cakes tell stories

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Business Plan

Cakes Tell Stories

www.cakes-tell-stories.com
http://www.cakes-tell-stories.com/http://www.cakes-tell-stories.com/http://www.cakes-tell-stories.com/


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Legal Page

Confidentiality Agreement

The undersigned reader acknowledges that the information provided by Cakes Tell Stories in this businessplan is confidential; therefore, reader agrees not to disclose it without the express written permission ofCakes Tell Stories.

It is acknowledged by reader that information to be furnished in this business plan is in all respects

confidential in nature, other than information which is in the public domain through other means and thatany disclosure or use of same by reader may cause serious harm or damage to Cakes Tell Stories.

Upon request, this document is to be immediately returned to Cakes Tell Stories.

___________________Signature

___________________Name (typed or printed)

___________________Date

This is a business plan. It does not imply an offering of securities.


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Table of Contents

1.0 Executive Summary .........................................................................................................1

Chart: Highlights ...............................................................................................................2

1.1 Objectives.........................................................................................................................2

1.2 Mission ...............................................................................................................................2

1.3 Keys to Success .............................................................................................................2

2.0 Company Summary ..........................................................................................................2

2.1 Company Ownership ....................................................................................................3

2.2 Start-up Summary ........................................................................................................3

Table: Start-up...................................................................................................................3

Chart: Start-up ..................................................................................................................4

3.0 Products ................................................................................................................................4

4.0 Market Analysis Summary .............................................................................................5

4.1 Market Segmentation ..................................................................................................5

Table: Market Analysis ....................................................................................................6

Chart: Market Analysis (Pie).........................................................................................6

4.2 Target Market Segment Strategy ...........................................................................6

4.3 Industry Analysis...........................................................................................................7

4.3.1 Competition and Buying Patterns ...................................................................7

5.0 Web Plan Summary ..........................................................................................................8

5.1 Website Marketing Strategy......................................................................................8

5 2 Development Requirements 9


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Table of Contents

Chart: Sales by Year ..................................................................................................13

6.5 Milestones.......................................................................................................................14

Table: Milestones ............................................................................................................14

Chart: Milestones ............................................................................................................14

7.0 Management Summary.................................................................................................14

7.1 Personnel Plan ..............................................................................................................15

Table: Personnel ..............................................................................................................15

8.0 Financial Plan ....................................................................................................................15

8.1 Start-up Funding .........................................................................................................15

Table: Start-up Funding ...............................................................................................16

8.2 Important Assumptions ............................................................................................16

8.3 Break-even Analysis...................................................................................................17

Table: Break-even Analysis.........................................................................................17

8.4 Projected Profit and Loss..........................................................................................17

Table: Profit and Loss ....................................................................................................18

Chart: Profit Monthly .....................................................................................................19

Chart: Profit Yearly .........................................................................................................19

Chart: Gross Margin Monthly......................................................................................20

Chart: Gross Margin Yearly .........................................................................................20

8 5 Projected Cash Flow 21


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1.0 Executive Summary

Cakes Tell Stories aims to give cakes a whole new dimension. Located at the heart of NewYork, the financial and marketing capital of the world, it will be a unique bakery for itscreative custom-made cakes and its relationship with its customers. Whether it's an

extravagant wedding, or a fun birthday cake, we like to talk to our customers and get a feelfor what they want. Our mission is to be a cornerstone in creating a unique bakerywhere customers tell their stories and watch their stories turn into cakes. We are sensitive

to each and every persons stories, empathize with them and portray that story in a cake.

Our cakes not only change their looks with every customer but also tastes delicious and areinexpensive. We seek fair and responsible profit, enough to keep the company financially

healthy.

Owner and founder of Cakes Tell Stories is starting the business with only $20,000 in their

pocket. But the company has a start-up requirement of about $130k, which will be spent inleasing a store-front, registering the business, acquiring insurance, purchasing equipmentfor set-up, for e.g., convention oven, microwave oven, fridge, computer etc., which are the

long term assets of the company. Other assets include electronics like mixers, blenders etc.,

and utensils like pans, spatula etc., while inventory includes flour, sugar, fondant, gumpaste etc. A major portion of the start-up expense also goes into marketing and advertising.

The major source of the fund will come from the investors, with an equity investment of$100,000. Other sources include short and long term loans, a short term liability or bankloan of $25k and a long term liability of $50k.

In the projections for Cakes Tell Stories, the company starts off with yearly sales of about

$228.55 thousand in its first year of operation. With the growth in business and expansioninto other lines, Cakes Tell Stories manages to earn revenue of about $455 thousand in thefifth year. The company will have a high gross margin of about 85% almost throughout

its five years of projections, which seems to leaves enough room for its fixed expenses andother administrative or operating expenses. In the first year, Cakes Tell Stories is projectedto have a loss after paying its operating expenses, taxes and interest payments. But, it is

projected to turn a net profit of almost 10% in the second year, which increases to almost

20% by the end of fifth year.


