Our biggest savings of the year
Burly Skate Shop
Financial Plan
Burly’s growth will be moderate and the cash balance will always be positive. As a retailer, we will not be selling on credit. We will accept cash, checks, and all major credit cards. TeleCheck Services will be used as the check guaranty system to help reduce the percentage of loss on bad checks. Marketing and advertising will range from 15% to 20% of sales. We will continue to reinvest residual profits into company expansion, and personnel.
8.1 Important Assumptions
Burly does not sell on credit; however, layaway is an option. We accept cash and checks, Visa, MasterCard, Discover and American Express. All sales paid via credit cards will be deposited in our business checking account within 48 hours. Our business checking account will be with a local bank. Our assumptions about loan and tax rates are listed below.
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 | 10.00% | 10.00% | 10.00% |
Tax Rate | 30.00% | 30.00% | 30.00% |
Other | 0 | 0 | 0 |
8.2 Break-even Analysis
Our break-even analysis is summarized by the following chart and table. With average monthly fixed costs for the first year of $7,284, we need to sell $13,243 of merchandise each month to break even. We will surpass this minimum amount in most months of the first year.

Break-even Analysis | |
Monthly Revenue Break-even | $12,245 |
Assumptions: | |
Average Percent Variable Cost | 45% |
Estimated Monthly Fixed Cost | $6,735 |
8.3 Projected Profit and Loss
The following chart and table indicate our projected profit and loss. We expect to make a modest profit in the first year, as we build name recognition and a loyal local clientele, with higher profits thereafter, despite increasing the personnel payments for all employees and offering health insurance by year 3.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $182,450 | $208,008 | $236,089 |
Direct Cost of Sales | $82,103 | $93,604 | $106,240 |
Other | $0 | $0 | $0 |
Total Cost of Sales | $82,103 | $93,604 | $106,240 |
Gross Margin | $100,348 | $114,404 | $129,849 |
Gross Margin % | 55.00% | 55.00% | 55.00% |
Expenses | |||
Payroll | $43,884 | $50,329 | $51,846 |
Marketing/Promotion | $9,600 | $11,040 | $12,696 |
Depreciation | $0 | $0 | $0 |
Rent | $22,500 | $23,175 | $23,870 |
Utilities | $2,700 | $2,781 | $2,865 |
Insurance | $576 | $576 | $576 |
Payroll Taxes | $0 | $0 | $0 |
Telephone | $1,560 | $1,560 | $1,560 |
Total Operating Expenses | $80,820 | $89,461 | $93,413 |
Profit Before Interest and Taxes | $19,528 | $24,943 | $36,436 |
EBITDA | $19,528 | $24,943 | $36,436 |
Interest Expense | $4,098 | $2,501 | $834 |
Taxes Incurred | $4,629 | $6,733 | $10,681 |
Net Profit | $10,801 | $15,710 | $24,922 |
Net Profit/Sales | 5.92% | 7.55% | 10.56% |
8.4 Projected Cash Flow
The following table shows projected cash flow. It includes repayment of the short-term loan principal, but does not list owners’ dividends – these are included as regular payments in the personnel table, for the purposes of this plan.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $182,450 | $208,008 | $236,089 |
Subtotal Cash from Operations | $182,450 | $208,008 | $236,089 |
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 | $182,450 | $208,008 | $236,089 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $43,884 | $50,329 | $51,846 |
Bill Payments | $84,775 | $140,330 | $158,848 |
Subtotal Spent on Operations | $128,659 | $190,659 | $210,694 |
Additional Cash Spent | |||
Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
Principal Repayment of Current Borrowing | $16,656 | $16,672 | $16,672 |
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 | $145,315 | $207,331 | $227,366 |
Net Cash Flow | $37,135 | $677 | $8,723 |
Cash Balance | $38,698 | $39,375 | $48,098 |
8.5 Projected Balance Sheet
The following table shows the projected balance sheet. It shows a steadily increasing net worth, as we gain market share and pay off our loan.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $38,698 | $39,375 | $48,098 |
Inventory | $6,237 | $7,111 | $8,071 |
Other Current Assets | $1,200 | $1,200 | $1,200 |
Total Current Assets | $46,135 | $47,686 | $57,369 |
Long-term Assets | |||
Long-term Assets | $0 | $0 | $0 |
Accumulated Depreciation | $0 | $0 | $0 |
Total Long-term Assets | $0 | $0 | $0 |
Total Assets | $46,135 | $47,686 | $57,369 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $9,227 | $11,741 | $13,174 |
Current Borrowing | $33,344 | $16,672 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $42,571 | $28,413 | $13,174 |
Long-term Liabilities | $0 | $0 | $0 |
Total Liabilities | $42,571 | $28,413 | $13,174 |
Paid-in Capital | $6,800 | $6,800 | $6,800 |
Retained Earnings | ($14,037) | ($3,236) | $12,474 |
Earnings | $10,801 | $15,710 | $24,922 |
Total Capital | $3,564 | $19,274 | $44,195 |
Total Liabilities and Capital | $46,135 | $47,686 | $57,369 |
Net Worth | $3,564 | $19,274 | $44,195 |
8.6 Business Ratios
Business ratios for the years of this plan are shown below. Industry profile ratios, for comparison, are based on the Standard Industrial Classification (SIC) code 5941, Sporting Goods and Bicycle Shops.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 14.01% | 13.50% | 4.63% |
Percent of Total Assets | ||||
Inventory | 13.52% | 14.91% | 14.07% | 36.51% |
Other Current Assets | 2.60% | 2.52% | 2.09% | 25.52% |
Total Current Assets | 100.00% | 100.00% | 100.00% | 77.61% |
Long-term Assets | 0.00% | 0.00% | 0.00% | 22.39% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 92.28% | 59.58% | 22.96% | 35.84% |
Long-term Liabilities | 0.00% | 0.00% | 0.00% | 15.20% |
Total Liabilities | 92.28% | 59.58% | 22.96% | 51.04% |
Net Worth | 7.72% | 40.42% | 77.04% | 48.96% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 55.00% | 55.00% | 55.00% | 30.04% |
Selling, General & Administrative Expenses | 47.89% | 44.52% | 41.65% | 19.81% |
Advertising Expenses | 0.00% | 0.00% | 0.00% | 1.28% |
Profit Before Interest and Taxes | 10.70% | 11.99% | 15.43% | 0.66% |
Main Ratios | ||||
Current | 1.08 | 1.68 | 4.35 | 1.90 |
Quick | 0.94 | 1.43 | 3.74 | 0.74 |
Total Debt to Total Assets | 92.28% | 59.58% | 22.96% | 56.14% |
Pre-tax Return on Net Worth | 432.95% | 116.44% | 80.56% | 1.41% |
Pre-tax Return on Assets | 33.44% | 47.06% | 62.06% | 3.22% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 5.92% | 7.55% | 10.56% | n.a |
Return on Equity | 303.07% | 81.51% | 56.39% | n.a |
Activity Ratios | ||||
Inventory Turnover | 5.97 | 14.03 | 14.00 | n.a |
Accounts Payable Turnover | 10.19 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 27 | 28 | n.a |
Total Asset Turnover | 3.95 | 4.36 | 4.12 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 11.95 | 1.47 | 0.30 | n.a |
Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $3,564 | $19,274 | $44,195 | n.a |
Interest Coverage | 4.77 | 9.97 | 43.71 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.25 | 0.23 | 0.24 | n.a |
Current Debt/Total Assets | 92% | 60% | 23% | n.a |
Acid Test | 0.94 | 1.43 | 3.74 | n.a |
Sales/Net Worth | 51.19 | 10.79 | 5.34 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |