Financial Plan Write-Up

Topics: Generally Accepted Accounting Principles, Asset, Inventory Pages: 7 (1764 words) Published: October 23, 2008
Financial Plan

The following sections will outline our financial plan for growth and continued sales. Important assumptions are laid out in each section to better clarify what we are projecting.

Important Assumptions

The current economic climate in the U.S. appears to be on the brink of recession. We do believe that this could have a mild impact on our company’s profitability because many families will start to allocate their expendable income towards more of the basic needs of the family. Spending money to go out to eat will be minimized. H.O.M.E. believes, however, that because our products are contributors to continued good health that people will continue to purchase our products to keep up with a healthy lifestyle.

We expect to raise $90,000 for start up capital between our 3 partners and to take out an SBA 7(a) loan of 30,000. The interest rate on this loan is prime (currently at 5.25%) plus 3.25% for loans under $100,000 with a note of 7 years or less. We are putting a lien on Matou’s current hairstyle business in order to secure our $30,000 loan. This will provide the necessary start-up capital, as well as, give us plenty of working capital to keep our business growing to meet our goal of opening another location in 3-4 years.

General Assumptions
Plan Month123
Current Interest Rate8.5%8.5%8.5%
Long-Term Interest Rate8.5%8.5%8.5%
Tax Rate25.0%25.0%25.0%

Projected Profit and Loss

We have projected that we will be losing money in the first twenty-four month period of our business. There is a steady climb of sales each month, to where by the 4th quarter of our second year we should be starting to see a profit. We assume that we will be able to survive with our large personal capital investment to handle our initial loses before breaking even. Some important factors that were used in making our projects include: •Cost of sales will rise each year by current 3% inflation rate plus 5% food cost •Straight-line depreciation 7 years

Utilities will rise by current inflation rate of 3%

Pro Forma Profit and Loss
Sales $100,828.00$171,380.00$260,905.00
Cost of Sales $43,600.00$47,088.00$50,855.04
Other $0.00$0.00$0.00
Total Cost of Sales $43,600.00$47,088.00$50,855.04

Gross Margin $57,228.00$124,292.00$210,049.96
Gross Margin % 56.76%72.52%80.51%

Payroll $40,872.00$45,240.00$45,240.00
Sales, Marketing and Other $2,000.00$1,800.00$1,600.00 Depreciation $3,212.44$3,212.44$3,212.44
Utilities $8,760.00$9,022.80$9,293.48
Rent $47,424.00$47,424.00$47,424.00
Insurance $624.00$624.00$624.00
Payroll Taxes $5,660.77$6,265.74$6,265.74
Miscellaneous $5,000.00$2,000.00$2,000.00
Total Operating Expenses $113,553.21$115,588.98$115,659.66

Profit Before Interest and Taxes -$56,325.21$8,703.02$94,390.30 Interest Expense $1,386.00$1,386.00$1,386.00
Taxes Incurred $0.00$2,275.81$23,900.01

Net Profit -$57,711.21$5,041.21$69,104.29
Net Profit/Sales -100.84%4.06%32.90%

Project Cash Flow

We expect our cash flow to be positive mainly because of the large personal capital investment done by ownership. Our projected cash flow is expected to look like a valley with a sharp decline in our first year with a rise by the end of 2010. The sharp decline is based off using our large personal capital investment to pay cash for most of our start-up costs to avoid costly long-term liabilities. Our business will see its first positive monthly cash flow by 2nd quarter of 2010. This will allow are cash flow to grow and be able to meet our future goal of opening another location in 3-4 years.

Pro Forma Cash Flow
Cash Flows from Operating Activities...
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