Masaki Water Bottling Company’s Business Plan

Introduction

Background

Water is an important and vital resource for human beings. It sustains life and makes it possible to carry out different social and economic activities. However, inequalities in the management of water and lack of adequate access to this commodity have created scarcities in the market where pockets of populations are often deprived of this valuable commodity, while others receive it in abundance. These challenges are more poignant in developing countries than developed ones (Judd, 2019; Adeniran, 2017; Onyango et al., 2015; Thai and Guevara, 2019; Taylor et al., 2020; Pittock, 2019; Narayanaswami, 2018). Indeed, improvements in government efficiency and service delivery standards have seen water become available to almost all households in developed nations. For most of these countries, the main water vending industry that still thrives is the bottling water industry. However, like all other business sectors, it has its challenges and opportunities, most of which need to be carefully evaluated to understand their impact on societies. Additionally, there is a need to undertake a critical review of the sub-segments of the market that are adequately serviced and those that are not. In this paper, it is proposed that the high-end section of the market is underserviced.

From the aforementioned market gap, two brothers of Indian descent founded Masaki Water Bottlers in August 2009. They started the business after noticing a gap in the niche water bottling market in the United Kingdom (UK), whereby the top-tier segment was significantly underserved while the middle and lower sections of the market were oversupplied. The purpose of this report is to seek additional funding to start a new bottling facility in Liverpool. This plant will serve the city market and expand the company’s production capacity to add value to existing product brand categories, as a strategy of standing out from the competition in the premium market segment. It is expected that the new plant will not only expand the company’s production capacity but also lower its operational costs. This outcome would suffice because the proposed business plan would make it cheaper to transport products from the new plant to the market, as opposed to the current model where the company subcontracts delivery services to a third party to distribute the goods on behalf of the company. Therefore, by locating the new services in-house, Masaki Bottlers can have better control of the value-chain process.

Additional funding is also needed to integrate the company’s business model with current online capabilities that allow customers to order products virtually and have them delivered at their doorsteps. This strategy aligns with the company’s plans of transitioning its business-to-customer (B2C) operational processes online as recommended by Wynn and Jones (2019). In this context of analysis, the additional funding obtained from investors would be used to update the company’s supply chain management activities to reflect a real-time ordering and delivery system. Current plans involve using unmanned automated vehicles and drones to improve deliveries to the target customers. Therefore, the additional funding sought through this plan will be instrumental in changing most aspects of logistics and supply chain activities to make them more efficient and responsive to customer needs, as suggested by Hatak and Snellman (2017).

Broadly, this document is a research proposal that explains how the above objectives are expected to be achieved. Key sections of this business plan highlight the main activities of Masaki Water Bottling Company and the services it provides to its customers. This document also contains information regarding the main services offered by the business to its customers as well as the management structure that currently guides the organization’s activities and future development plans. These insights will be presented in this report, relative to discussions that will explain how the proposed changes will fortify the target market and make it a key driver of growth in the next phase of the company’s business cycle. To have a proper understanding of the outcomes of the proposed plan, financial projections for the next three years will equally be provided in this report, with the key financial measures analyzed quarterly. However, before delving into the details of this analysis, it is first important to understand the scope of this report.

Scope of the Report

The scope of this report covers all aspects of Masaki’s business performance as they relate to water sales and distribution strategies. Key aspects of the plan include a sales strategy whereby the main markets are identified and ways of reaching them developed. While the theoretical contribution of the study to the business is highlighted in this study, additional financial information relating to the company’s performance will be provided in the appendix section. The goal will be to identify new opportunities for investments and estimate the timeline for the accomplishment of different operational objectives. Therefore, the full scope of this report not only explains the market conditions of the proposed business but also its future outcomes by evaluating the services it will offer to its customers.

The management structure that would guide decision-making in such an environment and the target market that should be identified to form the main customer group will also be described in this plan. These different aspects of the business plan are captured by Suša Vugec, Tomičić-Pupek, and Vukšić (2018) in their assessment of the main parts of a holistic business plan. The scope of this report will be domiciled in the water vending business with a special focus on the premium market segment. The aims and rationale of the business plan are outlined below.

Aims and Rationale

As highlighted in this paper, this study aims to develop a business plan for Masaki Bottling Company. The plan is aimed at launching new brands of luxury bottled water with different flavors in the UK. However, because of the challenges associated with implementing such a plan, the key success factor for this proposal is securing funding. This means that when financing is obtained, the business plan can be launched. The following two statements highlight the aims of the business plan.

  1. To seek funding for the business plan
  2. To profile the main target market for the company

Services Provided by the Business

Masaki water bottling company mainly sells water to customers in the UK. Its market around the region has been well established except for Liverpool, which is the last frontier of market growth (Howell et al., 2020). Besides, bottling its products, Masaki Water Company can package beverage bottles for other companies as well. Therefore, its services will not only be limited to business-to-customer (B2C) relationships but also business-to-business (B2B) relationships (Lyons and Brennan, 2019). Therefore, the water company will offer its services to both individual and corporate clients alike.

