Jasmine Teahouse
Financial Plan
Our Financial Plan is based on sound research into similar businesses in similar communities, and cost estimates obtained for equipment, rent, and other operating expenses. As an owner-operated business, we have some leeway in adjusting our own compensation if sales are low in a given month, but our forecasts are conservative. Our top financial priorities in the first three years are repaying our long-term loan, paying our employees fairly, covering our expenses on time, and generating a modest profit.
We are opening this shop because we love tea, we love tea drinkers, and we will enjoy all the hard work we must do to maintain the business. We do not expect to get rich doing this, but we do anticipate steadily increasing profits and net worth as Jasmine Teahouse becomes well-known and establishes a loyal clientele.
Sales growth will be aggressive the first 18 months as we sharpen our merchandise assortment, size scales, and stock levels to better meet our customer’s requirements. We anticipate a sales increase of roughly 10% during our second year of operation.
Marketing expenses are budgeted at approximately 3% of total sales.
We will invest residual profits into reducing debt.
Company expansion, while not a necessity, will be an option if sales projections are met and/or exceeded. The location we have chosen contains an additional area we can annex for extra seating if and when it becomes necessary, for a small additional rental charge.
7.1 Important Assumptions
Tax and interest rate assumptions for this plan are on the following table. In addition, there are some non-financial assumptions guiding our forecasts. We assume:
- No other teahouses opening in Simsbury in the next year. (A safe assumption)
- A continued gradual increase in the population and socio-economic class of the Simsbury area.
- Continued tourist interest in our area.
- Increasing consumer interest in tea and other “health” foods.
- That premium chocolates will continue to symbolize luxury and romance as gift choices.
General Assumptions | |||
Year 1 | Year 2 | Year 3 | |
Plan Month | 1 | 2 | 3 |
Current Interest Rate | 9.50% | 9.50% | 9.50% |
Long-term Interest Rate | 9.25% | 9.25% | 9.25% |
Tax Rate | 30.00% | 30.00% | 30.00% |
Other | 0 | 0 | 0 |
7.2 Break-even Analysis
Our break-even analysis is based on our cost and price structure for the first year. As we grow, the fixed costs will grow in proportion to the number of employees. We should surpass our Break-even point early on.

Break-even Analysis | |
Monthly Revenue Break-even | $11,612 |
Assumptions: | |
Average Percent Variable Cost | 41% |
Estimated Monthly Fixed Cost | $6,883 |
7.3 Projected Profit and Loss
The following table shows our profit and loss projections for the next three years. We will become profitable early in the first year, with net profits continuing to rise as sales increase. Sales and Marketing expenses include the costs of all advertisements, plus promotions like the monthly tastings and 1/2 off coupons for tourists. Depreciation reflects a straight-line depreciation of our long-term assets over 10 years.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $194,245 | $211,120 | $228,204 |
Direct Cost of Sales | $79,110 | $85,148 | $87,612 |
Other Costs of Goods | $0 | $0 | $0 |
Total Cost of Sales | $79,110 | $85,148 | $87,612 |
Gross Margin | $115,135 | $125,972 | $140,592 |
Gross Margin % | 59.27% | 59.67% | 61.61% |
Expenses | |||
Payroll | $43,600 | $56,000 | $63,500 |
Marketing/Promotion | $5,400 | $6,000 | $6,000 |
Depreciation | $1,380 | $1,380 | $1,380 |
Rent | $18,000 | $19,000 | $20,000 |
Utilities | $8,010 | $8,200 | $8,600 |
Monthly disposable supplies | $1,200 | $1,200 | $1,200 |
Insurance | $5,000 | $5,000 | $5,000 |
Payroll Taxes | $0 | $0 | $0 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $82,590 | $96,780 | $105,680 |
Profit Before Interest and Taxes | $32,545 | $29,192 | $34,912 |
EBITDA | $33,925 | $30,572 | $36,292 |
Interest Expense | $4,513 | $3,721 | $2,894 |
Taxes Incurred | $8,410 | $7,641 | $9,606 |
Net Profit | $19,622 | $17,830 | $22,413 |
Net Profit/Sales | 10.10% | 8.45% | 9.82% |
7.4 Projected Cash Flow
Our projected cash flow is outlined in the following chart and table. The table shows our planned loan principal repayment. We will be responsible for collecting and repaying sales tax at the 6% rate charged by Connecticut.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $194,245 | $211,120 | $228,204 |
Subtotal Cash from Operations | $194,245 | $211,120 | $228,204 |
Additional Cash Received | |||
Sales Tax, VAT, HST/GST Received | $11,655 | $12,667 | $13,692 |
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 | $205,900 | $223,787 | $241,896 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $43,600 | $56,000 | $63,500 |
Bill Payments | $117,261 | $135,040 | $140,758 |
Subtotal Spent on Operations | $160,861 | $191,040 | $204,258 |
Additional Cash Spent | |||
Sales Tax, VAT, HST/GST Paid Out | $11,655 | $12,667 | $13,692 |
Principal Repayment of Current Borrowing | $0 | $0 | $0 |
Other Liabilities Principal Repayment | $0 | $0 | $0 |
Long-term Liabilities Principal Repayment | $8,938 | $8,938 | $8,938 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $0 | $0 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $181,453 | $212,645 | $226,888 |
Net Cash Flow | $24,446 | $11,142 | $15,008 |
Cash Balance | $39,446 | $50,589 | $65,597 |
7.5 Projected Balance Sheet
All of our tables will be updated monthly to reflect past performance and future assumptions. Future assumptions will not be based on past performance but rather economic cycle activity, regional industry strength, and future cash flow possibilities. We expect solid growth in Jasmine Teahouse beyond the year 2005.
