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Gastronome Gander's Gatherings

Financial Plan

Our financial plan is based on conservative estimates and assumptions. Owner investment and a short-term business loan provide start-up financing.

8.1 Important Assumptions

We examined the local market for Recreation Services (SIC 7999.9912) but because of low numbers (12 companies in Washbourne and 17 companies in Gourmandeville/Cuisineburg) we evaluated a wider surrounding region (290 companies). From this analysis the following table provides annual sales during the first three years of operation.

Firms Small Business Start-ups
Year 1 Average Sales $157,500 $130,061 $100,000
Year 2 Average Sales $168,354 $123,570 $112,500
Year 3 Average Sales $185,882 $145,885 $100,000

Gastronome Gander’s Gatherings is classified in the ‘Small Business’ category for purposes of this table.

Data obtained from Bizminer (local marketing research profile for our region, Gourmandeville area, and Washbourne area) 2004.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 5.00% 5.00% 5.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

8.2 Break-even Analysis

The Break-even Analysis table and chart indicate what will be needed in monthly revenue to achieve the Break-even point.

Membership social events business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even $3,492
Assumptions:
Average Percent Variable Cost 46%
Estimated Monthly Fixed Cost $1,891

8.3 Projected Profit and Loss

The profit and loss numbers are estimates for this year, due in part to being a start-up company. We anticipate generation of revenue starting in April 2004. Some expenses are known and include utilities, phone, and Internet hosting/DSL. Other numbers are based in part on estimates from other similar membership event companies.

Membership social events business plan, financial plan chart image

Membership social events business plan, financial plan chart image

Membership social events business plan, financial plan chart image

Membership social events business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $56,250 $91,875 $169,290
Direct Cost of Sales $25,800 $28,140 $28,984
Other Costs of Sales $0 $0 $0
Total Cost of Sales $25,800 $28,140 $28,984
Gross Margin $30,450 $63,735 $140,306
Gross Margin % 54.13% 69.37% 82.88%
Expenses
Payroll $2,500 $26,500 $40,000
Sales and Marketing and Related Expenses $9,050 $2,000 $2,000
Depreciation $0 $0 $0
Rent $0 $0 $0
Utilities $360 $400 $450
Insurance $4,180 $4,300 $4,500
Payroll Taxes $0 $0 $0
Mailing Expense $726 $800 $900
Credit Card Merchant Fees $1,688 $2,756 $5,079
Website Maintanence – Web Master $0 $0 $0
Website Hosting & Fees $1,323 $1,418 $2,579
Telecomm & DSL $960 $1,000 $1,100
Office Expenses $1,900 $2,100 $2,500
Total Operating Expenses $22,687 $41,274 $59,108
Profit Before Interest and Taxes $7,763 $22,461 $81,198
EBITDA $7,763 $22,461 $81,198
Interest Expense $750 $750 $750
Taxes Incurred $2,104 $6,513 $24,134
Net Profit $4,909 $15,197 $56,313
Net Profit/Sales 8.73% 16.54% 33.26%

8.4 Projected Cash Flow

The cash flow projection shows that provisions for ongoing expenses are adequate to meet the needs of the company as the business generates sufficient cash flow to support operations.

Membership social events business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $56,250 $91,875 $169,290
Subtotal Cash from Operations $56,250 $91,875 $169,290
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 $56,250 $91,875 $169,290
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $2,500 $26,500 $40,000
Bill Payments $43,834 $51,176 $71,103
Subtotal Spent on Operations $46,334 $77,676 $111,103
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 $46,334 $77,676 $111,103
Net Cash Flow $9,916 $14,199 $58,187
Cash Balance $21,800 $35,999 $94,186

8.5 Projected Balance Sheet

The balance sheet shows healthy growth of net worth, and strong financial position. The monthly estimates are included in the appendix.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $21,800 $35,999 $94,186
Other Current Assets $0 $0 $0
Total Current Assets $21,800 $35,999 $94,186
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $21,800 $35,999 $94,186
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $5,122 $4,124 $5,998
Current Borrowing $15,000 $15,000 $15,000
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $20,122 $19,124 $20,998
Long-term Liabilities $0 $0 $0
Total Liabilities $20,122 $19,124 $20,998
Paid-in Capital $10,000 $10,000 $10,000
Retained Earnings ($13,232) ($8,323) $6,875
Earnings $4,909 $15,197 $56,313
Total Capital $1,677 $16,875 $73,188
Total Liabilities and Capital $21,800 $35,999 $94,186
Net Worth $1,677 $16,875 $73,188

8.6 Business Ratios

Our sales growth, as a percentage,  is exceptionally high due to the figures being the first two years of operation. Therefore, by virtue of comparison to low first-year numbers our percent increase will seem extraordinary. Our assets are lower than industry averages due to the initial investment being small, most of the equipment being expensed, and that the size of Gastronome Gander’s Gatherings is small in relation to other companies within this sector:  Recreation Services, SIC Code 7999.9912. Our total liabilities are higher than other companies, but improve rapidly. If additional investment is acquired instead of secured loans, this will help us meet our goal of keeping liabilities to a minimum.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 63.33% 84.26% 4.94%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 36.35%
Total Current Assets 100.00% 100.00% 100.00% 43.63%
Long-term Assets 0.00% 0.00% 0.00% 56.37%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 92.31% 53.12% 22.29% 21.68%
Long-term Liabilities 0.00% 0.00% 0.00% 31.17%
Total Liabilities 92.31% 53.12% 22.29% 52.85%
Net Worth 7.69% 46.88% 77.71% 47.15%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 54.13% 69.37% 82.88% 100.00%
Selling, General & Administrative Expenses 37.94% 45.18% 40.18% 76.74%
Advertising Expenses 0.00% 0.00% 0.00% 2.84%
Profit Before Interest and Taxes 13.80% 24.45% 47.96% 2.11%
Main Ratios
Current 1.08 1.88 4.49 1.05
Quick 1.08 1.88 4.49 0.69
Total Debt to Total Assets 92.31% 53.12% 22.29% 62.49%
Pre-tax Return on Net Worth 418.12% 128.66% 109.92% 2.98%
Pre-tax Return on Assets 32.17% 60.31% 85.41% 7.95%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 8.73% 16.54% 33.26% n.a
Return on Equity 292.69% 90.06% 76.94% n.a
Activity Ratios
Accounts Payable Turnover 9.53 12.17 12.17 n.a
Payment Days 27 34 25 n.a
Total Asset Turnover 2.58 2.55 1.80 n.a
Debt Ratios
Debt to Net Worth 12.00 1.13 0.29 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $1,677 $16,875 $73,188 n.a
Interest Coverage 10.35 29.95 108.26 n.a
Additional Ratios
Assets to Sales 0.39 0.39 0.56 n.a
Current Debt/Total Assets 92% 53% 22% n.a
Acid Test 1.08 1.88 4.49 n.a
Sales/Net Worth 33.54 5.44 2.31 n.a
Dividend Payout 0.00 0.00 0.00 n.a