Target Market

Identifying a target market requires a careful understanding of the unique needs of a market and the desires or wishes of customer groups who form it. Typically, most businesses segment their markets into three broad categories: low-income, middle income, and high income (Angeli and Jaiswal, 2016). As its name suggests, the low-income segment of the market is characterized by the activities of the mass population whose interests largely define what the majority of the people want or need. Similarly, as highlighted in this report, this section of the market is already saturated as there are many water bottling companies that offer affordable products within this segment of the population. The middle-income section of the market is equally served because prices are still set affordably and consumers have access to a wide variety of products and services. However, the high-income segment of the market does not share the same characteristics because there is a poor product-price-value match. After all, consumers have been forced to pay high prices for products that would be found in other segments of the market.

Overall, the premium-pricing model, which is used in many high-end markets, thus fails to communicate value to customers because the additional benefits expected of a premium pricing structure are non-existent in the current market setting (Hammer, 2019). As such, there is an opportunity in the industry to match the value and price that high-end customers pay for. Masaki Water Bottling Company hopes to tap into this market opportunity using high-end consumers as the main target market category.

Product and Pricing Strategies

Similar to most markets involved in the sale of goods and services, the water bottling market in the UK is also categorized into different market segments. Masaki Water Company mainly specializes in the high-end business market segment, which is characterized by people who have high income and education levels. This target market is selected for the proposed business plan because it is relatively underserved compared to the mainstream market. Stated differently, this segment of the market is poorly targeted as the products sold resemble the ones available in the mass market, but only more expensive. This means that the niche customer segment pays a premium for the same product that would be obtained using a standard pricing model in a shopping outlet located in a different part of the country.

This discrepancy means that consumers are not getting value for money. Masaki Water Bottling Company strives to change this situation by delivering value to this market segment. The plan is predicated on a value-addition strategy whereby products will be sold to consumers with additional benefits added to the items sold (Lloréns and Stanchich, 2019). For example, under this marketing plan, flavored water will be sold as a unique product category for the niche market. Similarly, consumers will be supplied with enriched products that contain extra minerals for use. This value addition strategy will allow the target market to understand the additional value offered to them, hence justifying a premium marketing strategy.

Promotion Strategy

A business’s promotion strategy plays a critical role in influencing the number of people who would buy a product, or not. At the core of its implementation plan is the need to make customers aware of the existence of a product and communicate its value to them. Relative to this assertion, a digital promotion strategy will be adopted by Masaki Water Company to reach the target market. As highlighted in this proposal, the targeted market will be comprised of high-end customers. The basic assumption of adopting a digital promotion strategy is that members of this customer group are tech-savvy and can be effectively reached using this promotion strategy. Research studies suggest that the digital marketing strategy is a recent addition to traditional organizational promotion strategies because past communication channels were based on print advertisements and billboards.

The digital marketing plan provides a different way of thinking about marketing a company’s products because it can accommodate multiple creative ideas at the same time. For example, an Instagram video could contain video, audio, and computer graphic imitations in one frame. The digital marketing strategy is considered a by-product of the digital revolution shaping the global e-commerce space (Angeli and Jaiswal, 2016). This trend has forced companies to rethink their business strategies, thereby making them more appealing and integrated into the digital marketing platform. However, its use in this study is justified because it is an inexpensive and effective form of communication. Therefore, it will be adopted as the main promotion strategy.

Management Structure and Personnel

The management structure of a business defines the decision-making framework that will be followed when formulating strategic choices in a company. Depending on the type of business and firm involved, companies often adopt varied management structures and personal organizational plans that are suited to the achievement of their key objectives (Chatha, 2019). In light of the important role played by management in dictating an organization’s strategic flow, attention has been directed towards the development of an effective oversight and governance model that would not burden the firm, in terms of decision-making efficiency, but facilitate its responsiveness to existing micro-economic and macro-economic forces affecting an enterprise (Barrett and Moores, 2020).

Masaki Water Company will have a Chief Executive Officer (CEO) as the most impactful person because he or she will exercise instruments of power in the overall management structure and plan of the firm. However, the company’s three directors will occupy the highest positions in the overall management structures and their responsibility would be providing the strategic direction of the business. Therefore, the CEO will have the task of implementing the day-to-day operational plans of the business. Under his authority will be departmental managers and lower cadre employees. This differentiated understanding of leadership and management responsibilities characterizes the nature of the relationship between Masaki’s directors and managers and the structure of the overall management plan.

