The Bottlecap
Financial Plan
The following section will lay out the general financial plan including our break-even analysis, profit and loss, cash flow, general assumptions, the balance sheet, and the business ratios.
7.1 Important Assumptions
The following table summarizes important assumptions necessary for good financial planning.
| 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 following table and chart summarize our break-even analysis. To break even we must sell at least 5,300 beers based upon the per unit cost. Therefore, customer traffic will become a big factor when it comes to the success of The Bottlecap.
| Break-even Analysis | |
| Monthly Units Break-even | 5,335 |
| Monthly Revenue Break-even | $15,713 |
| Assumptions: | |
| Average Per-Unit Revenue | $2.94 |
| Average Per-Unit Variable Cost | $0.66 |
| Estimated Monthly Fixed Cost | $12,192 |
7.3 Key Financial Indicators
The following chart compares five key indicators in regards to how much they change over the course of the first three years of plan implementation.
7.4 Projected Profit and Loss
One of the keys to success with a beer tavern such as The Bottlecap is the gross margin because of the low cost of buying beer in bulk. The profit-per-unit becomes very important because of the relatively high costs associated with running such an establishment.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $390,456 | $429,496 | $512,552 |
| Direct Cost of Sales | $87,478 | $96,225 | $113,868 |
| Production Payroll | $58,056 | $66,152 | $68,236 |
| Other | $24,000 | $30,000 | $40,000 |
| Total Cost of Sales | $169,534 | $192,377 | $222,104 |
| Gross Margin | $220,922 | $237,119 | $290,447 |
| Gross Margin % | 56.58% | 55.21% | 56.67% |
| Operating Expenses | |||
| Sales and Marketing Expenses | |||
| Sales and Marketing Payroll | $0 | $0 | $0 |
| Advertising/Promotion | $39,000 | $50,000 | $75,000 |
| Miscellaneous | $6,000 | $9,000 | $12,000 |
| Total Sales and Marketing Expenses | $45,000 | $59,000 | $87,000 |
| Sales and Marketing % | 11.52% | 13.74% | 16.97% |
| General and Administrative Expenses | |||
| General and Administrative Payroll | $48,000 | $50,000 | $52,000 |
| Sales and Marketing and Other Expenses | $0 | $0 | $0 |
| Depreciation | $0 | $0 | $0 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $9,000 | $11,000 | $12,000 |
| Insurance | $8,400 | $9,500 | $11,000 |
| Rent | $18,000 | $12,000 | $12,000 |
| Payroll Taxes | $15,908 | $17,423 | $18,035 |
| Other General and Administrative Expenses | $0 | $0 | $0 |
| Total General and Administrative Expenses | $99,308 | $99,923 | $105,035 |
| General and Administrative % | 25.43% | 23.27% | 20.49% |
| Other Expenses: | |||
| Other Payroll | $0 | $0 | $0 |
| Consultants | $0 | $0 | $0 |
| Contract/Consultants | $2,000 | $0 | $0 |
| Total Other Expenses | $2,000 | $0 | $0 |
| Other % | 0.51% | 0.00% | 0.00% |
| Total Operating Expenses | $146,308 | $158,923 | $192,035 |
| Profit Before Interest and Taxes | $74,613 | $78,196 | $98,412 |
| EBITDA | $74,613 | $78,196 | $98,412 |
| Interest Expense | $75 | $0 | $0 |
| Taxes Incurred | $18,262 | $19,549 | $25,013 |
| Net Profit | $56,276 | $58,647 | $73,399 |
| Net Profit/Sales | 14.41% | 13.65% | 14.32% |
7.5 Projected Cash Flow
The following chart and table explain the key elements of the pro forma cash flow.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $390,456 | $429,496 | $512,552 |
| Subtotal Cash from Operations | $390,456 | $429,496 | $512,552 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $2,000 | $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 | $3,000 | $0 | $0 |
| Subtotal Cash Received | $395,456 | $429,496 | $512,552 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $106,056 | $116,152 | $120,236 |
| Bill Payments | $212,551 | $262,072 | $316,120 |
