Chef Vending
Financial Plan
Chef Vending will meet its future needs for capital through the free cash flow generated from its operations. This will require us to be disciplined, tempered, and prudent in our operations and our growth.
7.1 Important Assumptions
The financial plan depends on important financial assumptions outlined in the following table. Key underlying assumptions are as follows:
- Industry growth trends will continue as they have for the past five years.
- Inflation will be at 3% for the next two years.
- We will access the capital we need to meet our cash needs for the first six months.
| 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 | 11.50% | 11.50% | 11.50% |
| Tax Rate | 25.42% | 25.00% | 25.42% |
| Other | 0 | 0 | 0 |
7.2 Projected Profit and Loss
Chef Vending is projected to make over $500,000 profit on $2.8 million of sales. The following table indicates how we will achieve this performance.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $2,851,450 | $3,524,392 | $4,356,149 |
| Direct Cost of Sales | $1,607,240 | $1,986,549 | $2,455,374 |
| Other | $0 | $0 | $0 |
| Total Cost of Sales | $1,607,240 | $1,986,549 | $2,455,374 |
| Gross Margin | $1,244,210 | $1,537,844 | $1,900,775 |
| Gross Margin % | 43.63% | 43.63% | 43.63% |
| Expenses | |||
| Payroll | $153,060 | $250,944 | $323,298 |
| Sales and Marketing and Other Expenses | $51,600 | $59,174 | $68,279 |
| Depreciation | $25,905 | $30,984 | $3,111 |
| Repairs & Maintanence | $6,000 | $6,180 | $6,365 |
| Commissions | $99,801 | $119,761 | $143,713 |
| Loan Repayments | $29,136 | $29,136 | $29,136 |
| Raw Materials | $7,736 | $9,670 | $12,088 |
| Freight | $64,290 | $77,148 | $92,577 |
| Office Supplies | $2,400 | $2,472 | $2,546 |
| Postage | $1,020 | $1,051 | $1,082 |
| Telephone | $9,000 | $9,270 | $9,548 |
| Utilities | $3,000 | $3,090 | $3,183 |
| Insurance | $3,600 | $3,708 | $3,819 |
| Rent | $15,972 | $25,000 | $35,000 |
| Payroll Taxes | $15,306 | $25,094 | $32,330 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $487,825 | $652,681 | $766,075 |
| Profit Before Interest and Taxes | $756,385 | $885,162 | $1,134,699 |
| EBITDA | $782,290 | $916,146 | $1,137,810 |
| Interest Expense | $15,057 | $15,790 | $14,966 |
| Taxes Incurred | $185,909 | $217,343 | $284,599 |
| Net Profit | $555,419 | $652,029 | $835,135 |
| Net Profit/Sales | 19.48% | 18.50% | 19.17% |
7.3 Key Financial Indicators
- Free cash flow to finance our growth.
- Gross margins will be an important gauge on our profitability.
- The exchange rates between the U.S. dollar and the Euro, which is tied to the Spanish Peseta.
7.4 Break-even Analysis
The following table indicates our break-even unit volume measure. An important element will be the product mix that went into the unit sales. We believe that we have outlined a conservative sales forecast that we should be able to achieve by year-end. The start-up months will be the most difficult as we attempt to break into the market, but after a three to four month successful product testing period, we should see tremendous sales, easily reaching our year-end targets.
