Financial Plan

Financial Plan

Sales: Randall Crater is basing their projected coffee and espresso sales on the financial snapshot information provided to them by Joey Bros. Coffee Co. Internet sales were estimated by calculating the total number of hours each terminal will be active each day and then generating a conservative estimate as to how many hours will be purchased by consumers.

Cost of Goods Sold: The cost of goods sold for coffee-related products was determined by the “retail profit analysis” we obtained from Joey Bros. Coffee Co. The cost of bakery items is 20% of the selling price. The cost of Internet access is $660 per month, paid to Southern Computers for networking fees. The cost of e-mail accounts is 25% of the selling price.

Fixture Costs: Fixture costs associated with starting Randall Crater are the following: 11 computers = $22,000, two printers = $1,000, one scanner = $500, one espresso machine = $10,700, one automatic espresso grinder = $795, two coffee/food preparation counters = $1,000, one information display counter = $1,000, one drinking/eating counter = $500, sixteen stools = $1,600, six computer desks w/chairs = $2,400, stationery goods = $500, two telephones = $200, decoration expense = $14,110 for a total fixture cost of $50,000.

Salaries Expense: The founder of Randall Crater, Randall Crater ®, will receive a salary of $24,000 in year one, $26,400 in year two, and $29,040 in year three.

Payroll Expense: Randall Crater intends to hire six part-time employees at $5.75/hour and a full-time technician at $10.00/hour. The total cost of employing seven people at these rates for the first year is $7,240/month.

Rent Expense: Randall Crater is leasing a 1700 square foot facility at $.85/sq. foot. The lease agreement Randall Crater signed specifies that we pay $2,000/month for a total of 36 months. At the end of the third year, the lease is open for negotiations and Randall Crater may or may not re-sign the lease depending on the demands of the lessor.

Utilities Expense: As stated in the contract, the lessor is responsible for the payment of utilities including gas, garbage disposal, and real estate taxes. The only utilities expense that Randall Crater must pay is the phone bill generated by fifteen phone lines; thirteen will be dedicated to modems and two for business purposes. The basic monthly service charge for each line provided by US West is $17.29. The 13 lines used to connect the modems will make local calls to the network provided by Bellevue resulting in a monthly charge of $224.77. The two additional lines used for business communication will cost $34.58/month plus long distance fees. Randall Crater assumes that it will not make more than $40.00/month in long distance calls. Therefore, the total cost associated with the two business lines is estimated at $74.58/month and the total phone expense at $299.35/month. In addition, there will be an additional utility expense of $800 for estimated EWEB bills.

Marketing Expense: Randall Crater will allocate $5,000 for promotional expenses at the time of start-up. These dollars will be used for advertising in local newspapers in order to build consumer awareness. For additional information, please refer to section 5.0 of the business plan.

Insurance Expense: Randall Crater has allocated $1,440 for insurance for the first year. As revenue increases in the second and third year of business, Randall Crater intends to invest more money for additional insurance coverage.

Legal and Consulting Fees: The cost of obtaining legal consultation in order to draw up the paper work necessary for an LLC is $1,000.

Depreciation: In depreciating our capital equipment, Randall Crater used the Modified Accelerated Cost Recovery Method. We depreciated our computers over a five-year time period and our fixtures over seven years.

Taxes: Randall Crater is an LLC and, as an entity, it is not taxed. However, there is a 15% payroll burden.

Accounts Payable: Randall Crater acquired a $24,000 loan from a bank at a 10% interest rate. The loan will be paid back at $750/month over the next three years. The $9,290 short term loan will be paid back at a rate of 8%.

Important Assumptions

Basic assumptions are presented in the table below.

General Assumptions
1999 2000 2001
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 25.42% 25.00% 25.42%
Other 0 0 0