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Table of Contents
1.0 Executive Summary.............................................................................................................................1
Chart: Highlights ......................................................................................................................2
1.1 Mission........................................................................................................................................2
1.2 Keys to Success ........................................................................................................................2
1.3 Objectives ...................................................................................................................................2
2.0 Company Summary.............................................................................................................................3
2.1 Company Ownership .................................................................................................................3
2.2 Start-up Summary ......................................................................................................................3
Table: Start-up .........................................................................................................................3
Chart: Start-up .........................................................................................................................4
Table: Start-up Funding ..........................................................................................................5
3.0 Services................................................................................................................................................5
4.0 Market Analysis Summary..................................................................................................................5
4.1 Market Segmentation ................................................................................................................6
Table: Market Analysis ...........................................................................................................6
Chart: Market Analysis (Pie) ..................................................................................................7
4.2 Target Market Segment Strategy.............................................................................................7
4.3 Service Business Analysis........................................................................................................8
4.3.1 Competition and Buying Patterns................................................................................8
5.0 Strategy and Implementation Summary ............................................................................................8
5.1 Competitive Edge ......................................................................................................................8
5.2 Marketing Strategy.....................................................................................................................8
5.3 Sales Strategy............................................................................................................................9
5.3.1 Sales Forecast ..............................................................................................................9
Table: Sales Forecast ...................................................................................................9
Chart: Sales Monthly ...................................................................................................10
5.4 Milestones ................................................................................................................................10
Chart: Milestones ..................................................................................................................10
Table: Milestones..................................................................................................................11
6.0 Web Plan Summary ..........................................................................................................................12
6.1 Website Marketing Strategy...................................................................................................12
6.2 Development Requirements ...................................................................................................12
7.0 Management Summary ....................................................................................................................12
7.1 Personnel Plan.........................................................................................................................12
Table: Personnel ...................................................................................................................13
8.0 Financial Plan ....................................................................................................................................13
8.1 Important Assumptions............................................................................................................13
Table: General Assumptions ...............................................................................................13
8.2 Break-even Analysis................................................................................................................13
Table: Break-even Analysis .................................................................................................14
Chart: Break-even Analysis .................................................................................................14
8.3 Projected Profit and Loss .......................................................................................................15
Chart: Profit Monthly .............................................................................................................15
Chart: Profit Yearly................................................................................................................15
Table: Profit and Loss ..........................................................................................................16
8.4 Projected Cash Flow...............................................................................................................16
Table: Cash Flow..................................................................................................................17
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Table of Contents
Chart: Cash ...........................................................................................................................18
8.5 Projected Balance Sheet ........................................................................................................18
Table: Balance Sheet ...........................................................................................................19
8.6 Business Ratios .......................................................................................................................19
Table: Ratios .........................................................................................................................20
Table: Sales Forecast ...............................................................................................................................1
Table: Personnel ........................................................................................................................................2
Table: General Assumptions ....................................................................................................................3
Table: Profit and Loss ...............................................................................................................................4
Table: Cash Flow .......................................................................................................................................5
Table: Balance Sheet ................................................................................................................................6

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Magnolia Inn
1.0 Executive Summary
The Magnolia Inn is a beautiful fac ility that sits atop a bluff overlooking the Pacific Ocean in
sc enic Half Moon Bay California. The Inn offers seven individually furnished rooms, eac h with its
own antique theme. We are a complete bed and breakfast Inn with a full complementary
breakfast served eac h morning to our guests. Magnolia's target market strategy is based on
bec oming a destination of choice for professional couples in the greater San Francisc o Bay
area who are looking for a plac e to relax and recharge. We will also advertise to the newly
married couple who is looking for that special get away. It will be important for us to be visible to
those potential guests who are traveling on Highway 101 through Half Moon Bay.
The Magnolia will have an eye catching sign that will alert potential customers and drop-ins of
our existence. We will use the Yellow Pages in the Bay area to market our Inn, as well as a
Web page on the Internet which will foc us on the features the Inn has to offer. Each room will
be displayed with its unique dec or, as well the outside of the Inn showing the beautiful
gardens and views of the Pacific Ocean. Attrac tions within 30 miles of the Inn will be displayed
with information about our shuttle service, room rates and directions. The Magnolia is confident
that it will not take long to build a following that will put us at full capacity within the next
year. The Inn would like to see steady growth with a average of over 90% capacity for Year
1, with profits also growing at a rate of 10%.
Jim and Nancy Anderson are the sole owners of the Magnolia and live at the Inn year around.
The Andersons are hands- on owners who oversee every aspec t of the Inn's operations. A small
staff consisting of a cook and a maid will work at the Inn. The cook will work 20 hours per
week and the maid will be on the payroll 40 hours per week as she will also help Nancy take
reservations and watch the front desk when needed. Nancy will oversee the inside operations
working with the maid and cook as well as taking reservations. Jim will oversee the
maintenance of the Inn and grounds and drive the van to shuttle guests when the need arises.
Both Jim and Nancy will promote the Inn and oversee the advertising.

