Sarrica's Market

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Gourmet Food Store Business Plan

Financial Plan

As our Sales Forecast made clear, profits will initially be seasonal. We expect to sustain small losses in the winter months for the first year, until our local clientele is fully established. Summer sales increases are based on the much larger number of potential customers in Moab then, and the trend for visitors to spend more per purchase than the locals.

We have planned for this seasonal variance, and the funding we are requesting will help to maintain a positive  cash balance throughout the first three years, until we become fully profitable. The owners are receiving no dividends, and have some margin to reduce their own salaries from what is projected to cushion any unexpected short-term shortfalls.

Our partnership agreement includes an exit plan (see topic 9.0, below), with clear agreements on what constitutes "success" or "failure" in each timeframe. If the businesses sustains larger than acceptable losses, our chief priority will be repaying our creditors, with recouping of owner investments as the last item on the payback list.

8.1 Break-even Analysis

Our estimated monthly revenue break-even point includes payroll, rent, utilities, cost of goods, and other operating costs.  We expect summer sales to make up for the slow winter months.

Being a family-run business will be an asset, because we will have the flexibility to adjust our expenses each month in order to maintain a positive cash flow.

Break-even Analysis
Monthly Revenue Break-even $32,425
Assumptions:
Average Percent Variable Cost 60%
Estimated Monthly Fixed Cost $12,970

8.2 Projected Profit and Loss

Projected profit and loss illustrated in the following table and charts. Sarrica's Market will be profitable early in the first year, with net profit rising over the next two years.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $461,900 $484,735 $508,712
Direct Cost of Sales $277,140 $282,620 $288,210
Hidden Row $0 $0 $0
Total Cost of Sales $277,140 $282,620 $288,210
Gross Margin $184,760 $202,115 $220,501
Gross Margin % 40.00% 41.70% 43.35%
Expenses
Payroll $86,240 $88,840 $92,840
Marketing/Postage/Other $6,000 $6,000 $6,000
Depreciation $2,500 $2,500 $2,500
Legal $1,200 $1,200 $1,200
Books/Accounting $1,200 $2,400 $2,400
Licenses/Permits/Memberships $900 $900 $900
Delivery/Transportation $4,800 $4,800 $4,800
Insurance $3,600 $3,600 $3,600
Rent $30,000 $30,000 $30,000
Utilities $12,000 $12,000 $12,000
Equipment/Supplies $4,800 $4,800 $4,800
Building/Equipment Maintenence $1,200 $1,200 $1,200
Payroll Taxes $0 $0 $0
Other $1,200 $1,200 $1,200
Total Operating Expenses $155,640 $159,440 $163,440
Profit Before Interest and Taxes $29,120 $42,675 $57,061
EBITDA $31,620 $45,175 $59,561
Interest Expense $5,997 $5,107 $4,179
Taxes Incurred $6,937 $11,270 $15,865
Net Profit $16,186 $26,297 $37,018
Net Profit/Sales 3.50% 5.43% 7.28%

8.3 Projected Cash Flow

Below is our projected cash flow. Sarrica's will maintain a positive cash balance while covering expenses and repaying our loan.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $461,900 $484,735 $508,712
Subtotal Cash from Operations $461,900 $484,735 $508,712
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 $461,900 $484,735 $508,712
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $86,240 $88,840 $92,840
Bill Payments $334,497 $356,068 $375,923
Subtotal Spent on Operations $420,737 $444,908 $468,763
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 $14,286 $14,285 $14,285
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $435,023 $459,193 $483,048
Net Cash Flow $26,877 $25,542 $25,664
Cash Balance $42,577 $68,120 $93,784

8.4 Projected Balance Sheet

Our projected Balance Sheet, based on well-researched sales and expense forecasts, shows a steadily increasing net worth.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $42,577 $68,120 $93,784
Inventory $16,368 $16,692 $17,022
Other Current Assets $5,000 $5,000 $5,000
Total Current Assets $63,945 $89,811 $115,806
Long-term Assets
Long-term Assets $20,000 $20,000 $20,000
Accumulated Depreciation $2,500 $5,000 $7,500
Total Long-term Assets $17,500 $15,000 $12,500
Total Assets $81,445 $104,811 $128,306
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $18,845 $30,199 $30,960
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $18,845 $30,199 $30,960
Long-term Liabilities $85,714 $71,429 $57,144
Total Liabilities $104,559 $101,628 $88,104
Paid-in Capital $24,000 $24,000 $24,000
Retained Earnings ($63,300) ($47,114) ($20,817)
Earnings $16,186 $26,297 $37,018
Total Capital ($23,114) $3,183 $40,201
Total Liabilities and Capital $81,445 $104,811 $128,306
Net Worth ($23,114) $3,183 $40,201

8.5 Business Ratios

The following table outlines some of the more important ratios from the Gourmet Food Stores industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 5499.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 4.94% 4.95% 3.96%
Percent of Total Assets
Inventory 20.10% 15.93% 13.27% 19.65%
Other Current Assets 6.14% 4.77% 3.90% 37.17%
Total Current Assets 78.51% 85.69% 90.26% 65.22%
Long-term Assets 21.49% 14.31% 9.74% 34.78%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 23.14% 28.81% 24.13% 24.57%
Long-term Liabilities 105.24% 68.15% 44.54% 25.08%
Total Liabilities 128.38% 96.96% 68.67% 49.65%
Net Worth -28.38% 3.04% 31.33% 50.35%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 40.00% 41.70% 43.35% 32.20%
Selling, General & Administrative Expenses 40.11% 38.22% 35.79% 17.91%
Advertising Expenses 0.00% 0.00% 0.00% 1.57%
Profit Before Interest and Taxes 6.30% 8.80% 11.22% 0.87%
Main Ratios
Current 3.39 2.97 3.74 1.96
Quick 2.52 2.42 3.19 0.98
Total Debt to Total Assets 128.38% 96.96% 68.67% 61.35%
Pre-tax Return on Net Worth -100.04% 1180.13% 131.54% 3.41%
Pre-tax Return on Assets 28.39% 35.84% 41.22% 8.82%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 3.50% 5.43% 7.28% n.a
Return on Equity 0.00% 826.09% 92.08% n.a
Activity Ratios
Inventory Turnover 10.82 17.10 17.10 n.a
Accounts Payable Turnover 18.75 12.17 12.17 n.a
Payment Days 27 24 30 n.a
Total Asset Turnover 5.67 4.62 3.96 n.a
Debt Ratios
Debt to Net Worth 0.00 31.93 2.19 n.a
Current Liab. to Liab. 0.18 0.30 0.35 n.a
Liquidity Ratios
Net Working Capital $45,100 $59,612 $84,845 n.a
Interest Coverage 4.86 8.36 13.66 n.a
Additional Ratios
Assets to Sales 0.18 0.22 0.25 n.a
Current Debt/Total Assets 23% 29% 24% n.a
Acid Test 2.52 2.42 3.19 n.a
Sales/Net Worth 0.00 152.27 12.65 n.a
Dividend Payout 0.00 0.00 0.00 n.a