Business / Salvador Sausage Business Plan

Salvador Sausage Business Plan

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Autor:  anton  03 September 2010
Tags:  Salvador,  Sausage,  Business
Words: 4716   |   Pages: 19
Views: 532

1.0 Executive Summary

• By focusing on its heritage and the strength it brings into the products, their quality, and uniqueness, Salvador's will increase its sales to more than $2 million by the turn of the century, while improving the gross margin on sales cash management and working capital.

• This business plan leads the way. It renews our vision and strategic focus on the quality and value we put in our products and the market segment originally targeted. Our vision has been broadened by the success we have found in the marketplace, to the extent of adding new products and current plans on additional items and services. It has given us a step-by-step plan to meet and exceed our goals for increased sales, gross margin, and profitability.

• This plan includes this summary, and chapters on the company, products and services, market focus, action plans and forecasts, management team, and financial plan.

1.1 Objectives

1. Increase sales to more than $1 million over the next three years.

2. Move gross margin to above 55% over the current product line and maintain that level.

3. Add products and services to meet market demand, again at 55% margin or above.

4. Sell $2 million of salsa and related Hispanic food items and service by 2000.

5. Improve inventory turnover, reduce the cost of goods sold while maintaining the high quality of the products.

6. To provide jobs to the Hispanic community that are rewarding and fulfilling.

1.2 Mission

Salvador's was built on offering the highest quality and value in its authentic hot salsa, filled with the history of the Hispanic community. Time honored family recipes have been passed down through the generations, rich with ethnic heritage. Knowledgeable consumers were looking for authentic products, filled with the best ingredients. The consumer was crying out for a change! They wanted real down home Hispanic salsa.

Salvador's answered this call, first with its hot salsa, then adding mild and extra hot salsa, followed by yellow and blue corn chips. Constantly striving to supply what the consumer is asking for, we continually review what is available in the marketplace, and what isn't. Improving on what is available and providing new products and services to the areas of need will assure our success in a market driven by consumer demand.

1.3 Keys to Success

1. Delivering high quality products that set themselves apart from the others in taste and value.

2. Providing service, support, and a better than average margin to our dealers.

3. Increase gross margin to over 55%.

4. Bring new products into the mix to increase sales volume.

2.0 Company Summary

Salvador's is in its third year of operation, increasing sales five-fold in its second year, and is on track to repeat this in its third year. It has a good reputation, excellent people, an increasing position in the local market, and opportunities to reach out into other states. Starting with a few outlets for our products, we now have over 40, with two large grocery chains in the approval process of carrying our full line of products, and a large distributor intending to sell over $100,000 worth of our products annually.

• See enclosed copies of letters from Moctezuma Foods, Inc., Meijer, Inc., and others.

2.1 Company Ownership

Salvador's is a privately-held C Corporation owned in total by its co-founders, Ricardo and Pat Torres.

2.2 Company History

Salvador's has been hindered only by the lack of working capital it had in its initial stages of setup and operation. Sales are growing steadily, with the cost of goods sold consistently decreasing. But to make significant headway in this area, additional capital is needed to purchase ingredients and processing in larger volumes, thereby reducing the costs of goods sold in excess of 32% overall.

• See enclosed copy of quote from Hirzel Canning Company

Past Performance

1993 1994 1995

Sales $0 $4,224 $21,050

Gross Margin $0 $2,451 $14,160

Gross % (calculated) 0.00% 58.03% 67.27%

Operating Expenses $0 $12,028 $20,719

Collection period (days) 0 10 15

Inventory turnover 0 6 5

Balance Sheet

Short-term Assets 1993 1994 1995

Cash $0 $0 $126

Accounts receivable $0 $0 $0

Inventory $0 $0 $3,492

Other Short-term Assets $0 $0 $0

Total Short-term Assets $0 $0 $3,618

Long-term Assets

Capital Assets $0 $0 $23,368

Accumulated Depreciation $0 $0 $9,792

Total Long-term Assets $0 $0 $13,576

Total Assets $0 $0 $17,194

Capital and Liabilities

1993 1994 1995

Accounts Payable $0 $0 $0

Short-term Notes $0 $0 $16,207

Other ST Liabilities $0 $0 $0

Subtotal Short-term Liabilities $0 $0 $16,207

Long-term Liabilities $0 $0 $0

Total Liabilities $0 $0 $16,207

Paid in Capital $0 $0 $25,000

Retained Earnings $0 $0 ($9,755)

