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Hunting & Fishing icon Fishing Supplies and Fly Shop Business Plan

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Kingfishers

Financial Plan

The $513,000 loan that the company expects to secure shortly will help cover the start-up expenses and provide operating cash.  The following sections show in detail that Kingfishers will be profitable from the beginning. Its healthy profits will be sufficient to pay back the loan and provide return to the owners with room to grow.

8.1 Start-up Funding

Our start up funding table shows a start up requirement of $577,000, which includes $556,800 of non-cash assets, $5,200 of expenses and $15,000 cash.  The owners will contribute $50,000 and $14,000, respectively, to the business. As shown in the table, Kingfishers only needs $513,000 in lending to get the business going. We will repay this loan over ten years at an 8% interest rate. We would like to defer initial repayments until April of the first year, when trout fishing picks up, in order to maintain a positive cash balance. We will make up these first three months of repayments with double payments for three months in the 3rd year. The major use of loan funds will be to buy the property of the former fly fishing business we plan to revive.

Start-up Funding
Start-up Expenses to Fund $5,200
Start-up Assets to Fund $571,800
Total Funding Required $577,000
Assets
Non-cash Assets from Start-up $556,800
Cash Requirements from Start-up $15,000
Additional Cash Raised $0
Cash Balance on Starting Date $15,000
Total Assets $571,800
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $513,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $513,000
Capital
Planned Investment
Owner-Ausable $50,000
Owner-Brassie $14,000
Additional Investment Requirement $0
Total Planned Investment $64,000
Loss at Start-up (Start-up Expenses) ($5,200)
Total Capital $58,800
Total Capital and Liabilities $571,800
Total Funding $577,000

8.2 Important Assumptions

The financial plan depends on important assumptions. The key underlying assumptions are:

  1. We assume a steady growth economy, without major recession.
  2. We assume that there wont be a catastrophic event such as 9-11, or that if such an event happens it won’t stop tourism.
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 30.00% 30.00% 30.00%
Other 0 0 0

8.3 Break-even Analysis

For our break-even analysis, we assume running costs which include our full payroll, loan principal repayment, and utilities, and an estimation of other running costs. Total direct costs for the first year average include inventory, payments to outside guides, cleaning and maintenance of the lodging, and credit card fees.

The table shows that we will surpass the break-even point in the second half of the first year. As the Fishing, Hunting and Tourism business is seasonal, we plan on making the majority of our revenues during the summer and fall months, which will carry us through the beginning of the next year until the next summer season starts.

Fishing supplies and fly shop business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even $16,291
Assumptions:
Average Percent Variable Cost 49%
Estimated Monthly Fixed Cost $8,236

8.4 Projected Profit and Loss

Our Pro Forma Profit and Loss statement was constructed from a conservative point-of-view, and is based in large part on past performance of the business under its former owner. By improving on the retail store and adding fresh ideas and spirit to the sales floor we can dramatically increase sales beyond our conservative estimates. By adding other services that are not highly labor intensive, such as lodging, to the business we can greatly increase revenue without greatly increasing costs.  By strengthening our service position, and rebuilding our customer relationships, we will widen our customer base and increase sales.

Non-inventory costs of sales listed below include payments to the independently-contracted guides, license fees, credit card fees, and cleaning and maintenance on the cabins.

Despite the seasonal nature of the business, we expect to generate a small profit in the first year, based on the past performance of the business, as backed up by tax statements, and on a modest increase in sales from the remodeling and new revenue streams. We expect second year profits to dip slightly as we increase payroll to include Brassy Nymph and hire additional part-time employees. Month-to-month projections for Profit and Loss are included in the appendix.

Fishing supplies and fly shop business plan, financial plan chart image

Fishing supplies and fly shop business plan, financial plan chart image

Fishing supplies and fly shop business plan, financial plan chart image

Fishing supplies and fly shop business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $275,525 $321,788 $369,723
Direct Cost of Sales $66,172 $73,835 $83,652
Independant Guide Cost $21,840 $40,800 $51,000
License Funds going back to state $26,600 $28,200 $29,700
Credit Card Fees $1,460 $2,011 $2,311
Lodging – cleaning and maintenance $20,160 $20,160 $23,040
Total Cost of Sales $136,232 $165,006 $189,703
Gross Margin $139,293 $156,782 $180,020
Gross Margin % 50.56% 48.72% 48.69%
Expenses
Payroll $28,200 $52,200 $60,200
Marketing/Promotion $10,600 $12,000 $15,000
Depreciation $15,060 $15,060 $15,060
Utilities $3,200 $3,200 $3,200
Insurance $2,400 $2,400 $2,400
Payroll Taxes $0 $0 $0
Other $900 $900 $900
Total Operating Expenses $60,360 $85,760 $96,760
Profit Before Interest and Taxes $78,933 $71,022 $83,260
EBITDA $93,993 $86,082 $98,320
Interest Expense $39,758 $35,882 $31,209
Taxes Incurred $11,753 $10,542 $15,615
Net Profit $27,423 $24,598 $36,436
Net Profit/Sales 9.95% 7.64% 9.85%

8.5 Projected Cash Flow

The cash flow table and chart, below, shows our cash position during the first 6 months of the year until the summer tourist and fishing season starts, based on receiving the full amount of funding requested. The table also shows our planned repayment of the loan principal, on the terms outlined in the Start-up Funding table. May shows a near shortage of cash, but we believe that this is more due to our conservative forecasting than a real danger.  The beginning of summer shows a decisive increase in cash, and is typical in a business such as this, where the total year’s earning are made in a season of about 5 months. 

