Martin Cove Brewing Company

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Microbrewery Business Plan

Financial Plan

The following is the financial plan for Martin Cove Brewing Company.

7.1 Break-even Analysis

The monthly break-even point is $67,036.

Break-even Analysis
Monthly Revenue Break-even $67,036
Assumptions:
Average Percent Variable Cost 30%
Estimated Monthly Fixed Cost $46,925

7.2 Projected Profit and Loss

The following table and charts highlight the projected profit and loss for the next three years.

Pro Forma Profit and Loss
FY 2003 FY 2004 FY 2005
Sales $890,000 $1,068,000 $1,281,600
Direct Cost of Sales $267,000 $320,400 $384,480
Other Production Expenses $0 $0 $0
Total Cost of Sales $267,000 $320,400 $384,480
Gross Margin $623,000 $747,600 $897,120
Gross Margin % 70.00% 70.00% 70.00%
Expenses
Payroll $372,000 $387,000 $402,000
Sales and Marketing and Other Expenses $63,000 $83,000 $105,000
Depreciation $14,400 $14,400 $14,400
Sales Commission $26,700 $32,040 $38,448
Utilities $12,000 $12,000 $12,000
Insurance $2,400 $2,600 $2,800
Rent $16,800 $16,800 $16,800
Payroll Taxes $55,800 $58,050 $60,300
Other $0 $0 $0
Total Operating Expenses $563,100 $605,890 $651,748
Profit Before Interest and Taxes $59,900 $141,710 $245,372
EBITDA $74,300 $156,110 $259,772
Interest Expense $3,782 $3,398 $2,998
Taxes Incurred $16,835 $41,494 $72,712
Net Profit $39,282 $96,818 $169,662
Net Profit/Sales 4.41% 9.07% 13.24%

7.3 Projected Cash Flow

The following table and chart highlight the projected cash flow for the next three years.

Pro Forma Cash Flow
FY 2003 FY 2004 FY 2005
Cash Received
Cash from Operations
Cash Sales $222,500 $267,000 $320,400
Cash from Receivables $622,500 $776,000 $931,200
Subtotal Cash from Operations $845,000 $1,043,000 $1,251,600
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 $845,000 $1,043,000 $1,251,600
Expenditures FY 2003 FY 2004 FY 2005
Expenditures from Operations
Cash Spending $372,000 $387,000 $402,000
Bill Payments $461,903 $552,706 $690,670
Subtotal Spent on Operations $833,903 $939,706 $1,092,670
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 $4,020 $4,000 $4,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $837,923 $943,706 $1,096,670
Net Cash Flow $7,077 $99,294 $154,930
Cash Balance $87,077 $186,372 $341,302

7.4 Projected Balance Sheet

The following table highlights the projected balance sheet for the next three years.

Pro Forma Balance Sheet
FY 2003 FY 2004 FY 2005
Assets
Current Assets
Cash $87,077 $186,372 $341,302
Accounts Receivable $125,000 $150,000 $180,000
Inventory $23,100 $27,720 $33,264
Other Current Assets $5,000 $5,000 $5,000
Total Current Assets $240,177 $369,092 $559,566
Long-term Assets
Long-term Assets $100,000 $100,000 $100,000
Accumulated Depreciation $26,400 $40,800 $55,200
Total Long-term Assets $73,600 $59,200 $44,800
Total Assets $313,777 $428,292 $604,366
Liabilities and Capital FY 2003 FY 2004 FY 2005
Current Liabilities
Accounts Payable $25,515 $47,211 $57,623
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $25,515 $47,211 $57,623
Long-term Liabilities $35,980 $31,980 $27,980
Total Liabilities $61,495 $79,191 $85,603
Paid-in Capital $80,000 $80,000 $80,000
Retained Earnings $133,000 $172,282 $269,101
Earnings $39,282 $96,818 $169,662
Total Capital $252,282 $349,101 $518,763
Total Liabilities and Capital $313,777 $428,292 $604,366
Net Worth $252,282 $349,101 $518,763

7.5 Business Ratios

Industry profile ratios based on the Standard Industrial Classification(SIC) code 5181, Beer and Ale, are shown for comparison.

Ratio Analysis
FY 2003 FY 2004 FY 2005 Industry Profile
Sales Growth 71.15% 20.00% 20.00% 6.20%
Percent of Total Assets
Accounts Receivable 39.84% 35.02% 29.78% 19.00%
Inventory 7.36% 6.47% 5.50% 28.70%
Other Current Assets 1.59% 1.17% 0.83% 31.50%
Total Current Assets 76.54% 86.18% 92.59% 79.20%
Long-term Assets 23.46% 13.82% 7.41% 20.80%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 8.13% 11.02% 9.53% 32.00%
Long-term Liabilities 11.47% 7.47% 4.63% 18.40%
Total Liabilities 19.60% 18.49% 14.16% 50.40%
Net Worth 80.40% 81.51% 85.84% 49.60%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 70.00% 70.00% 70.00% 24.60%
Selling, General & Administrative Expenses 65.60% 60.97% 56.82% 15.60%
Advertising Expenses 6.74% 7.49% 7.80% 0.60%
Profit Before Interest and Taxes 6.73% 13.27% 19.15% 2.80%
Main Ratios
Current 9.41 7.82 9.71 2.24
Quick 8.51 7.23 9.13 1.07
Total Debt to Total Assets 19.60% 18.49% 14.16% 50.40%
Pre-tax Return on Net Worth 22.24% 39.62% 46.72% 9.10%
Pre-tax Return on Assets 17.88% 32.29% 40.10% 18.40%
Additional Ratios FY 2003 FY 2004 FY 2005
Net Profit Margin 4.41% 9.07% 13.24% n.a
Return on Equity 15.57% 27.73% 32.71% n.a
Activity Ratios
Accounts Receivable Turnover 5.34 5.34 5.34 n.a
Collection Days 59 63 63 n.a
Inventory Turnover 10.91 12.61 12.61 n.a
Accounts Payable Turnover 18.32 12.17 12.17 n.a
Payment Days 28 23 27 n.a
Total Asset Turnover 2.84 2.49 2.12 n.a
Debt Ratios
Debt to Net Worth 0.24 0.23 0.17 n.a
Current Liab. to Liab. 0.41 0.60 0.67 n.a
Liquidity Ratios
Net Working Capital $214,662 $321,881 $501,943 n.a
Interest Coverage 15.84 41.70 81.85 n.a
Additional Ratios
Assets to Sales 0.35 0.40 0.47 n.a
Current Debt/Total Assets 8% 11% 10% n.a
Acid Test 3.61 4.05 6.01 n.a
Sales/Net Worth 3.53 3.06 2.47 n.a
Dividend Payout 0.00 0.00 0.00 n.a