5,300 $6,000
Insurance $650 $780 $900
Rent $7,200 $7,800 $8,500
Payroll Taxes $10,620 $11,400 $15,750
Other $0 $0 $0
Total Operating Expenses $103,130 $113,280 $149,450
Profit Before Interest and Taxes $37,870 $56,720 $70,550
EBITDA $42,670 $61,520 $75,350
Interest Expense $5,158 $4,340 $3,050
Taxes Incurred $9,814 $15,714 $20,250
Net Profit $22,899 $36,666 $47,250
Net Profit/Sales 8.12% 10.78% 11.25%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $70,500 $85,000 $105,000
Cash from Receivables $161,300 $244,675 $300,759
Subtotal Cash from Operations $231,800 $329,675 $405,759
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $12,000 $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 $243,800 $329,675 $405,759
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $70,800 $76,000 $105,000
Bill Payments $173,564 $232,719 $263,829
Subtotal Spent on Operations $244,364 $308,719 $368,829
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $3,000 $6,000 $3,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $8,400 $8,400 $8,400
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $255,764 $323,119 $380,229
Net Cash Flow ($11,964) $6,556 $25,530
Cash Balance $21,436 $27,993 $53,522
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $21,436 $27,993 $53,522
Accounts Receivable $50,200 $60,525 $74,766
Inventory $19,800 $23,872 $28,085
Other Current Assets $5,000 $5,000 $5,000
Total Current Assets $96,436 $117,390 $161,373
Long-term Assets
Long-term Assets $15,000 $15,000 $15,000
Accumulated Depreciation $4,800 $9,600 $14,400
Total Long-term Assets $10,200 $5,400 $600
Total Assets $106,636 $122,790 $161,973
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $24,738 $18,625 $21,959
Current Borrowing $9,000 $3,000 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $33,738 $21,625 $21,959
Long-term Liabilities $41,600 $33,200 $24,800
Total Liabilities $75,338 $54,825 $46,759
Paid-in Capital $50,000 $50,000 $50,000
Retained Earnings ($41,600) ($18,701) $17,965
Earnings $22,899 $36,666 $47,250
Total Capital $31,299 $67,965 $115,215
Total Liabilities and Capital $106,636 $122,790 $161,973
Net Worth $31,299 $67,965 $115,215
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 20.57% 23.53% 16.90%
Percent of Total Assets
Accounts Receivable 47.08% 49.29% 46.16% 28.90%
Inventory 18.57% 19.44% 17.34% 31.30%
Other Current Assets 4.69% 4.07% 3.09% 28.80%
Total Current Assets 90.43% 95.60% 99.63% 89.00%
Long-term Assets 9.57% 4.40% 0.37% 11.00%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 31.64% 17.61% 13.56% 49.00%
Long-term Liabilities 39.01% 27.04% 15.31% 12.60%
Total Liabilities 70.65% 44.65% 28.87% 61.60%
Net Worth 29.35% 55.35% 71.13% 38.40%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 50.00% 50.00% 52.38% 25.20%
Selling, General & Administrative Expenses 41.73% 39.09% 41.11% 15.50%
Advertising Expenses 0.85% 0.88% 0.95% 1.00%
Profit Before Interest and Taxes 13.43% 16.68% 16.80% 1.80%
Main Ratios
Current 2.86 5.43 7.35 1.67
Quick 2.27 4.32 6.07 0.86
Total Debt to Total Assets 70.65% 44.65% 28.87% 61.60%
Pre-tax Return on Net Worth 104.52% 77.07% 58.59% 5.70%
Pre-tax Return on Assets 30.68% 42.66% 41.67% 14.90%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 8.12% 10.78% 11.25% n.a
Return on Equity 73.16% 53.95% 41.01% n.a
Activity Ratios
Accounts Receivable Turnover 4.21 4.21 4.21 n.a
Collection Days 56 79 78 n.a
Inventory Turnover 10.57 7.79 7.70 n.a
Accounts Payable Turnover 8.02 12.17 12.17 n.a
Payment Days 27 35 28 n.a
Total Asset Turnover 2.64 2.77 2.59 n.a
Debt Ratios
Debt to Net Worth 2.41 0.81 0.41 n.a
Current Liab. to Liab. 0.45 0.39 0.47 n.a
Liquidity Ratios
Net Working Capital $62,699 $95,765 $139,415 n.a
Interest Coverage 7.34 13.07 23.13 n.a
Additional Ratios
Assets to Sales 0.38 0.36 0.39 n.a
Current Debt/Total Assets 32% 18% 14% n.a
Acid Test 0.78 1.53 2.67 n.a
Sales/Net Worth 9.01 5.00 3.65 n.a
Dividend Payout 0.00 0.00 0.00 n.a