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Magnolia Inn

1.1 Mission
The Magnolia Inn intends to provide a serene setting for our guests to enjoy the many
splendors of the beautiful California coast. Each guest will be treated with the kind of attention
that is reserved for family. When our guests arrive we want them to leave their troubles at the
door and step into a world of luxury and rest. As owners we intend to see that attention to
detail and service will be followed by a staff dedicated to eac h guest.

1.2 Keys to Success

The primary keys to success for the Inn will be based on the following fac tors:

Provide a fac ility that is first class with attention to detail.

Give eac h guest a sense that he or she is our top priority.
Provide quality meals.
Retain our guests to ensure repeat bookings and referrals.

1.3 Objectives
1.
2.
3.

Generate a customer satisfac tion rate above 90%.

Generate an average of $26,000 of sales eac h month.
Stay above 90% oc cupancy eac h month.

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Magnolia Inn
2.0 Company Summary
The Magnolia Inn is a beautiful fac ility that sits atop a bluff over looking the Pacific Ocean in
sc enic Half Moon Bay California. We are a new start-up enterprise that will offer seven
wonderfully furnished rooms to guests who want to get away from the ordinary. Each room is
individually furnished with antiques and there is a large dec k with a hot tub overlooking the
oc ean. The Magnolia will provide a full breakfast eac h morning to our guests with no expense
spared. Our target market is the professional couple who lives in the San Francisc o area, or
people looking for a plac e to honeymoon.

2.1 Company Ownership

The Magnolia Inn is owned and operated solely by Jim and Nancy Anderson. Jim and Nancy
have refurbished a beautiful victorian home to ac commodate 14 guests at a time in seven rooms.
This is a start-up enterprise for the Andersons who are equal owners in the business. Jim and
Nancy purchased the property a little over a year ago and have worked this past year
preparing to open the Inn.

2.2 Start-up Summary

The start-up costs will come to $38,000 (including cash required at start-up) which will be
primarily financed by Jim and Nancy Anderson. Joe Anderson, Jim's father has contributed
$15,000 into the enterprise. The costs of improvements to the building totaled $30,000. Jim
and Nancy purchased the property a year ago with the intent of renovating and opening the
business.

Table: Start-up
Start-up
Requirements
Start-up Expenses
Legal
Stationery etc.
Insurance
Improvements to Inn
Flowers
Total Start-up Expenses

$500
$500
$500
$30,000
$500
$32,000

Start-up Assets
Cash Required
Other Current Assets
Long-term Assets

$6,000
$10,000
$370,000

Total Assets

$386,000

Total Requirements

$418,000

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Magnolia Inn

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Magnolia Inn
Table: Start-up Funding
Start-up Funding
Start-up Expenses to Fund
Start-up Assets to Fund
Total Funding Required

$32,000
$386,000
$418,000

Assets
Non-cash Assets from Start-up
Cash Requirements from Start-up
Additional Cash Raised
Cash Balance on Starting Date

$380,000
$6,000
$0
$6,000

Total Assets

$386,000

Liabilities and Capital

Liabilities
Current Borrowing
Long-term Liabilities
Accounts Payable (Outstanding Bills)
Other Current Liabilities (interest-free)
Total Liabilities

$0
$353,000
$0
$0
$353,000

Capital
Planned Investment
Jim & Nancy Anderson
Joe Anderson
Additional Investment Requirement

$50,000
$15,000
$0

Total Planned Investment

$65,000

Loss at Start-up (Start-up Expenses)

Total Capital

($32,000)
$33,000

Total Capital and Liabilities

$386,000

Total Funding

$418,000

3.0 Services
The Magnolia Inn provides four-star lodging on the beautiful central California coast. We are a
complete bed and breakfast Inn with a full complementary breakfast served eac h morning. Seven
impec cable rooms, eac h with its own theme are ready to embrac e the individual who is looking
for solitude, or the more adventurish person who likes to be ac tive. We offer van trips to various
loc ations of interest if guests are interested.

4.0 Market Analysis Summary

The Magnolia Inn's target market strategy is based on bec oming a destination choice for people
in the greater San Francisc o Bay region who are looking for a plac e to relax and recharge. The
target markets that we are going to pursue are people looking for a vac ation destination,
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Magnolia Inn
Honeymooners, and drop-in c ustomers. We envision many professional married and single
customers making the short drive to Half Moon Bay from the greater Bay area to relax and
enjoy the beautiful California coast. Our setting and fac ility is a natural for people looking for a
plac e to spend their honeymoon. With an eye catching sign on highway 101 we will bring in
drop-in business. The Magnolia would like to see a 10% increase of potential customers on a
yearly basis.

4.1 Market Segmentation

The profile of our customer consists of the following geographic and demographic information.
Geographics

Our immediate geographic market is the San Francisc o Bay area with a population of
over one million people.
A 200-mile geographic area would want to use the kind of services we offer.
The total target area population is estimated at two million people.

Demographics

Male and female.

Married and single.
Combined annual income in excess of $75,000.
Age range of 25 to 65 years. with a median age of 40.
Work in a professional business setting.

