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Sporting Goods Retail icon Paintball Products Retail Business Plan

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Harquebus Paintball, Inc.

Financial Plan

Harquebus Paintball’s start-up funding will include an investment made in the company by the owners, and a long-term SBA or commercial bank loan. HPI will achieve profitability in its first year of operations, and will sustain a slow, steady profit margin and a rapidly growing cash account with solid growth from the end of the first year’s operations to the end of the third year’s operations.  HPI will continue this amazing growth via sales, promotions, product selection, the launching of new stores, distributor discounting, company franchising, etc.

The financials are projected out three years, but are based on the original store only. If actual results for each year play out at equal to or greater than projections, the available cash on hand will be used as seed capital for HPI’s expansion.

8.1 Important Assumptions

Harquebus Paintball has taken assumptions about the following:

  • The sport of paintball will undertake a slow and steady economic growth throughout the next several years.
  • A “worse case” scenario, HPI assumes a modest average profit margin on all products.
  • All avid Bombarde County paintball players will purchase new gear/equipment at least once a year.
  • Our target market only includes current Bombarde County paintballers, not all males ages 12-24 who may have an interest in paintball.

All estimates and assumptions will be adjusted once HPI has been finalized and established.

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 6.00% 6.00% 6.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

8.2 Start-up Funding

Padraich Petard, Geoffrey Gunnar and Petra Pistolero will each invest in Harquebus Paintball, Inc.  Dolores Derringer and Claude Carabinerie will also each invest, but a lesser amount.

Harquebus Paintball will welcome additional investment form outside parties.

HPI will seek a long-term SBA loan through local Bigbucks Bank, which specializes in serving Bombarde County commerce.

Start-up Funding
Start-up Expenses to Fund $95,336
Start-up Assets to Fund $124,664
Total Funding Required $220,000
Assets
Non-cash Assets from Start-up $97,100
Cash Requirements from Start-up $27,564
Additional Cash Raised $0
Cash Balance on Starting Date $27,564
Total Assets $124,664
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $140,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $140,000
Capital
Planned Investment
Petard $20,000
Gunnar $20,000
Pistolero $20,000
Derringer $10,000
Carabinerie $10,000
Additional Investment Requirement $0
Total Planned Investment $80,000
Loss at Start-up (Start-up Expenses) ($95,336)
Total Capital ($15,336)
Total Capital and Liabilities $124,664
Total Funding $220,000

8.3 Break-even Analysis

As shown in the table below, Harquebus Paintball estimates the number of units of $1 which must be sold (under the forecasted profit margin attributed to each item), to generate sufficient revenue monthly to break-even with its estimated monthly fixed costs (utilities, payroll, depreciation, etc.).

Paintball products retail business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even $74,192
Assumptions:
Average Percent Variable Cost 75%
Estimated Monthly Fixed Cost $18,842

8.4 Projected Profit and Loss

Shown in the following table and charts are projected profits and gross margins for the first year of operations.

Profits and losses are summed up below:

  • Rent: Rent in Enfilade Plaza has three property leasing charges: base rent charge ($12 s/f per annum), NNN charges ($4.45 s/f per annum); 4% s/f management fee based on the base rent charge. The property at Enfilade is 1,800 s/f. After all the math, the monthly costs are: $1,800.00(base fee) + 667.50(NNN fee) + $72.00(management fee) = $2,539.50 + 7% sales tax = $2,717.27 Total Monthly Rent.
  • Utilities: Utilities for HPI will consist of electric ($150), water ($25), telephone ($90), Internet ($90), fax ($30), etc., for a total monthly cost of approx. $400.
  • Insurance: A $50,000 125% inventory insurance policy will cost $94/month.
  • Payroll Taxes: Payroll taxes will average about 20% of total dollars earned.
Paintball products retail business plan, financial plan chart image

Paintball products retail business plan, financial plan chart image

Paintball products retail business plan, financial plan chart image

Paintball products retail business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $1,920,385 $2,016,177 $2,117,029
Direct Cost of Sales $1,432,685 $1,447,012 $1,461,482
Other Costs of Goods $0 $0 $0
Total Cost of Sales $1,432,685 $1,447,012 $1,461,482
Gross Margin $487,699 $569,165 $655,547
Gross Margin % 25.40% 28.23% 30.97%
Expenses
Payroll $100,920 $103,272 $105,225
Sales and Marketing and Other Expenses $78,000 $78,000 $78,000
Depreciation $600 $600 $600
Rent $32,607 $32,607 $32,607
Utilities $4,800 $4,800 $4,800
Insurance $1,128 $1,128 $1,128
Payroll Taxes $6,845 $7,286 $7,732
Website $1,200 $1,500 $1,500
Other $0 $0 $0
Total Operating Expenses $226,100 $229,192 $231,592
Profit Before Interest and Taxes $261,599 $339,973 $423,955
EBITDA $262,199 $340,573 $424,555
Interest Expense $7,658 $6,126 $4,500
Taxes Incurred $76,183 $100,154 $125,836
Net Profit $177,759 $233,693 $293,618
Net Profit/Sales 9.26% 11.59% 13.87%

8.5 Projected Cash Flow

Harquebus Paintball demonstrates its projected cash flow in the table and chart shown on the following pages.

