Columbia Cleaners
Financial Plan
The following topics, the cash flow statement, profit and loss account, and balance sheet have been built using forecasted information which is as accurate and realistic as possible. Sales increase gradually over the 12 months showing the positive trend of sales. Columbia Cleaners is steadily gaining market share. Gross profit and net profit rise proportionately to sales revenue. The financial statements show that the business runs quite well and achieves expected results.
7.1 Start-up Funding
Startup expenses will be funded through a combination of owner’s equity capital and a commercial loan, as summarized in the table below.
The owner will invest $40,000 in the business. Additional capital for the business in the amount of $20,000 will be borrowed from a bank.
The lending plan has to be completed and submitted to the bank 6 months before starting the business. The loan will be needed two months in advance. Annual interest of 10% has to be paid on the long-term loans secured with fixed assets.
Start-up Funding | |
Start-up Expenses to Fund | $23,000 |
Start-up Assets to Fund | $27,000 |
Total Funding Required | $50,000 |
Assets | |
Non-cash Assets from Start-up | $17,000 |
Cash Requirements from Start-up | $10,000 |
Additional Cash Raised | $10,000 |
Cash Balance on Starting Date | $20,000 |
Total Assets | $37,000 |
Liabilities and Capital | |
Liabilities | |
Current Borrowing | $0 |
Long-term Liabilities | $20,000 |
Accounts Payable (Outstanding Bills) | $0 |
Other Current Liabilities (interest-free) | $0 |
Total Liabilities | $20,000 |
Capital | |
Planned Investment | |
J.C. Copperbeech | $40,000 |
Other investors | $0 |
Additional Investment Requirement | $0 |
Total Planned Investment | $40,000 |
Loss at Start-up (Start-up Expenses) | ($23,000) |
Total Capital | $17,000 |
Total Capital and Liabilities | $37,000 |
Total Funding | $60,000 |
7.2 Break-even Analysis
The monthly break-even point of the business is calculated below. As revenue becomes higher than break-even point, the business starts to harvest the profit. As forecasted, the total demand on dry cleaning and laundry service continues to rise in the following years; therefore, if the service satisfies its customers, increases new customers and retains customer loyalty, the profit will continue to go up.

Break-even Analysis | |
Monthly Revenue Break-even | $19,205 |
Assumptions: | |
Average Percent Variable Cost | 11% |
Estimated Monthly Fixed Cost | $17,097 |
7.3 Projected Cash Flow
Cash flow increases gradually over the year creating the positive net worth. The first several months of operation will be of critical importance to the survival of the business, and we will be paying special attention to our cash flows. We plan to purchase one more van in April 2005 to accommodate for the growing business volumes. Initially, we do not plan to sell on credit, with all of our transactions being cash- or credit card based. We anticipate generating a sufficient customer base that will allow us to maintain healthy cash balances starting from the middle of the first year of operations, as summarized in the table below.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $324,700 | $422,110 | $548,744 |
Subtotal Cash from Operations | $324,700 | $422,110 | $548,744 |
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 | $324,700 | $422,110 | $548,744 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $115,860 | $121,653 | $127,736 |
Bill Payments | $133,714 | $191,828 | $245,003 |
Subtotal Spent on Operations | $249,574 | $313,481 | $372,739 |
Additional Cash Spent | |||
Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
Principal Repayment of Current Borrowing | $0 | $0 | $0 |
Other Liabilities Principal Repayment | $0 | $0 | $0 |
Long-term Liabilities Principal Repayment | $334 | $0 | $0 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $10,000 | $0 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $259,908 | $313,481 | $372,739 |
Net Cash Flow | $64,792 | $108,629 | $176,005 |
Cash Balance | $84,792 | $193,421 | $369,426 |
7.4 Projected Profit and Loss
The table below outlines our projected profit and loss statements for the first three years of operation. In general, the business might meet some difficulties in the beginning months but after that the business grows as expected and produces a small profit at the end of the year. It is not necessary for the business to gain high profit in the first year. Nevertheless, we are expecting to make a small profit the first year. Our second and third year net profits are expected to grow quite a bit, as shown below.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $324,700 | $422,110 | $548,744 |