The accompanying pro forma Balance Sheet shows our steadily increasing net worth, as we pay off our loans.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $39,446 | $50,589 | $65,597 |
Inventory | $7,400 | $7,964 | $8,195 |
Other Current Assets | $6,605 | $6,605 | $6,605 |
Total Current Assets | $53,451 | $65,158 | $80,397 |
Long-term Assets | |||
Long-term Assets | $13,808 | $13,808 | $13,808 |
Accumulated Depreciation | $1,380 | $2,760 | $4,140 |
Total Long-term Assets | $12,428 | $11,048 | $9,668 |
Total Assets | $65,879 | $76,206 | $90,065 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $9,782 | $11,217 | $11,601 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $9,782 | $11,217 | $11,601 |
Long-term Liabilities | $44,695 | $35,757 | $26,819 |
Total Liabilities | $54,477 | $46,974 | $38,420 |
Paid-in Capital | $10,330 | $10,330 | $10,330 |
Retained Earnings | ($18,550) | $1,072 | $18,902 |
Earnings | $19,622 | $17,830 | $22,413 |
Total Capital | $11,402 | $29,232 | $51,645 |
Total Liabilities and Capital | $65,879 | $76,206 | $90,065 |
Net Worth | $11,402 | $29,232 | $51,645 |
7.6 Business Ratios
Business ratios for the next three years are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5812, Eating Places (including cafes and tearooms), are shown for comparison.
The following table outlines some of the more important ratios from the Eating Places industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 5812.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 8.69% | 8.09% | 5.24% |
Percent of Total Assets | ||||
Inventory | 11.23% | 10.45% | 9.10% | 2.72% |
Other Current Assets | 10.03% | 8.67% | 7.33% | 32.59% |
Total Current Assets | 81.14% | 85.50% | 89.27% | 41.88% |
Long-term Assets | 18.86% | 14.50% | 10.73% | 58.12% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 14.85% | 14.72% | 12.88% | 21.75% |
Long-term Liabilities | 67.84% | 46.92% | 29.78% | 29.17% |
Total Liabilities | 82.69% | 61.64% | 42.66% | 50.92% |
Net Worth | 17.31% | 38.36% | 57.34% | 49.08% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 59.27% | 59.67% | 61.61% | 55.74% |
Selling, General & Administrative Expenses | 52.78% | 52.47% | 50.50% | 37.46% |
Advertising Expenses | 0.00% | 0.00% | 0.00% | 2.06% |
Profit Before Interest and Taxes | 16.75% | 13.83% | 15.30% | 1.50% |
Main Ratios | ||||
Current | 5.46 | 5.81 | 6.93 | 0.81 |
Quick | 4.71 | 5.10 | 6.22 | 0.51 |
Total Debt to Total Assets | 82.69% | 61.64% | 42.66% | 53.68% |
Pre-tax Return on Net Worth | 245.84% | 87.13% | 62.00% | 2.39% |
Pre-tax Return on Assets | 42.55% | 33.42% | 35.55% | 5.16% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 10.10% | 8.45% | 9.82% | n.a |
Return on Equity | 172.09% | 60.99% | 43.40% | n.a |
Activity Ratios | ||||
Inventory Turnover | 10.67 | 11.08 | 10.84 | n.a |
Accounts Payable Turnover | 12.99 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 28 | 30 | n.a |
Total Asset Turnover | 2.95 | 2.77 | 2.53 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 4.78 | 1.61 | 0.74 | n.a |
Current Liab. to Liab. | 0.18 | 0.24 | 0.30 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $43,669 | $53,941 | $68,796 | n.a |
Interest Coverage | 7.21 | 7.85 | 12.06 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.34 | 0.36 | 0.39 | n.a |
Current Debt/Total Assets | 15% | 15% | 13% | n.a |
Acid Test | 4.71 | 5.10 | 6.22 | n.a |
Sales/Net Worth | 17.04 | 7.22 | 4.42 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |