BUSINESS IDEAS Forum

Sales increase by nearly 400% in the second year, due to the addition of two more Drive-thrus and two more Mobile Cafes, reaching a total of $2,348,900, with a Gross Profit Margin of 39.58%. Although operating expenses double in the second year, The Daily Perc will be able to realize a Net After-tax profit of $190,467 or 6.79% of sales. In that same year, TDP will make charitable contributions of $70,000.

The third year is when The Daily Perc has the opportunity to break into markets outside the metropolitan area. TDP will see nine additional Drive-thru facilities open in the third year, which will drive sales to $6,022,950 and, even with a 200% increase in production costs, help reach a Gross Profit Margin of 45.05%. Several expenses take substantial jumps this year--advertising increasing from $36,000 to $72,000 and donations increasing from $72,000 to $180,000--and TDP will be adding several key management team members. These increases, as well as those for increased equipment leases and rents, raise our operating expenses to $1,673,431, leaving a Net After-tax profit of $860,428, or 11.96% of sales. The single largest expense sector in the third year, outside of production, is still G&A costs, but it is down from 23% in the first year and 18.5% in the second year to just 15.02%.

Profit Monthly

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7.5 Projected Cash Flow

Cash flow will have to be carefully monitored, as in any business, but The Daily Perc is also the beneficiary of operating a cash business. After the initial investment and start-up costs are covered, the business will become relatively self-sustaining. With the exception of seasonal dips, which TDP has attempted to account for, through changes in the menu items.

Assuming an initial investment and financing of $415,000, which would include $30,000 of operating capital, The Daily Perc anticipates no cash flow shortfalls for the first year or beyond.  March and May are the greatest cash drains, since TDP will be experiencing the cost of second drive thru and mobile unit start-up. Again, TDP sees heavier than normal drains of cash in December and January, as there will be certain accounts payable coming due.

Cash

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7.6 Projected Balance Sheet

The Daily Perc's projected balance sheet shows an increase in net worth to just over $1 million in 2004, at which point it expects to be making 11.96% after-tax profit on sales of $6.02 million. With the present financial projections, TDP expects to build a company with strong profit potential, and a solid balance sheet that will be asset heavy and flush with cash at the end of the third year. The Daily Perc has no intention of paying out dividends before the end of the third year, using the excess cash for continued growth.

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7.7 Business Ratios

Standard business ratios are included in the following table. The ratios show a plan for balanced, healthy growth. The Daily Perc's position within the industry is typical for a heavy growth startup company. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5812, Eating Places, are shown for comparison.
Comparing the ratios in the third year with the industry, this pro-forma plan appears to be within an acceptable difference margin.

TDP's return on net worth and net worth number differ from the Industry Profile due to the lack of overhead when compared to a typical walk-in cafe. The Drive Thru and Mobile business model is lean thus allowing for increase return ratio and providing a lower Net Worth.

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