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Retail Discount Store Business Plan

Dollar Store

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Financial Plan

  1. Growth will be moderate; cash flows steady.
  2. Marketing costs will remain below 15% of sales.
  3. The company will invest residual profits into financial markets and not company expansion (unless absolutely necessary).
  4. Future cash investments will use NOV projections to achieve maximum return with limited risk.

7.1 Important Assumptions

The personnel burden is very low because benefits are not paid to part-timers. And the short-term interest rate is extraordinarily low because of Mr. Brinkman's long-standing relationship with High Desert Credit Union.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 7.00% 7.00% 7.00%
Long-term Interest Rate 20.00% 20.00% 20.00%
Tax Rate 25.42% 25.00% 25.42%
Other 0 0 0

7.2 Break-even Analysis

A Break-even Analysis table has been completed on the basis of average costs/prices. With fixed costs, average sales, and average variable costs, the table and chart show what we need per month to break-even.

Break-even Analysis
Monthly Revenue Break-even £37,570
Assumptions:
Average Percent Variable Cost 50%
Estimated Monthly Fixed Cost £18,785

7.3 Projected Cash Flow

We are positioning ourselves in the market as a medium risk concern with steady cash flows. Accounts payable is paid at the end of each month, while sales are in cash, giving the Dollar Store an excellent cash structure. Fifty percent of cash above a TBA amount will be invested into semi-liquid stock portfolios to decrease the opportunity cost of cash held.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales £325,500 £390,600 £468,720
Subtotal Cash from Operations £325,500 £390,600 £468,720
Additional Cash Received
Sales Tax, VAT, HST/GST Received £0 £0 £0
New Current Borrowing £3,000 £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 £2,000 £0 £0
Subtotal Cash Received £330,500 £390,600 £468,720
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending £145,200 £151,100 £162,200
Bill Payments £219,294 £241,402 £272,314
Subtotal Spent on Operations £364,494 £392,502 £434,514
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out £0 £0 £0
Principal Repayment of Current Borrowing £100 £1,200 £1,200
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 £364,594 £393,702 £435,714
Net Cash Flow (£34,094) (£3,102) £33,006
Cash Balance £8,406 £5,304 £38,311

7.4 Projected Profit and Loss

We predict advertising costs will go down in the next three years. We will be able to find what has worked well for us and concentrate on those advertising methods. Normally, a start-up concern will operate with negative profits through the first two years. We will avoid that kind of operating loss by knowing our target markets.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales £325,500 £390,600 £468,720
Direct Cost of Sales £162,750 £195,300 £234,360
Other Costs of Goods £0 £0 £0
Total Cost of Sales £162,750 £195,300 £234,360
Gross Margin £162,750 £195,300 £234,360
Gross Margin % 50.00% 50.00% 50.00%
Expenses
Payroll £145,200 £151,100 £162,200
Sales and Marketing and Other Expenses £12,000 £0 £0
Depreciation £1,143 £1,143 £1,143
Rent £36,000 £0 £0
Utilities £3,300 £0 £0
Insurance £3,600 £0 £0
Payroll Taxes £21,780 £22,665 £24,330
Other £2,400 £0 £0
Total Operating Expenses £225,423 £174,908 £187,673
Profit Before Interest and Taxes (£62,673) £20,392 £46,687
EBITDA (£61,530) £21,535 £47,830
Interest Expense £34 £161 £77
Taxes Incurred £0 £5,058 £11,847
Net Profit (£62,707) £15,173 £34,763
Net Profit/Sales -19.26% 3.88% 7.42%

7.5 Projected Balance Sheet

All of our tables will be updated monthly to reflect past performance and future assumptions. Future assumptions will not be based on past performance but rather on economic cycle activity, regional industry strength, and future cash flow possibilities. We expect solid growth in net worth beyond the year 2006.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash £8,406 £5,304 £38,311
Inventory £23,650 £28,380 £34,056
Other Current Assets £1,000 £1,000 £1,000
Total Current Assets £33,056 £34,684 £73,367
Long-term Assets
Long-term Assets £10,000 £10,000 £10,000
Accumulated Depreciation £1,143 £2,286 £3,429
Total Long-term Assets £8,857 £7,714 £6,571
Total Assets £41,914 £42,399 £79,938
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable £32,221 £18,733 £22,709
Current Borrowing £2,900 £1,700 £500
Other Current Liabilities £500 £500 £500
Subtotal Current Liabilities £35,621 £20,933 £23,709
Long-term Liabilities £0 £0 £0
Total Liabilities £35,621 £20,933 £23,709
Paid-in Capital £82,000 £82,000 £82,000
Retained Earnings (£13,000) (£75,707) (£60,534)
Earnings (£62,707) £15,173 £34,763
Total Capital £6,293 £21,466 £56,229
Total Liabilities and Capital £41,914 £42,399 £79,938
Net Worth £6,293 £21,466 £56,229

7.6 Business Ratios

We expect our net profit margin and gross margin, to increase steadily over the three-year period. Our net working capital will increase handsomely by year three, proving that we have the cash flows to remain a going concern. The following table shows these important financial ratios, based upon NAICS industry code 452112, Discount Department Stores.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 20.00% 20.00% 6.06%
Percent of Total Assets
Inventory 56.43% 66.94% 42.60% 47.62%
Other Current Assets 2.39% 2.36% 1.25% 28.89%
Total Current Assets 78.87% 81.81% 91.78% 80.40%
Long-term Assets 21.13% 18.19% 8.22% 19.60%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 84.99% 49.37% 29.66% 17.64%
Long-term Liabilities 0.00% 0.00% 0.00% 10.82%
Total Liabilities 84.99% 49.37% 29.66% 28.46%
Net Worth 15.01% 50.63% 70.34% 71.54%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 50.00% 50.00% 50.00% 27.06%
Selling, General & Administrative Expenses 69.26% 46.12% 42.54% 9.93%
Advertising Expenses 0.00% 0.00% 0.00% 1.10%
Profit Before Interest and Taxes -19.25% 5.22% 9.96% 3.24%
Main Ratios
Current 0.93 1.66 3.09 3.98
Quick 0.26 0.30 1.66 1.18
Total Debt to Total Assets 84.99% 49.37% 29.66% 41.68%
Pre-tax Return on Net Worth -996.49% 94.25% 82.89% 7.89%
Pre-tax Return on Assets -149.61% 47.72% 58.31% 13.53%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -19.26% 3.88% 7.42% n.a
Return on Equity -996.49% 70.68% 61.82% n.a
Activity Ratios
Inventory Turnover 10.84 7.51 7.51 n.a
Accounts Payable Turnover 7.62 12.17 12.17 n.a
Payment Days 28 41 27 n.a
Total Asset Turnover 7.77 9.21 5.86 n.a
Debt Ratios
Debt to Net Worth 5.66 0.98 0.42 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital (£2,564) £13,752 £49,658 n.a
Interest Coverage -1,821.00 126.66 606.32 n.a
Additional Ratios
Assets to Sales 0.13 0.11 0.17 n.a
Current Debt/Total Assets 85% 49% 30% n.a
Acid Test 0.26 0.30 1.66 n.a
Sales/Net Worth 51.73 18.20 8.34 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 7.00% 7.00% 7.00%
Long-term Interest Rate 20.00% 20.00% 20.00%
Tax Rate 25.42% 25.00% 25.42%
Other 0 0 0
Break-even Analysis
Monthly Revenue Break-even £37,570
Assumptions:
Average Percent Variable Cost 50%
Estimated Monthly Fixed Cost £18,785
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales £325,500 £390,600 £468,720
Subtotal Cash from Operations £325,500 £390,600 £468,720
Additional Cash Received
Sales Tax, VAT, HST/GST Received £0 £0 £0
New Current Borrowing £3,000 £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 £2,000 £0 £0
Subtotal Cash Received £330,500 £390,600 £468,720
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending £145,200 £151,100 £162,200
Bill Payments £219,294 £241,402 £272,314
Subtotal Spent on Operations £364,494 £392,502 £434,514
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out £0 £0 £0
Principal Repayment of Current Borrowing £100 £1,200 £1,200
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 £364,594 £393,702 £435,714
Net Cash Flow (£34,094) (£3,102) £33,006
Cash Balance £8,406 £5,304 £38,311
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales £325,500 £390,600 £468,720
Direct Cost of Sales £162,750 £195,300 £234,360
