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.
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.
Interest rates and the tax rate reflect the current economic environment that Parkdale Meats will operate within.
Due to the monthly break even in sales, overall company break even is expected in the tenth month of operation.
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.
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.
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.
The business ratios for Parkdale Meats are compared here against specialty food stores of over $1 million annual revenue.