De Kliek Style Studio

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Women's Clothing Boutique Business Plan

Financial Plan

De Kliek looks to bring in annual sales of $600,000 with an operating profit margin of 20%. Gross margins are at 51%, which is 6 percentage points higher than the retail industry average but in line with retail boutique averages. Overall, De Kliek projects to reinvest net profits of 5% into the company for service enhancements and growth initiatives.

First-year cash flows are positive due to the cash-based business of De Kliek. De Kliek remains very liquid with no Current Liabilities forecasted for the year ending June 30, 2005. Startup costs are estimated at $132,700 with almost half of these costs going to startup inventory. See the Start-up Table, above, for details.

8.1 Important Assumptions

Payroll burden is calculated at 12.65% made up of 7.65% social security, 2% unemployment, and 3% worker's compensation. Payables are assumed to reach levels equal to one month's operating expenses. Long-term interest rates have been based on current SBA loan rates.

General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 7.96% 10.26% 7.96% 10.26% 7.96%
Long-term Interest Rate 8.00% 8.00% 8.00% 8.00% 8.00%
Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0

8.2 Break-even Analysis

Cost of goods for the break-even are based on line sheets from the vendors that De Kliek plans to carry. In addition, De Kliek plans to maintain an average 60% retail markup. De Kliek plans to maintain sales revenues well above the break-even level noted below.

Break-even Analysis
Monthly Revenue Break-even $34,501
Assumptions:
Average Percent Variable Cost 40%
Estimated Monthly Fixed Cost $20,740

8.3 Projected Profit and Loss

The projected Profit and Loss for five years is detailed in the table and charts following. Some assumptions and inclusions to be noted are included in the Appendix.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $513,503 $599,403 $609,402 $620,315 $630,937
Direct Cost of Sales $204,820 $237,520 $239,896 $245,911 $249,600
Other Costs of Goods $0 $0 $0 $0 $0
Total Cost of Sales $204,820 $237,520 $239,896 $245,911 $249,600
Gross Margin $308,683 $361,883 $369,507 $374,404 $381,337
Gross Margin % 60.11% 60.37% 60.63% 60.36% 60.44%
Expenses
Payroll $131,000 $122,000 $137,500 $139,500 $146,000
Advertising $4,800 $4,800 $4,800 $4,800 $4,800
Depreciation $4,889 $4,889 $4,889 $4,889 $4,889
Amortization - Startup Costs $5,500 $5,500 $5,500 $5,500 $5,500
Bank Service Charges $480 $480 $480 $480 $480
Dues & Subscriptions $600 $600 $600 $600 $600
Education & Training $1,200 $1,500 $2,000 $2,000 $2,000
Insurance - Workman's Comp $3,372 $3,500 $3,600 $3,800 $4,000
Insurance - property & liability $6,204 $6,200 $6,300 $6,500 $6,500
Interest Expense - LT Loan $4,716 $4,716 $4,716 $4,716 $4,716
License & Permits $110 $0 $0 $0 $0
Maintenance - Office $2,400 $2,400 $2,400 $2,400 $2,400
Marketing and PR $9,600 $10,000 $10,000 $10,000 $10,000
Miscellaneous $3,600 $3,600 $3,600 $3,600 $3,600
Payroll - Charges $797 $800 $800 $800 $800
Postage & Delivery $600 $600 $600 $600 $600
Printing & reproduction $1,200 $1,200 $1,200 $1,200 $1,200
Prof Fees - Accounting $1,500 $1,500 $1,500 $1,500 $1,500
Prof Fees - Legal $1,000 $500 $500 $500 $500
Rent $36,000 $36,000 $36,000 $40,000 $40,000
Repairs $600 $600 $600 $600 $600
Security $348 $350 $350 $350 $350
Supplies - Office & Store $4,200 $4,200 $4,200 $4,200 $4,200
Travel & Entertainment $8,500 $10,000 $10,000 $10,000 $10,000
Telephone / Internet Access $1,440 $1,440 $1,440 $1,440 $1,440
Utilities $2,100 $2,100 $2,100 $2,100 $2,100
Payroll Taxes $720 $10,515 $10,890 $11,490 $12,015
Employee Benefits $9,000 $9,100 $9,100 $10,100 $10,100
Other $2,400 $2,400 $2,400 $2,400 $2,400
Total Operating Expenses $248,876 $251,490 $268,065 $276,065 $283,290
Profit Before Interest and Taxes $59,806 $110,393 $101,442 $98,339 $98,047
EBITDA $64,696 $115,282 $106,331 $103,228 $102,936
Interest Expense $6,753 $5,963 $5,138 $4,314 $3,489
Taxes Incurred $15,916 $31,329 $28,891 $28,208 $28,367
Net Profit $37,137 $73,101 $67,412 $65,818 $66,191
Net Profit/Sales 7.23% 12.20% 11.06% 10.61% 10.49%