Earnings $0 $0 ($14,258)

Total Capital $0 $0 $987

Total Capital and Liabilities $0 $0 $17,194

Other Inputs 1993 1994 1995

Payment days 0 0 0

Sales on credit $0 $0 $0

Receivables turnover 0.00 0.00 0.00

2.3 Company Locations and Facilities

Currently we have one location in suburban Perrysburg. It includes the production area, offices, and warehouse area. We are currently looking into plans to increase the size of the warehouse by adding a location, and providing a store front to enhance the current business sales practices, while providing a high quality, ethnic outlet for Hispanic foods.

3.0 Products

Salvador's sells its authentic Hispanic salsa and chips to an ever-growing clientele. Originally geared toward the local Hispanic community, the market has expanded to include a much larger geographical area, in addition to a very broad consumer response.

We are selling quality and product-uniqueness in a market segment filled with competition. Our approach is to take our product image up-market because or our rich heritage and uncompromising view of product quality. This focus has enabled us to view the voids in the market, and add product to our line that will fill it. We have researched and reviewed other ethnic food item organizations, tracking their successes and positioning ourselves similarly.

Salvador's is building a reputation for high quality and strong value in a product filled with authentic Hispanic flavor. We service our dealers just as if they were a part of the family - and that is our unique approach to marketing our products. You are not just a dealer; not just a consumer; you are special to us - you are family. We go to great lengths to provide our dealers with high quality products, and the ability to make a good margin on them. In addition, we make ourselves available for on-site demonstrations of the product at no charge to them. We hope to continue offering this service, but at a minimal cost to lower our expenses in the future.

3.1 Product Description

We currently offer two basic product lines:

• Our original product, Salsa, was available only in a hot flavor. Because of consumer demand, we have added extra hot and mild flavors.

• Chips, both yellow corn and blue corn.

3.2 Competitive Comparison

To differentiate ourselves from all of the others, we stress quality and authenticity of the ingredients, and the heritage of the family recipe.

We sell more than a jar with salsa in it. We sell high quality ingredients, carefully put together in a masterful blend that can't be matched in taste or true Hispanic authenticity.

These are simple products that must be presented in a way that encourages the consumer to just give us a chance. Once they try our product, we will have a long-term relationship with them.

As in similar food items, we can charge a premium for what we supply. The market has shown it will buy our product over more readily known names because of the richness and authentic taste of our salsa.

3.3 Sales Literature

We are currently working on a new line of brochures and sales materials to assist our marketing, and that of our dealers. Our newly designed labels show the direction we are taking in this area, and we have enclosed a copy as an appendix/attachment.

3.4 Sourcing

Our costs are a part of the margin squeeze. As our orders go up, we need to increase our production in a way that also increases our margin. We have found a local supplier that can reduce our costs by handling much larger batches of salsa than we are currently able, yet maintain our high quality. This will reduce our costs over 32% per jar in the production of our salsa.

We need to continue to find additional opportunities that will afford us lower costs of production while maintaining the quality that has put us on the map. Our outsourcing for the corn chips has shown we can contract for a high quality product that we will be able to put our name on, and meet our goals for gross-profit margin.

3.5 Future Products

We are currently researching the addition of an authentic Hispanic Sauce, as well as other Hispanic food items to offer our current clients, and to build increased interest in Salvador's, Inc.

We are now looking into additional products, sauce, and other Hispanic food items, as well as other ways of marketing the overall line.

We are also looking into creation of a small store front, and eventually a lunch counter or small restaurant setting.

4.0 Market Analysis Summary

We have been selling at the rate of $2,500 per month to local restaurants, small grocery stores and distributors of Hispanic foodstuffs. Salvador's is currently awaiting approval for a large grocery chain to carry our products, and has received a commitment from a large distributor to sell from $100,000 to $150,000 of product per year. There are several other large grocery chains that have been approached and are in various stages of interest in carrying the Salvador's line of product.

