1.

Financial Plan
A brief summary of financial issues.

1.1.

Important Assumptions

In general terms, Eco garden promises to be a very healthy project due to higher profitability
margins. They derive from a pricing scale system, categorized in accordance to the 3 packages
offered by the company: 7 for Bronze package, 8 for Silver package and 9 for Golden
package. As remember this 3 kind of package differ from the service provide and the area rented to
the client. The 215 m provided with the Gold package are guaranteed to have a 24/7 care by the
company and the seedling supply also.

1.2.

Key Financial Indicators

The projected operations for the next five years of the company result in total incomes of 112800,
as the result of selling 1900 m of garden distributed in the 18 memberships expected to be
contracted during first year, until 3500 m in year 5 and 30 memberships, representing the full
capacity of the company. It is important to highlight that the selling price will be kept in order to
guarantee the customer loyalty.
Gross margin for the first 5 years of the company will reach the 33440 once deducted the 79359
expected as production costs. These costs includes the expenditures to build fences, benches,
seedlings supply, the land renting fee and other associated expenditures, which are estimated to be
increased by 10% yearly. The salary of the garden keeper was considered as a fixed cost.
As the company provides a service, there is not a stock of inventory while the land is planned to be
always available to be rented to new members until reach the maximum capacity of Eco garden.

1.3.

Projected Profit and Loss

The total 33440 turns into 27755 net income, because it has been estimated a 17% income tax.
A modest amount of 453 is expected at the end of first year but will be increased as the company
grows and land rented.

1.4.

Projected Cash Flow

It is estimated positive cash flows for all the 5 periods because of the profitability level of the
company.

1.5.

Projected Balance Sheet

Balance sheet for the first year includes the investment made by the partners at the start-up. The
partners will have an equal participation on net profits, but it is stated they will keep their money in
the company along the first 5 years.

1.6.

Break-even Analysis

With a 3 different prices schemes, the company have alternative break-even analyses. The average
unit price is estimated in 8 and the total variable costs are 5054 for a total rent of 1900 m.
Then, the average variable cost is 2,66 ( 5054 / 1900 m). Fixed costs are 800 monthly, 9600
per year
Units (in m) to be sold in order to reach break-even point:

X=

9600
=1797,75
82,66

This break-even point is well reached during first period and require to sell at least 8 Bronze, 4
Silver and 3 Gold packages respectively.

1.7.

Business Ratios

Activity ratios

Total assets turnover (TAT):

TAT =

TAT =

Sales
Total assets

15200
=2,20
7500

This is a positive results for the first year, since indicates that the company produces
2.20 worth of sales for every euro invested in total assets.

Liquidity ratios
Quick ratio:

QR=

Current assets
Current liabilities

QR=

28082
=15,21
1846

At the end of the 5th period of the project, the total assets (cash) covers by 15,21 times the total debt
(income taxes)

Profitability ratios

Gross margin ratio (GMR):

GMR=

Gross margin
Net sales

GMR=

33440
=0,2964
112800

At the end of the 5th period of the project, the margin of profitability (excluding fixed expenses)
will be more 29%

Profit margin ratio (PMR): P

MR=

Net profits
Net sales

PMR=

27755
=0,2460
112800

At the end of the 5th period of the project, the margin of profitability (including fixed expenses and
taxes) will be more 24% which makes this project a very profitable one and a desirable option to
invest.

1.8.

Risk Assessment

Eco garden might face the challenges of soil erosion or degradation because of the intensity of the
human interaction with the land. With a limited area to work with, it is not considered in this
project a substitution or switching the rented land to customers in this case. This could generate
undesirable (and also unaffordable) cost. The best solution to this problem is purchasing and then
applying the best organic materials available in the market. This should be includes in the selling
price, as it can afford it. This matter is particularly important, not only under the financial
perspective, but also to the social and environmental point of view and the companys image.

1.9.

Harvest Strategy

A description of plans related to asset transfers, ownership changes, and successor identification.
The company will intend to expand its business by renting or even purchasing new land in another
place with similar conditions. While the investors are able to make withdrawals whenever they
decide, they will be encouraged to stay their funds into the company. The plan would be diversify
the options and services provided. The company will accept another investors and partners as they
get involved with the same conditions than the founders and they will be mutually responsible just
in proportion to the investment made. All the rights and liabilities derived from this partnership are
transferable to the direct partners relative or their creditor as Slovenian laws states.