ReHabiliments

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Family Clothing Business Plan

Financial Plan

ReHabiliments' Financial Plan has the potential of providing expansion of the business, paving the way for new investments or loans, or changing the way in which the company conducts business.

ReHabiliments' financial objectives are:

  • To secure financing from an SBA lender.
  • To reinvest profits for market share growth in the restaurant industry.
  • Based upon market growth projections, to generate very healthy sales revenues in Years 2005, 2006, and 2007.

Financial projections are based upon sales volume at the levels detailed in the sales forecast and represent, to the best of management's knowledge and belief, the company's expected assets, liabilities, capital, revenues, and expenses.  Furthermore, these projections reflect management's judgment of the expected conditions and the company's expected course of action, given the financial assumptions.

8.1 Key Financial Indicators

The following chart shows some key benchmarks for the business.  We anticipate gross margin remaining relatively steady, despite increasing sales, because of our commitment to secure raw materials from ethically sound producers.

8.2 Break-even Analysis

The company's break-even analysis is based on the first year of operation, from April 1, 2004 through March 31, 2005.

ReHabiliments' estimated fixed costs include, but are not limited to, the following items:

  • Salaries
  • Rent
  • Utilities
  • Insurance (Vehicle and Business)
  • Depreciation on Equipment
  • Meetings/Dues
  • Advertising/Business Promotion
  • Office Supplies
  • Miscellaneous Repairs
  • Taxes
  • Legal/Professional Fees

Average percent variable cost takes into consideration variable costs of inventory that will fluctuate with the products provided to the customer.

Break-even Analysis
Monthly Revenue Break-even $129,524
Assumptions:
Average Percent Variable Cost 20%
Estimated Monthly Fixed Cost $103,619

8.3 Projected Cash Flow

The Projected Cash Flow table represents ReHabiliments' cash flow for the next four years (e.g., 2004, 2005, 2006, and 2007).  The related bar chart illustrates monthly cash flow in the first year, with one bar representing cash flow per month and the other representing the monthly balance.  Annual cash flow figures are included in the Projected Cash Flow table, with monthly cash flow projections included in the appendices.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $2,781,081 $4,977,966 $5,319,329
Cash from Receivables $2,181,014 $4,589,661 $5,251,552
Subtotal Cash from Operations $4,962,095 $9,567,628 $10,570,881
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 $4,962,095 $9,567,628 $10,570,881
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $638,317 $731,674 $766,217
Bill Payments $2,550,053 $4,869,143 $4,069,070
Subtotal Spent on Operations $3,188,370 $5,600,817 $4,835,288
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 $42,594 $46,908 $49,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $45,000 $60,000
Subtotal Cash Spent $3,230,963 $5,692,725 $4,944,288
Net Cash Flow $1,731,131 $3,874,902 $5,626,593
Cash Balance $2,119,915 $5,994,817 $11,621,410

8.4 Projected Profit and Loss

ReHabiliments is in its early stages of development.  Therefore, initial projections are based upon industry statistics, demographics in the Tri-State Area, and on the most important market segments believed to drive the income statement.  As the company matures and gains operational history, management will track planned versus actual financial figures.

The following table and associated charts illustrate ReHabiliments' projected profit and loss.  Monthly projections are included in the appendices.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $5,562,162 $9,955,933 $10,638,658
Direct Cost of Sales $1,112,432 $1,991,187 $2,127,732
Shipping/Postage $139,054 $248,898 $265,966
Total Cost of Sales $1,251,487 $2,240,085 $2,393,698
Gross Margin $4,310,676 $7,715,848 $8,244,960
Gross Margin % 77.50% 77.50% 77.50%
Expenses
Payroll $638,317 $731,674 $766,217
Temporary Staff $35,874 $6,240 $510,656
Depreciation $4,311 $4,311 $4,310
Office Supplies $2,537 $2,856 $2,942
Travel/Entertainment $30,000 $32,595 $34,551
Marketing/Promotion $96,000 $96,000 $100,000
Maintenance $3,000 $4,200 $4,452
Dues/Subscriptions $1,200 $1,800 $2,400
Photocopies $12,683 $14,295 $14,724
Cellular Phone $3,805 $4,291 $4,549
Telephone $5,073 $5,529 $5,861
Vehicle Expenses $12,683 $13,835 $14,250
Internet Fees $4,800 $5,088 $5,393
Rent $42,000 $43,200 $44,500
Utilities $10,400 $11,433 $11,776
Insurance $1,518 $1,564 $1,610
Payroll Taxes $0 $0 $0
Consulting Accountant $1,500 $1,500 $1,500
Consulting Attorney $1,500 $1,500 $1,500
Charitable Donations $247,240 $477,417 $531,933
Bad Debt Expense $88,995 $159,295 $170,219
Total Operating Expenses $1,243,432 $1,618,623 $2,233,343
Profit Before Interest and Taxes $3,067,243 $6,097,225 $6,011,617
EBITDA $3,071,554 $6,101,535 $6,015,927
Interest Expense $16,704 $15,133 $13,510
Taxes Incurred $915,162 $1,824,628 $0
Net Profit $2,135,377 $4,257,464 $5,998,107
Net Profit/Sales 38.39% 42.76% 56.38%

8.5 Important Assumptions

ReHabiliments' main assumptions and projected forecasts are based upon similar products and on the operational history of its competitors.  Interest rates, tax rates, and personnel burden are based on conservative assumptions.