4.1 Market Segmentation

The Hispanic food industry is in a boom period. While there are many items from various vendors available, Salvador's has approached the market as a Specialty Retailer: a provider of authentic high quality Hispanic salsa and chips.

We have made significant inroads with several area restaurants and a small grocer's, each providing us with a market presence. We are now looking at developing our own store front as an adjunct to our current marketing. There is a need for a speciality retailer catering specifically to the Hispanic client and to the individuals that appreciate authentic Hispanic cuisine.

In addition to the above, we are also looking at packaging our products for other groups to use for fundraising events, gift baskets for corporate promotions, and the possibility of a house restaurant to further advertise and promote the products.

Market Analysis

Potential Customers Growth 1996 1997 1998 1999 2000 CAGR

Grocery Stores 75% 53 93 163 285 499 75.17%

Distributors 100% 5 10 20 40 80 100.00%

Restaurants 45% 18 26 38 55 80 45.20%

Other 12% 10 11 12 13 15 10.67%

Total 67.32% 86 140 233 393 674 67.32%

4.2 Target Market Segment Strategy

We are initially focusing on the Hispanic community. They will be able to appreciate more readily the authenticity of the product. The market will observe the products they choose, and they will indirectly become promoters of our products.

4.2.1 Market Growth

The market analysis shows us a broad range of prospective clients, covering more than one ethnic group or body. The largest of these groups of customers is that of the mainstream American, which is projected to grow at 12% per year. The fasting growing segment is Hispanic, which is projected to grow at 22% per year.

4.3 Industry Analysis

The Hispanic food industry is relatively new, and its popularity is ever on the increase. The authentic taste is not common in this industry, which gives Salvador's a leg up on the competition.

In an industry currently in a steady upward growth curve, Salvador's is poised to capitalize on the consumer's desire for authentic, high quality, Hispanic cuisine.

While a troubling economy can affect many areas, food items are generally not as affected, with specialty items seeming to always find favor in the market place.

4.3.1 Industry Participants

While there are currently several vendors in this market selling competitive products, the commonality of those products provides an opening in the marketplace for the vibrant packaging and positioning of Salvador's salsa and chips. We stand out on the shelf, we stand out in the restaurant, and we will stand out in the mind of the consumer.

4.3.2 Distribution Patterns

While current brand names carry more weight in the marketplace, because of our unique marketing approach using local restaurants, and displaying and demonstrating our wares in local grocery stores, we are able to build consumer awareness at a margin of the cost of television and radio advertising.

In going to food fairs, neighborhood festivals and the like, we build consumer awareness and generate demand at the same time. While at these events we are also able to directly research the market and hear first-hand what the consumer is seeking.

4.3.3 Competition and Buying Patterns

There are many suppliers of salsa and similar products currently available on the shelves at your local grocer. However, there is still a lot of room for new products and new companies.

By positioning ourselves at the higher end of the market, we expose ourselves to consumers trying to get out of the rut, who continue to use a product that they have long forgotten why they buy. By not trying to compete head on, we are selling our product consistently and increasingly. With entrance into some of the larger grocery chains we will broaden our audience considerably.

4.3.4 Main Competitors

Although Salvador's is staking out the high end of this market, we can not fail to be compared with some of the current leaders in this arena. Chi - Chi's, El Paso, and Hunt's are just a few of the participants in this segment. Most have been on the shelf for so long they are taken for granted by the consumer. Our fresh approach to authentic taste and texture makes us different.

5.0 Strategy and Implementation Summary

Our strategy is based on serving niche markets well. The world is full of consumers who can't get what they perceive to be high quality or authentic. We are capitalizing on the family heritage in our product line.

We are building a marketing infrastructure that will provide what appears to be a seamless approach to our products, covering multiple avenues of utilizing grocery stores and major distributors. Each location will accent the other, providing for continuous exposure of Salvador's name.

5.1 Marketing Strategy

We are focusing on the consumer first through grocery exposure, and then impacting them through restaurants and other food places.

5.1.1 Pricing Strategy

We are able to price our products competitively. Even though we are subject to some impulse buying, we can provide a product to be resold at a generous mark-up for our dealers, while still providing a satisfactory experience for the consumer. At a retail range of $2.79 to $3.05 per jar of salsa, we cover the mid-to-upper price range of the salsa market, while providing a 33% margin for the dealers.

