Decorative Pottery Business Plan

Fat Cat Creations

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Financial Plan

The following is the financial plan for Fat Cat Creations.

7.1 Break-even Analysis

The following table and chart show our break-even analysis.

Break-even Analysis
Monthly Revenue Break-even $25,675
Assumptions:
Average Percent Variable Cost 25%
Estimated Monthly Fixed Cost $19,128

7.2 Projected Profit and Loss

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

 

 

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $339,000 $460,000 $540,000
Direct Cost of Sales $86,440 $128,000 $155,000
Other Production Expenses $0 $0 $0
Total Cost of Sales $86,440 $128,000 $155,000
Gross Margin $252,560 $332,000 $385,000
Gross Margin % 74.50% 72.17% 71.30%
Expenses
Payroll $180,000 $204,000 $226,000
Sales and Marketing and Other Expenses $18,000 $30,000 $55,000
Depreciation $2,136 $2,136 $2,136
Leased Equipment $0 $0 $0
Utilities $2,400 $2,400 $2,400
Insurance $0 $0 $0
Rent $0 $0 $0
Payroll Taxes $27,000 $30,600 $33,900
Other $0 $0 $0
Total Operating Expenses $229,536 $269,136 $319,436
Profit Before Interest and Taxes $23,024 $62,864 $65,564
EBITDA $25,160 $65,000 $67,700
Interest Expense $5,784 $5,402 $5,004
Taxes Incurred $5,172 $17,238 $18,168
Net Profit $12,068 $40,223 $42,392
Net Profit/Sales 3.56% 8.74% 7.85%

7.3 Projected Cash Flow

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

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $339,000 $460,000 $540,000
Subtotal Cash from Operations $339,000 $460,000 $540,000
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 $339,000 $460,000 $540,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $180,000 $204,000 $226,000
Bill Payments $147,452 $203,702 $267,209
Subtotal Spent on Operations $327,452 $407,702 $493,209
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 $3,984 $3,984 $3,984
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $331,436 $411,686 $497,193
Net Cash Flow $7,564 $48,314 $42,807
Cash Balance $37,764 $86,078 $128,885

7.4 Projected Balance Sheet

The following table projects the balance sheet for three years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $37,764 $86,078 $128,885
Inventory $7,130 $10,558 $12,785
Other Current Assets $12,000 $12,000 $12,000
Total Current Assets $56,894 $108,636 $153,670
Long-term Assets
Long-term Assets $15,000 $15,000 $15,000
Accumulated Depreciation $2,136 $4,272 $6,408
Total Long-term Assets $12,864 $10,728 $8,592
Total Assets $69,758 $119,364 $162,262
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $4,474 $17,841 $22,331
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $4,474 $17,841 $22,331
Long-term Liabilities $56,016 $52,032 $48,048
Total Liabilities $60,490 $69,873 $70,379
Paid-in Capital $30,000 $30,000 $30,000
Retained Earnings ($32,800) ($20,732) $19,491
Earnings $12,068 $40,223 $42,392
Total Capital $9,268 $49,491 $91,883
Total Liabilities and Capital $69,758 $119,364 $162,262
Net Worth $9,268 $49,491 $91,883

