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‘Business Plan – Hookah Bar’

Cd r S an g ra m D e y

EXECUTIVE SUMMARY

A business plan is a formal statement of a set of business goals, the


reasons why they are believed attainable and the plan for reaching those
goals. Business plans are decision-making tools and it represents all
aspects of business planning process; declaring vision and strategy
alongside sub-plans to cover marketing, finance, operations, human
resources as well as a legal plan, when required.

Opening a Hookah Bar is a fresh concept which centres around the


community aspect of smoking hookah pipes. The bar will be named as
‘Fag End’ and will be managed by its founders. The product will include
flavoured tobaccos, alcoholic and non-alcoholic drinks and appetizers. The
customers are expected to be those of urban niche customers and young
(22-35 year old) urbanites interested in a community-oriented experience
that is an alternative to bars and ‘thekas’. The aim of ‘Fag End Hookah
Bar’ is to provide a comfortable environment, sometimes relaxing and
sometimes energetic and stimulating, around which those who love
hookah smoking, as well as new converts, can come together.

While the owners will invest substantially in the company, the bulk
of the start-up funding will be provided primarily by outside investors,
with an additional long-term loan against the assets of the bar. The
business is expected to grow significantly in its first three years as it
meets the market need for an alternative to bars and one of its kind in
this region. Growth to a second location will occur in the fourth year,
financed by the cash reserves of the business. Long-term debt will be paid
over the first three years of operation with a grace period for the first six
months. Short-term borrowings will be paid over the first year of
operations.

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‘Business Plan – Hookah Bar’
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THE BACK DROP

1.1 Mission. The mission of ‘Fag End Hookah Bar’


is to provide a comfortable environment, sometimes
relaxing and sometimes energetic and stimulating,
around which those who love hookah smoking, as
well as new converts, can come together. The
environment will draw on elements of mature, cool
and poised ethnic culture as well as the culture of the urban environment.

1.2 Objectives. This can be achieved through:

 Create a comfortable environment through apt ambience.

 Provide high quality tobacco, food, drinks, hookah equipment


combined with personalized and professional service.

 Establish a loyal core following.

 Expand the market of hookah smokers in the Faridabad area.

 To become profitable in its second year through the sale of tobacco,


food and drinks.

 To establish a franchisable model for hookah bars and initiate


fundraising and planning for franchising by its fifth year of operation.

 Energize the customer base to generate their own culture and


events at ‘Fag End’ Hookah Bar

 To maintain a Facebook Fan page of 15,000 individuals by the end


of its third year as a sign of its community.

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THE COMPANY

2.1 ‘Fag End’ Hookah Bar is a new concept for a


hookah lounge which centres around the community
aspect of smoking hookah pipes. The business will
launch its first hookah lounge in Faridabad city within
six months and endeavour to create a scalable model
which can be franchised in additional urban locations.
The business will earn revenues through the sale of
tobacco (multiple flavours), drinks (alcoholic and non alcoholic) and food
(North Indian and Continental requiring light preparation). The customers
are expected to be those of urban niche customers and young (22-35
year old) urbanites interested in a community-oriented experience that is
an alternative to bars and ‘thekas’.

2.2 Company Ownership. ‘Fag End’ Hookah Bar will be owned and
established by the husband and wife team of Sangram Dey and Jeeta
Dey. The business will be established as a registered firm to allow for
additional investors to join. In the second year of operation a general
manager will be hired to take over staff supervision, staff training,
procurement and inventory management. Sayed Batroun will continue to
serve as head cook but will work on a more strategic level in other areas.
Additional staff will include kitchen staff and wait staff.

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‘Business Plan – Hookah Bar’
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START UP

3.1 Start up Expenses. The start-up expenses for


‘Fag End’ Hookah Bar include legal consultation and
permit fees as a retail and food service establishment,
as well as a special permit for the lounge to allow
smoking within. Stationery includes business cards,
letterhead, and business brochures.

