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E-Commerce Project: Business Plan

Financial Plan

We want to finance growth through a combination of long-term debt and cash flow. Purchase of the larger facility and equipment will require approximately eighty percent debt financing. Additional technology will be primarily financed with cash-flow. Inventory turnover must remain at or above four or we run the risk of backing up orders and jeopardizing our freshness guarantees. We have had no problems with accounts receivable and we expect to maintain our collection days at 30 with thirty percent of sales on credit.

In addition, we must achieve gross margins of forty-five percent and hold operating costs no more than fifty-five percent of sales.

Important Assumptions

Important assumptions for this plan are found in the following table. These assumptions largely determine the financial plan and require that we secure additional financing.

General Assumptions
	1999	2000	2001
Plan Month	1	2	3
Current Interest Rate	14.00%	14.00%	14.00%
Long-term Interest Rate	9.00%	9.00%	9.00%
Tax Rate	45.58%	47.00%	45.58%
Other	0	0	0

7.2 Key Financial Indicators

The most important factor to COYO .Inc. anticipated growth is the procurement of necessary financing. The size of the orders currently requested by importers are larger than what can be produced given our present plant capacity.

The following chart shows changes in key financial indicators: sales, gross margin, operating expenses, collection days, and inventory turnover. The growth in sales goes above thirty percent in the first year, twenty percent in second, and back to thirty percent in year three after which it will settle. We expect to increase gross margin but our projections show a decline in the first two years following the purchase of the new facility. This is due to the facilities not being run at maximum capacity. The projections for collection days and inventory turnover show that we expect a decline in these indicators.

Benchmarks

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7.3 Break-even Analysis

The break-even analysis shows that COYO.Inc has sufficient sales strength to remain viable. Our break-even point is close to 7,300 units per month and our sales forecast for the next year calls for almost 8500 units per month on average. Projections are detailed in the following table.

Break-even Analysis

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Break-even Analysis:
Monthly Units Break-even	7,333
Monthly Revenue Break-even	$1,774,667

Assumptions:
Average Per-Unit Revenue	$242.00
Average Per-Unit Variable Cost	$212.00
Estimated Monthly Fixed Cost	$220,000

7.4 Projected Profit and Loss

We expect to close the first year of production in the new facility with ($BRL) 26,260,416 in sales and increase our sales to more than ($BRL) 33 million in the second year and ($BRL) 46 million in year three. Net earnings will average ($BRL) 2.4 million.

Pro Forma Profit and Loss
	1999	2000	2001
Sales	$26,260,416	$33,021,600	$46,126,400
Direct Costs of Goods	$21,242,400	$26,712,000	$37,312,000
Production Payroll	$300,396	$316,884	$331,912
Other	$300,000	$345,000	$410,000
	------------	------------	------------
Cost of Goods Sold	$21,842,796	$27,373,884	$38,053,912
Gross Margin	$4,417,620	$5,647,716	$8,072,488
Gross Margin %	16.82%	17.10%	17.50%
Operating Expenses:
Sales and Marketing Expenses:
Sales and Marketing Payroll	$225,492	$128,150	$136,521
Advertising/Promotion	$144,000	$165,000	$165,000
Travel	$21,000	$22,500	$24,000
Miscellaneous	$24,000	$26,500	$28,500
Other	$0	$0	$0
	------------	------------	------------
Total Sales and Marketing Expenses	$414,492	$342,150	$354,021
Sales and Marketing %	1.58%	1.04%	0.77%
General and Administrative Expenses:
General and Administrative Payroll	$119,400	$130,228	$173,377
Sales and Marketing and Other Expenses	$0	$0	$0
Depreciation	$216,000	$216,000	$216,000
Leased Equipment	$50,400	$50,400	$50,400
Utilities	$36,000	$36,000	$36,000
Insurance	$72,000	$75,000	$78,000
Rent	$305,250	$300,000	$300,000
Other	$0	$0	$0
Payroll Taxes	$58,076	$51,774	$57,763
Other General and Administrative Expenses	$0	$0	$0
	------------	------------	------------
Total General and Administrative Expenses	$857,126	$859,402	$911,540
General and Administrative %	3.26%	2.60%	1.98%
Other Expenses:
Other Payroll	$0	$0	$0
Contract/Consultants	$18,000	$24,000	$30,000
Other	$0	$0	$0
	------------	------------	------------
Total Other Expenses	$18,000	$24,000	$30,000
Other %	0.07%	0.07%	0.07%
	------------	------------	------------
Total Operating Expenses	$1,289,618	$1,225,552	$1,295,561
Profit Before Interest and Taxes	$3,128,002	$4,422,164	$6,776,927
Interest Expense	$262,644	$214,159	$161,392
Taxes Incurred	$1,299,147	$1,977,763	$3,015,582
Net Profit	$1,566,211	$2,230,243	$3,599,954
Net Profit/Sales	5.96%	6.75%	7.80%

7.5 Projected Cash Flow

COYO. Inc expects to manage cash flow over the next three years with the assistance of a loan supported by the Central Bank of Brazil of ($BRL) 2,700.000. This financing assistance is required to provide the working capital to meet the current needs for the construction of the new production facility and additional personnel, distribution costs, and other related expenses.

Cash

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Pro Forma Cash Flow
	1999	2000	2001

Cash Received
Cash from Operations:
Cash Sales	$26,260,416	$33,021,600	$46,126,400
Cash from Receivables	$137,250	$0	$0
Subtotal Cash from Operations	$26,397,666	$33,021,600	$46,126,400

Additional Cash Received
Sales Tax, VAT, HST/GST Received	$0	$0	$0
New Current Borrowing	$0	$0	$0
New Other Liabilities (interest-free)	$0	$0	$0
New Long-term Liabilities	$2,700,000	$0	$0
Sales of Other Current Assets	$0	$0	$0
Sales of Long-term Assets	$0	$0	$0
New Investment Received	$0	$650,000	$650,000
Subtotal Cash Received	$29,097,666	$33,671,600	$46,776,400

Expenditures	1999	2000	2001
Expenditures from Operations:
Cash Spending	$1,400,401	$1,524,093	$2,133,911
Payment of Accounts Payable	$20,136,432	$29,123,331	$39,159,844
Subtotal Spent on Operations	$21,536,832	$30,647,424	$41,293,754

Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out	$0	$0	$0
Principal Repayment of Current Borrowing	$144,000	$175,000	$200,000
Other Liabilities Principal Repayment	$27,600	$25,300	$25,300
Long-term Liabilities Principal Repayment	$305,250	$294,636	$294,636
Purchase Other Current Assets	$60,000	$75,000	$85,000
Purchase Long-term Assets	$2,700,000	$0	$0
Dividends	$0	$0	$0
Subtotal Cash Spent	$24,773,682	$31,217,360	$41,898,690

Net Cash Flow	$4,323,984	$2,454,240	$4,877,710
Cash Balance	$5,318,244	$7,772,484	$12,650,194

7.6 Projected Balance Sheet

As shown in the balance sheet in the following table, our net will grow from approximately ($BRL) 935,626 to more than ($BRL) 1.48 million by the end of 1999 and to ($BRL) 3.46 million by the end of the plan period. The monthly projections are in the appendices.

Pro Forma Balance Sheet

Assets
Current Assets	1999	2000	2001
Cash	$5,318,244	$7,772,484	$12,650,194
Inventory	$1,780,800	$2,239,329	$3,127,952
Other Current Assets	$303,936	$378,936	$463,936
Total Current Assets	$7,402,980	$10,390,750	$16,242,082
Long-term Assets
Long-term Assets	$3,221,650	$3,221,650	$3,221,650
Accumulated Depreciation	$316,000	$532,000	$748,000
Total Long-term Assets	$2,905,650	$2,689,650	$2,473,650
Total Assets	$10,308,630	$13,080,400	$18,715,732

Liabilities and Capital
Current Liabilities	1999	2000	2001
Accounts Payable	$4,375,408	$4,761,870	$6,667,185
Current Borrowing	($86,000)	($261,000)	($461,000)
Other Current Liabilities	($27,600)	($52,900)	($78,200)
Subtotal Current Liabilities	$4,261,808	$4,447,970	$6,127,985

Long-term Liabilities	$2,796,750	$2,502,114	$2,207,478
Total Liabilities	$7,058,558	$6,950,084	$8,335,463

Paid-in Capital	$525,000	$1,175,000	$1,825,000
Retained Earnings	$1,021,611	$2,587,822	$4,818,065
Earnings	$1,566,211	$2,230,243	$3,599,954
Total Capital	$3,112,822	$5,993,065	$10,243,019
Total Liabilities and Capital	$10,171,380	$12,943,150	$18,578,482
Net Worth	$3,250,072	$6,130,315	$10,380,269

7.7 Business Ratios

Standard business ratios are included in the following table. The ratios show an aggressive plan for growth in order to reach maximum production within three years. Return on investment increases each year as we bring the new facility to maximum capacity and production. Return on sales and assets remain strong and cost of goods decreases based upon efficiency projections. Projections are based on the 1997/98 selling price.

Ratio Analysis
	1999	2000	2001	Industry Profile
Sales Growth	43.14%	25.75%	39.69%	-4.40%

Percent of Total Assets
Accounts Receivable	0.00%	0.00%	0.00%	22.10%
Inventory	17.27%	17.12%	16.71%	15.60%
Other Current Assets	2.95%	2.90%	2.48%	26.00%
Total Current Assets	71.81%	79.44%	86.78%	63.70%
Long-term Assets	28.19%	20.56%	13.22%	36.30%
Total Assets	100.00%	100.00%	100.00%	100.00%

Current Liabilities	41.34%	34.00%	32.74%	26.20%
Long-term Liabilities	27.13%	19.13%	11.79%	18.00%
Total Liabilities	68.47%	53.13%	44.54%	44.20%
Net Worth	31.53%	46.87%	55.46%	55.80%

Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	16.82%	17.10%	17.50%	33.10%
Selling, General & Administrative Expenses	11.04%	10.35%	9.90%	20.70%
Advertising Expenses	0.55%	0.50%	0.36%	1.90%
Profit Before Interest and Taxes	11.91%	13.39%	14.69%	2.80%

