Classique Gifts Etc.

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Gifts and Collectibles Retail Shop Business Plan

Financial Plan

  • Growth will be moderate.
  • Costs will be managed and forecasts for future needs will be performed on a regular basis.
  • Finding the right product, at the right price will enable the business to meet planned margins and maintain inventory at an acceptable level.

7.1 Important Assumptions

Key assumptions are:

  • We do not sell anything on credit.
  • We assume the continued popularity of collectibles.
  • We assume access to financing sufficient to maintain our financial plan as shown in the tables.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 6.00% 6.00% 6.00%
Long-term Interest Rate 7.00% 7.00% 7.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

7.2 Projected Profit and Loss

The following table shows our planned three-year profit and loss estimates. We expect to have a gross margin percent above 40% our first year, which will continue to grow in years two and three.

The associated charts show that we will have a negative profit/sales percentage for the first two years with a positive net profit by year three.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $143,510 $160,731 $180,019
Direct Cost of Sales $81,756 $85,844 $90,136
Other Costs of Goods $0 $0 $0
Total Cost of Sales $81,756 $85,844 $90,136
Gross Margin $61,754 $74,887 $89,883
Gross Margin % 43.03% 46.59% 49.93%
Expenses
Payroll $26,720 $34,120 $35,120
Sales and Marketing and Other Expenses $600 $1,200 $2,400
Depreciation $0 $0 $0
Rent and CAM Expense $18,150 $18,150 $18,150
Utilities $3,600 $3,600 $3,600
Liability Insurance:Store $0 $2,400 $2,400
Insurance (medical Brenda & Charles) $7,800 $7,150 $7,150
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $56,870 $66,620 $68,820
Profit Before Interest and Taxes $4,884 $8,267 $21,063
EBITDA $4,884 $8,267 $21,063
Interest Expense $3,156 $2,549 $1,915
Taxes Incurred $518 $1,716 $5,745
Net Profit $1,209 $4,003 $13,404
Net Profit/Sales 0.84% 2.49% 7.45%

7.3 Break-even Analysis

The following table and chart show our estimated monthly revenue break-even point.

Break-even Analysis
Monthly Revenue Break-even $11,013
Assumptions:
Average Percent Variable Cost 57%
Estimated Monthly Fixed Cost $4,739

7.4 Projected Cash Flow

The following table and chart represents the projected cash flow.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $143,510 $160,731 $180,019
Subtotal Cash from Operations $143,510 $160,731 $180,019
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 $143,510 $160,731 $180,019
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $26,720 $34,120 $35,120
Bill Payments $67,291 $124,798 $131,213
Subtotal Spent on Operations $94,011 $158,918 $166,333
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 $9,060 $9,060 $9,060
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $103,071 $167,978 $175,393
Net Cash Flow $40,439 ($7,247) $4,625
Cash Balance $52,624 $45,378 $50,003

7.5 Projected Balance Sheet

The following table shows our projected Balance Sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $52,624 $45,378 $50,003
Inventory $8,583 $9,012 $9,463
Other Current Assets $12,757 $12,757 $12,757
Total Current Assets $73,964 $67,147 $72,223
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $73,964 $67,147 $72,223
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $11,873 $10,113 $10,845
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $11,873 $10,113 $10,845
Long-term Liabilities $40,940 $31,880 $22,820
Total Liabilities $52,813 $41,993 $33,665
Paid-in Capital $40,000 $40,000 $40,000
Retained Earnings ($20,058) ($18,849) ($14,846)
Earnings $1,209 $4,003 $13,404
Total Capital $21,151 $25,154 $38,558
Total Liabilities and Capital $73,964 $67,147 $72,223
Net Worth $21,151 $25,154 $38,558

7.6 Business Ratios

The following table outlines some of the more important ratios from the Gift Shop industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code 5947.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 12.00% 12.00% 3.34%
Percent of Total Assets
Inventory 11.60% 13.42% 13.10% 40.42%
Other Current Assets 17.25% 19.00% 17.66% 23.99%
Total Current Assets 100.00% 100.00% 100.00% 80.29%
Long-term Assets 0.00% 0.00% 0.00% 19.71%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 16.05% 15.06% 15.02% 36.19%
Long-term Liabilities 55.35% 47.48% 31.60% 15.42%
Total Liabilities 71.40% 62.54% 46.61% 51.61%
Net Worth 28.60% 37.46% 53.39% 48.39%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 43.03% 46.59% 49.93% 37.74%
Selling, General & Administrative Expenses 44.22% 47.15% 45.12% 23.72%
Advertising Expenses 0.00% 0.00% 0.00% 2.14%
Profit Before Interest and Taxes 3.40% 5.14% 11.70% 1.65%
Main Ratios
Current 6.23 6.64 6.66 1.98
Quick 5.51 5.75 5.79 0.74
Total Debt to Total Assets 71.40% 62.54% 46.61% 3.65%
Pre-tax Return on Net Worth 8.17% 22.73% 49.66% 58.19%
Pre-tax Return on Assets 2.34% 8.52% 26.51% 8.72%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 0.84% 2.49% 7.45% n.a
Return on Equity 5.72% 15.91% 34.76% n.a
Activity Ratios
Inventory Turnover 5.75 9.76 9.76 n.a
Accounts Payable Turnover 6.67 12.17 12.17 n.a
Payment Days 27 33 29 n.a
Total Asset Turnover 1.94 2.39 2.49 n.a
Debt Ratios
Debt to Net Worth 2.50 1.67 0.87 n.a
Current Liab. to Liab. 0.22 0.24 0.32 n.a
Liquidity Ratios
Net Working Capital $62,091 $57,034 $61,378 n.a
Interest Coverage 1.55 3.24 11.00 n.a
Additional Ratios
Assets to Sales 0.52 0.42 0.40 n.a
Current Debt/Total Assets 16% 15% 15% n.a
Acid Test 5.51 5.75 5.79 n.a
Sales/Net Worth 6.78 6.39 4.67 n.a
Dividend Payout 0.00 0.00 0.00 n.a