Table: Market Analysis

Market Analysis
Year 1

Year 2

Year 3

Year 4

Year 5

Potential Customers
Vacationers

Growth
10%

800,000

880,000

968,000

1,064,800

1,171,280

CAGR
10.00%

Honeymooners
Drop-ins
Total

10%
10%
10.00%

5,000
1,000
806,000

5,500
1,100
886,600

6,050
1,210
975,260

6,655
1,331
1,072,786

7,321
1,464
1,180,065

10.00%
10.00%
10.00%

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Magnolia Inn

4.2 Target Market Segment Strategy

Our target market strategy is based on bec oming a destination for people who are looking to
get away for a few days, on the beautiful California coast. Our marketing strategy is based on
superior performance in the following areas:

Quality fac ilities.

Beautiful loc ation.
Customer service.

The target markets are separated into three segments; "Vacationers," "Honeymooners," and
"Drop-ins." The primary marketing opportunity is selling to these ac cessible target market
segments that foc uses on vac ation and recreational needs.
Vacationers
The most dominant segment of the three is comprised of the San Francisc o Bay and
surrounding area. Half Moon Bay is approximately a 45 minute drive for Bay area residents. Half
Moon Bay can seem like a different world and this is attrac tive for those people who have the
need to get away but do not have the time to go far.
Honeymooners
Because of the beauty and loc ation of our Inn, we will be a very attrac tive choice for people
looking for a honeymoon loc ation.
Drop-ins
When rooms are available we will welcome the drop-in c ustomer who is looking for a plac e to
stay for the night. Our sign can be seen from highway 101 and we expec t to get quite a few
drop-ins.

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Magnolia Inn
4.3 Service Business Analysis
The Magnolia Inn is a seven room fac ility that provides over night lodging and breakfast in a
luxurious setting on the beautiful California Coast. There are several other Inns in the area as
well as motels. Most people who need lodging in the area make reservations in advance to
assure room availability. Two other Bed and Breakfast Inns, the Riptide Inn, and the Bayshore
Inn are our main c ompetitors.

4.3.1 Competition and Buying Patterns

Typically in this industry the consumer is someone who is not just looking for a room to sleep
in, but a fac ility that provides a homespun touch. A plac e that is unique and offers more
personalized customer service. Because eac h Inn is offering something unique to the guest,
customer service and quality of the fac ilities are at the forefront of importance. Location is also
important and those Inns with an ocean view have an advantage, but with the limited number of
rooms at Inns in the area there are enough customers to match the supply. The Magnolia will not
be competing on price as the price of a room is on the high end of the sc ale. Guests at the
Magnolia are paying for more than just a room, they are paying for a oasis away from their
hec tic world.

5.0 Strategy and Implementation Summary

The primary sales and marketing strategy for Magnolia includes these fac tors:

To offer a bed and breakfast fac ility that will appeal to the busy professional.
To provide unmatched customer service to our guests.
To concentrate our marketing in the greater San Francisc o Bay area.

5.1 Competitive Edge

The Magnolia Inn sets itself apart from similar competition in the following ways.

Location: The sheer beauty of our setting is a huge plus. Nestled on a bluff with a
panoramic view of the Pacific Ocean the Magnolia is the ideal plac e to take in mother
nature. Beautiful magnolia trees and a garden area makes this setting a truly
magnificent plac e.
Our rooms: Each room is individually dec orated with antiques that are tasteful but
comfortable. You feel as if you have stepped bac k in time, as luxury is present at every
turn.
Customer service: Customer service is our number one priority. The Magnolia will treat
eac h guest as if they are family.

5.2 Marketing Strategy

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Magnolia Inn
Our marketing strategy is based on bec oming a destination for vac ationers and honeymooners
who are looking for truly beautiful and unique lodgings. With the greater San Francisc o Bay
area our main target market the Magnolia will use several different approaches to advertise our
fac ility. We will use the Yellow Pages to advertise, as well as develop a Web page that will
show our beautiful Inn. On highway 101 we will have an eye catching sign that will alert
potential drop-ins of our existence. The Magnolia is confident that it will not take long with
word-of-mouth from past customers, to build up to full capacity.

5.3 Sales Strategy

Our prime loc ation with a beautiful oc ean view and a quality fac ility will be an attrac tive choice
for our potential customers. Each room is dec orated individually with antiques and quality
furnishings made to feel just like home. A hot tub on the dec k overlooking the oc ean is provided
for our guests. A first class breakfast is served eac h morning with no expense spared. Guests will
have several options on our menu so that we can ac commodate most tastes. There are several
fun and interesting destination spots within 30 minutes of the Inn and we will have a van ready
to shuttle guests if they need the service. The Magnolia guest will feel pampered and will leave
for home well rested.

5.3.1 Sales Forecast

The sales forecast table is broken down into two main revenue streams: Reservations and Dropins. The sales forecast for the upcoming year is based on a 10% growth rate for direct sales.
The Magnolia has seven rooms to offer its guests at a rate of $175.00 per night. We expec t
the rate of rooms oc cupied to increase as the year progresses. In spite of the economic
unpredictability we are experiencing, these projections appear attainable and take the increasing
base into consideration. Growth rates for the years 2005 and 2006 are based on percentage
increases as follows:

Reservations: 10% growth rate per year.

