FynbosFarm
Financial Plan
The financial plan is outlined in the following tables and charts. With initial loans, we can construct the hydroponics facilities and begin crop development. Based on the high demand for these products, we expect solid sales in the first year, with improving margins.
7.1 Start-up Funding
FynbosFarm needs to fund its start-up requirements. The owner will provide personal investment, and is seeking long-term borrowing, using as collateral two other successful agricultural ventures he owns.
| Start-up Funding | |
| Start-up Expenses to Fund | R793,753 |
| Start-up Assets to Fund | R20,005,000 |
| Total Funding Required | R20,798,753 |
| Assets | |
| Non-cash Assets from Start-up | R20,000,000 |
| Cash Requirements from Start-up | R5,000 |
| Additional Cash Raised | R0 |
| Cash Balance on Starting Date | R5,000 |
| Total Assets | R20,005,000 |
| Liabilities and Capital | |
| Liabilities | |
| Current Borrowing | R0 |
| Long-term Liabilities | R18,000,000 |
| Accounts Payable (Outstanding Bills) | R0 |
| Other Current Liabilities (interest-free) | R0 |
| Total Liabilities | R18,000,000 |
| Capital | |
| Planned Investment | |
| Owners | R2,798,753 |
| Investor | R0 |
| Additional Investment Requirement | R0 |
| Total Planned Investment | R2,798,753 |
| Loss at Start-up (Start-up Expenses) | (R793,753) |
| Total Capital | R2,005,000 |
| Total Capital and Liabilities | R20,005,000 |
| Total Funding | R20,798,753 |
7.2 Important Assumptions
We assume:
- Steady demand for these products
- No major climate change that would make these products easier to grow without hydroponics in this area
7.3 Break-even Analysis
Based upon our monthly fixed costs we need to sell the number units, shown below, each month to break-even. Given the high demand for these products and our expertise in this industry, we should exceed this amount even in the first month of the plan, after our initial start-up period for construction and first crop growth.
| Break-even Analysis | |
| Monthly Units Break-even | 57,047 |
| Monthly Revenue Break-even | R261,511 |
| Assumptions: | |
| Average Per-Unit Revenue | R4.58 |
| Average Per-Unit Variable Cost | R2.28 |
| Estimated Monthly Fixed Cost | R131,388 |
7.4 Projected Profit and Loss
The following table and charts show our projected Profit and Loss statement. Monthly details for the first year can be found in the appendix.
| Pro Forma Profit and Loss | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Sales | R12,400,000 | R11,255,000 | R14,630,000 | R12,690,000 | R16,335,000 |
| Direct Cost of Sales | R6,170,000 | R5,583,500 | R7,267,000 | R6,293,000 | R8,111,500 |
| Other Costs of Sales | R0 | R0 | R0 | R0 | R0 |
| Total Cost of Sales | R6,170,000 | R5,583,500 | R7,267,000 | R6,293,000 | R8,111,500 |
| Gross Margin | R6,230,000 | R5,671,500 | R7,363,000 | R6,397,000 | R8,223,500 |
| Gross Margin % | 50.24% | 50.39% | 50.33% | 50.41% | 50.34% |
| Expenses | |||||
| Payroll | R480,000 | R483,000 | R519,750 | R559,345 | R602,009 |
| Marketing/Promotion | R10,000 | R10,500 | R11,025 | R11,907 | R12,860 |
| Depreciation | R666,660 | R666,700 | R666,700 | R666,700 | R666,700 |
| H.P.s | R120,000 | R120,600 | R121,203 | R121,203 | R120,600 |
| Fuel | R100,000 | R105,000 | R110,250 | R115,726 | R121,550 |
| maintenance | R20,000 | R21,000 | R22,050 | R23,153 | R24,310 |
| Payroll Taxes | R0 | R0 | R0 | R0 | R0 |
| Other | R180,000 | R189,000 | R198,450 | R208,373 | R218,719 |
| Total Operating Expenses | R1,576,660 | R1,595,800 | R1,649,428 | R1,706,407 | R1,766,748 |
| Profit Before Interest and Taxes | R4,653,340 | R4,075,700 | R5,713,572 | R4,690,593 | R6,456,752 |
| EBITDA | R5,320,000 | R4,742,400 | R6,380,272 | R5,357,293 | R7,123,452 |
| Interest Expense | R1,759,750 | R1,663,000 | R1,550,500 | R1,413,000 | R1,138,000 |
| Taxes Incurred | R868,077 | R723,810 | R1,248,922 | R983,278 | R1,595,626 |
| Net Profit | R2,025,513 | R1,688,890 | R2,914,150 | R2,294,315 | R3,723,126 |
| Net Profit/Sales | 16.33% | 15.01% | 19.92% | 18.08% | 22.79% |
7.5 Projected Cash Flow
The following table and chart show our projected cash flow, including estimate repayments of the principal borrowing amount.
| Pro Forma Cash Flow | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Cash Received | |||||
| Cash from Operations | |||||
| Cash Sales | R1,860,000 | R1,688,250 | R2,194,500 | R1,903,500 | R2,450,250 |
| Cash from Receivables | R9,471,833 | R9,665,383 | R12,144,769 | R10,953,616 | R13,570,761 |
| Subtotal Cash from Operations | R11,331,833 | R11,353,633 | R14,339,269 | R12,857,116 | R16,021,011 |
| Additional Cash Received | |||||
| Sales Tax, VAT, HST/GST Received | R0 | R0 | R0 | R0 | R0 |
| New Current Borrowing | R0 | R0 | R0 | R0 | R0 |
| New Other Liabilities (interest-free) | R0 | R0 | R0 | R0 | R0 |
| New Long-term Liabilities | R0 | R0 | R0 | R0 | R0 |
| Sales of Other Current Assets | R0 | R0 | R0 | R0 | R0 |
| Sales of Long-term Assets | R0 | R0 | R0 | R0 | R0 |
| New Investment Received | R0 | R0 | R0 | R0 | R0 |
| Subtotal Cash Received | R11,331,833 | R11,353,633 | R14,339,269 | R12,857,116 | R16,021,011 |
| Expenditures | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Expenditures from Operations | |||||
| Cash Spending | R480,000 | R483,000 | R519,750 | R559,345 | R602,009 |
| Bill Payments | R8,317,863 | R8,899,410 | R10,090,933 | R9,728,985 | R10,716,935 |
| Subtotal Spent on Operations | R8,797,863 | R9,382,410 | R10,610,683 | R10,288,330 | R11,318,944 |
| Additional Cash Spent | |||||
| Sales Tax, VAT, HST/GST Paid Out | R0 | R0 | R0 | R0 | R0 |
| Principal Repayment of Current Borrowing | R0 | R0 | R0 | R0 | R0 |
| Other Liabilities Principal Repayment | R0 | R0 | R0 | R0 | R0 |
| Long-term Liabilities Principal Repayment | R870,000 | R1,000,000 | R1,250,000 | R1,500,000 | R4,000,000 |
| Purchase Other Current Assets | R0 | R0 | R0 | R0 | R0 |
| Purchase Long-term Assets | R0 | R0 | R0 | R0 | R0 |
| Dividends | R0 | R0 | R0 | R0 | R0 |
| Subtotal Cash Spent | R9,667,863 | R10,382,410 | R11,860,683 | R11,788,330 | R15,318,944 |
| Net Cash Flow | R1,663,970 | R971,223 | R2,478,586 | R1,068,786 | R702,067 |
| Cash Balance | R1,668,970 | R2,640,193 | R5,118,779 | R6,187,566 | R6,889,633 |
7.6 Projected Balance Sheet
The Balance Sheet shows a steady increase in Net Worth over the next five years.
| Pro Forma Balance Sheet | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Assets | |||||
| Current Assets | |||||
| Cash | R1,668,970 | R2,640,193 | R5,118,779 | R6,187,566 | R6,889,633 |
| Accounts Receivable | R1,068,167 | R969,534 | R1,260,264 | R1,093,148 | R1,407,137 |
| Other Current Assets | R0 | R0 | R0 | R0 | R0 |
| Total Current Assets | R2,737,137 | R3,609,727 | R6,379,044 | R7,280,714 | R8,296,770 |
| Long-term Assets | |||||
| Long-term Assets | R20,000,000 | R20,000,000 | R20,000,000 | R20,000,000 | R20,000,000 |
| Accumulated Depreciation | R666,660 | R1,333,360 | R2,000,060 | R2,666,760 | R3,333,460 |
| Total Long-term Assets | R19,333,340 | R18,666,640 | R17,999,940 | R17,333,240 | R16,666,540 |
| Total Assets | R22,070,477 | R22,276,367 | R24,378,984 | R24,613,954 | R24,963,310 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Current Liabilities | |||||
| Accounts Payable | R909,964 | R426,964 | R865,430 | R306,085 | R932,315 |
| Current Borrowing | R0 | R0 | R0 | R0 | R0 |
| Other Current Liabilities | R0 | R0 | R0 | R0 | R0 |
| Subtotal Current Liabilities | R909,964 | R426,964 | R865,430 | R306,085 | R932,315 |
| Long-term Liabilities | R17,130,000 | R16,130,000 | R14,880,000 | R13,380,000 | R9,380,000 |
| Total Liabilities | R18,039,964 | R16,556,964 | R15,745,430 | R13,686,085 | R10,312,315 |
| Paid-in Capital | R2,798,753 | R2,798,753 | R2,798,753 | R2,798,753 | R2,798,753 |
| Retained Earnings | (R793,753) | R1,231,760 | R2,920,650 | R5,834,800 | R8,129,116 |
| Earnings | R2,025,513 | R1,688,890 | R2,914,150 | R2,294,315 | R3,723,126 |
| Total Capital | R4,030,513 | R5,719,403 | R8,633,553 | R10,927,869 | R14,650,995 |
| Total Liabilities and Capital | R22,070,477 | R22,276,367 | R24,378,984 | R24,613,954 | R24,963,310 |
| Net Worth | R4,030,513 | R5,719,403 | R8,633,553 | R10,927,868 | R14,650,995 |
7.7 Business Ratios
The following table outlines some of the more important ratios from the Hydroponic Crops Grown Under Cover industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 0182.9902.
