FARM WINERY PROJECT
MODEL BUSINESS PLAN
December 2004
Shepstone Management Company
100 Fourth Street Honesdale, PA 18431
570-251-9550 FAX 251-9551
www.shepstone.net
Table of Contents
Page
Table of Contents
i
1.0
Executive Summary
1-1
2.0
Business Description, Mission Statement and Business Goals
2-1
2.1
Description of Business
2-1
2.2
Business Mission Statement
2-2
2.3
Business Goals
2-2
3.0
Marketing Plan
3-1
3.1
Regional Wine Market and Competition
3-1
3.2
Business Marketing Plan
3-3
4.0
Management Plan
4-1
5.0
Financial Plan
5-1
5.1
Sales Forecast, Income and Expenses
5-1
5.2
Capital Requirements and Financing Proposal
5-1
5.3
Cash Flow Analysis
5-1
6.0
Appendices
6-1
A.
Pro Forma Income and Expense Statements
A-1
B.
Pro Forma Balance Sheets
B-1
C.
Cash Flow Projections
C-1
D.
Resumes of Management Personnel
D-1
E.
Equipment Listing
E-1
Shepstone Management Company
Table of Contents
i
1.0 Executive Summary
Brant Farms Winery, LLC, proposes to
establish a new estate winery in the
extensive juice grape region surrounding
Brant, New York. This will be a premium
winery that builds upon the success of
the several nearby wineries constituting
the Chautauqua and Niagara Wine Trails.
Annual production will begin at 5,550
cases and increase to 9,250 cases over
a period of 5-6 years. All grapes will be
purchased from local and regional
vineyards.
The winery will produce the following high
quality varietals: Chardonnay, Cabernet
Franc, Cabernet Savignon and Seyval
Blanc. It will also produce three relatively
high quality wines using native varieties;
Pink Catawba, Concord and Delaware.
Most of the wine will be sold out of the
tasting room, but high-end restaurants
and wine shops may also be used to
reach customers as volume grows.
Brant Farms Winery will be located in the
Town of Brant, Erie County, New York. It
will enjoy relatively easy access from I-90
via exits 57 and 58. This route is the
major link between the cities of Buffalo
and Erie. It carries 28,040 vehicles per
day, a significant portion of which
represent potential customers for Brant
Farms Winery.
There is a total market of over 1,225,000
persons within 60 minutes of Brant,
creating a major opportunity for a tourism
attraction with destination appeal. The
market within 30 minutes is also
considerable. It has a population of over
208,000 persons, of which over 80,000
are adults of 45 or more years of age.
This is a prime market for high quality
wines of the type Brant Farms Winery
proposes to supply.
There are, too, large gains in certain
categories around which a new winery
venture can be developed. These include
households earning over $50,000 per
year with the additional disposal income
to spend on travel, entertainment and
high-quality dining experiences. Those
households are increasing at a rate of
about 3% per year across the market as a
result of income gains as the population
ages. There is steady growth of about
1% per year in population aged 45+ years
who are likely to be interested in high
quality wines, particularly dry wines. This,
combined with income gains, creates a
growing market.
There are some 16 wineries located to
the north and south of Brant along the
Chautauqua and Niagara wine trails.
There are an additional 50 wineries
located on the Niagara Peninsula in
adjoining Ontario None of the local
wineries offer the same combination of
wines as proposed by Brant Farms
Winery, with its balance of native and high
quality varietals and emphasis on dry
wines.
Brant Farms Winery will emphasize a
strategy that is focused on a relatively
small number of higher-end products
products. This will be accomplished
using a tasting room and a wine club.
Also, high end restaurants and wine
shops will be used to market the ultra-
premium and super-premium products.
Brant Farms Winery will be owned and
operated by James and Mary Smith, the
owners of the vineyard on which it will be
located. They will conduct the business
through a limited liability corporation
known as Brant Farms Winery, LLC.
James will serve as President and
Operations Manager. He has worked as
a winemaker prior to returning to the
vineyard operation that he and Mary now
own. James and Mary both attended
Cornell and graduated with degrees in
Ag Economics.
Average prices of $8, $15 and $22 per
750 ml bottle are projected, respectively,
for premium, super-premium and
ultra-premium wines. It is anticipated that 60%
of wines will be sold as premium wines
with 30% and 10%, respectively, for
super-premium and ultra-premium wine
selections. This activity is forecasted to
generate $1,095,000 of sales in the fifth
year, at which point it will be profitable.
It is proposed to borrow the sum of
$1,200,000 over a 15 year term to finance
the establishment of this business over a
two-year period (the winery in the first year
and tasting room in the second), plus an
equal
amount
of working
capital,
substantial portions of which will be
supplied by the owners on a loan basis.
NOTE: This model plan is based on
similar models developed by Cornell
University (see Writing a Business Plan:
An Example for a Small Premium Winery,
E.B. 2002-07, by Mark E. Pisoni and
Gerald B. White) and by the Ohio Wine
Producers Association (The Dollar and
Sense of Starting a Small Winery, by
Chris Stamp). Several elements of this
model draw excerpts directly from these
reports and they provide much additional
guidance that will be helpful to any party
developing their own winery plan. This
model plan provides a recommended
approach for organizing such a business,
relying upon a number of assumptions
that are fictional in nature. It is, therefore,
not intended and should not be used as a
substitute for the extensive due diligence
and financial analysis connected with a
new business, activities that must be
tailored to the needs of each individual
enterprise.
Shepstone Management Company
Executive Summary
2.0 Business Description,
Mission Statement
and Business Goals
2.1
Business Description
Brant Farms Winery, LLC, proposes to
establish a new estate winery in the
extensive juice grape region surrounding
Brant, New York. This will be a premium
winery that builds upon the success of
the several nearby wineries constituting
the Chautauqua and Niagara Wine Trails.
Annual production will begin at 5,550
cases and increase to 9,250 cases over
a period of 5-6 years. All grapes will be
purchased from local and regional
vineyards.
The winery will produce the following high
quality varietals: Chardonnay, Cabernet
Franc, Cabernet Savignon and Seyval
Blanc. It will also produce three relatively
high quality wines using native varieties;
Pink Catawba, Concord and Delaware.
Most of the wine will be sold out of the
tasting room, but high-end restaurants
and wine shops may also be used to
reach customers as volume grows.
The key to the winery's success will be its
high quality wines. Research shows that
U.S. consumers are drinking more
expensive and higher quality wines. A
2003 study of California wine shipments
indicates premium table wine sales of $7
and above for a 750 ml bottle increased
6% to account for 30% of the volume and
62% of all winery revenues. The Brant
Farms Winery will capitalize on these
consumption trends. Most of the wineries
in the Lake Erie wine region over a wide
range of wines and tend to emphasize
fruity sweet wines (although many of the
Canadian wineries on the Niagara
Peninsula are more focused in their
offerings). Brant Farms Winery, by
producing a relatively smaller number of
higher quality wines, will establish a
marketable competitive advantage.
It is anticipated that 10% of the wines
produced will fall into the ultra-premium
market with an average price of $22.00
per 750 ml bottle. Another 30% will
constitute super-premium wines sold for
an average of $15.00 per bottle. The
remainder will be premium wines selling
at an average of $8.00 per bottle.