Drop-ins: 10% growth rate per year.

Table: Sales Forecast

Sales Forecast
Year 1

Year 2

Year 3

Sales
Reservations

$294,140

$323,554

$355,909

Drop-ins
Total Sales

$47,690
$341,830

$52,459
$376,013

$57,705
$413,614

Year 1
$14,707
$2,385
$17,092

Year 2
$14,000
$7,000
$21,000

Year 3
$16,000
$8,000
$24,000

Direct Cost of Sales

Reservations
Drop-ins
Subtotal Direct Cost of Sales

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Magnolia Inn

5.4 Milestones
The milestones table below outlines key ac tivities that will be critical to our success. Owners Jim
and Nancy Anderson will take care of these important ac tivities.

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Magnolia Inn
Table: Milestones
Milestones
Milestone
Business Plan
Web Development
Marketing
Accounting Plan
Totals

Start Date
1/8/2003
3/7/2003
5/12/2003
6/8/2003

End Date
2/8/2003
5/4/2003
7/1/2003
7/9/2003

Budget
$500
$1,000
$3,000
$500
$5,000

Manager
Jim
Nancy
Nancy
Jim

Department
Management
Management
Management
Management

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Magnolia Inn
6.0 Web Plan Summary
The Magnolia Inn website will foc us on the features the Inn has to offer. Each room with its
unique dec or will be on the site as well as pictures of the Inn and the surrounding gardens and
grounds over looking the Pacific Ocean. The breakfast menu will be displayed with pictures of the
food laid out in the dining room. Room rates will be given with maps on how to get to the Inn.
Attrac tions within 30 miles will be on the site and other loc al color will be shown. Reservations
can be made online if the consumer wishes to do so.

6.1 Website Marketing Strategy

Our website marketing strategy will foc us on professional couples who are looking for a
vac ation destination that is both c lose and elegant. The Bay area will be our main foc al point.
The Magnolia will promote through our website by using:

Detailed photos of the Inn and surrounding area.

Price list of our rooms and a menu of our breakfast.
Maps from many points of the Bay area that lead to the Inn.

6.2 Development Requirements

Co-owner Nancy Anderson will develop the website. The site itself will take several months to
develop and it will be an ongoing effort to add new information to the site as we see
nec essary. Nancy has a degree in c omputer science and extensive experience working with
websites. Every aspec t of the site will be handled by Nancy including company logo, Web page
format, and maintenance of the site. AOL Web services will host the site.

7.0 Management Summary

Jim and Nancy Anderson are the sole owners of the Magnolia Inn. A small staff consisting of a
cook and maid will work at the Inn. The rest of the tasks will be done by Jim and Nancy. Jim is
responsible for the outside maintenance of the grounds and of the Inn. He will also drive the
van for guests when the need arises. Nancy will organize the day to day operations on the inside
and handle reservations. Both Jim and Nancy will promote the Inn through the advertising
methods disc ussed in the marketing strategy section. Nancy will also work with the cook to
purchase the food served at the Inn.

7.1 Personnel Plan

Jim and Nancy sold a small motel a year and a half ago with the intent of finding the ideal
loc ation for a bed and breakfast. The personnel plan consists of Jim and Nancy's sc hedule plus
that of the staff. Stac ie, our cook will work 20 hours per week and will help with the shopping for
the supplies. Carol will work full time preparing rooms and helping with taking reservations and
watching the Inn when Jim or Nancy cannot be there. Jim and Nancy will live at the Inn with
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Magnolia Inn
their own quarters on site. Jim's dad will receive $500 dollars eac h month until the $15,000
dollars he invested is payed bac k. The total payroll equates to $111,000 including the $57,000
dollars that Jim and Nancy will take out as their salary.

Table: Personnel
Personnel Plan
Owners
Full time Staff
Total People
Total Payroll

Year 1
$57,000
$48,000
4

Year 2
$65,000
$52,000
4

Year 3
$65,000
$54,000
4

$105,000

$117,000

$119,000

8.0 Financial Plan

The Magnolia Inn expec ts business to grow steadily until we are at an average of over 90%
capacity for the year 2004 with a conservative capacity rate of 50% expec ted at times. We
will be growing slowly with profits growing at a rate of about 10%. Expenses will be well
managed, allowing Magnolia to make a profit even if the capacity rate drops as low as 50%.

8.1 Important Assumptions

The following critical assumptions will determine the potential for future success.

A healthy economy that supports a moderate level of growth in our market.

Keeping operating costs as low as possible, particularly in the areas of personnel and
our ongoing monthly expenses.

