Burly Skate Shop

Start your own business plan »

Skateboard Gear Retail Business Plan

Financial Plan

Burly's growth will be moderate and the cash balance will always be positive. As a retailer, we will not be selling on credit. We will accept cash, checks, and all major credit cards. TeleCheck Services will be used as the check guaranty system to help reduce the percentage of loss on bad checks. Marketing and advertising will range from 15% to 20% of sales. We will continue to reinvest residual profits into company expansion, and personnel.

8.1 Important Assumptions

Burly does not sell on credit; however, layaway is an option. We accept cash and checks, Visa, MasterCard, Discover and American Express. All sales paid via credit cards will be deposited in our business checking account within 48 hours. Our business checking account will be with a local bank. Our assumptions about loan and tax rates are listed below.

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 30.00% 30.00% 30.00%
Other 0 0 0

8.2 Break-even Analysis

Our break-even analysis is summarized by the following chart and table. With average monthly fixed costs for the first year of $7,284, we need to sell $13,243 of merchandise each month to break even. We will surpass this minimum amount in most months of the first year.

Break-even Analysis
Monthly Revenue Break-even $12,245
Assumptions:
Average Percent Variable Cost 45%
Estimated Monthly Fixed Cost $6,735

8.3 Projected Profit and Loss

The following chart and table indicate our projected profit and loss. We expect to make a modest profit in the first year, as we build name recognition and a loyal local clientele, with higher profits thereafter, despite increasing the personnel payments for all employees and offering health insurance by year 3.

 

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $182,450 $208,008 $236,089
Direct Cost of Sales $82,103 $93,604 $106,240
Other $0 $0 $0
Total Cost of Sales $82,103 $93,604 $106,240
Gross Margin $100,348 $114,404 $129,849
Gross Margin % 55.00% 55.00% 55.00%
Expenses
Payroll $43,884 $50,329 $51,846
Marketing/Promotion $9,600 $11,040 $12,696
Depreciation $0 $0 $0
Rent $22,500 $23,175 $23,870
Utilities $2,700 $2,781 $2,865
Insurance $576 $576 $576
Payroll Taxes $0 $0 $0
Telephone $1,560 $1,560 $1,560
Total Operating Expenses $80,820 $89,461 $93,413
Profit Before Interest and Taxes $19,528 $24,943 $36,436
EBITDA $19,528 $24,943 $36,436
Interest Expense $4,098 $2,501 $834
Taxes Incurred $4,629 $6,733 $10,681
Net Profit $10,801 $15,710 $24,922
Net Profit/Sales 5.92% 7.55% 10.56%

8.4 Projected Cash Flow

The following table shows projected cash flow. It includes repayment of the short-term loan principal, but does not list owners' dividends - these are included as regular payments in the personnel table, for the purposes of this plan.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $182,450 $208,008 $236,089
Subtotal Cash from Operations $182,450 $208,008 $236,089
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 $182,450 $208,008 $236,089
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $43,884 $50,329 $51,846
Bill Payments $84,775 $140,330 $158,848
Subtotal Spent on Operations $128,659 $190,659 $210,694
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $16,656 $16,672 $16,672
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 $145,315 $207,331 $227,366
Net Cash Flow $37,135 $677 $8,723
Cash Balance $38,698 $39,375 $48,098

8.5 Projected Balance Sheet

The following table shows the projected balance sheet. It shows a steadily increasing net worth, as we gain market share and pay off our loan.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $38,698 $39,375 $48,098
Inventory $6,237 $7,111 $8,071
Other Current Assets $1,200 $1,200 $1,200
Total Current Assets $46,135 $47,686 $57,369
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $46,135 $47,686 $57,369
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $9,227 $11,741 $13,174
Current Borrowing $33,344 $16,672 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $42,571 $28,413 $13,174
Long-term Liabilities $0 $0 $0
Total Liabilities $42,571 $28,413 $13,174
Paid-in Capital $6,800 $6,800 $6,800
Retained Earnings ($14,037) ($3,236) $12,474
Earnings $10,801 $15,710 $24,922
Total Capital $3,564 $19,274 $44,195
Total Liabilities and Capital $46,135 $47,686 $57,369
Net Worth $3,564 $19,274 $44,195

8.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios, for comparison, are based on the Standard Industrial Classification (SIC) code 5941, Sporting Goods and Bicycle Shops.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 14.01% 13.50% 4.63%
Percent of Total Assets
Inventory 13.52% 14.91% 14.07% 36.51%
Other Current Assets 2.60% 2.52% 2.09% 25.52%
Total Current Assets 100.00% 100.00% 100.00% 77.61%
Long-term Assets 0.00% 0.00% 0.00% 22.39%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 92.28% 59.58% 22.96% 35.84%
Long-term Liabilities 0.00% 0.00% 0.00% 15.20%
Total Liabilities 92.28% 59.58% 22.96% 51.04%
Net Worth 7.72% 40.42% 77.04% 48.96%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 55.00% 55.00% 55.00% 30.04%
Selling, General & Administrative Expenses 47.89% 44.52% 41.65% 19.81%
Advertising Expenses 0.00% 0.00% 0.00% 1.28%
Profit Before Interest and Taxes 10.70% 11.99% 15.43% 0.66%
Main Ratios
Current 1.08 1.68 4.35 1.90
Quick 0.94 1.43 3.74 0.74
Total Debt to Total Assets 92.28% 59.58% 22.96% 56.14%
Pre-tax Return on Net Worth 432.95% 116.44% 80.56% 1.41%
Pre-tax Return on Assets 33.44% 47.06% 62.06% 3.22%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 5.92% 7.55% 10.56% n.a
Return on Equity 303.07% 81.51% 56.39% n.a
Activity Ratios
Inventory Turnover 5.97 14.03 14.00 n.a
Accounts Payable Turnover 10.19 12.17 12.17 n.a
Payment Days 27 27 28 n.a
Total Asset Turnover 3.95 4.36 4.12 n.a
Debt Ratios
Debt to Net Worth 11.95 1.47 0.30 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $3,564 $19,274 $44,195 n.a
Interest Coverage 4.77 9.97 43.71 n.a
Additional Ratios
Assets to Sales 0.25 0.23 0.24 n.a
Current Debt/Total Assets 92% 60% 23% n.a
Acid Test 0.94 1.43 3.74 n.a
Sales/Net Worth 51.19 10.79 5.34 n.a
Dividend Payout 0.00 0.00 0.00 n.a