| Break-even Analysis | |
| Monthly Units Break-even | 27 |
| Monthly Revenue Break-even | $93,166 |
| Assumptions: | |
| Average Per-Unit Revenue | $3,481.62 |
| Average Per-Unit Variable Cost | $1,962.44 |
| Estimated Monthly Fixed Cost | $40,652 |
7.5 Projected Cash Flow
We expect to manage cash flow from an initial Small Business Administration (SBA) loan of $125,000, and then through our free cash flow generated from operations.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $1,425,725 | $1,762,196 | $2,178,074 |
| Cash from Receivables | $1,046,281 | $1,672,647 | $2,067,392 |
| Subtotal Cash from Operations | $2,472,006 | $3,434,843 | $4,245,467 |
| 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 | $24,280 | $4,856 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $125,000 | $0 | $0 |
| Subtotal Cash Received | $2,621,286 | $3,439,699 | $4,245,467 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $153,060 | $250,944 | $323,298 |
| Bill Payments | $2,048,212 | $2,707,861 | $3,214,920 |
| Subtotal Spent on Operations | $2,201,272 | $2,958,805 | $3,538,217 |
| 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 | $9,600 | $9,600 | $9,600 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $60,000 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| Subtotal Cash Spent | $2,270,872 | $2,968,405 | $3,547,817 |
| Net Cash Flow | $350,414 | $471,294 | $697,649 |
| Cash Balance | $375,414 | $846,708 | $1,544,358 |
7.6 Projected Balance Sheet
Our Balance Sheet projections are presented in the table below.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $375,414 | $846,708 | $1,544,358 |
| Accounts Receivable | $379,444 | $468,992 | $579,675 |
| Inventory | $243,705 | $301,219 | $372,307 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $998,563 | $1,616,920 | $2,496,339 |
| Long-term Assets | |||
| Long-term Assets | $60,000 | $60,000 | $60,000 |
| Accumulated Depreciation | $25,905 | $56,889 | $60,000 |
| Total Long-term Assets | $34,095 | $3,111 | ($0) |
| Total Assets | $1,032,658 | $1,620,031 | $2,496,339 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $277,551 | $217,640 | $268,413 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $277,551 | $217,640 | $268,413 |
| Long-term Liabilities | $139,680 | $134,936 | $125,336 |
| Total Liabilities | $417,231 | $352,576 | $393,749 |
| Paid-in Capital | $154,500 | $154,500 | $154,500 |
| Retained Earnings | ($94,492) | $460,927 | $1,112,956 |
| Earnings | $555,419 | $652,029 | $835,135 |
| Total Capital | $615,427 | $1,267,456 | $2,102,590 |
| Total Liabilities and Capital | $1,032,658 | $1,620,031 | $2,496,339 |
| Net Worth | $615,427 | $1,267,456 | $2,102,590 |
7.7 Business Ratios
The computed standard Business Ratios are presented in the table below. Industry Profile ratios are based on Standard Industry Classification (SIC) code, 5962.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 23.60% | 23.60% | -1.30% |
| Percent of Total Assets | ||||
| Accounts Receivable | 36.74% | 28.95% | 23.22% | 19.20% |
| Inventory | 23.60% | 18.59% | 14.91% | 36.00% |
| Other Current Assets | 0.00% | 0.00% | 0.00% | 24.80% |
| Total Current Assets | 96.70% | 99.81% | 100.00% | 80.00% |
| Long-term Assets | 3.30% | 0.19% | 0.00% | 20.00% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 26.88% | 13.43% | 10.75% | 36.40% |
| Long-term Liabilities | 13.53% | 8.33% | 5.02% | 11.70% |
| Total Liabilities | 40.40% | 21.76% | 15.77% | 48.10% |
| Net Worth | 59.60% | 78.24% | 84.23% | 51.90% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 43.63% | 43.63% | 43.63% | 38.00% |
| Selling, General & Administrative Expenses | 24.15% | 25.32% | 25.21% | 22.60% |
| Advertising Expenses | 0.83% | 0.81% | 0.79% | 3.00% |
| Profit Before Interest and Taxes | 26.53% | 25.12% | 26.05% | 1.90% |
| Main Ratios | ||||
| Current | 3.60 | 7.43 | 9.30 | 2.18 |
| Quick | 2.72 | 6.05 | 7.91 | 0.89 |
| Total Debt to Total Assets | 40.40% | 21.76% | 15.77% | 48.10% |
| Pre-tax Return on Net Worth | 120.46% | 68.59% | 53.25% | 4.30% |
| Pre-tax Return on Assets | 71.79% | 53.66% | 44.86% | 8.20% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 19.48% | 18.50% | 19.17% | n.a |
| Return on Equity | 90.25% | 51.44% | 39.72% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 3.76 | 3.76 | 3.76 | n.a |
| Collection Days | 56 | 88 | 88 | n.a |
| Inventory Turnover | 10.91 | 7.29 | 7.29 | n.a |
| Accounts Payable Turnover | 8.37 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 34 | 27 | n.a |
| Total Asset Turnover | 2.76 | 2.18 | 1.75 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.68 | 0.28 | 0.19 | n.a |
| Current Liab. to Liab. | 0.67 | 0.62 | 0.68 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $721,012 | $1,399,281 | $2,227,926 | n.a |
| Interest Coverage | 50.24 | 56.06 | 75.82 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.36 | 0.46 | 0.57 | n.a |
| Current Debt/Total Assets | 27% | 13% | 11% | n.a |
| Acid Test | 1.35 | 3.89 | 5.75 | n.a |
| Sales/Net Worth | 4.63 | 2.78 | 2.07 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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