3.2 Insurance. Insurance includes initial general and product


liability premiums as well as renter's and key-employee insurance. Rent
covers one month's security and two month's rent for the initial location
to allow for build out of the space before opening. Start-up marketing
covers the marketing campaign before launch, as described in the
marketing plan. The website is a significant expense. It offers basic
information on the business as well as a scalable social networking
component to allow for the organizing of hookah groups and the planning
of events.

3.3 Start up Assets. The cash required will see the business
through until cash flow break even is achieved. Current assets will include
lounge furniture (Rs 4,00,000), tables (Rs 4,00,000), kitchen supplies and
tools (Rs 4,00,000), silverware, plates, glassware, and hookahs (Rs
4,00,000). Long-term assets include basic improvements to the space
(Rs12,00,000 for additional plumbing, electrical work, taking down and
putting up walls where needed, painting, refinishing floors), lighting
fixtures (Rs 4,00,000), sound system (Rs 4,00,000), POS sales system
and wireless devices (Rs 8,00,000), kitchen equipment (Rs 8,00,000 for
stoves, refrigerator, and warming units), office equipment (Rs 2,00,000
for computer, printer, fax, telephones). The detail break down is placed at
Appendix A.

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3.4 Products and Services. ‘Fag End’ Hookah Bar will specialize in
alcoholic, non-alcoholic, organic drinks and healthy appetizers and snacks
of both North Indian and Continental. The food will have a natural smoked
flavour and minimum usage of fat will be the USP. Prices for drinks will
range from Rs 30 for simple teas or small coffees to Rs 200 for certain
juices and mocktails. Alcoholic drinks will be priced as per the quality and
brand keeping at least 30 – 37 % profit margin. Prices for appetizers will
range from Rs 200 to Rs 500 for single servings and Rs 1000 to Rs 2500
for group dishes (serving 4-6 people). Flavoured tobacco for hookah pipes
will be sold as well for Rs 500 for the first round and Rs 400 for
subsequent rounds.

3.5 Menu. The initial menu will include:

 Assortment of organic teas

 Assortment of organic coffees

 Fruit juices and juice blends

 "Mocktails" featuring fruit juices and fresh fruit

 Alcoholic beverages

 Cocktails

 Continental Salads

 Crudite and dips

 Smoked Chicken

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 Smoked Fish

 Barbequed chicken / fish / vegetable

 Tikkas

 Pita or pita chips and hummus/other dips

 Falafel

 Spinach fatayer

 Onion rings

 Dry fruits

 Fried fava beans

 Olives

 Flavoured tobacco (flavours include: Cherry, Strawberry,


Blackberry, Mixed Fruit, Apple, Liquorice, Candy, Jasmine, Banana, Rose,
Grape, Pistachio, Lemon, Cola, Mint, Orange, Peach, Vanilla, Mango)

3.6 Facility. The facility will include a stage area where


performances, talks, and films can be presented. These will be organized
by customer groups who will book the space free of charge for events that
are acceptable to ‘Fag End’ Hookah Bar management.

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MARKET ANALYSIS

4.1 The market for hookah bars in the India has


grown significantly in the past decade. Hookah-
bars.com reports that, as of October 2008, there were
at least 1470 hookah bars in the U.S. and an average
of five new hookah bars were opening every month.
From these numbers, it can be estimated that between
5-7 million current hookah smokers live in the India. Of these hookah
smokers, approximately 30% are of North Indian origin and the remaining
groups are from all parts of the country. In Faridabad, ‘Fag End’ Hookah
Bar will focus on locals and people from other NCR region.

4.2 Market Segmentation. ‘Fag End’ Hookah Bar has determined


the following market segmentation for potential customers:

 North Indian Upper Class: Area residents who value the


connection that hookah bars provide with their culture and traditional
elements. They do not feel alienated in hookah bars, which they
sometimes do in bars where smoking is prohibited. They appreciate being
able to meet other like minded people at hookah bars, both for friendship
and for dating. While this is a small market segment in Faridabad, they
use hookah bars more frequently than other groups.

