Music Retail Business Plan

Mojo Music

Financial Plan

The following is the financial plan for Mojo Music.

7.1 Break-even Analysis

The monthly sales break-even point is approximately 6,200 units.

Music retail business plan, financial plan chart image

Break-even Analysis


Monthly Units Break-even	6,215
Monthly Revenue Break-even	$56,512

Assumptions:
Average Per-Unit Revenue	$9.09
Average Per-Unit Variable Cost	$4.82
Estimated Monthly Fixed Cost	$26,553

7.2 Projected Profit and Loss

The following table and charts are the projected profit and loss for three years.

Pro Forma Profit and Loss
	Year 1	Year 2	Year 3
Sales	$864,700	$970,000	$1,087,000
Direct Cost of Sales	$458,400	$512,000	$575,000
Other Production Expenses	$0	$0	$0
Total Cost of Sales	$458,400	$512,000	$575,000

Gross Margin	$406,300	$458,000	$512,000
Gross Margin %	46.99%	47.22%	47.10%


Expenses
Payroll	$138,000	$148,000	$162,000
Sales and Marketing and Other Expenses	$100,000	$110,000	$130,000
Depreciation	$7,140	$7,143	$7,143
Leased Equipment	$0	$0	$0
Utilities	$4,800	$4,800	$4,800
Insurance	$0	$0	$0
Rent	$48,000	$48,000	$48,000
Payroll Taxes	$20,700	$22,200	$24,300
Other	$0	$0	$0

Total Operating Expenses	$318,640	$340,143	$376,243

Profit Before Interest and Taxes	$87,660	$117,857	$135,757
EBITDA	$94,800	$125,000	$142,900
Interest Expense	$8,917	$7,001	$5,002
Taxes Incurred	$23,623	$33,257	$39,227

Net Profit	$55,120	$77,599	$91,529
Net Profit/Sales	6.37%	8.00%	8.42%

7.3 Projected Cash Flow

The following is the projected cash flow for three years.

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

Cash from Operations
Cash Sales	$216,175	$242,500	$271,750
Cash from Receivables	$506,165	$710,164	$795,988
Subtotal Cash from Operations	$722,340	$952,664	$1,067,738

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	$68,000	$0	$0
Subtotal Cash Received	$790,340	$952,664	$1,067,738

Expenditures	Year 1	Year 2	Year 3

Expenditures from Operations
Cash Spending	$138,000	$148,000	$162,000
Bill Payments	$644,695	$762,547	$827,116
Subtotal Spent on Operations	$782,695	$910,547	$989,116

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	$19,992	$19,992	$19,992
Purchase Other Current Assets	$0	$0	$0
Purchase Long-term Assets	$0	$0	$0
Dividends	$0	$0	$0
Subtotal Cash Spent	$802,687	$930,539	$1,009,108

Net Cash Flow	($12,347)	$22,125	$58,630
Cash Balance	$36,653	$58,778	$117,408

7.4 Projected Balance Sheet

The following is the projected balance sheet for three years.

Pro Forma Balance Sheet
	Year 1	Year 2	Year 3
Assets

Current Assets
Cash	$36,653	$58,778	$117,408
Accounts Receivable	$142,360	$159,696	$178,958
Inventory	$59,730	$66,714	$74,923
Other Current Assets	$0	$0	$0
Total Current Assets	$238,743	$285,189	$371,290

Long-term Assets
Long-term Assets	$50,000	$50,000	$50,000
Accumulated Depreciation	$7,140	$14,283	$21,426
Total Long-term Assets	$42,860	$35,717	$28,574
Total Assets	$281,603	$320,906	$399,864

Liabilities and Capital	Year 1	Year 2	Year 3

Current Liabilities
Accounts Payable	$79,475	$61,171	$68,592
Current Borrowing	$0	$0	$0
Other Current Liabilities	$0	$0	$0
Subtotal Current Liabilities	$79,475	$61,171	$68,592

Long-term Liabilities	$80,008	$60,016	$40,024
Total Liabilities	$159,483	$121,187	$108,616

Paid-in Capital	$218,000	$218,000	$218,000
Retained Earnings	($151,000)	($95,880)	($18,281)
Earnings	$55,120	$77,599	$91,529
Total Capital	$122,120	$199,719	$291,248
Total Liabilities and Capital	$281,603	$320,906	$399,864

Net Worth	$122,120	$199,719	$291,248

7.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5735, Record and Prerecorded Tape Stores, are shown for comparison.

Ratio Analysis
	Year 1	Year 2	Year 3	Industry Profile
Sales Growth	0.00%	12.18%	12.06%	2.40%

Percent of Total Assets
Accounts Receivable	50.55%	49.76%	44.75%	18.30%
Inventory	21.21%	20.79%	18.74%	38.60%
Other Current Assets	0.00%	0.00%	0.00%	21.70%
Total Current Assets	84.78%	88.87%	92.85%	78.60%
Long-term Assets	15.22%	11.13%	7.15%	21.40%
Total Assets	100.00%	100.00%	100.00%	100.00%

Current Liabilities	28.22%	19.06%	17.15%	40.30%
Long-term Liabilities	28.41%	18.70%	10.01%	14.70%
Total Liabilities	56.63%	37.76%	27.16%	55.00%
Net Worth	43.37%	62.24%	72.84%	45.00%

Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	46.99%	47.22%	47.10%	33.50%
Selling, General & Administrative Expenses	40.61%	39.22%	38.68%	18.50%
Advertising Expenses	5.78%	5.15%	4.60%	3.60%
Profit Before Interest and Taxes	10.14%	12.15%	12.49%	1.60%

Main Ratios
Current	3.00	4.66	5.41	1.99
Quick	2.25	3.57	4.32	0.78
Total Debt to Total Assets	56.63%	37.76%	27.16%	55.00%
Pre-tax Return on Net Worth	64.48%	55.51%	44.89%	4.10%
Pre-tax Return on Assets	27.96%	34.54%	32.70%	9.00%

Additional Ratios	Year 1	Year 2	Year 3
Net Profit Margin	6.37%	8.00%	8.42%	n.a
Return on Equity	45.14%	38.85%	31.43%	n.a

Activity Ratios
Accounts Receivable Turnover	4.56	4.56	4.56	n.a
Collection Days	56	76	76	n.a
Inventory Turnover	10.91	8.10	8.12	n.a
Accounts Payable Turnover	9.11	12.17	12.17	n.a
Payment Days	27	34	28	n.a
Total Asset Turnover	3.07	3.02	2.72	n.a

Debt Ratios
Debt to Net Worth	1.31	0.61	0.37	n.a
Current Liab. to Liab.	0.50	0.50	0.63	n.a

Liquidity Ratios
Net Working Capital	$159,268	$224,018	$302,698	n.a
Interest Coverage	9.83	16.83	27.14	n.a

Additional Ratios
Assets to Sales	0.33	0.33	0.37	n.a
Current Debt/Total Assets	28%	19%	17%	n.a
Acid Test	0.46	0.96	1.71	n.a
Sales/Net Worth	7.08	4.86	3.73	n.a
Dividend Payout	0.00	0.00	0.00	n.a