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Fantastic Florals

Executive Summary

Fantastic Florals, Inc. (FFI) imports exclusively handmade flowers by artisans from Indonesia. The firm’s main office is in Anytown, Oregon, and has a customs house broker in Seattle, Washington to deal with related matters.

FFI quality products are unique and exclusive, and its target consumers are women with upper-middle to upper-end incomes. FFI’s competitive edge is that the products are 100% handmade, unlike competitor’s products. By this fact, the firm hopes to attract people that value the artistry of producing silk flowers. Since FFI products are mostly silk flowers and silk hair accessories, it considers itself to be in the retail gift market, although some consumers purchase the product for themselves.

For the starting year, the company plans to attract manufacturer reps and retailers to distribute the products by attending the Silk trade show in Chicago, Illinois. This trade show is where suppliers of silk flowers and other silk products and buyers meet and arrange deals to sell the product. FFI projected sales are approximately $1.1 million by the end of the first year of operation. Also during this year, FFI plans to open an exclusive gift shop for our product in Anytown at the Third Street Public Market, leasing for five years.

For the following year, the company plans to expand to direct mail catalog sales by being in an established catalog, with a similar target market. FFI projects sales of $1.5 million in Year 2. During the third year, FFI plans to do both selling through suppliers, catalogs, and the exclusive gift store in Anytown, projecting sales to be nearly $2 million.

The FFI family will expand in Year 3 by adding 10 different kinds of flowers and flower arrangements. Maintaining an average gross margin of 25 to 30 percent is very realistic. The projected rate of annual growth in sales is 25 percent.

Artificial flowers import business plan, executive summary chart image

1.1 Objectives

  1. Achieve Year 1 sales of $1.1 million.
  2. Open gift shop in Anytown at Third Street Public Market with five-year lease.
  3. For Year 2, expand into direct mail catalogs.
  4. Maintain gross margin of 25 percent.
  5. Establish annual growth rate of 25 percent.
  6. Expand product family by adding 10 different kinds of flowers and flower arrangements in Year 3.

1.2 Mission

FFI’s mission is to become a recognized importer of artisan quality silk gift items in the United States. The company guarantees 100 percent customer satisfaction and values friendly service.

FFI’s purpose is to increase customer appreciation of handmade silk flowers and other silk products and to provide customers with beautiful unique artistic decorations.

1.3 Keys to Success

Keys to success for Fantastic Florals Inc. are:

  1. Product quality.
  2. Customer service.
  3. Access to manufacturers and distribution channels.
  4. Controlling fixed and variable costs during first two years.
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Company Summary

Fantastic Florals, Inc. imports silk flowers and other silk accessories products from artisans in Indonesia and distributes the products to customers in the United States. The customers are retail stores and wholesalers who want imported silk flowers and accessories products, targeting women in middle-upper to upper-end income as the end user of the products.

2.1 Company Ownership

Fantastic Florals, Inc. is a privately held Anytown corporation. Suzy Rosemadder, FFI’s founder, is the majority owner. Several members of the board of directors also hold minority stock positions.

2.2 Start-up Summary

Start-up costs are approximated at $75,000, which primarily consists of product costs and expenses associated with establishing a marketing program and opening up FFI’s first distribution center.

Artificial flowers import business plan, company summary chart image

Start-up
Requirements
Start-up Expenses
Legal $1,000
Insurance $600
Rent $1,300
Other $200
Total Start-up Expenses $3,100
Start-up Assets
Cash Required $70,000
Start-up Inventory $0
Other Current Assets $0
Long-term Assets $0
Total Assets $70,000
Total Requirements $73,100

2.3 Company Locations and Facilities

FFI’s headquarters are located in Anytown at the founder’s home, 1234 Main Street, Anytown, OR 97440. It will also have a 600-square foot retail store at the Third Street Public Market, which will serve as both an outlet and test market.

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Products

FFI imports silk flowers and other silk accessories. These products provide consumers with a wide variety of product lines and allows for individual customization of orders.

3.1 Product Description

Fantastic Florals, Inc. has a variety of silk flowers and products from which to choose. During the first two years, the product line will include:

  • Tulips and roses.
  • Two kinds of flower arrangements.
  • Silk scarf and silk hair accessories.
  • Seasonal bouquets.

3.2 Competitive Comparison

Fantastic Florals, Inc. products contain these features that distinguish them from those produced by competitors:

  • FFI products are 100 percent handmade by Indonesian artisans and are then imported into the United States, which will be emphasized in all marketing efforts.
  • The quality of the silk flowers is obvious, even to the untrained eye. There is no use of plastic stems, which makes FFI products look more realistic.
  • FFI silk hair accessories are unique, and no similar product is available in the domestic market. These products will be protected by owning a patent. The product features beautiful embroidery on its edge, which will cost much more if it were to be produced in the United States.