 College Age Residents: College students who seek an alternative


to bars and parties on their campuses seek out different experiences.
Hookah bars provide such an experience because of their exotic
ambiance, colourful atmosphere, focus on group dynamics, and the
element of danger/risk provided by smoking.

 Young Professionals: 22-35 year-old professionals who are tired


with bar culture sometimes react against it by looking for other activities.

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They seek locations where they can congregate with friends, talk, and
share a new experience. However, they are turned off by hookah bars
with a high percentage of college age customers. The details about
growth of customers over the period of five years as well as CAGR to this
effect is placed at Appendix B.

4.3 Target Market Segment Strategy. By seeking the target


market segments described here, ‘Fag End’ Hookah Bar intends to
establish a base of loyal devotees who will serve to give the bar credibility
and authenticity. These devotees will feel comfortable bringing their own
niche culture to ‘Fag End’ Hookah Bar. These markets exist in Metros and
Faridabad location will serve as a proving ground for the ‘Fag End’ Hookah
Bar model.

4.4 Service Business Analysis. Over 1470 hookah bars are in


existence in India, spread throughout the country with some
concentration in cities. From 2000 to 2004, at least 200-300 new hookah
bars opened for business, according to the web news. Generally, as long
as 80% of sales are derived from tobacco, smoking within hookah
establishments can be permitted by law.

4.5 The hookah bar industry is highly fragmented, with most bars being
independent establishments. A small percentage open a second or third
location. There are currently no national hookah bar franchises. Indirect
competitors to hookah bars are coffee shops, bars that serve liquor, and
cigar stores/tobacconists.

4.6 Typically, hookah tobacco is sold and pipes are provided to


customers in hookah bars. Tobacco is sold in rounds which serves a group
of four to six for about an hour. Food and drinks are sold via waiter or bar
service while customers sit in groups and smoke. While some attend

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hookah bars alone, customers typically attend with groups and sit at
round tables with their group.

4.7 Competition and Buying Patterns. Hookah bar customers in


India judge between establishments based on location (they will not be
willing to travel too far out of their way for a hookah bar) the variety of
flavours served, the atmosphere, and the additional food and drink
options served.

4.8 Specific competitors for ‘Fag End’ Hookah Bar include two Hookah
bars located at Gurgaon and one in Basant Vihar.

4.9 Web Plan. The website for ‘Fag End’ Hookah Bar will offer a
standard "brochure-style" presentation with details on the products,
services, location, and concept of the bar, as well as an extended social
community component, tied in to Facebook. The website will serve casual
customers interested in the bar as well as fans who become involved in
creating cultural events and groups at ‘Fag End’ Hookah Bar through the
social portal, which will include a basic calendar visible to all users and
extended features reserved for members who log-in.

4.10 Website Marketing Strategy. The website for ‘Fag End’


Hookah Bar will be promoted through PR, direct advertising, search
engine optimization, and the growing community of customers.

 PR efforts will include promotion to blog writers for the Faridabad


area and hookah bars and guest posts by the owners to these blogs. PR
will also focus on the notable social media component of the website as it
ties in to developing programming for ‘Fag End’ Hookah Bar.

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 Direct advertising will include Google ads, Facebook ads, and


targeted ads on a few area websites. Rs 25,000 a month will be devoted
to this type of advertising in the first year.

 Search engine optimization will begin during the development of the


website through its initial design and will continue with an outsourced firm
retained to continue SEO work for Rs 25,000 a month.

 The community of customers will generate word-of-mouth and


online referrals by inviting friends to the ‘Fag End’ Hookah Bar website
through Facebook or ‘Fag End’ Hookah Bar's social network component.

