De Kliek looks to bring in annual sales of $600,000 with an operating profit margin of 20%. Gross margins are at 51%, which is 6 percentage points higher than the retail industry average but in line with retail boutique averages. Overall, De Kliek projects to reinvest net profits of 5% into the company for service enhancements and growth initiatives.
First-year cash flows are positive due to the cash-based business of De Kliek. De Kliek remains very liquid with no Current Liabilities forecasted for the year ending June 30, 2005. Startup costs are estimated at $132,700 with almost half of these costs going to startup inventory. See the Start-up Table, above, for details.
8.1 Important Assumptions
Payroll burden is calculated at 12.65% made up of 7.65% social security, 2% unemployment, and 3% worker's compensation. Payables are assumed to reach levels equal to one month's operating expenses. Long-term interest rates have been based on current SBA loan rates.
General Assumptions | |||||
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
Plan Month | 1 | 2 | 3 | 4 | 5 |
Current Interest Rate | 7.96% | 10.26% | 7.96% | 10.26% | 7.96% |
Long-term Interest Rate | 8.00% | 8.00% | 8.00% | 8.00% | 8.00% |
Tax Rate | 30.00% | 30.00% | 30.00% | 30.00% | 30.00% |
Other | 0 | 0 | 0 | 0 | 0 |
8.2 Break-even Analysis
Cost of goods for the break-even are based on line sheets from the vendors that De Kliek plans to carry. In addition, De Kliek plans to maintain an average 60% retail markup. De Kliek plans to maintain sales revenues well above the break-even level noted below.
Break-even Analysis | |
Monthly Revenue Break-even | $34,501 |
Assumptions: | |
Average Percent Variable Cost | 40% |
Estimated Monthly Fixed Cost | $20,740 |
8.3 Projected Profit and Loss
The projected Profit and Loss for five years is detailed in the table and charts following. Some assumptions and inclusions to be noted are included in the Appendix.
Pro Forma Profit and Loss | |||||
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
Sales | $513,503 | $599,403 | $609,402 | $620,315 | $630,937 |
Direct Cost of Sales | $204,820 | $237,520 | $239,896 | $245,911 | $249,600 |
Other Costs of Goods | $0 | $0 | $0 | $0 | $0 |
Total Cost of Sales | $204,820 | $237,520 | $239,896 | $245,911 | $249,600 |
Gross Margin | $308,683 | $361,883 | $369,507 | $374,404 | $381,337 |
Gross Margin % | 60.11% | 60.37% | 60.63% | 60.36% | 60.44% |
Expenses | |||||
Payroll | $131,000 | $122,000 | $137,500 | $139,500 | $146,000 |
Advertising | $4,800 | $4,800 | $4,800 | $4,800 | $4,800 |
Depreciation | $4,889 | $4,889 | $4,889 | $4,889 | $4,889 |
Amortization - Startup Costs | $5,500 | $5,500 | $5,500 | $5,500 | $5,500 |
Bank Service Charges | $480 | $480 | $480 | $480 | $480 |
Dues & Subscriptions | $600 | $600 | $600 | $600 | $600 |
Education & Training | $1,200 | $1,500 | $2,000 | $2,000 | $2,000 |
Insurance - Workman's Comp | $3,372 | $3,500 | $3,600 | $3,800 | $4,000 |
Insurance - property & liability | $6,204 | $6,200 | $6,300 | $6,500 | $6,500 |
Interest Expense - LT Loan | $4,716 | $4,716 | $4,716 | $4,716 | $4,716 |
License & Permits | $110 | $0 | $0 | $0 | $0 |
Maintenance - Office | $2,400 | $2,400 | $2,400 | $2,400 | $2,400 |
Marketing and PR | $9,600 | $10,000 | $10,000 | $10,000 | $10,000 |
Miscellaneous | $3,600 | $3,600 | $3,600 | $3,600 | $3,600 |
Payroll - Charges | $797 | $800 | $800 | $800 | $800 |
Postage & Delivery | $600 | $600 | $600 | $600 | $600 |
Printing & reproduction | $1,200 | $1,200 | $1,200 | $1,200 | $1,200 |
Prof Fees - Accounting | $1,500 | $1,500 | $1,500 | $1,500 | $1,500 |
Prof Fees - Legal | $1,000 | $500 | $500 | $500 | $500 |
Rent | $36,000 | $36,000 | $36,000 | $40,000 | $40,000 |
Repairs | $600 | $600 | $600 | $600 | $600 |
Security | $348 | $350 | $350 | $350 | $350 |
Supplies - Office & Store | $4,200 | $4,200 | $4,200 | $4,200 | $4,200 |
Travel & Entertainment | $8,500 | $10,000 | $10,000 | $10,000 | $10,000 |
Telephone / Internet Access | $1,440 | $1,440 | $1,440 | $1,440 | $1,440 |
Utilities | $2,100 | $2,100 | $2,100 | $2,100 | $2,100 |
Payroll Taxes | $720 | $10,515 | $10,890 | $11,490 | $12,015 |
Employee Benefits | $9,000 | $9,100 | $9,100 | $10,100 | $10,100 |
Other | $2,400 | $2,400 | $2,400 | $2,400 | $2,400 |
Total Operating Expenses | $248,876 | $251,490 | $268,065 | $276,065 | $283,290 |
Profit Before Interest and Taxes | $59,806 | $110,393 | $101,442 | $98,339 | $98,047 |
EBITDA | $64,696 | $115,282 | $106,331 | $103,228 | $102,936 |
Interest Expense | $6,753 | $5,963 | $5,138 | $4,314 | $3,489 |
Taxes Incurred | $15,916 | $31,329 | $28,891 | $28,208 | $28,367 |
Net Profit | $37,137 | $73,101 | $67,412 | $65,818 | $66,191 |
Net Profit/Sales | 7.23% | 12.20% | 11.06% | 10.61% | 10.49% |
