Financial Plan
Financial Plan
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.
General Assumptions
Plan Month 1 2 3 4 5
Other 0 0 0 0 0
Assumptions:
Expenses
Profit Before Interest and Taxes $59,806 $110,393 $101,442 $98,339 $98,047
• Average price points – this will help ensure that a good mix of prices are maintained.
• Delivery time frame & reliability – this will be crucial to ensure maximization of profits during the key
shopping time frames. For Italian designers who may live up to the Italian notoriety for being late in
deliveries, De Kliek will request the earliest possible delivery from them and also ensure they will be
open to discounts if deliveries are late.
• Shipping and transportation policies.
• Market demand and turn rates – typically the vendor should know their end customer and be able
to share that information so it aligns with my target market as well as helps me determine how much is
appropriate to buy.
• Payment terms and agreements –The goal is to be at Net 30 but I expect vendors to understand
that De Kliek is a new boutique and will work with De Kliek to get the store at Net 30 terms with them
within one season.
Cash Received
Assets
Current Assets
Current Liabilities
Current Borrowing $0 $0 $0 $0 $0
Ratio Analysis
Percent of Sales
Selling, General & Administrative Expenses 40.82% 41.05% 41.07% 41.51% 41.52% 21.02%
Profit Before Interest and Taxes 11.65% 18.42% 16.65% 15.85% 15.54% 3.15%
Main Ratios
Total Debt to Total Assets 77.10% 49.21% 34.87% 25.90% 19.40% 40.19%
Pre-tax Return on Net Worth 157.26% 98.67% 56.07% 39.83% 31.39% 7.14%
Debt Ratios
Liquidity Ratios
Additional Ratios
However, it is expected that One, Two, Step! will become profitable in the first year, but not excessively so.
This is partly due to our lower overall sales price for merchandise, compared to our competitors, but also
due to the fact that all our sales must come from customers lured away from other retailers. Once we have a
solid customer base, we can increase our margins slightly without risk of losing customers.
Break-even Analysis
Our break-even analysis is summarized by the following chart and table. In order to break even, we must
sell at least $7,312 of shoes and accessories per month. We should easily sell more than this even in our
first month.
Break-even Analysis
Expenses
Depreciation $0 $0 $0 $0 $0
Payroll taxes $0 $0 $0 $0 $0
Profit Before Interest and Taxes $10,671 $12,530 $12,913 $19,229 $26,303
Start-up Funding
I will be investing $10,000 in the business, and am seeking another $25,000 in SBA long-term loans, to be
repaid over six years.
Start-up Funding
Assets
Liabilities
Current Borrowing $0
Capital
Planned Investment
Owner $10,000
Investor $0
Cash Received
Cash from Operations
Dividends $0 $0 $0 $0 $0
Important Assumptions
I assume that the economic conditions will improve in the next two to three years. Therefore, business will
be good in year one, but years two and years three. One, Two, Step! will be very successful.
General Assumptions
Plan Month 1 2 3 4 5
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Other 0 0 0 0 0
Assets
Current Assets
Long-term Assets
Long-term Assets $0 $0 $0 $0 $0
Accumulated Depreciation $0 $0 $0 $0 $0
Total Long-term Assets $0 $0 $0 $0 $0
Current Liabilities
Current Borrowing $0 $0 $0 $0 $0
Business Ratios
One, Two, Step!'s ratios can be seen in the table below. For comparison, we have included standard
business ratios for the Miscellaneous retails stores industry, SIC Code 5999.
Ratio Analysis
Industry
Year 1 Year 2 Year 3 Year 4 Year 5
Profile
Percent of Sales
Profit Before Interest and Taxes 9.89% 11.28% 11.28% 16.32% 21.67% 1.05%
Main Ratios
Total Debt to Total Assets 72.51% 55.98% 42.52% 27.83% 15.96% 61.43%
Pre-tax Return on Net Worth 77.19% 58.11% 43.46% 46.53% 45.00% 2.23%
Debt Ratios
Liquidity Ratios
Additional Ratios