Vette Kat Harbour Bed and Breakfast
Financial Plan
The following sections will detail important financial information.
8.1 Important Assumptions
The following table highlights some of the important financial assumptions for the Vette Kat Harbour Bed & Breakfast.
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 6.00% | 6.00% | 6.00% |
| Long-term Interest Rate | 6.00% | 6.00% | 6.00% |
| Tax Rate | 13.00% | 13.00% | 13.00% |
| Other | 0 | 0 | 0 |
8.2 Break-even Analysis
The Break-even Analysis indicates the monthly revenue we must exceed to break even. This will fluctuate as the business plan is recalculated in the first twelve months of usage of utilities and advertising costs.
| Break-even Analysis | |
| Monthly Revenue Break-even | $1,820 |
| Assumptions: | |
| Average Percent Variable Cost | 10% |
| Estimated Monthly Fixed Cost | $1,642 |
8.3 Projected Profit and Loss
The following table indicates projected, modest profits.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $94,219 | $103,184 | $113,043 |
| Direct Cost of Sales | $9,240 | $9,698 | $10,177 |
| Other | $10,320 | $12,320 | $14,320 |
| Total Cost of Sales | $19,560 | $22,018 | $24,497 |
| Gross Margin | $74,659 | $81,166 | $88,546 |
| Gross Margin % | 79.24% | 78.66% | 78.33% |
| Expenses | |||
| Payroll | $0 | $0 | $0 |
| Sales & Marketing & Other Expenses | $6,500 | $10,000 | $10,000 |
| Depreciation | $1,200 | $1,200 | $1,200 |
| Annual web and Assoc fees | $1,200 | $1,600 | $1,700 |
| Utilities | $7,200 | $7,600 | $7,800 |
| Payroll Tax | $0 | $0 | $0 |
| Insurance | $3,600 | $4,800 | $5,000 |
| Total Operating Expenses | $19,700 | $25,200 | $25,700 |
| Profit Before Interest and Taxes | $54,959 | $55,966 | $62,846 |
| EBITDA | $56,159 | $57,166 | $64,046 |
| Interest Expense | $4,639 | $4,225 | $3,793 |
| Taxes Incurred | $6,542 | $6,726 | $7,677 |
| Net Profit | $43,779 | $45,015 | $51,376 |
| Net Profit/Sales | 46.46% | 43.63% | 45.45% |
8.4 Projected Cash Flow
The following chart and table will indicate projected cash flow.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $94,219 | $103,184 | $113,043 |
| Subtotal Cash from Operations | $94,219 | $103,184 | $113,043 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $12,248 | $13,414 | $14,696 |
| 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 | $106,468 | $116,598 | $127,739 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $0 | $0 | $0 |
| Bill Payments | $45,254 | $56,845 | $60,357 |
| Subtotal Spent on Operations | $45,254 | $56,845 | $60,357 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $12,248 | $13,414 | $14,696 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $7,200 | $7,200 | $7,200 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| Subtotal Cash Spent | $64,703 | $77,459 | $82,253 |
| Net Cash Flow | $41,765 | $39,139 | $45,486 |
| Cash Balance | $65,765 | $104,904 | $150,390 |
8.5 Projected Balance Sheet
The following table will indicate the projected balance sheet. Bankers and CPA’s will notice that excessive funds are reported being raised, initially. This is a contingency and prudent safety fund. It may prove cost effective and intelligent to place that into the SBA PE bank’s savings fund or mutually accessible program yielding a good rate.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $65,765 | $104,904 | $150,390 |
| Inventory | $847 | $889 | $933 |
| Other Current Assets | $13,667 | $13,667 | $13,667 |
| Total Current Assets | $80,279 | $119,460 | $164,990 |
| Long-term Assets | |||
| Long-term Assets | $56,000 | $56,000 | $56,000 |