4.11 Web Development Requirements. Development of the


website requires an experienced Web development firm with past success
in developing social networking components for businesses. The website
will include the following in its basic, front end:

 About Us - background on the business and its concept and mission

 FAQs about hookah smoking and ‘Fag End’ Hookah Bar

 Menu of food, drinks, and tobacco

 Photo gallery

 Contact page

 Location and Directions page with connection to maps from Google


Maps or MapQuest.

4.12 The social portal of the site will include:

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 Membership sign-up and log-in pages

 Social calendar for ‘Fag End’ Hookah Bar

 Step-by-step instructions for creating an event, discussion group, or


throwing a party at ‘Fag End’ Hookah Bar

 Individual pages for user-created events

 Account page for each user showing events they are signed up for
or have created

 Sharing buttons to make it easy for users to send event information


via Facebook, MySpace, Twitter.

 Automated tie-ins between the site and the Facebook Fan Page to
minimize changes that must be made in two places

4.13 Furthermore, the developer will create a Facebook Fan Page, and a
back end for the site including form to allow management to make
changes to menu offerings and prices without the need to use HTML. The
management will be able to add or remove photos from photo gallery and
to organize them into albums

4.14 Development of the website will occur over a three month period.
The first two months will produce a beta version which will be tested by
management, with revisions given to developers, for one month after
that. It is expected that additional changes will extend over the first few
months of operation and Rs 10,000/month of the marketing budget is
devoted to ongoing maintenance and development in the first year.

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‘Business Plan – Hookah Bar’
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STRATEGY AND IMPLEMENTATION

5.1 The focus for implementation will be on


establishing the quality of the offering, its suitability for
the 22+ target market, and the infrastructure to allow
for community-driven culture. The fostering of the ’Fag
End’ Hookah Bar community will be important to the
growth of the business and its proof as a franchisable
model.

5.2 Competitive Edge. ‘Fag End’ Hookah Bar's competitive edge will
be established through its community organizing ability via its website.
This website will present an interface for users to:

 Connect with each other and ‘Fag End’ Hookah Bar after they have
left the establishment.

 Organize groups to attend ‘Fag End’ Hookah Bar together.

 Plan events to propose for the ‘Fag End’ Hookah Bar calendar.

 Send out invites for these events.

5.3 The party-like atmosphere at other hookah bars does not allow for
easy conversation and for performances and events of the type expected
at ‘Fag End’ Hookah Bar. To that end, the following tactics will be
employed:

 Seeking mention in blogs for the local area.

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 Pitching the story of its concept and opening to Middle Eastern


cultural and language publications specifically, and area newspapers and
magazines in general.

 Advertising with posters and flyers in the Faridabad area.

5.4 The bar's grand opening will be marked by an event featuring live
music, free food and drink offers, and door prizes. After the launch,
promotional incentives for customers will be advertised in newspaper
advertisements, on the website, and in the store for:

 Group discounts

 Free prizes for winners of business card drawing (to encourage


target market of young professionals)

 Incentives to organize the first events via the website (such as free
rounds of tobacco for the organizers at a later date)

5.5 These expenses are included in the Profit and Loss statement for
‘Fag End’ Hookah Bar as marketing expense.

5.6 Sales Strategy. ‘Fag End’ Hookah Bar will sell its products
through attentive wait staff and bar counter staff. They will be
compensated through base hourly wages and tips and will work to provide
the best customer service possible. Wait staff will use wireless tablets to
place orders which are sent over the bar's wireless network to kitchen
staff and bar staff to prepare dishes and drinks.

5.7 Sales Forecast. Sales will be predominantly through tobacco


revenues, which also has a relatively low cost of sales. Secondary
revenue streams are food and drinks. Sharp growth is expected over the

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first three years of operation as the community aspect of ‘Fag End’


Hookah Bar is developed and customer-directed programming begins to
take place.

