Business Plan

Business Plan

Financial

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.

General assumptions

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.

General assumptions

Plan per year                 year one                      year two              year three

Sales rate %                            10                              10                          10

Tax rate %                              30                              30                          30

Other                                       0                                 0                            0

Financial indicators

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%

Expenses

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 Received

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

Assets

Current Assets

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

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

Current Liabilities

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
Break-even analysis

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

Assumptions

Average percent variable cost                                                       25%

Estimated monthly fixed cost                                                     $1500

Harvest Strategy

            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.

Appendix

            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.

References

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