Retail Furniture Manufacturer Business Plan

The House of Pine

Financial Plan

The following is the Financial plan for The House of Pine.

7.1 Break-even Analysis

The following table and chart show our monthly sales break-even point.

Retail furniture manufacturer business plan, financial plan chart image

Break-even Analysis


Monthly Revenue Break-even	$69,767

Assumptions:
Average Percent Variable Cost	45%
Estimated Monthly Fixed Cost	$38,502

7.2 Projected Profit and Loss

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

Pro Forma Profit and Loss
	Year 1	Year 2	Year 3
Sales	$964,000	$1,000,000	$1,050,000
Direct Cost of Sales	$432,000	$430,000	$450,000
Other Production Expenses	$0	$0	$0
Total Cost of Sales	$432,000	$430,000	$450,000

Gross Margin	$532,000	$570,000	$600,000
Gross Margin %	55.19%	57.00%	57.14%


Expenses
Payroll	$300,000	$326,500	$356,000
Sales and Marketing and Other Expenses	$60,000	$60,000	$60,000
Depreciation	$11,424	$11,424	$11,424
Leased Equipment	$0	$0	$0
Utilities	$9,600	$9,600	$9,600
Insurance	$12,000	$12,000	$12,000
Rent	$24,000	$24,000	$24,000
Payroll Taxes	$45,000	$48,975	$53,400
Other	$0	$0	$0

Total Operating Expenses	$462,024	$492,499	$526,424

Profit Before Interest and Taxes	$69,976	$77,501	$73,576
EBITDA	$81,400	$88,925	$85,000
Interest Expense	$11,917	$10,001	$8,002
Taxes Incurred	$17,418	$20,250	$19,672

Net Profit	$40,641	$47,250	$45,902
Net Profit/Sales	4.22%	4.72%	4.37%

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	$723,000	$750,000	$787,500
Cash from Receivables	$198,158	$248,400	$260,278
Subtotal Cash from Operations	$921,158	$998,400	$1,047,778

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	$921,158	$998,400	$1,047,778

Expenditures	Year 1	Year 2	Year 3

Expenditures from Operations
Cash Spending	$300,000	$326,500	$356,000
Bill Payments	$539,935	$637,773	$637,056
Subtotal Spent on Operations	$839,935	$964,273	$993,056

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	$859,927	$984,265	$1,013,048

Net Cash Flow	$61,231	$14,136	$34,730
Cash Balance	$67,031	$81,167	$115,897

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	$67,031	$81,167	$115,897
Accounts Receivable	$42,842	$44,442	$46,664
Inventory	$51,700	$51,461	$53,854
Other Current Assets	$0	$0	$0
Total Current Assets	$161,573	$177,069	$216,415

Long-term Assets
Long-term Assets	$60,000	$60,000	$60,000
Accumulated Depreciation	$11,424	$22,848	$34,272
Total Long-term Assets	$48,576	$37,152	$25,728
Total Assets	$210,149	$214,221	$242,143

Liabilities and Capital	Year 1	Year 2	Year 3

Current Liabilities
Accounts Payable	$73,700	$50,514	$52,526
Current Borrowing	$0	$0	$0
Other Current Liabilities	$0	$0	$0
Subtotal Current Liabilities	$73,700	$50,514	$52,526

Long-term Liabilities	$110,008	$90,016	$70,024
Total Liabilities	$183,708	$140,530	$122,550

Paid-in Capital	$50,000	$50,000	$50,000
Retained Earnings	($64,200)	($23,559)	$23,691
Earnings	$40,641	$47,250	$45,902
Total Capital	$26,441	$73,691	$119,593
Total Liabilities and Capital	$210,149	$214,221	$242,143

Net Worth	$26,441	$73,691	$119,593

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 5712, Furniture Stores, are shown for comparison.

The following is an explanation of the plans divergence with industry ratio profile.

Sales Growth – will start below the industry average but will be closer to the average after the third year of operation.
Accounts Receivable – is slightly below average due to the low use of credit for purchases (25%).
Inventory – is below the industry average because 20% of the furniture will be built to order.
Long Term Assets, Long Term Liabilities, and Expense of Sales – are higher because The House Of Pine builds furniture on site.

Ratio Analysis
	Year 1	Year 2	Year 3	Industry Profile
Sales Growth	0.00%	3.73%	5.00%	6.20%

Percent of Total Assets
Accounts Receivable	20.39%	20.75%	19.27%	21.00%
Inventory	24.60%	24.02%	22.24%	38.80%
Other Current Assets	0.00%	0.00%	0.00%	21.70%
Total Current Assets	76.88%	82.66%	89.37%	81.50%
Long-term Assets	23.12%	17.34%	10.63%	18.50%
Total Assets	100.00%	100.00%	100.00%	100.00%

Current Liabilities	35.07%	23.58%	21.69%	44.90%
Long-term Liabilities	52.35%	42.02%	28.92%	13.70%
Total Liabilities	87.42%	65.60%	50.61%	58.60%
Net Worth	12.58%	34.40%	49.39%	41.40%

Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	55.19%	57.00%	57.14%	37.60%
Selling, General & Administrative Expenses	50.97%	52.28%	52.77%	20.80%
Advertising Expenses	6.22%	6.00%	5.71%	4.40%
Profit Before Interest and Taxes	7.26%	7.75%	7.01%	1.60%

Main Ratios
Current	2.19	3.51	4.12	1.82
Quick	1.49	2.49	3.09	0.76
Total Debt to Total Assets	87.42%	65.60%	50.61%	58.60%
Pre-tax Return on Net Worth	219.58%	91.60%	54.83%	3.80%
Pre-tax Return on Assets	27.63%	31.51%	27.08%	9.20%

Additional Ratios	Year 1	Year 2	Year 3
Net Profit Margin	4.22%	4.72%	4.37%	n.a
Return on Equity	153.70%	64.12%	38.38%	n.a

Activity Ratios
Accounts Receivable Turnover	5.63	5.63	5.63	n.a
Collection Days	57	64	63	n.a
Inventory Turnover	10.73	8.34	8.55	n.a
Accounts Payable Turnover	8.33	12.17	12.17	n.a
Payment Days	27	37	29	n.a
Total Asset Turnover	4.59	4.67	4.34	n.a

Debt Ratios
Debt to Net Worth	6.95	1.91	1.02	n.a
Current Liab. to Liab.	0.40	0.36	0.43	n.a

Liquidity Ratios
Net Working Capital	$87,873	$126,555	$163,889	n.a
Interest Coverage	5.87	7.75	9.19	n.a

Additional Ratios
Assets to Sales	0.22	0.21	0.23	n.a
Current Debt/Total Assets	35%	24%	22%	n.a
Acid Test	0.91	1.61	2.21	n.a
Sales/Net Worth	36.46	13.57	8.78	n.a
Dividend Payout	0.00	0.00	0.00	n.a