Pottery Studio Business Plan

The Pottery Table

Financial Plan

The following is the financial plan for The Pottery Table.

7.1 Break-even Analysis

The monthly break-even point is shown in the table and chart below.

Pottery studio business plan, financial plan chart image

Break-even Analysis


Monthly Revenue Break-even	$9,426

Assumptions:
Average Percent Variable Cost	14%
Estimated Monthly Fixed Cost	$8,070

7.2 Projected Profit and Loss

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

Pro Forma Profit and Loss
	Year 1	Year 2	Year 3
Sales	$109,918	$164,300	$201,200
Direct Cost of Sales	$15,819	$22,350	$26,800
Other Production Expenses	$0	$0	$0
Total Cost of Sales	$15,819	$22,350	$26,800

Gross Margin	$94,099	$141,950	$174,400
Gross Margin %	85.61%	86.40%	86.68%


Expenses
Payroll	$69,000	$95,000	$106,000
Sales and Marketing and Other Expenses	$1,200	$1,500	$1,500
Depreciation	$4,284	$4,282	$4,282
Leased Equipment	$0	$0	$0
Utilities	$2,400	$2,400	$2,400
Insurance	$1,200	$0	$0
Rent	$8,400	$8,400	$8,400
Payroll Taxes	$10,350	$14,250	$15,900
Other	$0	$0	$0

Total Operating Expenses	$96,834	$125,832	$138,482

Profit Before Interest and Taxes	($2,735)	$16,118	$35,918
EBITDA	$1,549	$20,400	$40,200
Interest Expense	$924	$751	$585
Taxes Incurred	$0	$4,610	$10,600

Net Profit	($3,659)	$10,757	$24,733
Net Profit/Sales	-3.33%	6.55%	12.29%

7.3 Projected Cash Flow

The following table and chart highlight the projected cash flow for three years.

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

Cash from Operations
Cash Sales	$109,918	$164,300	$201,200
Subtotal Cash from Operations	$109,918	$164,300	$201,200

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	$109,918	$164,300	$201,200

Expenditures	Year 1	Year 2	Year 3

Expenditures from Operations
Cash Spending	$69,000	$95,000	$106,000
Bill Payments	$31,216	$54,225	$65,702
Subtotal Spent on Operations	$100,216	$149,225	$171,702

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	$1,660	$1,660	$1,660
Purchase Other Current Assets	$0	$0	$0
Purchase Long-term Assets	$0	$0	$0
Dividends	$0	$0	$0
Subtotal Cash Spent	$101,876	$150,885	$173,362

Net Cash Flow	$8,042	$13,415	$27,838
Cash Balance	$21,942	$35,357	$63,195

7.4 Projected Balance Sheet

The following table highlights the projected balance sheet for three years.

Pro Forma Balance Sheet
	Year 1	Year 2	Year 3
Assets

Current Assets
Cash	$21,942	$35,357	$63,195
Inventory	$1,702	$2,404	$2,883
Other Current Assets	$0	$0	$0
Total Current Assets	$23,644	$37,762	$66,078

Long-term Assets
Long-term Assets	$44,000	$44,000	$44,000
Accumulated Depreciation	$4,284	$8,566	$12,848
Total Long-term Assets	$39,716	$35,434	$31,152
Total Assets	$63,360	$73,196	$97,230

Liabilities and Capital	Year 1	Year 2	Year 3

Current Liabilities
Accounts Payable	$3,779	$4,518	$5,479
Current Borrowing	$0	$0	$0
Other Current Liabilities	$0	$0	$0
Subtotal Current Liabilities	$3,779	$4,518	$5,479

Long-term Liabilities	$8,340	$6,680	$5,020
Total Liabilities	$12,119	$11,198	$10,499

Paid-in Capital	$70,000	$70,000	$70,000
Retained Earnings	($15,100)	($18,759)	($8,002)
Earnings	($3,659)	$10,757	$24,733
Total Capital	$51,241	$61,998	$86,731
Total Liabilities and Capital	$63,360	$73,196	$97,230

Net Worth	$51,241	$61,998	$86,731

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 3269, Pottery Products, are shown for comparison.

Ratio Analysis
	Year 1	Year 2	Year 3	Industry Profile
Sales Growth	0.00%	49.48%	22.46%	5.10%

Percent of Total Assets
Inventory	2.69%	3.28%	2.97%	18.40%
Other Current Assets	0.00%	0.00%	0.00%	39.20%
Total Current Assets	37.32%	51.59%	67.96%	76.70%
Long-term Assets	62.68%	48.41%	32.04%	23.30%
Total Assets	100.00%	100.00%	100.00%	100.00%

Current Liabilities	5.96%	6.17%	5.64%	34.10%
Long-term Liabilities	13.16%	9.13%	5.16%	19.80%
Total Liabilities	19.13%	15.30%	10.80%	53.90%
Net Worth	80.87%	84.70%	89.20%	46.10%

Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	85.61%	86.40%	86.68%	38.40%
Selling, General & Administrative Expenses	88.94%	79.85%	74.39%	21.60%
Advertising Expenses	1.09%	0.91%	0.75%	1.20%
Profit Before Interest and Taxes	-2.49%	9.81%	17.85%	2.80%

Main Ratios
Current	6.26	8.36	12.06	1.77
Quick	5.81	7.83	11.53	1.01
Total Debt to Total Assets	19.13%	15.30%	10.80%	53.90%
Pre-tax Return on Net Worth	-7.14%	24.79%	40.74%	3.40%
Pre-tax Return on Assets	-5.77%	20.99%	36.34%	7.40%

Additional Ratios	Year 1	Year 2	Year 3
Net Profit Margin	-3.33%	6.55%	12.29%	n.a
Return on Equity	-7.14%	17.35%	28.52%	n.a

Activity Ratios
Inventory Turnover	5.92	10.89	10.14	n.a
Accounts Payable Turnover	9.26	12.17	12.17	n.a
Payment Days	27	28	27	n.a
Total Asset Turnover	1.73	2.24	2.07	n.a

Debt Ratios
Debt to Net Worth	0.24	0.18	0.12	n.a
Current Liab. to Liab.	0.31	0.40	0.52	n.a

Liquidity Ratios
Net Working Capital	$19,865	$33,244	$60,599	n.a
Interest Coverage	-2.96	21.46	61.40	n.a

Additional Ratios
Assets to Sales	0.58	0.45	0.48	n.a
Current Debt/Total Assets	6%	6%	6%	n.a
Acid Test	5.81	7.83	11.53	n.a
Sales/Net Worth	2.15	2.65	2.32	n.a
Dividend Payout	0.00	0.00	0.00	n.a