Hands On! Children's Art Museum
Financial Plan
The basis for our financial planning has been looking forward with conservative estimates for revenue and expenses. We are committed to consistent growth of our cash balances through prudent management of our expenses. Our focus will be on remaining profitable year to year, while also building adequate cash reserves.
Important Assumptions
Personnel burden is relatively low at 15% based on the assumption that the only benefits included will be minimal vacation time based on the number of hours worked. Personnel burden also includes taxes.
We anticipate carrying one month’s worth of inventory in the Curiosity Shop. The majority of items in the shop are sold on a consignment basis, and therefore do not affect inventory turnover.
The estimate of 8% funding on credit refers to the delay between the commitment of funding and the actual receipt of funds. We anticipate the great majority of our revenues will be paid by cash or check.
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 6.50% | 6.50% | 6.50% |
| Long-term Interest Rate | 7.00% | 7.00% | 7.00% |
| Tax Rate | 0.00% | 0.00% | 0.00% |
| Other | 0 | 0 | 0 |
Break-even Analysis
The table and chart below show the level of funding, from all sources combined, we need on a monthly average, to cover our operating expenses.
| Break-even Analysis | |
| Monthly Revenue Break-even | $24,111 |
| Assumptions: | |
| Average Percent Variable Cost | 7% |
| Estimated Monthly Fixed Cost | $22,493 |
Projected Surplus or Deficit
Our projected annual surplus or deficit is shown on the following table. The detailed monthly projections are included in the appendix.
| Surplus and Deficit | |||
| Year 1 | Year 2 | Year 3 | |
| Funding | $287,643 | $318,966 | $351,605 |
| Direct Cost | $19,303 | $22,570 | $24,451 |
| Other | $0 | $0 | $0 |
| Total Direct Cost | $19,303 | $22,570 | $24,451 |
| Gross Surplus | $268,340 | $296,396 | $327,153 |
| Gross Surplus % | 93.29% | 92.92% | 93.05% |
| Expenses | |||
| Payroll | $170,400 | $182,100 | $191,929 |
| Sales and Marketing and Other Expenses | $54,325 | $56,000 | $56,700 |
| Depreciation | $2,004 | $2,004 | $2,004 |
| Leased Equipment | $600 | $600 | $600 |
| Utilities | $14,400 | $15,000 | $15,000 |
| Insurance | $2,625 | $3,500 | $3,500 |
| Payroll Taxes | $25,560 | $27,315 | $28,789 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $269,914 | $286,519 | $298,523 |
| Surplus Before Interest and Taxes | ($1,574) | $9,877 | $28,631 |
| EBITDA | $430 | $11,881 | $30,635 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $0 | $0 | $0 |
| Net Surplus | ($1,574) | $9,877 | $28,631 |
| Net Surplus/Funding | -0.55% | 3.10% | 8.14% |
Projected Cash Flow
Management of cash flow is critical to our success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month, and the other bar the monthly balance. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendix. Should our monthly cash flows fail to meet expectations, directors salaries will not be paid. If further action is required, we will utilize revolving credit facilities.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Funding | $264,632 | $293,449 | $323,476 |
| Cash from Receivables | $19,666 | $25,153 | $27,749 |
| Subtotal Cash from Operations | $284,297 | $318,602 | $351,225 |
| 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 | $284,297 | $318,602 | $351,225 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $170,400 | $182,100 | $191,929 |
| Bill Payments | $106,718 | $126,009 | $128,808 |
| Subtotal Spent on Operations | $277,118 | $308,109 | $320,737 |
| 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 | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| Subtotal Cash Spent | $277,118 | $308,109 | $320,737 |
| Net Cash Flow | $7,179 | $10,493 | $30,488 |
