Pizzeria del Causamali

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Pizzeria Business Plan

Financial Plan

The financial picture is quite encouraging.  We will be slow to take on debt and heavily investing our own assets, but with our increase in sales we do expect to apply for a credit line with the bank, to a limit of $50,000.  The credit line is supported by assets.

8.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table.  The key underlying assumptions are:

  • We assume a fairly high-growth economy for pizza in the Deauville area, given the lack of competition and interest in having a pizza restaurant available in the area and pent-up demand. 
  • We assume, of course, that there are no unforeseen changes in technology to make our products immediately obsolete. 
  • We assume access to equity capital and financing sufficient to maintain our financial plan as shown in the tables.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 6.00% 6.00% 6.00%
Long-term Interest Rate 5.00% 5.00% 5.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

8.2 Break-even Analysis

Our break-even analysis is based on running costs, the "burn-rate" costs we incur to keep the business running, not on theoretical fixed costs that would be relevant only if we were closing. The essential insight here is that our sales level seems to be running comfortably above break-even. 

Break-even Analysis
Monthly Revenue Break-even $16,283
Assumptions:
Average Percent Variable Cost 24%
Estimated Monthly Fixed Cost $12,454

8.3 Projected Profit and Loss

We expect to be profitable in the first year, with profits increasing over the next two years, as we establish a loyal customer base.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $240,673 $258,055 $276,120
Direct Cost of Sales $56,587 $59,416 $62,387
Other Costs of Goods $0 $0 $0
Total Cost of Sales $56,587 $59,416 $62,387
Gross Margin $184,087 $198,639 $213,733
Gross Margin % 76.49% 76.98% 77.41%
Expenses
Payroll $105,720 $111,006 $116,556
Sales and Marketing and Other Expenses $7,250 $7,250 $7,500
Depreciation $2,040 $1,836 $1,652
Rent $14,400 $14,400 $14,400
Utilities $7,200 $7,200 $7,200
Insurance $4,200 $4,500 $4,800
Payroll Taxes $8,042 $8,444 $8,866
Website Hosting and Maintenance $600 $50 $50
Other $0 $0 $0
Total Operating Expenses $149,452 $154,686 $161,024
Profit Before Interest and Taxes $34,635 $43,954 $52,709
EBITDA $36,675 $45,790 $54,361
Interest Expense $1,088 $700 $225
Taxes Incurred $10,064 $12,976 $15,745
Net Profit $23,483 $30,278 $36,739
Net Profit/Sales 9.76% 11.73% 13.31%

8.4 Projected Cash Flow

The following table and chart is the projected cash flow for three years.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $240,673 $258,055 $276,120
Subtotal Cash from Operations $240,673 $258,055 $276,120
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 $240,673 $258,055 $276,120
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $105,720 $111,006 $116,556
Bill Payments $105,383 $114,835 $120,750
Subtotal Spent on Operations $211,103 $225,841 $237,306
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 $6,000 $10,000 $9,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $217,103 $235,841 $246,306
Net Cash Flow $23,570 $22,214 $29,813
Cash Balance $46,670 $68,884 $98,698

8.5 Projected Balance Sheet

As shown in the balance sheet in the following table, we expect a healthy growth in net worth.  The monthly projections are in the appendices. 

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $46,670 $68,884 $98,698
Inventory $1,720 $1,806 $1,896
Other Current Assets $5,250 $5,250 $5,250
Total Current Assets $53,640 $75,940 $105,844
Long-term Assets
Long-term Assets $20,300 $20,300 $20,300
Accumulated Depreciation $2,040 $3,876 $5,528
Total Long-term Assets $18,260 $16,424 $14,772
Total Assets $71,900 $92,364 $120,616
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $9,267 $9,454 $9,967
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $9,267 $9,454 $9,967
Long-term Liabilities $19,000 $9,000 $0
Total Liabilities $28,267 $18,454 $9,967
Paid-in Capital $46,000 $46,000 $46,000
Retained Earnings ($25,850) ($2,367) $27,911
Earnings $23,483 $30,278 $36,739
Total Capital $43,633 $73,911 $110,649
Total Liabilities and Capital $71,900 $92,364 $120,616
Net Worth $43,633 $73,911 $110,649

8.6 Business Ratios

Standard business ratios are included in the following table.  Industry profile ratios are shown for comparison, and are based on Standard Industrial Classification (SIC) code 5812.0600, Pizza Restaurants.  The ratios show a plan for balanced, healthy growth.  Our return on sales and return on assets remain strong in percentage terms. 

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 7.22% 7.00% 5.24%
Percent of Total Assets
Inventory 2.39% 1.96% 1.57% 3.54%
Other Current Assets 7.30% 5.68% 4.35% 34.82%
Total Current Assets 74.60% 82.22% 87.75% 43.85%
Long-term Assets 25.40% 17.78% 12.25% 56.15%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 12.89% 10.24% 8.26% 20.80%
Long-term Liabilities 26.43% 9.74% 0.00% 28.42%
Total Liabilities 39.31% 19.98% 8.26% 49.22%
Net Worth 60.69% 80.02% 91.74% 50.78%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 76.49% 76.98% 77.41% 61.18%
Selling, General & Administrative Expenses 39.83% 39.27% 38.77% 38.56%
Advertising Expenses 0.00% 0.00% 0.00% 2.28%
Profit Before Interest and Taxes 14.39% 17.03% 19.09% 1.44%
Main Ratios
Current 5.79 8.03 10.62 0.99
Quick 5.60 7.84 10.43 0.67
Total Debt to Total Assets 39.31% 19.98% 8.26% 52.80%
Pre-tax Return on Net Worth 76.88% 58.52% 47.43% 2.77%
Pre-tax Return on Assets 46.66% 46.83% 43.51% 5.88%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 9.76% 11.73% 13.31% n.a
Return on Equity 53.82% 40.97% 33.20% n.a
Activity Ratios
Inventory Turnover 31.29 33.70 33.70 n.a
Accounts Payable Turnover 11.35 12.17 12.17 n.a
Payment Days 30 30 29 n.a
Total Asset Turnover 3.35 2.79 2.29 n.a
Debt Ratios
Debt to Net Worth 0.65 0.25 0.09 n.a
Current Liab. to Liab. 0.33 0.51 1.00 n.a
Liquidity Ratios
Net Working Capital $44,373 $66,487 $95,877 n.a
Interest Coverage 31.85 62.79 234.26 n.a
Additional Ratios
Assets to Sales 0.30 0.36 0.44 n.a
Current Debt/Total Assets 13% 10% 8% n.a
Acid Test 5.60 7.84 10.43 n.a
Sales/Net Worth 5.52 3.49 2.50 n.a
Dividend Payout 0.00 0.00 0.00 n.a