The Pottery Table

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Pottery Studio Business Plan

Financial Plan

The following is the financial plan for The Pottery Table.

7.1 Break-even Analysis

The monthly break-even point is shown in the table and chart below.

Break-even Analysis
Monthly Revenue Break-even $9,426
Assumptions:
Average Percent Variable Cost 14%
Estimated Monthly Fixed Cost $8,070

7.2 Projected Profit and Loss

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

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $109,918 $164,300 $201,200
Direct Cost of Sales $15,819 $22,350 $26,800
Other Production Expenses $0 $0 $0
Total Cost of Sales $15,819 $22,350 $26,800
Gross Margin $94,099 $141,950 $174,400
Gross Margin % 85.61% 86.40% 86.68%
Expenses
Payroll $69,000 $95,000 $106,000
Sales and Marketing and Other Expenses $1,200 $1,500 $1,500
Depreciation $4,284 $4,282 $4,282
Leased Equipment $0 $0 $0
Utilities $2,400 $2,400 $2,400
Insurance $1,200 $0 $0
Rent $8,400 $8,400 $8,400
Payroll Taxes $10,350 $14,250 $15,900
Other $0 $0 $0
Total Operating Expenses $96,834 $125,832 $138,482
Profit Before Interest and Taxes ($2,735) $16,118 $35,918
EBITDA $1,549 $20,400 $40,200
Interest Expense $924 $751 $585
Taxes Incurred $0 $4,610 $10,600
Net Profit ($3,659) $10,757 $24,733
Net Profit/Sales -3.33% 6.55% 12.29%

7.3 Projected Cash Flow

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

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $109,918 $164,300 $201,200
Subtotal Cash from Operations $109,918 $164,300 $201,200
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 $109,918 $164,300 $201,200
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $69,000 $95,000 $106,000
Bill Payments $31,216 $54,225 $65,702
Subtotal Spent on Operations $100,216 $149,225 $171,702
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 $1,660 $1,660 $1,660
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $101,876 $150,885 $173,362
Net Cash Flow $8,042 $13,415 $27,838
Cash Balance $21,942 $35,357 $63,195

7.4 Projected Balance Sheet

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

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $21,942 $35,357 $63,195
Inventory $1,702 $2,404 $2,883
Other Current Assets $0 $0 $0
Total Current Assets $23,644 $37,762 $66,078
Long-term Assets
Long-term Assets $44,000 $44,000 $44,000
Accumulated Depreciation $4,284 $8,566 $12,848
Total Long-term Assets $39,716 $35,434 $31,152
Total Assets $63,360 $73,196 $97,230
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $3,779 $4,518 $5,479
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $3,779 $4,518 $5,479
Long-term Liabilities $8,340 $6,680 $5,020
Total Liabilities $12,119 $11,198 $10,499
Paid-in Capital $70,000 $70,000 $70,000
Retained Earnings ($15,100) ($18,759) ($8,002)
Earnings ($3,659) $10,757 $24,733
Total Capital $51,241 $61,998 $86,731
Total Liabilities and Capital $63,360 $73,196 $97,230
Net Worth $51,241 $61,998 $86,731

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 3269, Pottery Products, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 49.48% 22.46% 5.10%
Percent of Total Assets
Inventory 2.69% 3.28% 2.97% 18.40%
Other Current Assets 0.00% 0.00% 0.00% 39.20%
Total Current Assets 37.32% 51.59% 67.96% 76.70%
Long-term Assets 62.68% 48.41% 32.04% 23.30%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 5.96% 6.17% 5.64% 34.10%
Long-term Liabilities 13.16% 9.13% 5.16% 19.80%
Total Liabilities 19.13% 15.30% 10.80% 53.90%
Net Worth 80.87% 84.70% 89.20% 46.10%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 85.61% 86.40% 86.68% 38.40%
Selling, General & Administrative Expenses 88.94% 79.85% 74.39% 21.60%
Advertising Expenses 1.09% 0.91% 0.75% 1.20%
Profit Before Interest and Taxes -2.49% 9.81% 17.85% 2.80%
Main Ratios
Current 6.26 8.36 12.06 1.77
Quick 5.81 7.83 11.53 1.01
Total Debt to Total Assets 19.13% 15.30% 10.80% 53.90%
Pre-tax Return on Net Worth -7.14% 24.79% 40.74% 3.40%
Pre-tax Return on Assets -5.77% 20.99% 36.34% 7.40%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -3.33% 6.55% 12.29% n.a
Return on Equity -7.14% 17.35% 28.52% n.a
Activity Ratios
Inventory Turnover 5.92 10.89 10.14 n.a
Accounts Payable Turnover 9.26 12.17 12.17 n.a
Payment Days 27 28 27 n.a
Total Asset Turnover 1.73 2.24 2.07 n.a
Debt Ratios
Debt to Net Worth 0.24 0.18 0.12 n.a
Current Liab. to Liab. 0.31 0.40 0.52 n.a
Liquidity Ratios
Net Working Capital $19,865 $33,244 $60,599 n.a
Interest Coverage -2.96 21.46 61.40 n.a
Additional Ratios
Assets to Sales 0.58 0.45 0.48 n.a
Current Debt/Total Assets 6% 6% 6% n.a
Acid Test 5.81 7.83 11.53 n.a
Sales/Net Worth 2.15 2.65 2.32 n.a
Dividend Payout 0.00 0.00 0.00 n.a