Important assumptions and projections made when calculating the figures
In the months of November, December, January and February, the sales are expected to go down because of the weather conditions. This is because it is often a cold season; therefore, people would not drink much of the beverage in this season. On the other hand, the months of May and June the sales are expected to go up because it will be a hot season. The other months are expected to maintain a normal percentage rate of ten percent.
Plan per month Jan Feb Mar Apr may June July Aug Sept Oct Nov Dec
Sales rate % 5 5 10 10 15 15 10 10 10 10 5 5
Tax rate % 30 30 30 30 30 30 30 30 30 30 30 30
Other 0 0 0 0 0 0 0 0 0 0 0 0
During the year, the assumption is that the sales would be even in the next two years but the third it is expected to be higher since the company would have gain recognition by the customers.
Plan per year year one year two year three
Sales rate % 10 10 10
Tax rate % 30 30 30
Other 0 0 0
These are the indicators, which will show that the business is growing or not. Mostly, they are ratios for example; the gross profit margin and the inventory turn over. The others include the sales and operating expenses. Additionally, these financial indicators will be used to show when the best time is for the company to require external finance. In the company, it will be expected to acquire finances at the end of the third year because their will be enough resources for the company to ask for a long-term loan. This will be for the expansion of the business. The external finances that will be required are debts from the different suppliers of different goods.
Projected profit and loss
The expected monthly profits are expected to remain constant but the months of November, December, January and February are expected to go down even into a loss. However, after attaining the profits, the company is expected to pay us ten percent of the profit at the end of every month.
Expected monthly profits
Y axis – they are dollars in form of 1,000
Expected yearly profits
Y axis – they are dollars in form of 100,000
Projected income statement
The income statement helps us to plan on how much profits the company is expected to make by the end of the last three years.
Fresh Way Enterprise
Expected income statement for the next three years
Year 1 Year 2 Year 3
Sales $50,000 $70000 $105000
Direct Cost of Sales $12,114 $17,772 $24,227
Other Costs of Sales $0 $0 $0
Total Cost of Sales $12,114 $17,772 $24,227
Gross Margin $37886 $52228 $80,773
Gross Margin % 76% 77% 76%
Payroll $10,000 $11,000 $11,000
Marketing/Promotion $1,500 $1,450 $1,500
Depreciation $500 $500 $500
Utilities $1,660 $1,754 $1,765
Insurance $1,500 $1,210 $1,230
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $15,160 $15914 $15995
Profit before Interest and
Taxes $22726 $45300 $64,454
EBITDA $23226 $45700 $64,854
Interest Expense $4376 $2,526 $1,556
Taxes Incurred $3955 $12,355 $18,560
Net Profit $15395 $30419 $44738
Net Profit/Sales 28 % 36% 41%
Projected cash flows
The cash flows are going to show what is expected at the end of every year. In addition, they are also going to show what is expected at every end month.
Expected cash flow at the end of every month
Expected cash flow at the end of every year
Fresh Way Enterprises
Expected cash flow for the end of the next three years
Year 1 Year 2 Year 3
Cash from Operations
Cash Sales $50,000 $70,000 $105,000
Subtotal Cash from Operations $50,000 $70,000 $105,000
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 $50000 $70000 $105000 Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $10,000 $11,000 $11,000
Bill Payments $25,400 $34,900 $48,000
Subtotal Spent on Operations $35400 $46900 $59000
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $11,500 $11,500 $11,500
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 $46,900 $58,400 $70,500
Net Cash Flow $5,400 $21,600 $33,700
Cash Balance $41500 $36,800 $66,800
Projected balance sheet
The balance is used to show the expected financial position of the business after the next three years. This will show how much money the business has in total. Therefore, the balance sheet will be used to evaluate how much money the company needs in order to start.
Expected balance sheet at the end of every years
Fresh Ways Enterprises
Expected balance sheet as at the next three years
Year 1 Year 2 Year 3
Cash $41500 $36800 $66,800
Inventory $805 $1,428 $1,800
Other Current Assets $600 $600 $600
Total Current Assets $42900 $38,828 $69200
Long-term Assets $4,000 $4,000 $4,000
Accumulated Depreciation $400 $800 $1,200
Total Long-term Assets $3,600 $3,200 $2,800
Total Assets $54,500 $50,028 $72800
Liabilities and Capital Year 1 Year 2 Year 3
Accounts Payable $480 $3,089 $4,071
Current Borrowing $31,810 $21,000 $11510
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $31,000 $24,000 $14,000
Long-term Liabilities $0 $0 $0
Total Liabilities $31,000 $24,000 $14,000
Paid-in Capital $10,000 $10,000 $10,000
Retained Earnings ($36,000) ($21,300) $7,000
Earnings $14,000 $28,700 $33,000
Total Capital ($11,300) $17,200 $60,000
Total Liabilities and Capital $20,700 $42,372 $76,000
Net Worth ($11,010) $17,200 $60,500
The break-even analysis will be used to show how much the company needs in order to be able to recover the costs of preparing these beverages.
Break even analysis
Monthly revenue break-even $2000
Average percent variable cost 25%
Estimated monthly fixed cost $1500
Fresh Ways Company will not require any amount of money in the next three years from investors but it will need loans in order to fund it when it is expanding. However, incase one of the owners of the company happens to sell all his ownership rights or the company requires to include a new partner, there are necessary arrangements, which will be made to make the transfer of ownership rights to the different partners. In case the company considers selling the entity it will be after five years when the owners of the business have attained the amount of profit that they required.
The company on the other hand, has several strategies of identify different harvest opportunities like listing the company in the stock market. Additionally, it can sell the whole company to another company in the next five years for the purposes of smooth running after the owners of the company have attained their profits. In case the company will have the different investors, they investor will earn a share of the companies profits depending on their contribution to the company.
These are some of the sources that have been used in preparing the business plan and have not been included in the business plan:
American Institute of Certified Public Accountants. (2006). Analyzing financial ratios. New York, NY: American Institute of Certified Public Accountants.
IRS Corporate Financial Ratios. (2008). Schonfeld & Assoc.
Slahor, S. (January 01, 2010). Risk management is financial management. Law and Order, 58.
Saboo, B. L., Chandra, S., & Bartunia, B. (January 01, 2008). Financial management. Water and Energy International, 65, 1, 233-235.
Business Plan Handbook. (2008). Gale / Cengage Learning.
Bernstein, L. A., (2000). Analysis of financial statements. San Francisco, CA: McGraw-Hill
Bull, R. (2008). Financial ratios: How to use financial ratios to maximize value and success for your business. Oxford: CIMA.
Gibson, C., (2008). Financial Reporting and Analysis (Book Only). Belmont, CA: Cengage Learning
McKeever, M., (2010). How to Write a Business Plan. Berkeley, CA: Nolo Press
Melicher, R. W., (2010). Introduction to Finance: Markets, Investments, and Financial Management. New York, NY: John Wiley and Sons