Financial Projects

The financial projections outlined below relate to Masaki’s profitability, return on investments, sales projections, and balance sheet performance. However, before explaining the details of these projections, it is assumed that from the break-even analysis below, Masaki Water Bottlers would enjoy a 69% gross margin as a percentage of total sales, which will allow investors to break even in two years. When coming up with these calculations it was assumed that no employees would be contracted in the first year of operation, as services will be outsourced to reduce operation costs. However, the company would need to make sales of $17,608,490 annually or $1,467,374 monthly to break even. A further breakdown of these calculations is provided in table 1 below.

Table 1. Break-even Analysis 

Gross Margin % of Sales
Gross Margin $ 20,750,000
Total Sales $ 30,000,000
Gross Margin/Total Sales 69.2%
Total Fixed Expenses
Payroll $ –
Operating Expenses $ 12,179,205.57
Operating + Payroll $ 12,179,206
Breakeven Sales in Dollars (Annual)
Gross Margin % of Sales 69.2%
Total Fixed Expenses $ 12,179,206
Yearly Breakeven Amount $ 17,608,490
Monthly Breakeven Amount $ 1,467,374

Based on the above computations, Masaki Water Bottling Company is expected to be profitable within its first two years of operation. Table 2 below presents an estimation of the firm’s overall performance based on a review of key financial ratios.

Table 2. Indicative Financial Ratios 

Ratios Year One Year Two Year Three
Liquidity
Current Ratio 2.2 4.7 9.1
Quick Ratio 0.7 3.1 7.3
Safety
Debt to Equity Ratio 0.2 0.2 0.1
Debt-Service Coverage Ratio – DSCR 1.6 2.3 3.4
Profitability
Sales Growth 0.0% 10.0% 10.0%
COGS to Sales 30.8% 30.8% 30.8%
Gross Profit Margin 69.2% 69.2% 69.2%
SG&A to Sales 35.6% 33.4% 31.3%
Net Profit Margin 17.9% 18.9% 21.0%
Return on Equity (ROE) 32.8% 27.6% 25.2%
Return on Assets 26.3% 24.0% 23.1%
Owner’s Compensation to Sales 0.0% 0.0% 0.0%
Efficiency
Days in Receivables 21.3 20.6 18.7
Accounts Receivable Turnover 16.9 17.5 19.2
Days in Inventory 194.6 179.4 163.1
Inventory Turnover 1.9 2.0 2.2
Sales to Total Assets 1.5 1.3 1.1

As highlighted in table 2 above, the projected financial ratios for Masaki Bottling Company are promising in the sense that investors are assured of good returns when injecting their capital into the business. Additionally, these indicators suggest that the company’s overall performance will be higher than the industry average of less than 12% (Ganamotse et al., 2017; Berends et al., 2016). This comparison of statistics means that investors would be benefiting from better market returns if they allocate their capital to the bottling company (Le Breton-Miller and Miller, 2018). This possibility is supported by a positive estimation of sales numbers within the next three years of operation. Appendices 1-3 contain an estimation of the projected sales for the company during the aforementioned period under review. According to the income statement highlighted in appendix 4, it is also seen that the company is expected to make profits within the first three years of operation. In the first year, the expected margins are estimated to be at 18.1%, after which is expected to rise to 19% in the second year and ultimately to 21% in the third year. These figures suggest that the company will be profitable in the short term and middle term. The company’s balance sheet for the start of the year is presented in appendix 5, while its overall performance throughout the three years under review is captured in Appendix 6.

Summary

This business plan has covered all aspects of Masaki’s business performance as it relates to water sales and distribution strategies. Key aspects of the plan that have been investigated include a sales and marketing strategy, which has helped to identify the main markets and ways of reaching clients in them. While the theoretical contribution of the proposed plan to the business field is fixated on understanding how to run successful enterprises, additional financial information relating to the company’s performance will be generated as the business operates. The goal will be to identify new opportunities for investments and estimate the timeline for the accomplishment of different operational objectives. Therefore, the full scope of this report not only explains the market conditions of the proposed business but also its future outcomes through an analysis of the services it will offer its customers. The management structure that would guide decision-making processes in such an environment and the target market that should be identified to form the main customer groups have also been explained in this document. These different aspects of the business plan should provide investors with sufficient information to make a sound judgment on capital allocation.

Reference List

Adeniran, A. I. (2017) ‘Repository Africa in the evolving “Chinese Century”: the uneven Sino-Nigerian water conservation partnership’, Journal of Current Chinese Affairs, 46(3), pp. 33-52.

Angeli, F. and Jaiswal, A. K. (2016) ‘Business model innovation for inclusive health care delivery at the bottom of the pyramid’, Organization and Environment, 29(4), pp. 486-507.

Barrett, M. A. and Moores, K. (2020) ‘The what and how of Family business paradox: literature-inspired distillations and directions’, International Small Business Journal, 38(3), pp. 154-183.

