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Bed and Breakfast Business Plan

Coach House Bed and Breakfast

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Financial Plan

7.0 Financial Plan

Coach House will be acquired at £500,000 via an small business administration (SBA) loan (CDC 504 Loan Programme) with the buyers supplying 20% down (£100,000), Ameribank supplying 50% (£250,000), and SBA supplying 30% (£150,000). The bank mortgage is for 20 years at ten percent and the SBA 504 loan is for ten years, also at ten percent. We are assuming an initial capital start-up of £12,000 for operating expenses. In addition to the £12,000 of start-up money available from Mr. Maesch's retirement, Mr. Williams will be adding £30,000 by September 15, 2000.

7.1 Break-even Analysis

We estimate average monthly fixed costs to be at £6,770 (£3,486 for expenses and £3,283 for interest payments). Peak and off-season will have significant impact on the monthly earnings. For the first year, on-season revenues will offset off-season losses. As Coach House B&B builds its market position among the local patrons, we anticipate that off-season revenues will be enough to break even during that season. Further, a rate increase may be considered in Fiscal Year 2001.

Break-even Analysis



Break-even Analysis

Break-even Analysis:
Monthly Units Break-even	6,838
Monthly Revenue Break-even	£6,838
Assumptions:
Average Per-Unit Revenue	£1.00
Average Per-Unit Variable Cost	£0.01
Estimated Monthly Fixed Cost	£6,770

7.2 Projected Profit and Loss

Below is the Coach House's projected income statement for the next three years. As mentioned above, earnings are subject to seasonal fluctuations. The new ownership will, however, strengthen Coach House's market position among the local community who will patronise the establishment during the low season, and thus offset the negative impact of the season.

Profit and Loss

Pro Forma Profit and Loss
	2000	2001	2002
Sales	£124,718	£130,953	£137,501
Direct Cost of Sales	£0	£0	£0
Other	£0	£0	£0
	------------	------------	------------
Total Cost of Sales	£0	£0	£0
Gross Margin	£124,718	£130,953	£137,501
Gross Margin %	100.00%	100.00%	100.00%
Expenses:
Payroll	£15,000	£35,000	£40,000
Sales and Marketing and Other Expenses	£2,775	£3,900	£4,095
Depreciation	£4,440	£4,500	£473
Insurance	£2,580	£2,600	£210
Telephone	£2,400	£2,500	£10,500
Security	£420	£450	£368
Duties & Subscriptions	£175	£200	£2,100
Rent	£9,996	£10,000	£10,000
Room/Housecleaning	£300	£350	£2,730
Groceries	£1,500	£2,000	£2,625
Payroll Taxes (National Insurance) (National Insurance) (National Insurance)	£2,250	£5,250	£6,000
Other	£0	£0	£0
	------------	------------	------------
Total Operating Expenses	£41,836	£66,750	£79,100
Profit Before Interest and Taxes	£82,882	£64,203	£58,401
Interest Expense	£52,500	£51,750	£50,150
Taxes Incurred	£7,480	£3,113	£2,097
Net Profit	£22,902	£9,340	£6,154
Net Profit/Sales	18.36%	7.13%	4.48%

7.3 Projected Cash Flow

The table below outlines the projected cash flow and shows that the company will have enough cash reserves to cover the off-season's low sales. These projections are realistic in terms of the historical market of Tybee Island and operations, based on current pricing research and the addition of a fourth rental unit.

Cash



Cash Flow

Pro Forma Cash Flow
	2000	2001	2002
Cash Received
Cash from Operations:
Cash Sales	£31,179	£32,738	£34,375
Cash from Receivables	£91,109	£97,894	£102,788
Subtotal Cash from Operations	£122,288	£130,632	£137,164
Additional Cash Received
VAT, VAT, HST/GST Received	£0	£0	£0
New Current Borrowing	£0	£0	£0
New Other Liabilities (interest-free)	£0	£0	£0
New Fixed liabilities	£525,000	£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	£647,288	£130,632	£137,164
Expenditures	2000	2001	2002
Expenditures from Operations:
Cash Spending	£8,024	£7,686	£8,484
Payment of Accounts Payable	£104,787	£109,619	£121,937
Subtotal Spent on Operations	£112,812	£117,305	£130,421
Additional Cash Spent
VAT, VAT, HST/GST Paid Out	£0	£0	£0
Principal Repayment of Current Borrowing	£0	£0	£0
Other Liabilities Principal Repayment	£0	£0	£0
Fixed liabilities Principal Repayment	£0	£15,000	£17,000
Purchase Other Current Assets	£0	£0	£0
Purchase Fixed assets	£500,000	£0	£0
Dividends	£0	£0	£0
Subtotal Cash Spent	£612,812	£132,305	£147,421
Net Cash Flow	£34,477	(£1,674)	(£10,257)
Cash Balance	£46,477	£44,803	£34,546

7.4 Balance Sheet

The table below outlines the projected balance sheet of Coach House for Fiscal Year 2000-2002.