5.1.2 Promotion Strategy

The long-range goal is to gain enough visibility to leverage the product into other distribution sites within our region, then to move on to other geographical regions as inquiries and distribution requests come in.

Although our current contacts in the grocery chains are for local consumption, they all move out of this region in their normal distribution. It is our goal to move with them.

5.1.3 Distribution Strategy

To this means we have been continually reworking our packaging for better corporate identity, providing a more attractive package, a very important ingredient in the food industry. An example is the recent addition of bar-coding and nutritional information to our label.

5.2 Sales Strategy

The keys to our continuing success are in the areas we are adding to our current distribution channels. This will remain our main focus for the next five years. Sales calls on the following enterprises have resulted in Salvador's Salsa being stocked and sold by them.

Churchill Supermarkets

Kazmaiers

LaPeria (Toledo)

LaMexicana (Toledo)

Gift Baskets (Perrysburg)

Barney's (Perrysburg)

E & L Meats (Detroit)

LaColmena (Detroit)

Gerrards (Rossford)

Wolfert's (Toledo)

IGA (Delta)

Ottawa Market (Toledo)

Schorlings (Toledo)

Char's Best Market (Toledo)

Luna Bakery & Grocery (Detroit)

La Bottelia (Detroit)

D & D's Carryout (Pemberville)

Grumpy's (Toledo)

Pauken Wine & Liquor (Maumee)

K.O.A. Campground (Stoney Ridge)

Mad Anthony's (Waterville)

Brinkman's Country Corner (Findlay)

Connie Mac's (Toledo)

El Aguila Bakery (Fremont)

Elmore Super Value (Elmore)

Ohlman's Farm Market (Toledo)

Falls Crestview Market (Toledo)

Moser's Farm Market (Perrysburg)

Bassets IGA (Oak Harbor)

Dels (Woodville)

South Point Carryout (Toledo)

Markada (Ann Arbor)

Partners in Wine II (Ann Arbor)

Vernor Foods (Detroit)

Brownings (Whitehouse)

Stephen's Restaurant (Perrysburg)

Kirwen's (Gibsonburg)

5.2.1 Sales Forecast

We currently forecast our sales to grow at the rate of 514% for the next 12 months because of written commitments we have received from distributors intending to take on our product line in larger volumes in the future.

• See copies of letters attached.

This growth will continue, but at a lower rate of 45% for the next year , and by 45% the following year. We anticipate the growth rate to flatten out to a consistent 12% within five years, but to remain steady. Should the market on Hispanic food items continue at its current pace, we will keep pace with it. Our forecast does assume a downturn in the product within a three-year period, and the lower figures of 12% are a reflection of that forecast. We would be happy if it didn't falter.

Sales Forecast

Sales 1996 1997 1998

Sales $168,602 $217,320 $312,052

Other $0 $0 $0

Total Sales $168,602 $217,320 $312,052

Direct Cost of sales 1996 1997 1998

Sales $64,917 $86,928 $124,821

Other $0 $0 $0

Subtotal Cost of Sales $64,917 $86,928 $124,821

5.2.2 Sales Programs

Dealer sales: Thorough and persistent effort to generate sales through major names including:

• Meijer, Inc.

• Foodtown, Inc.

• Krogers

• Moctezuma Foods, Inc.

• IGA (various)

• Churchill's

• Ohlman's

To this means, we are currently interviewing distributors to assist us with the marketing and distribution of our salsa. Again, the hiring of a distributor, and a modest performance increase on their efforts for Salvador's would make our sales projections conservative. Key to the sale and distribution of our products through this channel is the constant care and feeding of the buyers for each of the organizations. Sales calls on a regular basis, along with samples of new product, will keep the doors open to us.

• See enclosed list of current customers.

5.3 Strategic Alliances

We do have some opportunity for building strategic alliances with several local restaurants some of which are listed below:

• La Perla

• Connie Mac's

• Zingerman's

Approached properly, they will not only serve our products in their restaurants, but also sell for carry out.

5.4 Milestones

The following table lists important program milestones, with dates and budgets for each. The milestone schedule indicates our emphasis on planning and for having a sure method of implementation when the time comes for each action.

