Peach and Apricot Farm Business Plan

Wilson Family Peach Farm

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Financial Plan

The financial future looks healthy for Wilson Family Peach Farm. Margins are higher than for typical fruit farms, because the Wilsons are focusing on growing hybrid fruit that are more difficult to grow, but produce a tastier fruit. In addition they will sell to the local produce stands which are able to charge more for the higher quality fruit.

7.1 Break-even Analysis

The farm's Break-even Analysis is based on its running costs, including payroll, and its present fixed costs, not including the expenses associated with the farm's planned expansion in 2004. All units are in bushels. 

Break-even Analysis
Monthly Revenue Break-even $12,658
Assumptions:
Average Percent Variable Cost 30%
Estimated Monthly Fixed Cost $8,860

7.2 Projected Profit and Loss

The Projected Profit and Loss for the Wilson Family Peach Farm has an average gross margin of about 35-40%. Th expenditures are based on the following data provided by the Georgia State Agriculture Division.

Average Expenditures on Georgia Farms, Percent of Total Expenses by Category

Capital 8.5%
Energy 4.5%
Feed & Hay23.0%
Fertilzer 5.0%
Hired Labor 9.0%
Interest 7.0%
Landlords 2.0%
Livestock 6.5%
Marketing 6.0%
Other Misc14.5%
Pesticides 4.5%
Repairs 4.0%
Seed 3.0%
Tax & Fees 2.5%

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $341,000 $354,640 $368,116
Direct Cost of Sales $102,300 $106,392 $110,435
Other Production Expenses $0 $0 $0
Total Cost of Sales $102,300 $106,392 $110,435
Gross Margin $238,700 $248,248 $257,681
Gross Margin % 70.00% 70.00% 70.00%
Expenses
Payroll $14,000 $8,000 $12,000
Sales and Marketing and Other Expenses $36,625 $41,000 $41,000
Depreciation $3,200 $5,000 $5,000
Leased Equipment $8,000 $8,000 $8,000
Utilities $4,600 $6,000 $6,000
Insurance $13,800 $14,400 $14,400
Rent $24,000 $24,000 $24,000
Payroll Taxes $2,100 $1,200 $1,800
Other $0 $0 $0
Total Operating Expenses $106,325 $107,600 $112,200
Profit Before Interest and Taxes $132,375 $140,648 $145,481
EBITDA $135,575 $145,648 $150,481
Interest Expense $11,037 $8,450 $6,300
Taxes Incurred $36,401 $39,659 $41,754
Net Profit $84,936 $92,539 $97,427
Net Profit/Sales 24.91% 26.09% 26.47%

7.3 Projected Cash Flow

The following is the projected Cash Flow for Wilson Family Peach Farm.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $51,150 $53,196 $55,217
Cash from Receivables $289,850 $301,444 $312,899
Subtotal Cash from Operations $341,000 $354,640 $368,116
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 $20,000 $0 $0
Subtotal Cash Received $361,000 $354,640 $368,116
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $14,000 $8,000 $12,000
Bill Payments $241,459 $234,647 $253,641
Subtotal Spent on Operations $255,459 $242,647 $265,641
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $12,000 $12,000 $1,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $15,000 $15,000 $15,000
Purchase Other Current Assets $0 $40,000 $10,000
Purchase Long-term Assets $24,000 $50,000 $0
Dividends $0 $50,000 $0
Subtotal Cash Spent $306,459 $409,647 $291,641
Net Cash Flow $54,541 ($55,007) $76,475
Cash Balance $182,261 $127,254 $203,729

7.4 Projected Balance Sheet

The following table shows the Projected Balance Sheet for Wilson Family Peach Farm.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $182,261 $127,254 $203,729
Accounts Receivable $0 $0 $0
Inventory $8,310 $8,642 $8,971
Other Current Assets $0 $40,000 $50,000
Total Current Assets $190,571 $175,896 $262,700
Long-term Assets
Long-term Assets $164,280 $214,280 $214,280
Accumulated Depreciation $3,200 $8,200 $13,200
Total Long-term Assets $161,080 $206,080 $201,080
Total Assets $351,651 $381,976 $463,780
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $5,715 $20,501 $20,878
Current Borrowing $13,000 $1,000 $0
Other Current Liabilities $25,000 $25,000 $25,000
Subtotal Current Liabilities $43,715 $46,501 $45,878
Long-term Liabilities $85,000 $70,000 $55,000
Total Liabilities $128,715 $116,501 $100,878
Paid-in Capital $195,000 $195,000 $195,000
Retained Earnings ($57,000) ($22,064) $70,475
Earnings $84,936 $92,539 $97,427
Total Capital $222,936 $265,475 $362,902
Total Liabilities and Capital $351,651 $381,976 $463,780
Net Worth $222,936 $265,475 $362,902

