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Plan Outline
Agriculture Fruit Farm Business Plan
Farmers Group
Financial Plan Summary
The following topics and tables outline our financial plan.
8.1 Start-up Funding
Funding Requirements and Uses
The company is seeking to raise of £830,000 for the purpose of financing the acquisition of the Green Acres Vegetable Farm and Mobile Farmers Vegetable Farm, facilities modifications, equipment, and funding operating expenses. Another £1,000,000 will be invested in the company by its four co-owners. The following is a breakdown of how the funds will be used:
| Breakdown of Use of Funds | |
| Acquisition: | |
| Property | £1,300,000 |
| Equipment System | £400,000 |
| Sub-total | £1,700,000 |
| Operating Expenses: | |
| Salaries | £80,000 |
| Marketing and promotion | £10,000 |
| Other operating expenses | £10,000 |
| Sub-total | £100,000 |
Total | £1,800,000 |
| Start-up Funding | |
| Start-up Expenses to Fund | £684,600 |
| Start-up Assets to Fund | £1,145,400 |
| Total Funding Required | £1,830,000 |
| Assets | |
| Non-cash Assets from Start-up | £900,000 |
| Cash Requirements from Start-up | £245,400 |
| Additional Cash Raised | £0 |
| Cash Balance on Starting Date | £245,400 |
| Total Assets | £1,145,400 |
| Liabilities and Capital | |
| Liabilities | |
| Current Borrowing | £400,000 |
| Long-term Liabilities | £400,000 |
| Accounts Payable (Outstanding Bills) | £30,000 |
| Other Current Liabilities (interest-free) | £0 |
| Total Liabilities | £830,000 |
| Capital | |
| Planned Investment | |
| Investor 1 | £250,000 |
| Investor 2 | £250,000 |
| Investor 3 | £250,000 |
| Investor 4 | £250,000 |
| Other | £0 |
| Additional Investment Requirement | £0 |
| Total Planned Investment | £1,000,000 |
| Loss at Start-up (Start-up Expenses) | (£684,600) |
| Total Capital | £315,400 |
| Total Capital and Liabilities | £1,145,400 |
| Total Funding | £1,830,000 |
8.2 Important Assumptions
Nature and Limitation of Projections
This financial projection is based on sales volume at the levels described in the sales forecast section and presents, to the best of management's knowledge, the company's expected assets, liabilities, capital, and revenues and expenses. The projections reflect management's judgement of the expected conditions and its expected course of action given the hypothetical assumptions.
Nature of Operations
The company is in the business of vegetable farming, greens cultivation, and composting. The company expects to be operating in 2000.
Revenues
The company's revenue is derived primarily from the sale of vegetables, strawberries, and bagged composted manure products.
Expenses
The company's expenses are primarily those of salaries, utilities, and insurance costs. Other expenses are based on management's estimates and industry averages.
| General Assumptions | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Plan Month | 1 | 2 | 3 | 4 | 5 |
| Current Interest Rate | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% |
| Long-term Interest Rate | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% |
| Tax Rate | 20.83% | 20.00% | 20.83% | 20.00% | 20.83% |
| Other | 0 | 0 | 0 | 0 | 0 |
8.3 Break-even Analysis
The company's break-even analysis is given below.
| Break-even Analysis | |
| Monthly Revenue Break-even | £36,974 |
| Assumptions: | |
| Average Percent Variable Cost | 68% |
| Estimated Monthly Fixed Cost | £11,832 |
8.4 Projected Profit and Loss
As the profit and loss table shows, Farmers Group expects a steady growth in profitability over the next few years.
| Pro Forma Profit and Loss | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Sales | £575,000 | £700,000 | £850,000 | £889,100 | £927,331 |
| Direct Cost of Sales | £391,000 | £478,100 | £578,850 | £601,032 | £627,803 |
| Other | £10,000 | £10,000 | £10,000 | £10,000 | £10,000 |
| Total Cost of Sales | £401,000 | £488,100 | £588,850 | £611,032 | £637,803 |
| Gross Margin | £174,000 | £211,900 | £261,150 | £278,068 | £289,528 |
| Gross Margin % | 30.26% | 30.27% | 30.72% | 31.28% | 31.22% |
| Expenses | |||||
| Payroll | £117,500 | £111,000 | £111,000 | £111,000 | £111,000 |
| Sales and Marketing and Other Expenses | £11,400 | £11,100 | £16,550 | £15,300 | £17,550 |
| Depreciation | £0 | £0 | £0 | £0 | £0 |
| Gas and Oil | £2,040 | £3,000 | £3,000 | £3,000 | £3,000 |
| Utilities | £6,000 | £6,000 | £6,000 | £6,000 | £6,000 |
| Insurance | £5,040 | £5,500 | £5,500 | £5,500 | £5,500 |
| Payroll Taxes | £0 | £0 | £0 | £0 | £0 |
| Other | £0 | £0 | £0 | £0 | £0 |
| Total Operating Expenses | £141,980 | £136,600 | £142,050 | £140,800 | £143,050 |
| Profit Before Interest and Taxes | £32,020 | £75,300 | £119,100 | £137,268 | £146,478 |
| EBITDA | £32,020 | £75,300 | £119,100 | £137,268 | £146,478 |
| Interest Expense | £54,664 | £47,845 | £39,095 | £32,095 | £26,495 |
| Taxes Incurred | £0 | £5,491 | £16,668 | £21,035 | £24,996 |
| Net Profit | (£22,644) | £21,964 | £63,337 | £84,139 | £94,987 |
| Net Profit/Sales | -3.94% | 3.14% | 7.45% | 9.46% | 10.24% |
8.5 Projected Cash Flow
The chart and table below contain the cash flow assumptions and projections for Farmers Group during the first five years of plan implementation. Year 1 monthlies are presented in the appendix.