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Chart: Highlights

1.1 Objectives

1. To establish a strong presence in the market as a unique bakery.

2. To specialize in cakes those are different from any other cakes available in themarket.

3. To establish a storefront by the end of summer 2011

1 2 Mission


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wedding, or a fun birthday cake, we like to talk to our customers and get a feel for whatthey want. We make sure the cake reflects their personal style, the event and the story

behind it. We emphasize on presentation, detail and taste.

2.1 Company Ownership

Cakes Tell Stories will be a one-member Limited Liability Corporation. Ms. Sumaiya

Zaman will be the only founding member at the time of its formation.

2.2 Start-up Summary

Like any other start-up, Cakes Tell Stories have the usual start-up costs of registeringthe company, attaining the license, and since it is registered as an LLC, there is also the

cost of publishing the legal notice in the newspapers. In addition, a store front along

with work space will be leased. The place will be refurbished and equipped with modernconvention ovens, microwave ovens, fridge etc. Other initial costs will include electronicslike mixers, beaters, along with cake pans, utensils etc. Inventory mainly comprises of

flour, baking powder, oil, butter, eggs, sugar, salt, fondant, gum paste and many more.

Table: Start-up

Start-upRequirements

Start-up ExpensesLegal $5,000Insurance $5,000Lease $25,000C t $2 000


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Chart: Start-up

3.0 Products

As the name suggests, Cakes Tell Stories sells cakes, but not just any cake, it sells

cakes that are unique and creative in their own ways. The cakes are custom-made and

are made after listening to the tale of each customer. Whether it's a wedding, babyshower, anniversary or a birthday party, every occasion has a theme, and stories behind

them. We listen to them, relate to them, form a relationship with them and try to makethe cake from their point of view. We make sure the cake reflects their personal style,

the event and the story behind it. Presentation is key for us, we pay close attention todetails and last but not the least, and we make the cakes taste delicious too.


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4.0 Market Analysis Summary

The target market for Cakes Tell Stories are the middle-class population and high-income professionals in New York metropolitan area, who appreciate the finer things inlife, and are willing to pay for them. They value relationships, art, great food and wine,

organic fruits and vegetables, delicious desserts made from scratch. The company will

not chase the $15-cake market; the same group that prefers convenience and lowprices. But it would be wrong to say that those who buy cakes from the grocery store

will not order cakes to Cakes Tell Stories. We sell cakes for special occasions, and those

who buy cakes from mom and pop bakeries or groceries on a daily basis will also ordercakes to Cakes Tell Stories once in a while.

Customers who appreciate a homemade treat made from scratch, using only fresh, highquality ingredients will also fall in the target market. When considering the socialladder, this target market will be members of the middle class and upper middle class

group, white collar workers. Price is not an issue for them. They would be willing to

pay a decent amount for a unique, creative and impressive as well asdelicious homemade cake. And since many of them are health-conscious, when they do

have the occasional sweet treat, they want it to be heavenly.

The target market has no age limit; it could be moms ordering cakes for their toddlers,husbands surprising their wives on their birthdays, couples celebrating their 50th

anniversary, friends preparing for a baby-shower or a bridal-shower. But, one thing is

common in all of them, they all value relationships, they all have a story to tell, they allwant their cakes to represent that story.

4.1 Market Segmentation


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Table: Market Analysis

Market Analysis2011 2012 2013 2014 2015

PotentialCustomers

Growth CAGR

Anniversary 1% 100,000 101,000 102,010 103,030 104,060 1.00%Birthdays 3% 500,000 512,500 525,313 538,446 551,907 2.50%Bridal shower/

baby shower

2% 50,000 51,000 52,020 53,060 54,121 2.00%

Wedding 2% 80,000 81,600 83,232 84,897 86,595 2.00%Mother's day 3% 25,000 25,750 26,523 27,319 28,139 3.00%Graduation 2% 75,000 76,500 78,030 79,591 81,183 2.00%Holiday/ Seasonal 1% 10,000 10,100 10,201 10,303 10,406 1.00%Total 2.20% 840,000 858,450 877,329 896,646 916,411 2.20%

Chart: Market Analysis (Pie)


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The bridal or baby shower sectors will grow from the image already built through thebirthday and anniversary segments. These sectors are less likely to have repeat

purchases but will grow through word-of-mouth. Even though a very important sectorfor any bakery is the wedding segment, Cakes Tell Stories does not plan to target thismarket segment until its fourth year into the business. The reasoning behind that is thefact that by the fourth year Cakes Tell Stories plan to establish a reputable brand name

in the market as well as become an expert in the area. It will have all the necessarytools to stand out as an outstanding bakery to serve the all important wedding-cakemarket.