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 0175, [Other Noncitrus Fruit Farming (except apples, grapes, berries, and fruit(s) and tree nut(s) combinations)], are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 4.00% 3.80% 1.65%
Percent of Total Assets
Accounts Receivable 0.00% 0.00% 0.00% 8.36%
Inventory 2.36% 2.26% 1.93% 9.81%
Other Current Assets 0.00% 10.47% 10.78% 26.10%
Total Current Assets 54.19% 46.05% 56.64% 44.27%
Long-term Assets 45.81% 53.95% 43.36% 55.73%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 12.43% 12.17% 9.89% 21.43%
Long-term Liabilities 24.17% 18.33% 11.86% 29.04%
Total Liabilities 36.60% 30.50% 21.75% 50.47%
Net Worth 63.40% 69.50% 78.25% 49.53%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 70.00% 70.00% 70.00% 50.62%
Selling, General & Administrative Expenses 35.83% 35.32% 35.03% 36.01%
Advertising Expenses 1.76% 2.26% 2.17% 0.27%
Profit Before Interest and Taxes 38.82% 39.66% 39.52% 0.85%
Main Ratios
Current 4.36 3.78 5.73 1.35
Quick 4.17 3.60 5.53 0.67
Total Debt to Total Assets 36.60% 30.50% 21.75% 60.87%
Pre-tax Return on Net Worth 54.43% 49.80% 38.35% 0.84%
Pre-tax Return on Assets 34.51% 34.61% 30.01% 2.14%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 24.91% 26.09% 26.47% n.a
Return on Equity 38.10% 34.86% 26.85% n.a
Activity Ratios
Accounts Receivable Turnover 0.00 0.00 0.00 n.a
Collection Days 60 0 0 n.a
Inventory Turnover 7.54 12.55 12.54 n.a
Accounts Payable Turnover 43.25 12.17 12.17 n.a
Payment Days 27 19 30 n.a
Total Asset Turnover 0.97 0.93 0.79 n.a
Debt Ratios
Debt to Net Worth 0.58 0.44 0.28 n.a
Current Liab. to Liab. 0.34 0.40 0.45 n.a
Liquidity Ratios
Net Working Capital $146,856 $129,395 $216,822 n.a
Interest Coverage 11.99 16.64 23.09 n.a
Additional Ratios
Assets to Sales 1.03 1.08 1.26 n.a
Current Debt/Total Assets 12% 12% 10% n.a
Acid Test 4.17 3.60 5.53 n.a
Sales/Net Worth 1.53 1.34 1.01 n.a
Dividend Payout 0.00 0.54 0.00 n.a
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Break-even Analysis
Monthly Revenue Break-even $12,658
Assumptions:
Average Percent Variable Cost 30%
Estimated Monthly Fixed Cost $8,860
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $341,000 $354,640 $368,116
Direct Cost of Sales $102,300 $106,392 $110,435
Other Production Expenses $0 $0 $0
Total Cost of Sales $102,300 $106,392 $110,435
Gross Margin $238,700 $248,248 $257,681
Gross Margin % 70.00% 70.00% 70.00%
Expenses
Payroll $14,000 $8,000 $12,000
Sales and Marketing and Other Expenses $36,625 $41,000 $41,000
Depreciation $3,200 $5,000 $5,000
Leased Equipment $8,000 $8,000 $8,000
Utilities $4,600 $6,000 $6,000
Insurance $13,800 $14,400 $14,400
Rent $24,000 $24,000 $24,000
Payroll Taxes $2,100 $1,200 $1,800
Other $0 $0 $0
Total Operating Expenses $106,325 $107,600 $112,200
Profit Before Interest and Taxes $132,375 $140,648 $145,481
EBITDA $135,575 $145,648 $150,481
Interest Expense $11,037 $8,450 $6,300
Taxes Incurred $36,401 $39,659 $41,754
Net Profit $84,936 $92,539 $97,427
Net Profit/Sales 24.91% 26.09% 26.47%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $51,150 $53,196 $55,217
Cash from Receivables $289,850 $301,444 $312,899
Subtotal Cash from Operations $341,000 $354,640 $368,116
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 $20,000 $0 $0
Subtotal Cash Received $361,000 $354,640 $368,116
