Financial Plan

The following section contains the financial information for Fluffy Cups. Tables and charts
show annual projections for the first five business years.

Startup Analysis
       
 
Fluffy Cups    

  Startup Expenses
  Capital Expenditure Cost
  Property Acquisition Fees $ 10,000
  Renovations and Decor $ 9,500
  Equipment and Office Supplies $ 8,500
  Permits and Licenses $ 1,500
  Inventory $ 6,000
  Marketing and Advertising $ 1,500
  Staffing $ 8,500
  Utilities and Operation Cost $ 3,000
  Insurance $ 1,500
  Miscellaneous $ 6,500
  Legal $ 1,000
  Accountants $ 2,500
  Total Startup Expenses $ 60,000
  Owner's Investment $ 2,500
  Loan $ 180,000
  Total Investment $ 182,500

Important Assumptions
General Assumption          
  Year 1 Year 2 Year 3 Year 4 Year 5
Loan $ 180,000
Tax Rate 5.75% 5.75% 5.75% 5.75% 5.75%
Interest Rate 3.75% 3.75% 3.75% 3.75% 3.75%
Loan Repayment $ 36,000 $ 36,000 $ 36,000 $ 36,000 $ 36,000
Owner's Investment $ 2,500
Interest Payment $ 6,750 $ 5,400 $ 4,050 $ 2,700 $ 1,350

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Financial Overview
Below is the financial overview showing the profitability of the business as the sales increases
with little change in the cost. The profit is seen to increase with sales.

Financial Overview          

  Year 1 Year 2 Year 3 Year 4 Year 5

Total Revenue $ 300,000 $ 420,000 $ 588,000 $ 823,200 $ 1,152,480
Variable Costs/Expenses $ 36,000 $ 50,400 $ 70,560 $ 98,784 $ 138,298
Fixed Costs $ 240,000 $ 259,200 $ 280,320 $ 303,552 $ 329,107
EBITDA $ 24,000 $ 110,400 $ 237,120 $ 420,864 $ 685,075
Depreciation $ 850 $ 850 $ 850 $ 850 $ 850
Taxes $ 1,380 $ 6,348 $ 13,634 $ 24,200 $ 39,392
Total Expenses $ 277,380 $ 315,948 $ 364,514 $ 426,536 $ 506,797
Net Profit $ 15,020 $ 97,802 $ 218,586 $ 393,114 $ 643,483

Financial Overview
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$-
1 2 3 4 5

Total Revenue Total Expenses Net Profit

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Profit and Loss
The below table is the profit and loss projection for the first five business years. The sales are
seen to increase each year, causing a considerable increase in the net profit too.

Profit and Loss Statements          

  Year 1 Year 2 Year 3 Year 4 Year 5

  $ $ $ $ $

Sales
Monthly Income 25,000 35,000 49,000 68,600 96,040
Number of Months 12 12 12 12 12
Total Sales 300,000 420,000 588,000 823,200 1,152,480

Total Cost of Sales 36,000 50,400 70,560 98,784 138,298

Gross Margin 264,000 369,600 517,440 724,416 1,014,182

Gross Margin % 88.00% 88.00% 88.00% 88.00% 88.00%

Operating Expenses

Marketing and Advertising 18,000 19,800 21,780 23,958 26,354

Staffing 126,000 138,600 152,460 167,706 184,477

Insurance 18,000 18,000 18,000 18,000 18,000

Utilities and Operation Cost 24,000 26,400 29,040 31,944 35,138

Rent 30,000 30,000 30,000 30,000 30,000

Miscellaneous 24,000 26,400 29,040 31,944 35,138

Total Operating Expenses 240,000 259,200 280,320 303,552 329,107

Operating Income 24,000 110,400 237,120 420,864 685,075

Operating Margin 8.00% 26.29% 40.33% 51.13% 59.44%

EBITDA 24,000 110,400 237,120 420,864 685,075

Depreciation and Amortization 850 850 850 850 850
Interest Expense 6,750 5,400 4,050 2,700 1,350
Tax Incurred 1,380 6,348 13,634 24,200 39,392

Net Profit $ 15,020 $ 97,802 $ 218,586 $ 393,114 $ 643,483

Net Profit/Sales % 5.01% 23.29% 37.17% 47.75% 55.83%

From the above analysis, it is projected that the business will have a total revenue of $300,000 in
the first year of business activities. Every business always aspires to increase its sales. With the
marketing strategy adopted, it is assumed that this will yield an increase in the subsequent years
of business operations, thereby, causing the revenue for each year to increase too.

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The volume of revenue influences the profit that will be made during the year, therefore revenue
generated in the course of running the business results in an increase in profit made by the
business after taking care of all expenses.

Chart: Profit and Loss

Net Profit
$700,000 $643,483
$600,000
$500,000 $393,114
$400,000
$300,000 $218,586
$200,000 $97,802
$100,000 $15,020
$-
Year 1 Year 2 Year 3 Year 4 Year 5

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Cash Flow Statement
Below is cash flow statement projection for five years showing the movement of cash within the
business. The owner seeks a loan of $60,000 for the business funding. The loan has an annual
interest rate of 3.75% and a repayment term of five years.

