Mojo Music

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Music Retail Business Plan

Financial Plan

The following is the financial plan for Mojo Music.

7.1 Break-even Analysis

The monthly sales break-even point is approximately 6,200 units.

Break-even Analysis
Monthly Units Break-even 6,215
Monthly Revenue Break-even $56,512
Assumptions:
Average Per-Unit Revenue $9.09
Average Per-Unit Variable Cost $4.82
Estimated Monthly Fixed Cost $26,553

7.2 Projected Profit and Loss

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

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $864,700 $970,000 $1,087,000
Direct Cost of Sales $458,400 $512,000 $575,000
Other Production Expenses $0 $0 $0
Total Cost of Sales $458,400 $512,000 $575,000
Gross Margin $406,300 $458,000 $512,000
Gross Margin % 46.99% 47.22% 47.10%
Expenses
Payroll $138,000 $148,000 $162,000
Sales and Marketing and Other Expenses $100,000 $110,000 $130,000
Depreciation $7,140 $7,143 $7,143
Leased Equipment $0 $0 $0
Utilities $4,800 $4,800 $4,800
Insurance $0 $0 $0
Rent $48,000 $48,000 $48,000
Payroll Taxes $20,700 $22,200 $24,300
Other $0 $0 $0
Total Operating Expenses $318,640 $340,143 $376,243
Profit Before Interest and Taxes $87,660 $117,857 $135,757
EBITDA $94,800 $125,000 $142,900
Interest Expense $8,917 $7,001 $5,002
Taxes Incurred $23,623 $33,257 $39,227
Net Profit $55,120 $77,599 $91,529
Net Profit/Sales 6.37% 8.00% 8.42%

7.3 Projected Cash Flow

The following is the projected cash flow for three years.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $216,175 $242,500 $271,750
Cash from Receivables $506,165 $710,164 $795,988
Subtotal Cash from Operations $722,340 $952,664 $1,067,738
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 $68,000 $0 $0
Subtotal Cash Received $790,340 $952,664 $1,067,738
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $138,000 $148,000 $162,000
Bill Payments $644,695 $762,547 $827,116
Subtotal Spent on Operations $782,695 $910,547 $989,116
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 $19,992 $19,992 $19,992
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $802,687 $930,539 $1,009,108
Net Cash Flow ($12,347) $22,125 $58,630
Cash Balance $36,653 $58,778 $117,408

7.4 Projected Balance Sheet

The following is the projected balance sheet for three years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $36,653 $58,778 $117,408
Accounts Receivable $142,360 $159,696 $178,958
Inventory $59,730 $66,714 $74,923
Other Current Assets $0 $0 $0
Total Current Assets $238,743 $285,189 $371,290
Long-term Assets
Long-term Assets $50,000 $50,000 $50,000
Accumulated Depreciation $7,140 $14,283 $21,426
Total Long-term Assets $42,860 $35,717 $28,574
Total Assets $281,603 $320,906 $399,864
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $79,475 $61,171 $68,592
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $79,475 $61,171 $68,592
Long-term Liabilities $80,008 $60,016 $40,024
Total Liabilities $159,483 $121,187 $108,616
Paid-in Capital $218,000 $218,000 $218,000
Retained Earnings ($151,000) ($95,880) ($18,281)
Earnings $55,120 $77,599 $91,529
Total Capital $122,120 $199,719 $291,248
Total Liabilities and Capital $281,603 $320,906 $399,864
Net Worth $122,120 $199,719 $291,248

7.5 Business Ratios

Business ratios for the years of this plan are shown below.  Industry profile ratios based on the Standard Industrial Classification (SIC) code 5735, Record and Prerecorded Tape Stores, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 12.18% 12.06% 2.40%
Percent of Total Assets
Accounts Receivable 50.55% 49.76% 44.75% 18.30%
Inventory 21.21% 20.79% 18.74% 38.60%
Other Current Assets 0.00% 0.00% 0.00% 21.70%
Total Current Assets 84.78% 88.87% 92.85% 78.60%
Long-term Assets 15.22% 11.13% 7.15% 21.40%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 28.22% 19.06% 17.15% 40.30%
Long-term Liabilities 28.41% 18.70% 10.01% 14.70%
Total Liabilities 56.63% 37.76% 27.16% 55.00%
Net Worth 43.37% 62.24% 72.84% 45.00%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 46.99% 47.22% 47.10% 33.50%
Selling, General & Administrative Expenses 40.61% 39.22% 38.68% 18.50%
Advertising Expenses 5.78% 5.15% 4.60% 3.60%
Profit Before Interest and Taxes 10.14% 12.15% 12.49% 1.60%
Main Ratios
Current 3.00 4.66 5.41 1.99
Quick 2.25 3.57 4.32 0.78
Total Debt to Total Assets 56.63% 37.76% 27.16% 55.00%
Pre-tax Return on Net Worth 64.48% 55.51% 44.89% 4.10%
Pre-tax Return on Assets 27.96% 34.54% 32.70% 9.00%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 6.37% 8.00% 8.42% n.a
Return on Equity 45.14% 38.85% 31.43% n.a
Activity Ratios
Accounts Receivable Turnover 4.56 4.56 4.56 n.a
Collection Days 56 76 76 n.a
Inventory Turnover 10.91 8.10 8.12 n.a
Accounts Payable Turnover 9.11 12.17 12.17 n.a
Payment Days 27 34 28 n.a
Total Asset Turnover 3.07 3.02 2.72 n.a
Debt Ratios
Debt to Net Worth 1.31 0.61 0.37 n.a
Current Liab. to Liab. 0.50 0.50 0.63 n.a
Liquidity Ratios
Net Working Capital $159,268 $224,018 $302,698 n.a
Interest Coverage 9.83 16.83 27.14 n.a
Additional Ratios
Assets to Sales 0.33 0.33 0.37 n.a
Current Debt/Total Assets 28% 19% 17% n.a
Acid Test 0.46 0.96 1.71 n.a
Sales/Net Worth 7.08 4.86 3.73 n.a
Dividend Payout 0.00 0.00 0.00 n.a