What's For Dinner?

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Food Preparation Business Plan

Financial Plan

What's For Dinner expects strong sales, based on research into our target market, similar businesses in other parts of the country, lack of direct competition, and the experience, reputations, and know-how of its owners/managers. By steadily repaying our long-term loan and holding down costs, we will generate a net profit midway through the first year and increase net worth dramatically by year 3. Our major fixed expenses are payroll and rent.

8.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions. The monthly assumptions are included in the appendices. 

Three of the more important underlying assumptions are: 

  • We assume a relatively strong economy, without major new recessions. Although an ailing economy would not allow us the growth that we anticipate, we believe that it would not drastically hurt the business because the service is economically feasible. The $175 session fee breaks down to $14.58 per meal - a deal hard to beat at even a fast-food restaurant for a family of four to six.
  • We assume that our market needs will be seasonal, with a decrease in sales during the summer months.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 7.00% 7.00% 7.00%
Long-term Interest Rate 7.00% 7.00% 7.00%
Tax Rate 24.00% 24.00% 24.00%
Other 0 0 0

8.2 Break-even Analysis

The following chart and table summarize our break-even analysis. With fixed costs of $10,520 per month at the outset (to cover payroll and other operating costs), and variable costs (inventory) at 74% of sales, we need to bill $41,167 to cover our costs. We do not expect to reach break-even until the sixth month into the business operation.

Break-even Analysis
Monthly Revenue Break-even $39,503
Assumptions:
Average Percent Variable Cost 74%
Estimated Monthly Fixed Cost $10,095

8.3 Projected Profit and Loss

What's For Dinner?'s projected profit and loss is shown in the following table, with sales increasing from $10K the first month to close to $1.4M by the third year. We will reach profitability in the middle of our first year.

We are projecting very conservatively regarding cost of sales and gross margin. Our costs of sales are based on grocery store prices, which will decrease once we are to consistently able to buy our food in larger quantities from a food distributor. This will significantly lower our cost of sales, and increase our gross margin more than in this projection. We prefer to project conservatively so that we make sure we have enough cash.

The Sales and Marketing Expenses vary from the food preparation industry norms. Our Sales and Marketing Expenses will be to consistently maintain our advertising and promotions, while our biggest marketing will be word of mouth from our customers. We are budgeting for a high level of service from our website hosting company and payment processor, since the website is a key component of our Sales and Marketing Strategies.

 The detailed monthly projections are included in the appendices.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $882,179 $1,102,724 $1,378,405
Direct Cost of Sales $656,733 $820,917 $1,026,146
Other Costs of Sales $0 $0 $0
Total Cost of Sales $656,733 $820,917 $1,026,146
Gross Margin $225,446 $281,807 $352,259
Gross Margin % 25.56% 25.56% 25.56%
Expenses
Payroll $34,000 $45,000 $60,000
Sales and Marketing and Other Expenses $3,000 $3,000 $3,000
Depreciation $4,200 $4,200 $4,200
Rent $53,304 $54,000 $54,500
Utilities $13,160 $14,476 $15,924
Office Supplies $1,200 $1,200 $1,200
Insurance $3,000 $3,000 $3,000
Payroll Taxes $0 $0 $0
Accountant $3,000 $3,200 $3,500
Lawyer $1,000 $1,100 $1,100
Bank Charges $180 $180 $180
Website Payment Fees $600 $700 $800
Website Hosting & Support $1,500 $1,600 $1,650
Repairs and Maintenance $3,000 $3,000 $3,000
Other $0 $0 $0
Total Operating Expenses $121,144 $134,656 $152,054
Profit Before Interest and Taxes $104,302 $147,151 $200,205
EBITDA $108,502 $151,351 $204,405
Interest Expense $17,342 $15,861 $14,316
Taxes Incurred $20,870 $31,510 $44,614
Net Profit $66,089 $99,780 $141,276
Net Profit/Sales 7.49% 9.05% 10.25%

