Scrapbooking Store Business Plan

It's Scrappy!

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Financial Plan

7.0 Financial Plan

The following financial plan includes our projected Break Even Analysis, Profit and Loss, Cash Flow and Balance Sheet.

7.1 Break-even Analysis

Our break-even analysis table shows our monthly expenses and costs, and estimates what well need to sell to meet those costs.

Break-even Analysis

Break-even Analysis
Monthly Revenue Break-even	£7,667
Assumptions:
Average Percent Variable Cost	25%
Estimated Monthly Fixed Cost	£5,750

Break-even Analysis



7.2 Projected Profit and Loss

As the following table describes, it will take several months before the store can realistically turn a profit. This is in part due to the time it takes to get the word out that the store is open for business and that what it offers for local scrappers is more than what our competition offers.

Although the winter time frame can be the best for class participation, these first monthly estimates were set conservatively, when, in fact, it is hoped that the initial advertising campaign will stimulate more sales and class sign-ups than what has been projected.

Although payroll costs are high for a start-up, the owner feels it is essential to have two part-time employees to help cover the store during its open hours. If necessary, the owner is prepared to reduce her monthly salary to ease the cash flow throughout the first year of operation.

Profit and Loss

Pro Forma Profit and Loss
	2005	2006	2007
Sales	£87,150	£93,251	£99,351
Direct Costs of Goods	£21,788	£22,877	£24,021
Other Costs of Goods	£0	£0	£0
	------------	------------	------------
Cost of Goods Sold	£21,788	£22,877	£24,021
Gross Margin	£65,363	£70,374	£75,330
Gross Margin %	75.00%	75.47%	75.82%
Expenses
Payroll	£31,200	£31,200	£31,200
Sales and Marketing and Other Expenses	£6,000	£6,500	£6,500
Depreciation	£0	£0	£0
Rent	£18,000	£18,000	£18,000
Utilities	£6,000	£6,000	£6,000
Insurance	£1,800	£1,800	£1,800
Payroll Taxes (National Insurance)	£6,000	£6,000	£6,000
Other	£0	£0	£0
	------------	------------	------------
Total Operating Expenses	£69,000	£69,500	£69,500
Profit Before Interest and Taxes	(£3,638)	£874	£5,830
EBITDA	(£3,638)	£874	£5,830
Interest Expense	£644	£0	£0
Taxes Incurred	£0	£0	£0
Net Profit	(£4,282)	£874	£5,830
Net Profit/Sales	-4.91%	0.94%	5.87%

Profit Monthly



Profit Yearly



Gross Margin Monthly



Gross Margin Yearly



7.3 Projected Cash Flow

Although the initial profit margins are small, the cash flow is sufficient to cover estimated monthly expenses and stock purchases. As additional back-up, a personal loan equal to the initial cost of stock will be secured so It's Scrappy! can adapt to changes in supply costs over the first year and be more able to make special-order purchases of new supplies and materials.

Estimated sales are expected to increase during the autumn and into the second winter of operation, while costs will be held as close to the same levels as possible.

Cash Flow

Pro Forma Cash Flow
	2005	2006	2007
Cash Received
Cash from Operations
Cash Sales	£87,150	£93,251	£99,351
Subtotal Cash from Operations	£87,150	£93,251	£99,351
Additional Cash Received
VAT, VAT, HST/GST Received	£0	£0	£0
New Current Borrowing	£7,000	£0	£0
New Other Liabilities (interest-free)	£0	£0	£0
New Fixed liabilities	£0	£0	£0
Sales of Other Current Assets	£0	£0	£0
Sales of Fixed assets	£0	£0	£0
New Investment Received	£0	£0	£0
Subtotal Cash Received	£94,150	£93,251	£99,351
Expenditures	2005	2006	2007
Expenditures from Operations
Cash Spending	£31,200	£31,200	£31,200
Bill Payments	£50,455	£61,657	£62,363
Subtotal Spent on Operations	£81,655	£92,857	£93,563
Additional Cash Spent
VAT, VAT, HST/GST Paid Out	£0	£0	£0
Principal Repayment of Current Borrowing	£1,029	£1,029	£1,029
Other Liabilities Principal Repayment	£0	£0	£0
Fixed liabilities Principal Repayment	£0	£0	£0
Purchase Other Current Assets	£0	£0	£0
Purchase Fixed assets	£0	£0	£0
Dividends	£0	£0	£0
Subtotal Cash Spent	£82,684	£93,886	£94,592
Net Cash Flow	£11,466	(£636)	£4,759
Cash Balance	£12,966	£12,330	£17,089

Cash



7.4 Projected Balance Sheet

The balance sheet shows are estimated assets and liabilities.

