Parkdale Meats

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Butcher Shop Business Plan

Financial Plan

The business will grow after startup from its own cash flow.  Significant growth is possible in the initial target markets before there is a need to take on additional staff or move to a larger facility.  These are possibilities after the first three years, as is opening an additional retail location in an area that will not compete with Parkdale Meats' first location.

Start-up Funding

Funding for the launch of the business will be provided primarily by equity from the two partners.  Each will contribute in equal share from their savings to launch the business.

 

The remainder of financing will be made up in temporary credit card debt taken on by the two founders and accounts payable from delayed payments on start-up costs.

 

The business seeks a business loan to finance the purchase of the equipment needed.  These assets can be held as collateral in this loan.

Start-up Funding
Start-up Expenses to Fund $32,800
Start-up Assets to Fund $182,000
Total Funding Required $214,800
Assets
Non-cash Assets from Start-up $102,000
Cash Requirements from Start-up $80,000
Additional Cash Raised $0
Cash Balance on Starting Date $80,000
Total Assets $182,000
Liabilities and Capital
Liabilities
Current Borrowing $40,000
Long-term Liabilities $40,000
Accounts Payable (Outstanding Bills) $4,800
Other Current Liabilities (interest-free) $0
Total Liabilities $84,800
Capital
Planned Investment
Robert Suidae $65,000
Eryka Auroch $0
Additional Investment Requirement $65,000
Total Planned Investment $130,000
Loss at Start-up (Start-up Expenses) ($32,800)
Total Capital $97,200
Total Capital and Liabilities $182,000
Total Funding $214,800

Important Assumptions

Interest rates and the tax rate reflect the current economic environment that Parkdale Meats will operate within.

Break-even Analysis

Due to the monthly break even in sales, overall company break even is expected in the tenth month of operation.

Break-even Analysis
Monthly Revenue Break-even $42,371
Assumptions:
Average Percent Variable Cost 56%
Estimated Monthly Fixed Cost $18,700

Projected Profit and Loss

Additional direct cost of sales reflects the costs of packaging, gas for deliveries, credit card transaction fees, and other direct costs of the meat preparation and order fulfillment processes.  Gross margins are based on the industry markup for butchered meats.

Marketing expenses will be higher in the first year to announce the opening of the firm and will drop after that.  Most expenses will show small increases each year as the business will remain in the same location over the first three years.  Profit will rise sharply over the first three years as sales are spread over these relatively stable expenses.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $478,711 $825,000 $1,085,000
Direct Cost of Sales $267,436 $465,000 $613,500
Other Costs of Sales $23,936 $41,250 $54,250
Total Cost of Sales $291,372 $506,250 $667,750
Gross Margin $187,339 $318,750 $417,250
Gross Margin % 39.13% 38.64% 38.46%
Expenses
Payroll $146,400 $150,000 $154,000
Marketing/Promotion $18,000 $13,000 $14,000
Depreciation $8,040 $8,040 $8,040
Rent $19,200 $20,160 $21,168
Utilities $2,400 $2,520 $2,646
Insurance $2,400 $2,520 $2,646
Payroll Taxes $21,960 $22,500 $23,100
Other $6,000 $6,300 $6,615
Total Operating Expenses $224,400 $225,040 $232,215
Profit Before Interest and Taxes ($37,061) $93,710 $185,035
EBITDA ($29,021) $101,750 $193,075
Interest Expense $7,725 $3,933 $1,400
Taxes Incurred $0 $26,933 $55,090
Net Profit ($44,786) $62,844 $128,544
Net Profit/Sales -9.36% 7.62% 11.85%

Projected Cash Flow

The business will pay back its current borrowing in credit card debt over the first and second years of operation, and its long-term loan over the first three years of operation, after smaller payments in the first year.