5.8 It is expected that a customer will return to ‘Fag End’ Hookah Bar
on average 15 times a year, taking part in 20 rounds of tobacco in that
time. Therefore, this projection represents 1,000 customer groups in the
first year, 2,500 customer groups in the second year and 3,500 customer
groups in the third year. Sales forecast is placed at Appendix C.

5.9 Campaign. The Rs 5,00,000 in start-up marketing will be


spent on the local ad campaign (design and production of posters and
flyers, as well as purchasing ad space), PR campaign (creation and
mailing of press kit), and the grand opening event (live music, door
prizes, decorations, free food and drink offers). After the launch, the
business will hold a series of promotions - first the business card drawing
and then event incentives - to initiate programming at ‘Fag End’ Hookah
Bar.

5.10 Personnel Plan. Staff will include one Finance Manager, one
Floor manager, four bartenders, six wait staff and four kitchen staff
initially. This will grow to 10 bartenders, 15 wait staff and 7 kitchen staff.
Wages for bartenders and wait staff are lower as they are significantly
augmented by tips. These personnel assumptions are based on the bar
being open 80 hours per week. Personal plan and proposed pay roll is
placed at Appendix D.

5.11 Financial Plan. The business is expected to grow significantly in


its first three years as it meets the market need for an alternative to local
youth-oriented hookah bars. Growth to a second location will occur in the
fourth year, financed by the cash reserves of the business.

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5.12 Start-up Funding. While the owners will invest


substantially in the company, the bulk of the start-up funding will be
provided primarily by outside investors, with an additional long-term loan
against the assets of the bar. Investors will be provided with 40% of
shares for their investment, as the current partners are contributing
considerable sweat and financial equity of their own. Detailed break down
on start up funding is placed at Appendix E.

5.13 Important Assumptions. We assume that the growth in hookah


bar popularity will continue and that the country is ready for a national
chain. We assume that anti-smoking lobbyists will not damage the
reputation and image of hookah bars.

5.14 Projected Profit and Loss. Key expenses will include the cost of
sales attributed to supplies and raw materials, payroll for the growing
staff, marketing to promote the bar in the community, and the bar's rent
and depreciation. The bar will show a profit in the first year which will
continue to grow. This is expected due to the high gross margins of
selling tobacco through hookahs and the type of food and drinks sold. Pro
Forma Profit and Loss statement is placed at Appendix F.

5.15 Projected Cash Flow. The cash flow table and chart shown at
Appendix G that the business becoming cash flow positive within six
months of operation. Cash will be retained in the business and invested in
short-term holdings in preparation for expansion of the franchise after the
third year of operation.

5.16 Long-term debt will be paid over the first three years of operation
with a grace period for the first six months. Short-term borrowings will be
paid over the first year of operations.

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5.17 Some current assets must be replenished each year, and long-term
assets must be replaced beginning in the second year as some equipment
ages.

5.18 Projected Balance Sheet. The net worth of ‘Fag End’ Hookah Bar
will grow significantly due to relatively low liabilities and high cash
reserves as the business prepares for future self-financed expansion. Pro
Forma Balance sheet is placed at Appendix H.

5.19 Valuation. 40% of equity will be awarded to investors for their


cash contribution, 22% to founders for their cash contribution, and the
remaining 38% to owners for their sweat equity.

5.20 Assuming valuations at either a multiple of earnings (10 is


reasonable for this industry), or a multiple of sales (2 is reasonable for
this industry), the valuation at the end of year 3 of the entire company is
around Rs 3.385 million (an average of the two methods of valuation).
This yields a significant, 121% internal rate of return for investors. An exit
event will be possible when the company raises money for franchising or
sells to an existing franchisor at the point of expansion. The Investment
Analysis that includes calculation of Net Present Value and Internal Rate
of Return is placed at Appendix J.