| Subtotal Spent on Operations | $318,607 | $378,224 | $436,356 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $2,000 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
| Purchase Other Current Assets | $50,000 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| Subtotal Cash Spent | $370,607 | $378,224 | $436,356 |
| Net Cash Flow | $24,849 | $51,272 | $76,195 |
| Cash Balance | $32,769 | $84,040 | $160,236 |
7.6 Projected Balance Sheet
The table below is the complete balance sheet which includes all assets, liabilities, and capital.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $32,769 | $84,040 | $160,236 |
| Inventory | $12,839 | $14,122 | $16,712 |
| Other Current Assets | $50,000 | $50,000 | $50,000 |
| Total Current Assets | $95,607 | $148,163 | $226,947 |
| Long-term Assets | |||
| Long-term Assets | $0 | $0 | $0 |
| Accumulated Depreciation | $0 | $0 | $0 |
| Total Long-term Assets | $0 | $0 | $0 |
| Total Assets | $95,607 | $148,163 | $226,947 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $27,131 | $21,039 | $26,425 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $27,131 | $21,039 | $26,425 |
| Long-term Liabilities | $0 | $0 | $0 |
| Total Liabilities | $27,131 | $21,039 | $26,425 |
| Paid-in Capital | $78,000 | $78,000 | $78,000 |
| Retained Earnings | ($65,800) | ($9,524) | $49,123 |
| Earnings | $56,276 | $58,647 | $73,399 |
| Total Capital | $68,476 | $127,123 | $200,522 |
| Total Liabilities and Capital | $95,607 | $148,163 | $226,947 |
| Net Worth | $68,476 | $127,123 | $200,522 |
7.7 Business Ratios
The Ratios table shows important ratios for The Bottlecap. These ratios are derived from the Standard Industry Classification (SIC) Index, code 5813.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 10.00% | 19.34% | 1.90% |
| Percent of Total Assets | ||||
| Inventory | 13.43% | 9.53% | 7.36% | 3.10% |
| Other Current Assets | 52.30% | 33.75% | 22.03% | 44.60% |
| Total Current Assets | 100.00% | 100.00% | 100.00% | 52.30% |
| Long-term Assets | 0.00% | 0.00% | 0.00% | 47.70% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 28.38% | 14.20% | 11.64% | 28.20% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 23.10% |
| Total Liabilities | 28.38% | 14.20% | 11.64% | 51.30% |
| Net Worth | 71.62% | 85.80% | 88.36% | 48.70% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 56.58% | 55.21% | 56.67% | 42.30% |
| Selling, General & Administrative Expenses | 42.26% | 41.55% | 42.27% | 23.40% |
| Advertising Expenses | 9.99% | 11.64% | 14.63% | 2.40% |
| Profit Before Interest and Taxes | 19.11% | 18.21% | 19.20% | 2.80% |
| Main Ratios | ||||
| Current | 3.52 | 7.04 | 8.59 | 1.14 |
| Quick | 3.05 | 6.37 | 7.96 | 0.74 |
| Total Debt to Total Assets | 28.38% | 14.20% | 11.64% | 51.30% |
| Pre-tax Return on Net Worth | 108.85% | 61.51% | 49.08% | 5.20% |
| Pre-tax Return on Assets | 77.96% | 52.78% | 43.36% | 10.60% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 14.41% | 13.65% | 14.32% | n.a |
| Return on Equity | 82.18% | 46.13% | 36.60% | n.a |
| Activity Ratios | ||||
| Inventory Turnover | 10.91 | 7.14 | 7.39 | n.a |
| Accounts Payable Turnover | 8.83 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 34 | 27 | n.a |
| Total Asset Turnover | 4.08 | 2.90 | 2.26 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.40 | 0.17 | 0.13 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $68,476 | $127,123 | $200,522 | n.a |
| Interest Coverage | 994.84 | 0.00 | 0.00 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.24 | 0.34 | 0.44 | n.a |
| Current Debt/Total Assets | 28% | 14% | 12% | n.a |
| Acid Test | 3.05 | 6.37 | 7.96 | n.a |
| Sales/Net Worth | 5.70 | 3.38 | 2.56 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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