Balance Sheet

Pro Forma Balance Sheet
	2005	2006	2007
Assets
Current Assets
Cash	£12,966	£12,330	£17,089
Stock	£2,613	£2,743	£2,880
Other Current Assets	£0	£0	£0
Total Current Assets	£15,579	£15,073	£19,969
Fixed assets
Fixed assets	£2,500	£2,500	£2,500
Accumulated Depreciation	£0	£0	£0
Total Fixed assets	£2,500	£2,500	£2,500
Total Assets	£18,079	£17,573	£22,469
Liabilities and Capital	2005	2006	2007
Current Liabilities
Accounts Payable	£5,389	£5,039	£5,134
Current Borrowing	£5,971	£4,942	£3,913
Other Current Liabilities	£0	£0	£0
Subtotal Current Liabilities	£11,360	£9,981	£9,047
Fixed liabilities	£0	£0	£0
Total Liabilities	£11,360	£9,981	£9,047
Paid-in Capital	£20,000	£20,000	£20,000
Retained Earnings	(£9,000)	(£13,282)	(£12,408)
Earnings	(£4,282)	£874	£5,830
Total Capital	£6,718	£7,592	£13,422
Total Liabilities and Capital	£18,079	£17,573	£22,469
Net Worth	£6,718	£7,592	£13,422

7.5 Business Ratios

The following comparison Ratios are taken from the Standard Industry Code for "Hobby and Craft Supplies," Standard Industrial Classification (SIC) code 5945. As the following tables shows, are estimates are within the standard ratios for this industry.

Ratios

Ratio Analysis
	2005	2006	2007	Industry Profile
Sales Growth	0.00%	7.00%	6.54%	-2.50%
Percent of Total Assets
Stock	14.45%	15.61%	12.82%	36.25%
Other Current Assets	0.00%	0.00%	0.00%	25.68%
Total Current Assets	86.17%	85.77%	88.87%	77.69%
Fixed assets	13.83%	14.23%	11.13%	22.31%
Total Assets	100.00%	100.00%	100.00%	100.00%
Current Liabilities	62.84%	56.80%	40.26%	31.11%
Fixed liabilities	0.00%	0.00%	0.00%	18.08%
Total Liabilities	62.84%	56.80%	40.26%	49.19%
Net Worth	37.16%	43.20%	59.74%	50.81%
Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	75.00%	75.47%	75.82%	32.08%
Selling, General & Administrative Expenses	54.65%	0.00%	0.00%	20.20%
Advertising Expenses	0.00%	0.00%	0.00%	1.61%
Profit Before Interest and Taxes	-4.17%	0.94%	5.87%	0.60%
Main Ratios
Current	1.37	1.51	2.21	2.17
Quick	1.14	1.24	1.89	0.83
Total Debt to Total Assets	62.84%	56.80%	40.26%	58.38%
Pre-tax Return on Net Worth	-63.73%	11.51%	43.44%	0.96%
Pre-tax Return on Assets	-23.68%	4.97%	25.95%	2.30%
Additional Ratios	2005	2006	2007
Net Profit Margin	-4.91%	0.94%	5.87%	n.a
Return on Equity	-63.73%	11.51%	43.44%	n.a
Activity Ratios
Stock Turnover	7.45	8.54	8.54	n.a
Accounts Payable Turnover	10.36	12.17	12.17	n.a
Payment Days	27	31	30	n.a
Total Asset Turnover	4.82	5.31	4.42	n.a
Debt Ratios
Debt to Net Worth	1.69	1.31	0.67	n.a
Current Liab. to Liab.	1.00	1.00	1.00	n.a
Liquidity Ratios
Net Working Capital	£4,218	£5,092	£10,922	n.a
Interest Coverage	-5.65	0.00	0.00	n.a
Additional Ratios
Assets to Sales	0.21	0.19	0.23	n.a
Current Debt/Total Assets	63%	57%	40%	n.a
Acid Test	1.14	1.24	1.89	n.a
Sales/Net Worth	12.97	12.28	7.40	n.a
Dividend Payout	0.00	0.00	0.00	n.a