NALB Creative Center
Financial Plan
- The growth of NALB will be moderate and the cash balance will always be positive.
- Being a retail environment we will not be selling on credit. We will accept cash, checks, Visa and MasterCard.
- Marketing and advertising will remain at or below 5% of sales.
- We will finance growth mainly through cash flow. We recognize that this means we will have to grow slowly.
- It should be noted that the owners of NALB Creative Center do not intend to take any profits out of the business until the long-term debt has been satisfied. Whatever profits remain after the debt payments will be used to finance growth, mainly through the acquisition of additional inventory.
8.1 Start-up Funding
NALB’s start-up funds are summarized in the following table:
- $210,000 SBA loan
- $20,000 short-term/credit card
- $45,000 Owner investment
The additional capital is needed to fund salaries, inventory lags and other costs during the first months of the business year.
Start-up Funding | |
Start-up Expenses to Fund | $27,950 |
Start-up Assets to Fund | $216,000 |
Total Funding Required | $243,950 |
Assets | |
Non-cash Assets from Start-up | $196,000 |
Cash Requirements from Start-up | $20,000 |
Additional Cash Raised | $11,050 |
Cash Balance on Starting Date | $31,050 |
Total Assets | $227,050 |
Liabilities and Capital | |
Liabilities | |
Current Borrowing | $0 |
Long-term Liabilities | $210,000 |
Accounts Payable (Outstanding Bills) | $0 |
Other Current Liabilities (interest-free) | $0 |
Total Liabilities | $210,000 |
Capital | |
Planned Investment | |
Owner | $45,000 |
Investor | $0 |
Additional Investment Requirement | $0 |
Total Planned Investment | $45,000 |
Loss at Start-up (Start-up Expenses) | ($27,950) |
Total Capital | $17,050 |
Total Capital and Liabilities | $227,050 |
Total Funding | $255,000 |
8.2 Important Assumptions
The financial plan depends on important assumptions, most of which are shown in the following table. The key underlying assumptions are:
- We do not sell anything on credit. We accept cash, checks, debit cards, Visa, MasterCard.
- A slow-growth economy/customer base, without major recession.
- Monthly sales are the largest indicator for this business. There are some seasonal variations, with the months October through January being the highest sales months.
- We assume access to capital and financing sufficient to maintain our financial plan as shown in the tables.
8.3 Break-even Analysis
Our break-even analysis is summarized by the following chart and table.

Break-even Analysis | |
Monthly Revenue Break-even | $21,000 |
Assumptions: | |
Average Percent Variable Cost | 50% |
Estimated Monthly Fixed Cost | $10,500 |
8.4 Projected Profit and Loss
We predict that during the second year of operation, our high level of customer service and strong assortment will allow us to generate approximately 5% profit. This will be above the normal two to three year period required for a start-up retailer. Our sales projections are conservative. Should sales increase as we anticipate, the profit-to-sales ratio could be as high as 10% by the end of year three.
The following chart and table will indicate projected profit and loss.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $316,800 | $349,525 | $419,630 |
Direct Cost of Sales | $158,400 | $174,763 | $209,815 |
Other Costs of Sales | $0 | $0 | $0 |
Total Cost of Sales | $158,400 | $174,763 | $209,815 |
Gross Margin | $158,400 | $174,763 | $209,815 |
Gross Margin % | 50.00% | 50.00% | 50.00% |
Expenses | |||
Payroll | $66,000 | $68,000 | $71,400 |
Marketing/Promotion | $2,400 | $2,520 | $2,646 |
Depreciation | $0 | $0 | $0 |
Rent | $42,000 | $12,600 | $7,056 |
Utilities | $12,000 | $6,720 | $7,056 |
Insurance | $3,600 | $3,780 | $3,969 |
Payroll Taxes | $0 | $0 | $0 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $126,000 | $93,620 | $92,127 |
Profit Before Interest and Taxes | $32,400 | $81,143 | $117,688 |
EBITDA | $32,400 | $81,143 | $117,688 |
Interest Expense | $11,747 | $10,238 | $8,663 |
Taxes Incurred | $6,196 | $21,272 | $32,708 |
Net Profit | $14,457 | $49,634 | $76,318 |
Net Profit/Sales | 4.56% | 14.20% | 18.19% |
8.5 Projected Cash Flow