Table: General Assumptions

General Assumptions
Plan Month
Current Interest Rate
Long-term Interest Rate
Tax Rate
Other

Year 1
1
9.50%

Year 2
2
9.50%

Year 3
3
9.50%

8.50%
28.17%
0

8.50%
28.00%
0

8.50%
28.17%
0

8.2 Break-even Analysis

The following chart and table summarize our break-even analysis. Our fixed costs will be $17,000
per month at the onset and we expec t to reac h the break-even point within the first few months
of operation.

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Magnolia Inn
Table: Break-even Analysis
Break-even Analysis
Monthly Revenue Break-even

$18,487

Assumptions:
Average Percent Variable Cost
Estimated Monthly Fixed Cost

5%
$17,563

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Magnolia Inn
8.3 Projected Profit and Loss
The following represents the Projected Profit and Loss for the Magnolia Inn based on sales and
expense projections for 2004 and beyond.

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Magnolia Inn
Table: Profit and Loss
Pro Forma Profit and Loss
Sales
Direct Cost of Sales
Other Costs of Sales
Total Cost of Sales

Year 1
$341,830
$17,092
$12,000
$29,092

Year 2
$376,013
$21,000
$14,000
$35,000

Year 3
$413,614
$24,000
$16,000
$40,000

Gross Margin
Gross Margin %

$312,739
91.49%

$341,013
90.69%

$373,614
90.33%

Expenses
Payroll
Sales and Marketing and Other Expenses
Depreciation
Rent
Utilities
Insurance
Payroll Taxes

$105,000
$12,000
$0
$48,000
$12,000
$6,000
$15,750

$117,000
$14,000
$0
$48,000
$14,000
$7,000
$17,550

$119,000
$16,000
$0
$48,000
$16,000
$8,000
$17,850

$12,000

$3,000

$0

Total Operating Expenses

$210,750

$220,550

$224,850

Profit Before Interest and Taxes

EBITDA

$101,989
$101,989

$120,463
$120,463

$148,764
$148,764

$29,885
$20,188

$29,660
$25,425

$29,411
$33,618

$51,916
15.19%

$65,378
17.39%

$85,736
20.73%

Other

Interest Expense
Taxes Incurred
Net Profit
Net Profit/Sales

8.4 Projected Cash Flow

The Cash Flow projections are outlined below. Again, these projections are based on our basic
assumptions with revenue generation fac tors carrying the most significant weight regarding the
outcome. We are anticipating that we will not need to invest any additional capital into the
business with a healthy cash flow in plac e.

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Magnolia Inn
Table: Cash Flow
Pro Forma Cash Flow
Year 1

Year 2

Year 3

$341,830
$341,830

$376,013
$376,013

$413,614
$413,614

$0

$0

$0

$0
$0
$0
$0
$0
$0
$341,830

$0
$0
$0
$0
$0
$0
$376,013

$0
$0
$0
$0
$0
$0
$413,614

Year 1

Year 2

Year 3

$105,000
$169,225
$274,225

$117,000
$193,409
$310,409

$119,000
$207,626
$326,626

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out
Principal Repayment of Current Borrowing

$0
$0

$0
$0

$0
$0

Other Liabilities Principal Repayment

Long-term Liabilities Principal Repayment
Purchase Other Current Assets

$0
$2,646
$0

$0
$2,831
$0

$0
$3,029
$0

$0
$6,000
$282,871

$0
$6,000
$319,240

$0
$3,000
$332,655

$58,959
$64,959

$56,773
$121,732

$80,959
$202,692

Cash Received
Cash from Operations
Cash Sales
Subtotal Cash from Operations
Additional Cash Received
Sales Tax, VAT, HST/GST Received
New Current Borrowing
New Other Liabilities (interest-free)
New Long-term Liabilities
Sales of Other Current Assets
Sales of Long-term Assets
New Investment Received
Subtotal Cash Received
Expenditures
Expenditures from Operations
Cash Spending
Bill Payments
Subtotal Spent on Operations

Purchase Long-term Assets

Dividends
Subtotal Cash Spent
Net Cash Flow
Cash Balance

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Magnolia Inn

8.5 Projected Balance Sheet

The Balance Sheet in the following table shows sufficient growth and a very ac ceptable financial
position. The monthly estimates are included and shown in the appendix.

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Magnolia Inn
Table: Balance Sheet
Pro Forma Balance Sheet
Year 1

Year 2

Year 3

$64,959
$10,000
$74,959

$121,732
$10,000
$131,732

$202,692
$10,000
$212,692

$370,000
$0
$370,000
$444,959

$370,000
$0
$370,000
$501,732

$370,000
$0
$370,000
$582,692

Year 1

Year 2

Year 3

Current Liabilities
Accounts Payable

$15,689

$15,915

$17,168

Current Borrowing
Other Current Liabilities
Subtotal Current Liabilities

$0
$0
$15,689

$0
$0
$15,915

$0
$0
$17,168

Long-term Liabilities
Total Liabilities

$350,354
$366,043

$347,523
$363,438

$344,494
$361,662

Paid-in Capital
Retained Earnings
Earnings
Total Capital
Total Liabilities and Capital

$65,000
($38,000)
$51,916
$78,916
$444,959

$65,000
$7,916
$65,378
$138,294
$501,732

$65,000
$70,294
$85,736
$221,030
$582,692

$78,916

$138,294

$221,030

Assets
Current Assets
Cash
Other Current Assets
Total Current Assets
Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets
Liabilities and Capital

Net Worth

8.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the
Standard Industrial Classification (SIC) code 7011.0401, Bed and Breakfast Inns are shown for
comparison.
The following will enable us to keep on trac k. If we fail in any of these areas we will need to reevaluate our business mode:

Month-to-month annual comparisons indicate an increase of 10% or greater.

