Mixed Greens Salad Gardens

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Produce Farm Business Plan

Financial Plan

The following sections will outline the important financial information.

7.1 Important Assumptions

The following table highlights some of the 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 25.42% 25.00% 25.42%
Other 0 0 0

7.2 Break-even Analysis

The Break-even Analysis below indicates the monthly sales needed to break even.

Break-even Analysis
Monthly Revenue Break-even $8,294
Assumptions:
Average Percent Variable Cost 12%
Estimated Monthly Fixed Cost $7,299

7.3 Projected Profit and Loss

The following table will indicate projected profit and loss. Our losses at start-up are evident, as is the turn of the corner in July when we become profitable.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $81,712 $122,500 $185,682
Direct Cost of Sales $9,805 $14,700 $22,282
Other $0 $0 $0
Total Cost of Sales $9,805 $14,700 $22,282
Gross Margin $71,906 $107,800 $163,400
Gross Margin % 88.00% 88.00% 88.00%
Expenses
Payroll $64,050 $68,000 $79,500
Sales and Marketing and Other Expenses $0 $0 $0
Depreciation $2,532 $2,532 $2,532
Leased Equipment $0 $0 $0
Utilities $3,000 $3,000 $3,000
Insurance $2,400 $2,400 $2,400
Rent $6,000 $6,000 $6,000
Payroll Taxes $9,608 $10,200 $11,925
Other $0 $0 $0
Total Operating Expenses $87,590 $92,132 $105,357
Profit Before Interest and Taxes ($15,683) $15,668 $58,043
EBITDA ($13,151) $18,200 $60,575
Interest Expense $370 $140 ($20)
Taxes Incurred $0 $3,882 $14,758
Net Profit ($16,053) $11,646 $43,305
Net Profit/Sales -19.65% 9.51% 23.32%

7.4 Projected Cash Flow

The following chart and table will indicate projected cash flow.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $32,685 $49,000 $74,273
Cash from Receivables $36,451 $67,222 $101,685
Subtotal Cash from Operations $69,136 $116,223 $175,958
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 $69,136 $116,223 $175,958
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $64,050 $68,000 $79,500
Bill Payments $29,537 $40,751 $59,778
Subtotal Spent on Operations $93,587 $108,751 $139,278
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $2,400 $2,400 $800
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 $95,987 $111,151 $140,078
Net Cash Flow ($26,851) $5,072 $35,879
Cash Balance $7,849 $12,920 $48,800

7.5 Projected Balance Sheet

The following table will indicate the projected balance sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $7,849 $12,920 $48,800
Accounts Receivable $12,576 $18,854 $28,578
Inventory $1,438 $2,156 $3,268
Other Current Assets $500 $500 $500
Total Current Assets $22,363 $34,430 $81,145
Long-term Assets
Long-term Assets $25,300 $25,300 $25,300
Accumulated Depreciation $2,532 $5,064 $7,596
Total Long-term Assets $22,768 $20,236 $17,704
Total Assets $45,131 $54,666 $98,849
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $3,084 $3,373 $5,051
Current Borrowing $2,600 $200 ($600)
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $5,684 $3,573 $4,451
Long-term Liabilities $0 $0 $0
Total Liabilities $5,684 $3,573 $4,451
Paid-in Capital $60,600 $60,600 $60,600
Retained Earnings ($5,100) ($21,153) ($9,507)
Earnings ($16,053) $11,646 $43,305
Total Capital $39,447 $51,093 $94,398
Total Liabilities and Capital $45,131 $54,666 $98,849
Net Worth $39,447 $51,093 $94,398

7.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 0161, Lettuce Farms, as part of Vegetables and Melons, Not Elsewhere Classified, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 49.92% 51.58% -4.60%
Percent of Total Assets
Accounts Receivable 27.87% 34.49% 28.91% 12.90%
Inventory 3.19% 3.94% 3.31% 14.40%
Other Current Assets 1.11% 0.91% 0.51% 28.90%
Total Current Assets 49.55% 62.98% 82.09% 56.20%
Long-term Assets 50.45% 37.02% 17.91% 43.80%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 12.59% 6.54% 4.50% 31.10%
Long-term Liabilities 0.00% 0.00% 0.00% 20.50%
Total Liabilities 12.59% 6.54% 4.50% 51.60%
Net Worth 87.41% 93.46% 95.50% 48.40%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 88.00% 88.00% 88.00% 32.00%
Selling, General & Administrative Expenses 107.19% 78.41% 64.56% 20.70%
Advertising Expenses 0.00% 0.00% 0.00% 0.20%
Profit Before Interest and Taxes -19.19% 12.79% 31.26% 1.70%
Main Ratios
Current 3.93 9.64 18.23 1.65
Quick 3.68 9.03 17.50 0.88
Total Debt to Total Assets 12.59% 6.54% 4.50% 51.60%
Pre-tax Return on Net Worth -40.70% 30.39% 61.51% 2.20%
Pre-tax Return on Assets -35.57% 28.41% 58.74% 4.50%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -19.65% 9.51% 23.32% n.a
Return on Equity -40.70% 22.79% 45.88% n.a
Activity Ratios
Accounts Receivable Turnover 3.90 3.90 3.90 n.a
Collection Days 56 78 78 n.a
Inventory Turnover 10.89 8.18 8.22 n.a
Accounts Payable Turnover 10.58 12.17 12.17 n.a
Payment Days 27 29 25 n.a
Total Asset Turnover 1.81 2.24 1.88 n.a
Debt Ratios
Debt to Net Worth 0.14 0.07 0.05 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $16,679 $30,857 $76,694 n.a
Interest Coverage -42.39 111.92 0.00 n.a
Additional Ratios
Assets to Sales 0.55 0.45 0.53 n.a
Current Debt/Total Assets 13% 7% 5% n.a
Acid Test 1.47 3.76 11.08 n.a
Sales/Net Worth 2.07 2.40 1.97 n.a
Dividend Payout 0.00 0.00 0.00 n.a