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Start up Requirements
Appendix A
(Refer to para 3.3)

Start-up Expenses

Legal Help and Permits Rs 2,00,000

Stationery etc. Rs 80,000

Insurance Rs 80,000

Rent Rs 2,40,000

Start-up Marketing Rs 6,00,000

Website Rs 10,00,000

Total Start-up Expenses Rs 22,00,000

Start-up Assets

Cash Required Rs 1,60,000

Other Current Assets Rs 1,60,000

Long-term Assets Rs 38,00,000

Total Assets Rs 41,20,000

Total Requirements Rs 63,20,000

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Market Analysis
Appendix B
(Refer to para 4.2)

Particulars Year 1 Year 2 Year 3 Year 4 Year 5

Potential Customers Growth CAGR

North Indian Upper Class 3% 500 515 530 546 562 2.97%

College Age Residents 3% 15,000 15,450 15,914 16,391 16,883 3.00%

Young Professionals 3% 30,000 30,900 31,827 32,782 33,765 3.00%

Total 3% 45,500 46,865 48,271 49,719 51,210 3.00%

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Sales Forecast

Appendix C

(Refer to para 5.8)

Particulars Year 1 Year 2 Year 3


Unit Sales
Tobacco 20,000 50,000 70,000
Drinks 25,000 60,000 80,000
Food 15,000 30,000 50,000
Total Unit Sales 60,000 140,000 200,000
Unit Prices Year 1 Year 2 Year 3
Tobacco Rs 500 Rs 500 Rs 500
Drinks Rs 200 Rs 200 Rs 200
Food Rs 800 Rs 800 Rs 800
Sales
Tobacco Rs 100,00,000 Rs 250,00,000 Rs 350,00,000
Drinks Rs 50,00,000 Rs 120,00,000 Rs 160,00,000
Food Rs 120,00,000 Rs 240,00,000 Rs 400,00,000
Total Sales Rs 270,00,000 Rs 610,00,000 Rs 910,00,000
Direct Unit Costs Year 1 Year 2 Year 3
Tobacco Rs 200 Rs 200 Rs 200
Drinks Rs 80 Rs 80 Rs 80
Food Rs 300 Rs 300 Rs 300
Direct Cost of Sales
Tobacco Rs 40,00,000 Rs 100,00,000 Rs 140,00,000
Drinks Rs 20,00,000 Rs 48,00,000 Rs 64,00,000
Food Rs 45,00,000 Rs 90,00,000 Rs 150,00,000
Subtotal Direct Cost of Sales Rs 105,00,000 Rs 238,00,000 Rs 354,00,000

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Pay Roll

Appendix D

(Refer to para 5.10)

Staff Year 1 Year 2 Year 3

General Manager - Rs 10,00,000 Rs 10,00,000

Floor Manager Rs 7,00,000 Rs 7,00,000 Rs 7,00,000

Bar Staff Rs 20,00,000 Rs 40,00,000 Rs 60,00,000

Wait Staff Rs 20,00,000 Rs 40,00,000 Rs 60,00,000

Kitchen Staff Rs 15,00,000 Rs 30,00,000 Rs 45,00,000

Finance Manager Rs 7,00,000 Rs 7,00,000 Rs 7,00,000

Total People 16 35 42

Total Payroll Rs 62,00,000 Rs 134,00,000 Rs 189,00,000

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Start up Funding

Appendix E

(Refer to para 5.12)

Start-up Expenses to Fund Rs 22,00,000

Start-up Assets to Fund Rs 41,20,000

Total Funding Required Rs 63,20,000

Assets

Non-cash Assets from Start-up Rs 39,60,000

Cash Requirements from Start-up Rs 1,60,000

Additional Cash Raised Rs 0

Cash Balance on Starting Date Rs 1,60,000

Total Assets Rs 41,20,000

Liabilities

Current Borrowing Rs 3,20,000

Long-term Liabilities Rs 20,00,000

Accounts Payable (Outstanding Bills) Rs 0

Other Current Liabilities (interest-free) Rs 0

Total Liabilities Rs 23,20,000

Capital (Planned Investment)