Cash on hand will allow for dividends to be paid to the partners in the second and third years of operation.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $478,711 $825,000 $1,085,000
Subtotal Cash from Operations $478,711 $825,000 $1,085,000
Additional Cash Received
Sales Tax, VAT, HST/GST Received $33,510 $57,750 $75,950
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $512,221 $882,750 $1,160,950
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $146,400 $150,000 $154,000
Bill Payments $321,065 $621,800 $779,090
Subtotal Spent on Operations $467,465 $771,800 $933,090
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $33,510 $57,750 $75,950
Principal Repayment of Current Borrowing $24,000 $16,000 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $6,000 $13,332 $13,332
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $50,000 $100,000
Subtotal Cash Spent $530,975 $908,882 $1,122,372
Net Cash Flow ($18,754) ($26,132) $38,578
Cash Balance $61,246 $35,113 $73,691

Projected Balance Sheet

The balance sheet shows long-term liabilities will be paid off over the first three years and retained earnings will increase in the company, despite dividends being paid.  The business will increasingly develop means to finance its own growth in future years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $61,246 $35,113 $73,691
Inventory $13,219 $16,844 $16,863
Other Current Assets $20,000 $20,000 $20,000
Total Current Assets $94,465 $71,957 $110,554
Long-term Assets
Long-term Assets $80,000 $80,000 $80,000
Accumulated Depreciation $8,040 $16,080 $24,120
Total Long-term Assets $71,960 $63,920 $55,880
Total Assets $166,425 $135,877 $166,434
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $64,010 $49,951 $65,296
Current Borrowing $16,000 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $80,010 $49,951 $65,296
Long-term Liabilities $34,000 $20,668 $7,336
Total Liabilities $114,010 $70,619 $72,632
Paid-in Capital $130,000 $130,000 $130,000
Retained Earnings ($32,800) ($127,586) ($164,742)
Earnings ($44,786) $62,844 $128,544
Total Capital $52,414 $65,258 $93,802
Total Liabilities and Capital $166,425 $135,877 $166,434
Net Worth $52,414 $65,258 $93,802

Business Ratios

The business ratios for Parkdale Meats are compared here against specialty food stores of over $1 million annual revenue.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 72.34% 31.52% -0.06%
Percent of Total Assets
Inventory 7.94% 12.40% 10.13% 23.32%
Other Current Assets 12.02% 14.72% 12.02% 33.42%
Total Current Assets 56.76% 52.96% 66.43% 82.61%
Long-term Assets 43.24% 47.04% 33.57% 17.39%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 48.08% 36.76% 39.23% 37.13%
Long-term Liabilities 20.43% 15.21% 4.41% 30.43%
Total Liabilities 68.51% 51.97% 43.64% 67.55%
Net Worth 31.49% 48.03% 56.36% 32.45%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 39.13% 38.64% 38.46% 19.29%
Selling, General & Administrative Expenses 48.49% 31.02% 26.61% 8.62%
Advertising Expenses 3.76% 1.58% 1.29% 0.29%
Profit Before Interest and Taxes -7.74% 11.36% 17.05% 1.72%
Main Ratios
Current 1.18 1.44 1.69 1.90
Quick 1.02 1.10 1.43 1.28
Total Debt to Total Assets 68.51% 51.97% 43.64% 67.55%
Pre-tax Return on Net Worth -85.45% 137.57% 195.77% 26.22%
Pre-tax Return on Assets -26.91% 66.07% 110.33% 8.51%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -9.36% 7.62% 11.85% n.a
Return on Equity -85.45% 96.30% 137.04% n.a
Activity Ratios
Inventory Turnover 48.00 30.94 36.40 n.a
Accounts Payable Turnover 5.94 12.17 12.17 n.a
Payment Days 27 34 26 n.a
Total Asset Turnover 2.88 6.07 6.52 n.a
Debt Ratios
Debt to Net Worth 2.18 1.08 0.77 n.a
Current Liab. to Liab. 0.70 0.71 0.90 n.a
Liquidity Ratios
Net Working Capital $14,454 $22,006 $45,258 n.a
Interest Coverage -4.80 23.82 132.15 n.a
Additional Ratios
Assets to Sales 0.35 0.16 0.15 n.a
Current Debt/Total Assets 48% 37% 39% n.a
Acid Test 1.02 1.10 1.43 n.a
Sales/Net Worth 9.13 12.64 11.57 n.a
Dividend Payout 0.00 0.80 0.78 n.a