| Cash Balance | $32,179 | $42,672 | $73,160 |
Projected Balance Sheet
The following balance sheet shows our projected financial position during the next three years. The monthly estimates are included in the appendix.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $32,179 | $42,672 | $73,160 |
| Accounts Receivable | $3,346 | $3,710 | $4,090 |
| Inventory | $1,686 | $2,793 | $2,803 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $37,211 | $49,175 | $80,053 |
| Long-term Assets | |||
| Long-term Assets | $8,500 | $8,500 | $8,500 |
| Accumulated Depreciation | $2,004 | $4,008 | $6,012 |
| Total Long-term Assets | $6,496 | $4,492 | $2,488 |
| Total Assets | $43,707 | $53,667 | $82,541 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $10,281 | $10,364 | $10,607 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $10,281 | $10,364 | $10,607 |
| Long-term Liabilities | $0 | $0 | $0 |
| Total Liabilities | $10,281 | $10,364 | $10,607 |
| Paid-in Capital | $70,000 | $70,000 | $70,000 |
| Accumulated Surplus/Deficit | ($35,000) | ($36,574) | ($26,697) |
| Surplus/Deficit | ($1,574) | $9,877 | $28,631 |
| Total Capital | $33,426 | $43,303 | $71,934 |
| Total Liabilities and Capital | $43,707 | $53,667 | $82,541 |
| Net Worth | $33,426 | $43,303 | $71,934 |
Standard Ratios
Our projected business ratios for the three years of this plan are shown below, along with ratios for an industry profile, based on the Standard Industry Classification (SIC) Index, 8412, for Museums and Art Galleries.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Funding Growth | n.a. | 10.89% | 10.23% | 9.50% |
| Percent of Total Assets | ||||
| Accounts Receivable | 7.65% | 6.91% | 4.95% | 18.90% |
| Inventory | 3.86% | 5.20% | 3.40% | 1.00% |
| Other Current Assets | 0.00% | 0.00% | 0.00% | 36.40% |
| Total Current Assets | 85.14% | 91.63% | 96.99% | 56.30% |
| Long-term Assets | 14.86% | 8.37% | 3.01% | 43.70% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 23.52% | 19.31% | 12.85% | 32.50% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 28.50% |
| Total Liabilities | 23.52% | 19.31% | 12.85% | 61.00% |
| Net Worth | 76.48% | 80.69% | 87.15% | 39.00% |
| Percent of Funding | ||||
| Funding | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Surplus | 93.29% | 92.92% | 93.05% | 0.00% |
| Selling, General & Administrative Expenses | 93.84% | 89.83% | 84.90% | 82.00% |
| Advertising Expenses | 2.66% | 2.82% | 2.70% | 0.90% |
| Surplus Before Interest and Taxes | -0.55% | 3.10% | 8.14% | 1.70% |
| Main Ratios | ||||
| Current | 3.62 | 4.74 | 7.55 | 1.71 |
| Quick | 3.46 | 4.48 | 7.28 | 1.52 |
| Total Debt to Total Assets | 23.52% | 19.31% | 12.85% | 61.00% |
| Pre-tax Return on Net Worth | -4.71% | 22.81% | 39.80% | 1.10% |
| Pre-tax Return on Assets | -3.60% | 18.40% | 34.69% | 2.90% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Surplus Margin | -0.55% | 3.10% | 8.14% | n.a |
| Return on Equity | -4.71% | 22.81% | 39.80% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 6.88 | 6.88 | 6.88 | n.a |
| Collection Days | 57 | 50 | 51 | n.a |
| Inventory Turnover | 9.45 | 10.08 | 8.74 | n.a |
| Accounts Payable Turnover | 11.38 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 30 | 30 | n.a |
| Total Asset Turnover | 6.58 | 5.94 | 4.26 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.31 | 0.24 | 0.15 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $26,930 | $38,811 | $69,446 | n.a |
| Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
| Additional Ratios | ||||
| Assets to Funding | 0.15 | 0.17 | 0.23 | n.a |
| Current Debt/Total Assets | 24% | 19% | 13% | n.a |
| Acid Test | 3.13 | 4.12 | 6.90 | n.a |
| Funding/Net Worth | 8.61 | 7.37 | 4.89 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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