Candlelight Cichlid Breeders
Financial Plan
The following topics outline the financial plan for Candlelight Cichlid Breeders.
7.1 Important Assumptions
The following table shows the general assumptions.
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 10.00% | 10.00% | 10.00% |
| Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
| Tax Rate | 25.42% | 25.00% | 25.42% |
| Other | 0 | 0 | 0 |
7.2 Key Financial Indicators
The following chart illustrates the key financial indicators.
7.3 Break-even Analysis
Our break-even analysis is a calculation of costs required to keep the business running. Payroll, mortgage payments, utilities, marketing, Internet costs, accounting expenses, and expenses involved with aquarium water conditioning factor into our break-even analysis. We estimate a total monthly fixed costs as shown below.
| Break-even Analysis | |
| Monthly Units Break-even | 1,110 |
| Monthly Revenue Break-even | $5,705 |
| Assumptions: | |
| Average Per-Unit Revenue | $5.14 |
| Average Per-Unit Variable Cost | $0.50 |
| Estimated Monthly Fixed Cost | $5,150 |
7.4 Projected Profit and Loss
We expect a high degree of profitability from this venture do to high margins and inventory turnover inherent to the industry. Profit in the first year (2004) will be lower than projected potential due to the immaturity of two-thirds of the breeding stock and low name recognition within the industry. By September, 2005 all of the breeding stock will have matured and 100% of the projected profit potential will be realized.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $95,600 | $219,600 | $253,500 |
| Direct Cost of Sales | $9,300 | $19,900 | $23,125 |
| Production Payroll | $18,000 | $18,000 | $42,000 |
| Other | $0 | $0 | $0 |
| Total Cost of Sales | $27,300 | $37,900 | $65,125 |
| Gross Margin | $68,300 | $181,700 | $188,375 |
| Gross Margin % | 71.44% | 82.74% | 74.31% |
| Operating Expenses | |||
| Sales and Marketing Expenses | |||
| Sales and Marketing Payroll | $0 | $0 | $0 |
| Advertising/Promotion | $1,440 | $2,880 | $4,320 |
| Travel | $1,200 | $1,800 | $2,400 |
| Miscellaneous | $1,800 | $1,800 | $1,800 |
| Total Sales and Marketing Expenses | $4,440 | $6,480 | $8,520 |
| Sales and Marketing % | 4.64% | 2.95% | 3.36% |
| General and Administrative Expenses | |||
| General and Administrative Payroll | $36,000 | $48,000 | $60,000 |
| Sales and Marketing and Other Expenses | $0 | $0 | $0 |
| Depreciation | $12,000 | $12,000 | $12,000 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $1,260 | $1,300 | $1,400 |
| Rent | $0 | $0 | $0 |
| Payroll Taxes | $8,100 | $9,900 | $15,300 |
| Other General and Administrative Expenses | $0 | $0 | $0 |
| Total General and Administrative Expenses | $57,360 | $71,200 | $88,700 |
| General and Administrative % | 60.00% | 32.42% | 34.99% |
| Other Expenses: | |||
| Other Payroll | $0 | $0 | $0 |
| Consultants | $0 | $0 | $0 |
| Contract/Consultants | $0 | $0 | $0 |
| Total Other Expenses | $0 | $0 | $0 |
| Other % | 0.00% | 0.00% | 0.00% |
| Total Operating Expenses | $61,800 | $77,680 | $97,220 |
| Profit Before Interest and Taxes | $6,500 | $104,020 | $91,155 |
| EBITDA | $18,500 | $116,020 | $103,155 |
| Interest Expense | $3,873 | $3,230 | $2,559 |
| Taxes Incurred | $412 | $25,198 | $22,518 |
| Net Profit | $2,215 | $75,593 | $66,078 |
| Net Profit/Sales | 2.32% | 34.42% | 26.07% |
7.5 Projected Cash Flow
As our breeding stock mature and our reputation becomes known the business will experience increased cash flows. We may expand at this time with the construction of another building adjacent to the original structure.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $57,360 | $131,760 | $152,100 |
| Cash from Receivables | $29,351 | $76,310 | $98,248 |
| Subtotal Cash from Operations | $86,711 | $208,070 | $250,348 |
| 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 | $86,711 | $208,070 | $250,348 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $54,000 | $66,000 | $102,000 |
| Bill Payments | $24,437 | $65,049 | $73,300 |
| Subtotal Spent on Operations | $78,437 | $131,049 | $175,300 |
| 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 | $6,708 | $6,708 | $6,708 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| Subtotal Cash Spent | $85,145 | $137,757 | $182,008 |
| Net Cash Flow | $1,566 | $70,313 | $68,340 |
| Cash Balance | $41,566 | $111,878 | $180,218 |
7.6 Projected Balance Sheet
The following table shows the projected balance sheet for Candlelight Cichlid Breeders.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $41,566 | $111,878 | $180,218 |
| Accounts Receivable | $8,889 | $20,419 | $23,572 |
| Inventory | $1,183 | $2,530 | $2,940 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $51,638 | $134,828 | $206,730 |
| Long-term Assets | |||
| Long-term Assets | $35,000 | $35,000 | $35,000 |
| Accumulated Depreciation | $12,000 | $24,000 | $36,000 |
| Total Long-term Assets | $23,000 | $11,000 | ($1,000) |
| Total Assets | $74,638 | $145,828 | $205,730 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $3,230 | $5,536 | $6,068 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $3,230 | $5,536 | $6,068 |
| Long-term Liabilities | $35,652 | $28,944 | $22,236 |
| Total Liabilities | $38,882 | $34,480 | $28,304 |
| Paid-in Capital | $59,590 | $59,590 | $59,590 |
| Retained Earnings | ($26,050) | ($23,835) | $51,758 |
| Earnings | $2,215 | $75,593 | $66,078 |
| Total Capital | $35,755 | $111,348 | $177,426 |
| Total Liabilities and Capital | $74,638 | $145,828 | $205,730 |
| Net Worth | $35,755 | $111,348 | $177,426 |
7.7 Business Ratios
The following table outlines some of the more important ratios from the Breeding of Pets industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the NAICS code, 112990.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 129.71% | 15.44% | 3.52% |
| Percent of Total Assets | ||||
| Accounts Receivable | 11.91% | 14.00% | 11.46% | 8.54% |
| Inventory | 1.58% | 1.74% | 1.43% | 11.36% |
| Other Current Assets | 0.00% | 0.00% | 0.00% | 30.17% |
| Total Current Assets | 69.18% | 92.46% | 100.49% | 50.07% |
| Long-term Assets | 30.82% | 7.54% | -0.49% | 49.93% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 4.33% | 3.80% | 2.95% | 24.29% |
| Long-term Liabilities | 47.77% | 19.85% | 10.81% | 29.26% |
| Total Liabilities | 52.09% | 23.64% | 13.76% | 53.55% |
| Net Worth | 47.91% | 76.36% | 86.24% | 46.45% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 71.44% | 82.74% | 74.31% | 59.45% |
| Selling, General & Administrative Expenses | 74.41% | 48.60% | 48.18% | 37.30% |
| Advertising Expenses | 1.51% | 0.11% | 0.14% | 0.42% |
| Profit Before Interest and Taxes | 6.80% | 47.37% | 35.96% | 2.80% |
| Main Ratios | ||||
| Current | 15.99 | 24.35 | 34.07 | 1.31 |
| Quick | 15.62 | 23.90 | 33.58 | 0.63 |
| Total Debt to Total Assets | 52.09% | 23.64% | 13.76% | 65.25% |
| Pre-tax Return on Net Worth | 7.35% | 90.52% | 49.93% | 3.14% |
| Pre-tax Return on Assets | 3.52% | 69.12% | 43.06% | 9.04% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 2.32% | 34.42% | 26.07% | n.a |
| Return on Equity | 6.20% | 67.89% | 37.24% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 4.30 | 4.30 | 4.30 | n.a |
| Collection Days | 56 | 61 | 79 | n.a |
| Inventory Turnover | 8.36 | 10.72 | 8.45 | n.a |
| Accounts Payable Turnover | 8.57 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 24 | 29 | n.a |
| Total Asset Turnover | 1.28 | 1.51 | 1.23 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 1.09 | 0.31 | 0.16 | n.a |
| Current Liab. to Liab. | 0.08 | 0.16 | 0.21 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $48,407 | $129,292 | $200,662 | n.a |
| Interest Coverage | 1.68 | 32.21 | 35.62 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.78 | 0.66 | 0.81 | n.a |
| Current Debt/Total Assets | 4% | 4% | 3% | n.a |
| Acid Test | 12.87 | 20.21 | 29.70 | n.a |
| Sales/Net Worth | 2.67 | 1.97 | 1.43 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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