Barton Interiors
Financial Plan
The initial funding of $25,000 will be invested by the owner. The goal is to fund the growth of the business from its earnings. The financial plan contains these essential factors:
- A growth rate in sales of 47% for the year 2002 and 15% for 2003.
- An average sales per month that increases each year, averaging $3,870 in the first year, $5,720 the second, and $6,600 in the third year.
- Continue to fund the growth of the business from the revenues it generates.
<p size="4" Financial difficulties and risks
- Slow sales resulting in less-than-projected cash flow.
- Unexpected and excessive cost increases compared to the planned expenses.
- Overly aggressive and debilitating actions by competing designers.
- A parallel entry by a new competitor further diminishing revenue generation potential.
Worst case risks might include
- Determining the business cannot support itself on an ongoing basis.
- Dealing with the financial, business, and personal devastation of the venture’s failure. Survivable but painful.
Break-even Analysis
The break-even analysis below is expressed as a per-client unit. This is based on average hourly billing, product sales, and costs per transaction.

Break-even Analysis | |
Monthly Revenue Break-even | $4,067 |
Assumptions: | |
Average Percent Variable Cost | 32% |
Estimated Monthly Fixed Cost | $2,763 |
Important Assumptions
The following captured critical assumptions will determine the potential for future success.
- A healthy economy that supports a moderate level of growth in the market.
- The ability to support a gross margin percentage in excess of 65%.
- Keeping operating costs low, particularly in the areas of product purchases ongoing monthly expenses.
- Receiving an initial payment for each project of 50% of estimated time and product purchases and collecting the balance of these revenues within 45 days of completing each project.
General Assumptions | |||
Year 1 | Year 2 | Year 3 | |
Plan Month | 1 | 2 | 3 |
Current Interest Rate | 9.50% | 9.50% | 9.50% |
Long-term Interest Rate | 8.50% | 8.50% | 8.50% |
Tax Rate | 28.17% | 28.00% | 28.17% |
Other | 0 | 0 | 0 |
Key Financial Indicators
The key financial indicators focus on cash flow. There is virtually no inventory but late payments for completed jobs will be a concern. Timely billing and collection will be critical. All expenses are tracked on a monthly basis, recorded in the accounting software, and will be compared to our business plan budget.

Start-up Summary
The following details the initial start-up expenses for Barton Interiors. Most equipment costs are office related. Sample and display costs include books, samples and resources necessary to promote furniture, fabric and other home accessory products.
Start-up | |
Requirements | |
Start-up Expenses | |
Legal | $500 |
Stationery etc. | $850 |
Brochures | $420 |
Consultants | $450 |
Insurance | $150 |
Samples and Reference Books | $3,250 |
Research and development | $800 |
Expensed equipment | $4,250 |
Other | $550 |
Total Start-up Expenses | $11,220 |
Start-up Assets | |
Cash Required | $9,780 |
Other Current Assets | $1,000 |
Long-term Assets | $3,000 |
Total Assets | $13,780 |
Total Requirements | $25,000 |
Start-up Funding | |
Start-up Expenses to Fund | $11,220 |
Start-up Assets to Fund | $13,780 |
Total Funding Required | $25,000 |
Assets | |
Non-cash Assets from Start-up | $4,000 |
Cash Requirements from Start-up | $9,780 |
Additional Cash Raised | $0 |
Cash Balance on Starting Date | $9,780 |
Total Assets | $13,780 |
Liabilities and Capital | |
Liabilities | |
Current Borrowing | $0 |
Long-term Liabilities | $0 |
Accounts Payable (Outstanding Bills) | $0 |
Other Current Liabilities (interest-free) | $0 |
Total Liabilities | $0 |
Capital | |
Planned Investment | |
Jill Barton | $25,000 |
Investor 2 | $0 |
Other | $0 |
Additional Investment Requirement | $0 |
Total Planned Investment | $25,000 |
Loss at Start-up (Start-up Expenses) | ($11,220) |
Total Capital | $13,780 |
Total Capital and Liabilities | $13,780 |
Total Funding | $25,000 |
Projected Profit and Loss
The following represents the projected profit and loss for Barton Interiors based on sales and expense projections for 2002 through 2004.


Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $46,460 | $68,640 | $99,200 |
Direct Cost of Sales | $14,889 | $22,776 | $33,280 |
Other | $0 | $0 | $0 |
Total Cost of Sales | $14,889 | $22,776 | $33,280 |
Gross Margin | $31,571 | $45,864 | $65,920 |
Gross Margin % | 67.95% | 66.82% | 66.45% |
Expenses | |||
Payroll | $19,800 | $28,800 | $36,000 |
Sales and Marketing and Other Expenses | $11,560 | $13,430 | $15,100 |
Depreciation | $300 | $750 | $800 |
Leased Equipment | $0 | $0 | $0 |
Utilities | $540 | $660 | $800 |
Insurance | $960 | $1,200 | $1,600 |
Rent | $0 | $0 | $0 |
Payroll Taxes | $0 | $0 | $0 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $33,160 | $44,840 | $54,300 |
Profit Before Interest and Taxes | ($1,589) | $1,024 | $11,620 |
EBITDA | ($1,289) | $1,774 | $12,420 |
Interest Expense | $0 | $76 | $238 |
Taxes Incurred | $0 | $265 | $3,206 |
Net Profit | ($1,589) | $683 | $8,176 |
Net Profit/Sales | -3.42% | 0.99% | 8.24% |
Projected Cash Flow
The cash flow projections are outlined below. These cash flow projects are based on our basic assumptions and expense and revenue projections.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $32,522 | $48,048 | $69,440 |
Cash from Receivables | $9,578 | $18,511 | $26,892 |
Subtotal Cash from Operations | $42,100 | $66,559 | $96,332 |
Additional Cash Received | |||
Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
New Current Borrowing | $0 | $1,600 | $1,800 |
New Other Liabilities (interest-free) | $0 | $0 | $0 |
New Long-term Liabilities | $0 | $0 | $0 |
Sales of Other Current Assets | $210 | $0 | $0 |
Sales of Long-term Assets | $0 | $0 | $0 |
New Investment Received | $0 | $0 | $0 |
Subtotal Cash Received | $42,310 | $68,159 | $98,132 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $19,800 | $28,800 | $36,000 |
Bill Payments | $24,693 | $38,506 | $52,924 |
Subtotal Spent on Operations | $44,493 | $67,306 | $88,924 |
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 | $44,493 | $67,306 | $88,924 |
Net Cash Flow | ($2,183) | $852 | $9,209 |
Cash Balance | $7,597 | $8,449 | $17,658 |
Projected Balance Sheet
Barton Interiors’ balance sheet is outlined below.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $7,597 | $8,449 | $17,658 |
Accounts Receivable | $4,360 | $6,441 | $9,308 |
Other Current Assets | $790 | $790 | $790 |
Total Current Assets | $12,747 | $15,680 | $27,757 |
Long-term Assets | |||
Long-term Assets | $3,000 | $3,000 | $3,000 |
Accumulated Depreciation | $300 | $1,050 | $1,850 |
Total Long-term Assets | $2,700 | $1,950 | $1,150 |
Total Assets | $15,447 | $17,630 | $28,907 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $3,256 | $3,157 | $4,457 |
Current Borrowing | $0 | $1,600 | $3,400 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $3,256 | $4,757 | $7,857 |
Long-term Liabilities | $0 | $0 | $0 |
Total Liabilities | $3,256 | $4,757 | $7,857 |
Paid-in Capital | $25,000 | $25,000 | $25,000 |
Retained Earnings | ($11,220) | ($12,809) | ($12,126) |
Earnings | ($1,589) | $683 | $8,176 |
Total Capital | $12,191 | $12,874 | $21,050 |
Total Liabilities and Capital | $15,447 | $17,630 | $28,907 |
Net Worth | $12,191 | $12,874 | $21,050 |
Business Ratios
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7389, Business Services–Interior Design Services, are shown for comparison. If we fail in any of these areas, we will need to re-evaluate our business model:
- Gross margins at, or above, 65%.
- Month-to-month and annual increases to meet the expected growth requirements.
- Self-fund growth not dependant on the credit line to meet cash requirements.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | n.a. | 47.74% | 44.52% | 12.40% |
Percent of Total Assets | ||||
Accounts Receivable | 28.22% | 36.53% | 32.20% | 26.10% |
Other Current Assets | 5.11% | 4.48% | 2.73% | 44.70% |
Total Current Assets | 82.52% | 88.94% | 96.02% | 74.50% |
Long-term Assets | 17.48% | 11.06% | 3.98% | 25.50% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 21.08% | 26.98% | 27.18% | 44.30% |
Long-term Liabilities | 0.00% | 0.00% | 0.00% | 16.00% |
Total Liabilities | 21.08% | 26.98% | 27.18% | 60.30% |
Net Worth | 78.92% | 73.02% | 72.82% | 39.70% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 67.95% | 66.82% | 66.45% | 0.00% |
Selling, General & Administrative Expenses | 73.96% | 65.72% | 38.61% | 80.80% |
Advertising Expenses | 16.36% | 12.24% | 11.36% | 1.30% |
Profit Before Interest and Taxes | -3.42% | 1.49% | 11.71% | 2.20% |
Main Ratios | ||||
Current | 3.92 | 3.30 | 3.53 | 1.75 |
Quick | 3.92 | 3.30 | 3.53 | 1.38 |
Total Debt to Total Assets | 21.08% | 26.98% | 27.18% | 60.30% |
Pre-tax Return on Net Worth | -13.03% | 7.36% | 54.07% | 3.80% |
Pre-tax Return on Assets | -10.29% | 5.38% | 39.38% | 9.70% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | -3.42% | 0.99% | 8.24% | n.a |
Return on Equity | -13.03% | 5.30% | 38.84% | n.a |
Activity Ratios | ||||
Accounts Receivable Turnover | 3.20 | 3.20 | 3.20 | n.a |
Collection Days | 55 | 96 | 97 | n.a |
Accounts Payable Turnover | 8.58 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 30 | 26 | n.a |
Total Asset Turnover | 3.01 | 3.89 | 3.43 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.27 | 0.37 | 0.37 | n.a |
Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $9,491 | $10,924 | $19,900 | n.a |
Interest Coverage | 0.00 | 13.47 | 48.93 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.33 | 0.26 | 0.29 | n.a |
Current Debt/Total Assets | 21% | 27% | 27% | n.a |
Acid Test | 2.58 | 1.94 | 2.35 | n.a |
Sales/Net Worth | 3.81 | 5.33 | 4.71 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |