Independent Video Store Business Plan

Independent Choice Flicks

Financial Plan

The following section will outline important financial information.

7.1 Important Assumptions

The following table indicates the important financial 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 Break-even Analysis

The Break-even Analysis is shown below.

Independent video store business plan, financial plan chart image

Break-even Analysis


Monthly Revenue Break-even	$12,113

Assumptions:
Average Percent Variable Cost	35%
Estimated Monthly Fixed Cost	$7,874

7.3 Projected Profit and Loss

The following table shows projected profit and loss.

Pro Forma Profit and Loss
	Year 1	Year 2	Year 3
Sales	$114,483	$200,951	$231,092
Direct Cost of Sales	$40,069	$70,333	$80,882
Other	$0	$0	$0
Total Cost of Sales	$40,069	$70,333	$80,882

Gross Margin	$74,414	$130,618	$150,210
Gross Margin %	65.00%	65.00%	65.00%


Expenses
Payroll	$65,400	$78,600	$78,600
Sales and Marketing and Other Expenses	$2,400	$2,400	$2,400
Depreciation	$3,072	$3,072	$3,072
Leased Equipment	$0	$0	$0
Utilities	$1,800	$1,800	$1,800
Insurance	$1,800	$1,800	$1,800
Rent	$10,200	$10,200	$10,200
Payroll Taxes	$9,810	$11,790	$11,790
Other	$0	$0	$0

Total Operating Expenses	$94,482	$109,662	$109,662

Profit Before Interest and Taxes	($20,068)	$20,956	$40,548
EBITDA	($16,996)	$24,028	$43,620
Interest Expense	$0	$0	$0
Taxes Incurred	$0	$5,239	$10,306

Net Profit	($20,068)	$15,717	$30,242
Net Profit/Sales	-17.53%	7.82%	13.09%

7.4 Projected Cash Flow

The following chart and table will display projected cash flow.

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

Cash from Operations
Cash Sales	$114,483	$200,951	$231,092
Subtotal Cash from Operations	$114,483	$200,951	$231,092

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	$114,483	$200,951	$231,092

Expenditures	Year 1	Year 2	Year 3

Expenditures from Operations
Cash Spending	$65,400	$78,600	$78,600
Bill Payments	$64,059	$109,005	$120,035
Subtotal Spent on Operations	$129,459	$187,605	$198,635

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	$0	$0	$0
Purchase Other Current Assets	$0	$0	$0
Purchase Long-term Assets	$0	$0	$0
Dividends	$0	$0	$0
Subtotal Cash Spent	$129,459	$187,605	$198,635

Net Cash Flow	($14,976)	$13,346	$32,457
Cash Balance	$13,824	$27,170	$59,627

7.5 Projected Balance Sheet

The following table indicates the projected balance sheet.

Pro Forma Balance Sheet
	Year 1	Year 2	Year 3
Assets

Current Assets
Cash	$13,824	$27,170	$59,627
Inventory	$7,049	$12,372	$14,228
Other Current Assets	$0	$0	$0
Total Current Assets	$20,873	$39,543	$73,855

Long-term Assets
Long-term Assets	$15,700	$15,700	$15,700
Accumulated Depreciation	$3,072	$6,144	$9,216
Total Long-term Assets	$12,628	$9,556	$6,484
Total Assets	$33,501	$49,099	$80,339

Liabilities and Capital	Year 1	Year 2	Year 3

Current Liabilities
Accounts Payable	$9,069	$8,950	$9,948
Current Borrowing	$0	$0	$0
Other Current Liabilities	$0	$0	$0
Subtotal Current Liabilities	$9,069	$8,950	$9,948

Long-term Liabilities	$0	$0	$0
Total Liabilities	$9,069	$8,950	$9,948

Paid-in Capital	$45,000	$45,000	$45,000
Retained Earnings	($500)	($20,568)	($4,851)
Earnings	($20,068)	$15,717	$30,242
Total Capital	$24,432	$40,149	$70,391
Total Liabilities and Capital	$33,501	$49,099	$80,339

Net Worth	$24,432	$40,149	$70,391

7.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7841, Video Tape Rental, are shown for comparison.

Ratio Analysis
	Year 1	Year 2	Year 3	Industry Profile
Sales Growth	0.00%	75.53%	15.00%	11.90%

Percent of Total Assets
Inventory	21.04%	25.20%	17.71%	4.10%
Other Current Assets	0.00%	0.00%	0.00%	42.90%
Total Current Assets	62.31%	80.54%	91.93%	54.80%
Long-term Assets	37.69%	19.46%	8.07%	45.20%
Total Assets	100.00%	100.00%	100.00%	100.00%

Current Liabilities	27.07%	18.23%	12.38%	37.70%
Long-term Liabilities	0.00%	0.00%	0.00%	23.20%
Total Liabilities	27.07%	18.23%	12.38%	60.90%
Net Worth	72.93%	81.77%	87.62%	39.10%

Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	65.00%	65.00%	65.00%	0.00%
Selling, General & Administrative Expenses	82.53%	57.18%	51.84%	75.80%
Advertising Expenses	2.10%	1.19%	1.04%	1.50%
Profit Before Interest and Taxes	-17.53%	10.43%	17.55%	1.90%

Main Ratios
Current	2.30	4.42	7.42	0.68
Quick	1.52	3.04	5.99	0.35
Total Debt to Total Assets	27.07%	18.23%	12.38%	60.90%
Pre-tax Return on Net Worth	-82.14%	52.20%	57.60%	2.70%
Pre-tax Return on Assets	-59.90%	42.68%	50.47%	6.80%

Additional Ratios	Year 1	Year 2	Year 3
Net Profit Margin	-17.53%	7.82%	13.09%	n.a
Return on Equity	-82.14%	39.15%	42.96%	n.a

Activity Ratios
Inventory Turnover	10.91	7.24	6.08	n.a
Accounts Payable Turnover	8.06	12.17	12.17	n.a
Payment Days	27	30	28	n.a
Total Asset Turnover	3.42	4.09	2.88	n.a

Debt Ratios
Debt to Net Worth	0.37	0.22	0.14	n.a
Current Liab. to Liab.	1.00	1.00	1.00	n.a

Liquidity Ratios
Net Working Capital	$11,804	$30,593	$63,907	n.a
Interest Coverage	0.00	0.00	0.00	n.a

Additional Ratios
Assets to Sales	0.29	0.24	0.35	n.a
Current Debt/Total Assets	27%	18%	12%	n.a
Acid Test	1.52	3.04	5.99	n.a
Sales/Net Worth	4.69	5.01	3.28	n.a
Dividend Payout	0.00	0.00	0.00	n.a