Trestle Creek Cabinets

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Furniture Manufacturer Business Plan

Financial Plan

Below are the initial financial goals for the company:

  • Obtain an operating line of credit from a financial institution.
  • Finance growth through retained earnings.
  • Operate on a 25-30% gross margin.

The financial plan for Trestle Creek Cabinets is outlined in the following sections.

7.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table as annual 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 16.25% 15.00% 16.25%
Other 0 0 0

7.2 Break-even Analysis

As the business settles in and start-up/showroom costs are met, average monthly operating costs will increase and then stabilize. The average per unit price is for a 24" base unit. This table shows we need to sell 16 units or 32 lineal feet of cabinets a month to break even.

Break-even Analysis
Monthly Revenue Break-even $38,806
Assumptions:
Average Percent Variable Cost 68%
Estimated Monthly Fixed Cost $12,327

7.3 Projected Profit and Loss

Our projected profit and loss is shown in the following table.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $442,000 $1,000,000 $1,500,000
Direct Cost of Sales $301,600 $725,000 $1,087,500
Other $0 $0 $0
Total Cost of Sales $301,600 $725,000 $1,087,500
Gross Margin $140,400 $275,000 $412,500
Gross Margin % 31.76% 27.50% 27.50%
Expenses
Payroll $78,000 $157,000 $195,000
Sales and Marketing and Other Expenses $45,680 $44,600 $61,000
Depreciation $0 $0 $0
Utilities $3,000 $4,000 $5,000
Insurance $1,140 $1,300 $1,500
Rent $8,400 $9,000 $12,000
Payroll Taxes $11,700 $23,550 $29,250
Other $0 $0 $0
Total Operating Expenses $147,920 $239,450 $303,750
Profit Before Interest and Taxes ($7,520) $35,550 $108,750
EBITDA ($7,520) $35,550 $108,750
Interest Expense $4,000 $3,336 $1,937
Taxes Incurred $0 $4,832 $17,357
Net Profit ($11,520) $27,382 $89,456
Net Profit/Sales -2.61% 2.74% 5.96%

7.4 Projected Cash Flow

We do not expect to have major problems with cash flow as most of our contracts will require a 50% deposit upon signing.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $110,500 $250,000 $375,000
Cash from Receivables $281,813 $687,272 $1,068,792
Subtotal Cash from Operations $392,313 $937,272 $1,443,792
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 $392,313 $937,272 $1,443,792
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $78,000 $157,000 $195,000
Bill Payments $349,852 $774,249 $1,182,673
Subtotal Spent on Operations $427,852 $931,249 $1,377,673
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 $13,289 $14,681
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $427,852 $944,538 $1,392,354
Net Cash Flow ($35,539) ($7,266) $51,438
Cash Balance $53,759 $46,494 $97,932

7.5 Projected Balance Sheet

The balance sheet shows a healthy growth of net worth and a strong financial position.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $53,759 $46,494 $97,932
Accounts Receivable $49,688 $112,415 $168,623
Other Current Assets $14,478 $14,478 $14,478
Total Current Assets $117,925 $173,387 $281,033
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $117,925 $173,387 $281,033
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $25,668 $67,037 $99,908
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $25,668 $67,037 $99,908
Long-term Liabilities $40,000 $26,711 $12,030
Total Liabilities $65,668 $93,748 $111,938
Paid-in Capital $88,419 $88,419 $88,419
Retained Earnings ($24,642) ($36,162) ($8,780)
Earnings ($11,520) $27,382 $89,456
Total Capital $52,257 $79,639 $169,095
Total Liabilities and Capital $117,925 $173,387 $281,033
Net Worth $52,257 $79,639 $169,095

7.6 Business Ratios

The following table contains important ratios for the woodworking industry, as determined by the Standard Industry Classification (SIC) Code, #1751, .
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 126.24% 50.00% 7.90%
Percent of Total Assets
Accounts Receivable 42.13% 64.83% 60.00% 35.00%
Other Current Assets 12.28% 8.35% 5.15% 30.30%
Total Current Assets 100.00% 100.00% 100.00% 71.50%
Long-term Assets 0.00% 0.00% 0.00% 28.50%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 21.77% 38.66% 35.55% 42.70%
Long-term Liabilities 33.92% 15.41% 4.28% 14.30%
Total Liabilities 55.69% 54.07% 39.83% 57.00%
Net Worth 44.31% 45.93% 60.17% 43.00%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 31.76% 27.50% 27.50% 31.60%
Selling, General & Administrative Expenses 34.37% 24.76% 21.45% 16.70%
Advertising Expenses 1.27% 0.80% 1.00% 0.50%
Profit Before Interest and Taxes -1.70% 3.56% 7.25% 3.40%
Main Ratios
Current 4.59 2.59 2.81 1.64
Quick 4.59 2.59 2.81 1.28
Total Debt to Total Assets 55.69% 54.07% 39.83% 57.00%
Pre-tax Return on Net Worth -22.04% 40.45% 63.17% 7.50%
Pre-tax Return on Assets -9.77% 18.58% 38.01% 17.40%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -2.61% 2.74% 5.96% n.a
Return on Equity -22.04% 34.38% 52.90% n.a
Activity Ratios
Accounts Receivable Turnover 6.67 6.67 6.67 n.a
Collection Days 58 39 46 n.a
Accounts Payable Turnover 14.63 12.17 12.17 n.a
Payment Days 27 21 25 n.a
Total Asset Turnover 3.75 5.77 5.34 n.a
Debt Ratios
Debt to Net Worth 1.26 1.18 0.66 n.a
Current Liab. to Liab. 0.39 0.72 0.89 n.a
Liquidity Ratios
Net Working Capital $92,257 $106,350 $181,125 n.a
Interest Coverage -1.88 10.66 56.14 n.a
Additional Ratios
Assets to Sales 0.27 0.17 0.19 n.a
Current Debt/Total Assets 22% 39% 36% n.a
Acid Test 2.66 0.91 1.13 n.a
Sales/Net Worth 8.46 12.56 8.87 n.a
Dividend Payout 0.00 0.00 0.00 n.a