3.3 Sales Literature

Copies of FFI products, more specifically bouquets and other arrangements are included. Upon production of advertisements and brochures, these will be added.

3.4 Sourcing

FFI imports products from artisans in Indonesia and then hires brokers in Seattle to take care of the legal requirements and paperwork. Currently, there are no significant obstacles in importing the products into the United States. According to the U.S. Customs Office in Seattle, there are no quotas for artificial products imported from Indonesia. FFI will benefit from the duty-free treatment under the new GSP rules.

3.5 Technology

Some FFI products are protected by patents, although the majority of products and services are not dependent on patentable inventions nor process technology.

3.6 Future Products

Fantastic Florals, Inc. plans to introduce ten new kinds of flowers and silk products every year for the first four years, with aggressive advertising at the beginning of each year that introduces these new flowers.

After establishing a firm reputation, FFI plans to import products other that silk products, but all will still be related to flowers. These will be produced by Indonesian artisans in various cities in the original region, all managed by the same artist. The products will include silk jewelry boxes, mirrors, and china, all with hand-painted flowers.

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Market Analysis Summary

Currently, the market for permanent floral products is rapidly expanding. According to 1993 statistics, the value of permanent floral products for the 1992 fiscal year was over $2.2 billion, and it still continues to grow.

The gift industry is also growing, as households headed by 45- to 54-year-olds are the biggest gift purchasers.

4.1 Market Segmentation

Since Fantastic Florals, Inc. only deals with a few, select products, segmentation is minimal. Two segments currently exist:

  1. Gift purchasers: mostly women over 30 with a relatively large amount of discretionary income.
  2. Floral collectors: same target as above, but with higher standards of quality.
Artificial flowers import business plan, market analysis summary chart image

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Gift Purchasers 6% 275,000 291,500 308,990 327,529 347,181 6.00%
Floral Collectors 4% 250,000 260,000 270,400 281,216 292,465 4.00%
Other 3% 175,000 180,250 185,658 191,228 196,965 3.00%
Total 4.56% 700,000 731,750 765,048 799,973 836,611 4.56%

4.2 Industry Analysis

There are two industries for Fantastic Florals, Inc.: the gift market industry and the silk flower and accessories industry.

In 1991, the average American household gave 5.8 percent of its total spending to gifts, a 0.3 percent increase from 1988. Households headed by 45- to 54-year-olds are the biggest gift-givers. These consumers spend an average of $1,450 on gifts, which is 62 percent more than the average household. In addition, married couples without children are the most generous gift-givers. These households spend 48 percent more than average on gifts. Households with incomes of over $65,000 spent 135 percent more than average on gifts, while they also account for 58 percent of the glassware gift market and 62 percent of the plant and flower gift market. By the year 2000, it is estimated that households headed by 35- to 54-year-olds will account for 63 percent of the gift market.

In the silk flowers and accessories industry, flowers alone accumulated sales over $1.95 billion in 1992. This category still continues to grow.

Considering the information and analysis of both industries, FFI believes that its products have the opportunity to be successful in the market. The growing gift industry and silk flower and accessories industry imply that there is a growing demand for these products. Because there is no similar product currently available in the U.S. market, FFI has a huge opportunity in the silk accessory industry.

4.2.1 Competition and Buying Patterns

According to the information from Silk ’94, the wholesale buyers of silk flowers and accessories are:

  • 53 percent – Floral Wholesalers.
  • 19 percent – Craft Chain Stores, Floral Chain Stores, Gift Chain Stores, Variety Chain Stores, Fabric Centers.
  • 19 percent – Manufacturers/Assemblers.
  • 9 percent – Home Centers, Membership Clubs, Nursery and Garden Centers, Catalog/Mail Order, etc.

4.2.2 Main Competitors

Fantastic Florals, Inc. current competitors in the surrounding area are:

  • Flower markets.
  • Floral wholesalers.
  • Craft stores.
  • Gift shops.

4.2.3 Industry Participants

There are currently no direct competitors in the silk hair accessories market, and the silk flowers industry is very unconcentrated. Few wholesalers distribute directly to the consuming public, and the majority of retail stores only offer a minimal selection with varying quality.

Both industries, however, are predicted to develop further, while the gift industry also continues to grow. As the markets evolve, the key issue will be relations with suppliers. As there are few suppliers of silk flowers and accessories, competition is likely to increase substantially.

4.2.4 Distribution Patterns

Distribution channels are currently relatively simple. There is one artist in Indonesia who provides all products for FFI. The products are shipped directly to FFI facilities, which are then sold to consumers. There are no significant obstacles to importing these products, and there are no import quotas.

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Strategy and Implementation Summary

FFI focuses on providing high-quality products to consumers with outstanding service. Customization of orders and specialization of services will create a competitive advantage.

FFI is developing the organization by beginning with few employees to reduce costs. All current employees are very motivated, resulting in a positive and strong company culture. This culture will carry over to all new trainees, which is a prime objective for the expansion of FFI.