  • Cash Flow: HPI estimates mass inventory purchases every other month, therefore creating a “wave” effect in HPI’s cash flow from positive flow to negative flow during inventory months, yet sustaining an overall positive cash balance. As HPI will continue to grow throughout the years, negative cash flow will slowly decrease as positive cash flow slowly increases. As shown in the table on the following page, Net Cash Flow is derived by the “Cash Spent (inventory; payroll, rent, etc.)” and subtracted from the “Operations Cash (cash gained from sales),” therefore showing how much money is flowing into or out of HPI’s checking accounts. By the end of first year’s operations, HPI will have sustained an overall positive cash flow.
  • Cash Balance: As shown in the chart on the following page, HPI’s “Cash Balance (cash in checking account)” will remain positive, and sustain a continuous positive growth rate. Cash balance is derived by taking the current month’s “Net Cash Flow” and adding it to the previous month’s “Cash Balance.” Cash “on hand” by the end of first year’s operations is estimated to increase nearly 10-fold over the beginning cash balance.
Paintball products retail business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $1,920,385 $2,016,177 $2,117,029
Subtotal Cash from Operations $1,920,385 $2,016,177 $2,117,029
Additional Cash Received
Sales Tax, VAT, HST/GST Received $134,427 $141,132 $148,192
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 $2,054,812 $2,157,310 $2,265,221
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $100,920 $103,272 $105,225
Bill Payments $1,559,101 $1,682,525 $1,715,781
Subtotal Spent on Operations $1,660,021 $1,785,797 $1,821,006
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $134,427 $141,132 $148,192
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $24,750 $26,300 $27,900
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $1,819,198 $1,953,229 $1,997,098
Net Cash Flow $235,614 $204,080 $268,123
Cash Balance $263,178 $467,258 $735,381

8.6 Projected Balance Sheet

The balance sheet below represents Harquebus Paintball’s overall cash position through the years 2006-2008, only including the original store, as well as Internet sales. As shown in the table below, HPI’s “Net Worth” is projected to increase approximately exponentially from month one to the end of 2008. Harquebus Paintball does not project any trouble meeting its debt obligations as long as the specific goals and objectives mentioned earlier in this plan are achieved.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $263,178 $467,258 $735,381
Inventory $138,604 $139,990 $141,390
Other Current Assets $12,100 $12,100 $12,100
Total Current Assets $413,882 $619,348 $888,871
Long-term Assets
Long-term Assets $5,000 $5,000 $5,000
Accumulated Depreciation $600 $1,200 $1,800
Total Long-term Assets $4,400 $3,800 $3,200
Total Assets $418,282 $623,148 $892,071
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $140,609 $138,082 $141,286
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $140,609 $138,082 $141,286
Long-term Liabilities $115,250 $88,950 $61,050
Total Liabilities $255,859 $227,032 $202,336
Paid-in Capital $80,000 $80,000 $80,000
Retained Earnings ($95,336) $82,423 $316,116
Earnings $177,759 $233,693 $293,618
Total Capital $162,423 $396,116 $689,734
Total Liabilities and Capital $418,282 $623,148 $892,071
Net Worth $162,423 $396,116 $689,734

8.7 Business Ratios

Harquebus Paintball’s projected business ratios are provided in the table below. HPI chose the Standard Industry Classification (SIC) code: Sporting goods and bicycle shops – 5941 as the closest match to its industry.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 4.99% 5.00% -1.56%
Percent of Total Assets
Inventory 33.14% 22.46% 15.85% 37.25%
Other Current Assets 2.89% 1.94% 1.36% 28.41%
Total Current Assets 98.95% 99.39% 99.64% 77.97%
Long-term Assets 1.05% 0.61% 0.36% 22.03%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 33.62% 22.16% 15.84% 33.29%
Long-term Liabilities 27.55% 14.27% 6.84% 16.07%
Total Liabilities 61.17% 36.43% 22.68% 49.36%
Net Worth 38.83% 63.57% 77.32% 50.64%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 25.40% 28.23% 30.97% 32.06%
Selling, General & Administrative Expenses 8.24% 7.98% 7.72% 16.24%
Advertising Expenses 0.00% 0.00% 0.00% 1.62%
Profit Before Interest and Taxes 13.62% 16.86% 20.03% 1.22%
Main Ratios
Current 2.94 4.49 6.29 2.01
Quick 1.96 3.47 5.29 0.79
Total Debt to Total Assets 61.17% 36.43% 22.68% 56.78%
Pre-tax Return on Net Worth 156.35% 84.28% 60.81% 2.79%
Pre-tax Return on Assets 60.71% 53.57% 47.02% 6.45%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 9.26% 11.59% 13.87% n.a
Return on Equity 109.44% 59.00% 42.57% n.a
Activity Ratios
Inventory Turnover 10.91 10.39 10.39 n.a
Accounts Payable Turnover 12.09 12.17 12.17 n.a
Payment Days 27 30 30 n.a
Total Asset Turnover 4.59 3.24 2.37 n.a
Debt Ratios
Debt to Net Worth 1.58 0.57 0.29 n.a
Current Liab. to Liab. 0.55 0.61 0.70 n.a
Liquidity Ratios
Net Working Capital $273,273 $481,266 $747,584 n.a
Interest Coverage 34.16 55.50 94.21 n.a
Additional Ratios
Assets to Sales 0.22 0.31 0.42 n.a
Current Debt/Total Assets 34% 22% 16% n.a
Acid Test 1.96 3.47 5.29 n.a
Sales/Net Worth 11.82 5.09 3.07 n.a
Dividend Payout 0.00 0.00 0.00 n.a