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $14,000 $8,000 $12,000
Bill Payments $241,459 $234,647 $253,641
Subtotal Spent on Operations $255,459 $242,647 $265,641
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $12,000 $12,000 $1,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $15,000 $15,000 $15,000
Purchase Other Current Assets $0 $40,000 $10,000
Purchase Long-term Assets $24,000 $50,000 $0
Dividends $0 $50,000 $0
Subtotal Cash Spent $306,459 $409,647 $291,641
Net Cash Flow $54,541 ($55,007) $76,475
Cash Balance $182,261 $127,254 $203,729
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $182,261 $127,254 $203,729
Accounts Receivable $0 $0 $0
Inventory $8,310 $8,642 $8,971
Other Current Assets $0 $40,000 $50,000
Total Current Assets $190,571 $175,896 $262,700
Long-term Assets
Long-term Assets $164,280 $214,280 $214,280
Accumulated Depreciation $3,200 $8,200 $13,200
Total Long-term Assets $161,080 $206,080 $201,080
Total Assets $351,651 $381,976 $463,780
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $5,715 $20,501 $20,878
Current Borrowing $13,000 $1,000 $0
Other Current Liabilities $25,000 $25,000 $25,000
Subtotal Current Liabilities $43,715 $46,501 $45,878
Long-term Liabilities $85,000 $70,000 $55,000
Total Liabilities $128,715 $116,501 $100,878
Paid-in Capital $195,000 $195,000 $195,000
Retained Earnings ($57,000) ($22,064) $70,475
Earnings $84,936 $92,539 $97,427
Total Capital $222,936 $265,475 $362,902
Total Liabilities and Capital $351,651 $381,976 $463,780
Net Worth $222,936 $265,475 $362,902
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 4.00% 3.80% 1.65%
Percent of Total Assets
Accounts Receivable 0.00% 0.00% 0.00% 8.36%
Inventory 2.36% 2.26% 1.93% 9.81%
Other Current Assets 0.00% 10.47% 10.78% 26.10%
Total Current Assets 54.19% 46.05% 56.64% 44.27%
Long-term Assets 45.81% 53.95% 43.36% 55.73%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 12.43% 12.17% 9.89% 21.43%
Long-term Liabilities 24.17% 18.33% 11.86% 29.04%
Total Liabilities 36.60% 30.50% 21.75% 50.47%
Net Worth 63.40% 69.50% 78.25% 49.53%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 70.00% 70.00% 70.00% 50.62%
Selling, General & Administrative Expenses 35.83% 35.32% 35.03% 36.01%
Advertising Expenses 1.76% 2.26% 2.17% 0.27%
Profit Before Interest and Taxes 38.82% 39.66% 39.52% 0.85%
Main Ratios
Current 4.36 3.78 5.73 1.35
Quick 4.17 3.60 5.53 0.67
Total Debt to Total Assets 36.60% 30.50% 21.75% 60.87%
Pre-tax Return on Net Worth 54.43% 49.80% 38.35% 0.84%
Pre-tax Return on Assets 34.51% 34.61% 30.01% 2.14%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 24.91% 26.09% 26.47% n.a
Return on Equity 38.10% 34.86% 26.85% n.a
Activity Ratios
Accounts Receivable Turnover 0.00 0.00 0.00 n.a
Collection Days 60 0 0 n.a
Inventory Turnover 7.54 12.55 12.54 n.a
Accounts Payable Turnover 43.25 12.17 12.17 n.a
Payment Days 27 19 30 n.a
Total Asset Turnover 0.97 0.93 0.79 n.a
Debt Ratios
Debt to Net Worth 0.58 0.44 0.28 n.a
Current Liab. to Liab. 0.34 0.40 0.45 n.a
Liquidity Ratios
Net Working Capital $146,856 $129,395 $216,822 n.a
Interest Coverage 11.99 16.64 23.09 n.a
Additional Ratios
Assets to Sales 1.03 1.08 1.26 n.a
Current Debt/Total Assets 12% 12% 10% n.a
Acid Test 4.17 3.60 5.53 n.a
Sales/Net Worth 1.53 1.34 1.01 n.a
Dividend Payout 0.00 0.54 0.00 n.a