We have projected to end the year with enough cash to make it through the winter and spring of 2006 and to start the season in a good position. Based on this, we project our cash flows will increase steadily over the coming years, allowing us to improve our inventory, and increase our revenue-producing assets, such as cabins for lodging. We believe these cash flow projections are realistic, if not slightly conservative. 

Fishing supplies and fly shop business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $275,525 $321,788 $369,723
Subtotal Cash from Operations $275,525 $321,788 $369,723
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 $275,525 $321,788 $369,723
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $28,200 $52,200 $60,200
Bill Payments $205,669 $214,251 $241,745
Subtotal Spent on Operations $233,869 $266,451 $301,945
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 $38,475 $52,000 $64,825
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $272,344 $318,451 $366,770
Net Cash Flow $3,181 $3,337 $2,953
Cash Balance $18,181 $21,518 $24,471

8.6 Projected Balance Sheet

Our Balance Sheet shows that we have planned for and expect steady growth in the business. Notice that our net worth is growing year by year, and that even in the first year we can show a profit. We fully expect to be able to fulfill all debt obligations easily. We will continue to take a conservative approach in our expectations and reinvest any profit that is above and beyond our forecasts. By doing this, we will be able to not only expand our holdings and improve our position, but we will be able to attract more customers and clients, leading to more revenue and a continued cycle of growth.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $18,181 $21,518 $24,471
Inventory $101,829 $107,994 $114,342
Other Current Assets $6,400 $6,400 $6,400
Total Current Assets $126,410 $135,912 $145,213
Long-term Assets
Long-term Assets $452,400 $452,400 $452,400
Accumulated Depreciation $15,060 $30,120 $45,180
Total Long-term Assets $437,340 $422,280 $407,220
Total Assets $563,750 $558,192 $552,433
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $3,002 $24,846 $47,476
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $3,002 $24,846 $47,476
Long-term Liabilities $474,525 $422,525 $357,700
Total Liabilities $477,527 $447,371 $405,176
Paid-in Capital $64,000 $64,000 $64,000
Retained Earnings ($5,200) $22,223 $46,821
Earnings $27,423 $24,598 $36,436
Total Capital $86,223 $110,821 $147,257
Total Liabilities and Capital $563,750 $558,192 $552,433
Net Worth $86,223 $110,821 $147,257

8.7 Business Ratios

The company’s projected business ratios are provided in the table below. The final column, Industry Profile, shows significant ratios for the Retail Fishing Equipment and Supplies Industry, with the Standard Industry Classification (SIC) Code of 5091.03.

Please note the comparisons with our Gross Margin ratios as ours are significantly higher than the industry standard, as is our Profit before Interest ratio.  Our high gross margin comes of an intimate knowledge of the inventory needs of a fly shop in this town, based on our own expertise and the advise of the previous owner, and on our plan to increase sales with high-margin items like the cabins, and food and beverage options.

Our Debt to Assets ratio is showing higher than the industry standard, but we expect that to level out and then surpass the standard in 6-7 years. 

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 16.79% 14.90% 2.44%
Percent of Total Assets
Inventory 18.06% 19.35% 20.70% 29.25%
Other Current Assets 1.14% 1.15% 1.16% 27.04%
Total Current Assets 22.42% 24.35% 26.29% 90.39%
Long-term Assets 77.58% 75.65% 73.71% 9.61%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 0.53% 4.45% 8.59% 36.23%
Long-term Liabilities 84.17% 75.70% 64.75% 9.00%
Total Liabilities 84.71% 80.15% 73.34% 45.23%
Net Worth 15.29% 19.85% 26.66% 54.77%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 50.56% 48.72% 48.69% 33.14%
Selling, General & Administrative Expenses 40.60% 41.08% 38.84% 19.58%
Advertising Expenses 0.00% 0.00% 0.00% 1.07%
Profit Before Interest and Taxes 28.65% 22.07% 22.52% 1.83%
Main Ratios
Current 42.11 5.47 3.06 2.11
Quick 8.19 1.12 0.65 1.14
Total Debt to Total Assets 84.71% 80.15% 73.34% 52.38%
Pre-tax Return on Net Worth 45.44% 31.71% 35.35% 3.78%
Pre-tax Return on Assets 6.95% 6.30% 9.42% 7.95%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 9.95% 7.64% 9.85% n.a
Return on Equity 31.80% 22.20% 24.74% n.a
Activity Ratios
Inventory Turnover 0.83 0.70 0.75 n.a
Accounts Payable Turnover 69.52 9.50 5.57 n.a
Payment Days 27 22 50 n.a
Total Asset Turnover 0.49 0.58 0.67 n.a
Debt Ratios
Debt to Net Worth 5.54 4.04 2.75 n.a
Current Liab. to Liab. 0.01 0.06 0.12 n.a
Liquidity Ratios
Net Working Capital $123,408 $111,066 $97,737 n.a
Interest Coverage 1.99 1.98 2.67 n.a
Additional Ratios
Assets to Sales 2.05 1.73 1.49 n.a
Current Debt/Total Assets 1% 4% 9% n.a
Acid Test 8.19 1.12 0.65 n.a
Sales/Net Worth 3.20 2.90 2.51 n.a
Dividend Payout 0.00 0.00 0.00 n.a