Vino Maestro Ltd.

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Wine Store Business Plan

Financial Plan

50%-70% of sales are projected as credit card sales, in-line with actual experience of retail liquor stores in Boston.

Credit card collection is typically short, and this plan assumes an one day collection time.

The payment days estimate ranges from 30 days to 28 days. Distributors terms are 30 days, although substantial discounts can be secured with earlier payments.

The long-term interest rate basis is the current SBA guideline of prime plus 2.25% for a seven year loan.

The short-term interest rate basis is the fed funds rate plus 2.5%

Distributors reward volume purchases with lower costs. The company plans to take advantage of distributors' volume discounts, and will pass along these savings to consumers in the form of sales and special promotions to stimulate loyalty and further growth. Gross margins will be maintained in the 30-33% range, which would put our business in-line with the competition in the Boston metro area.

6.1 Projected Balance Sheet

As the business grows, our investment in inventory increases. This reflects sales volume increases and the commensurate ability to secure favorable volume discount terms with our distributors.

The projected accounts receivable position is relatively low and steady due to the nature of the business, in which up to 50% of our sales are cash, and the balance are consumer credit card purchases. No other consumer credit terms are envisioned or necessary for the operation of this business.

Capital assets of $235K are comprised of a quoted $100-$130k for the build-out of the store (depreciating straight line over the 15 year term of the lease), $75k for start-up costs (amortized over five years), and $50k for the landlord's security deposit (about eight months rent).

Long-term liabilities are projected to decrease steadily, reflecting re-payment of the original seven year term loan required to finance the business.

It is important to note that part of the retained earnings may become a distribution of capital to the owners, while the balance would be reinvested in the business to replenish depreciated assets and to support further growth.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $242,668 $326,466 $486,356
Inventory $60,546 $86,495 $107,911
Other Current Assets $0 $0 $0
Total Current Assets $303,215 $412,961 $594,267
Long-term Assets
Long-term Assets $180,000 $180,000 $180,000
Accumulated Depreciation $18,480 $42,240 $76,890
Total Long-term Assets $161,520 $137,760 $103,110
Total Assets $464,735 $550,721 $697,377
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $73,228 $89,859 $110,218
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $73,228 $89,859 $110,218
Long-term Liabilities $205,716 $171,432 $137,148
Total Liabilities $278,944 $261,291 $247,366
Paid-in Capital $235,000 $235,000 $235,000
Retained Earnings ($75,000) ($49,209) $54,431
Earnings $25,791 $103,640 $160,580
Total Capital $185,791 $289,431 $450,011
Total Liabilities and Capital $464,735 $550,721 $697,377
Net Worth $185,791 $289,431 $450,011
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 9.00% 9.00% 9.00%
Long-term Interest Rate 11.00% 11.00% 11.00%
Tax Rate 25.42% 25.00% 25.42%
Other 0 0 0

6.2 Key Financial Indicators

Since this is a start-up operation, a steady increase in sales is forecast over three years, as consumer awareness and regular repeat business grows with a strong and consistent increase in the population of Southside Towers, from an initial 3,000 residents to about 17,000 residents upon completion. A solid business plan and the management skills and experience of the managing partners should be sufficient to orchestrate the necessary growth to make this a successful launch with steady increases in sales over the first three years.

Operating expenses are based on an assessment of operational needs for a store of this size. Observations of Boston retail wine shop staffing, direct experience at Liberty and Star City wine stores, and interviews with store owners and suppliers are the basis for these projections. Rent is based on negotiated lease agreement with the landlord. Other estimates are based on experience in operating a 4,000 square foot Boston storefront business, and on vendor quotes and estimates.

Collection days should remain fairly short, given the substantial cash revenues, and standard credit card collection periods.

