The Coffee Warehouse
Financial Plan
The Coffee Warehouse projects the gross margin to be at approximately 20-25 percent. Sales projections for FY2004 are at $2,229,652 increasing to $2,558,584 in FY2005 and $2,936,137 in FY2006. 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 for this plan are on the following table.
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 8.00% | 8.00% | 8.00% |
| Long-term Interest Rate | 8.00% | 8.00% | 8.00% |
| Tax Rate | 25.42% | 25.00% | 25.42% |
| Other | 0 | 0 | 0 |
7.2 Break-even Analysis
The following table and chart illustrate our break-even analysis. With our fixed costs estimate of approximately $15,000 per month, operating on average at a 25% profit margin, we will need to sell 67,666 units to break-even in a month. Fixed costs include our warehouse lease, vehicle leases, utilities, insurance, payroll, and an estimation of other running costs.
| Break-even Analysis | |
| Monthly Revenue Break-even | $75,055 |
| Assumptions: | |
| Average Percent Variable Cost | 79% |
| Estimated Monthly Fixed Cost | $15,993 |
7.3 Projected Profit and Loss
The following table and charts show the projected profit and loss. Monthly projections are included in the appendix.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $2,229,652 | $2,558,584 | $2,936,137 |
| Direct Cost of Sales | $1,754,550 | $2,012,837 | $2,309,230 |
| Hidden Row | $0 | $0 | $0 |
| Total Cost of Sales | $1,754,550 | $2,012,837 | $2,309,230 |
| Gross Margin | $475,102 | $545,747 | $626,907 |
| Gross Margin % | 21.31% | 21.33% | 21.35% |
| Expenses | |||
| Payroll | $93,757 | $102,000 | $110,500 |
| Other | $0 | $0 | $0 |
| Depreciation | $0 | $0 | $0 |
| Rent | $33,096 | $34,260 | $35,460 |
| Utilities and Phone | $7,200 | $7,500 | $7,800 |
| Insurance | $6,000 | $6,300 | $6,500 |
| Payroll Burden | $14,064 | $15,300 | $16,575 |
| Leased Equipment (Delivery Vehicles) | $12,000 | $12,600 | $13,200 |
| Leased Equipment (Warehouse) | $3,000 | $3,000 | $3,000 |
| Leased Equipment (Other) | $2,400 | $2,400 | $2,400 |
| Fuel (delivery) | $12,000 | $12,500 | $13,000 |
| Advertising / Promotion | $3,600 | $3,600 | $3,600 |
| Professional Services | $2,400 | $2,200 | $2,600 |
| Miscellaneous (office supplies, etc) | $2,400 | $2,700 | $3,000 |
| Total Operating Expenses | $191,917 | $204,360 | $217,635 |
| Profit Before Interest and Taxes | $283,186 | $341,387 | $409,272 |
| EBITDA | $283,186 | $341,387 | $409,272 |
| Interest Expense | $6,560 | $4,720 | $2,800 |
| Taxes Incurred | $69,354 | $84,167 | $103,312 |
| Other Income | |||
| Interest Income | $0 | $0 | $0 |
| Other Income Account Name | $0 | $0 | $0 |
| Total Other Income | $0 | $0 | $0 |
| Other Expense | |||
| Account Name | $0 | $0 | $0 |
| Other Expense Account Name | $0 | $0 | $0 |
| Total Other Expense | $0 | $0 | $0 |
| Net Other Income | $0 | $0 | $0 |
| Net Profit | $207,271 | $252,500 | $303,160 |
| Net Profit/Sales | 9.30% | 9.87% | 10.33% |
7.4 Projected Cash Flow
The following table shows cash flow for the three years, and the chart illustrates monthly cash flow in the first year. Monthly cash flow projections are included in the appendix.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $2,229,652 | $2,558,584 | $2,936,137 |
| Subtotal Cash from Operations | $2,229,652 | $2,558,584 | $2,936,137 |
| Additional Cash Received | |||
| Non Operating (Other) Income | $0 | $0 | $0 |
| 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 | $2,229,652 | $2,558,584 | $2,936,137 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $93,757 | $102,000 | $110,500 |
| Bill Payments | $1,826,094 | $2,457,050 | $2,556,178 |
| Subtotal Spent on Operations | $1,919,851 | $2,559,050 | $2,666,678 |