Other Costs of Goods £0 £0 £0
Total Cost of Sales £162,750 £195,300 £234,360
Gross Margin £162,750 £195,300 £234,360
Gross Margin % 50.00% 50.00% 50.00%
Expenses
Payroll £145,200 £151,100 £162,200
Sales and Marketing and Other Expenses £12,000 £0 £0
Depreciation £1,143 £1,143 £1,143
Rent £36,000 £0 £0
Utilities £3,300 £0 £0
Insurance £3,600 £0 £0
Payroll Taxes £21,780 £22,665 £24,330
Other £2,400 £0 £0
Total Operating Expenses £225,423 £174,908 £187,673
Profit Before Interest and Taxes (£62,673) £20,392 £46,687
EBITDA (£61,530) £21,535 £47,830
Interest Expense £34 £161 £77
Taxes Incurred £0 £5,058 £11,847
Net Profit (£62,707) £15,173 £34,763
Net Profit/Sales -19.26% 3.88% 7.42%
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash £8,406 £5,304 £38,311
Inventory £23,650 £28,380 £34,056
Other Current Assets £1,000 £1,000 £1,000
Total Current Assets £33,056 £34,684 £73,367
Long-term Assets
Long-term Assets £10,000 £10,000 £10,000
Accumulated Depreciation £1,143 £2,286 £3,429
Total Long-term Assets £8,857 £7,714 £6,571
Total Assets £41,914 £42,399 £79,938
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable £32,221 £18,733 £22,709
Current Borrowing £2,900 £1,700 £500
Other Current Liabilities £500 £500 £500
Subtotal Current Liabilities £35,621 £20,933 £23,709
Long-term Liabilities £0 £0 £0
Total Liabilities £35,621 £20,933 £23,709
Paid-in Capital £82,000 £82,000 £82,000
Retained Earnings (£13,000) (£75,707) (£60,534)
Earnings (£62,707) £15,173 £34,763
Total Capital £6,293 £21,466 £56,229
Total Liabilities and Capital £41,914 £42,399 £79,938
Net Worth £6,293 £21,466 £56,229
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 20.00% 20.00% 6.06%
Percent of Total Assets
Inventory 56.43% 66.94% 42.60% 47.62%
Other Current Assets 2.39% 2.36% 1.25% 28.89%
Total Current Assets 78.87% 81.81% 91.78% 80.40%
Long-term Assets 21.13% 18.19% 8.22% 19.60%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 84.99% 49.37% 29.66% 17.64%
Long-term Liabilities 0.00% 0.00% 0.00% 10.82%
Total Liabilities 84.99% 49.37% 29.66% 28.46%
Net Worth 15.01% 50.63% 70.34% 71.54%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 50.00% 50.00% 50.00% 27.06%
Selling, General & Administrative Expenses 69.26% 46.12% 42.54% 9.93%
Advertising Expenses 0.00% 0.00% 0.00% 1.10%
Profit Before Interest and Taxes -19.25% 5.22% 9.96% 3.24%
Main Ratios
Current 0.93 1.66 3.09 3.98
Quick 0.26 0.30 1.66 1.18
Total Debt to Total Assets 84.99% 49.37% 29.66% 41.68%
Pre-tax Return on Net Worth -996.49% 94.25% 82.89% 7.89%
Pre-tax Return on Assets -149.61% 47.72% 58.31% 13.53%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -19.26% 3.88% 7.42% n.a
Return on Equity -996.49% 70.68% 61.82% n.a
Activity Ratios
Inventory Turnover 10.84 7.51 7.51 n.a
Accounts Payable Turnover 7.62 12.17 12.17 n.a
Payment Days 28 41 27 n.a
Total Asset Turnover 7.77 9.21 5.86 n.a
Debt Ratios
Debt to Net Worth 5.66 0.98 0.42 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital (£2,564) £13,752 £49,658 n.a
Interest Coverage -1,821.00 126.66 606.32 n.a
Additional Ratios
Assets to Sales 0.13 0.11 0.17 n.a
Current Debt/Total Assets 85% 49% 30% n.a
Acid Test 0.26 0.30 1.66 n.a
Sales/Net Worth 51.73 18.20 8.34 n.a
Dividend Payout 0.00 0.00 0.00 n.a