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Beverage Machine Retail Business Plan

Margarita Momma

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Financial Plan

7.0 Financial Plan

We want to finance growth mainly through cash flow. We recognise that this means we will have to grow slowly, adding machines one at a time, not in bulk. The most important indicator in our case is that minimal stock will have to be stored for these rentals; this translates into very low overhead.

There are some seasonal variations, with the months of March through September being the hottest months in Texas. This will, as expected, mean a high rate of rentals for events such as pool parties, Fourth of July celebrations, and barbecues. However, we expect the winter months to be just as lucrative due to the number of holiday parties, football gatherings, and fundraising events. We expect a light seasonal variation, with sales increasing slightly during the cooler months. For the most part, Margarita Momma will experience a high rate of sales, regardless of weather variations.

7.1 Important Assumptions

The financial assumptions for Margarita Momma are included in the following table.

General Assumptions

General Assumptions
	FY 2001	FY 2002	FY 2003
Plan Month	1	2	3
Current Interest Rate	10.00%	10.00%	10.00%
Long-term Interest Rate	10.00%	10.00%	10.00%
Tax Rate	25.42%	25.00%	25.42%
Other	0	0	0

7.2 Key Financial Indicators
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Benchmarks



7.3 Break-even Analysis

The following table and chart summarise our break-even analysis. With estimated fixed costs as shown in the following table, we need to have 16 rentals by the end of the year to cover our costs.

Break-even Analysis

Break-even Analysis
Monthly Units Break-even	16
Monthly Revenue Break-even	£1,204
Assumptions:
Average Per-Unit Revenue	£74.51
Average Per-Unit Variable Cost	£6.76
Estimated Monthly Fixed Cost	£1,095

Break-even Analysis



7.4 Projected Profit and Loss

We expect net profits, and gross margins for FY 2001 through FY2003 as shown in the following table.

Profit and Loss

Pro Forma Profit and Loss
	FY 2001	FY 2002	FY 2003
Sales	£60,875	£69,500	£80,250
Direct Cost of Sales	£5,523	£6,380	£7,380
Other	£0	£0	£0
	------------	------------	------------
Total Cost of Sales	£5,523	£6,380	£7,380
Gross Margin	£55,352	£63,120	£72,870
Gross Margin %	90.93%	90.82%	90.80%
Expenses
Payroll	£11,050	£11,800	£12,500
Sales and Marketing and Other Expenses	£280	£300	£250
Depreciation	£150	£150	£150
Leased Equipment	£0	£0	£0
Utilities	£0	£0	£0
Insurance	£0	£0	£0
Rent	£0	£0	£0
Payroll Taxes (National Insurance)	£1,658	£1,770	£1,875
Other	£0	£0	£0
	------------	------------	------------
Total Operating Expenses	£13,137	£14,020	£14,775
Profit Before Interest and Taxes	£42,215	£49,100	£58,095
EBITDA	£42,364	£49,250	£58,245
Interest Expense	£1,031	£916	£796
Taxes Incurred	£10,382	£12,046	£14,563
Net Profit	£30,802	£36,138	£42,736
Net Profit/Sales	50.60%	52.00%	53.25%

Profit Monthly



Profit Yearly



Gross Margin Monthly



Gross Margin Yearly



7.5 Projected Cash Flow

The following cash flow projections show the annual amounts only. For a monthly breakdown, please see the appendix at the end of the business plan.

Cash Flow

Pro Forma Cash Flow
	FY 2001	FY 2002	FY 2003
Cash Received
Cash from Operations
Cash Sales	£60,875	£69,500	£80,250
Subtotal Cash from Operations	£60,875	£69,500	£80,250
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	£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	£60,875	£69,500	£80,250
Expenditures	FY 2001	FY 2002	FY 2003
Expenditures from Operations
Cash Spending	£11,050	£11,800	£12,500
Bill Payments	£17,254	£21,916	£24,791
Subtotal Spent on Operations	£28,304	£33,716	£37,291
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	£1,200	£1,200	£1,200
Purchase Other Current Assets	£0	£0	£0
Purchase Fixed assets	£0	£0	£0
Dividends	£0	£0	£0
Subtotal Cash Spent	£29,504	£34,916	£38,491
Net Cash Flow	£31,371	£34,584	£41,759
Cash Balance	£32,210	£66,794	£108,553

Cash



7.6 Projected Balance Sheet

The following table represents our financial position at the end of each of the three upcoming fiscal years.

Balance Sheet

Pro Forma Balance Sheet
	FY 2001	FY 2002	FY 2003
Assets
Current Assets
Cash	£32,210	£66,794	£108,553
Stock	£1,177	£1,359	£1,572
Other Current Assets	£1,260	£1,260	£1,260
Total Current Assets	£34,647	£69,413	£111,385
Fixed assets
Fixed assets	£9,000	£9,000	£9,000
Accumulated Depreciation	£150	£300	£450
Total Fixed assets	£8,851	£8,701	£8,551
Total Assets	£43,498	£78,114	£119,936
Liabilities and Capital	FY 2001	FY 2002	FY 2003
Current Liabilities
Accounts Payable	£2,097	£1,775	£2,061
Current Borrowing	£0	£0	£0
Other Current Liabilities	£0	£0	£0
Subtotal Current Liabilities	£2,097	£1,775	£2,061
Fixed liabilities	£9,760	£8,560	£7,360
Total Liabilities	£11,857	£10,335	£9,421
Paid-in Capital	£1,000	£1,000	£1,000
Retained Earnings	(£161)	£30,641	£66,779
Earnings	£30,802	£36,138	£42,736
Total Capital	£31,641	£67,779	£110,515
Total Liabilities and Capital	£43,498	£78,114	£119,936
Net Worth	£31,641	£67,779	£110,515

7.7 Business Ratios

The following table shows standard ratios and industry comparison for SIC code 7359, rental businesses.

Ratios

Ratio Analysis
	FY 2001	FY 2002	FY 2003	Industry Profile
Sales Growth	0.00%	14.17%	15.47%	7.90%
Percent of Total Assets
Stock	2.71%	1.74%	1.31%	3.40%
Other Current Assets	2.90%	1.61%	1.05%	45.10%
Total Current Assets	79.65%	88.86%	92.87%	74.30%
Fixed assets	20.35%	11.14%	7.13%	25.70%
Total Assets	100.00%	100.00%	100.00%	100.00%
Current Liabilities	4.82%	2.27%	1.72%	42.00%
Fixed liabilities	22.44%	10.96%	6.14%	15.70%
Total Liabilities	27.26%	13.23%	7.86%	57.70%
Net Worth	72.74%	86.77%	92.14%	42.30%
Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	90.93%	90.82%	90.80%	0.00%
Selling, General & Administrative Expenses	38.15%	36.91%	35.50%	82.90%
Advertising Expenses	0.46%	0.43%	0.31%	1.00%
Profit Before Interest and Taxes	69.35%	70.65%	72.39%	2.60%
Main Ratios
Current	16.53	39.11	54.04	1.68
Quick	15.96	38.34	53.28	1.33
Total Debt to Total Assets	27.26%	13.23%	7.86%	57.70%
Pre-tax Return on Net Worth	130.16%	71.09%	51.85%	4.80%
Pre-tax Return on Assets	94.68%	61.68%	47.77%	11.40%
Additional Ratios	FY 2001	FY 2002	FY 2003
Net Profit Margin	50.60%	52.00%	53.25%	n.a
Return on Equity	97.35%	53.32%	38.67%	n.a
Activity Ratios
Stock Turnover	5.89	5.03	5.03	n.a
Accounts Payable Turnover	9.23	12.17	12.17	n.a
Payment Days	27	33	28	n.a
Total Asset Turnover	1.40	0.89	0.67	n.a
Debt Ratios
Debt to Net Worth	0.37	0.15	0.09	n.a
Current Liab. to Liab.	0.18	0.17	0.22	n.a
Liquidity Ratios
Net Working Capital	£32,551	£67,639	£109,324	n.a
Interest Coverage	40.95	53.60	72.98	n.a
Additional Ratios
Assets to Sales	0.71	1.12	1.49	n.a
Current Debt/Total Assets	5%	2%	2%	n.a
Acid Test	15.96	38.34	53.28	n.a
Sales/Net Worth	1.92	1.03	0.73	n.a
Dividend Payout	0.00	0.00	0.00	n.a