4.3 Industry Analysis

The US bakery industry includes about 2,800 commercial bakeries with combined annual

revenue of about $30 billion, along with about 6,000 retail bakeries with combinedannual revenue of about $3 billion. Major companies include Hostess Brands and Flowers

Foods, plus the US operations of Mexico's Grupo Bimbo. The commercial side of theindustry is concentrated: the 50 largest companies generate 75 percent of revenue. The

retail side of the industry is highly fragmented: the 50 largest companies generate about15 percent of revenue, and the typical company operates just one facility. (Source:

hoovers.com)

4.3.1 Competition and Buying Patterns

The US bakery industry includes about 2,800 commercial bakeries with combined annualrevenue of about $30 billion, along with about 6,000 retail bakeries with combined

annual revenue of about $3 billion. Major companies include Hostess Brands and FlowersFoods, plus the US operations of Mexico's Group Bimbo. The commercial side of the

industry is concentrated: the 50 largest companies generate 75 percent of revenue. Theretail side of the industry is highly fragmented: the 50 largest companies generate about15 percent of revenue, and the typical company operates just one facility.


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grocery stores, and they can be more easily acquired if the bakery has an establishedbrand or the marketing resources to create one.

Buyers: Buyers of the bakery industry's products, such as supermarkets, grocery stores,hotel chains and convenience stores, are able to appropriate much of the industry'sprofit due to the large number of small bakeries that are all vying to find outlets for their

products. As a result, buyers are able to command low prices and volume discounts.Only large players, such as Kraft, Kellogg, Yamazaki Baking and Grupo Bimbo, have thepower to level the playing field and achieve a more balanced share of the profits.

Suppliers: Suppliers do not have much negotiating power in the bakery business due to

the well developed markets for their products and the commoditized nature of what theyare selling. Bakeries can be affected by price swings of the raw inputs, but the changes

are a result of global supply and demand determinants rather than suppliers' negotiatingpower.

Substitutes: Many substitutes exist for bakery products. Breakfast cereals, rice and

potatoes are all viable alternatives and individuals can also make all of the baked goodsthey want at home. Bakeries rely upon price and convenience to keep individuals

switching to a substitute or baking what they need at home.

Source: http://www.ehow.com/about_5234246_bakery-industry-analysis.html#ixzz1ODsazdx1

5.0 Web Plan Summary

Cakes Tell Stories has already launched a website atwww.cakes-tell-stories.com. This

website will play a major role in the business and will be a dynamic marketing tool for

the company. Along with marketing, it will also serve as the business development tool,

sales, catalogue, hiring and recruiting, and later expanding to other areas. It will providesufficient information about the company's products, pricing and other services for

target customers and potential business partners, such as affiliate programs, marketingcollateral, technical white papers, and new product updates. As the company grows, its
http://www.ehow.com/about_5234246_bakery-industry-analysis.html#ixzz1ODsazdx1http://www.ehow.com/about_5234246_bakery-industry-analysis.html#ixzz1ODsazdx1http://www.cakes-tell-stories.com/http://www.cakes-tell-stories.com/http://www.cakes-tell-stories.com/http://www.cakes-tell-stories.com/http://www.ehow.com/about_5234246_bakery-industry-analysis.html#ixzz1ODsazdx1


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5.2 Development Requirements

The website has been created through intuit.com. Any future updates or additions willalso be done through them. Intuit also offers marketing tools to help spread thecompany name faster.

6.0 Strategy and Implementation Summary

Cakes Tell Stories will succeed through making high quality, unique, creative custom-made cakes. It will focus on a niche market and will attempt to achieve the bestreputation in that segment.

6.1 SWOT Analysis

The SWOT analysis for Cakes Tell Stories provided us with the opportunity to analyze itsinternal strengths and weaknesses against the external opportunities and threats. It

gives the company a chance to build on its strengths and work on its weaknesses bytaking advantage of the opportunities and protecting itself from the threats.Cakes Tell Stories unique strengths of creativity and custom made cakes at lower prices

than its competitors protects its from its potential threats of new entrants. While

targeting its niche market, it also works on its weaknesses by overcoming itsdependence on the distribution system.

6.1.1 Strengths

1. Uniqueness: Cakes Tell Stories have made cakes and will continue to make cakesthat are one of a kind. , because each cake represents a person or a relationship or a

celebration by them. So, like each individual or his/her relationship with others, the

cakes are unique.2 C ti d t d Th k ti d h i i f t


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6.1.3 Opportunities

1. Changing Consumer Tastes: Changing consumer tastes have given rise to "artisan"or gourmet cakes. Smaller bakers like Cakes Tell Stories with flexible productionfacilities can capitalize on such.

2. Home-made high quality products: In the recent years, customers are becomingmore and more health conscious and prefer home-made goods made with qualityingredients and customers are also willing to pay a high price for that. Cakes Tell Stories

produces just that.

6.1.4 Threats

1. Raw-material and energy costs volatile: The costs of major raw materials, suchas wheat, vegetable oils, fuel for delivery fleets, and natural gas for ovens, can change

rapidly. The volatility in prices of raw-materials cannot affect the end-product price, thus

shrinking the profit.2. Competitors: Current and potential competitors are major threats for Cakes Tell

Stories. The creativity and the uniqueness of its cakes cannot be patented and can easilybe copied.

6.2 Competitive Edge

The US bakery industry is highly fragmented and is very competitive. Cakes Tell Stories'

competitive advantage comes from its uniqueness, differentiation, high quality ata lower price, all of which are key desires for all consumers of the industry.

6.3 Marketing Strategy

Cakes Tell Stories marketing strategy will include a lot of advertising online and in the

targeted print media. We believe in target marketing and it will be aimed at getting theright information at the right place. We will make sure that those who will appreciate the

product will know about it. To do that, it is necessary that we target the correct

psychographic segmentation


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6.4.1 Sales Forecast

The following chart and table show our sales forecast for the first 4 years of Cakes TellStories in operation. We have projected a slower growth rate initially given the fact thatit takes time to achieve recognition. The growth rate increases in the third and fourth

year of operation.Along with the growth of its initial lines of Anniversary and Birthday cakes, in the secondyear the company also expands to Bridal shower, Baby shower, Graduation and other

miscellaneous cakes. From the fourth year, it introduces its most expensive line of

Wedding cakes.


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Table: Sales Forecast

Sales ForecastFY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Unit SalesBirthday Cakes 350 400 450 500 500Anniversary Cakes 353 400 450 500 500Bridal Shower, BabyShower etc.

0 100 150 200 200

Wedding Cakes 0 0 0 50 100Total Unit Sales 703 900 1,050 1,250 1,300

Unit Prices FY 2012 FY 2013 FY 2014 FY 2015 FY 2016Birthday Cakes $300.00 $300.00 $300.00 $300.00 $300.00Anniversary Cakes $350.00 $350.00 $350.00 $350.00 $350.00Bridal Shower, BabyShower etc.

$0.00 $350.00 $350.00 $350.00 $350.00

Wedding Cakes $0.00 $600.00 $600.00 $600.00 $600.00

SalesBirthday Cakes $105,000 $120,000 $135,000 $150,000 $150,000Anniversary Cakes $123,550 $140,000 $157,500 $175,000 $175,000Bridal Shower, BabyShower etc.

$0 $35,000 $52,500 $70,000 $70,000

Wedding Cakes $0 $0 $0 $30,000 $60,000Total Sales $228,550 $295,000 $345,000 $425,000 $455,000

Direct Unit Costs FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Birthday Cakes $45.00 $45.00 $45.00 $45.00 $45.00Anniversary Cakes $52.50 $52.50 $52.50 $52.50 $52.50Bridal Shower, BabyShower etc.

$0.00 $52.50 $52.50 $52.50 $52.50


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Chart: Sales Monthly

Chart: Sales by Year


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6.5 Milestones

The accompanying table shows specific milestones, with responsibilities assigned, dates,and budgets. The milestones represented in this plan are those which we havedetermined to be the most important.

Table: Milestones

MilestonesMilestone Start Date End Date Budget Manager Department

Initial Setup 6/4/2011 8/4/2011 $30,000 Sumaiya PlanningMarketing, print 6/30/2011 9/30/2011 $5,000 Pamela MarketingMarketing, web 6/30/2011 9/30/2011 $9,000 Pamela MarketingTotals $44,000

Chart: Milestones


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7.1 Personnel Plan

The personnel plan only shows the salary information and forecast of the currentemployees. The company also plans to hire part-time employees as the company grows.

Table: Personnel

Personnel PlanFY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Sumaiya $48,000 $50,000 $55,000 $60,000 $65,000

Pamela $36,000 $38,000 $40,000 $43,000 $45,000John $36,000 $38,000 $40,000 $43,000 $45,000Total People 3 3 3 3 3

Total Payroll $120,000 $126,000 $135,000 $146,000 $155,000

8.0 Financial Plan

We want to finance growth in terms of increased demand through a combination ofshort-term debt and cash inflow. Larger purchases of more equipment like oven, fridge,computer etc. after full depreciation will require approximately eighty percent debt

financing (long term debt). Additional investments will be primarily financed with cash-

flow. Inventory turnover must remain at or above one or we run the risk of backing uporders and jeopardizing our freshness guarantees. We have had no problems withaccounts receivable and we expect to maintain our collection days at 3 to 5 with minimalsales on credit.

In addition, we must achieve gross margins of eighty-five percent and hold operatingcosts no more than seventy-five percent of sales.


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Table: Start-up Funding

Start-up FundingStart-up Expenses to Fund $56,000Start-up Assets to Fund $75,000Total Funding Required $131,000

AssetsNon-cash Assets from Start-up $55,000

Cash Requirements from Start-up $20,000Additional Cash Raised $64,000Cash Balance on Starting Date $84,000Total Assets $139,000

Liabilities and Capital

Liabilities

Current Borrowing $25,000Long-term Liabilities $50,000Accounts Payable (Outstanding Bills) $0Other Current Liabilities (interest-free) $0Total Liabilities $75,000

Capital

Planned InvestmentOwner $20,000Investor $100,000Additional Investment Requirement $0Total Planned Investment $120,000


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8.3 Break-even Analysis

The break-even analysis shows that Cakes Tell Stories has sufficient sales strength toremain viable. Our break-even point is close to 60 cakes per month, which amounts toless than $20,000 in revenue per month.

Cakes Tell Stories has high average cost of almost $16,500. Although its average

variable cost per unit is very low, the high fixed costs delay its break-even time.Projections are detailed in the following table.

Table: Break-even Analysis

Break-even AnalysisMonthly Units Break-even 59Monthly Revenue Break-even $19,314

Assumptions:Average Per-Unit Revenue $325.11Average Per-Unit Variable Cost $48.77Estimated Monthly Fixed Cost $16,417

8.4 Projected Profit and Loss

In the projections for Cakes Tell Stories, the company starts off with yearly sales of

about $228.55 thousands in its first year of operation. With the growth in business andexpansion into other lines, Cakes Tell Stories manages to earn revenue of about $455


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Table: Profit and Loss

Pro Forma Profit and LossFY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Sales $228,550 $295,000 $345,000 $425,000 $455,000Direct Cost of Sales $34,283 $44,250 $51,750 $65,250 $71,250Other Costs of Sales $0 $0 $0 $0 $0Total Cost of Sales $34,283 $44,250 $51,750 $65,250 $71,250

Gross Margin $194,268 $250,750 $293,250 $359,750 $383,750Gross Margin % 85.00% 85.00% 85.00% 84.65% 84.34%

ExpensesPayroll $120,000 $126,000 $135,000 $146,000 $155,000Marketing/Promotion $18,000 $15,000 $15,000 $20,000 $20,000Depreciation $5,000 $5,000 $5,000 $5,000 $5,000Rent $24,000 $24,000 $24,000 $24,000 $24,000Utilities $6,000 $6,000 $6,000 $6,000 $6,000Insurance $6,000 $6,000 $6,000 $6,000 $6,000Payroll Taxes $18,000 $18,900 $20,250 $21,900 $23,250Other $0 $0 $0 $0 $0

Total Operating Expenses $197,000 $200,900 $211,250 $228,900 $239,250

Profit Before Interest andTaxes

($2,733) $49,850 $82,000 $130,850 $144,500

EBITDA $2,268 $54,850 $87,000 $135,850 $149,500

Interest Expense $5,375 $4,500 $5,500 $7,275 $12,350Taxes Incurred $0 $13,605 $22,950 $37,073 $39,645

Net Profit ($8,107) $31,745 $53,550 $86,503 $92,505


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Chart: Profit Monthly

Chart: Profit Yearly


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Chart: Gross Margin Monthly

Chart: Gross Margin Yearly


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8.5 Projected Cash Flow

Cakes Tell Stories expects to have all its transactions through online payments, creditcards, checks or cash, none of which have a transaction time more than a couple of daysand thus is almost as liquid as cash.

The company also expects to manage cash flow for the first year with the assistance of a

roll-over loan supported by the Astoria Federal Bank for $25,000. This financing

assistance is required to keep the flow of the working capital even throughout the yearand not being too dependent on the cash earned from the revenue. It will help meet the

current needs of running the store front smoothly, purchase inventory, pay personnel

salary, distribution costs, and other related expenses, even if the cash inflow fromrevenue is not constant.

Cakes Tell Stories will borrow $50k in Long Term Loans for purchase of long term assetslike convention oven, microwave oven, fridge etc. The company will repay the loan in 5

years with equal amounts of payment each month.


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Table: Cash Flow

Pro Forma Cash FlowFY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Cash Received

Cash from OperationsCash Sales $228,550 $295,000 $345,000 $425,000 $455,000Subtotal Cash fromOperations

$228,550 $295,000 $345,000 $425,000 $455,000

Additional Cash ReceivedSales Tax, VAT, HST/GSTReceived

$19,998 $25,813 $30,187 $37,188 $39,813

New Current Borrowing $0 $25,000 $25,000 $25,000 $25,000New Other Liabilities(interest-free)

$0 $0 $0 $0 $0

New Long-term Liabilities $0 $0 $0 $0 $50,000Sales of Other CurrentAssets

$0 $0 $0 $0 $0

Sales of Long-term Assets $0 $0 $0 $0 $1,000New Investment Received $0 $0 $0 $0 $0Subtotal Cash Received $248,548 $345,813 $400,188 $487,188 $570,813

Expenditures FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Expenditures fromOperationsCash Spending $120,000 $126,000 $135,000 $146,000 $155,000

Bill Payments $81,144 $141,458 $151,722 $190,049 $200,632Subtotal Spent onOperations

$201,144 $267,458 $286,722 $336,049 $355,632


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Chart: Cash

8.6 Projected Balance Sheet

As shown in the balance sheet in the following table, our net will grow from

approximately $56,000 in 2012 to more than $320,000 by the end of 2016. The monthlyprojections are in the appendix.

