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One, Two, Step!

Financial Plan

Sales growth will be aggressive the first 18 months as we sharpen our merchandise assortment, size scales, and stock levels to better meet our customers’ requirements.

However, it is expected that One, Two, Step! will become profitable in the first year, but not excessively so. This is partly due to our lower overall sales price for merchandise, compared to our competitors, but also due to the fact that all our sales must come from customers lured away from other retailers. Once we have a solid customer base, we can increase our margins slightly without risk of losing customers.

Break-even Analysis

Our break-even analysis is summarized by the following chart and table. In order to break even, we must sell at least $7,312 of shoes and accessories per month. We should easily sell more than this even in our first month.

Womens boutique shoe store business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even $6,585
Assumptions:
Average Percent Variable Cost 63%
Estimated Monthly Fixed Cost $2,436

Projected Profit and Loss

The following table and charts show our profitability for the next three years, and detail our operating expenses. these include a portion of the mortgage for my house, for the spaces which will be dedicated solely to business operations.

 

 

 

Womens boutique shoe store business plan, financial plan chart image

Womens boutique shoe store business plan, financial plan chart image

Womens boutique shoe store business plan, financial plan chart image

Womens boutique shoe store business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $107,859 $111,094 $114,427 $117,859 $121,396
Direct Cost of Sales $67,951 $69,989 $72,089 $68,405 $64,468
Other Costs of Sales $0 $0 $0 $0 $0
Total Cost of Sales $67,951 $69,989 $72,089 $68,405 $64,468
Gross Margin $39,908 $41,105 $42,338 $49,454 $56,928
Gross Margin % 37.00% 37.00% 37.00% 41.96% 46.89%
Expenses
Payroll $21,510 $21,600 $21,700 $21,700 $21,700
Marketing/Promotion $2,375 $1,500 $2,000 $2,500 $2,750
Depreciation $0 $0 $0 $0 $0
Mortgage %/Rent $1,800 $1,800 $1,800 $1,800 $1,800
Utilities $960 $1,000 $1,100 $1,200 $1,300
Insurance $1,800 $1,850 $2,000 $2,200 $2,250
Website maintenance $372 $375 $375 $375 $375
POS contract/fees $420 $450 $450 $450 $450
Payroll taxes $0 $0 $0 $0 $0
Total Operating Expenses $29,237 $28,575 $29,425 $30,225 $30,625
Profit Before Interest and Taxes $10,671 $12,530 $12,913 $19,229 $26,303
EBITDA $10,671 $12,530 $12,913 $19,229 $26,303
Interest Expense $2,274 $1,875 $1,459 $1,042 $626
Taxes Incurred $2,519 $3,196 $3,436 $5,456 $7,703
Net Profit $5,878 $7,458 $8,018 $12,731 $17,974
Net Profit/Sales 5.45% 6.71% 7.01% 10.80% 14.81%

Start-up Funding

I will be investing $10,000 in the business, and am seeking another $25,000 in SBA long-term loans, to be repaid over six years.

Start-up Funding
Start-up Expenses to Fund $5,000
Start-up Assets to Fund $30,000
Total Funding Required $35,000
Assets
Non-cash Assets from Start-up $20,000
Cash Requirements from Start-up $10,000
Additional Cash Raised $0
Cash Balance on Starting Date $10,000
Total Assets $30,000
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $25,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $25,000
Capital
Planned Investment
Owner $10,000
Investor $0
Additional Investment Requirement $0
Total Planned Investment $10,000
Loss at Start-up (Start-up Expenses) ($5,000)
Total Capital $5,000
Total Capital and Liabilities $30,000
Total Funding $35,000

Projected Cash Flow

Our projected cash flow is outlined in the following chart and table. The table lists sales tax collected and paid out, as well as repayment of the loan we are seeking.

Womens boutique shoe store business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $107,859 $111,094 $114,427 $117,859 $121,396
Subtotal Cash from Operations $107,859 $111,094 $114,427 $117,859 $121,396
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0
Subtotal Cash Received $107,859 $111,094 $114,427 $117,859 $121,396
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $21,510 $21,600 $21,700 $21,700 $21,700
Bill Payments $70,868 $82,102 $84,729 $82,123 $81,093
Subtotal Spent on Operations $92,378 $103,702 $106,429 $103,823 $102,793
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $4,164 $4,165 $4,165 $4,165 $4,165
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0
Subtotal Cash Spent $96,542 $107,867 $110,594 $107,988 $106,958
Net Cash Flow $11,317 $3,227 $3,833 $9,871 $14,438
Cash Balance $21,317 $24,544 $28,377 $38,248 $52,686

Important Assumptions

I assume that the economic conditions will improve in the next two to three years. Therefore, business will be good in year one, but years two and years three.  One, Two, Step! will be very successful.

General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0

Projected Balance Sheet

The table below outlines the projected balance sheet. While, as a retail store, we have no plans for long-term assets, we will have a healthy cash balance, growing over the next five years. We plan to pay off our loan within six years, and increase the net worth of the business from $5,000 at start-up to over $15,000 by the end of five years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $21,317 $24,544 $28,377 $38,248 $52,686
Inventory $13,255 $12,111 $12,475 $10,905 $10,208
Other Current Assets $5,000 $5,000 $5,000 $5,000 $5,000
Total Current Assets $39,573 $41,655 $45,852 $54,154 $67,894
Long-term Assets
Long-term Assets $0 $0 $0 $0 $0
Accumulated Depreciation $0 $0 $0 $0 $0
Total Long-term Assets $0 $0 $0 $0 $0
Total Assets $39,573 $41,655 $45,852 $54,154 $67,894
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $7,859 $6,649 $6,992 $6,728 $6,660
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $7,859 $6,649 $6,992 $6,728 $6,660
Long-term Liabilities $20,836 $16,671 $12,506 $8,341 $4,176
Total Liabilities $28,695 $23,320 $19,498 $15,069 $10,836
Paid-in Capital $10,000 $10,000 $10,000 $10,000 $10,000
Retained Earnings ($5,000) $878 $8,336 $16,354 $29,084
Earnings $5,878 $7,458 $8,018 $12,731 $17,974
Total Capital $10,878 $18,336 $26,354 $39,084 $57,059
Total Liabilities and Capital $39,573 $41,655 $45,852 $54,154 $67,894
Net Worth $10,878 $18,336 $26,354 $39,084 $57,059

Business Ratios

One, Two, Step!’s ratios can be seen in the table below. For comparison, we have included standard business ratios for the Miscellaneous retails stores industry, SIC Code 5999.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth n.a. 3.00% 3.00% 3.00% 3.00% 2.79%
Percent of Total Assets
Inventory 33.50% 29.08% 27.21% 20.14% 15.03% 33.69%
Other Current Assets 12.64% 12.00% 10.90% 9.23% 7.36% 24.88%
Total Current Assets 100.00% 100.00% 100.00% 100.00% 100.00% 75.34%
Long-term Assets 0.00% 0.00% 0.00% 0.00% 0.00% 24.66%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 19.86% 15.96% 15.25% 12.42% 9.81% 37.95%
Long-term Liabilities 52.65% 40.02% 27.27% 15.40% 6.15% 16.70%
Total Liabilities 72.51% 55.98% 42.52% 27.83% 15.96% 54.65%
Net Worth 27.49% 44.02% 57.48% 72.17% 84.04% 45.35%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 37.00% 37.00% 37.00% 41.96% 46.89% 31.49%
Selling, General & Administrative Expenses 31.55% 30.29% 29.99% 31.16% 32.09% 18.95%
Advertising Expenses 0.00% 0.00% 0.00% 0.00% 0.00% 1.80%
Profit Before Interest and Taxes 9.89% 11.28% 11.28% 16.32% 21.67% 1.05%
Main Ratios
Current 5.04 6.27 6.56 8.05 10.20 1.77
Quick 3.35 4.44 4.77 6.43 8.66 0.70
Total Debt to Total Assets 72.51% 55.98% 42.52% 27.83% 15.96% 61.43%
Pre-tax Return on Net Worth 77.19% 58.11% 43.46% 46.53% 45.00% 2.23%
Pre-tax Return on Assets 21.22% 25.58% 24.98% 33.58% 37.82% 5.78%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin 5.45% 6.71% 7.01% 10.80% 14.81% n.a
Return on Equity 54.03% 40.68% 30.42% 32.57% 31.50% n.a
Activity Ratios
Inventory Turnover 5.95 5.52 5.86 5.85 6.11 n.a
Accounts Payable Turnover 10.02 12.17 12.17 12.17 12.17 n.a
Payment Days 27 33 29 31 30 n.a
Total Asset Turnover 2.73 2.67 2.50 2.18 1.79 n.a
Debt Ratios
Debt to Net Worth 2.64 1.27 0.74 0.39 0.19 n.a
Current Liab. to Liab. 0.27 0.29 0.36 0.45 0.61 n.a
Liquidity Ratios
Net Working Capital $31,714 $35,007 $38,860 $47,425 $61,235 n.a
Interest Coverage 4.69 6.68 8.85 18.45 42.03 n.a
Additional Ratios
Assets to Sales 0.37 0.37 0.40 0.46 0.56 n.a
Current Debt/Total Assets 20% 16% 15% 12% 10% n.a
Acid Test 3.35 4.44 4.77 6.43 8.66 n.a
Sales/Net Worth 9.92 6.06 4.34 3.02 2.13 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a