Business Financial Plan

For: Tea and Coffee Shop at UCW

Prepared by: [Your Name/Your Team Name]

Role: Chief Financial Officer (CFO)

Date: [Insert Date]

Institution:
 Introduction
Production of good revenues and cash flow plan is very significant in the success of the existing
UCW tea and coffee shop. For the purpose of the present financial analysis, there are some key aspects
that are used: income, break-even analysis, funding, exit strategy, risk analysis, and risk management
plan. Such ideas share a grounding in business management to promote organizational functionality and
investors’ trust (Gitman et al., 2023; Donaldson, 2022).

Financial Projections

The projected revenues for the tea and coffee shop show a regular increase in the revenue growth at the
rate 15 % for the year 1 = $ 90000 to year 3 = $119025. This rise can be attributed to good promotions,
customers, and the ever-growing market within campus (Donaldson, 2022).

They are Human Resource Costs or HR costs, Marketing Costs or expenses, Operation costs, and
Variable costs. Human resources, which is the costliest at $69,300 in Year 1, is an identified area of the
business that is subject to annual inflation and employee incentives. Marketing expenses are initially
$11,700 rising fairly to maintain brand awareness. They increase in proportion to the sales total, having
risen from $36,000 to $47,610 in three years.

Year Revenue HR Costs Marketing Operational Variable Net Profit

($) ($) Costs ($) Costs ($) Costs ($) ($)
Year 1 90,000 69,300 11,700 45,000 36,000 -36,000
Year 2 103,500 72,765 12,285 47,250 41,400 -70,200
Year 3 119,025 76,403 12,899 49,613 47,610 -67,500

Net profits are shown to be in the negative territory in the first three years of operation due to lower
direct sales fixed costs (Gitman et al., 2023). Losses which are $36,000 in the first-year rise to $70,200 in
the second year before rising slightly to $67,500 in the third year, sign of the steady progress.
 The break-even point at 18 months portends profitability hence less dependency on outside financier as
portrayed in Williams & Sonja, 2022.

Cash Flow Projections

The business’s segment cash flows start with Year 1’s revenue inflows amounting to $90,000,
followed by Year 2 and Year 3 inflows, respectively: $105,450 (1.15 * $90,000) and $119,025 (1.15 *
$105,450) due to customer acquisition and effective promotion (Donaldson, 2022). Outflows are
moderate and also rise 5% per year by means of HR costs which are $69,300 and marketing and operating
cost as well. The variable costs increase with the sales and comparing the Year 1 values, with Year 3
values, it is seen that the variable cost has risen to 104,810 from $36,000. Net cash flow remains in the
negative in Year 1 at -$ 72,000 although it margins slightly better in Year 3 -$ 67,500. This reduces
deficit, and as the experts in the field of finance Gitman et al., (2023) suggest, this is a process of moving
toward achieving financial solvency and, further, to achieving profitability.

Year Cash HR Costs Marketing Operational Variable Net Cash

Inflows ($) Costs ($) Costs ($) Costs ($) Flow ($)
(Revenue)
($)
Year 1 90,000 69,300 11,700 45,000 36,000 -72,000
Year 2 103,500 72,765 12,285 47,250 41,400 -70,200
Year 3 119,025 76,403 12,899 49,613 47,610 -67,500

Balance Sheet Projections

Predicted balance sheets show slightly increasing values of assets, liabilities and equity for three years.
Assets, which increase by enhanced revenues, have increased from $90,000 in the first year to $119,025
in the third year. Expenses such as human resource, marketing expenses and other operation expenses
increases from $126,000 to $138,915 due to moderate inflation and increase in business operations.
Equity is still negative, it is -$36,000 in Year 1 and it is down to -$67,500 in Year 3 because all costs are
regulated and there are more revenues. These projections suggest the trend of stabilization in line with the
course that points to profitability in the future (Pauley, 2021; Gitman et al., 2023).

Year Assets ($) Liabilities ($) Equity ($)

 Year 1 90,000 126,000 -36,000
Year 2 103,500 132,300 -70,200
Year 3 119,025 138,915 -67,500

Break-even Analysis

The ‘break-even analysis determines when the cash received to meet all the expenses which include
cost of production, selling cost, and other expenses have been met’. A breakdown of overheads; Human
resource and marketing amount to [$81000] pa; Variable cost per unit = $2; selling price per unit
=$5Selling price per unit – variable cost per unit where total revenue equals total costs, ensuring all
expenses are covered. Fixed costs, including HR and marketing, total $81,000 annually, while the variable
cost per unit is $2, and the selling price per unit is $5.