Table: Balance Sheet

Pro Forma Balance Sheet


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Subtotal Current Liabilities $8,926 $36,869 $62,524 $90,898 $116,543

Long-term Liabilities $40,000 $30,000 $20,000 $10,000 $50,000Total Liabilities $48,926 $66,869 $82,524 $100,898 $166,543

Paid-in Capital $120,000 $120,000 $120,000 $120,000 $120,000Retained Earnings ($56,000) ($64,107) ($32,362) $21,188 $107,690Earnings ($8,107) $31,745 $53,550 $86,503 $92,505Total Capital $55,893 $87,638 $141,188 $227,690 $320,195Total Liabilities and Capital $104,818 $154,506 $223,712 $328,588 $486,738

Net Worth $55,893 $87,638 $141,188 $227,690 $320,195

8.7 Business Ratios

Standard business ratios are included in the following table. The ratios show a solid plan

for growth in order to reach maximum production within the first few years. Asset tosales ratio doubles from the time of inception to the end of fifth year. Current debt to

total asset ratio is low in the first year, but maintains almost 25% from the next. Last

but not the least the Acid Test maintains an average of 2.5 times throughout the 5 yearperiod.

Table: Ratios

Ratio AnalysisFY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Industry

ProfileSales Growth n.a. 29.07% 16.95% 23.19% 7.06% -1.00%

Percent of Total AssetsInventory 3.26% 10.07% 7.37% 6.82% 4.35% 6.34%


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Main Ratios

Current 3.90 2.43 2.62 3.01 3.70 1.25Quick 3.52 2.01 2.35 2.76 3.52 1.00Total Debt to TotalAssets

46.68% 43.28% 36.89% 30.71% 34.22% 99.31%

Pre-tax Return on NetWorth

-14.51% 51.75% 54.18% 54.27% 41.27% 4325.10%

Pre-tax Return onAssets

-7.73% 29.35% 34.20% 37.61% 27.15% 29.65%

Additional Ratios FY 2012 FY 2013 FY 2014 FY 2015 FY 2016Net Profit Margin -3.55% 10.76% 15.52% 20.35% 20.33% n.aReturn on Equity -14.51% 36.22% 37.93% 37.99% 28.89% n.a

Activity RatiosInventory Turnover 3.67 4.66 3.23 3.35 3.27 n.aAccounts PayableTurnover

10.09 12.17 12.17 12.17 12.17 n.a

Payment Days 27 26 29 27 29 n.aTotal Asset Turnover 2.18 1.91 1.54 1.29 0.93 n.a

Debt RatiosDebt to Net Worth 0.88 0.76 0.58 0.44 0.52 n.aCurrent Liab. to Liab. 0.18 0.55 0.76 0.90 0.70 n.a

Liquidity RatiosNet Working Capital $25,893 $52,638 $101,188 $182,690 $315,195 n.a

Interest Coverage -0.51 11.08 14.91 17.99 11.70 n.a

Additional RatiosAssets to Sales 0.46 0.52 0.65 0.77 1.07 n.a


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Appendix

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Table: Sales Forecast

Sales ForecastMay Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Unit SalesBirthday Cakes 20 25 30 30 30 30 30 30 30 30 30 35Anniversary Cakes 20 35 35 35 35 28 25 25 25 25 30 35

Bridal Shower, Baby Showeretc.

0 0 0 0 0 0 0 0 0 0 0 0

Wedding Cakes 0 0 0 0 0 0 0 0 0 0 0 0Total Unit Sales 40 60 65 65 65 58 55 55 55 55 60 70

Unit Prices May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AprBirthday Cakes $300.00 $300.00 $300.00 $300.00 $300.00 $300.00 $300.00 $300.00 $300.00 $300.00 $300.00 $300.00Anniversary Cakes $350.00 $350.00 $350.00 $350.00 $350.00 $350.00 $350.00 $350.00 $350.00 $350.00 $350.00 $350.00Bridal Shower, Baby Showeretc.

$350.00 $350.00 $350.00 $350.00 $350.00 $350.00 $350.00 $350.00 $350.00 $350.00 $350.00 $350.00

Wedding Cakes $600.00 $600.00 $600.00 $600.00 $600.00 $600.00 $600.00 $600.00 $600.00 $600.00 $600.00 $600.00

SalesBirthday Cakes $6,000 $7,500 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $10,500Anniversary Cakes $7,000 $12,250 $12,250 $12,250 $12,250 $9,800 $8,750 $8,750 $8,750 $8,750 $10,500 $12,250Bridal Shower, Baby Showeretc.