| Pro Forma Cash Flow | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Cash Received | |||||
| Cash from Operations | |||||
| Cash Sales | £143,750 | £175,000 | £212,500 | £222,275 | £231,833 |
| Cash from Receivables | £431,250 | £525,000 | £637,500 | £666,825 | £695,498 |
| Subtotal Cash from Operations | £575,000 | £700,000 | £850,000 | £889,100 | £927,331 |
| 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 | £97,000 | £0 | £0 |
| Subtotal Cash Received | £575,000 | £700,000 | £947,000 | £889,100 | £927,331 |
| Expenditures | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Expenditures from Operations | |||||
| Cash Spending | £117,500 | £111,000 | £111,000 | £111,000 | £111,000 |
| Bill Payments | £408,920 | £498,803 | £668,927 | £694,140 | £720,435 |
| Subtotal Spent on Operations | £526,420 | £609,803 | £779,927 | £805,140 | £831,435 |
| Additional Cash Spent | |||||
| Sales Tax, VAT, HST/GST Paid Out | £0 | £0 | £0 | £0 | £0 |
| Principal Repayment of Current Borrowing | £54,000 | £100,000 | £100,000 | £25,000 | £35,000 |
| Other Liabilities Principal Repayment | £0 | £0 | £0 | £0 | £0 |
| Long-term Liabilities Principal Repayment | £0 | £25,000 | £25,000 | £50,000 | £50,000 |
| Purchase Other Current Assets | £0 | £0 | £0 | £0 | £20,000 |
| Purchase Long-term Assets | £0 | £0 | £0 | £0 | £0 |
| Dividends | £0 | £25,000 | £20,000 | £10,000 | £10,000 |
| Subtotal Cash Spent | £580,420 | £759,803 | £924,927 | £890,140 | £946,435 |
| Net Cash Flow | (£5,420) | (£59,803) | £22,073 | (£1,040) | (£19,104) |
| Cash Balance | £239,980 | £180,177 | £202,250 | £201,210 | £182,106 |
8.6 Projected Balance Sheet
We project solid cash balance and net worth over the years of the plan.
| Pro Forma Balance Sheet | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Assets | |||||
| Current Assets | |||||
| Cash | £239,980 | £180,177 | £202,250 | £201,210 | £182,106 |
| Accounts Receivable | £0 | £0 | £0 | £0 | £0 |
| Inventory | £55,760 | £24,586 | £29,767 | £31,136 | £32,475 |
| Other Current Assets | £250,000 | £250,000 | £250,000 | £250,000 | £270,000 |
| Total Current Assets | £545,740 | £454,763 | £482,017 | £482,346 | £484,581 |
| Long-term Assets | |||||
| Long-term Assets | £500,000 | £500,000 | £500,000 | £500,000 | £500,000 |
| Accumulated Depreciation | £0 | £0 | £0 | £0 | £0 |
| Total Long-term Assets | £500,000 | £500,000 | £500,000 | £500,000 | £500,000 |
| Total Assets | £1,045,740 | £954,763 | £982,017 | £982,346 | £984,581 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Current Liabilities | |||||
| Accounts Payable | £6,984 | £44,043 | £55,960 | £57,150 | £59,399 |
| Current Borrowing | £346,000 | £246,000 | £146,000 | £121,000 | £86,000 |
| Other Current Liabilities | £0 | £0 | £0 | £0 | £0 |
| Subtotal Current Liabilities | £352,984 | £290,043 | £201,960 | £178,150 | £145,399 |
| Long-term Liabilities | £400,000 | £375,000 | £350,000 | £300,000 | £250,000 |
| Total Liabilities | £752,984 | £665,043 | £551,960 | £478,150 | £395,399 |
| Paid-in Capital | £1,000,000 | £1,000,000 | £1,097,000 | £1,097,000 | £1,097,000 |
| Retained Earnings | (£684,600) | (£732,244) | (£730,280) | (£676,943) | (£602,804) |
| Earnings | (£22,644) | £21,964 | £63,337 | £84,139 | £94,987 |
| Total Capital | £292,756 | £289,720 | £430,057 | £504,196 | £589,182 |
| Total Liabilities and Capital | £1,045,740 | £954,763 | £982,017 | £982,346 | £984,581 |
| Net Worth | £292,756 | £289,720 | £430,057 | £504,196 | £589,182 |
8.7 Business Ratios
The business ratios given below are contrasted to industry standards for SIC code 0161 which covers vegetable and melon growers. Within this category, research has shown that there can be significant deviations from industry standards due to farm size, product life cycle, and capital resources.
