The following are the summarized points from The College Cafe’s financial plan. All charts and tables supporting these results are included in the appendix at the end of the business plan:
The College Cafe will generate assertive revenues by the end of year one.
The College Cafe will start reporting sustained profits during the 9th month of the 1st year.
Sales and profits by year three will top 1.5x that of year one.
The College Cafe will require an initial investment in capital to finance the marketing campaign and launch strategy.
The College Cafe will require additional investment to fund additional Web development, sales and marketing efforts and general operating expenses.
The College Cafe will provide a complete student-to-student marketplace. Investment contacts have already been approached and their expressions of satisfaction and encouragement are numerous. We intend to continue our advances with more unique and effective business solutions for the the college market. Based on the attached financial projections, we believe that this venture represents a sound business investment.
9.1 Important Assumptions
The financial projections are based on the following assumptions and facts for the industry as outlined in our market analysis:
As of 2003, college students spend and estimated $200 billion annually.
There are over 15.8 million college students.
The founders have contributed significant capital.
The fee for posting textbooks will equal $3 per textbook.
The fee for posting classifieds will equal $5 per classified.
The sales margin for products sold will average 15% and vary based on product.
General Assumptions
Year 1
Year 2
Year 3
Plan Month
1
2
3
Current Interest Rate
9.00%
9.00%
9.00%
Long-term Interest Rate
5.00%
5.00%
5.00%
Tax Rate
27.00%
27.00%
27.00%
Other
0
0
0
9.2 Start-up Funding
In order to implement The College Cafe Phase 1 marketing campaign and launch strategy, we are seeking an initial seed investment of $150,000. An additional investment of $1 million will be required for operational expenses, continuing marketing campaigns, additional website enhancements, maintenance and support as necessary to establish and maintain The College Cafe as the leading online student-to-student market place.
As detailed in the Cash Balance chart for one year, The College Cafe will be able to begin and sustain its operations with the above mentioned investments. We are confident the opportunities in the market place are so compelling that with year one cash flows, The College Cafe will grow and take advantage of the growth in the college market.
Start-up Funding
Start-up Expenses to Fund
$57,685
Start-up Assets to Fund
$157,315
Total Funding Required
$215,000
Assets
Non-cash Assets from Start-up
$155,000
Cash Requirements from Start-up
$2,315
Additional Cash Raised
$0
Cash Balance on Starting Date
$2,315
Total Assets
$157,315
Liabilities and Capital
Liabilities
Current Borrowing
$5,000
Long-term Liabilities
$0
Accounts Payable (Outstanding Bills)
$0
Other Current Liabilities (interest-free)
$0
Total Liabilities
$5,000
Capital
Planned Investment
Gerald Owens
$50,000
Andrea Powers
$5,000
Kelley Mitchell
$2,500
Allison Elliott
$2,500
Additional Investment Requested
$150,000
Additional Investment Requirement
$0
Total Planned Investment
$210,000
Loss at Start-up (Start-up Expenses)
($57,685)
Total Capital
$152,315
Total Capital and Liabilities
$157,315
Total Funding
$215,000
9.3 Use of Funds
Initial funding proceeds will be used primarily for marketing, additional website development and maintenance. All the equipment needed will be leased or purchased, and included in the operational expenses. The rest of the funds will be used as working capital to maintain the operations until revenues generated by The College Cafe will be at the point where we can sustain operational expenses.
9.4 Exit Strategy
The financial projections indicate that The College Cafe will have generated enough cash in the next five years to permit the exit of the outside investors if so desired. It is the founders’ choice to continue with the company’s profitable operations until The College Cafe is presented with a viable offer for acquisition or the opportunity of an IPO is contemplated.
9.5 Key Financial Indicators
The following chart shows changes in key financial indicators: sales, gross margin, and operating expenses.
9.6 Break-even Analysis
A break-even analysis table has been completed on the basis of average costs/prices.
Break-even Analysis
Monthly Revenue Break-even
$133,362
Assumptions:
Average Percent Variable Cost
56%
Estimated Monthly Fixed Cost
$58,648
9.7 Sales Forcast
The table and charts below show our forecasts for sales and costs of sales. Annual figures for three years are shown. Monthly estimates for the first year are included in the appendix.
Sales Forecast
Year 1
Year 2
Year 3
Sales
Textbook Exchange
$741,000
$963,300
$1,252,290
Classifieds
$596,000
$774,800
$1,007,240
Auctions
$291,000
$378,300
$491,790
Retail
$206,000
$267,800
$348,140
Advertisement
$278,500
$362,050
$470,665
Total Sales
$2,112,500
$2,746,250
$3,570,125
Direct Cost of Sales
Year 1
Year 2
Year 3
Textbook Exchange
$391,000
$430,100
$473,110
Classifieds
$258,000
$283,800
$312,180
Auction
$170,500
$187,550
$206,305
Retail
$193,500
$212,850
$234,135
Advertisement
$170,500
$187,550
$206,305
Subtotal Direct Cost of Sales
$1,183,500
$1,301,850
$1,432,035
9.8 Personnel Plan
The table below shows our forecasts for personnel. Annual figures for three years are shown. Monthly estimates for the first year are included in the appendix.