Berends, H. et al. (2016) ‘Learning while (re)configuring: business model innovation processes in established firms’, Strategic Organization, 14(3), pp. 181-219.

Chatha, K. A. (2019) ‘Service tyre and tube division: strategic capabilities for business growth’, Asian Journal of Management Cases, 16(1), pp. 51-75.

Ganamotse, G. N. et al. (2017) ‘The emerging properties of business accelerators: the case of Botswana, Namibia and Uganda global business labs’, Journal of Entrepreneurship and Innovation in Emerging Economies, 3(1), pp. 16-40.

Hammer, P. J. (2019) ‘The Flint water crisis, the Karegnondi Water Authority and strategic–structural racism’, Critical Sociology, 45(1), pp. 103-119.

Hatak, I. and Snellman, K. (2017) ‘The influence of anticipated regret on business start-up behaviour’, International Small Business Journal, 35(3), pp. 349-360.

Howell, R. et al. (2020) ‘Consumption of bottled water at the bottom of the pyramid: who purchases first?’, Journal of Macromarketing, 40(1), pp. 31-50.

Judd, B. (2019) ‘Kapi Wiya: water insecurity and aqua-nullius in remote inland Aboriginal Australia’, Thesis Eleven, 150(1), pp. 102-118.

Le Breton-Miller, I. and Miller, D. (2018) ‘Beyond the firm: business families as entrepreneurs’, Entrepreneurship Theory and Practice, 42(4), pp. 527-536.

Lloréns, H. and Stanchich, M. (2019) ‘Water is life, but the colony is a necropolis: environmental terrains of struggle in Puerto Rico’, Cultural Dynamics, 31(2), pp. 81-101.

Lyons, P. and Brennan, L. (2019) ‘Assessing value from business-to-business services relationships: temporality, tangibility, temperament, and trade-offs’, Journal of Service Research, 22(1), pp. 27-43.

Narayanaswami, S. (2018) ‘Water ATMs of Indian railways: causing a silent revolution’, Vikalpa, 43(2), pp. 115-120.

Onyango, L. A. et al. (2015) ‘A study of failure events in drinking water systems as a basis for comparison and evaluation of the efficacy of potable reuse schemes’, Environmental Health Insights, 5(2), pp. 1-10.

Pittock, J. (2019) ‘Are we there yet? The Murray-Darling Basin and sustainable water management’, Thesis Eleven, 150(1), pp. 119-130.

Suša Vugec, D., Tomičić-Pupek, K. and Vukšić, V. B. (2018) ‘Social business process management in practice: overcoming the limitations of the traditional business process management’, International Journal of Engineering Business Management, 5(2), pp. 1-11.

Taylor, J. A. et al. (2020) ‘Legionella species: a potential problem associated with rainwater harvesting systems?’, Indoor and Built Environment, 7(2), pp. 1-10.

Thai, N. V. and Guevara, J. R. (2019) ‘Women and water management: a policy assessment – a case study in An Giang Province, Mekong Delta, Vietnam’, Asia-Pacific Journal of Rural Development, 29(1), pp. 77-97.

Wynn, M. and Jones, P. (2019) ‘Context and entrepreneurship in knowledge transfer partnerships with small business enterprises’, The International Journal of Entrepreneurship and Innovation, 20(1), pp. 8-20.

