Cosmetic Herbal Sundries Business Plan

Gentle Touch Creations

Financial Plan

The following topics cover the financial plan for Gentle Touch Products. The tables show annual figures. Monthly numbers for the first year are in the appendix.

7.1 Break-even Analysis

The monthly break-even point is approximately $17,000.

Cosmetic herbal sundries business plan, financial plan chart image

Break-even Analysis


Monthly Revenue Break-even	$17,188

Assumptions:
Average Percent Variable Cost	50%
Estimated Monthly Fixed Cost	$8,594

7.2 Projected Profit and Loss

The following table and charts highlight the projected profit and loss for three years.

Pro Forma Profit and Loss
	Year 1	Year 2	Year 3
Sales	$282,000	$340,000	$420,000
Direct Cost of Sales	$141,000	$170,000	$200,000
Other Production Expenses	$0	$0	$0
Total Cost of Sales	$141,000	$170,000	$200,000

Gross Margin	$141,000	$170,000	$220,000
Gross Margin %	50.00%	50.00%	52.38%


Expenses
Payroll	$70,800	$76,000	$105,000
Sales and Marketing and Other Expenses	$4,260	$7,200	$8,500
Depreciation	$4,800	$4,800	$4,800
Leased Equipment	$0	$0	$0
Utilities	$4,800	$5,300	$6,000
Insurance	$650	$780	$900
Rent	$7,200	$7,800	$8,500
Payroll Taxes	$10,620	$11,400	$15,750
Other	$0	$0	$0

Total Operating Expenses	$103,130	$113,280	$149,450

Profit Before Interest and Taxes	$37,870	$56,720	$70,550
EBITDA	$42,670	$61,520	$75,350
Interest Expense	$5,158	$4,340	$3,050
Taxes Incurred	$9,814	$15,714	$20,250

Net Profit	$22,899	$36,666	$47,250
Net Profit/Sales	8.12%	10.78%	11.25%

7.3 Projected Cash Flow

The following table and chart highlights the projected cash flow for three years.

Pro Forma Cash Flow
	Year 1	Year 2	Year 3
Cash Received

Cash from Operations
Cash Sales	$70,500	$85,000	$105,000
Cash from Receivables	$161,300	$244,675	$300,759
Subtotal Cash from Operations	$231,800	$329,675	$405,759

Additional Cash Received
Sales Tax, VAT, HST/GST Received	$0	$0	$0
New Current Borrowing	$12,000	$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	$243,800	$329,675	$405,759

Expenditures	Year 1	Year 2	Year 3

Expenditures from Operations
Cash Spending	$70,800	$76,000	$105,000
Bill Payments	$173,564	$232,719	$263,829
Subtotal Spent on Operations	$244,364	$308,719	$368,829

Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out	$0	$0	$0
Principal Repayment of Current Borrowing	$3,000	$6,000	$3,000
Other Liabilities Principal Repayment	$0	$0	$0
Long-term Liabilities Principal Repayment	$8,400	$8,400	$8,400
Purchase Other Current Assets	$0	$0	$0
Purchase Long-term Assets	$0	$0	$0
Dividends	$0	$0	$0
Subtotal Cash Spent	$255,764	$323,119	$380,229

Net Cash Flow	($11,964)	$6,556	$25,530
Cash Balance	$21,436	$27,993	$53,522

7.4 Projected Balance Sheet

The following table highlights the projected balance sheet for three years.

Pro Forma Balance Sheet
	Year 1	Year 2	Year 3
Assets

Current Assets
Cash	$21,436	$27,993	$53,522
Accounts Receivable	$50,200	$60,525	$74,766
Inventory	$19,800	$23,872	$28,085
Other Current Assets	$5,000	$5,000	$5,000
Total Current Assets	$96,436	$117,390	$161,373

Long-term Assets
Long-term Assets	$15,000	$15,000	$15,000
Accumulated Depreciation	$4,800	$9,600	$14,400
Total Long-term Assets	$10,200	$5,400	$600
Total Assets	$106,636	$122,790	$161,973

Liabilities and Capital	Year 1	Year 2	Year 3

Current Liabilities
Accounts Payable	$24,738	$18,625	$21,959
Current Borrowing	$9,000	$3,000	$0
Other Current Liabilities	$0	$0	$0
Subtotal Current Liabilities	$33,738	$21,625	$21,959

Long-term Liabilities	$41,600	$33,200	$24,800
Total Liabilities	$75,338	$54,825	$46,759

Paid-in Capital	$50,000	$50,000	$50,000
Retained Earnings	($41,600)	($18,701)	$17,965
Earnings	$22,899	$36,666	$47,250
Total Capital	$31,299	$67,965	$115,215
Total Liabilities and Capital	$106,636	$122,790	$161,973

Net Worth	$31,299	$67,965	$115,215

7.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5122, Drug, Proprietaries, and Sundries, are shown for comparison.

Ratio Analysis
	Year 1	Year 2	Year 3	Industry Profile
Sales Growth	0.00%	20.57%	23.53%	16.90%

Percent of Total Assets
Accounts Receivable	47.08%	49.29%	46.16%	28.90%
Inventory	18.57%	19.44%	17.34%	31.30%
Other Current Assets	4.69%	4.07%	3.09%	28.80%
Total Current Assets	90.43%	95.60%	99.63%	89.00%
Long-term Assets	9.57%	4.40%	0.37%	11.00%
Total Assets	100.00%	100.00%	100.00%	100.00%

Current Liabilities	31.64%	17.61%	13.56%	49.00%
Long-term Liabilities	39.01%	27.04%	15.31%	12.60%
Total Liabilities	70.65%	44.65%	28.87%	61.60%
Net Worth	29.35%	55.35%	71.13%	38.40%

Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	50.00%	50.00%	52.38%	25.20%
Selling, General & Administrative Expenses	41.73%	39.09%	41.11%	15.50%
Advertising Expenses	0.85%	0.88%	0.95%	1.00%
Profit Before Interest and Taxes	13.43%	16.68%	16.80%	1.80%

Main Ratios
Current	2.86	5.43	7.35	1.67
Quick	2.27	4.32	6.07	0.86
Total Debt to Total Assets	70.65%	44.65%	28.87%	61.60%
Pre-tax Return on Net Worth	104.52%	77.07%	58.59%	5.70%
Pre-tax Return on Assets	30.68%	42.66%	41.67%	14.90%

Additional Ratios	Year 1	Year 2	Year 3
Net Profit Margin	8.12%	10.78%	11.25%	n.a
Return on Equity	73.16%	53.95%	41.01%	n.a

Activity Ratios
Accounts Receivable Turnover	4.21	4.21	4.21	n.a
Collection Days	56	79	78	n.a
Inventory Turnover	10.57	7.79	7.70	n.a
Accounts Payable Turnover	8.02	12.17	12.17	n.a
Payment Days	27	35	28	n.a
Total Asset Turnover	2.64	2.77	2.59	n.a

Debt Ratios
Debt to Net Worth	2.41	0.81	0.41	n.a
Current Liab. to Liab.	0.45	0.39	0.47	n.a

Liquidity Ratios
Net Working Capital	$62,699	$95,765	$139,415	n.a
Interest Coverage	7.34	13.07	23.13	n.a

Additional Ratios
Assets to Sales	0.38	0.36	0.39	n.a
Current Debt/Total Assets	32%	18%	14%	n.a
Acid Test	0.78	1.53	2.67	n.a
Sales/Net Worth	9.01	5.00	3.65	n.a
Dividend Payout	0.00	0.00	0.00	n.a