Motel - Hunting Lodge Business Plan

Lowland Heights Roadhouse

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Financial Plan

The Lowland Heights Roadhouse expects business to grow steadily until we are at an average of over 60% capacity for the year 2004 with a conservative capacity rate of 50% expected at times. The year 2005 we expect business to grow steadily until we are at an average of over 90% capacity. We will be growing slowly with profits growing at a rate of about 10%. Expenses will be well managed, allowing Lowland Heights Roadhouse to make a profit even if the capacity rate drops as low as 50%.

8.1 Break-even Analysis

We estimate average monthly fixed costs shown below. Peak and off-season will have significant impact on the monthly earnings. For the first year, on-season revenues will offset off-season losses. As Lowland Heights Roadhouse builds its market position among the local patrons, we anticipate that off-season revenues will be enough to break even during that season. Further, a rate increase may be considered in Fiscal Year 2005.

Break-even Analysis
Monthly Revenue Break-even $4,103
Assumptions:
Average Percent Variable Cost 7%
Estimated Monthly Fixed Cost $3,797

8.2 Projected Profit and Loss

Below is the Lowland Heights Roadhouse projected income statement for the next three years. As mentioned above, earnings are subject to seasonal fluctuations. The new owners will, however, strengthen the Lowland Heights Roadhouse's market position among the local communities who will patronize the establishment during the low season, and thus offset the negative impact of the season.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $151,394 $915,000 $1,022,000
Direct Cost of Sales $11,271 $34,850 $44,150
Other Production Expenses $0 $0 $0
Total Cost of Sales $11,271 $34,850 $44,150
Gross Margin $140,123 $880,150 $977,850
Gross Margin % 92.56% 96.19% 95.68%
Expenses
Payroll $2,400 $251,000 $266,000
Sales and Marketing and Other Expenses $1,160 $80,000 $100,000
Depreciation $14,280 $14,280 $14,280
Leased Equipment $0 $0 $0
Utilities $3,725 $26,000 $26,000
Insurance $2,700 $24,000 $24,000
Lease $7,300 $0 $0
Mortgage Payment $14,000 $62,100 $65,700
Other $0 $0 $0
Total Operating Expenses $45,565 $457,380 $495,980
Profit Before Interest and Taxes $94,558 $422,770 $481,870
EBITDA $108,838 $437,050 $496,150
Interest Expense $22,850 $20,500 $17,500
Taxes Incurred $21,512 $120,681 $139,311
Net Profit $50,195 $281,589 $325,059
Net Profit/Sales 33.16% 30.77% 31.81%

8.3 Projected Cash Flow

The Cash Flow projections are outlined below. Again, these projections are based on our basic assumptions with revenue generation factors carrying the most significant weight regarding the outcome. We are anticipating that we will not need to invest any additional capital into the business with a healthy cash flow in place.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $151,394 $915,000 $1,022,000
Subtotal Cash from Operations $151,394 $915,000 $1,022,000
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 $151,394 $915,000 $1,022,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $2,400 $251,000 $266,000
Bill Payments $78,949 $347,991 $413,786
Subtotal Spent on Operations $81,349 $598,991 $679,786
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 $12,000 $30,000 $30,000
Purchase Other Current Assets $0 $18,000 $21,000
Purchase Long-term Assets $0 $20,000 $60,000
Dividends $0 $0 $0
Subtotal Cash Spent $93,349 $666,991 $790,786
Net Cash Flow $58,044 $248,009 $231,214
Cash Balance $281,627 $529,636 $760,850

8.4 Projected Balance Sheet

The following is a projected Balance Sheet showing sufficient growth and a very acceptable financial position.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $281,627 $529,636 $760,850
Inventory $1,199 $3,707 $4,697
Other Current Assets $9,827 $27,827 $48,827
Total Current Assets $292,653 $561,170 $814,373
Long-term Assets
Long-term Assets $15,206 $35,206 $95,206
Accumulated Depreciation $14,280 $28,560 $42,840
Total Long-term Assets $926 $6,646 $52,366
Total Assets $293,579 $567,817 $866,740
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $7,815 $30,464 $34,327
Current Borrowing $0 $0 $0
Other Current Liabilities $744 $744 $744
Subtotal Current Liabilities $8,559 $31,207 $35,071
Long-term Liabilities $220,000 $190,000 $160,000
Total Liabilities $228,559 $221,207 $195,071
Paid-in Capital $78,000 $78,000 $78,000
Retained Earnings ($63,175) ($12,980) $268,609
Earnings $50,195 $281,589 $325,059
Total Capital $65,020 $346,609 $671,668
Total Liabilities and Capital $293,579 $567,817 $866,740
Net Worth $65,020 $346,609 $671,668

8.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7011, Hotels and Motels, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 504.38% 11.69% 0.21%
Percent of Total Assets
Inventory 0.41% 0.65% 0.54% 1.31%
Other Current Assets 3.35% 4.90% 5.63% 28.59%
Total Current Assets 99.68% 98.83% 93.96% 33.99%
Long-term Assets 0.32% 1.17% 6.04% 66.01%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 2.92% 5.50% 4.05% 10.26%
Long-term Liabilities 74.94% 33.46% 18.46% 25.87%
Total Liabilities 77.85% 38.96% 22.51% 36.13%
Net Worth 22.15% 61.04% 77.49% 63.87%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 92.56% 96.19% 95.68% 100.00%
Selling, General & Administrative Expenses 83.02% 65.42% 63.87% 70.85%
Advertising Expenses 39.63% 8.74% 9.78% 1.66%
Profit Before Interest and Taxes 62.46% 46.20% 47.15% 1.26%
Main Ratios
Current 34.19 17.98 23.22 1.68
Quick 34.05 17.86 23.09 1.29
Total Debt to Total Assets 77.85% 38.96% 22.51% 50.04%
Pre-tax Return on Net Worth 110.28% 116.06% 69.14% 0.88%
Pre-tax Return on Assets 24.43% 70.85% 53.58% 1.76%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 33.16% 30.77% 31.81% n.a
Return on Equity 77.20% 81.24% 48.40% n.a
Activity Ratios
Inventory Turnover 7.85 14.21 10.51 n.a
Accounts Payable Turnover 10.97 12.17 12.17 n.a
Payment Days 27 19 28 n.a
Total Asset Turnover 0.52 1.61 1.18 n.a
Debt Ratios
Debt to Net Worth 3.52 0.64 0.29 n.a
Current Liab. to Liab. 0.04 0.14 0.18 n.a
Liquidity Ratios
Net Working Capital $284,094 $529,963 $779,302 n.a
Interest Coverage 4.14 20.62 27.54 n.a
Additional Ratios
Assets to Sales 1.94 0.62 0.85 n.a
Current Debt/Total Assets 3% 5% 4% n.a
Acid Test 34.05 17.86 23.09 n.a
Sales/Net Worth 2.33 2.64 1.52 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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Break-even Analysis
Monthly Revenue Break-even $4,103
Assumptions:
Average Percent Variable Cost 7%
Estimated Monthly Fixed Cost $3,797
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $151,394 $915,000 $1,022,000
Direct Cost of Sales $11,271 $34,850 $44,150
Other Production Expenses $0 $0 $0
Total Cost of Sales $11,271 $34,850 $44,150
Gross Margin $140,123 $880,150 $977,850
Gross Margin % 92.56% 96.19% 95.68%
Expenses
Payroll $2,400 $251,000 $266,000
Sales and Marketing and Other Expenses $1,160 $80,000 $100,000
Depreciation $14,280 $14,280 $14,280
Leased Equipment $0 $0 $0
Utilities $3,725 $26,000 $26,000
Insurance $2,700 $24,000 $24,000
Lease $7,300 $0 $0
Mortgage Payment $14,000 $62,100 $65,700
Other $0 $0 $0
Total Operating Expenses $45,565 $457,380 $495,980
Profit Before Interest and Taxes $94,558 $422,770 $481,870
EBITDA $108,838 $437,050 $496,150
Interest Expense $22,850 $20,500 $17,500
Taxes Incurred $21,512 $120,681 $139,311
Net Profit $50,195 $281,589 $325,059
Net Profit/Sales 33.16% 30.77% 31.81%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $151,394 $915,000 $1,022,000
Subtotal Cash from Operations $151,394 $915,000 $1,022,000
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 $151,394 $915,000 $1,022,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $2,400 $251,000 $266,000
Bill Payments $78,949 $347,991 $413,786
Subtotal Spent on Operations $81,349 $598,991 $679,786
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 $12,000 $30,000 $30,000
Purchase Other Current Assets $0 $18,000 $21,000
Purchase Long-term Assets $0 $20,000 $60,000
Dividends $0 $0 $0
Subtotal Cash Spent $93,349 $666,991 $790,786
Net Cash Flow $58,044 $248,009 $231,214
Cash Balance $281,627 $529,636 $760,850
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $281,627 $529,636 $760,850
Inventory $1,199 $3,707 $4,697
Other Current Assets $9,827 $27,827 $48,827
Total Current Assets $292,653 $561,170 $814,373
Long-term Assets
Long-term Assets $15,206 $35,206 $95,206
Accumulated Depreciation $14,280 $28,560 $42,840
Total Long-term Assets $926 $6,646 $52,366
Total Assets $293,579 $567,817 $866,740
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $7,815 $30,464 $34,327
Current Borrowing $0 $0 $0
Other Current Liabilities $744 $744 $744
Subtotal Current Liabilities $8,559 $31,207 $35,071
Long-term Liabilities $220,000 $190,000 $160,000
Total Liabilities $228,559 $221,207 $195,071
Paid-in Capital $78,000 $78,000 $78,000
Retained Earnings ($63,175) ($12,980) $268,609
Earnings $50,195 $281,589 $325,059
Total Capital $65,020 $346,609 $671,668
Total Liabilities and Capital $293,579 $567,817 $866,740
Net Worth $65,020 $346,609 $671,668
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 504.38% 11.69% 0.21%
Percent of Total Assets
Inventory 0.41% 0.65% 0.54% 1.31%
Other Current Assets 3.35% 4.90% 5.63% 28.59%
Total Current Assets 99.68% 98.83% 93.96% 33.99%
Long-term Assets 0.32% 1.17% 6.04% 66.01%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 2.92% 5.50% 4.05% 10.26%
Long-term Liabilities 74.94% 33.46% 18.46% 25.87%
Total Liabilities 77.85% 38.96% 22.51% 36.13%
Net Worth 22.15% 61.04% 77.49% 63.87%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 92.56% 96.19% 95.68% 100.00%
Selling, General & Administrative Expenses 83.02% 65.42% 63.87% 70.85%
Advertising Expenses 39.63% 8.74% 9.78% 1.66%
Profit Before Interest and Taxes 62.46% 46.20% 47.15% 1.26%
Main Ratios
Current 34.19 17.98 23.22 1.68
Quick 34.05 17.86 23.09 1.29
Total Debt to Total Assets 77.85% 38.96% 22.51% 50.04%
Pre-tax Return on Net Worth 110.28% 116.06% 69.14% 0.88%
Pre-tax Return on Assets 24.43% 70.85% 53.58% 1.76%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 33.16% 30.77% 31.81% n.a
Return on Equity 77.20% 81.24% 48.40% n.a
Activity Ratios
Inventory Turnover 7.85 14.21 10.51 n.a
Accounts Payable Turnover 10.97 12.17 12.17 n.a
Payment Days 27 19 28 n.a
Total Asset Turnover 0.52 1.61 1.18 n.a
Debt Ratios
Debt to Net Worth 3.52 0.64 0.29 n.a
Current Liab. to Liab. 0.04 0.14 0.18 n.a
Liquidity Ratios
Net Working Capital $284,094 $529,963 $779,302 n.a
Interest Coverage 4.14 20.62 27.54 n.a
Additional Ratios
Assets to Sales 1.94 0.62 0.85 n.a
Current Debt/Total Assets 3% 5% 4% n.a
Acid Test 34.05 17.86 23.09 n.a
Sales/Net Worth 2.33 2.64 1.52 n.a
Dividend Payout 0.00 0.00 0.00 n.a