Appendix

Appendix 1: Year 1-Projected Sales

Product Lines Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Annual Totals Category Breakdown Category / Total
Tonic
1000000 Sold 84,000 84,000 84,000 84,000 84,000 84,000 83,000 82,000 86,000 84,000 84,000 77,000 1,000,000 16.7%
Total Sales 420,000 420,000 420,000 420,000 420,000 420,000 415,000 410,000 430,000 420,000 420,000 385,000 $ 5,000,000 100.0% 16.7%
Total COGS 125,160 125,160 125,160 125,160 125,160 125,160 123,670 122,180 128,140 125,160 125,160 114,730 $ 1,490,000 29.8% 16.1%
Total Margin 294,840 294,840 294,840 294,840 294,840 294,840 291,330 287,820 301,860 294,840 294,840 270,270 $ 3,510,000 70.2% 16.9%
Lemon
1000000 Sold 80,000 88,000 84,000 84,000 84,000 84,000 84,000 84,000 84,000 84,000 84,000 76,000 1,000,000 16.7%
Total Sales 400,000 440,000 420,000 420,000 420,000 420,000 420,000 420,000 420,000 420,000 420,000 380,000 $ 5,000,000 100.0% 16.7%
Total COGS 132,800 146,080 139,440 139,440 139,440 139,440 139,440 139,440 139,440 139,440 139,440 126,160 $ 1,660,000 33.2% 17.9%
Margin 267,200 293,920 280,560 280,560 280,560 280,560 280,560 280,560 280,560 280,560 280,560 253,840 $ 3,340,000 66.8% 16.1%
Citric
1000000 Sold 84,000 84,000 84,000 84,000 84,000 84,000 84,000 84,000 84,000 84,000 84,000 76,000 1,000,000 16.7%
Total Sales 420,000 420,000 420,000 420,000 420,000 420,000 420,000 420,000 420,000 420,000 420,000 380,000 $ 5,000,000 100.0% 16.7%
Total COGS 85,680 85,680 85,680 85,680 85,680 85,680 85,680 85,680 85,680 85,680 85,680 77,520 $ 1,020,000 20.4% 11.0%
Margin 334,320 334,320 334,320 334,320 334,320 334,320 334,320 334,320 334,320 334,320 334,320 302,480 $ 3,980,000 79.6% 19.2%
Pineapple
1000000 Sold 84,000 84,000 84,000 84,000 84,000 70,000 98,000 84,000 84,000 84,000 84,000 76,000 1,000,000 16.7%
Total Sales 420,000 420,000 420,000 420,000 420,000 350,000 490,000 420,000 420,000 420,000 420,000 380,000 $ 5,000,000 100.0% 16.7%
Total COGS 166,320 166,320 166,320 166,320 166,320 138,600 194,040 166,320 166,320 166,320 166,320 150,480 $ 1,980,000 39.6% 21.4%
Margin 253,680 253,680 253,680 253,680 253,680 211,400 295,960 253,680 253,680 253,680 253,680 229,520 $ 3,020,000 60.4% 14.6%
Orange
1000000 Sold 84,000 84,000 84,000 84,000 84,000 84,000 84,000 84,000 84,000 84,000 84,000 76,000 1,000,000 16.7%
Total Sales 420,000 420,000 420,000 420,000 420,000 420,000 420,000 420,000 420,000 420,000 420,000 380,000 $ 5,000,000 100.0% 16.7%
Total COGS 168,000 168,000 168,000 168,000 168,000 168,000 168,000 168,000 168,000 168,000 168,000 152,000 $ 2,000,000 40.0% 21.6%
Margin 252,000 252,000 252,000 252,000 252,000 252,000 252,000 252,000 252,000 252,000 252,000 228,000 $ 3,000,000 60.0% 14.5%
Vinegar
1000000 Sold 84,000 84,000 84,000 84,000 84,000 84,000 84,000 84,000 84,000 84,000 84,000 76,000 1,000,000 16.7%
Total Sales 420,000 420,000 420,000 420,000 420,000 420,000 420,000 420,000 420,000 420,000 420,000 380,000 $ 5,000,000 100.0% 16.7%
Total COGS 92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 83,600 $ 1,100,000 22.0% 11.9%
Margin 327,600 327,600 327,600 327,600 327,600 327,600 327,600 327,600 327,600 327,600 327,600 296,400 $ 3,900,000 78.0% 18.8%
Total Units Sold 500,000 508,000 504,000 504,000 504,000 490,000 517,000 502,000 506,000 504,000 504,000 457,000 6,000,000
Total Sales $ 2,500,000 $ 2,540,000 $ 2,520,000 $ 2,520,000 ######### ######### ######### ######### $ 2,530,000 ######### $ 2,520,000 $ 2,285,000 $ 30,000,000
Total Cost of Goods Sold $ 770,360 $ 783,640 $ 777,000 $ 777,000 $ 777,000 $ 749,280 $ 803,230 $ 774,020 $ 779,980 $ 777,000 $ 777,000 $ 704,490 $ 9,250,000
Total Margin $ 1,729,640 $ 1,756,360 $ 1,743,000 $ 1,743,000 ######### ######### ######### ######### $ 1,750,020 ######### $ 1,743,000 $ 1,580,510 $ 20,750,000