6.3 Projected Profit and Loss

The following table presents the profit and loss figures for Vino Maestro.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $924,000 $1,320,000 $1,650,000
Direct Cost of Sales $577,943 $825,633 $1,030,059
Other $0 $0 $0
Total Cost of Sales $577,943 $825,633 $1,030,059
Gross Margin $346,057 $494,367 $619,941
Gross Margin % 37.45% 37.45% 37.57%
Expenses
Payroll $124,430 $125,270 $135,200
Sales and Marketing and Other Expenses $0 $0 $0
Depreciation $18,480 $23,760 $34,650
POS computer software lease $3,000 $3,500 $4,000
Rent $56,093 $77,000 $80,000
Utilities- HVAC and phone/data lines $6,000 $6,600 $7,260
Insurance $6,000 $6,600 $7,260
Vehicle Delivery Expenses $6,000 $12,000 $24,000
Maintenance/Repairs $6,000 $6,500 $7,000
Cleaning/Supplies $6,000 $6,500 $7,000
Rent $23,664 $23,664 $23,664
Leased Equipment $0 $0 $0
Advertising/Marketing $12,000 $24,000 $36,000
Payroll Taxes $19,909 $20,043 $21,632
Other $0 $0 $0
Total Operating Expenses $287,575 $335,437 $387,666
Profit Before Interest and Taxes $58,481 $158,929 $232,275
EBITDA $76,961 $182,689 $266,925
Interest Expense $24,357 $20,743 $16,972
Taxes Incurred $8,333 $34,547 $54,723
Net Profit $25,791 $103,640 $160,580
Net Profit/Sales 2.79% 7.85% 9.73%

6.4 Projected Cash Flow

We are positioning ourselves in the market as a medium-risk concern with steady cash flows. Accounts payable is paid at the end of each month while sales are in cash and short-term credit card collectibles. Cash balances will be used to reduce outstanding line of credit balances, or will be invested in a low-risk liquid money market fund to decrease the opportunity cost of cash held. Surplus cash balances during the critical first year of operations will function as protection against unforeseen changes in the timing of disbursements required to fund operations.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $924,000 $1,320,000 $1,650,000
Subtotal Cash from Operations $924,000 $1,320,000 $1,650,000
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 $924,000 $1,320,000 $1,650,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $124,430 $125,270 $135,200
Bill Payments $592,618 $1,076,648 $1,320,626
Subtotal Spent on Operations $717,048 $1,201,918 $1,455,826
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 $34,284 $34,284 $34,284
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $751,332 $1,236,202 $1,490,110
Net Cash Flow $172,668 $83,798 $159,890
Cash Balance $242,668 $326,466 $486,356

6.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5921, [insert code title here], are shown for comparison.
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 42.86% 25.00% 9.40%
Percent of Total Assets
Inventory 13.03% 15.71% 15.47% 42.10%
Other Current Assets 0.00% 0.00% 0.00% 32.30%
Total Current Assets 65.24% 74.99% 85.21% 76.10%
Long-term Assets 34.76% 25.01% 14.79% 23.90%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 15.76% 16.32% 15.80% 41.80%
Long-term Liabilities 44.27% 31.13% 19.67% 19.40%
Total Liabilities 60.02% 47.45% 35.47% 61.20%
Net Worth 39.98% 52.55% 64.53% 38.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 37.45% 37.45% 37.57% 23.10%
Selling, General & Administrative Expenses 34.68% 29.60% 27.79% 12.70%
Advertising Expenses 0.00% 0.00% 0.00% 0.50%
Profit Before Interest and Taxes 6.33% 12.04% 14.08% 1.10%
Main Ratios
Current 4.14 4.60 5.39 2.19
Quick 3.31 3.63 4.41 0.50
Total Debt to Total Assets 60.02% 47.45% 35.47% 61.20%
Pre-tax Return on Net Worth 18.37% 47.74% 47.84% 3.40%
Pre-tax Return on Assets 7.34% 25.09% 30.87% 8.90%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 2.79% 7.85% 9.73% n.a
Return on Equity 13.88% 35.81% 35.68% n.a
Activity Ratios
Inventory Turnover 8.62 11.23 10.60 n.a
Accounts Payable Turnover 9.09 12.17 12.17 n.a
Payment Days 27 27 27 n.a
Total Asset Turnover 1.99 2.40 2.37 n.a
Debt Ratios
Debt to Net Worth 1.50 0.90 0.55 n.a
Current Liab. to Liab. 0.26 0.34 0.45 n.a
Liquidity Ratios
Net Working Capital $229,987 $323,103 $484,049 n.a
Interest Coverage 2.40 7.66 13.69 n.a
Additional Ratios
Assets to Sales 0.50 0.42 0.42 n.a
Current Debt/Total Assets 16% 16% 16% n.a
Acid Test 3.31 3.63 4.41 n.a
Sales/Net Worth 4.97 4.56 3.67 n.a
Dividend Payout 0.00 0.00 0.00 n.a