Structure of the Simplified Business Plan

Structure of the 5-year Simplified Business Plan

Following the previous articles, we will now configure the structure of the simplified business plan, over a 5-year horizon. Planned what we consider the business year of cruising, we have to adjust the plan to our medium-term vision. On the one hand, the business may not start on the 1st of January and, on the other hand, in the first months we can expect a reduced activity that will have to be reflected in the simplified business plan.

Sales in the 1st year of activity

In the first year of activity, on a cruise, as we said, we estimated the Sales Plan with restaurant example as being €143.493.

Recipe Year Recipes
Cruise Year Recipes

We will then admit that the activity starts in June and therefore the 1st year will only have 7 months of activity, from June to December.

Thus, we arrive at this scenario:

Start-up Year Revenue
Start-up revenue

In other words, in the start-up year, we expect a turnover of € 45.853 and, in the year of full activity, € 143.493. A great growth, although the evolution of sales in the first year has risen a lot since June with a turnover of € 5.086 until December with a value of € 11.000.

The following year, full activity, has a monthly average of € 11.957,75, therefore closer to the end of the start-up year.

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5-Year Sales Plan

Finally and also forecasting an annual growth of 2%, we have the 5-year sales plan with the following evolution:

5-year sales plan
5-year sales plan

For the preparation of these dishes and services, we have to consider the variable costs, relative to the raw materials we need for the manufacture and production of each one.

Variable Cost Structure

In the structure of the simplified business plan, we consider these costs as a percentage of the selling price. Are the variable costs or production costs.

Variable costs
Variable costs

Personnel Charges

We assume salary increases for the 5-year period and, with this additional parameter, personnel costs are calculated and planned as follows:

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Personnel cost plan
Personnel cost plan

Investment Plan

In the structure of the business plan, we will admit a 2-month working capital, considering that the first year of activity has only 1 months:

Necessary investment
Necessary investment

External Supplies and Services for 5 years

In our simplified business plan structure, we are going to start with the calculation we made of the Supplies and external services and we consider an increase in these costs of 2% for subsequent years:

Supplies and external services
Supplies and external services

Project Financing

For the financing we will admit that in addition to the Social Capital, the necessary capital will be through the use of loans from the partners (supplies).

Funding Source
Funding Source

Structure of the 5-year Simplified Business Plan

Structure of the Simplified Business Plan with DR
Operating Results and Net Results

Once here, we can make an economic and financial assessment of the project.

Evaluation of the Simplified Business Plan

So, in the structure of business plan, the Operating Result in the start-up year is negative, but the remaining 4 years are positive and the accumulated result is also positive.

In the economic evaluation, revenues and expenses are used, which are the right to receive and pay, respectively.

In the financial analysis, receipts and payments are used, which are cash movements, that is, financial flows or “Cash flows" in English.

Therefore, the financial assessment has to be done considering the company's financial flows over the 5 years.

To calculate cash flow, amortization is deducted each year from the respective net result. In the 1st year, the net result also removes the value of the working capital.

In this case, cash flow is as follows:

Project Evaluation
Project Evaluation

The internal rate of return - TIR (in English Internal Rate of Return) is 54%, that is, the capital invested will be remunerated with this rate.

For this calculation, Excel has a formula that helps to calculate.

The "payback”Is around 2 ½ years, when the accumulated cash flow is positive. That is, the investment is fully recovered at the end of this period.

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