Appendix 2: Year 2 Projected 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 Year 2 Totals Category Breakdown Category / Total
92,400 92,400 92,400 92,400 92,400 92,400 91,300 90,200 94,600 92,400 92,400 84,700 1,100,000 16.7%
462,000 462,000 462,000 462,000 462,000 462,000 456,500 451,000 473,000 462,000 462,000 423,500 $ 5,500,000 100.0% 16.7%
137,676 137,676 137,676 137,676 137,676 137,676 136,037 134,398 140,954 137,676 137,676 126,203 $ 1,639,000 29.8% 16.1%
324,324 324,324 324,324 324,324 324,324 324,324 320,463 316,602 332,046 324,324 324,324 297,297 $ 3,861,000 70.2% 16.9%
88,000 96,800 92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 83,600 1,100,000 16.7%
440,000 484,000 462,000 462,000 462,000 462,000 462,000 462,000 462,000 462,000 462,000 418,000 $ 5,500,000 100.0% 16.7%
146,080 160,688 153,384 153,384 153,384 153,384 153,384 153,384 153,384 153,384 153,384 138,776 $ 1,826,000 33.2% 17.9%
293,920 323,312 308,616 308,616 308,616 308,616 308,616 308,616 308,616 308,616 308,616 279,224 $ 3,674,000 66.8% 16.1%
92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 83,600 1,100,000 16.7%
462,000 462,000 462,000 462,000 462,000 462,000 462,000 462,000 462,000 462,000 462,000 418,000 $ 5,500,000 100.0% 16.7%
94,248 94,248 94,248 94,248 94,248 94,248 94,248 94,248 94,248 94,248 94,248 85,272 $ 1,122,000 20.4% 11.0%
367,752 367,752 367,752 367,752 367,752 367,752 367,752 367,752 367,752 367,752 367,752 332,728 $ 4,378,000 79.6% 19.2%
92,400 92,400 92,400 92,400 92,400 77,000 107,800 92,400 92,400 92,400 92,400 83,600 1,100,000 16.7%
462,000 462,000 462,000 462,000 462,000 385,000 539,000 462,000 462,000 462,000 462,000 418,000 $ 5,500,000 100.0% 16.7%
182,952 182,952 182,952 182,952 182,952 152,460 213,444 182,952 182,952 182,952 182,952 165,528 $ 2,178,000 39.6% 21.4%
279,048 279,048 279,048 279,048 279,048 232,540 325,556 279,048 279,048 279,048 279,048 252,472 $ 3,322,000 60.4% 14.6%
92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 83,600 1,100,000 16.7%
462,000 462,000 462,000 462,000 462,000 462,000 462,000 462,000 462,000 462,000 462,000 418,000 $ 5,500,000 100.0% 16.7%
184,800 184,800 184,800 184,800 184,800 184,800 184,800 184,800 184,800 184,800 184,800 167,200 $ 2,200,000 40.0% 21.6%
277,200 277,200 277,200 277,200 277,200 277,200 277,200 277,200 277,200 277,200 277,200 250,800 $ 3,300,000 60.0% 14.5%
92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 92,400 83,600 1,100,000 16.7%
462,000 462,000 462,000 462,000 462,000 462,000 462,000 462,000 462,000 462,000 462,000 418,000 $ 5,500,000 100.0% 16.7%
101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 91,960 $ 1,210,000 22.0% 11.9%
360,360 360,360 360,360 360,360 360,360 360,360 360,360 360,360 360,360 360,360 360,360 326,040 $ 4,290,000 78.0% 18.8%
550,000 558,800 554,400 554,400 554,400 539,000 568,700 552,200 556,600 554,400 554,400 502,700 6,600,000
######## $ 2,794,000 ######## $ 2,772,000 ######## $ 2,695,000 ######## ######## $ 2,783,000 $ 2,772,000 $ 2,772,000 $ 2,513,500 $ 33,000,000
$847,396 $ 862,004 $854,700 $ 854,700 $ 854,700 $ 824,208 $883,553 $851,422 $ 857,978 $ 854,700 $ 854,700 $ 774,939 $ 10,175,000
######## $ 1,931,996 ######## $ 1,917,300 ######## $ 1,870,792 ######## ######## $ 1,925,022 $ 1,917,300 $ 1,917,300 $ 1,738,561 $ 22,825,000