Do not depend on credit line to meet cash requirements.

Page 19

Magnolia Inn
Table: Ratios
Ratio Analysis
Year 1
n.a.

Year 2
10.00%

Year 3
10.00%

Industry Profile
7.24%

2.25%
16.85%
83.15%
100.00%

1.99%
26.26%
73.74%
100.00%

1.72%
36.50%
63.50%
100.00%

22.48%
27.08%
72.92%
100.00%

3.53%
78.74%
82.26%
17.74%

3.17%
69.26%
72.44%
27.56%

2.95%
59.12%
62.07%
37.93%

14.60%
32.80%
47.40%
52.60%

100.00%
91.49%
76.30%
0.00%
29.84%

100.00%
90.69%
73.30%
0.00%
32.04%

100.00%
90.33%
69.55%
0.00%
35.97%

100.00%
100.00%
67.52%
2.55%
0.36%

Main Ratios
Current
Quick
Total Debt to Total Assets
Pre-tax Return on Net Worth
Pre-tax Return on Assets

4.78
4.78
82.26%
91.37%
16.20%

8.28
8.28
72.44%
65.66%
18.10%

12.39
12.39
62.07%
54.00%
20.48%

1.00
0.76
59.90%
0.24%
0.60%

Additional Ratios
Net Profit Margin

Year 1
15.19%

Year 2
17.39%

Year 3
20.73%

n.a

Return on Equity

65.79%

47.27%

38.79%

n.a

11.79
27
0.77

12.17
30
0.75

12.17
29
0.71

n.a
n.a
n.a

4.64
0.04

2.63
0.04

1.64
0.05

n.a
n.a

$59,270
3.41

$115,817
4.06

$195,524
5.06

n.a
n.a

1.30
4%
4.78
4.33
0.12

1.33
3%
8.28
2.72
0.09

1.41
3%
12.39
1.87
0.03

n.a
n.a
n.a
n.a
n.a

Sales Growth
Percent of Total Assets
Other Current Assets
Total Current Assets
Long-term Assets
Total Assets
Current Liabilities
Long-term Liabilities
Total Liabilities
Net Worth
Percent of Sales
Sales
Gross Margin
Selling, General & Administrative Expenses
Advertising Expenses
Profit Before Interest and Taxes

Activity Ratios
Accounts Payable Turnover
Payment Days
Total Asset Turnover
Debt Ratios
Debt to Net Worth
Current Liab. to Liab.
Liquidity Ratios
Net Working Capital
Interest Coverage
Additional Ratios
Assets to Sales
Current Debt/Total Assets
Acid Test
Sales/Net Worth
Dividend Payout

Page 20

Appendix
Table: Sales Forecast
Sales Forecast
Sales
Reservations
Drop-ins
Total Sales
Direct Cost of Sales
Reservations
Drop-ins
Subtotal Direct Cost of Sales

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

0%

$18,000

$20,000

$24,482

$24,727

$24,974

$25,224

$25,476

$25,731

$25,989

$26,248

$26,511

$26,776

0%

$2,000
$20,000

$3,000
$23,000

$4,080
$28,563

$4,121
$28,848

$4,162
$29,137

$4,204
$29,428

$4,246
$29,723

$4,289
$30,020

$4,331
$30,320

$4,375
$30,623

$4,418
$30,929

$4,463
$31,239

Month 1
$900
$100
$1,000

Month 2
$1,000
$150
$1,150

Month 3
$1,224
$204
$1,428

Month 4
$1,236
$206
$1,442

Month 5
$1,249
$208
$1,457

Month 6
$1,261
$210
$1,471

Month 7
$1,274
$212
$1,486

Month 8
$1,287
$214
$1,501

Month 9
$1,299
$217
$1,516

Month 10
$1,312
$219
$1,531

Month 11
$1,326
$221
$1,546

Month 12
$1,339
$223
$1,562

Page 1

Appendix
Table: Personnel
Personnel Plan
Month 1
$3,000
$4,000

Month 2
$4,000
$4,000

Month 3
$5,000
$4,000

Month 4
$5,000
$4,000

Month 5
$5,000
$4,000

Month 6
$5,000
$4,000

Month 7
$5,000
$4,000

Month 8
$5,000
$4,000

Month 9
$5,000
$4,000

Month 10
$5,000
$4,000

Month 11
$5,000
$4,000

Month 12
$5,000
$4,000

Total People

Total Payroll

$7,000

$8,000

$9,000

$9,000

$9,000

$9,000

$9,000

$9,000

$9,000

$9,000

$9,000

$9,000

Owners
Full time Staff

0%
0%

Page 2

Appendix
Table: General Assumptions
General Assumptions
Plan Month
Current Interest Rate
Long-term Interest Rate
Tax Rate
Other

