Mt. Hood Records

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Music Recording Producer Business Plan

Financial Plan

The following sections presents important financial information.

8.1 Important Assumptions

The following table lists 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 30.00% 30.00% 30.00%
Other 0 0 0

8.2 Break-even Analysis

The Break-even Analysis indicates what is needed in monthly revenue to break even.

Break-even Analysis
Monthly Revenue Break-even $1,502
Assumptions:
Average Percent Variable Cost 0%
Estimated Monthly Fixed Cost $1,502

8.3 Projected Profit and Loss

The following table and charts illustrated projected profit and loss.

Explanations for some line items:

  • Sales and Marketing-  The compilation CDs will be used for marketing purposes. The initial goal is to develop visibility for Mt. Hood Records as a record label. This will assist in the process of introducing up and coming bands bands to Mt. Hood Records. Once the bands have been signed to exclusive contracts by Mt. Hood Records, then the signed bands will be the only bands on the compilation CDs. Mt. Hood Records has not purchased any equipment for the mixing, mastering, CD production, and artwork/barcode expenses. These activities will be outsourced to keep capital expenditures low. Expenses related to the cost of production of the compilation captured in the sales and marketing costs include:
    • initial studio recording time
    • mixing, mastering expenses
    • CD label costs (artwork, barcode, etc.)
    • Promotional CDs given out.
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $0 $82,160 $143,766
Direct Cost of Sales $0 $23,161 $33,022
Other Costs of Goods $0 $0 $0
Total Cost of Sales $0 $23,161 $33,022
Gross Margin $0 $59,000 $110,744
Gross Margin % 0.00% 71.81% 77.03%
Expenses
Payroll $1,600 $24,000 $56,000
Sales and Marketing and Other Expenses $13,500 $14,500 $15,500
Depreciation $400 $400 $400
Rent $0 $4,000 $4,000
Website expenses $1,560 $1,800 $2,000
Utilities $360 $800 $1,000
Insurance $360 $600 $800
Payroll Taxes $240 $3,600 $8,400
Returned CDs $0 $1,200 $1,200
Total Operating Expenses $18,020 $50,900 $89,300
Profit Before Interest and Taxes ($18,020) $8,100 $21,444
EBITDA ($17,620) $8,500 $21,844
Interest Expense $0 $0 $0
Taxes Incurred $0 $2,430 $6,433
Net Profit ($18,020) $5,670 $15,011
Net Profit/Sales 0.00% 6.90% 10.44%

8.4 Projected Cash Flow

The following chart and table show the projected cash flow.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $0 $20,540 $35,942
Cash from Receivables $0 $61,620 $107,825
Subtotal Cash from Operations $0 $82,160 $143,766
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 $0 $82,160 $143,766
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $1,600 $24,000 $56,000
Bill Payments $15,595 $48,234 $70,690
Subtotal Spent on Operations $17,195 $72,234 $126,690
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 $17,195 $72,234 $126,690
Net Cash Flow ($17,195) $9,926 $17,076
Cash Balance $2,155 $12,081 $29,158

8.5 Projected Balance Sheet

The following table presents the projected balance sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $2,155 $12,081 $29,158
Accounts Receivable $0 $0 $0
Inventory $0 $0 $0
Other Current Assets $0 $0 $0
Total Current Assets $2,155 $12,081 $29,158
Long-term Assets
Long-term Assets $2,000 $2,000 $2,000
Accumulated Depreciation $400 $800 $1,200
Total Long-term Assets $1,600 $1,200 $800
Total Assets $3,756 $13,281 $29,958
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $425 $4,281 $5,947
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $425 $4,281 $5,947
Long-term Liabilities $0 $0 $0
Total Liabilities $425 $4,281 $5,947
Paid-in Capital $28,000 $28,000 $28,000
Retained Earnings ($6,650) ($24,670) ($19,000)
Earnings ($18,020) $5,670 $15,011
Total Capital $3,330 $9,000 $24,011
Total Liabilities and Capital $3,756 $13,281 $29,958
Net Worth $3,330 $9,000 $24,011

8.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Music recording and distribuiting industry NAICS code 512220, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 0.00% 74.98% -22.55%
Percent of Total Assets
Accounts Receivable 0.00% 0.00% 0.00% 16.48%
Inventory 0.00% 0.00% 0.00% 21.02%
Other Current Assets 0.00% 0.00% 0.00% 31.62%
Total Current Assets 57.39% 90.96% 97.33% 69.12%
Long-term Assets 42.61% 9.04% 2.67% 30.88%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 11.32% 32.24% 19.85% 25.08%
Long-term Liabilities 0.00% 0.00% 0.00% 16.76%
Total Liabilities 11.32% 32.24% 19.85% 41.84%
Net Worth 88.68% 67.76% 80.15% 58.16%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 0.00% 71.81% 77.03% 29.18%
Selling, General & Administrative Expenses 0.00% 64.91% 66.59% 10.66%
Advertising Expenses 0.00% 0.00% 0.00% 0.44%
Profit Before Interest and Taxes 0.00% 9.86% 14.92% 5.25%
Main Ratios
Current 5.07 2.82 4.90 2.54
Quick 5.07 2.82 4.90 1.38
Total Debt to Total Assets 11.32% 32.24% 19.85% 49.40%
Pre-tax Return on Net Worth -541.06% 89.99% 89.31% 6.25%
Pre-tax Return on Assets -479.79% 60.98% 71.58% 12.35%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 0.00% 6.90% 10.44% n.a
Return on Equity -541.06% 63.00% 62.52% n.a
Activity Ratios
Accounts Receivable Turnover 0.00 0.00 0.00 n.a
Collection Days 0 0 0 n.a
Inventory Turnover 0.00 0.00 0.00 n.a
Accounts Payable Turnover 37.66 12.17 12.17 n.a
Payment Days 27 16 26 n.a
Total Asset Turnover 0.00 6.19 4.80 n.a
Debt Ratios
Debt to Net Worth 0.13 0.48 0.25 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $1,730 $7,800 $23,211 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales n.a. 0.16 0.21 n.a
Current Debt/Total Assets 11% 32% 20% n.a
Acid Test 5.07 2.82 4.90 n.a
Sales/Net Worth 0.00 9.13 5.99 n.a
Dividend Payout 0.00 0.00 0.00 n.a