Rockin Roll

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Karaoke Bar - Bowling Alley Business Plan

Financial Plan

  • Rockin' Roll Bowling Lanes wants to attract local bowling leaguers, youths and senior citizens. This will require advertising on local radio shows and cable networks as well as reaching out to businesses, clubs and bowlers.
  • The most important factor in our case is getting them in the door. Once our customers come in the door they will be personally greeted by Pelvis Restley and made to feel comfortable so that they keep coming back.
  • We are also assuming start-up capital of $200,000.

7.1 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 appendix. From the beginning, we recognize that youths and seniors are critical, but not a factor we can influence easily. At least we are planning on advertising to seniors and youths and dealing with it. Bowling league participation rates are based on conservative assumptions.

Two of the more important underlying assumptions are:

  1. We assume youths, seniors, and adult bowlers will congregate together at Rockin' Roll Bowling Lanes given separate environments to listen to their own preferences in music.
  2. We assume that there are no unforeseen changes in the local bowling community to increase competition in Fremont.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

7.2 Break-even Analysis

The following chart and table summarize our break-even analysis. With fixed costs of $16,000 per month at the outset (a bare minimum), we need to generate approximately $21,600 to break even, but don't really expect to reach break-even until a few months into the business operation.

The break-even assumes variable costs of 25 percent of revenue.

Break-even Analysis
Monthly Revenue Break-even $21,644
Assumptions:
Average Percent Variable Cost 26%
Estimated Monthly Fixed Cost $16,057

7.3 Projected Balance Sheet

The balance sheet in the following table shows managed but sufficient growth of net worth, and a sufficiently healthy financial position. The monthly estimates are included in the appendix.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $174,603 $260,324 $431,807
Inventory $13,805 $22,243 $28,407
Other Current Assets $0 $0 $0
Total Current Assets $188,408 $282,567 $460,214
Long-term Assets
Long-term Assets $77,900 $77,900 $77,900
Accumulated Depreciation $7,788 $15,576 $23,364
Total Long-term Assets $70,112 $62,324 $54,536
Total Assets $258,520 $344,891 $514,750
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $31,162 $30,427 $37,094
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $31,162 $30,427 $37,094
Long-term Liabilities $0 $0 $0
Total Liabilities $31,162 $30,427 $37,094
Paid-in Capital $200,000 $200,000 $200,000
Retained Earnings ($65,000) $27,358 $114,464
Earnings $92,358 $87,106 $163,192
Total Capital $227,358 $314,464 $477,656
Total Liabilities and Capital $258,520 $344,891 $514,750
Net Worth $227,358 $314,464 $477,656

7.4 Projected Profit and Loss

The following table indicates the projected profit and loss.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $437,570 $558,889 $718,370
Direct Cost of Sales $112,950 $181,988 $232,425
Hidden Row $0 $0 $0
Total Cost of Sales $112,950 $181,988 $232,425
Gross Margin $324,620 $376,901 $485,946
Gross Margin % 74.19% 67.44% 67.65%
Expenses
Payroll $85,680 $102,240 $102,240
Sales and Marketing and Other Expenses $3,000 $3,000 $3,000
Depreciation $7,788 $7,788 $7,788
Rent $80,000 $120,000 $120,000
Utilities $3,360 $3,600 $3,900
Insurance $0 $500 $550
Payroll Taxes $12,852 $15,336 $15,336
Total Operating Expenses $192,680 $252,464 $252,814
Profit Before Interest and Taxes $131,940 $124,437 $233,132
EBITDA $139,728 $132,225 $240,920
Interest Expense $0 $0 $0
Taxes Incurred $39,582 $37,331 $69,940
Other Income
Interest Income $0 $0 $0
Other Income Account Name $0 $0 $0
Total Other Income $0 $0 $0
Other Expense
Account Name $0 $0 $0
Other Expense Account Name $0 $0 $0
Total Other Expense $0 $0 $0
Net Other Income $0 $0 $0
Net Profit $92,358 $87,106 $163,192
Net Profit/Sales 21.11% 15.59% 22.72%

7.5 Projected Cash Flow

The following cash flow projections show the initial investment ($200,000).

Cash flow projections are critical to Rockin' Roll's 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 appendix.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $437,570 $558,889 $718,370
Subtotal Cash from Operations $437,570 $558,889 $718,370
Additional Cash Received
Non Operating (Other) Income $0 $0 $0
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 $437,570 $558,889 $718,370
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $85,680 $102,240 $102,240
Bill Payments $227,387 $370,928 $444,647
Subtotal Spent on Operations $313,067 $473,168 $546,887
Additional Cash Spent
Non Operating (Other) Expense $0 $0 $0
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 $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $313,067 $473,168 $546,887
Net Cash Flow $124,503 $85,721 $171,483
Cash Balance $174,603 $260,324 $431,807

7.6 Business Ratios

The following table shows the projected businesses ratios. We expect to maintain healthy ratios for profitability, risk, and return.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 27.73% 28.54% 0.11%
Percent of Total Assets
Inventory 5.34% 6.45% 5.52% 3.48%
Other Current Assets 0.00% 0.00% 0.00% 36.21%
Total Current Assets 72.88% 81.93% 89.41% 46.12%
Long-term Assets 27.12% 18.07% 10.59% 53.88%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 12.05% 8.82% 7.21% 15.99%
Long-term Liabilities 0.00% 0.00% 0.00% 26.89%
Total Liabilities 12.05% 8.82% 7.21% 42.88%
Net Worth 87.95% 91.18% 92.79% 57.12%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 74.19% 67.44% 67.65% 100.00%
Selling, General & Administrative Expenses 46.09% 47.32% 36.86% 75.02%
Advertising Expenses 0.00% 0.00% 0.00% 3.53%
Profit Before Interest and Taxes 30.15% 22.27% 32.45% 1.62%
Main Ratios
Current 6.05 9.29 12.41 1.74
Quick 5.60 8.56 11.64 1.18
Total Debt to Total Assets 12.05% 8.82% 7.21% 54.33%
Pre-tax Return on Net Worth 58.03% 39.57% 48.81% 1.54%
Pre-tax Return on Assets 51.04% 36.08% 45.29% 3.37%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 21.11% 15.59% 22.72% n.a
Return on Equity 40.62% 27.70% 34.17% n.a
Activity Ratios
Inventory Turnover 9.33 10.10 9.18 n.a
Accounts Payable Turnover 8.30 12.17 12.17 n.a
Payment Days 28 30 27 n.a
Total Asset Turnover 1.69 1.62 1.40 n.a
Debt Ratios
Debt to Net Worth 0.14 0.10 0.08 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $157,246 $252,140 $423,120 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.59 0.62 0.72 n.a
Current Debt/Total Assets 12% 9% 7% n.a
Acid Test 5.60 8.56 11.64 n.a
Sales/Net Worth 1.92 1.78 1.50 n.a
Dividend Payout 0.00 0.00 0.00 n.a