This mix will allow for higher margins but
will also require some specialized
equipment to accommodate the varied
processes involved. Moreover, it is
anticipated that sales of super-premium
and ultra-premium wines will require
waiting 18 months after production to
make the first sales, while premium
wines will be sold after 12 months. It is
assumed that 50% of a given wine will be
sold the first year it is marketed, with 25%
each for the following two years.
This project will support other agricultural
tourism efforts locally and help to
implement the goal of the Brant, Evans
and North Collins Regional Farmland
Protection Plan to "...promote local
agritourism in tourism brochures and
other tourism outlets such as in state
publications, along wine tasting routes or
at the Seaway Trail and Convention and
Visitors Bureau."
2.2
Mission Statement
The Brant Farms Winery will market a
limited but top quality lines of wines from
both native and vinifera grape varieties
that build on the Lake Erie and Brant
region's reputation for producing fine
agricultural products, also creating a
tourism attraction for visitors from Buffalo,
Cleveland, Erie and other markets.
2.3
Business Goals
The following are the key business goals
of Brant Farms Winery in launching this
project:
A.
Creating a business that will ensure
full-time employment for the winery
owners.
B.
Generating a positive cash flow
within five years of business
establishment.
C.
Generating a profit within five years
of business establishment.
D.
Generating a long-term rate of return
of at least 10% on equity invested,
including land priced at market
value.
E.
Achieving an operating margin of
40% before depreciation, interest
and taxes.
F.
Establishing a foundation for future
business growth through increased
visitation to the area, expansions
and new still higher-quality offerings,
that fit within the above mission
statement.
G.
Establishing and maintaining a
position of leadership in the regional
grape and wine industry.
H.
Establishing a reputation as a
centerpiece tourist attraction that will
draw still more visitors and create
new marketing opportunities within
the greater Buffalo region.
Shepstone Management Company
Business Description and Mission
3.0 Marketing Plan
3.1
Regional Wine Market and
Competition
Brant Farms Winery will be located in the
Town of Brant, Erie County, New York. It
will enjoy relatively easy access from I-90
via exits 57 and 58. This route is the
major link between the cities of Buffalo
and Erie. It carries 28,040 vehicles per
day, a significant portion of which
represent potential customers for Brant
Farms Winery. Other major market
factors include the following:
A.
U.S. Route 20 also provides access
to the site and serves as a regional
alternate and collector for I-90. It
carries 15,600 vehicles per day.
B.
There is a total market of over
1,225,000
persons
within
60
minutes
of Brant (see
table
following),
creating
a
major
opportunity for a tourism attraction
with destination appeal. The market
within
30
minutes
is
also
considerable. It has a population of
over 208,000 persons, of which over
80,000 are adults of 45 or more
years of age. This is a prime market
for high quality wines of the type
Brant Farms Winery proposes to
supply.
C.
While the overall population of the
region is not growing, the number of
households is relatively stable.
There are, too, large gains in certain
categories around which a new
winery venture can be developed.
These include households earning
over $50,000 per year with the
additional disposal income to spend
on travel, entertainment and
high-quality dining experiences. Those
households are increasing at a rate
of about 3% per year across the
market as a result of income gains
as the population ages.
There is steady growth of about 1%
per year in population aged 45+
years who are likely to be interested
in high quality wines, particularly dry
wines. This, combined with income
gains, creates a growing market.
0-30
Minutes Minutes30-45 Minutes45-60 Total Population, 2000 208,329 696,450 330,155 1,234,934 Population, 2003 207,355 687,996 329,731 1,225,082 Population, 2008 204,397 676,261 325,511 1,206,169 Households, 2000 79,244 284,577 129,740 493,561 Households, 2003 79,415 282,636 130,306 492,357 Households, 2008 79,283 281,184 130,305 490,772 HH's $50K Income, 2000 32,332 100,740 47,615 180,686 HH's $50K Income, 2003 35,340 109,945 52,644 197,929 HH's $50K Income, 2008 40,593 126,814 60,852 228,259 Growth, 2003-2008 5,253 16,869 8,209 30,331 % Growth, 2003-2008 14.9% 15.3% 15.6% 15.3% Annual % Growth 3.0% 3.1% 3.1% 3.1% Population 45+, 2000 80,832 267,437 127,110 475,378 Population 45+, 2003 84,808 275,198 133,541 493,548 Population 45+, 2008 89,526 289,440 140,621 519,586 Growth, 2003-2008 4,718 14,241 7,080 26,039 % Growth, 2003-2008 5.6% 5.2% 5.3% 5.3% Annual % Growth 1.1% 1.0% 1.1% 1.1%
Source: ESRI - Business Information Solutions
Market Area Demographics, 2000-2008
D.
The amount of spending within the
identified
market
areas
(0-30
minutes (Primary Market), 30-45
minutes (Secondary Market) and
45-60 minutes (Tertiary or Fringe
Market) is quite impressive. The
following table summarizes some of
the most relevant trends:
While there is no specific data
available on wine use, travel
expenditures
as
a whole
by
households residing
within 30
minutes are estimated to total over
$116 million. The market within one
hour represents over $685 million of
travel expenditures.
Three categories of comparable
interests to visiting a winery were
examined. Dining out, for example,
was an activity enjoyed by some
470,000 adults in
the market area
and 184,000 adults
cooked for fun, plus
185,000 individuals
went to a bar or
nightclub. These
are all potential
consumers of wine,
a large number of
whom
could be
attracted to a Brant
Farms Winery on
the Chautauqua or
Niagara wine trail.
There is competition throughout the outer
reaches of the market area for this type of
enterprise but none within the immediate
Brant area. The Lake
Erie Viticultural Area
(Chautauqua County) is,
in fact, the largest grape
growing county outside
of California, with some
20,000
acres
of
vineyards. Most of these
vineyards are planted to
Concord grapes used
for grape juice. There
are also, however, some
16 wineries located to the north and
south of Brant along the Chautauqua and
Niagara wine trails. There are an
additional 50 wineries located on the
Niagara Peninsula in adjoining Ontario.
There are 18 wineries in the
Niagara-on-the-Lake area alone, plus numerous
others throughout the peninsula. The
following table examines the wine
varieties offered by the principal wineries
along the Chautauqua Wine Trail, the
most likely source of competition for Brant
Farms Winery.
Shepstone Management Company
Marketing Plan
Page 3-2
0-30
Minutes
Minutes
30-45
Minutes
45-60
Total
Travel Expenditures
$116,234,322 $368,658,225 $200,149,685 $685,042,232
Average Per Household
$1,464
$1,304
$1,536
$1,391
Dined Out
82,652
254,502
132,749
469,903
Cooked for Fun
30,796
103,252
50,311
184,359
Went to Bar/Nightclub
31,927
102,722
49,968
184,617
Note: Visitation estimates reflect the number of market area adults participating Source: ESRI - Business Information Solutions
Market Area Visitation to Attractions and Expenditures
Blueberry Sky Johnson Estate Merritt Estate Roberian Schloss Doepken Vetter Vineyards Willow
Creek Woodbury Count
Chardonnay No Yes Yes Yes No Yes Yes Yes 6 Cabernet Sauvignon No Yes No Yes Yes Yes Yes No 5 Delaware No Yes Yes Yes No Yes Yes No 5 Reisling No Yes No Yes Yes No Yes Yes 5 Seyval No Yes Yes Yes No Yes No Yes 5 Fruit Wines Yes No Yes No No Yes No Yes 4 Niagara No Yes No No No Yes Yes Yes 4 Concord No Yes No No No Yes Yes No 3 Dry Riesling No No No No No Yes Yes Yes 3 Marechal Foch No Yes Yes No No Yes No No 3 Chambourcin No Yes No No No No Yes No 2 Chautauqua Blush No Yes Yes No No No No No 2 Chautauqua White No No Yes No Yes No No No 2 Ives Noir No Yes No Yes No No No No 2 Pink Catawba No No No Yes No No Yes No 2 Vidal Blanc No Yes No Yes No No No No 2 Other Red No Yes Yes No No Yes Yes Yes 5 Other White No Yes Yes No Yes No No Yes 4 Other Blush No Yes Yes No No No No Yes 3
Other No Yes Yes No No No Yes No 3
The table indicates that all of the wines
proposed to be produced by Brant Farms
Winery, with the exception of Cabernet
Franc, are made by other wineries.
