Egger's Coffee Roasters

Business Plan
Invest $800,000 cash savings for capital equipment and "working capital. " (In an emergenc
Buy Capital Equpment (Roasting Machines) for $540,000 during organizing period for busines
Buy Green (unroasted) Coffee Beans for cash on delivery - $2/pound after receiving bulk ord
Additional variable cost per pound roasted for fuel, labor, packaging, transportation, etc to de
Average time from order to delivery is 1 month
Rent, Utilities, Insurance, Bookkeeping, etc (fixed costs) - $10,000/month - $120,000 per yea
Sell roasted, packaged, and delivered beans to retailer for $6/pound
Average time from delivery until when retailer pays is 2 months (Typical "Net 60" Payment Te
Sounds like a no-lose proposition!

Scenario 1- Assume steady orders & sales of $25,000 pounds per month

Profit & Loss (P&L) Statement [Simplified]

Unit Sales (in pounds)
Sales Revenue
General & Administrative (G&A) Expense
Variable costs of good sold
Depreciation (3 years straight line on $540,000 roasting equipment)
Net Profit (calculated monthly)
Aggregate Profit
Note that the business is profitable from the first month
First year's profits are $600,000 - an outstanding return on my $800,000 investment!

Statement of Cash Flows [Simplified]

Unit Sales (in pounds)
Cash Received
Capital Purchases
General & Administrative (Fixed) Expense

Variable Expense for current month's production

Net Cash flow for Month
Aggregate Net Cash Flow (me + the Business together)
Cash on Hand

Tracking my cash flow gives a very different picture The business almost runs out of cash in March, ending the month with only $5,000 of my orig
That was close!
It takes more than 15 months to get back to the original $800,000 invested.

All assumptions the same as Scenario 1 Above, but assume sales of:
25,000 pounds per month for months 1-3
50,000 pounds per month for months 4-6
100,000 pounds per month for months 7-9
200,000 pounds per month for months 10-12
and so on
Profit & Loss (P&L) Statement [Simplified]
Unit Sales (in pounds)
Sales Revenue -- matched to when order confirmed
General & Administrative Expense
Variable Costs [approx. Cost of Goods Sold]
Depreciation 3 years flat line on $540,000 roasting equipment
Net Profit (calculated monthly)
Aggregate Profit
Under this scenario, total orders equal $6.75 million
and total profits equal $1.95 million. What a great business, right?
Statement of Cash Flows [Simplified]
Unit Sales (in pounds)
Cash Received
Capital Purchases

General & Administrative (Fixed) Expense

Variable Expense for Production
Net Cash flow for Month
Aggregate Net Cash Flow (me + the Business together)
Cash on Hand

g capital. " (In an emergency, I can borrow up to another $800,000 from friends and family)
organizing period for business
ound after receiving bulk order for roast beans ("variable cost" as depends on number of pounds roas
ing, transportation, etc to deliver beans to retailer is $2/pound

00/month - $120,000 per year"Fixed Cost" (Called a "fixed cost" because it doesnt depend on amount

(Typical "Net 60" Payment Terms)

Scenario 1- Assume steady unit sales of 25,000 pound

first order placed in January, first

Scenario 1 - Profit and Loss Statement - Calculated Monthly

Organizing Period

January

February

March

25,000
$150,000

25,000
$150,000

25,000
$150,000

0
0
0

($10,000)
($100,000)
($15,000)

($10,000)
($100,000)
($15,000)

($10,000)
($100,000)
($15,000)

0
0

$25,000
$25,000

$25,000
$50,000

$25,000
$75,000

800,000 investment!

Scenario 1 - Cash Flow Statement - Calculated Monthly

Organizing Period

January

February

March

25,000

25,000

25,000

($10,000)

($10,000)

($10,000)

$800,000
($540,000)

($100,000)

($100,000)

$260,000 ($110,000.00)
($540,000) ($650,000.00)

($110,000.00)
($760,000.00)

$260,000

($100,000)

($110,000.00)
($870,000.00)
[March - Point of Maximum Total
$40,000.00
($70,000.00)
Put it on my credit card!

$150,000.00

h with only $5,000 of my original $800,000 still in the bank.

0 invested.

Scenario 2 - Assume Rapid Increases in Sales

Scenario 2 - Profit and Loss Statement - Calculated Monthly

Organizing Period

January

February

March

25,000
$150,000

25,000
$150,000

25,000
$150,000

0
0
0

($10,000)
($100,000)
($15,000)

($10,000)
($100,000)
($15,000)

($10,000)
($100,000)
($15,000)

0
0

$25,000
$25,000

$25,000
$50,000

$25,000
$75,000

Scenario 2 - Cash Flow Statement - Calculated Monthly

Organizing Period

January

February
25,000

$800,000
($540,000)

March
25,000

25,000

($10,000)
($100,000)

($10,000)
($100,000)

($10,000)
($100,000)

$260,000 ($110,000.00)
($540,000)

($110,000.00)

($110,000.00)

$260,000

$150,000.00

$40,000.00

($70,000.00)
Start to Borrow from emergency

nd family)

mber of pounds roasted)

depend on amount of beans roasted)

of 25,000 pounds per month

aced in January, first product delivered in February, first cash payment received in April

alculated Monthly
April

May

June

July

25,000
$150,000

25,000
$150,000

25,000
$150,000

25,000
$150,000

($10,000)
($100,000)
($15,000)

($10,000)
($100,000)
($15,000)

($10,000)
($100,000)
($15,000)

($10,000)
($100,000)
($15,000)

$25,000
$100,000

$25,000
$125,000

$25,000
$150,000

$25,000
$175,000

ted Monthly
April

May

June

July

25,000
$150,000

25,000
$150,000

25,000
$150,000

25,000
$150,000

($10,000)

($10,000)

($10,000)

($10,000)

($100,000)
($100,000)
($100,000)
[April - Point of Cash Flow Breakeven]
$40,000.00
$40,000.00
$40,000.00
($830,000.00) ($790,000.00)
($750,000.00)
nt of Maximum Total Cash Drawdown]
($30,000.00)
$10,000.00
$50,000.00
credit card!

($100,000)
$40,000.00
($710,000.00)
$90,000.00

n Sales

alculated Monthly
April

May

June

July

50,000
$300,000

50,000
$300,000

50,000
$300,000

100,000
$600,000

($10,000)
($200,000)
($15,000)

($10,000)
($200,000)
($15,000)

($10,000)
($200,000)
($15,000)

($10,000)
($400,000)
($15,000)

$75,000
$150,000

$75,000
$225,000

$75,000
$300,000

$175,000
$475,000

ted Monthly
April

May
50,000
$150,000

June
50,000
$150,000

July
50,000
$150,000

100,000
$300,000

($10,000)
($200,000)

($10,000)
($200,000)

($10,000)
($200,000)

($10,000)
($400,000)

($60,000.00)

($60,000.00)

($60,000.00)

($110,000.00)

($250,000.00)

($360,000.00)

($130,000.00) ($190,000.00)
row from emergency sources - friends & family

received in April

August

September
October
25,000
25,000
$150,000
$150,000

25,000
$150,000

($10,000)
($100,000)
($15,000)

($10,000)
($100,000)
($15,000)

($10,000)
($100,000)
($15,000)

$25,000
$200,000

$25,000
$225,000

$25,000
$250,000

August

September
October
25,000
25,000
$150,000
$150,000

25,000
$150,000

($10,000)

($10,000)

($10,000)

($100,000)

($100,000)

($100,000)

$40,000.00
($670,000.00)

$40,000.00
($630,000.00)

$40,000.00
($590,000.00)

$130,000.00

$170,000.00

$210,000.00

August

September

October

100,000
$600,000

100,000
$600,000

200,000
$1,200,000

($10,000)
($400,000)
($15,000)

($10,000)
($400,000)
($15,000)

($10,000)
($800,000)
($15,000)

$175,000
$650,000

$175,000
$825,000

$375,000
$1,200,000

August

September
October
100,000
100,000
$300,000
$300,000

200,000
$600,000

($10,000)
($400,000)

($10,000)
($400,000)

($10,000)
($800,000)

($110,000.00)

($110,000.00)

($210,000.00)

($470,000.00)
start to panic

($580,000.00)

($790,000.00)
exhaust reserves

November

December
25,000
$150,000

25,000
$150,000

($10,000)
($100,000)
($15,000)

($10,000)
($100,000)
($15,000)

$25,000
$275,000

$25,000
$300,000

November

December
25,000
$150,000

25,000
$150,000

($10,000)

($10,000)

($100,000)

($100,000)

$40,000.00
($550,000.00)

$40,000.00
($510,000.00)

$250,000.00

$290,000.00

November

December
200,000
$1,200,000

200,000
$1,200,000

($10,000)
($800,000)
($15,000)

($10,000)
($800,000)
($15,000)

$375,000
$1,575,000

$375,000
$1,950,000

November

December
200,000
$600,000

$200,000
$600,000

($10,000)
($800,000)

($10,000)
($800,000)

($210,000.00)

($210,000.00)

($1,000,000.00)
($1,210,000.00)
unable to pay for beans delivered - go bankrupt!

Year 2
January

February

March

$150,000

$150,000

$150,000

($10,000)

($10,000)

($10,000)

($100,000)

($100,000)

($100,000)

$40,000.00
($470,000.00)

$40,000.00
($430,000.00)

$40,000.00
($390,000.00)

$330,000.00

$370,000.00

$410,000.00

Year 2
January

February
March
$400,000
$400,000
$1,200,000
$1,200,000

$400,000
$1,200,000

($10,000)
($1,600,000)

($10,000)
($1,600,000)

($10,000)
($1,600,000)

($410,000.00)

($410,000.00)

($410,000.00)

($1,620,000.00) ($2,030,000.00)
Does it get better, ever?

($2,440,000.00)

April

May

June

$150,000

$150,000

$150,000

($10,000)

($10,000)

($10,000)

($100,000)

($100,000)

($100,000)

$40,000.00
($350,000.00)

$40,000.00
($310,000.00)

$40,000.00
($270,000.00)

$450,000.00

$490,000.00

$530,000.00

April

May
800,000
$2,400,000

June
800,000
$2,400,000

800,000
$2,400,000

($10,000)
($3,200,000)

($10,000)
($3,200,000)

($10,000)
($3,200,000)

($810,000.00)

($810,000.00)

($810,000.00)

($3,250,000.00)

($4,060,000.00)

($4,870,000.00)
noonly if...

July

August

September

October

$150,000

$150,000

$150,000

$150,000

($10,000)

($10,000)

($10,000)

($10,000)

($100,000)

($100,000)

($100,000)

($100,000)

$40,000.00
($230,000.00)

$40,000.00
($190,000.00)

$40,000.00
($150,000.00)

$40,000.00
($110,000.00)

$570,000.00

$610,000.00

$650,000.00

$690,000.00

July

August
800,000
$4,800,000

September
October
800,000
800,000
800,000
$4,800,000
$4,800,000
$4,800,000

($10,000)
($3,200,000)
$1,590,000.00

($3,280,000.00)
sales level off

($10,000)
($3,200,000)
$1,590,000.00

($1,690,000.00)

($10,000)
($3,200,000)
$1,590,000.00

($100,000.00)

($10,000)
($3,200,000)
$1,590,000.00

$1,490,000.00

November

December

$150,000

$150,000

($10,000)

($10,000)

($100,000)

($100,000)

$40,000.00
($70,000.00)

$40,000.00
($30,000.00)

$730,000.00

November
800,000
$4,800,000

$770,000.00
[Return of original Capital invested - January Year 3]

December
800,000
$4,800,000

($10,000)
($3,200,000)

($10,000)
($3,200,000)

$1,590,000.00

$1,590,000.00

$3,080,000.00

$4,670,000.00

ary Year 3]