The financial plan depends on initial investment of $20,000 from the founder, plus a five-year loan of $30,000, and another $10,000, 10-month, interest-free loan from a family member. Much as we'd like to bootstrap this business without initial investment, it just isn't worth it. The rest of the plan is reasonably conservative, but there does have to be money at risk.
The bank loan will be secured with real estate owned by the founder.
7.1 Important Assumptions
Important general assumptions are shown in the following table.
7.2 Key Financial Indicators
The benchmarks chart shows changes in sales, operating expenses, gross margin, and collection days. We think the chart speaks for itself, and what it says is that the numbers and assumptions are reasonable.
7.3 Break-even Analysis
This is a preliminary break-even for now.
7.4 Projected Profit and Loss
We assume a slightly higher gross margin than industry standards for eating places, because we don't have the full slate of meals or servers. Also, kitchen and busboy employees are not included in cost of sales, for simplicity.
Because we're new to this business, we've adjusted the profitability into normal range by adding a relatively large amount of additional unitemized expenses. That gives us a buffer for the additional unforeseen expenses that we expect will come up. If they don't, then we'll be more profitable than normal for the deli business.
7.5 Projected Cash Flow
With the financing plan as projected, the business remains cash positive throughout the first three years. During year two and three, it is expected that a significant amount of cash will be used to upgrade facilities and purchase new equipment.
7.6 Projected Balance Sheet
The balance sheet shows that the negative net worth is gradually solved with profits later on. Debts are repaid ahead of schedule.
7.7 Business Ratios
Standard business ratios are for the eating establishment industry as a whole. Because of the vast number of firms in this industry and the incredible variety that exists between firms, there is variance between the industry standard and a specific company like New World Deli. However, the ratios do show a healthy company that has appropriate costs plus asset and liability allocation. Industry profile ratios are based on the Standard Industrial Classification (SIC) code 5812, Eating Places, are shown for comparison.