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 7336, Commercial Art and Graphic Design, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 35.69% 17.39% 8.50%
Percent of Total Assets
Inventory 10.22% 8.85% 7.88% 5.30%
Other Current Assets 17.20% 10.05% 7.40% 44.20%
Total Current Assets 81.56% 91.01% 94.70% 69.00%
Long-term Assets 18.44% 8.99% 5.30% 31.00%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 6.41% 14.95% 13.76% 43.70%
Long-term Liabilities 80.30% 43.59% 29.61% 19.40%
Total Liabilities 86.71% 58.54% 43.37% 63.10%
Net Worth 13.29% 41.46% 56.63% 36.90%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 74.50% 72.17% 71.30% 0.00%
Selling, General & Administrative Expenses 70.94% 63.43% 63.45% 81.30%
Advertising Expenses 3.54% 4.35% 7.41% 1.00%
Profit Before Interest and Taxes 6.79% 13.67% 12.14% 1.70%
Main Ratios
Current 12.72 6.09 6.88 1.60
Quick 11.12 5.50 6.31 1.23
Total Debt to Total Assets 86.71% 58.54% 43.37% 63.10%
Pre-tax Return on Net Worth 186.02% 116.11% 65.91% 3.60%
Pre-tax Return on Assets 24.71% 48.14% 37.32% 9.80%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 3.56% 8.74% 7.85% n.a
Return on Equity 130.21% 81.27% 46.14% n.a
Activity Ratios
Inventory Turnover 8.78 14.47 13.28 n.a
Accounts Payable Turnover 33.96 12.17 12.17 n.a
Payment Days 27 19 27 n.a
Total Asset Turnover 4.86 3.85 3.33 n.a
Debt Ratios
Debt to Net Worth 6.53 1.41 0.77 n.a
Current Liab. to Liab. 0.07 0.26 0.32 n.a
Liquidity Ratios
Net Working Capital $52,420 $90,795 $131,339 n.a
Interest Coverage 3.98 11.64 13.10 n.a
Additional Ratios
Assets to Sales 0.21 0.26 0.30 n.a
Current Debt/Total Assets 6% 15% 14% n.a
Acid Test 11.12 5.50 6.31 n.a
Sales/Net Worth 36.58 9.29 5.88 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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Break-even Analysis
Monthly Revenue Break-even $25,675
Assumptions:
Average Percent Variable Cost 25%
Estimated Monthly Fixed Cost $19,128
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $339,000 $460,000 $540,000
Direct Cost of Sales $86,440 $128,000 $155,000
Other Production Expenses $0 $0 $0
Total Cost of Sales $86,440 $128,000 $155,000
Gross Margin $252,560 $332,000 $385,000
Gross Margin % 74.50% 72.17% 71.30%
Expenses
Payroll $180,000 $204,000 $226,000
Sales and Marketing and Other Expenses $18,000 $30,000 $55,000
Depreciation $2,136 $2,136 $2,136
Leased Equipment $0 $0 $0
Utilities $2,400 $2,400 $2,400
Insurance $0 $0 $0
Rent $0 $0 $0
Payroll Taxes $27,000 $30,600 $33,900
Other $0 $0 $0
Total Operating Expenses $229,536 $269,136 $319,436
Profit Before Interest and Taxes $23,024 $62,864 $65,564
EBITDA $25,160 $65,000 $67,700
Interest Expense $5,784 $5,402 $5,004
Taxes Incurred $5,172 $17,238 $18,168
Net Profit $12,068 $40,223 $42,392
Net Profit/Sales 3.56% 8.74% 7.85%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $339,000 $460,000 $540,000
Subtotal Cash from Operations $339,000 $460,000 $540,000
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 $339,000 $460,000 $540,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $180,000 $204,000 $226,000
Bill Payments $147,452 $203,702 $267,209
Subtotal Spent on Operations $327,452 $407,702 $493,209
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 $3,984 $3,984 $3,984
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $331,436 $411,686 $497,193
Net Cash Flow $7,564 $48,314 $42,807
Cash Balance $37,764 $86,078 $128,885
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $37,764 $86,078 $128,885
Inventory $7,130 $10,558 $12,785
Other Current Assets $12,000 $12,000 $12,000
Total Current Assets $56,894 $108,636 $153,670
Long-term Assets
Long-term Assets $15,000 $15,000 $15,000
Accumulated Depreciation $2,136 $4,272 $6,408
Total Long-term Assets $12,864 $10,728 $8,592
Total Assets $69,758 $119,364 $162,262
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $4,474 $17,841 $22,331
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $4,474 $17,841 $22,331
Long-term Liabilities $56,016 $52,032 $48,048
Total Liabilities $60,490 $69,873 $70,379
Paid-in Capital $30,000 $30,000 $30,000
Retained Earnings ($32,800) ($20,732) $19,491
Earnings $12,068 $40,223 $42,392
Total Capital $9,268 $49,491 $91,883
Total Liabilities and Capital $69,758 $119,364 $162,262
Net Worth $9,268 $49,491 $91,883
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 35.69% 17.39% 8.50%
Percent of Total Assets
Inventory 10.22% 8.85% 7.88% 5.30%
Other Current Assets 17.20% 10.05% 7.40% 44.20%
Total Current Assets 81.56% 91.01% 94.70% 69.00%
Long-term Assets 18.44% 8.99% 5.30% 31.00%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 6.41% 14.95% 13.76% 43.70%
Long-term Liabilities 80.30% 43.59% 29.61% 19.40%
Total Liabilities 86.71% 58.54% 43.37% 63.10%
Net Worth 13.29% 41.46% 56.63% 36.90%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 74.50% 72.17% 71.30% 0.00%
Selling, General & Administrative Expenses 70.94% 63.43% 63.45% 81.30%
Advertising Expenses 3.54% 4.35% 7.41% 1.00%
Profit Before Interest and Taxes 6.79% 13.67% 12.14% 1.70%
Main Ratios
Current 12.72 6.09 6.88 1.60
Quick 11.12 5.50 6.31 1.23
Total Debt to Total Assets 86.71% 58.54% 43.37% 63.10%
Pre-tax Return on Net Worth 186.02% 116.11% 65.91% 3.60%
Pre-tax Return on Assets 24.71% 48.14% 37.32% 9.80%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 3.56% 8.74% 7.85% n.a
Return on Equity 130.21% 81.27% 46.14% n.a
Activity Ratios
Inventory Turnover 8.78 14.47 13.28 n.a
Accounts Payable Turnover 33.96 12.17 12.17 n.a
Payment Days 27 19 27 n.a
Total Asset Turnover 4.86 3.85 3.33 n.a
Debt Ratios
Debt to Net Worth 6.53 1.41 0.77 n.a
Current Liab. to Liab. 0.07 0.26 0.32 n.a
Liquidity Ratios
Net Working Capital $52,420 $90,795 $131,339 n.a
Interest Coverage 3.98 11.64 13.10 n.a
Additional Ratios
Assets to Sales 0.21 0.26 0.30 n.a
Current Debt/Total Assets 6% 15% 14% n.a
Acid Test 11.12 5.50 6.31 n.a
Sales/Net Worth 36.58 9.29 5.88 n.a
Dividend Payout 0.00 0.00 0.00 n.a