Milestones

Milestone Start Date End Date Budget Manager Department

SBA Loan 1/9/1996 1/11/1996 $1,500 Patricia Finance

Hirzel Contract 15/4/1997 15/6/1997 $9,600 Ricardo Finance

1st Employee 1/12/1996 1/12/1996 $9,600 Patricia Admin./Mgmt

Store Front/Warehouse 1/1/1997 1/3/1997 $12,000 Ricardo Sales

2nd Employee 1/3/1997 1/5/1997 $24,000 Ricardo Production

New Product Development 1/1/1997 1/12/1997 $350 Pat/Ric Marketing

Marketing Development 1/1/1997 1/3/1997 $500 Ricardo Marketing

3rd Employee - Administration 15/1/1998 1/3/1998 $18,500 Pat Admin.

4th Employee - Warehse/Deliver 1/3/1998 1/6/1998 $24,500 Ricardo Warehouse

Other 1/1/1998 1/1/1998 $0 ABC Department

Totals $100,550

6.0 Management Summary

Salvador's was founded by Ricardo & Patricia Torres and has operated without the burden of any payroll or salary expense to this point.

Patricia Torres - President

Patricia is currently responsible for the preparation of salsa and maintaining the various inventories of raw materials; purchasing of food ingredients; assistance with packaging and shipping. In addition, she maintains the company records and is in direct communication with the accountant and other advisors.

Ricardo Torres - Vice President

Ricardo assists with the preparation and production of salsa; maintains the inventory of the finished products; is responsible for packing and shipping; assists with recordkeeping and cost containment. Ricardo also shares in the marketing and promotion of the product.

Current plans are to bring Patricia on board in a paid capacity on or about August 1st, and we have forecast the proper expenses to do so. As orders are processed and goals met, Ricardo will take charge of the logistics and become a fulltime paid employee as well. We are currently forecasting this to transpire in the first quarter of 1997. We plan on hiring additional personnel as the need for them arises, and as we have the ability to pay them.

6.1 Organizational Structure

Salvador's planned organization calls for sales and marketing, product development, finance and administration. Actual production falls under the finance and administrative area. We are currently using outside consultants to assist in these areas.

6.2 Management Team

The management team is currently comprised of Ricardo and Patricia Torres, the founders of Salvador's, Inc. In addition, they have a board of advisors with over 78 years of administrative, financial, and sales management experience to assist them with management decisions on daily operations, and the long-range planning necessary for continued, consistent growth.

The team is currently composed of the following professionals:

Mr. Lupe T. Hinojosa (419) 868-8055

Branch Manager

Mariner Financial Services, Inc.

Money Management, Insurance & Financial Advice

5640 Southwyck Blvd., Suite 101

Toledo, Ohio 43614

Mr. Jack L. Karsten (419) 893-8248

President

IHN Consulting Services, Inc.

Administrative, Marketing & Strategic Planning

P. O. Box 746

Maumee, Ohio 43537-0746

Mr. Douglas Holthues (419) 476-4677

C.P.A.

Holthues & Sheperd

Bookkeeping, Financial Reporting & Tax Planning

4415 Lewis Avenue

Toledo, Ohio 43612

Legal Advice and Assistance

Mike Hood

Attorney at Law

6.3 Management Team Gaps

The gaps in the management team are currently being addressed through the use of outside consultants as shown above, and will continue to be until the cash flow allows for the hiring of employees to fill those capacities. The identifiable gaps are in administration, finance management, and marketing.

6.4 Personnel Plan

The current personnel plan calls for Patricia to become a paid employee on or about August 1st. Although she has been working for Salvador's since it's inception two years ago, she has not drawn a salary or been reimbursed for expenses. We are then planning on Ricardo taking a paid position with Salvador's by early 1997, or the successful approval of a Link Deposit Loan; whichever comes first.

Personnel Plan

1996 1997 1998

Payroll $9,600 $43,500 $72,800

7.0 Financial Plan

We have forecast a very rapid growth for Salvador's this year. Although this may seem ambitious based on historic sales, this rate of growth is due to the large orders we have received to date from several distributors, letters of commitment from Meijers and Krogers (copies enclosed), and the increasing number of orders from current clients.

7.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table. The key underlying assumptions are:

• We assume a slow-growth economy, without major recession.

