Regali Luxuri

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Gift Shop Business Plan

Financial Plan

The following topics present the financials for Regali Luxuri.

7.1 Start-up Funding

Kaethe Villanova and Bensai Halstadt will each invest in Regali Luxuri. Additional start-up funding includes existing computer and printing equipment, some short-term debt in the form of credit card purchases, and a small amount of Accounts Payables owed to suppliers for inventory purchased while this operation was a hobby.

Start-up Funding
Start-up Expenses to Fund $17,080
Start-up Assets to Fund $9,800
Total Funding Required $26,880
Assets
Non-cash Assets from Start-up $9,000
Cash Requirements from Start-up $800
Additional Cash Raised $0
Cash Balance on Starting Date $800
Total Assets $9,800
Liabilities and Capital
Liabilities
Current Borrowing $2,160
Long-term Liabilities $0
Accounts Payable (Outstanding Bills) $720
Other Current Liabilities (interest-free) $0
Total Liabilities $2,880
Capital
Planned Investment
Bensai Halstadt $12,000
Kaethe Villanova $12,000
Other $0
Additional Investment Requirement $0
Total Planned Investment $24,000
Loss at Start-up (Start-up Expenses) ($17,080)
Total Capital $6,920
Total Capital and Liabilities $9,800
Total Funding $26,880

7.2 Break-even Analysis

Current projections of average monthly expenses, and an admittedly high estimated cost of goods, Regali Luxuri will need to sell mechandise and services each month, as shown below, to break even.

Break-even Analysis
Monthly Revenue Break-even $5,048
Assumptions:
Average Percent Variable Cost 42%
Estimated Monthly Fixed Cost $2,928

7.3 Projected Profit and Loss

The profit and loss figures show Regali Luxuri balances on the knife edge of profitability. The owners are aware that they may forego salaries in any given month to insure profitablity and positive cash balance.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $65,355 $81,694 $98,033
Direct Cost of Sales $27,449 $27,449 $28,821
Other Costs of Goods $0 $0 $0
Total Cost of Sales $27,449 $27,449 $28,821
Gross Margin $37,906 $54,245 $69,211
Gross Margin % 58.00% 66.40% 70.60%
Expenses
Payroll $18,000 $30,000 $36,000
Marketing/Promotion $1,200 $1,600 $2,000
Depreciation $396 $400 $400
Delivery & Shipping Cost $1,200 $1,200 $1,200
Legal Expenses $720 $720 $720
Payroll Taxes $0 $0 $0
Rent $9,600 $9,600 $9,600
Utilities & Internet $1,500 $1,500 $1,500
Business Insurance $1,020 $1,020 $1,020
Telephones-Landline/Cell $1,500 $1,500 $1,500
Total Operating Expenses $35,136 $47,540 $53,940
Profit Before Interest and Taxes $2,770 $6,705 $15,271
EBITDA $3,166 $7,105 $15,671
Interest Expense $40 $0 $0
Taxes Incurred $819 $2,011 $4,581
Net Profit $1,911 $4,693 $10,690
Net Profit/Sales 2.92% 5.75% 10.90%

7.4 Projected Cash Flow

The following includes Regali Luxuri Projected Cash Flow through 2007.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $65,355 $81,694 $98,033
Subtotal Cash from Operations $65,355 $81,694 $98,033
Additional Cash Received
Sales Tax, VAT, HST/GST Received $4,575 $5,159 $5,828
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 $69,930 $86,853 $103,861
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $18,000 $30,000 $36,000
Bill Payments $42,017 $44,813 $50,691
Subtotal Spent on Operations $60,017 $74,813 $86,691
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $4,575 $5,159 $5,828
Principal Repayment of Current Borrowing $2,160 $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 $66,752 $79,972 $92,519
Net Cash Flow $3,178 $6,881 $11,341
Cash Balance $3,978 $10,859 $22,201

7.5 Projected Balance Sheet

The balance sheet for Regali Luxuri is somewhat typical of a shoe-string start up company, relying upon the passion and dedication of this founding owners. The company displays steady growth, based on conservative forecasting. Earnings and Net Worth grow and show improvement each year of the plan.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $3,978 $10,859 $22,201
Inventory $2,291 $2,291 $2,406
Other Current Assets $3,000 $3,000 $3,000
Total Current Assets $9,270 $16,150 $27,607
Long-term Assets
Long-term Assets $2,000 $2,000 $2,000
Accumulated Depreciation $396 $796 $1,196
Total Long-term Assets $1,604 $1,204 $804
Total Assets $10,874 $17,354 $28,411
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $2,043 $3,830 $4,196
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $2,043 $3,830 $4,196
Long-term Liabilities $0 $0 $0
Total Liabilities $2,043 $3,830 $4,196
Paid-in Capital $24,000 $24,000 $24,000
Retained Earnings ($17,080) ($15,169) ($10,476)
Earnings $1,911 $4,693 $10,690
Total Capital $8,831 $13,524 $24,214
Total Liabilities and Capital $10,874 $17,354 $28,411
Net Worth $8,831 $13,524 $24,214

7.6 Business Ratios

The Standard Industrial Classification (SIC) Code for our industy is Gift Shops (5947.0104).  We used the report for broader category Gift, Novelty, and Souvenir shop (5947) to generate the industry profile ratios shown in the following table.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 25.00% 20.00% 0.44%
Percent of Total Assets
Inventory 21.07% 13.20% 8.47% 34.88%
Other Current Assets 27.59% 17.29% 10.56% 23.80%
Total Current Assets 85.25% 93.06% 97.17% 76.55%
Long-term Assets 14.75% 6.94% 2.83% 23.45%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 18.79% 22.07% 14.77% 34.24%
Long-term Liabilities 0.00% 0.00% 0.00% 15.29%
Total Liabilities 18.79% 22.07% 14.77% 49.53%
Net Worth 81.21% 77.93% 85.23% 50.47%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 58.00% 66.40% 70.60% 39.04%
Selling, General & Administrative Expenses 134.30% 118.94% 105.29% 24.17%
Advertising Expenses 0.00% 0.00% 0.00% 1.96%
Profit Before Interest and Taxes 4.24% 8.21% 15.58% 1.36%
Main Ratios
Current 4.54 4.22 6.58 1.99
Quick 3.42 3.62 6.01 0.81
Total Debt to Total Assets 18.79% 22.07% 14.77% 51.50%
Pre-tax Return on Net Worth 30.91% 49.58% 63.07% 2.37%
Pre-tax Return on Assets 25.11% 38.63% 53.75% 4.90%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 2.92% 5.75% 10.90% n.a
Return on Equity 21.64% 34.70% 44.15% n.a
Activity Ratios
Inventory Turnover 10.09 11.98 12.27 n.a
Accounts Payable Turnover 21.22 12.17 12.17 n.a
Payment Days 28 23 29 n.a
Total Asset Turnover 6.01 4.71 3.45 n.a
Debt Ratios
Debt to Net Worth 0.23 0.28 0.17 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $7,227 $12,320 $23,410 n.a
Interest Coverage 69.25 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.17 0.21 0.29 n.a
Current Debt/Total Assets 19% 22% 15% n.a
Acid Test 3.42 3.62 6.01 n.a
Sales/Net Worth 7.40 6.04 4.05 n.a
Dividend Payout 0.00 0.00 0.00 n.a