E-commerce Internet Business Plan

FireStarters

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Financial Plan

The following is the financial plan for FireStarters.

7.1 Break-even Analysis

The monthly break-even point, based on forecasted monthly expenses and costs, is shown in the table and chart below.

Break-even Analysis
Monthly Revenue Break-even $27,657
Assumptions:
Average Percent Variable Cost 25%
Estimated Monthly Fixed Cost $20,615

7.2 Projected Profit and Loss

The following table and charts present the projected profit and loss for three years. First year monthlies are in the appendix.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $395,650 $610,000 $750,000
Direct Cost of Sales $100,740 $164,000 $210,000
Other Production Expenses $0 $0 $0
Total Cost of Sales $100,740 $164,000 $210,000
Gross Margin $294,910 $446,000 $540,000
Gross Margin % 74.54% 73.11% 72.00%
Expenses
Payroll $177,600 $192,600 $212,000
Sales and Marketing and Other Expenses $0 $130,000 $150,000
Depreciation $7,140 $7,140 $7,140
Leased Equipment $0 $0 $0
Utilities $6,000 $6,000 $6,000
Insurance $6,000 $6,000 $6,000
Rent $24,000 $24,000 $24,000
Payroll Taxes $26,640 $28,890 $31,800
Other $0 $0 $0
Total Operating Expenses $247,380 $394,630 $436,940
Profit Before Interest and Taxes $47,530 $51,370 $103,060
EBITDA $54,670 $58,510 $110,200
Interest Expense $13,830 $12,750 $12,570
Taxes Incurred $10,110 $11,586 $27,147
Net Profit $23,590 $27,034 $63,343
Net Profit/Sales 5.96% 4.43% 8.45%

7.3 Projected Cash Flow

The following table and chart is detail the projected cash flow for three years. The appendices include first year cash flow monthly estimates.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $395,650 $610,000 $750,000
Subtotal Cash from Operations $395,650 $610,000 $750,000
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 $395,650 $610,000 $750,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $177,600 $192,600 $212,000
Bill Payments $103,957 $364,975 $463,540
Subtotal Spent on Operations $281,557 $557,575 $675,540
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 $21,600 $1,800 $1,800
Purchase Other Current Assets $19,800 $19,800 $19,800
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $322,957 $579,175 $697,140
Net Cash Flow $72,693 $30,825 $52,860
Cash Balance $137,293 $168,118 $220,978

7.4 Projected Balance Sheet

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

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $137,293 $168,118 $220,978
Inventory $6,270 $10,207 $13,070
Other Current Assets $19,800 $39,600 $59,400
Total Current Assets $163,363 $217,926 $293,448
Long-term Assets
Long-term Assets $50,000 $50,000 $50,000
Accumulated Depreciation $7,140 $14,280 $21,420
Total Long-term Assets $42,860 $35,720 $28,580
Total Assets $206,223 $253,646 $322,028
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $9,633 $31,822 $38,661
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $9,633 $31,822 $38,661
Long-term Liabilities $128,400 $126,600 $124,800
Total Liabilities $138,033 $158,422 $163,461
Paid-in Capital $200,000 $200,000 $200,000
Retained Earnings ($155,400) ($131,810) ($104,776)
Earnings $23,590 $27,034 $63,343
Total Capital $68,190 $95,224 $158,567
Total Liabilities and Capital $206,223 $253,646 $322,028
Net Worth $68,190 $95,224 $158,567

7.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the NAICS code 454111, Electronic Shopping, a subcategory of the Retail Trade, are shown for comparison.
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 54.18% 22.95% 7.56%
Percent of Total Assets
Inventory 3.04% 4.02% 4.06% 37.60%
Other Current Assets 9.60% 15.61% 18.45% 29.04%
Total Current Assets 79.22% 85.92% 91.13% 78.59%
Long-term Assets 20.78% 14.08% 8.87% 21.41%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 4.67% 12.55% 12.01% 38.50%
Long-term Liabilities 62.26% 49.91% 38.75% 19.42%
Total Liabilities 66.93% 62.46% 50.76% 57.92%
Net Worth 33.07% 37.54% 49.24% 42.08%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 74.54% 73.11% 72.00% 34.85%
Selling, General & Administrative Expenses 68.58% 68.68% 63.55% 16.95%
Advertising Expenses 0.00% 21.31% 20.00% 2.50%
Profit Before Interest and Taxes 12.01% 8.42% 13.74% 1.10%
Main Ratios
Current 16.96 6.85 7.59 1.79
Quick 16.31 6.53 7.25 0.70
Total Debt to Total Assets 66.93% 62.46% 50.76% 65.04%
Pre-tax Return on Net Worth 49.42% 40.56% 57.07% 2.65%
Pre-tax Return on Assets 16.34% 15.23% 28.10% 7.59%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 5.96% 4.43% 8.45% n.a
Return on Equity 34.59% 28.39% 39.95% n.a
Activity Ratios
Inventory Turnover 2.45 19.91 18.04 n.a
Accounts Payable Turnover 11.79 12.17 12.17 n.a
Payment Days 27 20 27 n.a
Total Asset Turnover 1.92 2.40 2.33 n.a
Debt Ratios
Debt to Net Worth 2.02 1.66 1.03 n.a
Current Liab. to Liab. 0.07 0.20 0.24 n.a
Liquidity Ratios
Net Working Capital $153,730 $186,104 $254,787 n.a
Interest Coverage 3.44 4.03 8.20 n.a
Additional Ratios
Assets to Sales 0.52 0.42 0.43 n.a
Current Debt/Total Assets 5% 13% 12% n.a
Acid Test 16.31 6.53 7.25 n.a
Sales/Net Worth 5.80 6.41 4.73 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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