- 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 AssumptionsThe 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.
7.2 Break-even AnalysisThe 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.
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.
7.4 Projected Profit and Loss
The following table indicates the projected profit and loss.
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.
7.6 Business Ratios
The following table shows the projected businesses ratios. We expect to maintain healthy ratios for profitability, risk, and return.