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2MBA – Financial Plan

9.1 Underlying Assumptions

  • Nestle will purchase all MVU’s under a contract allowing price fluctuations in-line with materials and labour costs
  • Sales invoices to be paid when units dispatched from factory
  • Creditors paid 7 days end of month
  • Each month’s production is sold in the following month
  • Factory operations will be set up in Pennsylvania
  • Pay as you go has been assumed for income taxes

9.2 Financial Highlights (Best Case Scenario)

  • Cash positive in each year of operation
  • $5.8 million committed to R&D
  • MVU cash surplus reinvested into La Barista

9.3 Financial Ratios

Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Gross Margin 30% 37% 40% 41% 42%
NPAT % Total Assets 39% 20% 29% 35% 34%
Quick Ratio 120% 209% 227% 324% 449%
Inventory Turnover 9.50 9.62 10.05 10.28 10.42

9.4 Breakeven Point

MVU 4 units per week $3,000,000 annual sales
La Barista 13 units per week $4,400,000 annual sales

 

Annual Sales($million)
MBA, Inc. Profits ($million)

9.5 Financial Proformas

Cash Flow Year 1 Year 2 Year 3 Year 4 Year 5
Opening cash balance 535,819 1,789,976 2,962,807 5,763,924
Cash Inflows
Capital funds 621,400 1,000,000
Sales 6,080,000 13,187,200 21,826,688 31,136,236 41,155,624
Total Cash Inflows 6,701,400 14,187,200 21,826,688 31,136,236 41,155,624
Cash Outflows
Purchase of equipment 150,000 500,000 500,000 500,000 500,000
Assembly-MVU 4,678,149 5,560,314 5,782,727 6,014,036 6,014,036
Manufacturing La Barista 3,550,950 8,616,972 14,082,594 19,971,679
Factory rent 84,000 174,720 272,563 374,320 385,659
Maintenance 91,200 197,808 327,400 467,044 617,334
Research & Development 240,000 439,680 1,559,667 1,556,812 2,057,781
Training 60,000 120,000 120,000 120,000 120,000
Marketing Budget 120,000 600,000 480,000 480,000 480,000
Factory/Office wages 411,200 640,000 770,000 850,000 930,000
Federal Income Tax 20,893 378,885 875,848 1,803,570 2,751,060
State Income Tax 6,139 111,325 257,345 529,931 808,326
License Fees 304,000 659,360 1,091,334 1,556,812 2,057,781
Dividends Paid
Total Cash Outflows 6,165,581 12,933,043 20,653,857 28,335,119 36,693,657
Net cash flow 535,819 1,254,157 1,172,831 2,801,117 4,461,967
Closing Cash balance 535,819 1,789,976 2,962,807 5,763,924 10,225,891

 

Inventory Management Year 1 Year 2 Year 3 Year 4 Year 5
Start up Inventory 0 40 140 240 340
Unit Sales 380 1280 2480 3680 4880
Manufacturing 420 1380 2580 3780 4980
Closing inventory 40 140 240 340 440

 

Tax Reconciliation Year 1 Year 2 Year 3 Year 4 Year 5
Net cash flow 535,819 1,254,157 1,172,831 2,801,117 4,461,967
Less Equity Injection (621,400) (1,000,000)
Less Depreciation (30,000) (130,000) (230,000) (330,000) (430,000)
Add: Capital Expenditure 150,000 500,000 500,000 500,000 500,000
Add Tax Paid 27,032 490,210 1,133,193 2,333,501 3,559,387
Add:
Add: Dividends Paid
Taxable Income 61,451 1,114,368 2,576,024 5,304,618 8,091,354
Federal Tax Liability 20,893 378,885 875,848 1,803,570 2,751,060
State Tax Liability 6,139 111,325 257,345 529,931 808,326
27,032 490,210 1,133,193 2,333,501 3,559,387

Refer Appendix I for Financial Analysis Worksheets

9.6 Sensitivity Analysis

The first scenario to consider is that the Nestle contract does not materialize, in which case the investor will not be required to provide any funds. Should Nestle’s requirements not meet expectations then production of the MVU could be scaled back. Of course this would impact on 2MBA, Inc.’s ability to provide funding for the subsequent La Barista production facilities. For example, if the MVU production was reduced to 30 units per month and there was no other external funding than that contemplated in the Offer, 2MBA, Inc. would not be able to fund the second La Barista production facility until Year 5. Under the above eventuality the investor would be entitled to claw back the Management Team’s equity to 30%, thereby increasing their own equity to 50%. The investors IRR would then calculate to 72% (refer 2MBA, Inc. sensitivity analysis Appendix I). The majority of cash expenditure is related to production and sales volumes and allowances have been made in the Nestle contract for raw material and labor cost increases to be reflected in the selling price of the MVU. It is envisaged that similar type arrangements will be put in place for La Barista.

9.7 Source and Application of Funds

Source Application
JAJA Equity
$121,400Investor Equity
$500,000Investor Equity
$1,000,000
MVU Assembly equipment
$150,000Raw materials (2 months)
$250,000Working Capital
$250,000

La Barista Production Equipment
$500,000

Raw Materials (4 months)
$250,000

Working Capital
$250,000

9.8 Critical Risks and Problems

Risk Dimension Perceived Risk
Development Zero
Management Low/Moderate
Marketing Low/Moderate
Financial Low/Moderate
Valuation Low
Financing Low/Moderate
Exit Low/Moderate

See Appendix B for further explanation of Risks and Problems.


 

2MBA
Table of Contents Appendices
0. Executive Summary
1. The Offer
2. The Products
3. The Organization
4. Strategic Analysis
5. Key Strategic Issues
6. Marketing Plan
7. Production Plan
8. Organization Plan
9. Financial Plan
A. Internal Environment Analysis
B. Critical Risks and Problems
C. SWOT Analysis
D. Testimonials
E. Production Layout
F. Action Plan
G. Team Member Details
H. Reference Sources
I. Financial Analysis Worksheets
All information herein is confidential and belongs to 2MBA, Inc.
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