Rockin Roll
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:
- 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.
- 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 |