8.4 Projected Cash Flow

The projected Cash Flow for five years is detailed in the table and chart following. In addition, it should be noted that De Kliek will establish relationships with vendors and/or representatives to determine the following to maintain cash flow:

  • Average price points – this will help ensure that a good mix of prices are maintained.

  • Delivery time frame & reliability – this will be crucial to ensure maximization of profits during the key shopping time frames. For Italian designers who may live up to the Italian notoriety for being late in deliveries, De Kliek will request the earliest possible delivery from them and also ensure they will be open to discounts if deliveries are late.

  • Shipping and transportation policies.

  • Market demand and turn rates – typically the vendor should know their end customer and be able to share that information so it aligns with my target market as well as helps me determine how much is appropriate to buy.

  • Payment terms and agreements –The goal is to be at Net 30 but I expect vendors to understand that De Kliek is a new boutique and will work with De Kliek to get the store at Net 30 terms with them within one season.
Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $513,503 $599,403 $609,402 $620,315 $630,937
Subtotal Cash from Operations $513,503 $599,403 $609,402 $620,315 $630,937
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0
Subtotal Cash Received $513,503 $599,403 $609,402 $620,315 $630,937
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $131,000 $122,000 $137,500 $139,500 $146,000
Bill Payments $275,075 $404,006 $400,156 $409,729 $414,040
Subtotal Spent on Operations $406,075 $526,006 $537,656 $549,229 $560,040
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $10,308 $10,308 $10,308 $10,308 $10,308
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $1,000 $1,000 $1,500 $1,500 $1,000
Subtotal Cash Spent $417,383 $537,314 $549,464 $561,037 $571,348
Net Cash Flow $96,120 $62,089 $59,938 $59,277 $59,589
Cash Balance $103,620 $165,709 $225,647 $284,924 $344,513

8.5 Projected Balance Sheet

All financials will be updated monthly to reflect past performance and future assumptions. Future assumptions will be based on our inventory plans from Retail Merchandising Service Automation (RMSA), economic cycle activity, regional retail indicators, apparel trends, and future cash flow. De Kliek works with both an Accountant and CPA whom both have personal and professional experience in retail operations. We expect solid growth in net worth beyond the first fiscal year of operation.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $103,620 $165,709 $225,647 $284,924 $344,513
Inventory $24,003 $27,835 $28,113 $28,616 $29,106
Other Current Assets $0 $0 $0 $0 $0
Total Current Assets $127,622 $193,544 $253,760 $313,541 $373,620
Long-term Assets
Long-term Assets $24,599 $24,599 $24,599 $24,599 $24,599
Accumulated Depreciation $4,889 $9,778 $14,667 $19,556 $24,445
Total Long-term Assets $19,710 $14,821 $9,932 $5,043 $154
Total Assets $147,332 $208,364 $263,692 $318,583 $373,773
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $33,904 $33,143 $32,867 $33,749 $34,056
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $33,904 $33,143 $32,867 $33,749 $34,056
Long-term Liabilities $79,692 $69,384 $59,076 $48,768 $38,460
Total Liabilities $113,596 $102,527 $91,943 $82,517 $72,516
Paid-in Capital $42,707 $42,707 $42,707 $42,707 $42,707
Retained Earnings ($46,108) ($9,971) $61,630 $127,542 $192,360
Earnings $37,137 $73,101 $67,412 $65,818 $66,191
Total Capital $33,736 $105,837 $171,749 $236,067 $301,257
Total Liabilities and Capital $147,332 $208,364 $263,692 $318,583 $373,773
Net Worth $33,736 $105,837 $171,749 $236,067 $301,257