The first year of service will be the most important, as FFI plans to establish strong relations with both suppliers and buyers. These relationships will help FFI to grow and evolve in this industry.

5.1 Marketing Strategy

  • FFI is focusing on silk flowers and accessories, targeting women with upper-end income as the end customers, and targeting sales reps that distribute to exclusive gift retail stores and mail-order catalog companies.
  • FFI plans to be an exhibitor at Silk ’95, having already collected all the necessary information at Silk ’94. This trade show is the largest international silk flower and accessories exhibition attended by multiple buyers including, but not limited to, catalog/mail-order, floral wholesalers, chain stores, craft stores and wholesalers, visual display companies, etc. This will be a good opportunity to start and get exposure to FFI’s product. FFI plans to attract the right sales rep and mail-order company for its products through this trade show, which is realistic since Silk ’95 is the biggest and most reputable permanent and silk accessories trade show in the United States.
  • For the first year, FFI will both lease a space for a retail store at the Third Street Public Market and supply its products to buyers that FFI attains though Silk ’95.
  • FFI will also send some samples to “Blossom” catalog, who does mail orders for silk flowers and other silk accessories. The purpose of this is to reach more customers while doing only minimal research.

5.1.1 Promotion Strategy

The goal of FFI is to promote its products as fine collectibles, either for the collector or the gift-buyer. This will be done through in-store promotions, direct-mail advertisements, appearances in related catalogs, and publicity events.

5.1.2 Pricing Strategy

FFI sets standard prices for each product line. These prices are not expected to experience significant change over the next three years.

  • Tulips and Roses – $2.25
  • Arranged Flower 1 – $18.99
  • Arranged Flower 2 – $39.99
  • Silk Scarf – $15.99
  • Other hair accessories – $9.99
  • Other/Seasonal bouquet – $59.99

These prices exhibit quality products at reasonable costs to consumers.

5.2 Sales Strategy

Products will be distributed through the retail store in Anytown at Third Street Market or by pre-orders until FFI is able to further expand. Sales is one area that needs to be developed in order to better serve the consumer and meet objectives.

5.2.1 Sales Forecast

As indicated in the table, sales are forecasted to remain relatively constant throughout 1995, with growth predicted in both 1996 and 1997. Sales, however, will tend to fluctuate depending on the month and the season.

Artificial flowers import business plan, strategy and implementation summary chart image

Artificial flowers import business plan, strategy and implementation summary chart image

Sales Forecast
Year 1 Year 2 Year 3
Unit Sales
Tulips and Roses 28,300 35,165 45,714
Arranged Flowers 1 5,000 6,501 8,451
Arranged Flowers 2 5,000 6,500 8,450
Silk Scarf 10,800 13,910 18,083
Other hair accessories 12,000 15,600 20,280
Other/seasonal bouquet 8,200 10,660 13,858
Catalog Sales 0 20,000 30,000
Total Unit Sales 69,300 108,336 144,836
Unit Prices Year 1 Year 2 Year 3
Tulips and Roses $2.25 $2.25 $2.25
Arranged Flowers 1 $18.99 $18.99 $2.25
Arranged Flowers 2 $39.99 $39.99 $39.99
Silk Scarf $15.99 $15.99 $15.99
Other hair accessories $9.99 $9.99 $9.99
Other/seasonal bouquet $59.99 $59.99 $59.99
Catalog Sales $0.00 $2.25 $2.25
Sales
Tulips and Roses $63,675 $79,121 $102,857
Arranged Flowers 1 $94,950 $123,454 $19,015
Arranged Flowers 2 $199,950 $259,935 $337,916
Silk Scarf $172,692 $222,421 $289,147
Other hair accessories $119,880 $155,844 $202,597
Other/seasonal bouquet $491,918 $639,493 $831,341
Catalog Sales $0 $45,000 $67,500
Total Sales $1,143,065 $1,525,269 $1,850,373
Direct Unit Costs Year 1 Year 2 Year 3
Tulips and Roses $1.50 $1.50 $1.50
Arranged Flowers 1 $11.99 $11.99 $1.42
Arranged Flowers 2 $27.99 $27.99 $27.99
Silk Scarf $8.50 $8.50 $8.50
Other hair accessories $6.50 $6.50 $6.50
Other/seasonal bouquet $41.99 $41.99 $41.99
Catalog Sales $0.00 $1.50 $1.50
Direct Cost of Sales
Tulips and Roses $42,446 $52,742 $68,564
Arranged Flowers 1 $59,951 $77,949 $12,006
Arranged Flowers 2 $139,963 $181,952 $236,537
Silk Scarf $91,803 $118,239 $153,711
Other hair accessories $78,006 $101,408 $131,830
Other/seasonal bouquet $344,343 $447,645 $581,939
Catalog Sales $0 $29,997 $44,996
Subtotal Direct Cost of Sales $756,512 $1,009,932 $1,229,583

5.2.2 Sales Programs

  • Floral wholesalers: Develop awareness about the quality of FFI’s products in order to create demand within the first two months. For the next year, provide incentives and price-promotions to encourage wholesalers to purchase FFI products.
  • Retail Stores: Offer low-priced products in exchange for significant shelf space and access to consumers. By the end of the first year, have FFI products distributed in selected stores with minimal constraints on price and location.
  • Manufacturers/Assemblers: Provide FFI products at a reduced rate corresponding to volume of purchase.

5.2.3 Sales Goals

  • End of 1995 – Sales of $1.1 million.
  • July 1995 – Open exclusive gift shop at Third Street Market in Anytown.
  • 1996 – Sales of $1.5 million.
  • July 1996 – Expand distribution into catalog/direct mail.
  • 1997 – Sales of $2 million.

5.3 Milestones

Sample Milestones topic text.

The milestones table and chart show the specific detail about actual program activities that should be taking place during the year. Each one has its manager, starting date, ending date, and budget. During the year we will be keeping track of implementation against plan, with reports on the timely completion of these activities as planned.

Artificial flowers import business plan, strategy and implementation summary chart image

Milestones
Milestone Start Date End Date Budget Manager Department
Sample Milestones 1/4/2008 1/4/2008 $0 ABC Department
Finish Business Plan 5/7/2009 6/6/2009 $100 Dude Boss
Acquire Financing 5/17/2009 7/6/2009 $200 Dudette Legumers
Ah HA! Event 5/27/2009 6/1/2009 $60 Marianne Bosses
Oh NO! Event 6/26/2009 7/1/2009 $250 Marionette Bouc émissaire
Grande Opening 7/6/2009 7/11/2009 $500 Gloworm Nobs
Marketing Program Starts 6/6/2009 7/1/2009 $1,000 Glower Marketeers
Plan vs. Actual Review 11/1/2009 11/8/2009 $0 Galore Alles
First Break-even Month 3/5/2010 4/4/2010 $0 Bouys Salers
Hire Employees 2/1/2010 3/3/2010 $150 Gulls HRM
Upgrade Business Plan Pro 4/22/2010 4/24/2010 $100 Brass Bossies
Totals $2,360

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Management Summary

Fantastic Florals, Inc. will start with three qualified and experienced employees. An increase to six employees will likely be needed in three to five years. FFI will continue to have a customs-house broker in Seattle to take care of the import-related matters and sales representatives who are compensated based on commission.

6.1 Organizational Structure

Fantastic Florals, Inc. will be a Subchapter-S corporation. Legal matters and written agreements are being handled by an FFI consultant lawyer.

The company is organized into three main functional areas:

  • Sales and marketing.
  • Finance and administration.
  • Communication.

6.2 Management Team

  • Suzy Rosemadder: President and founder. Graduated from the University of North Carolina (major: management). Originally from Indonesia and has worked for a silk flower company there for five years. Familiar with the Indonesian government and key people there.
  • Angela Stalks: On Board of Directors. Previously manager of an exclusive gift shop in Dallas, Texas for ten years. MBA in Finance from University of Minnesota.
  • Steven Gardener: On Board of Directors. Will be in charge of marketing and sales. Graduated from Cornell University with B.S. degree in marketing and public relations.

6.3 Management Team Gaps

Each of the three employees is responsible for managing his or her area of expertise. The problems with having only one individual in charge of a department are as follows:

  1. Lack of understanding of other departments.
  2. Minimal management experience.
  3. Sole control over all operations.

6.4 Personnel Plan

The personnel plan indicates one employee for each department:

  • Production/Fulfillment.
  • Sales and Marketing.
  • Administration.

Beginning in 1996, there will be two employees in both Sales and Marketing and Administration.

Personnel Plan
Year 1 Year 2 Year 3
Production/Fulfillment $14,400 $16,000 $18,000
Sales and Marketing $14,400 $32,000 $54,000
Administration $14,400 $32,000 $36,000
Total People 3 3 4
Total Payroll $43,200 $80,000 $108,000

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Financial Plan

  • Fantastic Florals, Inc. projects the gross margin to be at approximately 25 percent. Sales projection for 1995 is at $1.1 million, increasing to $1.5 million in 1996 and $2 million in 1997.
  • Cash-flow analysis, balance sheet, business ratio, break-even analysis, and other financial details are shown in the appendix.

7.1 Important Assumptions

General assumptions in FFI’s financial plan indicate the assumption of a stable economy without any major recessions or booms in both the U.S. and Indonesian economies.

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

7.2 Start-up Funding

The owner will contribute $35,000 to finance the start-up requirements. FFI is also seeking a short-term loan of $35,000, to be repaid by July 1997 (two and a half years), for the remainder of necessary start-up funding.

Start-up Funding
Start-up Expenses to Fund $3,100
Start-up Assets to Fund $70,000
Total Funding Required $73,100
Assets
Non-cash Assets from Start-up $0
Cash Requirements from Start-up $70,000
Additional Cash Raised $0
Cash Balance on Starting Date $70,000
Total Assets $70,000
Liabilities and Capital
Liabilities
Current Borrowing $35,000
Long-term Liabilities $0
Accounts Payable (Outstanding Bills) $3,100
Other Current Liabilities (interest-free) $0
Total Liabilities $38,100
Capital
Planned Investment
Owner $35,000
Investor $0
Additional Investment Requirement $0
Total Planned Investment $35,000
Loss at Start-up (Start-up Expenses) ($3,100)
Total Capital $31,900
Total Capital and Liabilities $70,000
Total Funding $73,100

7.3 Key Financial Indicators

Key financial indicators for Fantastic Florals, Inc. include:

  • Constant gross margins.
  • Sales on credit.
  • Net worth.
  • Return on equity.
Artificial flowers import business plan, financial plan chart image

7.4 Break-even Analysis

FFI’s break-even analysis indicates that the firm has a strong balance of costs and sales.

Artificial flowers import business plan, financial plan chart image

Break-even Analysis
Monthly Units Break-even 2,284
Monthly Revenue Break-even $37,667
Assumptions:
Average Per-Unit Revenue $16.49
Average Per-Unit Variable Cost $10.92
Estimated Monthly Fixed Cost $12,738

7.5 Projected Profit and Loss

Fantastic Florals, Inc. projects profits for every month of 1995 and on into both 1996 and 1997, in addition to positive growth margins for the same time periods.

Artificial flowers import business plan, financial plan chart image

Artificial flowers import business plan, financial plan chart image

Artificial flowers import business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $1,143,065 $1,525,269 $1,850,373
Direct Cost of Sales $756,512 $1,009,932 $1,229,583
Shipping, etc. $40,235 $44,260 $48,688
Total Cost of Sales $796,747 $1,054,192 $1,278,271
Gross Margin $346,318 $471,077 $572,102
Gross Margin % 30.30% 30.88% 30.92%
Expenses
Payroll $43,200 $80,000 $108,000
Marketing/Promotion $84,455 $118,860 $162,302
Depreciation $0 $0 $0
Rent $15,600 $17,160 $18,876
Utilities $2,400 $2,640 $2,904
Insurance $7,200 $7,920 $8,712
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $152,855 $226,580 $300,794
Profit Before Interest and Taxes $193,463 $244,497 $271,308
EBITDA $193,463 $244,497 $271,308
Interest Expense $2,778 $1,500 $417
Taxes Incurred $57,206 $72,899 $81,267
Net Profit $133,480 $170,097 $189,624
Net Profit/Sales 11.68% 11.15% 10.25%

7.6 Projected Cash Flow

FFI’s cash balance is expected to increase each year, providing the necessary capital for expansion into different product lines and distribution channels.

Artificial flowers import business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $857,299 $1,143,951 $1,387,779
Cash from Receivables $232,800 $363,607 $447,529
Subtotal Cash from Operations $1,090,099 $1,507,558 $1,835,308
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 $1,090,099 $1,507,558 $1,835,308
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $43,200 $80,000 $108,000
Bill Payments $916,116 $1,339,812 $1,556,038
Subtotal Spent on Operations $959,316 $1,419,812 $1,664,038
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $13,332 $13,332 $8,336
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 $972,648 $1,433,144 $1,672,374
Net Cash Flow $117,451 $74,415 $162,934
Cash Balance $187,451 $261,865 $424,800

7.7 Projected Balance Sheet

The balance sheet indicates a positive and ever-increasing net worth for FFI.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $187,451 $261,865 $424,800
Accounts Receivable $52,967 $70,677 $85,741
Inventory $88,783 $118,524 $144,302
Other Current Assets $0 $0 $0
Total Current Assets $329,200 $451,066 $654,843
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $329,200 $451,066 $654,843
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $142,153 $107,253 $129,742
Current Borrowing $21,668 $8,336 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $163,821 $115,589 $129,742
Long-term Liabilities $0 $0 $0
Total Liabilities $163,821 $115,589 $129,742
Paid-in Capital $35,000 $35,000 $35,000
Retained Earnings ($3,100) $130,380 $300,477
Earnings $133,480 $170,097 $189,624
Total Capital $165,380 $335,477 $525,101
Total Liabilities and Capital $329,200 $451,066 $654,843
Net Worth $165,380 $335,477 $525,101

