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Independent Video Store Business Plan

Financial Plan

The following section will outline important financial information.

7.1 Important Assumptions

The following table indicates the important financial 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 Break-even Analysis

The Break-even Analysis is shown below.

Break-even Analysis
Monthly Revenue Break-even $12,113
Assumptions:
Average Percent Variable Cost 35%
Estimated Monthly Fixed Cost $7,874

7.3 Projected Profit and Loss

The following table shows projected profit and loss.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $114,483 $200,951 $231,092
Direct Cost of Sales $40,069 $70,333 $80,882
Other $0 $0 $0
Total Cost of Sales $40,069 $70,333 $80,882
Gross Margin $74,414 $130,618 $150,210
Gross Margin % 65.00% 65.00% 65.00%
Expenses
Payroll $65,400 $78,600 $78,600
Sales and Marketing and Other Expenses $2,400 $2,400 $2,400
Depreciation $3,072 $3,072 $3,072
Leased Equipment $0 $0 $0
Utilities $1,800 $1,800 $1,800
Insurance $1,800 $1,800 $1,800
Rent $10,200 $10,200 $10,200
Payroll Taxes $9,810 $11,790 $11,790
Other $0 $0 $0
Total Operating Expenses $94,482 $109,662 $109,662
Profit Before Interest and Taxes ($20,068) $20,956 $40,548
EBITDA ($16,996) $24,028 $43,620
Interest Expense $0 $0 $0
Taxes Incurred $0 $5,239 $10,306
Net Profit ($20,068) $15,717 $30,242
Net Profit/Sales -17.53% 7.82% 13.09%

7.4 Projected Cash Flow

The following chart and table will display projected cash flow.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $114,483 $200,951 $231,092
Subtotal Cash from Operations $114,483 $200,951 $231,092
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 $114,483 $200,951 $231,092
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $65,400 $78,600 $78,600
Bill Payments $64,059 $109,005 $120,035
Subtotal Spent on Operations $129,459 $187,605 $198,635
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 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $129,459 $187,605 $198,635
Net Cash Flow ($14,976) $13,346 $32,457
Cash Balance $13,824 $27,170 $59,627

7.5 Projected Balance Sheet

The following table indicates the projected balance sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $13,824 $27,170 $59,627
Inventory $7,049 $12,372 $14,228
Other Current Assets $0 $0 $0
Total Current Assets $20,873 $39,543 $73,855
Long-term Assets
Long-term Assets $15,700 $15,700 $15,700
Accumulated Depreciation $3,072 $6,144 $9,216
Total Long-term Assets $12,628 $9,556 $6,484
Total Assets $33,501 $49,099 $80,339
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $9,069 $8,950 $9,948
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $9,069 $8,950 $9,948
Long-term Liabilities $0 $0 $0
Total Liabilities $9,069 $8,950 $9,948
Paid-in Capital $45,000 $45,000 $45,000
Retained Earnings ($500) ($20,568) ($4,851)
Earnings ($20,068) $15,717 $30,242
Total Capital $24,432 $40,149 $70,391
Total Liabilities and Capital $33,501 $49,099 $80,339
Net Worth $24,432 $40,149 $70,391

7.6 Business Ratios

Business ratios for the years of this plan are shown below.  Industry profile ratios based on the Standard Industrial Classification (SIC) code 7841, Video Tape Rental, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 75.53% 15.00% 11.90%
Percent of Total Assets
Inventory 21.04% 25.20% 17.71% 4.10%
Other Current Assets 0.00% 0.00% 0.00% 42.90%
Total Current Assets 62.31% 80.54% 91.93% 54.80%
Long-term Assets 37.69% 19.46% 8.07% 45.20%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 27.07% 18.23% 12.38% 37.70%
Long-term Liabilities 0.00% 0.00% 0.00% 23.20%
Total Liabilities 27.07% 18.23% 12.38% 60.90%
Net Worth 72.93% 81.77% 87.62% 39.10%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 65.00% 65.00% 65.00% 0.00%
Selling, General & Administrative Expenses 82.53% 57.18% 51.84% 75.80%
Advertising Expenses 2.10% 1.19% 1.04% 1.50%
Profit Before Interest and Taxes -17.53% 10.43% 17.55% 1.90%
Main Ratios
Current 2.30 4.42 7.42 0.68
Quick 1.52 3.04 5.99 0.35
Total Debt to Total Assets 27.07% 18.23% 12.38% 60.90%
Pre-tax Return on Net Worth -82.14% 52.20% 57.60% 2.70%
Pre-tax Return on Assets -59.90% 42.68% 50.47% 6.80%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -17.53% 7.82% 13.09% n.a
Return on Equity -82.14% 39.15% 42.96% n.a
Activity Ratios
Inventory Turnover 10.91 7.24 6.08 n.a
Accounts Payable Turnover 8.06 12.17 12.17 n.a
Payment Days 27 30 28 n.a
Total Asset Turnover 3.42 4.09 2.88 n.a
Debt Ratios
Debt to Net Worth 0.37 0.22 0.14 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $11,804 $30,593 $63,907 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.29 0.24 0.35 n.a
Current Debt/Total Assets 27% 18% 12% n.a
Acid Test 1.52 3.04 5.99 n.a
Sales/Net Worth 4.69 5.01 3.28 n.a
Dividend Payout 0.00 0.00 0.00 n.a