Farmers Group is a start-up venture, and therefore has a more heavy debt to equity ratio than most existing farms. Furthermore, due to its move into a niche market, the company is expected to spend more on advertising than its competitors. The first two years of operations are expected also to have a higher growth rate than average as it gains market share.
| Ratio Analysis | ||||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Industry Profile | |
| Sales Growth | 0.00% | 21.74% | 21.43% | 4.60% | 4.30% | -4.60% |
| Percent of Total Assets | ||||||
| Accounts Receivable | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 12.90% |
| Inventory | 5.33% | 2.58% | 3.03% | 3.17% | 3.30% | 14.40% |
| Other Current Assets | 23.91% | 26.18% | 25.46% | 25.45% | 27.42% | 28.90% |
| Total Current Assets | 52.19% | 47.63% | 49.08% | 49.10% | 49.22% | 56.20% |
| Long-term Assets | 47.81% | 52.37% | 50.92% | 50.90% | 50.78% | 43.80% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 33.75% | 30.38% | 20.57% | 18.14% | 14.77% | 31.10% |
| Long-term Liabilities | 38.25% | 39.28% | 35.64% | 30.54% | 25.39% | 20.50% |
| Total Liabilities | 72.00% | 69.66% | 56.21% | 48.67% | 40.16% | 51.60% |
| Net Worth | 28.00% | 30.34% | 43.79% | 51.33% | 59.84% | 48.40% |
| Percent of Sales | ||||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 30.26% | 30.27% | 30.72% | 31.28% | 31.22% | 32.00% |
| Selling, General & Administrative Expenses | 37.26% | 29.04% | 24.76% | 23.31% | 22.31% | 20.70% |
| Advertising Expenses | 0.83% | 0.71% | 1.23% | 1.20% | 1.23% | 0.20% |
| Profit Before Interest and Taxes | 5.57% | 10.76% | 14.01% | 15.44% | 15.80% | 1.70% |
| Main Ratios | ||||||
| Current | 1.55 | 1.57 | 2.39 | 2.71 | 3.33 | 1.65 |
| Quick | 1.39 | 1.48 | 2.24 | 2.53 | 3.11 | 0.88 |
| Total Debt to Total Assets | 72.00% | 69.66% | 56.21% | 48.67% | 40.16% | 51.60% |
| Pre-tax Return on Net Worth | -7.73% | 9.48% | 18.60% | 20.86% | 20.36% | 2.20% |
| Pre-tax Return on Assets | -2.17% | 2.88% | 8.15% | 10.71% | 12.19% | 4.50% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Net Profit Margin | -3.94% | 3.14% | 7.45% | 9.46% | 10.24% | n.a |
| Return on Equity | -7.73% | 7.58% | 14.73% | 16.69% | 16.12% | n.a |
| Activity Ratios | ||||||
| Accounts Receivable Turnover | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | n.a |
| Collection Days | 60 | 0 | 0 | 0 | 0 | n.a |
| Inventory Turnover | 3.93 | 11.90 | 21.30 | 19.74 | 19.74 | n.a |
| Accounts Payable Turnover | 55.25 | 12.17 | 12.17 | 12.17 | 12.17 | n.a |
| Payment Days | 29 | 17 | 27 | 30 | 29 | n.a |
| Total Asset Turnover | 0.55 | 0.73 | 0.87 | 0.91 | 0.94 | n.a |
| Debt Ratios | ||||||
| Debt to Net Worth | 2.57 | 2.30 | 1.28 | 0.95 | 0.67 | n.a |
| Current Liab. to Liab. | 0.47 | 0.44 | 0.37 | 0.37 | 0.37 | n.a |
| Liquidity Ratios | ||||||
| Net Working Capital | £192,756 | £164,720 | £280,057 | £304,196 | £339,182 | n.a |
| Interest Coverage | 0.59 | 1.57 | 3.05 | 4.28 | 5.53 | n.a |
| Additional Ratios | ||||||
| Assets to Sales | 1.82 | 1.36 | 1.16 | 1.10 | 1.06 | n.a |
| Current Debt/Total Assets | 34% | 30% | 21% | 18% | 15% | n.a |
| Acid Test | 1.39 | 1.48 | 2.24 | 2.53 | 3.11 | n.a |
| Sales/Net Worth | 1.96 | 2.42 | 1.98 | 1.76 | 1.57 | n.a |
| Dividend Payout | 0.00 | 1.14 | 0.32 | 0.12 | 0.11 | n.a |