Financial projections
I have creating a detailed 5-year sales forecast for a breakfast, brunch, lunch and beverage
business with a starting weekly sales target of £20,000, a 70% gross profit margin (This is what I have achieved always )
60% operating expenses (This is something regularly review and adjust our financial projections as the business progresses) and an average annual growth rate of 25%, aiming for a 15% net profit after taxes each year,
involves multiple steps and assumptions the 60% operating expenses is something I can control especially kitchen side of thing.
Breakdown year by year is below:
Year 1:
Sales Forecast:
Weekly Sales: £20,000
Annual Sales: £20,000 x 52 = £1,040,000
Gross Profit:
Gross Profit Margin: 70%
Gross Profit: £1,040,000 x 70% = £728,000
Operating Expenses:
Operating Expenses as a percentage of sales: 60%
Operating Expenses: £1,040,000 x 60% = £624,000
Net Profit Before Taxes:
Net Profit Before Taxes: Gross Profit - Operating Expenses = £728,000 - £624,000 = £104,000
Taxes (Assuming 30% Tax Rate):
Taxes: £104,000 x 30% = £31,200
Net Profit After Taxes:
Net Profit After Taxes: Net Profit Before Taxes - Taxes = £104,000 - £31,200 = £72,800
Year 2:
Sales Growth (25%):
Annual Sales: Year 1 Sales x (1 + Growth Rate) = £1,040,000 x 1.25 = £1,300,000
Gross Profit:
Gross Profit: £1,300,000 x 70% = £910,000
Operating Expenses:
Operating Expenses: £1,300,000 x 60% = £780,000
Net Profit Before Taxes:
Net Profit Before Taxes: Gross Profit - Operating Expenses = £910,000 - £780,000 = £130,000
Taxes (Assuming 30% Tax Rate):
Taxes: £130,000 x 30% = £39,000
Net Profit After Taxes:
Net Profit After Taxes: Net Profit Before Taxes - Taxes = £130,000 - £39,000 = £91,000
Repeated the same calculations for Years 3, 4, and 5, increasing sales by 25% each year and maintaining the same profit margins and expense percentages.
Year 3:
Sales: £1,625,000
Gross Profit: £1,137,500
Operating Expenses: £975,000
Net Profit After Taxes: £162,500
Year 4:
Sales: £2,031,250
Gross Profit: £1,421,875
Operating Expenses: £1,218,750
Net Profit After Taxes: £203,125
Year 5:
Sales: £2,539,063
Gross Profit: £1,777,344
Operating Expenses: £1,523,438
Net Profit After Taxes: £253,906
So, over the 5-year period, Incantio kitchen business is expected to generate increasing sales and profits, reaching an estimated net profit before taxes of £975,010 in Year 5.
Total of Net Profit After Taxes: for five year should exceed £783,331
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