However, none of the other wineries offer
the same combination of wines as
proposed by Brant Farms Winery, with its
balance of native and high quality
varietals with emphasis on dry wines over
fruity and sweet varieties.
Cabernet Franc is not offered on the
Chautauqua Wine Trail, although it is
grown by several Niagara Peninsula
wineries in nearby Canada. Pinot Noir is
alternative to Cabernet Franc if grapes
are not available to purchase at a
reasonable price. Pinot Noir is produced
by one other winery on the Chautauqua
Wine Trail and another on the Niagara
Wine Trail but not promoted heavily in the
region. Significantly, Warm Lake Estates
Winery, north of Buffalo, markets its Pinot
Noir at prices ranging from $15.99 to
$35.99 for 750 ml bottles, indicating the
potential in premium wines.
3.2
Business Marketing Plan
The proposed
winery's competitive
advantage will be its dedication to
producing higher quality wines than its
competitors by purchasing the best
grapes and investing in the highest
quality wine making equipment. The
Brant Farms Winery will also emphasize
a strategy that is more focused with fewer
products. High end restaurants and wine
shops will be used to market the ultra-
premium and super-premium products.
Brant Farms Winery will target wealthy,
college-educated baby boomers as
customers. These individuals are highly
wine-educated, enjoy dining out, and
regularly entertain friends or business
associates. These consumers are
become more wine-educated through
experience and promotional efforts in
which Brant Farms Winery will also
participate.
Brant Farms Winery's second target
market consists of premier restaurants
and wine shops located throughout the
Buffalo, Cleveland and Erie regions.
Gourmet restaurants that carry a variety of
premium wines and in state specialty
wine shops that focus on carrying
premium wine.
Brant Farms Winery will market 40% of its
wines under "reserve" labels as
ultra-premium and super-ultra-premium products
(10% and 30%, respectively). The
remainder will be sold simply as
premium wines. Wines will be packaged
in standard 750-ml bottles and follow
traditional European bottle shapes and
colors. Natural corks will be used to
allow consumers to smell them, adding
to the romance and sophistication of the
wine drinking experience. Natural cork
also follows with European wine tradition.
Foil capsules are, likewise, the standard
in premium wine; therefore, Brant Farms
Winery will be using these. Cardboard
twelve bottle cases are the standard in
the wine industry and will be used to
package the wine.
Brant Farms Winery will offer its
customers a number of other activities
intended to create a pleasant “winery
experience.” Wine tastings will be offered
each day to encourage customers to visit
the winery and try the various wines.
Educational winery tours will be offered
on weekends to introduce customers to
the grape growing and winemaking
process. A monthly wine tasting class
will be led by the winemaker. Other
events will also be conducted on special
occasions.
Brant Farms Winery will adopt a high
price and high quality pricing strategy.
Prestige pricing will be used to inform
customers of the high quality product
being sold. Ultra-premium wines will be
marketed at an average price of $22 per
bottle, super-premiums at $15 and
premiums at $8. These prices are
consistent with other high quality wines in
the marketplace (e.g. Warm Lake
Estates).
Many regional wineries have produced
lower priced wines from native varieties
and
French
American
hybrids.
Consequently, local consumers have
grown accustomed to lighter, fruity, sweet
wines. However, research shows that
over time, consumer's taste preferences
shift from lighter, sweeter wines to drier,
more complex wines (Barclay, 1999).
This present an opportunity to increase
prices by producing higher quality wines.
Brant Farms Winery’s promotion goal will
be one of differentiation and all promotion
activities will reinforce the winery's
premium positioning status. Consumer
promotion events will be intended to bring
customers to the winery for fun,
non-commercial activities. These events
include crush and bottling parties,
dances, food pairings, tastings, home
winemaking seminars, barrel tastings,
and
winery
and
vineyard
tours.
Additionally, the winery will participate in
the appropriate wine trail program
(Chautauqua or Niagara). Events
targeting other customers will focus on
building relationships. These events will
include regularly visiting restaurants and
wine shops, having special dinners and
barrel tastings at the winery for top
accounts and regularly sending free wine
samples to these accounts.
Brant Farms Winery will spend $4 per
case plus a fixed amount of $500 per
month on marketing its wines. A
webpage and some billboards will be
used to help launch the promotional
campaign. Grand opening advertising
and publicity will be used to call attention
to season openings and the Brant Farms
Winery website. The bulk of marketing
expenditures, however, will be directed to
the brochure, website and publicity
campaign.
All employees will be given hospitality
and customer service training prior to
staring work.
Road signage will also be used to
communicate information on the Brant
Farms Winery location, business hours,
special
promotions
and
related
attractions. A number of signs will be
placed along busy roadways (e.g. U.S.
Route 20) to ensure customer exposure.
Direct marketing studies indicate the
number of roadside signs is directly
related to tourist site revenue and,
therefore, every effort will be made to
maximize the use of such signage, which
will be done using bright but tasteful
designs and Brant Farms Winery logo.
Shepstone Management Company
Marketing Plan
A variety of other promotional and
marketing techniques will be used to
build consumer interest in Brant Farms
Winery. These will include:
• Regular and frequent events that can
be used as an excuse for advertising
and publicity. Such events will include
contests, displays and educational
events.
• Use of promotional items such as
calendars, maps and other advertising
specialties displaying Brant Farms
Winery logo and providing directional
information.
• Cross-promotion with noncompeting
businesses selling to Brant Farms
Winery target market (e.g. a local B&B).
• Assembly of media packages to
encourage profiles of Brant Farms
Winery in local newspapers.
• Support of different fund-raising and
charity events.
Publicity will be heavily used to generate
inexpensive or free advertising by
developing news releases that provide
local media with a feature stories on
Brant Farms Winery events. A media day
will be conducted at the outset of each
season to encourage feature stories in
local and regional media outlets. A
media list will be developed for this
purpose and news releases will be sent
to appropriate media each time there is
an occasion or event associated with
Brant Farms Winery.
A mailing list will be developed to inform
Brant Farms Winery customers that the
business is open each year and to alert
them regarding special events. The
mailing list will also be used as the basis
for establishing a Brant Farms Winery
Club to market premium wines to higher
income repeat customers.
4.0 Management Plan
Brant Farms Winery will be owned and
operated by James and Mary Smith, the
owners of the vineyard on which it will be
located. They will conduct the business
through a limited liability corporation
known as Brant Farms Winery, LLC.
Each of the principals will own 50% of the
stock. James will serve as President and
Operations Manager. His duties will
include coordinating grape purchasing,
winery operation and maintenance and
staffing. He has worked as a winemaker
for one of the
Finger
Lakes
wineries (see his
resume) prior to
returning to the
v i n e y a r d
operation that he
and Mary now
own. James
attended Cornell
and
graduated
with a degree in
Ag Economics.
Mary Smith will
act as Treasurer
and
Financial
Manager of the
operation. She,
too, is a Cornell
Ag
Economic
graduate
and
has been actively
engaged in managing the family vineyard
operation. Bill Jones will serve as
Winemaker for the operation, working
under the direction of James Smith. Sally
Ames will serve as Sales Manager. Both
will work 8 months per year. An
organization chart follows:
Resumes, including work experience,
education, professional affiliations and
other qualifications to run this business,
are attached. The two principals will, at
the outset, be the only year-round
employees of Brant Farms Winery,
although the Winemaker and Sales
Manager will be permanent positions.
Other positions will be filled with part-time
or seasonal personnel. It is anticipated
that approximately 25 such employees
will be required, most of whom will be
youth, retirees or other individuals
seeking part-time work.
Brant Farms Winery, LLC will also join
either the Chautauqua or Niagara Wine
Shepstone Management Company
Management Plan
Page 4-1
Temporary Bottlers
& Winery Employees
Sally Ames
Sales Manager
Tasting Room
Employees
Brant Farms
Winery, LLC
James & Mary Smith
Owners
James Smith
President and Manager
Mary Smith
Treasurer
Bill Jones
Winemaker
Trails and the New York Wine and Grape
Foundation
to
secure
additional
marketing support services for its
business.
5.0 Financial Plan
5.1
Sales Forecast, Income and
Expenses
As indicated earlier, Brant Farms Winery
will have the capacity to produce 9,250
cases of wine per year. It will begin
marketing premium wines 12 months
following their manufacture and
super-premium and ultra-super-premium wines 18
months after production. It will start
producing at 60% of capacity and
increase to full capacity within five years.
Average prices of $8, $15 and $22 per
750 ml bottle are projected, respectively,
for premium, super-premium and
ultra-premium wines. It is anticipated that 60%
of wines will be sold as premium wines
with 30% and 10%, respectively, for
super-premium and ultra-premium wine
selections. Other assumptions may be
found in the self-explanatory cash flow
analysis.
This activity is forecasted to generate
$1,095,000 of sales in the fifth year, at
which point it will be profitable.
5.2
Capital Requirements and
Financing Proposal
It is proposed to borrow the sum of
$1,200,000 over a 15 year term to finance
the establishment of this business over a
two-year period (the winery in the first year
and tasting room in the second), plus an
equal amount of working capital. The
working capital financing is proposed as
a line of credit for cash flow projection
purposes. The owners will invest
$25,000 worth of equity in land and
another $225,000 in cash equity toward
the project.
The
capital
expenses
involve an
estimated $12,500 in site work and
$700,000 of building expenses for a
winery and tasting room. Approximately
$450,000 will be required for
wine-making equipment. This includes
equipment for manufacturing high quality
red as well as white wines, although
used equipment will be employed in
many instances to lower capital costs. A
detailed listing of equipment is included
in the Appendices.
NOTE: Sample equipment inventories
that may be used to assemble such a
listing are available in the model
business plans developed by Cornell
University (see Writing a Business Plan:
An Example for a Small Premium Winery,
E.B. 2002-07, by Marke E. Pisoni and
Gerald B. White) and by the Ohio Wine
Producers Association (The Dollar and
Sense of Starting a Small Winery, by
Chris Stamp).
5.3
Cash Flow Analysis
A self-explanatory cash flow analysis is
attached as Appendix C of this Business
Plan. The assumptions used in the
analysis are also provided. It indicates
this business will amortize long-term
debt. While it will require up to
$1,200,000
of
working
capital,
a
substantial portion of which will be
provided by the owners on a loan basis,
that capital will be returned in full with
interest at 7.5% by the eight year of
operation. The project will return all
Shepstone Management Company
Financial Plan
equity by the ninth year of operation and
generate net operating income (before
depreciation and taxes) of $555,000 per
year thereafter. It will generate a positive
net operating income before taxes in the
fourth year of operation.
Because much of the working capital for
this project will be provided in the form of
owner financing and the interest rate is, at
7.5%, above current lending rates, there
is a significant margin of error for any
unanticipated costs of launching the
enterprise
and
bearing
marketing
expenses, including wine giveaways.
6.0 Appendices
Attached, as appendices to this Business
Plan, are the following business financial
documents:
A.
Pro Forma Income and
Expense Statements
B.
Pro Forma Balance Sheets
C.
Cash Flow Projections
D.
Resumes of Management
Personnel
E.
Equipment Listing
Shepstone Management Company
Appendices
Pro Forma Income &
Expense Statements
INCOME
Ultra-premium sales
$0
$20,513
$90,354
$151,404
$202,198
Super-premium sales
$0
$41,958
$184,815
$309,690
$413,586
Premium sales
$0
$159,840
$293,040
$426,240
$479,520
SUB-TOTAL
$0
$222,311
$568,209
$887,334
$1,095,304
Cost of Goods Sold (Grapes)
$115,677
$154,236
$173,516
$183,156
$192,795
GROSS INCOME
($115,677)
$68,074
$394,693
$704,178
$902,508
EXPENSES
Principal/manager/office salaries
$80,000
$80,000
$80,000
$80,000
$80,000
Other variable labor costs (production)
$38,850
$51,800
$58,275
$61,513
$64,750
Other variable labor costs (sales)
$38,850
$51,800
$58,275
$61,513
$64,750
Labor overhead
$39,425
$45,900
$49,138
$50,756
$52,375
Packaging
$0
$80,475
$107,300
$120,713
$115,348
Repairs/maintenance
$12,000
$12,000
$12,000
$12,000
$12,000
Fuel and supplies
$6,750
$8,600
$9,525
$9,988
$10,450
Utilities
$15,158
$18,210
$19,736
$20,499
$21,263
Insurance
$14,400
$14,400
$14,400
$14,400
$14,400
Office expense/professional fees
$6,000
$6,000
$6,000
$6,000
$6,000
Marketing
$28,200
$35,600
$39,300
$41,150
$43,000
Contingency/miscellaneous
$13,982
$20,239
$22,697
$23,927
$24,217
SUB-TOTAL
$293,614
$425,024
$476,646
$502,457
$508,552
Interest
$60,797
$134,872
$159,126
$163,877
$150,384
Depreciation
$47,125
$65,458
$65,458
$65,458
$65,458
TOTAL EXPENSES
$401,536
$625,355
$701,230
$731,792
$724,394
NET INCOME BEFORE TAXES
($517,213)
($557,280)
($306,537)
($27,614)
$178,114
ASSETS AND LIABILITIES:
FY 2005
FY 2006
FY 2007
FY 2008
FY 2009
FY 2009
ASSETS
CURRENT ASSETS
Cash on hand
$225,000
$1,777
$2,900
$1,113
$4,314
$3,999
Accounts receivable
$0
$0
$0
$0
$0
$0
TOTAL CURRENT ASSETS
$225,000
$1,777
$2,900
$1,113
$4,314
$3,999
FIXED ASSETS (DEPRECIATED VALUE)
Land
$25,000
$25,000
$25,000
$25,000
$25,000
$25,000
Buildings, equipment & other
$0
$659,750
$1,119,292
$1,053,833
$988,375
$922,917
TOTAL FIXED ASSETS
$25,000
$684,750
$1,144,292
$1,078,833
$1,013,375
$947,917
TOTAL ASSETS
$250,000
$686,527
$1,147,192
$1,079,947
$1,017,689
$951,916
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable
$0
$0
$0
$0
$0
$0
Short-term debt
$0
$280,000
$845,000
$1,135,000
$1,155,000
$970,000
Current portion of long-term debt
$0
$28,298
$50,708
$54,645
$58,887
$63,458
TOTAL CURRENT LIABILITIES
$0
$308,298
$895,708
$1,189,645
$1,213,887
$1,033,458
LONG-TERM LIABILITIES
Non-current portion of long-term debt
$0
$645,442
$1,075,978
$1,021,333
$962,446
$898,988
TOTAL LIABILITIES
$0
$953,740
$1,971,686
$2,210,978
$2,176,333
$1,932,446
Equity
$250,000
$250,000
$250,000
$250,000
$250,000
$250,000
Retained earnings
$0
($517,213)
($1,074,494) ($1,381,031) ($1,408,645) ($1,230,531)
Premium wine cases produced 3,330 4,440 4,995 5,273 5,550 5,550 5,550 5,550 5,550 5,550 REVENUE Ultra-premium sales $0 $20,513 $90,354 $151,404 $202,198 $224,054 $236,752 $242,002 $244,200 $244,200 Super-premium sales $0 $41,958 $184,815 $309,690 $413,586 $458,291 $484,265 $495,005 $499,500 $499,500 Premium sales $0 $159,840 $293,040 $426,240 $479,520 $512,820 $526,140 $532,800 $532,800 $532,800 SUB-TOTAL $0 $222,311 $568,209 $887,334 $1,095,304 $1,195,165 $1,247,157 $1,269,807 $1,276,500 $1,276,500 Cost of Goods (retail and food) ($115,677) ($154,236) ($173,516) ($183,156) ($192,795) ($192,795) ($192,795) ($192,795) ($192,795) ($192,795)
TOTAL GROSS MARGIN ($115,677) $68,074 $394,693 $704,178 $902,508 $1,002,369 $1,054,362 $1,077,011 $1,083,705 $1,083,705
OPERATING EXPENSES
Principal/manager/office salaries $80,000 $80,000 $80,000 $80,000 $80,000 $80,000 $80,000 $80,000 $80,000 $80,000 Other variable labor costs (production) $38,850 $51,800 $58,275 $61,513 $64,750 $64,750 $64,750 $64,750 $64,750 $64,750 Other variable labor costs (sales) $38,850 $51,800 $58,275 $61,513 $64,750 $64,750 $64,750 $64,750 $64,750 $64,750 Labor overhead $39,425 $45,900 $49,138 $50,756 $52,375 $52,375 $52,375 $52,375 $52,375 $52,375 Packaging $0 $80,475 $107,300 $120,713 $115,348 $134,125 $134,125 $134,125 $134,125 $134,125 Repairs/maintenance $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 Fuel and supplies $6,750 $8,600 $9,525 $9,988 $10,450 $10,450 $10,450 $10,450 $10,450 $10,450 Utilities $15,158 $18,210 $19,736 $20,499 $21,263 $21,263 $21,263 $21,263 $21,263 $21,263 Insurance $14,400 $14,400 $14,400 $14,400 $14,400 $14,400 $14,400 $14,400 $14,400 $14,400 Office expense/professional fees $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 Marketing $28,200 $35,600 $39,300 $41,150 $43,000 $43,000 $43,000 $43,000 $43,000 $43,000 Contingency/miscellaneous $13,982 $20,239 $22,697 $23,927 $24,217 $25,156 $25,156 $25,156 $25,156 $25,156
TOTAL OPERATING EXPENSES $293,614 $425,024 $476,646 $502,457 $508,552 $528,268 $528,268 $528,268 $528,268 $528,268
OPERATING MARGIN (CASH) ($409,291) ($356,950) ($81,953) $201,721 $393,956 $474,101 $526,094 $548,743 $555,436 $555,436
DEVELOPMENT COSTS
Land $25,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Site work $12,500 $0 $0 $0 $0 $0 $0 $0 $0 $0
Winery construction costs $450,000 $250,000 $0 $0 $0 $0 $0 $0 $0 $0 Equipment costs $200,000 $250,000 $0 $0 $0 $0 $0 $0 $0 $0 Financing/organizational costs $10,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 Contingency $34,375 $25,000 $0 $0 $0 $0 $0 $0 $0 $0
TOTAL DEVELOPMENT COSTS $731,875 $525,000 $0 $0 $0 $0 $0 $0 $0 $0
FINANCING & EQUITY
Equity in land $25,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 Cash equity contribution $225,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
TOTAL EQUITY $250,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Working capital loan proceeds $280,000 $570,000 $385,000 $220,000 $125,000 $100,000 $80,000 $45,000 $0 $0 Working capital loan repayments $0 $5,000 $95,000 $200,000 $310,000 $385,000 $440,000 $365,000 $5,000 $0 Working capital loan balance $280,000 $845,000 $1,135,000 $1,155,000 $970,000 $685,000 $325,000 $5,000 $0 $0 Working capital loan interest ($9,188) ($48,438) ($76,344) ($85,031) ($75,781) ($57,031) ($32,094) ($3,438) $0 $0 Loan proceeds $700,000 $500,000 $0 $0 $0 $0 $0 $0 $0 $0 Amortization ($77,869) ($133,490) ($133,490) ($133,490) ($133,490) ($133,490) ($133,490) ($133,490) ($133,490) ($133,490)
TOTAL DEBT SERVICE ($87,057) ($181,927) ($209,834) ($218,521) ($209,271) ($190,521) ($165,584) ($136,927) ($133,490) ($133,490)
CASH FLOW $1,777 $1,123 ($1,787) $3,200 ($315) ($1,420) $510 $91,816 $416,947 $421,947
CUMULATIVE CASH $1,777 $2,900 $1,113 $4,314 $3,999 $2,579 $3,089 $94,905 $511,852 $933,798
Principal/manager/office salaries $80,000 Interest rate 7.5% Variable labor costs/case - production $7.00 Labor overhead 25.0% Variable labor costs/case - sales $7.00 Repair/maintenance costs/year $12,000 Grape price per ton, ultra-premium $1,600 Variable fuel/supply costs per case $1.00 Grape price per ton, super-premium $1,450 Variable utility costs per case $1.65 Grape price per ton, premium $1,200 Insurance costs (monthly) $1,200 Ultra-premium cases produced annually 925 Office/professional expense (monthly) $500 Super-premium cases produced annually 2,775 Variable marketing costs per case $4.00 Premium cases produced annually 5,550 Contingency expense 5.0% Total cases produced annually (capacity) 9,250 1st year production % 60.0% Packaging costs/case $14.50 2nd year production % 80.0% Ultra-premium sales price/bottle $22.00 3rd year production % 90.0% Super-premium sales price/bottle $15.00 Annual growth rate (years 4 to 5) 5.0% Premium sales price/bottle $8.00 Annual growth rate (years 6+) 0.0%
Premium wine cases produced 0 0 500 500 500 500 333 333 333 333 0 0 REVENUE Ultra-premium sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Super-premium sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Premium sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 SUB-TOTAL $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Cost of Goods (grapes) $0 $0 ($57,839) ($57,839) $0 $0 $0 $0 $0 $0 $0 $0
TOTAL GROSS MARGIN $0 $0 ($57,839) ($57,839) $0 $0 $0 $0 $0 $0 $0 $0
OPERATING EXPENSES
Principal/manager/office salaries $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 Other variable labor costs (production) $0 $0 $5,828 $5,828 $5,828 $5,828 $3,885 $3,885 $3,885 $3,885 $0 $0 Other variable labor costs (sales) $0 $0 $5,828 $5,828 $5,828 $5,828 $3,885 $3,885 $3,885 $3,885 $0 $0 Labor overhead $1,667 $1,667 $4,580 $4,580 $4,580 $4,580 $3,609 $3,609 $3,609 $3,609 $1,667 $1,667
Packaging $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Repairs/maintenance $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 Fuel and supplies $100 $100 $933 $933 $933 $933 $655 $655 $655 $655 $100 $100 Utilities $500 $500 $1,874 $1,874 $1,874 $1,874 $1,416 $1,416 $1,416 $1,416 $500 $500 Insurance $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 Office expense/professional fees $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 Marketing $500 $500 $3,830 $3,830 $3,830 $3,830 $2,720 $2,720 $2,720 $2,720 $500 $500 Contingency/miscellaneous $607 $607 $1,612 $1,612 $1,612 $1,612 $1,277 $1,277 $1,277 $1,277 $607 $607
TOTAL OPERATING EXPENSES $12,740 $12,740 $33,850 $33,850 $33,850 $33,850 $26,813 $26,813 $26,813 $26,813 $12,740 $12,740
OPERATING MARGIN (CASH) ($12,740) ($12,740) ($91,689) ($91,689) ($33,850) ($33,850) ($26,813) ($26,813) ($26,813) ($26,813) ($12,740) ($12,740)
DEVELOPMENT COSTS
Land $25,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Site work $12,500 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Winery construction costs $450,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Equipment costs $200,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Financing/organizational costs $10,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Contingency $34,375 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
TOTAL DEVELOPMENT COSTS $731,875 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
FINANCING & EQUITY
Equity in land $25,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Cash equity contribution $225,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
TOTAL EQUITY $250,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Working capital loan proceeds $0 $0 $0 $20,000 $40,000 $40,000 $35,000 $35,000 $35,000 $35,000 $20,000 $20,000 Working capital loan repayments $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Working capital loan balance $0 $0 $0 $20,000 $60,000 $100,000 $135,000 $170,000 $205,000 $240,000 $260,000 $280,000 Working capital loan interest $0 $0 $0 ($125) ($375) ($625) ($844) ($1,063) ($1,281) ($1,500) ($1,625) ($1,750) Loan proceeds $700,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Amortization ($6,489) ($6,489) ($6,489) ($6,489) ($6,489) ($6,489) ($6,489) ($6,489) ($6,489) ($6,489) ($6,489) ($6,489)
TOTAL DEBT SERVICE ($6,489) ($6,489) ($6,489) ($6,614) ($6,864) ($7,114) ($7,333) ($7,552) ($7,770) ($7,989) ($8,114) ($8,239)
CASH FLOW $198,896 ($19,229) ($98,178) ($78,303) ($714) ($964) $854 $635 $416 $198 ($854) ($979)
CUMULATIVE CASH $198,896 $179,667 $81,489 $3,186 $2,472 $1,508 $2,361 $2,996 $3,413 $3,610 $2,756 $1,777
Principal/manager/office salaries $80,000 Interest rate 7.5% Produce % Sales % Variable labor costs/case - production $7.00 Labor overhead 25.00% July 0.0% 10.0% Variable labor costs/case - sales $7.00 Repair/maintenance costs/year $12,000 August 0.0% 12.0% Grape price per ton, ultra-premium $1,600 Variable fuel/supply costs per case $1.00 September 15.0% 15.0% Grape price per ton, super-premium $1,450 Variable utility costs per case $1.65 October 15.0% 18.0% Grape price per ton, premium $1,200 Insurance costs (monthly) $1,200 November 15.0% 8.0% Ultra-premium cases produced annually 925 Office/professional expense (monthly) $500 December 15.0% 9.0% Super-premium cases produced annually 2,775 Variable marketing costs per case $4.00 January 10.0% 3.0% Premium cases produced annually 5,550 Contingency expense 5.00% February 10.0% 3.0% Total cases produced annually (capacity) 9,250 1st year production % 60.0% March 10.0% 4.0% Packaging costs/case $14.50 2nd year production % 80.0% April 10.0% 4.0% Ultra-premium sales price/bottle $22.00 3rd year production % 90.0% May 0.0% 5.0% Super-premium sales price/bottle $15.00 Annual growth rate (years 4 to 5) 5.0% June 0.0% 9.0% Premium sales price/bottle $8.00 Annual growth rate (years 6+) 0.0% Total 2005 100.0% 100.0%
Premium wine cases produced 0 0 666 666 666 666 444 444 444 444 0 0 REVENUE Ultra-premium sales $0 $0 $0 $0 $0 $0 $2,198 $2,198 $2,930 $2,930 $3,663 $6,593 Super-premium sales $0 $0 $0 $0 $0 $0 $4,496 $4,496 $5,994 $5,994 $7,493 $13,487 Premium sales $15,984 $19,181 $23,976 $28,771 $12,787 $14,386 $4,795 $4,795 $6,394 $6,394 $7,992 $14,386 SUB-TOTAL $15,984 $19,181 $23,976 $28,771 $12,787 $14,386 $11,489 $11,489 $15,318 $15,318 $19,148 $34,466 Cost of Goods (grapes) $0 $0 ($77,118) ($77,118) $0 $0 $0 $0 $0 $0 $0 $0
TOTAL GROSS MARGIN $15,984 $19,181 ($53,142) ($48,347) $12,787 $14,386 $11,489 $11,489 $15,318 $15,318 $19,148 $34,466
OPERATING EXPENSES
Principal/manager/office salaries $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 Other variable labor costs (production) $0 $0 $7,770 $7,770 $7,770 $7,770 $5,180 $5,180 $5,180 $5,180 $0 $0 Other variable labor costs (sales) $0 $0 $7,770 $7,770 $7,770 $7,770 $5,180 $5,180 $5,180 $5,180 $0 $0 Labor overhead $1,667 $1,667 $5,552 $5,552 $5,552 $5,552 $4,257 $4,257 $4,257 $4,257 $1,667 $1,667 Packaging $2,500 $2,500 $7,071 $12,071 $12,071 $12,071 $8,048 $8,048 $8,048 $8,048 $0 $0 Repairs/maintenance $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 Fuel and supplies $100 $100 $1,210 $1,210 $1,210 $1,210 $840 $840 $840 $840 $100 $100 Utilities $500 $500 $2,332 $2,332 $2,332 $2,332 $1,721 $1,721 $1,721 $1,721 $500 $500 Insurance $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 Office expense/professional fees $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 Marketing $500 $500 $4,940 $4,940 $4,940 $4,940 $3,460 $3,460 $3,460 $3,460 $500 $500 Contingency/miscellaneous $732 $732 $2,301 $2,551 $2,551 $2,551 $1,903 $1,903 $1,903 $1,903 $607 $607
TOTAL OPERATING EXPENSES $15,365 $15,365 $48,312 $53,562 $53,562 $53,562 $39,954 $39,954 $39,954 $39,954 $12,740 $12,740
OPERATING MARGIN (CASH) $619 $3,816 ($101,454) ($101,909) ($40,774) ($39,176) ($28,466) ($28,466) ($24,636) ($24,636) $6,408 $21,726
DEVELOPMENT COSTS
Land $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Site work $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Winery construction costs $250,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Equipment costs $250,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Financing/organizational costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Contingency $25,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
TOTAL DEVELOPMENT COSTS $525,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
FINANCING & EQUITY
Equity in land $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Cash equity contribution $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
TOTAL EQUITY $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Working capital loan proceeds $40,000 $10,000 $115,000 $115,000 $55,000 $55,000 $45,000 $45,000 $40,000 $40,000 $10,000 $0 Working capital loan repayments $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $5,000 Working capital loan balance $320,000 $330,000 $445,000 $560,000 $615,000 $670,000 $715,000 $760,000 $800,000 $840,000 $850,000 $845,000 Working capital loan interest ($2,000) ($2,063) ($2,781) ($3,500) ($3,844) ($4,188) ($4,469) ($4,750) ($5,000) ($5,250) ($5,313) ($5,281) Loan proceeds $500,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Amortization ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124)
TOTAL DEBT SERVICE ($13,124) ($13,187) ($13,905) ($14,624) ($14,968) ($15,312) ($15,593) ($15,874) ($16,124) ($16,374) ($16,437) ($16,405)
CASH FLOW $2,495 $629 ($359) ($1,533) ($742) $512 $941 $660 ($761) ($1,011) ($29) $320
CUMULATIVE CASH $4,272 $4,901 $4,542 $3,009 $2,267 $2,779 $3,720 $4,380 $3,620 $2,609 $2,580 $2,900
Principal/manager/office salaries $80,000 Interest rate 7.5% Produce % Sales % Variable labor costs/case - production $7.00 Labor overhead 25.0% July 0.0% 10.0% Variable labor costs/case - sales $7.00 Repair/maintenance costs/year $12,000 August 0.0% 12.0% Grape price per ton, ultra-premium $1,600 Variable fuel/supply costs per case $1.00 September 15.0% 15.0% Grape price per ton, super-premium $1,450 Variable utility costs per case $1.65 October 15.0% 18.0% Grape price per ton, premium $1,200 Insurance costs (monthly) $1,200 November 15.0% 8.0% Ultra-premium cases produced annually 925 Office/professional expense (monthly) $500 December 15.0% 9.0% Super-premium cases produced annually 2,775 Variable marketing costs per case $4.00 January 10.0% 3.0% Premium cases produced annually 5,550 Contingency expense 5.0% February 10.0% 3.0% Total cases produced annually (capacity) 9,250 1st year production % 60.0% March 10.0% 4.0% Packaging costs/case $14.50 2nd year production % 80.0% April 10.0% 4.0% Ultra-premium sales price/bottle $22.00 3rd year production % 90.0% May 0.0% 5.0% Super-premium sales price/bottle $15.00 Annual growth rate (years 4 to 5) 5.0% June 0.0% 9.0% Premium sales price/bottle $8.00 Annual growth rate (years 6+) 0.0% Total 2005 100.0% 100.0%
Premium wine cases produced 0 0 749 749 749 749 500 500 500 500 0 0 REVENUE Ultra-premium sales $7,326 $8,791 $10,989 $13,187 $5,861 $6,593 $4,029 $4,029 $5,372 $5,372 $6,716 $12,088 Super-premium sales $14,985 $17,982 $22,478 $26,973 $11,988 $13,487 $8,242 $8,242 $10,989 $10,989 $13,736 $24,725 Premium sales $29,304 $35,165 $43,956 $52,747 $23,443 $26,374 $8,791 $8,791 $11,722 $11,722 $14,652 $26,374 SUB-TOTAL $51,615 $61,938 $77,423 $92,907 $41,292 $46,454 $21,062 $21,062 $28,083 $28,083 $35,104 $63,187 Cost of Goods (grapes) $0 $0 ($86,758) ($86,758) $0 $0 $0 $0 $0 $0 $0 $0
TOTAL GROSS MARGIN $51,615 $61,938 ($9,335) $6,149 $41,292 $46,454 $21,062 $21,062 $28,083 $28,083 $35,104 $63,187
OPERATING EXPENSES
Principal/manager/office salaries $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 Other variable labor costs (production) $0 $0 $8,741 $8,741 $8,741 $8,741 $5,828 $5,828 $5,828 $5,828 $0 $0 Other variable labor costs (sales) $0 $0 $8,741 $8,741 $8,741 $8,741 $5,828 $5,828 $5,828 $5,828 $0 $0 Labor overhead $1,667 $1,667 $6,037 $6,037 $6,037 $6,037 $4,580 $4,580 $4,580 $4,580 $1,667 $1,667 Packaging $0 $0 $16,095 $16,095 $16,095 $16,095 $10,730 $10,730 $10,730 $10,730 $0 $0 Repairs/maintenance $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 Fuel and supplies $100 $100 $1,349 $1,349 $1,349 $1,349 $933 $933 $933 $933 $100 $100 Utilities $500 $500 $2,560 $2,560 $2,560 $2,560 $1,874 $1,874 $1,874 $1,874 $500 $500 Insurance $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 Office expense/professional fees $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 Marketing $500 $500 $5,495 $5,495 $5,495 $5,495 $3,830 $3,830 $3,830 $3,830 $500 $500 Contingency/miscellaneous $607 $607 $2,919 $2,919 $2,919 $2,919 $2,148 $2,148 $2,148 $2,148 $607 $607
TOTAL OPERATING EXPENSES $12,740 $12,740 $61,305 $61,305 $61,305 $61,305 $45,117 $45,117 $45,117 $45,117 $12,740 $12,740
OPERATING MARGIN (CASH) $38,875 $49,198 ($70,640) ($55,156) ($20,013) ($14,851) ($24,054) ($24,054) ($17,034) ($17,034) $22,364 $50,447
DEVELOPMENT COSTS
Land $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Site work $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Winery construction costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Equipment costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Financing/organizational costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Contingency $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
TOTAL DEVELOPMENT COSTS $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
FINANCING & EQUITY
Equity in land $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Cash equity contribution $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
TOTAL EQUITY $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Working capital loan proceeds $0 $0 $85,000 $75,000 $35,000 $35,000 $40,000 $40,000 $35,000 $40,000 $0 $0 Working capital loan repayments $25,000 $30,000 $0 $0 $0 $0 $0 $0 $0 $0 $5,000 $35,000 Working capital loan balance $820,000 $790,000 $875,000 $950,000 $985,000 $1,020,000 $1,060,000 $1,100,000 $1,135,000 $1,175,000 $1,170,000 $1,135,000 Working capital loan interest ($5,125) ($4,938) ($5,469) ($5,938) ($6,156) ($6,375) ($6,625) ($6,875) ($7,094) ($7,344) ($7,313) ($7,094)
Loan proceeds $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Amortization ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124)
TOTAL DEBT SERVICE ($16,249) ($16,062) ($16,593) ($17,062) ($17,280) ($17,499) ($17,749) ($17,999) ($18,218) ($18,468) ($18,437) ($18,218)
CASH FLOW ($2,374) $3,136 ($2,233) $2,782 ($2,293) $2,649 ($1,804) ($2,054) ($252) $4,498 ($1,073) ($2,771)