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Wedding Cakes $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Sales $13,000 $19,750 $21,250 $21,250 $21,250 $18,800 $17,750 $17,750 $17,750 $17,750 $19,500 $22,750

Direct Unit Costs May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AprBirthday Cakes 15.00% $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00Anniversary Cakes 15.00% $52.50 $52.50 $52.50 $52.50 $52.50 $52.50 $52.50 $52.50 $52.50 $52.50 $52.50 $52.50

Bridal Shower, Baby Showeretc. 15.00% $52.50 $52.50 $52.50 $52.50 $52.50 $52.50 $52.50 $52.50 $52.50 $52.50 $52.50 $52.50

Wedding Cakes 20.00% $120.00 $120.00 $120.00 $120.00 $120.00 $120.00 $120.00 $120.00 $120.00 $120.00 $120.00 $120.00

Direct Cost of SalesBirthday Cakes $900 $1,125 $1,350 $1,350 $1,350 $1,350 $1,350 $1,350 $1,350 $1,350 $1,350 $1,575Anniversary Cakes $1,050 $1,838 $1,838 $1,838 $1,838 $1,470 $1,313 $1,313 $1,313 $1,313 $1,575 $1,838Bridal Shower, Baby Showeretc.

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Wedding Cakes $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Direct Cost of Sales $1,950 $2,963 $3,188 $3,188 $3,188 $2,820 $2,663 $2,663 $2,663 $2,663 $2,925 $3,413


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Appendix

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Table: Personnel

Personnel PlanMay Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Sumaiya $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000Pamela $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000

John $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000Total People 3 3 3 3 3 3 3 3 3 3 3 3

Total Payroll $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000


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Appendix

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Table: Profit and Loss

Pro Forma Profit and

LossMay Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Sales $13,000 $19,750 $21,250 $21,250 $21,250 $18,800 $17,750 $17,750 $17,750 $17,750 $19,500 $22,750

Direct Cost of Sales $1,950 $2,963 $3,188 $3,188 $3,188 $2,820 $2,663 $2,663 $2,663 $2,663 $2,925 $3,413Other Costs of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Cost of Sales $1,950 $2,963 $3,188 $3,188 $3,188 $2,820 $2,663 $2,663 $2,663 $2,663 $2,925 $3,413

Gross Margin $11,050 $16,788 $18,063 $18,063 $18,063 $15,980 $15,088 $15,088 $15,088 $15,088 $16,575 $19,338Gross Margin % 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% 85.00%

ExpensesPayroll $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000Marketing/Promotion $5,000 $4,000 $4,000 $1,000 $500 $500 $500 $500 $500 $500 $500 $500Depreciation $417 $417 $417 $417 $417 $417 $417 $417 $417 $417 $417 $417

Rent $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000Utilities $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500Insurance $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500Payroll Taxes 15% $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total OperatingExpenses

$19,917 $18,917 $18,917 $15,917 $15,417 $15,417 $15,417 $15,417 $15,417 $15,417 $15,417 $15,417

Profit Before Interest andTaxes

($8,867) ($2,129) ($854) $2,146 $2,646 $563 ($329) ($329) ($329) ($329) $1,158 $3,921

EBITDA ($8,450) ($1,712) ($437) $2,563 $3,063 $980 $88 $88 $88 $88 $1,575 $4,338Interest Expense $563 $542 $521 $500 $479 $458 $437 $417 $396 $375 $354 $333Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Net Profit ($9,429) ($2,671) ($1,375) $1,646 $2,167 $105 ($767) ($746) ($725) ($704) $804 $3,588

Net Profit/Sales -72.53% -13.52% -6.47% 7.75% 10.20% 0.56% -4.32% -4.20% -4.08% -3.97% 4.12% 15.77%

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Table: Cash Flow

Pro Forma Cash FlowMay Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Cash Received

Cash from OperationsCash Sales $13,000 $19,750 $21,250 $21,250 $21,250 $18,800 $17,750 $17,750 $17,750 $17,750 $19,500 $22,750Subtotal Cash from Operations $13,000 $19,750 $21,250 $21,250 $21,250 $18,800 $17,750 $17,750 $17,750 $17,750 $19,500 $22,750

Additional Cash ReceivedSales Tax, VAT, HST/GSTReceived

8.75% $1,138 $1,728 $1,859 $1,859 $1,859 $1,645 $1,553 $1,553 $1,553 $1,553 $1,706 $1,991

New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0New Other Liabilities (interest-free)

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Subtotal Cash Received $14,138 $21,478 $23,109 $23,109 $23,109 $20,445 $19,303 $19,303 $19,303 $19,303 $21,206 $24,741

Expenditures May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Expenditures from OperationsCash Spending $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000Bill Payments $335 $10,028 $9,041 $8,920 $5,983 $5,478 $5,458 $5,470 $6,447 $7,364 $8,054 $8,565Subtotal Spent on Operations $10,335 $20,028 $19,041 $18,920 $15,983 $15,478 $15,458 $15,470 $16,447 $17,364 $18,054 $18,565

