Candlelight Cichlid Breeders

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Fish Breeder Business Plan

Financial Plan

The following topics outline the financial plan for Candlelight Cichlid Breeders.

7.1 Important Assumptions

The following table shows the general assumptions.

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 25.42% 25.00% 25.42%
Other 0 0 0

7.2 Key Financial Indicators

The following chart illustrates the key financial indicators.

7.3 Break-even Analysis

Our break-even analysis is a calculation of costs required to keep the business running.  Payroll, mortgage payments, utilities, marketing, Internet costs, accounting expenses, and expenses involved with aquarium water conditioning factor into our break-even analysis.  We estimate a total monthly fixed costs as shown below.

Break-even Analysis
Monthly Units Break-even 1,110
Monthly Revenue Break-even $5,705
Assumptions:
Average Per-Unit Revenue $5.14
Average Per-Unit Variable Cost $0.50
Estimated Monthly Fixed Cost $5,150

7.4 Projected Profit and Loss

We expect a high degree of profitability from this venture do to high margins and inventory turnover inherent to the industry.  Profit in the first year (2004)  will be lower than projected potential due to the immaturity of two-thirds of the breeding stock and low name recognition within the industry.  By September, 2005 all of the breeding stock will have matured and 100% of the projected profit potential will be realized.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $95,600 $219,600 $253,500
Direct Cost of Sales $9,300 $19,900 $23,125
Production Payroll $18,000 $18,000 $42,000
Other $0 $0 $0
Total Cost of Sales $27,300 $37,900 $65,125
Gross Margin $68,300 $181,700 $188,375
Gross Margin % 71.44% 82.74% 74.31%
Operating Expenses
Sales and Marketing Expenses
Sales and Marketing Payroll $0 $0 $0
Advertising/Promotion $1,440 $2,880 $4,320
Travel $1,200 $1,800 $2,400
Miscellaneous $1,800 $1,800 $1,800
Total Sales and Marketing Expenses $4,440 $6,480 $8,520
Sales and Marketing % 4.64% 2.95% 3.36%
General and Administrative Expenses
General and Administrative Payroll $36,000 $48,000 $60,000
Sales and Marketing and Other Expenses $0 $0 $0
Depreciation $12,000 $12,000 $12,000
Leased Equipment $0 $0 $0
Utilities $1,260 $1,300 $1,400
Rent $0 $0 $0
Payroll Taxes $8,100 $9,900 $15,300
Other General and Administrative Expenses $0 $0 $0
Total General and Administrative Expenses $57,360 $71,200 $88,700
General and Administrative % 60.00% 32.42% 34.99%
Other Expenses:
Other Payroll $0 $0 $0
Consultants $0 $0 $0
Contract/Consultants $0 $0 $0
Total Other Expenses $0 $0 $0
Other % 0.00% 0.00% 0.00%
Total Operating Expenses $61,800 $77,680 $97,220
Profit Before Interest and Taxes $6,500 $104,020 $91,155
EBITDA $18,500 $116,020 $103,155
Interest Expense $3,873 $3,230 $2,559
Taxes Incurred $412 $25,198 $22,518
Net Profit $2,215 $75,593 $66,078
Net Profit/Sales 2.32% 34.42% 26.07%

7.5 Projected Cash Flow

As our breeding stock mature and our reputation becomes known the business will experience increased cash flows.  We may expand at this time with the construction of another building adjacent to the original structure.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $57,360 $131,760 $152,100
Cash from Receivables $29,351 $76,310 $98,248
Subtotal Cash from Operations $86,711 $208,070 $250,348
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 $86,711 $208,070 $250,348
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $54,000 $66,000 $102,000
Bill Payments $24,437 $65,049 $73,300
Subtotal Spent on Operations $78,437 $131,049 $175,300
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 $6,708 $6,708 $6,708
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $85,145 $137,757 $182,008
Net Cash Flow $1,566 $70,313 $68,340
Cash Balance $41,566 $111,878 $180,218

7.6 Projected Balance Sheet

The following table shows the projected balance sheet for Candlelight Cichlid Breeders.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $41,566 $111,878 $180,218
Accounts Receivable $8,889 $20,419 $23,572
Inventory $1,183 $2,530 $2,940
Other Current Assets $0 $0 $0
Total Current Assets $51,638 $134,828 $206,730
Long-term Assets
Long-term Assets $35,000 $35,000 $35,000
Accumulated Depreciation $12,000 $24,000 $36,000
Total Long-term Assets $23,000 $11,000 ($1,000)
Total Assets $74,638 $145,828 $205,730
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $3,230 $5,536 $6,068
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $3,230 $5,536 $6,068
Long-term Liabilities $35,652 $28,944 $22,236
Total Liabilities $38,882 $34,480 $28,304
Paid-in Capital $59,590 $59,590 $59,590
Retained Earnings ($26,050) ($23,835) $51,758
Earnings $2,215 $75,593 $66,078
Total Capital $35,755 $111,348 $177,426
Total Liabilities and Capital $74,638 $145,828 $205,730
Net Worth $35,755 $111,348 $177,426

7.7 Business Ratios

The following table outlines some of the more important ratios from the Breeding of Pets industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the NAICS code, 112990.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 129.71% 15.44% 3.52%
Percent of Total Assets
Accounts Receivable 11.91% 14.00% 11.46% 8.54%
Inventory 1.58% 1.74% 1.43% 11.36%
Other Current Assets 0.00% 0.00% 0.00% 30.17%
Total Current Assets 69.18% 92.46% 100.49% 50.07%
Long-term Assets 30.82% 7.54% -0.49% 49.93%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 4.33% 3.80% 2.95% 24.29%
Long-term Liabilities 47.77% 19.85% 10.81% 29.26%
Total Liabilities 52.09% 23.64% 13.76% 53.55%
Net Worth 47.91% 76.36% 86.24% 46.45%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 71.44% 82.74% 74.31% 59.45%
Selling, General & Administrative Expenses 74.41% 48.60% 48.18% 37.30%
Advertising Expenses 1.51% 0.11% 0.14% 0.42%
Profit Before Interest and Taxes 6.80% 47.37% 35.96% 2.80%
Main Ratios
Current 15.99 24.35 34.07 1.31
Quick 15.62 23.90 33.58 0.63
Total Debt to Total Assets 52.09% 23.64% 13.76% 65.25%
Pre-tax Return on Net Worth 7.35% 90.52% 49.93% 3.14%
Pre-tax Return on Assets 3.52% 69.12% 43.06% 9.04%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 2.32% 34.42% 26.07% n.a
Return on Equity 6.20% 67.89% 37.24% n.a
Activity Ratios
Accounts Receivable Turnover 4.30 4.30 4.30 n.a
Collection Days 56 61 79 n.a
Inventory Turnover 8.36 10.72 8.45 n.a
Accounts Payable Turnover 8.57 12.17 12.17 n.a
Payment Days 27 24 29 n.a
Total Asset Turnover 1.28 1.51 1.23 n.a
Debt Ratios
Debt to Net Worth 1.09 0.31 0.16 n.a
Current Liab. to Liab. 0.08 0.16 0.21 n.a
Liquidity Ratios
Net Working Capital $48,407 $129,292 $200,662 n.a
Interest Coverage 1.68 32.21 35.62 n.a
Additional Ratios
Assets to Sales 0.78 0.66 0.81 n.a
Current Debt/Total Assets 4% 4% 3% n.a
Acid Test 12.87 20.21 29.70 n.a
Sales/Net Worth 2.67 1.97 1.43 n.a
Dividend Payout 0.00 0.00 0.00 n.a