50%-70% of sales are projected as credit card sales, in-line with actual experience of retail liquor stores in Boston.
Credit card collection is typically short, and this plan assumes an one day collection time.
The payment days estimate ranges from 30 days to 28 days. Distributors terms are 30 days, although substantial discounts can be secured with earlier payments.
The long-term interest rate basis is the current SBA guideline of prime plus 2.25% for a seven year loan.
The short-term interest rate basis is the fed funds rate plus 2.5%
Distributors reward volume purchases with lower costs. The company plans to take advantage of distributors' volume discounts, and will pass along these savings to consumers in the form of sales and special promotions to stimulate loyalty and further growth. Gross margins will be maintained in the 30-33% range, which would put our business in-line with the competition in the Boston metro area.
As the business grows, our investment in inventory increases. This reflects sales volume increases and the commensurate ability to secure favorable volume discount terms with our distributors.
The projected accounts receivable position is relatively low and steady due to the nature of the business, in which up to 50% of our sales are cash, and the balance are consumer credit card purchases. No other consumer credit terms are envisioned or necessary for the operation of this business.
Capital assets of $235K are comprised of a quoted $100-$130k for the build-out of the store (depreciating straight line over the 15 year term of the lease), $75k for start-up costs (amortized over five years), and $50k for the landlord's security deposit (about eight months rent).
Long-term liabilities are projected to decrease steadily, reflecting re-payment of the original seven year term loan required to finance the business.
It is important to note that part of the retained earnings may become a distribution of capital to the owners, while the balance would be reinvested in the business to replenish depreciated assets and to support further growth.
Since this is a start-up operation, a steady increase in sales is forecast over three years, as consumer awareness and regular repeat business grows with a strong and consistent increase in the population of Southside Towers, from an initial 3,000 residents to about 17,000 residents upon completion. A solid business plan and the management skills and experience of the managing partners should be sufficient to orchestrate the necessary growth to make this a successful launch with steady increases in sales over the first three years.
Operating expenses are based on an assessment of operational needs for a store of this size. Observations of Boston retail wine shop staffing, direct experience at Liberty and Star City wine stores, and interviews with store owners and suppliers are the basis for these projections. Rent is based on negotiated lease agreement with the landlord. Other estimates are based on experience in operating a 4,000 square foot Boston storefront business, and on vendor quotes and estimates.
Collection days should remain fairly short, given the substantial cash revenues, and standard credit card collection periods.
The following table presents the profit and loss figures for Vino Maestro.
We are positioning ourselves in the market as a medium-risk concern with steady cash flows. Accounts payable is paid at the end of each month while sales are in cash and short-term credit card collectibles. Cash balances will be used to reduce outstanding line of credit balances, or will be invested in a low-risk liquid money market fund to decrease the opportunity cost of cash held. Surplus cash balances during the critical first year of operations will function as protection against unforeseen changes in the timing of disbursements required to fund operations.