Month 1
1
9.50%

Month 2
2
9.50%

Month 3
3
9.50%

Month 4
4
9.50%

Month 5
5
9.50%

Month 6
6
9.50%

Month 7
7
9.50%

Month 8
8
9.50%

Month 9
9
9.50%

Month 10
10
9.50%

Month 11
11
9.50%

Month 12
12
9.50%

8.50%

8.50%

8.50%

8.50%

8.50%

8.50%

8.50%

8.50%

8.50%

8.50%

8.50%

8.50%

30.00%
0

28.00%
0

28.00%
0

28.00%
0

28.00%
0

28.00%
0

28.00%
0

28.00%
0

28.00%
0

28.00%
0

28.00%
0

28.00%
0

Page 3

Appendix
Table: Profit and Loss
Pro Forma Profit and Loss
Sales
Direct Cost of Sales

Month 1
$20,000
$1,000

Month 2
$23,000
$1,150

Month 3
$28,563
$1,428

Month 4
$28,848
$1,442

Month 5
$29,137
$1,457

Month 6
$29,428
$1,471

Month 7
$29,723
$1,486

Month 8
$30,020
$1,501

Month 9
$30,320
$1,516

Month 10
$30,623
$1,531

Month 11
$30,929
$1,546

Month 12
$31,239
$1,562

Other Costs of Sales

Total Cost of Sales

$1,000
$2,000

$1,000
$2,150

$1,000
$2,428

$1,000
$2,442

$1,000
$2,457

$1,000
$2,471

$1,000
$2,486

$1,000
$2,501

$1,000
$2,516

$1,000
$2,531

$1,000
$2,546

$1,000
$2,562

$18,000
90.00%

$20,850
90.65%

$26,135
91.50%

$26,406
91.53%

$26,680
91.57%

$26,957
91.60%

$27,236
91.64%

$27,519
91.67%

$27,804
91.70%

$28,092
91.73%

$28,383
91.77%

$28,677
91.80%

Gross Margin
Gross Margin %

Expenses
Payroll

$7,000

$8,000

$9,000

$9,000

$9,000

$9,000

$9,000

$9,000

$9,000

$9,000

$9,000

$9,000

Sales and Marketing and Other

Expenses
Depreciation

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Rent

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

Utilities
Insurance
Payroll Taxes

$1,000
$500
$1,050

$1,000
$500
$1,200

$1,000
$500
$1,350

$1,000
$500
$1,350

$1,000
$500
$1,350

$1,000
$500
$1,350

$1,000
$500
$1,350

$1,000
$500
$1,350

$1,000
$500
$1,350

$1,000
$500
$1,350

$1,000
$500
$1,350

$1,000
$500
$1,350

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$15,550

$16,700

$17,850

$17,850

$17,850

$17,850

$17,850

$17,850

$17,850

$17,850

$17,850

$17,850

$2,450
$2,450

$4,150
$4,150

$8,285
$8,285

$8,556
$8,556

$8,830
$8,830

$9,107
$9,107

$9,386
$9,386

$9,669
$9,669

$9,954
$9,954

$10,242
$10,242

$10,533
$10,533

$10,827
$10,827

$2,499

$2,497

$2,496

$2,494

$2,493

$2,491

$2,490

$2,488

$2,487

$2,485

$2,483

$2,482

($15)

$463

$1,621

$1,697

$1,774

$1,852

$1,931

$2,011

$2,091

$2,172

$2,254

$2,337

($34)

$1,190

$4,168

$4,364

$4,563

$4,763

$4,966

$5,170

$5,377

$5,585

$5,796

$6,008

-0.17%

5.17%

14.59%

15.13%

15.66%

16.19%

16.71%

17.22%

17.73%

18.24%

18.74%

19.23%

Other
Total Operating Expenses
Profit Before Interest and Taxes
EBITDA
Interest Expense
Taxes Incurred
Net Profit
Net Profit/Sales

15%

Page 4

Appendix
Table: Cash Flow
Pro Forma Cash Flow
Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$20,000
$20,000

$23,000
$23,000

$28,563
$28,563

$28,848
$28,848

$29,137
$29,137

$29,428
$29,428

$29,723
$29,723

$30,020
$30,020

$30,320
$30,320

$30,623
$30,623

$30,929
$30,929

$31,239
$31,239

Cash Received
Cash from Operations
Cash Sales
Subtotal Cash from Operations
Additional Cash Received
Sales Tax, VAT, HST/GST Received

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

New Current Borrowing

New Other Liabilities (interest-free)

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$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

$0

Sales of Other Current Assets

Sales of Long-term Assets
New Investment Received

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

Subtotal Cash Received

$20,000

$23,000

$28,563

$28,848

$29,137

$29,428

$29,723

$30,020

$30,320

$30,623

$30,929

$31,239

Expenditures

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Expenditures from Operations