7.8 Business Ratios

The ratios illustrated in the table indicate strong, consistent growth. Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5193, Flowers and Florist’s Supplies, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 33.44% 21.31% 6.22%
Percent of Total Assets
Accounts Receivable 16.09% 15.67% 13.09% 25.17%
Inventory 26.97% 26.28% 22.04% 28.25%
Other Current Assets 0.00% 0.00% 0.00% 28.53%
Total Current Assets 100.00% 100.00% 100.00% 81.95%
Long-term Assets 0.00% 0.00% 0.00% 18.05%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 49.76% 25.63% 19.81% 45.52%
Long-term Liabilities 0.00% 0.00% 0.00% 13.34%
Total Liabilities 49.76% 25.63% 19.81% 58.86%
Net Worth 50.24% 74.37% 80.19% 41.14%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 30.30% 30.88% 30.92% 13.07%
Selling, General & Administrative Expenses 21.06% 21.93% 22.19% 5.31%
Advertising Expenses 1.05% 0.89% 0.76% 0.67%
Profit Before Interest and Taxes 16.92% 16.03% 14.66% 1.00%
Main Ratios
Current 2.01 3.90 5.05 1.53
Quick 1.47 2.88 3.94 0.82
Total Debt to Total Assets 49.76% 25.63% 19.81% 62.11%
Pre-tax Return on Net Worth 115.30% 72.43% 51.59% 3.32%
Pre-tax Return on Assets 57.92% 53.87% 41.37% 8.77%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 11.68% 11.15% 10.25% n.a
Return on Equity 80.71% 50.70% 36.11% n.a
Activity Ratios
Accounts Receivable Turnover 5.40 5.40 5.40 n.a
Collection Days 56 59 62 n.a
Inventory Turnover 12.00 9.74 9.36 n.a
Accounts Payable Turnover 7.42 12.17 12.17 n.a
Payment Days 27 35 27 n.a
Total Asset Turnover 3.47 3.38 2.83 n.a
Debt Ratios
Debt to Net Worth 0.99 0.34 0.25 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $165,380 $335,477 $525,101 n.a
Interest Coverage 69.64 162.98 650.93 n.a
Additional Ratios
Assets to Sales 0.29 0.30 0.35 n.a
Current Debt/Total Assets 50% 26% 20% n.a
Acid Test 1.14 2.27 3.27 n.a
Sales/Net Worth 6.91 4.55 3.52 n.a
Dividend Payout 0.00 0.00 0.00 n.a

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Appendix

Sales Forecast
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Unit Sales
Tulips and Roses 0% 2,000 3,000 2,500 1,500 3,000 2,500 3,000 2,200 1,600 1,700 1,800 3,500
Arranged Flowers 1 0% 350 500 500 400 350 500 350 500 350 300 300 600
Arranged Flowers 2 0% 350 500 500 400 350 500 350 500 350 300 300 600
Silk Scarf 0% 600 1,000 600 600 1,000 1,000 1,100 1,200 800 800 800 1,300
Other hair accessories 0% 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Other/seasonal bouquet 0% 500 800 700 500 800 850 600 850 500 500 600 1,000
Catalog Sales 0% 0 0 0 0 0 0 0 0 0 0 0 0
Total Unit Sales 4,800 6,800 5,800 4,400 6,500 6,350 6,400 6,250 4,600 4,600 4,800 8,000
Unit Prices Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Tulips and Roses $2.25 $2.25 $2.25 $2.25 $2.25 $2.25 $2.25 $2.25 $2.25 $2.25 $2.25 $2.25
Arranged Flowers 1 $18.99 $18.99 $18.99 $18.99 $18.99 $18.99 $18.99 $18.99 $18.99 $18.99 $18.99 $18.99
Arranged Flowers 2 $39.99 $39.99 $39.99 $39.99 $39.99 $39.99 $39.99 $39.99 $39.99 $39.99 $39.99 $39.99
Silk Scarf $15.99 $15.99 $15.99 $15.99 $15.99 $15.99 $15.99 $15.99 $15.99 $15.99 $15.99 $15.99
Other hair accessories $9.99 $9.99 $9.99 $9.99 $9.99 $9.99 $9.99 $9.99 $9.99 $9.99 $9.99 $9.99
Other/seasonal bouquet $59.99 $59.99 $59.99 $59.99 $59.99 $59.99 $59.99 $59.99 $59.99 $59.99 $59.99 $59.99
Catalog Sales $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sales
Tulips and Roses $4,500 $6,750 $5,625 $3,375 $6,750 $5,625 $6,750 $4,950 $3,600 $3,825 $4,050 $7,875
Arranged Flowers 1 $6,646 $9,495 $9,495 $7,596 $6,646 $9,495 $6,646 $9,495 $6,646 $5,697 $5,697 $11,394
Arranged Flowers 2 $13,997 $19,995 $19,995 $15,996 $13,997 $19,995 $13,997 $19,995 $13,997 $11,997 $11,997 $23,994
Silk Scarf $9,594 $15,990 $9,594 $9,594 $15,990 $15,990 $17,589 $19,188 $12,792 $12,792 $12,792 $20,787
Other hair accessories $9,990 $9,990 $9,990 $9,990 $9,990 $9,990 $9,990 $9,990 $9,990 $9,990 $9,990 $9,990
Other/seasonal bouquet $29,995 $47,992 $41,993 $29,995 $47,992 $50,992 $35,994 $50,992 $29,995 $29,995 $35,994 $59,990
Catalog Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Sales $74,722 $110,212 $96,692 $76,546 $101,365 $112,087 $90,966 $114,610 $77,020 $74,296 $80,520 $134,030
Direct Unit Costs Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Tulips and Roses 66.66% $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50
Arranged Flowers 1 63.14% $11.99 $11.99 $11.99 $11.99 $11.99 $11.99 $11.99 $11.99 $11.99 $11.99 $11.99 $11.99
Arranged Flowers 2 70.00% $27.99 $27.99 $27.99 $27.99 $27.99 $27.99 $27.99 $27.99 $27.99 $27.99 $27.99 $27.99
Silk Scarf 53.16% $8.50 $8.50 $8.50 $8.50 $8.50 $8.50 $8.50 $8.50 $8.50 $8.50 $8.50 $8.50
Other hair accessories 65.07% $6.50 $6.50 $6.50 $6.50 $6.50 $6.50 $6.50 $6.50 $6.50 $6.50 $6.50 $6.50
Other/seasonal bouquet 70.00% $41.99 $41.99 $41.99 $41.99 $41.99 $41.99 $41.99 $41.99 $41.99 $41.99 $41.99 $41.99
Catalog Sales 66.66% $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Direct Cost of Sales
Tulips and Roses $3,000 $4,500 $3,750 $2,250 $4,500 $3,750 $4,500 $3,300 $2,400 $2,550 $2,700 $5,249
Arranged Flowers 1 $4,197 $5,995 $5,995 $4,796 $4,197 $5,995 $4,197 $5,995 $4,197 $3,597 $3,597 $7,194
Arranged Flowers 2 $9,797 $13,996 $13,996 $11,197 $9,797 $13,996 $9,797 $13,996 $9,797 $8,398 $8,398 $16,796
Silk Scarf $5,100 $8,500 $5,100 $5,100 $8,500 $8,500 $9,350 $10,200 $6,800 $6,800 $6,800 $11,050
Other hair accessories $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500
Other/seasonal bouquet $20,997 $33,594 $29,395 $20,997 $33,594 $35,694 $25,196 $35,694 $20,997 $20,997 $25,196 $41,993
Catalog Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $49,591 $73,086 $64,737 $50,840 $67,089 $74,436 $59,540 $75,686 $50,691 $48,842 $53,191 $88,783
Personnel Plan
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Production/Fulfillment 0% $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200
Sales and Marketing 0% $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200
Administration 0% $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200
Total People 3 3 3 3 3 3 3 3 3 3 3 3
Total Payroll $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600

Pro Forma Profit and Loss
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales $74,722 $110,212 $96,692 $76,546 $101,365 $112,087 $90,966 $114,610 $77,020 $74,296 $80,520 $134,030
Direct Cost of Sales $49,591 $73,086 $64,737 $50,840 $67,089 $74,436 $59,540 $75,686 $50,691 $48,842 $53,191 $88,783
Shipping, etc. $3,000 $3,060 $3,121 $3,184 $3,247 $3,312 $3,378 $3,446 $3,515 $3,585 $3,657 $3,730
Total Cost of Sales $52,591 $76,146 $67,858 $54,024 $70,336 $77,748 $62,918 $79,132 $54,206 $52,427 $56,848 $92,513
Gross Margin $22,131 $34,066 $28,834 $22,522 $31,029 $34,339 $28,048 $35,478 $22,814 $21,869 $23,672 $41,517
Gross Margin % 29.62% 30.91% 29.82% 29.42% 30.61% 30.64% 30.83% 30.96% 29.62% 29.44% 29.40% 30.98%
Expenses
Payroll $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600
Marketing/Promotion $6,355 $7,788 $7,160 $6,257 $7,279 $7,676 $6,720 $7,815 $6,290 $6,180 $6,395 $8,540
Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Rent $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300
Utilities $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200
Insurance $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600
Payroll Taxes 18% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Operating Expenses $12,055 $13,488 $12,860 $11,957 $12,979 $13,376 $12,420 $13,515 $11,990 $11,880 $12,095 $14,240
Profit Before Interest and Taxes $10,076 $20,578 $15,974 $10,565 $18,050 $20,963 $15,628 $21,963 $10,824 $9,989 $11,577 $27,277
EBITDA $10,076 $20,578 $15,974 $10,565 $18,050 $20,963 $15,628 $21,963 $10,824 $9,989 $11,577 $27,277
Interest Expense $282 $273 $264 $255 $245 $236 $227 $218 $208 $199 $190 $181
Taxes Incurred $2,938 $6,091 $4,713 $3,093 $5,341 $6,218 $4,620 $6,523 $3,185 $2,937 $3,416 $8,129
Net Profit $6,856 $14,213 $10,997 $7,217 $12,463 $14,509 $10,781 $15,221 $7,431 $6,853 $7,971 $18,967
Net Profit/Sales 9.17% 12.90% 11.37% 9.43% 12.30% 12.94% 11.85% 13.28% 9.65% 9.22% 9.90% 14.15%

Pro Forma Cash Flow
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Cash Received
Cash from Operations
Cash Sales $56,042 $82,659 $72,519 $57,410 $76,024 $84,065 $68,225 $85,957 $57,765 $55,722 $60,390 $100,523
Cash from Receivables $0 $623 $18,976 $27,440 $24,005 $19,343 $25,431 $27,846 $22,939 $28,339 $19,232 $18,626
Subtotal Cash from Operations $56,042 $83,282 $91,495 $84,850 $100,029 $103,408 $93,655 $113,803 $80,704 $84,061 $79,622 $119,148
Additional Cash Received
Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $56,042 $83,282 $91,495 $84,850 $100,029 $103,408 $93,655 $113,803 $80,704 $84,061 $79,622 $119,148
Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Expenditures from Operations
Cash Spending $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600
Bill Payments $6,895 $113,925 $114,489 $73,015 $53,489 $101,543 $100,004 $63,364 $109,569 $41,694 $62,371 $75,757
Subtotal Spent on Operations $10,495 $117,525 $118,089 $76,615 $57,089 $105,143 $103,604 $66,964 $113,169 $45,294 $65,971 $79,357
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $1,111 $1,111 $1,111 $1,111 $1,111 $1,111 $1,111 $1,111 $1,111 $1,111 $1,111 $1,111
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $11,606 $118,636 $119,200 $77,726 $58,200 $106,254 $104,715 $68,075 $114,280 $46,405 $67,082 $80,468
Net Cash Flow $44,435 ($35,354) ($27,705) $7,124 $41,829 ($2,846) ($11,060) $45,727 ($33,577) $37,656 $12,541 $38,680
Cash Balance $114,435 $79,081 $51,376 $58,500 $100,328 $97,483 $86,423 $132,150 $98,574 $136,230 $148,770 $187,451

Pro Forma Balance Sheet
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Assets Starting Balances
Current Assets
Cash $70,000 $114,435 $79,081 $51,376 $58,500 $100,328 $97,483 $86,423 $132,150 $98,574 $136,230 $148,770 $187,451
Accounts Receivable $0 $18,681 $45,611 $50,808 $42,504 $43,840 $52,518 $49,829 $50,636 $46,952 $37,187 $38,085 $52,967
Inventory $0 $49,591 $73,086 $64,737 $50,840 $67,089 $74,436 $59,540 $75,686 $50,691 $48,842 $53,191 $88,783
Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Current Assets $70,000 $182,707 $197,778 $166,920 $151,844 $211,257 $224,437 $195,792 $258,472 $196,217 $222,259 $240,046 $329,200
Long-term Assets
Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Accumulated Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Assets $70,000 $182,707 $197,778 $166,920 $151,844 $211,257 $224,437 $195,792 $258,472 $196,217 $222,259 $240,046 $329,200
Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Current Liabilities
Accounts Payable $3,100 $110,062 $112,031 $71,287 $50,104 $98,165 $97,948 $59,633 $108,203 $39,628 $59,927 $70,855 $142,153
Current Borrowing $35,000 $33,889 $32,778 $31,667 $30,556 $29,445 $28,334 $27,223 $26,112 $25,001 $23,890 $22,779 $21,668
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $38,100 $143,951 $144,809 $102,954 $80,660 $127,610 $126,282 $86,856 $134,315 $64,629 $83,817 $93,634 $163,821
Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Liabilities $38,100 $143,951 $144,809 $102,954 $80,660 $127,610 $126,282 $86,856 $134,315 $64,629 $83,817 $93,634 $163,821
Paid-in Capital $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000
Retained Earnings ($3,100) ($3,100) ($3,100) ($3,100) ($3,100) ($3,100) ($3,100) ($3,100) ($3,100) ($3,100) ($3,100) ($3,100) ($3,100)
Earnings $0 $6,856 $21,069 $32,066 $39,283 $51,747 $66,255 $77,036 $92,257 $99,688 $106,541 $114,512 $133,480
Total Capital $31,900 $38,756 $52,969 $63,966 $71,183 $83,647 $98,155 $108,936 $124,157 $131,588 $138,441 $146,412 $165,380
Total Liabilities and Capital $70,000 $182,707 $197,778 $166,920 $151,844 $211,257 $224,437 $195,792 $258,472 $196,217 $222,259 $240,046 $329,200
Net Worth $31,900 $38,756 $52,969 $63,966 $71,183 $83,647 $98,155 $108,936 $124,157 $131,588 $138,441 $146,412 $165,380

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