Cash Flow          

  Year 1 Year 2 Year 3 Year 4 Year 5

  $ $ $ $ $
Cash From Operations
Cash Sales 300,000 420,000 588,000 823,200 1,152,480
Subtotal Cash From Operations 300,000 420,000 588,000 823,200 1,152,480

Additional Cash Received

Owner's Investment 2,500 0 0 0 0
Investors 180,000 0 0 0 0
New Long-term Liabilities 0 0 0 0 0
Subtotal Cash Received 482,500 420,000 588,000 823,200 1,152,480

Expenditures Year 1 Year 2 Year 3 Year 4 Year 5

Expenditures from Operations

Total Cost of Sales 36,000 50,400 70,560 98,784 138,298
Total Operating Expenses 240,000 259,200 280,320 303,552 329,107
Interest Expense 6,750 5,400 4,050 2,700 1,350
Tax Incurred 1,380 6,348 13,634 24,200 39,392
Subtotal Spent on Operations 284,130 321,348 368,564 429,236 508,147

Additional Cash Spent

Long-term Liabilities Principal 36,000 36,000 36,000 36,000 36,000
Repayment

Purchase Long-term Assets 8,500 0 0 0 0

Subtotal Cash Spent 328,630 357,348 404,564 465,236 544,147

Net Cash Flow $ 153,870 $ 62,652 $ 183,436 $ 357,964 $ 608,333

Cash Balance $ 153,870 $ 216,522 $ 399,958 $ 757,922 $ 1,366,255

Chart: Cash Flow

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 Cash Flow
$1,500,000

$1,000,000

$500,000

$-
1 2 3 4 5
Year

Net Cash Flow Cash Balance

The graph above shows an upward movement of closing cash balance which indicates that there
is an increase in cash balance at the end of every period.

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Balance Sheet
Below is the financial forecast of the balance sheet for the business. The below table shows the
steady growth in the net worth of the organization, this shows that the business is a very
profitable one.

Table: Balance Sheet

Balance Sheet            

  Starting Bal. Year 1 Year 2 Year 3 Year 4 Year 5

  $ $ $ $ $ $
Assets            

Current Assets

Cash and Cash Equivalent 174,000 153,870 216,522 399,958 757,922 1,366,255

Total Current Assets 174,000 153,870 216,522 399,958 757,922 1,366,255

Long-term Assets

Long-term Assets 8,500 8,500 8,500 8,500 8,500 8,500

Accumulated Depreciation - 850 1,700 2,550 3,400 4,250
Total Long-term Assets 8,500 7,650 6,800 5,950 5,100 4,250
Total Assets 182,500 161,520 223,322 405,908 763,022 1,370,505

Liabilities and Capital

Current Liabilities

Accounts Payable 0 0 0 0 0 0
Subtotal Current Liabilities 0 0 0 0 0 0

Long-term Liabilities 180,000 144,000 108,000 72,000 36,000 -

Total Liabilities 180,000 144,000 108,000 72,000 36,000 -

Paid-in Capital 0 0 0 0 0 0

Retained Earnings 0 15,020 112,822 331,408 724,522 1,368,005

Earning 0 15,020 97,802 218,586 393,114 643,483
Total Capital - 15,020 112,822 331,408 724,522 1,368,005
Total Liabilities and Capital 180,000 159,020 220,822 403,408 760,522 1,368,005

Net Worth $ 2,500 $ 17,520 $ 115,322 $ 333,908 $ 727,022 $ 1,370,505

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Chart: Net Worth

Net Worth
$1,370,505

$727,022

$333,908
$115,322
$17,520
1 2 3 4 5
Year

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Break-even Analysis
Break-even is the point where the business neither makes profit nor loss. This means that at
break-even, the business is only able to pay up its expenses both fixed and variable cost without
any excess. The essence of break-even is to determine the number of sales that could lead to
profitability

Break Even Analysis          

  Year 1 Year 2 Year 3 Year 4 Year 5
Fixed cost $ 240,000 $ 259,200 $ 280,320 $ 303,552 $ 329,107
Variable Cost % 12.00% 12.00% 12.00% 12.00% 12.00%
Gross Margin % 88.00% 88.00% 88.00% 88.00% 88.00%
Break Even Income $ 272,727 $ 294,545 $ 318,545 $ 344,945 $ 373,985
Revenue $ 300,000 $ 420,000 $ 588,000 $ 823,200 $ 1,152,480

The business is seen to break the even in the first year of business activities. This means that
there must be more than $272,727 worth of sales yearly before any profit can be recorded. The
above analysis can be seen in the below graph showing the breakeven income and revenue.

Breakeven Curve
$1,152,480

$823,200
$588,000
$420,000 $344,945 $373,985
$300,000
$272,727 $294,545 $318,545

1 2 3 4 5
Year

Break Even Income Revenue

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