Category Amount ($) Details

Fixed Costs $81,000 HR and marketing costs.
Variable Cost per Unit $2 Materials, packaging, and
utilities per unit.
Price per Unit $5 Selling price per item.
Break-even Units 27,000 units Units required to sell to break
even.
Break-even Revenue $135,000 Revenue required to break even.

The break-even formula is:

Break-even Units=Fixed Costs

Selling Price per Unit−Variable Cost per Unit

Break-even Units= Selling Price per Unit−Variable Cost per Unit

Fixed Costs

Substituting the values:

Break-even Units=81,000

5−2=

27,000 units.
 The breakeven of 1500 units/month will be reached in 18 months and selling will yield break even
revenue of $ 135, 000. This achievement makes a business less dependent on third party financing and
sets it up for sustainable profitability (Donaldson, 2022; Gitman et al., 2023; Pauley, 2021).

Funding Requirements

The total funding required to establish the business is $126,000, calculated as follows:

HR Costs:

Salaries: $1000/month × 12 months = %48,000HR expenditure + Marketing expenditure + Operation

expenditure = 69,300 + 11,700 + 45,000 = 126,000 is $126,000, calculated as follows:

HR Costs:

Salaries: $4,000/month × 12 months = $48,000

Additional benefits, training, and recruitment: $21,300

Total HR Costs: $69,300

Marketing Costs:

Branding, promotions, and campaigns: $11,700.

Operational Costs:

Rent, utilities, and supplies: $45,000.

Total Funding: HR Costs+Marketing Costs+Operational Costs=69,300+11,700+45,000=126,000

This one foster recruitment, branding, and operational readiness (Williams & Sonja, 2022; Gitman et
al., 2023).

Exit Strategy

The business affords multiple-exit opportunities so the investor gets a preferred return and the business
remains free to maneuver. The first option is the sale of a business where the company and all its assets –
name, equipment and customers can be bought out by a competitor or someone interested in running a
business. Another way is to liquidate assets, when equipment, stock and other tangible assets are sold to
bring money back. Last is through the use of revenue sharing where investors reduce their trading by
confirming their profits through receipt of agreed portions of the profits as the company expands through
profit sharing. These strategies are consistent with traditional activities of an entrepreneur: maintaining
liquidity positions but, at the same time, retaining the business’s value (Pauley, 2021; Gitman et al.,
2023).

Risk management and Contingency Plans

The business faces several risks that require proactive mitigation:

Risk Mitigation Strategy

Market Risks Promotions and loyalty programs to boost sales.
Financial Risks Contingency funds and cost optimization.
Operational Risks Backup suppliers and preventive equipment
maintenance.
Regulatory Risks Regular compliance training and legal
consultation

Market Risks: Low usage or possibly, low consumer interest.

Mitigation: Use customer loyalty programs, sales promotions focusing on targeted markets, and follow
client feedback to change or modify products.

Financial Risks: Fixed costs cannot be covered during low activity periods due to the nature of the
industry unrealistic competitive pricing.

Mitigation: Ensure that an amount of $5,000 is kept in the contingency fund while making certain that
each costs centers have optimum costs.

Operational Risks: Default in the equipments used or in the supply chains.

Mitigation: Have and maintain secure contracts for service in the maintenance of the meta facilities, and
have multiple supplier relationships.

Regulatory Risks: Violation of campus and health standard.

 All these strategies facilitate continuity and also assure the resilience of an organization (Donaldson,
2022; SAIT, 2021).
 References

Cruthers, A. (2023). Writing for Every Businessman. Kwantlen Polytechnic University.

Donaldson. (2022). Introduction to Business Management: Canadian. Cambrian College.

Gitman, L. J., McDaniel, C., Shah, A., Reece, M., Koffel, L., Talsma, B., & Hyatt, J. C.

Introduction to Business. OpenStax.

Pauley, M. (2021). Business Startup and Entrepreneurship: Canada. University of Prince

Edward Island.

Southern Alberta Institute of Technology (SAIT). (2021). Speaking and Writing Skills for

Corporate Proficiency II. Open Education Alberta.

Williams V., & Sonja, N. (2022). Business Communication Basics. BC Campus.