Cash Spending

$7,000

$8,000

$9,000

$9,000

$9,000

$9,000

$9,000

$9,000

$9,000

$9,000

$9,000

$9,000

Bill Payments
Subtotal Spent on Operations

$434
$7,434

$13,060
$21,060

$13,863
$22,863

$15,398
$24,398

$15,487
$24,487

$15,577
$24,577

$15,668
$24,668

$15,760
$24,760

$15,853
$24,853

$15,947
$24,947

$16,041
$25,041

$16,137
$25,137

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Principal Repayment of Current Borrowing

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Other Liabilities Principal Repayment

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$212
$0

$214
$0

$215
$0

$217
$0

$218
$0

$220
$0

$221
$0

$223
$0

$224
$0

$226
$0

$228
$0

$229
$0

Long-term Liabilities Principal Repayment

Purchase Other Current Assets
Purchase Long-term Assets
Dividends
Subtotal Cash Spent

0.00%

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$500

$500

$500

$500

$500

$500

$500

$500

$500

$500

$500

$500

$8,147

$21,774

$23,578

$25,114

$25,205

$25,297

$25,389

$25,483

$25,577

$25,672

$25,769

$25,866

Net Cash Flow

$11,853

$1,226

$4,985

$3,734

$3,932

$4,132

$4,333

$4,537

$4,743

$4,951

$5,161

$5,373

Cash Balance

$17,853

$19,080

$24,065

$27,799

$31,730

$35,862

$40,195

$44,732

$49,475

$54,426

$59,586

$64,959

Page 5

Appendix
Table: Balance Sheet
Pro Forma Balance Sheet
Assets

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Starting Balances

Current Assets
Cash
Other Current Assets

$6,000
$10,000

$17,853
$10,000

$19,080
$10,000

$24,065
$10,000

$27,799
$10,000

$31,730
$10,000

$35,862
$10,000

$40,195
$10,000

$44,732
$10,000

$49,475
$10,000

$54,426
$10,000

$59,586
$10,000

$64,959
$10,000

Total Current Assets

$16,000

$27,853

$29,080

$34,065

$37,799

$41,730

$45,862

$50,195

$54,732

$59,475

$64,426

$69,586

$74,959

Long-term Assets

$370,000

$370,000

$370,000

$370,000

$370,000

$370,000

$370,000

$370,000

$370,000

$370,000

$370,000

$370,000

$370,000

Accumulated Depreciation
Total Long-term Assets

$0
$370,000

$0
$370,000

$0
$370,000

$0
$370,000

$0
$370,000

$0
$370,000

$0
$370,000

$0
$370,000

$0
$370,000

$0
$370,000

$0
$370,000

$0
$370,000

$0
$370,000

Total Assets

$386,000

$397,853

$399,080

$404,065

$407,799

$411,730

$415,862

$420,195

$424,732

$429,475

$434,426

$439,586

$444,959

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Long-term Assets

Liabilities and Capital

Current Liabilities
Accounts Payable

$0

$12,600

$13,350

$14,882

$14,968

$15,055

$15,143

$15,232

$15,321

$15,412

$15,503

$15,596

$15,689

Current Borrowing
Other Current Liabilities
Subtotal Current Liabilities

$0
$0
$0

$0
$0
$12,600

$0
$0
$13,350

$0
$0
$14,882

$0
$0
$14,968

$0
$0
$15,055

$0
$0
$15,143

$0
$0
$15,232

$0
$0
$15,321

$0
$0
$15,412

$0
$0
$15,503

$0
$0
$15,596

$0
$0
$15,689

Long-term Liabilities

$353,000

$352,788

$352,574

$352,359

$352,143

$351,925

$351,705

$351,484

$351,261

$351,037

$350,811

$350,583

$350,354

Total Liabilities

$353,000

$365,388

$365,924

$367,241

$367,111

$366,980

$366,848

$366,716

$366,582

$366,449

$366,314

$366,179

$366,043

Paid-in Capital
Retained Earnings

$65,000
($32,000)

$65,000
($32,500)

$65,000
($33,000)

$65,000
($33,500)

$65,000
($34,000)

$65,000
($34,500)

$65,000
($35,000)

$65,000
($35,500)

$65,000
($36,000)

$65,000
($36,500)

$65,000
($37,000)

$65,000
($37,500)

$65,000
($38,000)

$0
$33,000

($34)
$32,466

$1,156
$33,156

$5,324
$36,824

$9,688
$40,688

$14,251
$44,751

$19,014
$49,014

$23,980
$53,480

$29,150
$58,150

$34,526
$63,026

$40,112
$68,112

$45,907
$73,407

$51,916
$78,916

$386,000

$397,853

$399,080

$404,065

$407,799

$411,730

$415,862

$420,195

$424,732

$429,475

$434,426

$439,586

$444,959

$33,000

$32,466

$33,156

$36,824

$40,688

$44,751

$49,014

$53,480

$58,150

$63,026

$68,112

$73,407

$78,916

Earnings
Total Capital
Total Liabilities and Capital
Net Worth

Page 6