| Additional Cash Spent | |||
| Non Operating (Other) Expense | $0 | $0 | $0 |
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $24,000 | $24,000 | $24,000 |
| 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 | $1,943,851 | $2,583,050 | $2,690,678 |
| Net Cash Flow | $285,801 | ($24,466) | $245,459 |
| Cash Balance | $295,601 | $271,134 | $516,594 |
7.5 Projected Balance Sheet
The projected balance sheet is shown in the following table, with monthly projections in the appendix.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $295,601 | $271,134 | $516,594 |
| Inventory | $358,198 | $410,929 | $471,438 |
| Other Current Assets | $18,750 | $18,750 | $18,750 |
| Total Current Assets | $672,549 | $700,813 | $1,006,782 |
| Long-term Assets | |||
| Long-term Assets | $0 | $0 | $0 |
| Accumulated Depreciation | $0 | $0 | $0 |
| Total Long-term Assets | $0 | $0 | $0 |
| Total Assets | $672,549 | $700,813 | $1,006,782 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $385,728 | $185,492 | $212,300 |
| Current Borrowing | $71,000 | $47,000 | $23,000 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $456,728 | $232,492 | $235,300 |
| Long-term Liabilities | $0 | $0 | $0 |
| Total Liabilities | $456,728 | $232,492 | $235,300 |
| Paid-in Capital | $25,000 | $25,000 | $25,000 |
| Retained Earnings | ($16,450) | $190,821 | $443,321 |
| Earnings | $207,271 | $252,500 | $303,160 |
| Total Capital | $215,821 | $468,321 | $771,482 |
| Total Liabilities and Capital | $672,549 | $700,813 | $1,006,782 |
| Net Worth | $215,821 | $468,321 | $771,482 |
7.6 Business Ratios
The table shows projected business ratios.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 14.75% | 14.76% | 0.00% |
| Percent of Total Assets | ||||
| Inventory | 53.26% | 58.64% | 46.83% | 0.00% |
| Other Current Assets | 2.79% | 2.68% | 1.86% | 100.00% |
| Total Current Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Long-term Assets | 0.00% | 0.00% | 0.00% | 0.00% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 67.91% | 33.17% | 23.37% | 0.00% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 0.00% |
| Total Liabilities | 67.91% | 33.17% | 23.37% | 0.00% |
| Net Worth | 32.09% | 66.83% | 76.63% | 100.00% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 21.31% | 21.33% | 21.35% | 0.00% |
| Selling, General & Administrative Expenses | 8.61% | 8.17% | 7.51% | 0.00% |
| Advertising Expenses | 0.00% | 0.00% | 0.00% | 0.00% |
| Profit Before Interest and Taxes | 12.70% | 13.34% | 13.94% | 0.00% |
| Main Ratios | ||||
| Current | 1.47 | 3.01 | 4.28 | 0.00 |
| Quick | 0.69 | 1.25 | 2.28 | 0.00 |
| Total Debt to Total Assets | 67.91% | 33.17% | 23.37% | 0.00% |
| Pre-tax Return on Net Worth | 128.17% | 71.89% | 52.69% | 0.00% |
| Pre-tax Return on Assets | 41.13% | 48.04% | 40.37% | 0.00% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 9.30% | 9.87% | 10.33% | n.a |
| Return on Equity | 96.04% | 53.92% | 39.30% | n.a |
| Activity Ratios | ||||
| Inventory Turnover | 10.91 | 5.23 | 5.23 | n.a |
| Accounts Payable Turnover | 5.73 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 46 | 28 | n.a |
| Total Asset Turnover | 3.32 | 3.65 | 2.92 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 2.12 | 0.50 | 0.30 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $215,821 | $468,321 | $771,482 | n.a |
| Interest Coverage | 43.17 | 72.33 | 146.17 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.30 | 0.27 | 0.34 | n.a |
| Current Debt/Total Assets | 68% | 33% | 23% | n.a |
| Acid Test | 0.69 | 1.25 | 2.28 | n.a |
| Sales/Net Worth | 10.33 | 5.46 | 3.81 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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