CUMULATIVE CASH $526 $3,662 $1,429 $4,211 $1,918 $4,567 $2,764 $710 $459 $4,957 $3,885 $1,113
Principal/manager/office salaries $80,000 Interest rate 7.5% Produce % Sales % Variable labor costs/case - production $7.00 Labor overhead 25.0% July 0.0% 10.0% Variable labor costs/case - sales $7.00 Repair/maintenance costs/year $12,000 August 0.0% 12.0% Grape price per ton, ultra-premium $1,600 Variable fuel/supply costs per case $1.00 September 15.0% 15.0% Grape price per ton, super-premium $1,450 Variable utility costs per case $1.65 October 15.0% 18.0% Grape price per ton, premium $1,200 Insurance costs (monthly) $1,200 November 15.0% 8.0% Ultra-premium cases produced annually 925 Office/professional expense (monthly) $500 December 15.0% 9.0% Super-premium cases produced annually 2,775 Variable marketing costs per case $4.00 January 10.0% 3.0% Premium cases produced annually 5,550 Contingency expense 5.0% February 10.0% 3.0% Total cases produced annually (capacity) 9,250 1st year production % 60.0% March 10.0% 4.0% Packaging costs/case $14.50 2nd year production % 80.0% April 10.0% 4.0% Ultra-premium sales price/bottle $22.00 3rd year production % 90.0% May 0.0% 5.0% Super-premium sales price/bottle $15.00 Annual growth rate (years 4 to 5) 5.0% June 0.0% 9.0% Premium sales price/bottle $8.00 Annual growth rate (years 6+) 0.0% Total 2005 100.0% 100.0%
Premium wine cases produced 0 0 791 791 791 791 527 527 527 527 0 0 REVENUE Ultra-premium sales $13,431 $16,117 $20,147 $24,176 $10,745 $12,088 $5,861 $5,861 $7,814 $7,814 $9,768 $17,582 Super-premium sales $27,473 $32,967 $41,209 $49,451 $21,978 $24,725 $11,988 $11,988 $15,984 $15,984 $19,980 $35,964 Premium sales $42,624 $51,149 $63,936 $76,723 $34,099 $38,362 $12,787 $12,787 $17,050 $17,050 $21,312 $38,362 SUB-TOTAL $83,528 $100,233 $125,291 $150,350 $66,822 $75,175 $30,636 $30,636 $40,848 $40,848 $51,060 $91,908 Cost of Goods (grapes) $0 $0 ($91,578) ($91,578) $0 $0 $0 $0 $0 $0 $0 $0
TOTAL GROSS MARGIN $83,528 $100,233 $33,713 $58,772 $66,822 $75,175 $30,636 $30,636 $40,848 $40,848 $51,060 $91,908
OPERATING EXPENSES
Principal/manager/office salaries $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 $6,667 Other variable labor costs (production) $0 $0 $9,227 $9,227 $9,227 $9,227 $6,151 $6,151 $6,151 $6,151 $0 $0 Other variable labor costs (sales) $0 $0 $9,227 $9,227 $9,227 $9,227 $6,151 $6,151 $6,151 $6,151 $0 $0 Labor overhead $1,667 $1,667 $6,280 $6,280 $6,280 $6,280 $4,742 $4,742 $4,742 $4,742 $1,667 $1,667 Packaging $0 $0 $18,107 $18,107 $18,107 $18,107 $12,071 $12,071 $12,071 $12,071 $0 $0 Repairs/maintenance $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 Fuel and supplies $100 $100 $1,418 $1,418 $1,418 $1,418 $979 $979 $979 $979 $100 $100 Utilities $500 $500 $2,675 $2,675 $2,675 $2,675 $1,950 $1,950 $1,950 $1,950 $500 $500 Insurance $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 Office expense/professional fees $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 Marketing $500 $500 $5,773 $5,773 $5,773 $5,773 $4,015 $4,015 $4,015 $4,015 $500 $500 Contingency/miscellaneous $607 $607 $3,104 $3,104 $3,104 $3,104 $2,271 $2,271 $2,271 $2,271 $607 $607
TOTAL OPERATING EXPENSES $12,740 $12,740 $65,177 $65,177 $65,177 $65,177 $47,698 $47,698 $47,698 $47,698 $12,740 $12,740
OPERATING MARGIN (CASH) $70,788 $87,493 ($31,463) ($6,405) $1,645 $9,998 ($17,062) ($17,062) ($6,850) ($6,850) $38,320 $79,168
DEVELOPMENT COSTS
Land $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Site work $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Winery construction costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Equipment costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Financing/organizational costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Contingency $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
TOTAL DEVELOPMENT COSTS $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
FINANCING & EQUITY
Equity in land $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Cash equity contribution $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
TOTAL EQUITY $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Working capital loan proceeds $0 $0 $50,000 $20,000 $20,000 $5,000 $35,000 $35,000 $30,000 $25,000 $0 $0 Working capital loan repayments $50,000 $70,000 $0 $0 $0 $0 $0 $0 $0 $0 $20,000 $60,000 Working capital loan balance $1,085,000 $1,015,000 $1,065,000 $1,085,000 $1,105,000 $1,110,000 $1,145,000 $1,180,000 $1,210,000 $1,235,000 $1,215,000 $1,155,000 Working capital loan interest ($6,781) ($6,344) ($6,656) ($6,781) ($6,906) ($6,938) ($7,156) ($7,375) ($7,563) ($7,719) ($7,594) ($7,219)
Loan proceeds $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Amortization ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124) ($11,124)
TOTAL DEBT SERVICE ($17,905) ($17,468) ($17,780) ($17,905) ($18,030) ($18,062) ($18,280) ($18,499) ($18,687) ($18,843) ($18,718) ($18,343)
CASH FLOW $2,882 $25 $756 ($4,310) $3,615 ($3,063) ($342) ($561) $4,464 ($693) ($398) $825
CUMULATIVE CASH $3,995 $4,021 $4,777 $467 $4,082 $1,018 $676 $115 $4,579 $3,886 $3,488 $4,314
Principal/manager/office salaries $80,000 Interest rate 7.5% Produce % Sales % Variable labor costs/case - production $7.00 Labor overhead 25.0% July 0.0% 10.0% Variable labor costs/case - sales $7.00 Repair/maintenance costs/year $12,000 August 0.0% 12.0% Grape price per ton, ultra-premium $1,600 Variable fuel/supply costs per case $1.00 September 15.0% 15.0% Grape price per ton, super-premium $1,450 Variable utility costs per case $1.65 October 15.0% 18.0% Grape price per ton, premium $1,200 Insurance costs (monthly) $1,200 November 15.0% 8.0% Ultra-premium cases produced annually 925 Office/professional expense (monthly) $500 December 15.0% 9.0% Super-premium cases produced annually 2,775 Variable marketing costs per case $4.00 January 10.0% 3.0% Premium cases produced annually 5,550 Contingency expense 5.0% February 10.0% 3.0% Total cases produced annually (capacity) 9,250 1st year production % 60.0% March 10.0% 4.0% Packaging costs/case $14.50 2nd year production % 80.0% April 10.0% 4.0% Ultra-premium sales price/bottle $22.00 3rd year production % 90.0% May 0.0% 5.0% Super-premium sales price/bottle $15.00 Annual growth rate (years 4 to 5) 5.0% June 0.0% 9.0% Premium sales price/bottle $8.00 Annual growth rate (years 6+) 0.0% Total 2005 100.0% 100.0%