Rutabaga Sweets

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Dessert Bakery Business Plan

Financial Plan

It is key to our financial success to grow Rutabaga Sweets not just as a dessert bar, but as a company.  We are looking for an investment of $300,000 seed money with the hopes of eventually selling an established chain of dessert bars or establishing our company as a gourmet franchise.  This means we must always be reinvesting in the future of Rutabaga Sweets.

7.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table. The key underlying assumptions are:

  • We assume a slow-growth economy, without major recession.
  • We assume of course that there are no unforeseen changes in technology to make products immediately obsolete.
  • We assume access to equity capital and financing sufficient to maintain our financial plan as shown in the tables.
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

For our break-even analysis, we assume running costs including our full payroll, rent, and utilities, and an estimation of other running costs. Payroll alone, at our present run rate, is only about $4,000.

Margins are harder to assume that far in the future.

Break-even Analysis
Monthly Revenue Break-even $13,251
Assumptions:
Average Percent Variable Cost 19%
Estimated Monthly Fixed Cost $10,689

7.3 Projected Profit and Loss

An important assumption when calculating our P&L is the increase in sales from year to year.  We are basing our assumptions on the financial success of Finale Dessertery in Boston, Massachusetts.  They reported a 50% increase in sales the second year of business followed by a 30% increase the next year.  We feel Rutabaga Sweets can match, if not beat those sales, considering the National Restaurant Association's analysis of the Bureau of Labor Statistics Consumer Expenditure Survey states that Washington DC households spend the most at restaurants per year.

It is also vital that we hold our food cost at 20% and 15% respectively for dine-in desserts and POP, carry-out and weekly lessons.  That will assure our gross margin remains high.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $166,150 $241,525 $312,751
Direct Cost of Sales $32,123 $47,232 $60,499
Other Production Expenses $0 $0 $0
Total Cost of Sales $32,123 $47,232 $60,499
Gross Margin $134,028 $194,293 $252,252
Gross Margin % 80.67% 80.44% 80.66%
Expenses
Payroll $50,063 $54,019 $60,387
Sales and Marketing and Other Expenses $2,300 $2,500 $2,500
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $6,000 $6,000 $6,000
Insurance $2,400 $2,400 $2,400
Rent $60,000 $60,000 $60,000
Payroll Taxes $7,509 $8,103 $9,058
Other $0 $0 $0
Total Operating Expenses $128,272 $133,022 $140,345
Profit Before Interest and Taxes $5,755 $61,271 $111,907
EBITDA $5,755 $61,271 $111,907
Interest Expense $0 $0 $0
Taxes Incurred $1,727 $18,381 $33,572
Net Profit $4,029 $42,890 $78,335
Net Profit/Sales 2.42% 17.76% 25.05%

7.4 Projected Cash Flow

Being a quick-service oriented business, our cash flow depends on sales assumptions.  It is critical to keep our food cost low. We also need to be careful to balance slow (non-holiday) months with busy months with big holidays such as Christmas, Valentine's Day and Mother's Day.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $166,150 $241,525 $312,751
Subtotal Cash from Operations $166,150 $241,525 $312,751
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 $166,150 $241,525 $312,751
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $50,063 $54,019 $60,387
Bill Payments $104,118 $146,159 $173,213
Subtotal Spent on Operations $154,181 $200,178 $233,600
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 $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $154,181 $200,178 $233,600
Net Cash Flow $11,969 $41,347 $79,151
Cash Balance $30,969 $72,316 $151,467

7.5 Projected Balance Sheet

The balance sheet is quite solid. We do not project any real trouble meeting our debt obligations - as long as we can achieve our specific objectives. We realize we've projected aggressively, but are confident the location we've chosen for Rutabaga Sweets, as well as the dessert bar concept itself , will be very successful.

At this point we haven't included any assets or depreciation in our calculations.  Whether we purchase new or used kitchen equipment will determine those numbers at a later date.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $30,969 $72,316 $151,467
Inventory $3,834 $5,637 $7,220
Other Current Assets $0 $0 $0
Total Current Assets $34,802 $77,953 $158,687
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $34,802 $77,953 $158,687
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $11,774 $12,034 $14,434
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $11,774 $12,034 $14,434
Long-term Liabilities $0 $0 $0
Total Liabilities $11,774 $12,034 $14,434
Paid-in Capital $300,000 $300,000 $300,000
Retained Earnings ($281,000) ($276,971) ($234,082)
Earnings $4,029 $42,890 $78,335
Total Capital $23,029 $65,918 $144,253
Total Liabilities and Capital $34,802 $77,953 $158,687
Net Worth $23,029 $65,918 $144,253

7.6 Business Ratios

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 45.37% 29.49% 4.56%
Percent of Total Assets
Inventory 11.02% 7.23% 4.55% 13.08%
Other Current Assets 0.00% 0.00% 0.00% 33.35%
Total Current Assets 100.00% 100.00% 100.00% 54.27%
Long-term Assets 0.00% 0.00% 0.00% 45.73%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 33.83% 15.44% 9.10% 24.73%
Long-term Liabilities 0.00% 0.00% 0.00% 27.23%
Total Liabilities 33.83% 15.44% 9.10% 51.96%
Net Worth 66.17% 84.56% 90.90% 48.04%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 80.67% 80.44% 80.66% 24.26%
Selling, General & Administrative Expenses 78.24% 62.69% 55.61% 12.12%
Advertising Expenses 1.38% 1.04% 0.80% 0.98%
Profit Before Interest and Taxes 3.46% 25.37% 35.78% 1.92%
Main Ratios
Current 2.96 6.48 10.99 1.37
Quick 2.63 6.01 10.49 0.74
Total Debt to Total Assets 33.83% 15.44% 9.10% 59.26%
Pre-tax Return on Net Worth 24.99% 92.95% 77.58% 4.93%
Pre-tax Return on Assets 16.54% 78.60% 70.52% 12.10%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 2.42% 17.76% 25.05% n.a
Return on Equity 17.49% 65.07% 54.30% n.a
Activity Ratios
Inventory Turnover 10.74 9.97 9.41 n.a
Accounts Payable Turnover 9.84 12.17 12.17 n.a
Payment Days 27 30 28 n.a
Total Asset Turnover 4.77 3.10 1.97 n.a
Debt Ratios
Debt to Net Worth 0.51 0.18 0.10 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $23,029 $65,918 $144,253 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.21 0.32 0.51 n.a
Current Debt/Total Assets 34% 15% 9% n.a
Acid Test 2.63 6.01 10.49 n.a
Sales/Net Worth 7.21 3.66 2.17 n.a
Dividend Payout 0.00 0.00 0.00 n.a