Balance Sheet

Pro Forma Balance Sheet
Assets
Current Assets	2000	2001	2002
Cash	£46,477	£44,803	£34,546
Accounts Receivable	£6,429	£6,751	£7,088
Other Current Assets	£1,000	£1,000	£1,000
Total Current Assets	£53,906	£52,554	£42,634
Fixed assets
Fixed assets	£700,000	£700,000	£700,000
Accumulated Depreciation	£34,440	£38,940	£39,413
Total Fixed assets	£665,560	£661,060	£660,588
Total Assets	£719,466	£713,614	£703,221
Liabilities and Capital
Current Liabilities	2000	2001	2002
Accounts Payable	£4,564	£4,372	£4,826
Current Borrowing	£0	£0	£0
Other Current Liabilities	£0	£0	£0
Subtotal Current Liabilities	£4,564	£4,372	£4,826
Fixed liabilities	£525,000	£510,000	£493,000
Total Liabilities	£529,564	£514,372	£497,826
Paid-in Capital	£50,000	£50,000	£50,000
Retained Earnings	£117,000	£139,902	£149,242
Earnings	£22,902	£9,340	£6,154
Total Capital	£189,902	£199,242	£205,396
Total Liabilities and Capital	£719,466	£713,614	£703,221
Net Worth	£189,902	£199,242	£205,396

7.5 Business Ratios

The following table provides industry information for Coach House B&B based on the Standard Industry Classification (SIC) Index, 7011.

Ratios

Ratio Analysis
	2000	2001	2002	Industry Profile
Sales Growth	340.39%	5.00%	5.00%	5.90%
Percent of Total Assets
Accounts Receivable	0.89%	0.95%	1.01%	5.00%
Stock	0.00%	0.00%	0.00%	1.00%
Other Current Assets	0.14%	0.14%	0.14%	26.00%
Total Current Assets	7.49%	7.36%	6.06%	32.00%
Fixed assets	92.51%	92.64%	93.94%	68.00%
Total Assets	100.00%	100.00%	100.00%	100.00%
Current Liabilities	0.63%	0.61%	0.69%	19.40%
Fixed liabilities	72.97%	71.47%	70.11%	34.60%
Total Liabilities	73.61%	72.08%	70.79%	54.00%
Net Worth	26.39%	27.92%	29.21%	46.00%
Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	100.00%	100.00%	100.00%	0.00%
Selling, General & Administrative Expenses	81.73%	92.87%	95.50%	75.10%
Advertising Expenses	1.60%	2.29%	2.29%	1.90%
Profit Before Interest and Taxes	66.46%	49.03%	42.47%	2.50%
Main Ratios
Current	11.81	12.02	8.83	1.45
Quick	11.81	12.02	8.83	1.05
Total Debt to Total Assets	73.61%	72.08%	70.79%	54.00%
Pre-tax Return on Net Worth	16.00%	6.25%	4.02%	1.70%
Pre-tax Return on Assets	4.22%	1.75%	1.17%	3.70%
Additional Ratios	2000	2001	2002
Net Profit Margin	18.36%	7.13%	4.48%	n.a
Return on Equity	12.06%	4.69%	3.00%	n.a
Activity Ratios
Accounts Receivable Turnover	14.55	14.55	14.55	n.a
Collection Days	45	24	24	n.a
Stock Turnover	0.00	0.00	0.00	n.a
Accounts Payable Turnover	19.58	25.03	25.36	n.a
Payment Days	28	15	14	n.a
Total Asset Turnover	0.17	0.18	0.20	n.a
Debt Ratios
Debt to Net Worth	2.79	2.58	2.42	n.a
Current Liab. to Liab.	0.01	0.01	0.01	n.a
Liquidity Ratios
Net Working Capital	£49,342	£48,182	£37,808	n.a
Interest Coverage	1.58	1.24	1.16	n.a
Additional Ratios
Assets to Sales	5.77	5.45	5.11	n.a
Current Debt/Total Assets	1%	1%	1%	n.a
Acid Test	10.40	10.48	7.37	n.a
Sales/Net Worth	0.66	0.66	0.67	n.a
Dividend Payout	0.00	0.00	0.00	n.a