Appendix 3: Year 3 Projected 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 Year 3 Totals Category Breakdown Category / Total
101,640 101,640 101,640 101,640 101,640 101,640 100,430 99,220 104,060 101,640 101,640 93,170 1,210,000 16.7%
508,200 508,200 508,200 508,200 508,200 508,200 502,150 496,100 520,300 508,200 508,200 465,850 $ 6,050,000 100.0% 16.7%
151,444 151,444 151,444 151,444 151,444 151,444 149,641 147,838 155,049 151,444 151,444 138,823 $ 1,802,900 29.8% 16.1%
356,756 356,756 356,756 356,756 356,756 356,756 352,509 348,262 365,251 356,756 356,756 327,027 $ 4,247,100 70.2% 16.9%
96,800 106,480 101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 91,960 1,210,000 16.7%
484,000 532,400 508,200 508,200 508,200 508,200 508,200 508,200 508,200 508,200 508,200 459,800 $ 6,050,000 100.0% 16.7%
160,688 176,757 168,722 168,722 168,722 168,722 168,722 168,722 168,722 168,722 168,722 152,654 $ 2,008,600 33.2% 17.9%
323,312 355,643 339,478 339,478 339,478 339,478 339,478 339,478 339,478 339,478 339,478 307,146 $ 4,041,400 66.8% 16.1%
101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 91,960 1,210,000 16.7%
508,200 508,200 508,200 508,200 508,200 508,200 508,200 508,200 508,200 508,200 508,200 459,800 $ 6,050,000 100.0% 16.7%
103,673 103,673 103,673 103,673 103,673 103,673 103,673 103,673 103,673 103,673 103,673 93,799 $ 1,234,200 20.4% 11.0%
404,527 404,527 404,527 404,527 404,527 404,527 404,527 404,527 404,527 404,527 404,527 366,001 $ 4,815,800 79.6% 19.2%
101,640 101,640 101,640 101,640 101,640 84,700 118,580 101,640 101,640 101,640 101,640 91,960 1,210,000 16.7%
508,200 508,200 508,200 508,200 508,200 423,500 592,900 508,200 508,200 508,200 508,200 459,800 $ 6,050,000 100.0% 16.7%
201,247 201,247 201,247 201,247 201,247 167,706 234,788 201,247 201,247 201,247 201,247 182,081 $ 2,395,800 39.6% 21.4%
306,953 306,953 306,953 306,953 306,953 255,794 358,112 306,953 306,953 306,953 306,953 277,719 $ 3,654,200 60.4% 14.6%
101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 91,960 1,210,000 16.7%
508,200 508,200 508,200 508,200 508,200 508,200 508,200 508,200 508,200 508,200 508,200 459,800 $ 6,050,000 100.0% 16.7%
203,280 203,280 203,280 203,280 203,280 203,280 203,280 203,280 203,280 203,280 203,280 183,920 $ 2,420,000 40.0% 21.6%
304,920 304,920 304,920 304,920 304,920 304,920 304,920 304,920 304,920 304,920 304,920 275,880 $ 3,630,000 60.0% 14.5%
101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 101,640 91,960 1,210,000 16.7%
508,200 508,200 508,200 508,200 508,200 508,200 508,200 508,200 508,200 508,200 508,200 459,800 $ 6,050,000 100.0% 16.7%
111,804 111,804 111,804 111,804 111,804 111,804 111,804 111,804 111,804 111,804 111,804 101,156 $ 1,331,000 22.0% 11.9%
396,396 396,396 396,396 396,396 396,396 396,396 396,396 396,396 396,396 396,396 396,396 358,644 $ 4,719,000 78.0% 18.8%
605,000 614,680 609,840 609,840 609,840 592,900 625,570 607,420 612,260 609,840 609,840 552,970 7,260,000
######## ######### ######## ######## ######## ######## ######## ######## $ 3,061,300 ######## $ 3,049,200 $ 2,764,850 ##########
######## $ 948,204 ######## ######## ######## ######## ######## ######## $ 943,776 ######## $ 940,170 $ 852,433 ##########
######## ######### ######## ######## ######## ######## ######## ######## $ 2,117,524 ######## $ 2,109,030 $ 1,912,417 ##########

Appendix 4: Profit and Loss Statement

Income Statement

Revenue First Year Second Year Third Year
Tonic 5,000,000 5,500,000 6,050,000
Lemon 5,000,000 5,500,000 6,050,000
Citric 5,000,000 5,500,000 6,050,000
Pineapple 5,000,000 5,500,000 6,050,000
Orange 5,000,000 5,500,000 6,050,000
Vinegar 5,000,000 5,500,000 6,050,000
Total Revenue $ 30,000,000 100% $ 33,000,000 100% $ 36,300,000 100%
Cost of Goods Sold
Tonic 1,490,000 1,639,000 1,802,900
Lemon 1,660,000 1,826,000 2,008,600
Citric 1,020,000 1,122,000 1,234,200
Pineapple 1,980,000 2,178,000 2,395,800
Orange 2,000,000 2,200,000 2,420,000
Vinegar 1,100,000 1,210,000 1,331,000
Total Cost of Goods Sold 9,250,000 31% 10,175,000 31% 11,192,500 31%
Gross Margin 20,750,000 69% 22,825,000 69% 25,107,500 69%
Payroll
Operating Expenses
Advertising 650,000 669,500 689,585
Car and Truck Expenses 12,000 12,360 12,731
Commissions and Fees 600,000 630,000 661,500
Contract Labor (Not included in payroll) 120,000 123,600 127,308
Insurance (other than health) 60,000 61,800 63,654
Legal and Professional Services
Licenses 20,000 21,000 22,050
Office Expense
Rent or Lease — Vehicles, Machinery, Equipment 597,000 614,910 633,357
Rent or Lease — Other Business Property
Repairs and Maintenance 12,000 12,600 13,230
Supplies 8,400,000 8,652,000 8,911,560
Travel, Meals and Entertainment 60,000 61,800 63,654
Utilities 120,000 123,600 127,308
Miscellaneous 36,000 37,080 38,192
Other Expense 1
Other Expense 2
Total Operating Expenses $ 10,687,000 36% $ 11,020,250 33% $ 11,364,130 31%
Income (Before Other Expenses) $ 10,063,000 34% $ 11,804,750 36% $ 13,743,371 38%
Other Expenses
Amortized Start-up Expenses 618,333 618,333 618,333
Depreciation 1,182,119 1,708,571 1,708,571
Interest
Commercial Loan 119,468 105,410 90,033
Commercial Mortgage
Credit Card Debt 6,452 5,065 3,859
Vehicle Loans 40,348 29,800 18,601
Other Bank Debt 38,524 23,837 8,599
Line of Credit 105,295 122,734 122,734
Bad Debt Expense
Total Other Expenses $ 2,110,539 7% $ 2,613,751 8% $ 2,570,731 7%
Net Income Before Income Tax $ 7,952,461 27% $ 9,190,999 28% $ 11,172,640 31%
Income Tax $ 2,571,238 $ 2,942,800 $ 3,537,292
Net Income/Loss $ 5,381,223 18% $ 6,248,199 19% $ 7,635,348 21%