8.6 Business Ratios

Standard business ratios are included in the following table. The ratios show a plan for balanced, healthy growth. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5621, Women's Clothing Stores, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 16.73% 1.67% 1.79% 1.71% 2.95%
Percent of Total Assets
Inventory 16.29% 13.36% 10.66% 8.98% 7.79% 55.38%
Other Current Assets 0.00% 0.00% 0.00% 0.00% 0.00% 25.29%
Total Current Assets 86.62% 92.89% 96.23% 98.42% 99.96% 88.70%
Long-term Assets 13.38% 7.11% 3.77% 1.58% 0.04% 11.30%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 23.01% 15.91% 12.46% 10.59% 9.11% 24.77%
Long-term Liabilities 54.09% 33.30% 22.40% 15.31% 10.29% 5.35%
Total Liabilities 77.10% 49.21% 34.87% 25.90% 19.40% 30.12%
Net Worth 22.90% 50.79% 65.13% 74.10% 80.60% 69.88%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 60.11% 60.37% 60.63% 60.36% 60.44% 41.89%
Selling, General & Administrative Expenses 40.82% 41.05% 41.07% 41.51% 41.52% 21.02%
Advertising Expenses 0.00% 0.00% 0.00% 0.00% 0.00% 3.78%
Profit Before Interest and Taxes 11.65% 18.42% 16.65% 15.85% 15.54% 3.15%
Main Ratios
Current 3.76 5.84 7.72 9.29 10.97 3.37
Quick 3.06 5.00 6.87 8.44 10.12 0.87
Total Debt to Total Assets 77.10% 49.21% 34.87% 25.90% 19.40% 40.19%
Pre-tax Return on Net Worth 157.26% 98.67% 56.07% 39.83% 31.39% 7.14%
Pre-tax Return on Assets 36.01% 50.12% 36.52% 29.51% 25.30% 11.93%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin 7.23% 12.20% 11.06% 10.61% 10.49% n.a
Return on Equity 110.08% 69.07% 39.25% 27.88% 21.97% n.a
Activity Ratios
Inventory Turnover 7.93 9.16 8.58 8.67 8.65 400.00%
Accounts Payable Turnover 9.11 12.17 12.17 12.17 12.17 n.a
Payment Days 27 30 30 30 30 n.a
Total Asset Turnover 3.49 2.88 2.31 1.95 1.69 n.a
Debt Ratios
Debt to Net Worth 3.37 0.97 0.54 0.35 0.24 100.00%
Current Liab. to Liab. 0.30 0.32 0.36 0.41 0.47 n.a
Liquidity Ratios
Net Working Capital $93,718 $160,400 $220,893 $279,792 $339,564 n.a
Interest Coverage 8.86 18.51 19.74 22.80 28.10 n.a
Additional Ratios
Assets to Sales 0.29 0.35 0.43 0.51 0.59 n.a
Current Debt/Total Assets 23% 16% 12% 11% 9% n.a
Acid Test 3.06 5.00 6.87 8.44 10.12 n.a
Sales/Net Worth 15.22 5.66 3.55 2.63 2.09 n.a
Dividend Payout 0.03 0.01 0.02 0.02 0.02 n.a