8.4 Projected Cash Flow

The following cash flow projections show the annual amounts only. Cash flow projections are critical to our success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month, and the other the monthly cash balance. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendices.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $882,179 $1,102,724 $1,378,405
Subtotal Cash from Operations $882,179 $1,102,724 $1,378,405
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 $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 $882,179 $1,102,724 $1,378,405
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $34,000 $45,000 $60,000
Bill Payments $758,414 $1,055,142 $1,197,241
Subtotal Spent on Operations $792,414 $1,100,142 $1,257,241
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $22,080 $22,080 $22,080
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $814,494 $1,122,222 $1,279,321
Net Cash Flow $67,685 ($19,498) $99,083
Cash Balance $101,685 $82,187 $181,270

8.5 Projected Balance Sheet

The balance sheet in the following table shows managed but sufficient growth of net worth, and a sufficiently healthy financial position. Our negative net worth, due to borrowed capital for start-up, makes a significant increase by the second year, and becomes positive in year three. It is common for start-up businesses to have a negative net worth their first few years.

The monthly estimates are included in the appendices.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $101,685 $82,187 $181,270
Inventory $137,714 $172,142 $215,178
Other Current Assets $8,000 $8,000 $8,000
Total Current Assets $247,399 $262,329 $404,448
Long-term Assets
Long-term Assets $42,000 $42,000 $42,000
Accumulated Depreciation $4,200 $8,400 $12,600
Total Long-term Assets $37,800 $33,600 $29,400
Total Assets $285,199 $295,929 $433,848
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $148,189 $81,220 $99,942
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $148,189 $81,220 $99,942
Long-term Liabilities $237,628 $215,548 $193,468
Total Liabilities $385,817 $296,768 $293,410
Paid-in Capital $30,000 $30,000 $30,000
Retained Earnings ($196,708) ($130,619) ($30,838)
Earnings $66,089 $99,780 $141,276
Total Capital ($100,619) ($838) $140,438
Total Liabilities and Capital $285,199 $295,929 $433,848
Net Worth ($100,619) ($838) $140,438

8.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 2099, Food Preparation, are shown for comparison.

The following table outlines some of the more important ratios from the Food Preparation industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 2099.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 25.00% 25.00% 5.54%
Percent of Total Assets
Inventory 48.29% 58.17% 49.60% 11.58%
Other Current Assets 2.81% 2.70% 1.84% 22.16%
Total Current Assets 86.75% 88.65% 93.22% 53.03%
Long-term Assets 13.25% 11.35% 6.78% 46.97%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 51.96% 27.45% 23.04% 27.29%
Long-term Liabilities 83.32% 72.84% 44.59% 20.18%
Total Liabilities 135.28% 100.28% 67.63% 47.47%
Net Worth -35.28% -0.28% 32.37% 52.53%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 25.56% 25.56% 25.56% 30.90%
Selling, General & Administrative Expenses 17.88% 16.00% 15.03% 16.61%
Advertising Expenses 0.00% 0.00% 0.00% 1.28%
Profit Before Interest and Taxes 11.82% 13.34% 14.52% 1.33%
Main Ratios
Current 1.67 3.23 4.05 1.54
Quick 0.74 1.11 1.89 0.98
Total Debt to Total Assets 135.28% 100.28% 67.63% 55.42%
Pre-tax Return on Net Worth -86.42% -15658.38% 132.36% 2.12%
Pre-tax Return on Assets 30.49% 44.37% 42.85% 4.76%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 7.49% 9.05% 10.25% n.a
Return on Equity 0.00% 0.00% 100.60% n.a
Activity Ratios
Inventory Turnover 10.91 5.30 5.30 n.a
Accounts Payable Turnover 6.12 12.17 12.17 n.a
Payment Days 27 42 27 n.a
Total Asset Turnover 3.09 3.73 3.18 n.a
Debt Ratios
Debt to Net Worth 0.00 0.00 2.09 n.a
Current Liab. to Liab. 0.38 0.27 0.34 n.a
Liquidity Ratios
Net Working Capital $99,209 $181,110 $304,506 n.a
Interest Coverage 6.01 9.28 13.99 n.a
Additional Ratios
Assets to Sales 0.32 0.27 0.31 n.a
Current Debt/Total Assets 52% 27% 23% n.a
Acid Test 0.74 1.11 1.89 n.a
Sales/Net Worth 0.00 0.00 9.82 n.a
Dividend Payout 0.00 0.00 0.00 n.a