Appendix 5: Balance Sheet for Start of Business

Fixed Assets Amount Depreciation (years) Notes
Real Estate-Land 1,000,000 Not Depreciated
Real Estate-Buildings 1,000,000 20
Leasehold Improvements 10,000 7
Equipment 2,000,000 7
Furniture and Fixtures 1,500,000 5
Vehicles 1,000,000 5
Other 30,000 5
Total Fixed Assets $ 6,540,000
Operating Capital Amount Notes
Pre-Opening Salaries and Wages 500,000
Prepaid Insurance Premiums 5,000
Inventory 5,000,000
Legal and Accounting Fees 100,000
Rent Deposits 500,000
Utility Deposits 250,000
Supplies 100,000
Advertising and Promotions 100,000
Licenses 100,000
Other Initial Start-Up Costs 200,000
Working Capital (Cash On Hand) 750,000
Total Operating Capital $ 7,605,000
Total Required Funds $ 14,145,000
Sources of Funding Percentage Totals Loan Rate Term in Months Monthly Payments Notes
Owner’s Equity 70.70% 10,000,000
Outside Investors 7.07% 1,000,000
Additional Loans or Debt
Commercial Loan 9.86% 1,395,000 9.00% 84 22,444
Commercial Mortgage 0.00% 9.00% 240
Credit Card Debt 0.71% 100,000 7.00% 60 1,980
Vehicle Loans 5.30% 750,000 6.00% 48 17,614
Other Bank Debt 6.36% 900,000 5.00% 36 26,974
Total Sources of Funding 100.00% $ 14,145,000 $ 69,012
Total Funding Needed $ –

Appendix 6: Balance Sheet during Continuity of Business (3 Years)

ASSETS First Year Second Year Third Year
Current Assets
Cash 1,000,000 8,858,834 18,122,183
Accounts Receivable 1,772,500 1,889,100 1,889,100
Inventory 5,000,000 5,000,000 5,000,000
Prepaid Expenses 1,103,333 551,667
Other Initial Costs 133,333 66,667
Total Current Assets $ 9,009,167 $ 16,366,268 $ 25,011,283
Fixed Assets
Real Estate — Land 1,000,000 1,000,000 1,000,000
Real Estate — Buildings 3,080,000 3,080,000 3,080,000
Leasehold Improvements 650,000 650,000 650,000
Equipment 2,000,000 2,000,000 2,000,000
Furniture and Fixtures 2,600,000 2,600,000 2,600,000
Vehicles 3,250,000 3,250,000 3,250,000
Other 30,000 30,000 30,000
Total Fixed Assets $ 12,610,000 $ 12,610,000 $ 12,610,000
(Less Accumulated Depreciation) $ 1,182,119 $ 2,890,690 $ 4,599,262
Total Assets $ 20,437,047 $ 26,085,577 $ 33,022,021
LIABILITIES & EQUITY
Liabilities
Accounts Payable 64,129 72,277
Commercial Loan Balance 1,245,137 1,081,216 901,918
Commercial Mortgage Balance
Credit Card Debt Balance 82,690 64,129 44,226
Vehicle Loans Balance 578,983 397,417 204,653
Other Bank Debt Balance 614,838 315,087 (0)
Line of Credit Balance 1,534,177 1,534,177 1,534,177
Total Liabilities $ 4,055,825 $ 3,456,155 $ 2,757,251
Equity
Common Stock 11,000,000 11,000,000 11,000,000
Retained Earnings 5,381,223 11,629,422 19,264,770
Dividends Dispersed/Owners Draw
Total Equity $ 16,381,223 $ 22,629,422 $ 30,264,770
Total Liabilities and Equity $ 20,437,047 $ 26,085,577 $ 33,022,021
Balance sheet in or out of balance? $ – $ – $ –
Balanced! Balanced! Balanced!
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