• We assume, of course, that there are no unforeseen changes in the consumer market to make products immediately obsolete or out of favor (or not increasing in popularity).

• We assume access to equity capital and financing sufficient to maintain our financial plan as shown in the tables, addendum, and additional documentation.

General Assumptions

1996 1997 1998

Short-term Interest Rate % 1.00% 1.00% 1.00%

Long-term Interest Rate % 0.00% 0.00% 0.00%

Payment Days Estimator 30 30 30

Collection Days Estimator 30 30 30

Inventory Turnover Estimator 5.00 5.00 5.00

Tax Rate % 1.00% 1.00% 1.00%

Expenses in Cash % 10.00% 10.00% 10.00%

Sales on Credit % 15.00% 15.00% 15.00%

Personnel Burden % 10.00% 10.00% 10.00%

7.2 Key Financial Indicators

The most important factor in our case is the ability to procure financing to go to the next level. The size of the orders currently being asked of us are well beyond our current production capability, but well within the production capability of a local processor. *Note: purchasing from this supplier will also reduce our per unit production costs in excess of 30%. An additional alternative would be to purchase the production equipment necessary, and not be subject to the local manufacturer's production scheduling (see enclosed quotes on production equipment).

We must maintain gross margins of at least 55% and hold marketing costs to no more than 20% of sales to provide the income to reduce our debt, and equip us to sustain the growth we anticipate. We will meet and exceed all of these conditions through buying at increased volumes. Then we'll pass the savings on to our customers through increases in the margins at which they retail the product.

7.3 Break even Analysis

The break-even analysis shows that Salvador's has a good balance of fixed costs and sufficient sales to remain healthy. Our break-even point is close to 1,426 jars (119 cases) of salsa a month, while our sales forecast for the next year calls for almost 10,000 jars (833 cases) of salsa a month, on average.

We have just recently contracted with another jar supplier that will reduce our costs by 18% per jar of salsa with the next supply order. This will further reduce the break-even point, and add to our goal of increasing the margin on our salsa.

Break Even Analysis:

Monthly Units Break-even 1,426

Monthly Sales Break-even $2,852

Assumptions:

Average Per-Unit Revenue $2.00

Average Per-Unit Variable Cost $1.40

Estimated Monthly Fixed Cost $856

7.4 Projected Profit and Loss

We expect to close out this year with over $100,000 in sales, and to increase our sales to more than $400,000 per year by the turn of the century, with net earnings averaging in excess of 10%.

Profit and Loss (Income Statement)

1996 1997 1998

Sales $168,602 $217,320 $312,052

Direct Cost of Sales $64,917 $86,928 $124,821

Other $0 $0 $0

------------ ------------ ------------

Total Cost of Sales $64,917 $86,928 $124,821

Gross Margin $103,685 $130,392 $187,231

Gross Margin % 61.50% 60.00% 60.00%

Operating expenses:

Advertising/Promotion $466 $750 $1,250

Travel $916 $1,250 $3,500

Miscellaneous $637 $1,000 $1,850

Other $792 $700 $900

Payroll Expense $9,600 $43,500 $72,800

Depreciation $5,520 $5,520 $8,950

Leased Equipment $465 $1,000 $1,000

Utilities $3,850 $3,900 $4,500

Insurance $1,044 $2,010 $2,650

Rent $3,500 $12,000 $16,500

Other $4,290 $4,225 $6,275

Other $0 $0 $0

Other $3,953 $4,015 $6,500

------------ ------------ ------------

Total Operating Expenses $35,033 $79,870 $126,675

Profit Before Interest and Taxes $68,652 $50,522 $60,556

Interest Expense Short-term $149 $98 $40

Interest Expense Long-term $0 $0 $0

Taxes Incurred $685 $504 $605

Net Profit $67,818 $49,920 $59,911

Net Profit/Sales 40.22% 22.97% 19.20%

7.5 Projected Cash Flow

We expect to manage cash flow over the next three years with the assistance of a Small Business Administration supported loan of $165,000. This financing assistance is required to provide the working capital to meet the current needs while providing a solid foundation to build the growth of the organization. After a six-month period, we anticipate requesting an open line of credit of between $50,000 and $100,000 to further the company's ability to meet and exceed sales projections, gross margin, and return on investment.

Pro-Forma Cash Flow

1996 1997 1998

Net Profit $67,818 $49,920 $59,911

Plus:

Depreciation $5,520 $5,520 $8,950

Change in Accounts Payable $7,462 $2,057 $4,407

Current Borrowing (repayment) ($3,650) ($5,555) ($6,000)

Increase (decrease) Other Liabilities $0 $0 $0

Long-term Borrowing (repayment) ($7,100) ($17,042) ($17,042)

Capital Input $0 $0 $0

Subtotal $70,050 $34,900 $50,225

Less: 1996 1997 1998

Change in Accounts Receivable $2,435 $704 $1,368

Change in Inventory $11,225 $4,990 $8,590

Change in Other ST Assets $0 $0 $0

Capital Expenditure $0 $0 $0

Dividends $45,000 $0 $0

Subtotal $58,660 $5,694 $9,959

Net Cash Flow $11,390 $29,206 $40,267

Cash Balance $11,516 $40,722 $80,988

7.6 Projected Balance Sheet

As shown by the balance sheet in the table, we expect a healthy growth in net worth through the end of the plan period.

Pro-forma Balance Sheet

Assets

Short-term Assets 1996 1997 1998

Cash $11,516 $40,722 $80,988

Accounts Receivable $2,435 $3,139 $4,507

Inventory $14,717 $19,707 $28,297

Other Short-term Assets $0 $0 $0

Total Short-term Assets $28,668 $63,568 $113,793

Long-term Assets

Capital Assets $23,368 $23,368 $23,368

Accumulated Depreciation $15,312 $20,832 $29,782

Total Long-term Assets $8,056 $2,536 ($6,414)

Total Assets $36,724 $66,104 $107,379

Liabilities and Capital

1996 1997 1998

Accounts Payable $7,462 $9,519 $13,925

Short-term Notes $12,557 $7,002 $1,002

Other Short-term Liabilities $0 $0 $0

Subtotal Short-term Liabilities $20,019 $16,521 $14,927

Long-term Liabilities ($7,100) ($24,142) ($41,184)

Total Liabilities $12,919 ($7,621) ($26,257)

Paid in Capital $25,000 $25,000 $25,000

Retained Earnings ($69,013) ($1,195) $48,725

Earnings $67,818 $49,920 $59,911

Total Capital $23,805 $73,725 $133,636

Total Liabilities and Capital $36,724 $66,104 $107,379

Net Worth $23,805 $73,725 $133,636

7.7 Business Ratios

Standard business ratios are included in the table that follows. The ratios show a plan for well balanced, healthy growth.

Ratio Analysis

Profitability Ratios: 1996 1997 1998 RMA

Gross Margin 61.50% 60.00% 60.00% 0

Net Profit Margin 40.22% 22.97% 19.20% 0

Return on Assets 184.67% 75.52% 55.79% 0

Return on Equity 284.89% 67.71% 44.83% 0

Activity Ratios 1996 1997 1998 RMA

AR Turnover 10.39 10.39 10.39 0

Collection Days 18 31 30 0

Inventory Turnover 7.13 5.05 5.20 0

Accts Payable Turnover 11.69 12.17 12.17 0

Total Asset Turnover 4.59 3.29 2.91 0

Debt Ratios 1996 1997 1998 RMA

Debt to Net Worth 0.54 -0.10 -0.20 0

Short-term Liab. to Liab. 1.55 0.00 0.00 0

Liquidity Ratios 1996 1997 1998 RMA

Current Ratio 1.43 3.85 7.62 0

Quick Ratio 0.70 2.65 5.73 0

Net Working Capital $8,649 $47,047 $98,866 0

Interest Coverage 459.89 516.61 1513.14 0

Additional Ratios 1996 1997 1998 RMA

Assets to Sales 0.22 0.30 0.34 0

Debt/Assets 35% -12% -24% 0

Current Debt/Total Assets 55% 25% 14% 0

Acid Test 0.58 2.46 5.43 0

Asset Turnover 4.59 3.29 2.91 0

Sales/Net Worth 7.08 2.95 2.34 0

Dividend Payout $1 0.00 0.00 0



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