We have forecast a very rapid growth for Salvador's this year. Although this may seem ambitious based on historic sales, this rate of growth is due to the large orders we have received to date from several distributors, letters of commitment from Meijer's and Kroger's, and the increasing number of orders from current clients.
The financial plan depends on important assumptions, most of which are shown in the following table. The key underlying assumptions are:
The most important factor in our case is the ability to procure financing to go the the next level. The size of the orders currently being asked of us are well beyond our current production capacity, but well within the production capability of a local processor. *Note: purchasing from this supplier will also reduce our per unit production costs in excess of 30%. An additional alternative would be to purchase the production equipment necessary, and not be subject to the local manufacturer's production scheduling.
We must maintain reasonably high gross margins, and hold marketing costs to no more than 20% of sales to provide the income to reduce out debt, and equip us to sustain the growth we anticipate. We will meet and exceed all of theses conditions through buying at increased volumes. Then we'll pass the savings on to our customers through increases in the margins at which they retail the product.
The break-even analysis shows that Salvador's has a good balance of fixed costs and sufficient sales to remain healthy. We have already passed our monthly break-even point; last year's overall loss reflects high costs in the first half of the year.
We have just recently contracted with another jar supplier that will reduce our costs by 18% per jar of salsa with the next supply order. This will further reduce the break-even point, and add to our goal of increasing the margin on our salsa.
We expect to close out this year with good sales growth, and to increase our sales each year through the turn of the century, with comfortable net profit.
We expect to manage cash flow over the next three years with the assistance of a Small Business Administration supported loan. This financing assistance is required to provide the working capital to meet the current needs while providing a solid foundation to build the growth of the organization. After a six-month period, we anticipate requesting an open line of credit to further the company's ability to meet and exceed sales projections, gross margin, and return on investment.
As shown by the balance sheet in the table, we expect a healthy growth in net worth through the end of the plan period.
Standard business ratios are included in the table that follows. The ratios show a plan for well balanced, healthy growth. The industry comparisons are for the Perishable Prepared Food Manufacturing industry, NAICS classification code 311991.