ICICI Bank Rs 14,00,000

HDFC Bank Rs 14,00,000

Other Investors Rs 50,80,000

Additional Investment Requirement Rs 0

Total Planned Investment Rs 78,80,000

Loss at Start-up (Start-up Expenses) (Rs 22,00,000)

Total Capital Rs 46,80,000

Total Capital and Liabilities Rs 41,20,000

Total Funding Rs 63,20,000

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Pro Forma Profit and Loss

Appendix F

(Refer to para 5.14)

Particulars Year 1 Year 2 Year 3

Sales Rs 270,00,000 Rs 610,00,000 Rs 910,00,000

Direct Cost of Sales Rs 105,00,000 Rs 238,00,000 Rs 354,00,000

Other Costs of Sales Rs 6,36,000 Rs 19,36,000 Rs 20,52,000

Total Cost of Sales Rs 111,36,000 Rs 257,36,000 Rs 374,52,000

Gross Margin Rs 158,64,000 Rs 352,64,000 Rs 535,48,000

Gross Margin % 69.67% 68.98% 69.81%

Expenses

Payroll Rs 62,00,000 Rs 134,00,000 Rs 189,00,000

Marketing/Promotion Rs 17,60,000 Rs 22,00,000 Rs 30,00,000

Depreciation Rs 6,72,000 Rs 8,00,000 Rs 9,60,000

Rent Rs 2,40,000 Rs 2,75,000 Rs 3,00,000

Utilities Rs 1,44,000 Rs 1,60,000 Rs 1,80,000

Insurance Rs 80,000 Rs 1,00,000 Rs 1,20,000

Payroll Taxes Rs 3,50,000 Rs 5,20,000 Rs 6,10,000

Permit Renewals Rs 1,00,000 Rs 1,25,000 Rs 1,50,000

Supplies Rs 2,50,000 Rs 3,10,000 Rs 4,20,000

Total Operating Expenses Rs 97,96,000 Rs 178,90,000 Rs 246,40,000

Profit Before Interest and Taxes Rs 15,60,080 Rs 138,34,000 Rs 192,24,000

EBITDA Rs 22,32,080 Rs 146,34,000 Rs 201,84,000

Interest Expense Rs 2,13,640 Rs 1,28,000 Rs 56,000

Taxes Incurred Rs 4,03,920 Rs 41,11,800 Rs 57,50,400

Net Profit Rs 9,42,480 Rs 95,94,200 Rs 134,17,600

Net Profit/Sales 4.72% 19.82% 19.62%

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Pro Forma Cash Flow

Appendix G

(Refer to para 5.15)

Particulars Year 1 Year 2 Year 3


Cash Received
Cash from Operations
Cash Sales Rs 270,00,000 Rs 610,00,000 Rs 910,00,000
Subtotal Cash from Operations Rs 270,00,000 Rs 610,00,000 Rs 910,00,000
Additional Cash Received
Sales Tax, VAT, HST/GST Received Rs 17,95,400 Rs 43,56,000 Rs 61,56,000
New Current Borrowing Rs 0 Rs 0 Rs 0
New Other Liabilities (interest-free) Rs 0 Rs 0 Rs 0
New Long-term Liabilities Rs 0 Rs 0 Rs 0
Sales of Other Current Assets Rs 0 Rs 0 Rs 0
Sales of Long-term Assets Rs 0 Rs 0 Rs 0
New Investment Received Rs 0 Rs 0 Rs 0
Subtotal Cash Received Rs 287,95,400 Rs 653,56,000 Rs 971,56,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending (Pay Roll) Rs 62,00,000 Rs 134,00,000 Rs 189,00,000
Bill Payments Rs 91,30,360 Rs 243,70,040 Rs 339,02,680
Subtotal Spent on Operations Rs 153,30,360 Rs 377,70,040 Rs 528,02,680
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out Rs 17,95,400 Rs 43,56,000 Rs 61,56,000
Principal Repayment of Current Rs 3,20,000 Rs 0 Rs 0
Borrowing
Other Liabilities Principal Repayment Rs 0 Rs 0 Rs 0
Long-term Liabilities Principal Rs 3,60,000 Rs 7,20,000 Rs 7,20,000
Repayment
Purchase Other Current Assets Rs 96,000 Rs 1,20,000 Rs 1,40,000
Purchase Long-term Assets Rs 0 Rs 4,00,000 Rs 4,00,000
Dividends Rs 0 Rs 0 Rs 0
Subtotal Cash Spent Rs 179,01,760 Rs 433,66,040 Rs 602,18,680
Net Cash Flow Rs 108,93,640 Rs 219,89,960 Rs 369,37,320
Cash Balance Rs 110,53,640 Rs 330,43,600 Rs 699,80,920

23
National Institute of Financial Management
‘Business Plan – Hookah Bar’
Cd r S an g ra m D e y

Pro Forma Balance Sheet

Appendix H

(Refer to para 5.18)

Particulars Year 1 Year 2 Year 3

Assets

Current Assets

Cash Rs 110,53,640 Rs 330,43,600 Rs 699,80,920


Other Current Assets Rs 16,96,000 Rs 18,16,000 Rs 19,56,000

Total Current Assets Rs 127,49,640 Rs 348,59,600 Rs 719,36,920

Long-term Assets

Long-term Assets Rs 38,00,000 Rs 42,00,000 Rs 46,00,000

Accumulated Depreciation Rs 6,72,000 Rs 14,72,000 Rs 24,32,000

Total Long-term Assets Rs 31,28,000 Rs 27,28,000 Rs 21,68,000

Total Assets Rs 158,77,640 Rs 375,87,600 Rs 741,04,920

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities

Accounts Payable Rs 18,60,080 Rs 20,15,800 Rs 28,55,520

Current Borrowing Rs 0 Rs 0 Rs 0

Other Current Liabilities Rs 0 Rs 0 Rs 0

Subtotal Current Liabilities Rs 18,60,080 Rs 20,15,800 Rs 28,55,520

Long-term Liabilities Rs 16,40,000 Rs 9,20,000 Rs 2,00,000

Total Liabilities Rs 35,00,080 Rs 29,35,800 Rs 30,55,520

Paid-in Capital Rs 78,80,000 Rs 78,80,000 Rs 78,80,000

Retained Earnings (Rs 32,00,000) (Rs 22,57,520) Rs 73,36,680

Earnings Rs 9,42,480 Rs 95,94,200 Rs 134,17,600

Total Capital Rs 56,22,480 Rs 152,16,680 Rs 286,34,280

Total Liabilities and Capital Rs 11,22,560 Rs 181,52,520 Rs 316,89,840

Net Worth Rs 56,22,480 Rs 152,16,680 Rs 286,34,280

24
National Institute of Financial Management
‘Business Plan – Hookah Bar’
Cd r S an g ra m D e y

Investment Analysis
Appendix J
(Refer to para 5.20)

Particulars Start Year 1 Year 2 Year 3


Initial Investment
Investment Rs 78,80,000 Rs 0 Rs 0 Rs 0
Dividends Rs 0 Rs 0 Rs 0 Rs 0
Ending Valuation Rs 0 Rs 0 Rs 0 Rs 848,16,000
Combination as Income Stream (Rs 78,80,000) Rs 0 Rs 0 Rs 848,16,000
Percent Equity Acquired 62%
Net Present Value (NPV) Rs 507,66,840
Internal Rate of Return (IRR) 121%
Assumptions
Discount Rate 10.00%
Valuation Earnings Multiple 10 10 10
Valuation Sales Multiple 2 2 2
Investment (calculated) Rs 78,80,000 Rs 0 Rs 0 Rs 0
Dividends Rs 0 Rs 0 Rs 0

25
National Institute of Financial Management