Personnel Plan
Year 1
Year 2
Year 3
Gerald Owens
$66,000
$70,000
$75,000
Kelley Mitchell
$60,000
$65,000
$70,000
Andrea Powers
$57,000
$60,000
$65,000
College Reps (1 at each College for phase 1)
$228,000
$250,000
$300,000
Students Interns
$0
$0
$0
Total People
22
0
0
Total Payroll
$411,000
$445,000
$510,000
9.9 Projected Profit and Loss
The table and charts below present our forecasted for profit and loss. Annual figures for three years are shown. Monthly estimates for the first year are included in the appendix.
Pro Forma Profit and Loss
Year 1
Year 2
Year 3
Sales
$2,112,500
$2,746,250
$3,570,125
Direct Cost of Sales
$1,183,500
$1,301,850
$1,432,035
Other Costs of Goods
$0
$0
$0
Total Cost of Sales
$1,183,500
$1,301,850
$1,432,035
Gross Margin
$929,000
$1,444,400
$2,138,090
Gross Margin %
43.98%
52.60%
59.89%
Expenses
Payroll
$411,000
$445,000
$510,000
Sales and Marketing and Other Expenses
$0
$0
$0
Depreciation
$0
$0
$0
Web Hosting
$720
$1,000
$1,250
Utilities
$1,200
$1,500
$2,000
Website Enhancement Projects
$225,000
$200,000
$200,000
Insurance
$1,200
$15,000
$17,500
Payroll Taxes
$59,850
$64,650
$74,250
Other General and Administrative Expenses
$4,800
$7,500
$10,000
Total Operating Expenses
$703,770
$734,650
$815,000
Profit Before Interest and Taxes
$225,230
$709,750
$1,323,090
EBITDA
$225,230
$709,750
$1,323,090
Interest Expense
$275
$63
$0
Taxes Incurred
$60,738
$191,615
$357,234
Net Profit
$164,218
$518,072
$965,856
Net Profit/Sales
7.77%
18.86%
27.05%
9.10 Projected Cash Flow
The table and chart below show our cash flow predictions. Annual figures for three years are shown. Monthly estimates for the first year are included in the appendix.
Pro Forma Cash Flow
Year 1
Year 2
Year 3
Cash Received
Cash from Operations
Cash Sales
$2,112,500
$2,746,250
$3,570,125
Subtotal Cash from Operations
$2,112,500
$2,746,250
$3,570,125
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
$150,000
$0
$0
Subtotal Cash Received
$2,262,500
$2,746,250
$3,570,125
Expenditures
Year 1
Year 2
Year 3
Expenditures from Operations
Cash Spending
$411,000
$445,000
$510,000
Bill Payments
$1,290,342
$1,883,557
$2,068,700
Subtotal Spent on Operations
$1,701,342
$2,328,557
$2,578,700
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out
$0
$0
$0
Principal Repayment of Current Borrowing
$3,600
$1,400
$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
$1,704,942
$2,329,957
$2,578,700
Net Cash Flow
$557,558
$416,293
$991,425
Cash Balance
$559,873
$976,167
$1,967,591
9.11 Projected Balance Sheet
The table below details our projected balance sheet. Annual figures for three years are shown. Monthly estimates for the first year are included in the appendix.
Pro Forma Balance Sheet
Year 1
Year 2
Year 3
Assets
Current Assets
Cash
$559,873
$976,167
$1,967,591
Other Current Assets
$5,000
$5,000
$5,000
Total Current Assets
$564,873
$981,167
$1,972,591
Long-term Assets
Long-term Assets
$150,000
$150,000
$150,000
Accumulated Depreciation
$0
$0
$0
Total Long-term Assets
$150,000
$150,000
$150,000
Total Assets
$714,873
$1,131,167
$2,122,591
Liabilities and Capital
Year 1
Year 2
Year 3
Current Liabilities
Accounts Payable
$246,941
$146,563
$172,132
Current Borrowing
$1,400
$0
$0
Other Current Liabilities
$0
$0
$0
Subtotal Current Liabilities
$248,341
$146,563
$172,132
Long-term Liabilities
$0
$0
$0
Total Liabilities
$248,341
$146,563
$172,132
Paid-in Capital
$360,000
$360,000
$360,000
Retained Earnings
($57,685)
$106,533
$624,604
Earnings
$164,218
$518,072
$965,856
Total Capital
$466,533
$984,604
$1,950,460
Total Liabilities and Capital
$714,873
$1,131,167
$2,122,591
Net Worth
$466,533
$984,604
$1,950,460
9.12 Business Ratios
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5942.9904, College book stores, are shown for comparison.
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