Additional Cash SpentSales Tax, VAT, HST/GST PaidOut

$1,138 $1,728 $1,859 $1,859 $1,859 $1,645 $1,553 $1,553 $1,553 $1,553 $1,706 $1,991

Principal Repayment of CurrentBorrowing

$2,083 $2,083 $2,083 $2,083 $2,083 $2,083 $2,083 $2,083 $2,083 $2,083 $2,083 $2,083

Other Liabilities PrincipalRepayment

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Long-term Liabilities PrincipalRepayment

$833 $833 $833 $833 $833 $833 $833 $833 $833 $833 $833 $833

Purchase Other Current Assets $10,000 $10,000 $5,000 $0 $0 $0 $0 $0 $0 $0 $0 $0Purchase Long-term Assets $20,000 $20,000 $10,000 $0 $0 $0 $0 $0 $0 $0 $0 $0

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Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Subtotal Cash Spent $44,390 $54,673 $38,817 $23,696 $20,759 $20,040 $19,927 $19,940 $20,917 $21,834 $22,677 $23,472

Net Cash Flow ($30,252) ($33,195) ($15,708) ($587) $2,351 $405 ($624) ($637) ($1,614) ($2,531) ($1,471) $1,269

Cash Balance $53,748 $20,553 $4,845 $4,258 $6,609 $7,014 $6,390 $5,753 $4,139 $1,608 $137 $1,406

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Appendix

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Table: Balance Sheet

Pro Forma Balance

SheetMay Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Assets Starting

Balances

Current AssetsCash $84,000 $53,748 $20,553 $4,845 $4,258 $6,609 $7,014 $6,390 $5,753 $4,139 $1,608 $137 $1,406Inventory $25,000 $23,050 $20,088 $16,900 $13,713 $10,525 $7,705 $5,043 $3,380 $2,663 $2,663 $2,925 $3,413Other Current Assets $5,000 $15,000 $25,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000Total Current Assets $114,000 $91,798 $65,640 $51,745 $47,971 $47,134 $44,719 $41,432 $39,133 $36,801 $34,270 $33,062 $34,818

Long-term AssetsLong-term Assets $25,000 $45,000 $65,000 $75,000 $75,000 $75,000 $75,000 $75,000 $75,000 $75,000 $75,000 $75,000 $75,000AccumulatedDepreciation

$0 $417 $833 $1,250 $1,667 $2,083 $2,500 $2,917 $3,333 $3,750 $4,167 $4,583 $5,000

Total Long-term Assets $25,000 $44,583 $64,167 $73,750 $73,333 $72,917 $72,500 $72,083 $71,667 $71,250 $70,833 $70,417 $70,000Total Assets $139,000 $136,381 $129,807 $125,495 $121,304 $120,051 $117,219 $113,515 $110,799 $108,051 $105,104 $103,479 $104,818

Liabilities and Capital May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Current LiabilitiesAccounts Payable $0 $9,727 $8,740 $8,720 $5,800 $5,297 $5,276 $5,256 $6,203 $7,096 $7,770 $8,257 $8,926Current Borrowing $25,000 $22,917 $20,833 $18,750 $16,667 $14,583 $12,500 $10,417 $8,333 $6,250 $4,167 $2,083 $0Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Subtotal CurrentLiabilities

$25,000 $32,644 $29,574 $27,470 $22,467 $19,880 $17,776 $15,673 $14,536 $13,346 $11,936 $10,340 $8,926

Long-term Liabilities $50,000 $49,167 $48,333 $47,500 $46,667 $45,833 $45,000 $44,167 $43,333 $42,500 $41,667 $40,833 $40,000Total Liabilities $75,000 $81,810 $77,907 $74,970 $69,133 $65,713 $62,776 $59,840 $57,869 $55,846 $53,603 $51,174 $48,926

Paid-in Capital $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000Retained Earnings ($56,000) ($56,000) ($56,000) ($56,000) ($56,000) ($56,000) ($56,000) ($56,000) ($56,000) ($56,000) ($56,000) ($56,000) ($56,000)Earnings $0 ($9,429) ($12,100) ($13,475) ($11,829) ($9,662) ($9,557) ($10,324) ($11,070) ($11,795) ($12,499) ($11,695) ($8,107)Total Capital $64,000 $54,571 $51,900 $50,525 $52,171 $54,338 $54,443 $53,676 $52,930 $52,205 $51,501 $52,305 $55,893Total Liabilities andCapital

$139,000 $136,381 $129,807 $125,495 $121,304 $120,051 $117,219 $113,515 $110,799 $108,051 $105,104 $103,479 $104,818

Net Worth $64,000 $54,571 $51,900 $50,525 $52,171 $54,338 $54,443 $53,676 $52,930 $52,205 $51,501 $52,305 $55,893

Appendix


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Appendix

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cakes tell stories

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