| Accumulated Depreciation | $1,200 | $2,400 | $3,600 |
| Total Long-term Assets | $54,800 | $53,600 | $52,400 |
| Total Assets | $135,079 | $173,060 | $217,390 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $2,333 | $2,499 | $2,653 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $2,333 | $2,499 | $2,653 |
| Long-term Liabilities | $74,010 | $66,810 | $59,610 |
| Total Liabilities | $76,343 | $69,309 | $62,263 |
| Paid-in Capital | $24,840 | $24,840 | $24,840 |
| Retained Earnings | ($9,883) | $33,896 | $78,911 |
| Earnings | $43,779 | $45,015 | $51,376 |
| Total Capital | $58,736 | $103,751 | $155,128 |
| Total Liabilities and Capital | $135,079 | $173,060 | $217,390 |
| Net Worth | $58,736 | $103,751 | $155,128 |
8.6 Business Ratios
The business ratios reflect both a cross-sectional analysis and time-series analysis of the company’s risk and profitability. The cross-sectional analysis consists of a comparison of our firm’s ratios and those of the hotel and motel industry, NAICS code 72110, averages. The reader will note that there are some significant differences in the ratios, especially in regards to the way our company is leveraged. This is due to the fact that industry averages also include very large hotel chains that usually have much higher capital costs and investments in long-term assets. Furthermore, the Vette Kat Harbour B & B has lower SG&A costs than other hotels and motels since B & Bs usually provide fewer services than larger competitors.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 9.52% | 9.55% | 7.24% |
| Percent of Total Assets | ||||
| Inventory | 0.63% | 0.51% | 0.43% | 1.35% |
| Other Current Assets | 10.12% | 7.90% | 6.29% | 24.20% |
| Total Current Assets | 59.43% | 69.03% | 75.90% | 29.12% |
| Long-term Assets | 40.57% | 30.97% | 24.10% | 70.88% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 1.73% | 1.44% | 1.22% | 16.94% |
| Long-term Liabilities | 54.79% | 38.61% | 27.42% | 26.60% |
| Total Liabilities | 56.52% | 40.05% | 28.64% | 43.54% |
| Net Worth | 43.48% | 59.95% | 71.36% | 56.46% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 79.24% | 78.66% | 78.33% | 100.00% |
| Selling, General & Administrative Expenses | 138.22% | 42.64% | 43.67% | 75.85% |
| Advertising Expenses | 5.03% | 1.22% | 1.09% | 2.17% |
| Profit Before Interest and Taxes | 58.33% | 54.24% | 55.59% | 0.35% |
| Main Ratios | ||||
| Current | 34.41 | 47.80 | 62.20 | 0.98 |
| Quick | 34.05 | 47.45 | 61.85 | 0.75 |
| Total Debt to Total Assets | 56.52% | 40.05% | 28.64% | 58.28% |
| Pre-tax Return on Net Worth | 85.67% | 49.87% | 38.07% | 0.29% |
| Pre-tax Return on Assets | 37.25% | 29.90% | 27.16% | 0.70% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 46.46% | 43.63% | 45.45% | n.a |
| Return on Equity | 74.54% | 43.39% | 33.12% | n.a |
| Activity Ratios | ||||
| Inventory Turnover | 9.94 | 11.17 | 11.17 | n.a |
| Accounts Payable Turnover | 20.40 | 22.81 | 22.81 | n.a |
| Payment Days | 14 | 15 | 16 | n.a |
| Total Asset Turnover | 0.70 | 0.60 | 0.52 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 1.30 | 0.67 | 0.40 | n.a |
| Current Liab. to Liab. | 0.03 | 0.04 | 0.04 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $77,946 | $116,961 | $162,338 | n.a |
| Interest Coverage | 11.85 | 13.25 | 16.57 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 1.43 | 1.68 | 1.92 | n.a |
| Current Debt/Total Assets | 2% | 1% | 1% | n.a |
| Acid Test | 34.05 | 47.45 | 61.85 | n.a |
| Sales/Net Worth | 1.60 | 0.99 | 0.73 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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