Our projected cash flow is outlined in the following chart and table.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $316,800 | $349,525 | $419,630 |
Subtotal Cash from Operations | $316,800 | $349,525 | $419,630 |
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 | $316,800 | $349,525 | $419,630 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $66,000 | $68,000 | $71,400 |
Bill Payments | $217,354 | $244,145 | $296,130 |
Subtotal Spent on Operations | $283,354 | $312,145 | $367,530 |
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 | $26,250 | $26,250 | $26,250 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $0 | $0 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $309,604 | $338,395 | $393,780 |
Net Cash Flow | $7,196 | $11,130 | $25,850 |
Cash Balance | $38,246 | $49,375 | $75,225 |
8.6 Projected Balance Sheet
The table shows the annual balance sheet results, with a conservative projected increase in net worth. Detailed monthly projections are in the appendix.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $38,246 | $49,375 | $75,225 |
Inventory | $130,000 | $143,429 | $172,197 |
Other Current Assets | $26,000 | $26,000 | $26,000 |
Total Current Assets | $194,246 | $218,804 | $273,422 |
Long-term Assets | |||
Long-term Assets | $40,000 | $40,000 | $40,000 |
Accumulated Depreciation | $0 | $0 | $0 |
Total Long-term Assets | $40,000 | $40,000 | $40,000 |
Total Assets | $234,246 | $258,804 | $313,422 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $18,988 | $20,163 | $24,713 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $18,988 | $20,163 | $24,713 |
Long-term Liabilities | $183,750 | $157,500 | $131,250 |
Total Liabilities | $202,738 | $177,663 | $155,963 |
Paid-in Capital | $45,000 | $45,000 | $45,000 |
Retained Earnings | ($27,950) | ($13,493) | $36,141 |
Earnings | $14,457 | $49,634 | $76,318 |
Total Capital | $31,507 | $81,141 | $157,459 |
Total Liabilities and Capital | $234,246 | $258,804 | $313,422 |
Net Worth | $31,507 | $81,141 | $157,459 |
8.7 Business Ratios
Business ratios for the years of this plan are shown below. The industry profile is from 2003, and based on the Standard Industrial Classification (SIC) code 5092.9901 for the Arts and crafts equipment and supplies industry.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 10.33% | 20.06% | 2.44% |
Percent of Total Assets | ||||
Inventory | 55.50% | 55.42% | 54.94% | 28.77% |
Other Current Assets | 11.10% | 10.05% | 8.30% | 26.58% |
Total Current Assets | 82.92% | 84.54% | 87.24% | 87.58% |
Long-term Assets | 17.08% | 15.46% | 12.76% | 12.42% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 8.11% | 7.79% | 7.89% | 41.17% |
Long-term Liabilities | 78.44% | 60.86% | 41.88% | 9.71% |
Total Liabilities | 86.55% | 68.65% | 49.76% | 50.88% |
Net Worth | 13.45% | 31.35% | 50.24% | 49.12% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 50.00% | 50.00% | 50.00% | 30.58% |
Selling, General & Administrative Expenses | 45.44% | 35.80% | 31.81% | 16.83% |
Advertising Expenses | 0.00% | 0.00% | 0.00% | 1.21% |
Profit Before Interest and Taxes | 10.23% | 23.22% | 28.05% | 1.02% |
Main Ratios | ||||
Current | 10.23 | 10.85 | 11.06 | 1.84 |
Quick | 3.38 | 3.74 | 4.10 | 1.00 |
Total Debt to Total Assets | 86.55% | 68.65% | 49.76% | 55.33% |
Pre-tax Return on Net Worth | 65.55% | 87.39% | 69.24% | 2.27% |
Pre-tax Return on Assets | 8.82% | 27.40% | 34.79% | 5.08% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 4.56% | 14.20% | 18.19% | n.a |
Return on Equity | 45.89% | 61.17% | 48.47% | n.a |
Activity Ratios | ||||
Inventory Turnover | 1.20 | 1.28 | 1.33 | n.a |
Accounts Payable Turnover | 12.45 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 29 | 27 | n.a |
Total Asset Turnover | 1.35 | 1.35 | 1.34 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 6.43 | 2.19 | 0.99 | n.a |
Current Liab. to Liab. | 0.09 | 0.11 | 0.16 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $175,257 | $198,641 | $248,709 | n.a |
Interest Coverage | 2.76 | 7.93 | 13.59 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.74 | 0.74 | 0.75 | n.a |
Current Debt/Total Assets | 8% | 8% | 8% | n.a |
Acid Test | 3.38 | 3.74 | 4.10 | n.a |
Sales/Net Worth | 10.05 | 4.31 | 2.67 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |