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Religious Coffeeshop Business Plan

Inspirational Grounds

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Financial Plan

8.0 Financial Plan

Inspirational Grounds is basing projected sales on the market research, industry analysis and proximity of other coffee houses in the area. We are looking to obtain a modest .1% of the market share.

The cost of goods sold is based on the price list of Espresso Services, Inc., and is consistent with costs in the coffee and espresso industry. The cost of the bakery items and candies is 50% of the selling price.

Inspirational Grounds will use its POS System to keep cash flow and sales goals on track, and to indicate which marketing efforts are worth the investment. We expect sales to easily exceed the break-even point from the first month onward. The following sections outline our projected Profit and loss, Cash Flow, and Balance Sheet.

8.1 Important Assumptions

We do not sell anything on credit. The personnel burden is very low because part-time workers receive no benefits. The long-term interest rate is extraordinarily low because of the MCDA business programme which loans money to start-up ventures at a 2% annual interest rate.

Inspirational Grounds will obtain employees through MCDA's community reinvestment programmes, which further establishes our commitment to the community, and raises community awareness of our presence and purpose. We will also look to local seminaries to involve their students in a internship capacity.

General Assumptions

General Assumptions
	FY 2006	FY 2007	FY 2008
Plan Month	1	2	3
Current Interest Rate	8.75%	8.75%	8.75%
Long-term Interest Rate	2.00%	2.00%	2.00%
Tax Rate	25.00%	25.00%	25.00%
Other	0	0	0

8.2 Break-even Analysis
For our break-even analysis, we assume fixed costs of approximately £11,650 per month, which includes our full payroll, rent, and utilities, and an estimation of other running costs.

The chart shows that we need to sell about £15,000 per month to break-even, according to these assumptions. Our conservative projections will exceed the break-even point even in the first month of business.

Break-even Analysis



Break-even Analysis

Break-even Analysis
Monthly Revenue Break-even	£15,017
Assumptions:
Average Percent Variable Cost	22%
Estimated Monthly Fixed Cost	£11,646

8.3 Projected Profit and Loss

Projected profit and loss are depicted in the table below. Payroll expenses reflect the annual salaries of operations manager and 5 part-time baristas. Rental Expense is based on leasing 2,000 square feet at £12.50 per square foot.

We project sales and marketing expenses at £12,000 for the first year. Inspirational Grounds will depend on curiosity, established community involvement and media human interest stories to spread the word, in addition to the tradition sales and marketing tactics.

Profit and Loss

Pro Forma Profit and Loss
	FY 2006	FY 2007	FY 2008
Sales	£203,440	£220,053	£238,054
Direct Costs of Goods	£45,657	£47,014	£48,444
Other	£0	£0	£0
	------------	------------	------------
Cost of Goods Sold	£45,657	£47,014	£48,444
Gross Margin	£157,783	£173,038	£189,610
Gross Margin %	77.56%	78.63%	79.65%
Expenses
Payroll	£74,160	£76,968	£86,916
Marketing/Promotion	£12,000	£15,000	£18,000
Depreciation	£2,004	£2,000	£2,000
Leased Equipment	£3,000	£3,000	£3,000
Utilities	£4,000	£4,700	£5,800
Insurance	£1,800	£1,900	£2,000
Rent	£28,380	£31,691	£33,100
Website Hosting and Maintenance	£300	£325	£350
Payroll Taxes (National Insurance)	£11,113	£11,545	£13,037
Other	£3,000	£4,000	£4,500
	------------	------------	------------
Total Operating Expenses	£139,757	£151,129	£168,703
Profit Before Interest and Taxes	£18,026	£21,909	£20,906
EBITDA	£20,030	£23,909	£22,906
Interest Expense	£1,528	£1,400	£1,267
Taxes Incurred	£4,124	£5,127	£4,910
Net Profit	£12,373	£15,382	£14,730
Net Profit/Sales	6.08%	6.99%	6.19%

Profit Monthly



Profit Yearly



Gross Margin Monthly



Gross Margin Yearly



8.4 Projected Cash Flow
We will be a medium risk concern with steady cash flows. Sales are in cash, giving Inspirational Grounds an excellent cash structure. Solid product offerings and intelligent marketing will secure a cash balance of close to £48,000 by December 2005.
Cash Flow

Pro Forma Cash Flow
	FY 2006	FY 2007	FY 2008
Cash Received
Cash from Operations
Cash Sales	£203,440	£220,053	£238,054
Subtotal Cash from Operations	£203,440	£220,053	£238,054
Additional Cash Received
VAT, VAT, HST/GST Received	£0	£0	£0
Subtotal Cash Received	£203,440	£220,053	£238,054
Expenditures	FY 2006	FY 2007	FY 2008
Expenditures from Operations
Cash Spending	£74,160	£76,968	£86,916
Bill Payments	£102,996	£125,217	£133,830
Subtotal Spent on Operations	£177,156	£202,185	£220,746
Additional Cash Spent
VAT, VAT, HST/GST Paid Out	£0	£0	£0
Fixed liabilities Principal Repayment	£6,660	£6,660	£6,660
Purchase Other Current Assets	£0	£4,000	£4,000
Purchase Fixed assets	£0	£0	£0
Dividends	£0	£0	£0
Subtotal Cash Spent	£183,816	£212,845	£231,406
Net Cash Flow	£19,624	£7,208	£6,647
Cash Balance	£50,224	£57,432	£64,080

Cash



8.5 Projected Balance Sheet

The following table shows our projected assets and liabilities over the next three years. We anticipate a steadily increasing net worth, as we pay off our loan and sales show modest increases. The Balance Sheet also reflects new current asset purchases in years 2 and 3.

Balance Sheet

Pro Forma Balance Sheet
	FY 2006	FY 2007	FY 2008
Assets
Current Assets
Cash	£50,224	£57,432	£64,080
Stock	£4,418	£4,549	£4,688
Other Current Assets	£12,000	£16,000	£20,000
Total Current Assets	£66,642	£77,982	£88,767
Fixed assets
Fixed assets	£16,000	£16,000	£16,000
Accumulated Depreciation	£2,004	£4,004	£6,004
Total Fixed assets	£13,996	£11,996	£9,996
Total Assets	£80,638	£89,978	£98,763
Liabilities and Capital	FY 2006	FY 2007	FY 2008
Current Liabilities
Accounts Payable	£9,725	£10,343	£11,059
Current Borrowing	£0	£0	£0
Other Current Liabilities	£0	£0	£0
Subtotal Current Liabilities	£9,725	£10,343	£11,059
Fixed liabilities	£73,340	£66,680	£60,020
Total Liabilities	£83,065	£77,023	£71,079
Paid-in Capital	£15,000	£15,000	£15,000
Retained Earnings	(£29,800)	(£17,427)	(£2,045)
Earnings	£12,373	£15,382	£14,730
Total Capital	(£2,427)	£12,955	£27,685
Total Liabilities and Capital	£80,638	£89,978	£98,763
Net Worth	(£2,427)	£12,955	£27,685

8.6 Business Ratios

The following table outlines some of the more important ratios from the Coffee Shop industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 5812.

Our business will be a little different from the standard coffee shop, in that we will also sell books and music. One of the major differences between us and the rest of the industry is our asset structure - most of our assets are short-term, rather than long-term, in part because of our extra stock, but also because we will lease, rather than own, our space.

Ratios

Ratio Analysis
	FY 2006	FY 2007	FY 2008	Industry Profile
Sales Growth	0.00%	8.17%	8.18%	5.24%
Percent of Total Assets
Stock	5.48%	5.06%	4.75%	2.72%
Other Current Assets	14.88%	17.78%	20.25%	32.59%
Total Current Assets	82.64%	86.67%	89.88%	41.88%
Fixed assets	17.36%	13.33%	10.12%	58.12%
Total Assets	100.00%	100.00%	100.00%	100.00%
Current Liabilities	12.06%	11.49%	11.20%	21.75%
Fixed liabilities	90.95%	74.11%	60.77%	29.17%
Total Liabilities	103.01%	85.60%	71.97%	50.92%
Net Worth	-3.01%	14.40%	28.03%	49.08%
Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	77.56%	78.63%	79.65%	55.74%
Selling, General & Administrative Expenses	71.48%	71.64%	73.46%	37.46%
Advertising Expenses	5.90%	6.82%	7.56%	2.06%
Profit Before Interest and Taxes	8.86%	9.96%	8.78%	1.50%
Main Ratios
Current	6.85	7.54	8.03	0.81
Quick	6.40	7.10	7.60	0.51
Total Debt to Total Assets	103.01%	85.60%	71.97%	53.68%
Pre-tax Return on Net Worth	-679.90%	158.31%	70.94%	2.39%
Pre-tax Return on Assets	20.46%	22.79%	19.89%	5.16%
Additional Ratios	FY 2006	FY 2007	FY 2008
Net Profit Margin	6.08%	6.99%	6.19%	n.a
Return on Equity	0.00%	118.73%	53.20%	n.a
Activity Ratios
Stock Turnover	10.90	10.49	10.49	n.a
Accounts Payable Turnover	11.59	12.17	12.17	n.a
Payment Days	27	29	29	n.a
Total Asset Turnover	2.52	2.45	2.41	n.a
Debt Ratios
Debt to Net Worth	0.00	5.95	2.57	n.a
Current Liab. to Liab.	0.12	0.13	0.16	n.a
Liquidity Ratios
Net Working Capital	£56,917	£67,639	£77,709	n.a
Interest Coverage	11.80	15.65	16.50	n.a
Additional Ratios
Assets to Sales	0.40	0.41	0.41	n.a
Current Debt/Total Assets	12%	11%	11%	n.a
Acid Test	6.40	7.10	7.60	n.a
Sales/Net Worth	0.00	16.99	8.60	n.a
Dividend Payout	0.00	0.00	0.00	n.a