The following tables illustrate our financial projections over the next three years. Please note that we expect to be operating at a loss for the first six months before advertising begins to take effect and draw in customers.
As retained earnings increase, a debt retirement fund will be established to encourage early repayment, thus relieving interest expense. Also, a 30-day payment period for purchases will be used to avoid incurring liabilities.
MillenniumMart is basing its assumptions on a stable growth market using average interest rates over the past ten years.
The following table and chart show our Break-even Analysis. Although our break-even point seems quite high, we are expecting to have higher than average fixed costs during the period of this plan due to customer "creation costs," R&D costs, higher rent in a premier spot, higher percentage of payroll costs to overall fixed costs with a small company, and the need to import and pay for the store facilities. We expect to have a more reasonable positive retained earnings point around year 5.
The following table explains our itemized costs and determines gross and net margin. Please note that these predictions are weighted toward having higher costs in comparison to revenues in case unexpected hidden costs arise. The charts give a visual representation of the data.
MillenniumMart will be receiving periodic influxes of cash in order to cover operating expenses during the first two years as it strives toward sustainable profitability. Almost all of this funding has been arranged through lending institutions and private investors already. We do not anticipate any cash flow problems during the next three years.
The following table shows the Projected Balance Sheet for MillenniumMart.
We are using the industry standard business ratios for independent convenience store chains as a comparison to our own. There are some significant differences between the two since we have a completely different storefront than our competitors. First of all our accounts receivable are very different as we expect to have higher sales using credit cards than other stores, due to the convenience of using credit cards and cash cards at our facility. There is generally a three day waiting period to receive funds from the credit card company. This is a short period of time compared to a normal collection day period of 30 days, but it is still something we need to factor for.
In addition, we expect higher percentages in inventory as we will be operating only one store initially and even many independent convenience store owners often have two or more facilities. Our long-term assets are low since we are only renting our facilities.