The more important underlying assumptions are:

  • A strong economy, without major recession.
  • That there are no unforeseen changes in the apparel industry that would make the company's products immediately obsolete or uneconomical to produce.
  • Access to equity capital and financing options sufficient to maintain the company's financial plan as outlined in this Business Plan.
  • That first round funding will be obtained through a combination of equity, debt, and investment strategies.

All assumptions made about the company's market are supported by industry standards, relevant market research, market trends, surveys, and personal interviews.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 4.00% 4.00% 4.00%
Long-term Interest Rate 3.50% 3.50% 3.50%
Tax Rate 0.00% 0.00% 0.00%
Other 0 0 0

8.6 Projected Balance Sheet

The Projected Balance Sheet shows healthy growth of ReHabiliments' net worth and strong financial position.  Monthly projections are included in the appendices.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $2,119,915 $5,994,817 $11,621,410
Accounts Receivable $600,068 $988,373 $1,056,150
Inventory $135,821 $225,493 $240,956
Other Current Assets $24,950 $24,950 $24,950
Total Current Assets $2,880,753 $7,233,632 $12,943,466
Long-term Assets
Long-term Assets $34,485 $34,485 $34,485
Accumulated Depreciation $4,311 $8,621 $12,931
Total Long-term Assets $30,174 $25,864 $21,554
Total Assets $2,910,927 $7,259,496 $12,965,020
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $319,926 $502,938 $319,355
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $319,926 $502,938 $319,355
Long-term Liabilities $457,406 $410,498 $361,498
Total Liabilities $777,332 $913,436 $680,853
Paid-in Capital $23,000 $23,000 $23,000
Retained Earnings ($24,782) $2,065,596 $6,263,060
Earnings $2,135,377 $4,257,464 $5,998,107
Total Capital $2,133,596 $6,346,060 $12,284,167
Total Liabilities and Capital $2,910,927 $7,259,496 $12,965,020
Net Worth $2,133,596 $6,346,060 $12,284,167

8.7 Business Ratios

Standard business ratios for ReHabiliments are included in the following table, along with ratios for the Women's and Children's Clothing Industry (SIC Code 5137) for comparison.  ReHabiliments differs from these industry standard ratios in a number of ways, since no industry code exactly matches our business type. 

These ratios show a plan for balanced, healthy growth.  One of the more important indicators is the increase in working capital, which is critical to the growth and financial health of the company.  Although there are significant differences between ReHabiliments' ratios and the standard industry ratios, these differences reflect our mixed business type.  We manufacture, distribute (wholesale) and sell our products directly to consumers (retail).  Our asset structure, in particular, reflects that of a manufacturer rather than a retailer or distributor, since we need both inventory (raw materials) and production equipment. 

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 78.99% 6.86% 3.65%
Percent of Total Assets
Accounts Receivable 20.61% 13.61% 8.15% 34.61%
Inventory 4.67% 3.11% 1.86% 32.12%
Other Current Assets 0.86% 0.34% 0.19% 25.15%
Total Current Assets 98.96% 99.64% 99.83% 91.88%
Long-term Assets 1.04% 0.36% 0.17% 8.12%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 10.99% 6.93% 2.46% 40.71%
Long-term Liabilities 15.71% 5.65% 2.79% 8.38%
Total Liabilities 26.70% 12.58% 5.25% 49.09%
Net Worth 73.30% 87.42% 94.75% 50.91%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 77.50% 77.50% 77.50% 22.63%
Selling, General & Administrative Expenses 5.00% 4.97% 9.72% 13.94%
Advertising Expenses 4.83% 0.00% 0.00% 0.64%
Profit Before Interest and Taxes 55.14% 61.24% 56.51% 1.44%
Main Ratios
Current 9.00 14.38 40.53 2.10
Quick 8.58 13.93 39.78 1.06
Total Debt to Total Assets 26.70% 12.58% 5.25% 56.17%
Pre-tax Return on Net Worth 142.98% 95.84% 48.83% 3.45%
Pre-tax Return on Assets 104.80% 83.78% 46.26% 7.88%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 38.39% 42.76% 56.38% n.a
Return on Equity 100.08% 67.09% 48.83% n.a
Activity Ratios
Accounts Receivable Turnover 4.63 5.04 5.04 n.a
Collection Days 57 58 70 n.a
Inventory Turnover 10.08 11.02 9.12 n.a
Accounts Payable Turnover 8.97 10.05 12.17 n.a
Payment Days 27 30 39 n.a
Total Asset Turnover 1.91 1.37 0.82 n.a
Debt Ratios
Debt to Net Worth 0.36 0.14 0.06 n.a
Current Liab. to Liab. 0.41 0.55 0.47 n.a
Liquidity Ratios
Net Working Capital $2,560,827 $6,730,694 $12,624,111 n.a
Interest Coverage 183.62 402.91 444.98 n.a
Additional Ratios
Assets to Sales 0.52 0.73 1.22 n.a
Current Debt/Total Assets 11% 7% 2% n.a
Acid Test 6.70 11.97 36.47 n.a
Sales/Net Worth 2.61 1.57 0.87 n.a
Dividend Payout 0.00 0.01 0.01 n.a