Direct Cost of Sales | $35,652 | $46,348 | $60,252 |
Other Costs of Sales | $0 | $0 | $0 |
Total Cost of Sales | $35,652 | $46,348 | $60,252 |
Gross Margin | $289,048 | $375,762 | $488,492 |
Gross Margin % | 89.02% | 89.02% | 89.02% |
Expenses | |||
Payroll | $115,860 | $121,653 | $127,736 |
Marketing/Promotion | $2,250 | $2,700 | $3,000 |
Depreciation | $4,500 | $4,000 | $5,000 |
Rent | $14,400 | $15,000 | $16,000 |
Utilities | $11,100 | $12,000 | $13,000 |
Telecommunications | $4,800 | $5,000 | $5,500 |
Insurance | $10,200 | $11,000 | $12,000 |
Payroll Taxes | $0 | $0 | $0 |
Maintenance | $1,200 | $1,500 | $2,000 |
Gas | $5,250 | $6,500 | $7,500 |
Equipment lease | $20,000 | $20,000 | $20,000 |
Office cleaning | $3,600 | $4,000 | $5,000 |
Other | $12,000 | $20,000 | $30,000 |
Total Operating Expenses | $205,160 | $223,353 | $246,736 |
Profit Before Interest and Taxes | $83,888 | $152,409 | $241,756 |
EBITDA | $88,388 | $156,409 | $246,756 |
Interest Expense | $1,967 | $1,967 | $1,967 |
Taxes Incurred | $24,576 | $45,133 | $71,937 |
Net Profit | $57,345 | $105,310 | $167,853 |
Net Profit/Sales | 17.66% | 24.95% | 30.59% |
7.5 Projected Balance Sheet
The table below shows the balance sheet annual figures for the first three years of operation. First year monthly figures are presented in the appendix.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $84,792 | $193,421 | $369,426 |
Inventory | $4,008 | $5,210 | $6,773 |
Other Current Assets | $0 | $0 | $0 |
Total Current Assets | $88,800 | $198,631 | $376,199 |
Long-term Assets | |||
Long-term Assets | $25,000 | $25,000 | $25,000 |
Accumulated Depreciation | $4,500 | $8,500 | $13,500 |
Total Long-term Assets | $20,500 | $16,500 | $11,500 |
Total Assets | $109,300 | $215,131 | $387,699 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $15,289 | $15,810 | $20,525 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $15,289 | $15,810 | $20,525 |
Long-term Liabilities | $19,666 | $19,666 | $19,666 |
Total Liabilities | $34,955 | $35,476 | $40,191 |
Paid-in Capital | $40,000 | $40,000 | $40,000 |
Retained Earnings | ($23,000) | $34,345 | $139,655 |
Earnings | $57,345 | $105,310 | $167,853 |
Total Capital | $74,345 | $179,655 | $347,508 |
Total Liabilities and Capital | $109,300 | $215,131 | $387,699 |
Net Worth | $74,345 | $179,655 | $347,508 |
7.6 Business Ratios
Business ratios for the years of this plan are shown below. Industry profile ratios for Commercial Drycleaning and Laundry Collection and Distribution Establishments, based on the Standard Industrial Classification code 7216.9903, are shown for comparison.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 30.00% | 30.00% | 4.37% |
Percent of Total Assets | ||||
Inventory | 3.67% | 2.42% | 1.75% | 4.37% |
Other Current Assets | 0.00% | 0.00% | 0.00% | 38.35% |
Total Current Assets | 81.24% | 92.33% | 97.03% | 55.47% |
Long-term Assets | 18.76% | 7.67% | 2.97% | 44.53% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 13.99% | 7.35% | 5.29% | 22.38% |
Long-term Liabilities | 17.99% | 9.14% | 5.07% | 24.56% |
Total Liabilities | 31.98% | 16.49% | 10.37% | 46.94% |
Net Worth | 68.02% | 83.51% | 89.63% | 53.06% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 89.02% | 89.02% | 89.02% | 100.00% |
Selling, General & Administrative Expenses | 71.36% | 64.07% | 58.43% | 77.90% |
Advertising Expenses | 0.00% | 0.00% | 0.00% | 2.06% |
Profit Before Interest and Taxes | 25.84% | 36.11% | 44.06% | 2.41% |
Main Ratios | ||||
Current | 5.81 | 12.56 | 18.33 | 1.70 |
Quick | 5.55 | 12.23 | 18.00 | 1.28 |
Total Debt to Total Assets | 31.98% | 16.49% | 10.37% | 61.40% |
Pre-tax Return on Net Worth | 110.19% | 83.74% | 69.00% | 4.39% |
Pre-tax Return on Assets | 74.95% | 69.93% | 61.85% | 11.38% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 17.66% | 24.95% | 30.59% | n.a |
Return on Equity | 77.13% | 58.62% | 48.30% | n.a |
Activity Ratios | ||||
Inventory Turnover | 11.85 | 10.06 | 10.06 | n.a |
Accounts Payable Turnover | 9.75 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 30 | 27 | n.a |
Total Asset Turnover | 2.97 | 1.96 | 1.42 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.47 | 0.20 | 0.12 | n.a |
Current Liab. to Liab. | 0.44 | 0.45 | 0.51 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $73,511 | $182,821 | $355,674 | n.a |
Interest Coverage | 42.66 | 77.50 | 122.93 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.34 | 0.51 | 0.71 | n.a |
Current Debt/Total Assets | 14% | 7% | 5% | n.a |
Acid Test | 5.55 | 12.23 | 18.00 | n.a |
Sales/Net Worth | 4.37 | 2.35 | 1.58 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |