Quick and Efficient Gas Business Plan — Key Assumptions
Every volume, price, margin, cost and funding assumption behind the model, and those most in need of verification.
Key Assumptions
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- Overview & contents
- i. Important Notice and Basis of Preparation
- 1. Executive Summary
- 2. The Business and the Regulated Price
- 3. Licensing, Safety and Compliance
- 4. Market and Customers
- 5. SWOT and Competitive Position
- 6. Operations
- 7. Financial Plan
- 8. Break-Even and Debt Service
- 9. Investment Analysis
- 10. Sensitivity and Scenario Analysis
- 11. The Margin Squeeze
- 12. Risk Analysis
- 13. Implementation Roadmap
- 14. Key Performance Indicators
- 15. Key Assumptions
- 16. Conclusion and Recommendation
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Volume, Price and Cost Schedules
- C. Appendix C: Funding, Debt and Working Capital Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
- 15.1 Volume, price and margin
- 15.2 Capital, funding and tax
- 15.3 Assumptions most in need of independent verification
15.1 Volume, price and margin
|
Assumption |
Year 1 |
Year 5 |
Basis |
|---|---|---|---|
|
Cylinder fills a trading day |
27.3 |
49.4 |
Break-even is 30.9. Year 1 trades below it by construction |
|
Trading days |
310 |
310 |
Six days a week, allowing for public holidays |
|
Average kilograms a fill |
16.9 |
16.9 |
Weighted across 9, 14, 19 and 48 kg cylinders |
|
Tonnes of LPG sold |
143.0 |
258.9 |
Fills times days times average fill |
|
Maximum retail price |
R42.00/kg |
R50.09/kg |
Gazetted for the Johannesburg zone; escalated at 4.5% a year |
|
Bulk delivered price |
R30.80/kg |
R37.68/kg effective |
Assumed and modelled; escalated at 4.7% a year |
|
Fill loss |
1.8% |
1.8% |
Vapour, purging and weighing tolerance |
|
Gas margin a kilogram |
R10.64 |
R12.40 |
25.3% of the capped price in Year 1, drifting to 24.8% |
|
Accessory revenue |
R2 054 000 |
R3 821 116 |
Grows faster than gas as the customer base builds |
|
Accessory gross profit |
R684 750 |
R1 273 860 |
22% to 56% margins across cylinders, appliances and installation |
|
Operating costs |
R2 405 104 |
R2 945 756 |
Escalated at 5.2% a year |
15.2 Capital, funding and tax
|
Assumption |
Value |
Basis |
|---|---|---|
|
Bulk LPG storage vessel and installation |
R685 000 |
4.9 tonne, holding about 4 165 kg of usable gas |
|
Cylinder float |
R512 000 |
Initial stock of exchange cylinders; real capital that does not depreciate quickly |
|
Filling bay, fire protection and hardstand |
R752 000 |
Pump, meters, scales, hoses, deluge, detection, bunding and fencing |
|
Delivery vehicle |
R348 000 |
LDV with cylinder cage, dangerous-goods compliant |
|
Shop fit-out, electrical, fees, POS and IT |
R394 000 |
Hazardous-area compliant reticulation; design, SAQCC and CoC fees |
|
Capital expenditure |
R2 691 000 |
|
|
Working capital, licences and pre-opening |
R1 350 000 |
Includes the Year 1 trading loss and the seasonal working capital swing |
|
Total funding requirement |
R4 041 000 |
|
|
Owner equity |
R2 100 000 |
52.0% of the requirement |
|
Term loan |
R1 941 000 |
Five years at 13.75% with a three-month capital moratorium |
|
Depreciation |
R268 067 a year |
Straight-line over asset lives of 4 to 15 years |
|
Pre-opening costs |
R170 000 |
Funded at day zero; charged to Year 1 below EBITDA |
|
Taxation |
Small Business Corporation rates |
Year 1 assessed loss carried forward; no tax before Year 4 |
|
Debtor days |
9 days |
Largely a cash and card business; accounts for small-business customers |
|
Creditor days |
21 days |
Wholesale supply terms |
|
Stock days |
14 days |
Gas in the vessel plus accessory inventory |
|
Exit multiple |
3.5x Year 5 EBITDA |
An owner-operated retail business with a hard asset base |
15.3 Assumptions most in need of independent verification
|
Assumption |
Modelled |
Verification required |
Consequence if wrong |
|---|---|---|---|
|
Bulk delivered price of R30.80 a kilogram |
Escalated at 4.7% a year |
A written supply agreement with a licensed wholesaler, before the lease is signed |
The largest lever in the model. Break-even is R34.39 — headroom of only 12% |
|
Municipal consent use obtainable at the chosen site |
Assumed available |
In-principle indication from the municipality before lease negotiation |
Without it the business cannot trade and R2 691 000 of installation is stranded |
|
47 cylinder fills a trading day at maturity |
From 27.3 in Year 1 |
Traffic counts, catchment density and competitor mapping at the specific site |
Break-even is 30.9 fills. A 22% shortfall produces cumulative negative EBITDA |
|
Accessory revenue of R2 054 000 in Year 1 |
Growing to R3 821 116 |
Local pricing and attachment rates for cylinders, appliances and installation |
Without accessories break-even rises from 30.9 to 43.1 fills a day |
|
Winter delivery availability at 4.9 a month |
Contracted with the wholesaler |
A written winter delivery commitment, not an assurance |
The vessel cannot be stockpiled. A supply failure in July costs the best trading weeks |
|
A SAQCC-registered filler recruitable and retainable |
One from opening, two by Year 3 |
Direct market testing before the licence application |
The shop cannot lawfully fill without one on site |
|
Rent at R118/m² a month on 320 m² |
R453 120 a year |
Comparable rentals for correctly zoned sites with tanker access |
Rent is 19% of the operating cost base and fixed at lease signature |
The list is ordered by consequence, and the first two are not close. The buying price determines whether the business works at all, and consent use determines whether it can open. Both are knowable before a lease is signed, and neither is recoverable afterwards.