| Ratio Analysis | ||||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Industry Profile | |
| Sales Growth | 0.00% | -9.23% | 29.99% | -13.26% | 28.72% | -1.70% |
| Percent of Total Assets | ||||||
| Accounts Receivable | 4.84% | 4.35% | 5.17% | 4.44% | 5.64% | 2.94% |
| Other Current Assets | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 24.83% |
| Total Current Assets | 12.40% | 16.20% | 26.17% | 29.58% | 33.24% | 39.79% |
| Long-term Assets | 87.60% | 83.80% | 73.83% | 70.42% | 66.76% | 60.21% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 4.12% | 1.92% | 3.55% | 1.24% | 3.73% | 22.33% |
| Long-term Liabilities | 77.61% | 72.41% | 61.04% | 54.36% | 37.58% | 22.42% |
| Total Liabilities | 81.74% | 74.33% | 64.59% | 55.60% | 41.31% | 44.75% |
| Net Worth | 18.26% | 25.67% | 35.41% | 44.40% | 58.69% | 55.25% |
| Percent of Sales | ||||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 50.24% | 50.39% | 50.33% | 50.41% | 50.34% | 46.28% |
| Selling, General & Administrative Expenses | 33.91% | 35.39% | 30.41% | 32.33% | 27.55% | 29.76% |
| Advertising Expenses | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.36% |
| Profit Before Interest and Taxes | 37.53% | 36.21% | 39.05% | 36.96% | 39.53% | 0.30% |
| Main Ratios | ||||||
| Current | 3.01 | 8.45 | 7.37 | 23.79 | 8.90 | 1.08 |
| Quick | 3.01 | 8.45 | 7.37 | 23.79 | 8.90 | 0.38 |
| Total Debt to Total Assets | 81.74% | 74.33% | 64.59% | 55.60% | 41.31% | 54.22% |
| Pre-tax Return on Net Worth | 71.79% | 42.18% | 48.22% | 29.99% | 36.30% | 0.29% |
| Pre-tax Return on Assets | 13.11% | 10.83% | 17.08% | 13.32% | 21.31% | 0.63% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Net Profit Margin | 16.33% | 15.01% | 19.92% | 18.08% | 22.79% | n.a |
| Return on Equity | 50.25% | 29.53% | 33.75% | 21.00% | 25.41% | n.a |
| Activity Ratios | ||||||
| Accounts Receivable Turnover | 9.87 | 9.87 | 9.87 | 9.87 | 9.87 | n.a |
| Collection Days | 29 | 39 | 33 | 40 | 33 | n.a |
| Accounts Payable Turnover | 10.14 | 19.71 | 12.17 | 29.96 | 12.17 | n.a |
| Payment Days | 27 | 29 | 22 | 23 | 20 | n.a |
| Total Asset Turnover | 0.56 | 0.51 | 0.60 | 0.52 | 0.65 | n.a |
| Debt Ratios | ||||||
| Debt to Net Worth | 4.48 | 2.89 | 1.82 | 1.25 | 0.70 | n.a |
| Current Liab. to Liab. | 0.05 | 0.03 | 0.05 | 0.02 | 0.09 | n.a |
| Liquidity Ratios | ||||||
| Net Working Capital | R1,827,173 | R3,182,763 | R5,513,613 | R6,974,628 | R7,364,455 | n.a |
| Interest Coverage | 2.64 | 2.45 | 3.68 | 3.32 | 5.67 | n.a |
| Additional Ratios | ||||||
| Assets to Sales | 1.78 | 1.98 | 1.67 | 1.94 | 1.53 | n.a |
| Current Debt/Total Assets | 4% | 2% | 4% | 1% | 4% | n.a |
| Acid Test | 1.83 | 6.18 | 5.91 | 20.22 | 7.39 | n.a |
| Sales/Net Worth | 3.08 | 1.97 | 1.69 | 1.16 | 1.11 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | n.a |
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