Main Ratios
Current	1.74	2.34	2.65	2.23
Quick	1.32	1.83	2.14	1.40
Total Debt to Total Assets	68.47%	53.13%	44.54%	44.20%
Pre-tax Return on Net Worth	88.16%	68.64%	63.73%	6.50%
Pre-tax Return on Assets	27.80%	32.17%	35.35%	11.60%

Additional Ratios	1999	2000	2001
Net Profit Margin	5.96%	6.75%	7.80%	n.a
Return on Equity	48.19%	36.38%	34.68%	n.a

Activity Ratios
Accounts Receivable Turnover	0.00	0.00	0.00	n.a
Collection Days	0	0	0	n.a
Inventory Turnover	12.00	13.29	13.90	n.a
Accounts Payable Turnover	5.60	6.20	6.16	n.a
Payment Days	58	57	51	n.a
Total Asset Turnover	2.55	2.52	2.46	n.a

Debt Ratios
Debt to Net Worth	2.17	1.13	0.80	n.a
Current Liab. to Liab.	0.60	0.64	0.74	n.a

Liquidity Ratios
Net Working Capital	$3,141,172	$5,942,779	$10,114,097	n.a
Interest Coverage	11.91	20.65	41.99	n.a

Additional Ratios
Assets to Sales	0.39	0.40	0.41	n.a
Current Debt/Total Assets	41%	34%	33%	n.a
Acid Test	1.32	1.83	2.14	n.a
Sales/Net Worth	8.08	5.39	4.44	n.a
Dividend Payout	0.00	0.00	0.00	n.a
3.0 Products

COYO. Inc. deal exclusively in green coffee, grown in the southern states of Brazil and one-hundred percent Arabica. Beans in parchment are purchased directly from growers and are de-husked and packaged into 60kg sacks in the COYO.Inc' plant. The final product is suitable for sale and exportation.

3.1 Competitive Comparison

In order to differentiate our product, coffee, which is a commodity, from the product offering of competitors, all beans are guaranteed fresh and are shipped within seven days of preparation. In addition all beans are sorted at ninety-five percent screen 18 and above compared to the industry standard ninety percent screen of 17 and above. The beans shipped by COYO.Inc are therefore larger than most and are guaranteed fresh. In addition, all of the farms from which COYO.Inc purchases coffee adhere to environmentally sound farming practices and avoid the use of pesticides and chemicals in crop production.

There are approximately ten competitors who offer a product similar to ours. Our research indicates that with the additional capacity we would become one of the top four, in terms of quantity, providers. We have the advantage of established distribution channels and reputation. In addition, improvements to our marketing efforts will further separate us from the larger market and from our close competitors.

3.2 Sales Literature

COYO.Inc currently works with two importers in the United States who handle all of our shipments. Likewise, we have dealt with the same Brazilian wholesalers, for internal sales, each year. Sales to this point have been handled through personal selling. Additional sales literature will include a website, direct mail to specialty roasters and importers, and print advertising in several trade publications including Coffee Times, a monthly publication which targets American business dealing with issues relevant to the coffee industry.

3.3 Sourcing

Both the existing and the proposed facilities are ideally located in Ouro Fino, in the state of Minas Gerais. Minas Gerais is the largest coffee producing state in Brazil and beans produced in the region are of the highest quality. With additional financing, we would be able to buy larger volumes at lower prices. We now buy from one or more of six private growers or grower cooperatives. Contracts are secured six months in advance of harvest.

3.4 Technology

Improvements in technology will include the use of partially automated selecting machines which will allow for increased production capacity with a lower machine-to-operator ratio than we currently employ. Additional storage capabilities will decrease shipping charges and will reduce the need for permanent shipping employees by thirty-five percent. High-technology information system upgrades will improve all aspects of business, especially inventory control, tracking of shipments, and communication with clients in import countries.

3.5 Future Products

Alternative to the Arabica bean, Coffea Robusta, though it shares some similarities with the Arabica bean, is very different. Coffea Robusta is grown at lower elevations and has a higher yield per plant as well as being more resistant to disease. It also has up to twice the caffeine level as it's cousin the Arabica Bean. Due to the lower cost and larger market amount of Robusta coffee, it is found primarily on supermarket shelves. The Arabica species grows at much higher elevations, better soil rich areas, and is the source of the worlds finest coffees.

By providing the finest species of coffee, COYO.Inc has taken the first step towards a differentiated product. To further distinguish our coffee, we adhere to higher quality standards than approximately ninety-five percent of the market. In addition, all of our beans are of the Bourbon Santos variety. The "Bourbon" strain is considered one of the finest Brazil has to offer. It is grown in the mountains surrounding Sao Paulo and is highly sought after by specialty roasters from around the world. We have assumed the position of a specialized provider of this exceptional coffee. Our customers, American and Brazilian specialty roasters, recognize COYO.Inc for our ability to provide the type of beans they require to produce award winning coffee.

Releference: COYO.Inc( Export Coffee Business Plan)