On The Water
Financial Plan
The following topics and tables outline our financial plan. We plan to turn a significant profit, but we will structure the business so as to maintain a healthy cash flow.
7.1 Important Assumptions
The financial plan depends upon important assumptions, most of which are shown in the following table. The key underlying assumptions are:
- We assume a slow-growth economy, without major recession.
- We assume that there are no unforseen changes in the expectancy in the popularity of our restaurant.
- We assume access to investments and financing are sufficient to maintain and fulfill our financial plan as shown in the tables.
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 | 25.42% | 25.00% | 25.42% |
Other | 0 | 0 | 0 |
7.2 Break-even Analysis
For our Break-even Analysis, we assume running costs which include our full payroll, rent, and utilities, and an estimation of other running costs.

Break-even Analysis | |
Monthly Units Break-even | 4,117 |
Monthly Revenue Break-even | $29,113 |
Assumptions: | |
Average Per-Unit Revenue | $7.07 |
Average Per-Unit Variable Cost | $1.03 |
Estimated Monthly Fixed Cost | $24,875 |
7.3 Projected Profit and Loss
The most important assumption in the Projected Profit and Loss statement is the gross margin. Although it doesn’t jump drastically in the first year, over given time the restaurant will develop its customer base and name, and the growth will pick up more rapidly towards the fourth and fifth years of business. The increase in gross margin will be due to a slow increase in sales prices and an increase in customer base, which is critical.
Month-by-month assumptions for profit and loss are included in the appendix.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $1,319,635 | $1,785,000 | $2,345,000 |
Direct Cost of Sales | $192,074 | $348,000 | $477,750 |
Other | $0 | $0 | $0 |
Total Cost of Sales | $192,074 | $348,000 | $477,750 |
Gross Margin | $1,127,561 | $1,437,000 | $1,867,250 |
Gross Margin % | 85.44% | 80.50% | 79.63% |
Expenses | |||
Payroll | $226,350 | $248,985 | $273,884 |
Sales and Marketing and Other Expenses | $2,200 | $200 | $300 |
Depreciation | $0 | $0 | $0 |
Insurance | $0 | $0 | $0 |
Rent | $36,000 | $36,000 | $36,000 |
Utilities | $0 | $0 | $0 |
Leased Equipment | $0 | $0 | $0 |
Payroll Taxes | $33,953 | $37,348 | $41,083 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $298,503 | $322,533 | $351,266 |
Profit Before Interest and Taxes | $829,059 | $1,114,467 | $1,515,984 |
EBITDA | $829,059 | $1,114,467 | $1,515,984 |
Interest Expense | $0 | $0 | $0 |
Taxes Incurred | $207,115 | $278,617 | $385,313 |
Net Profit | $621,944 | $835,850 | $1,130,671 |
Net Profit/Sales | 47.13% | 46.83% | 48.22% |
7.4 Projected Cash Flow
The cash flow depends on assumptions for inventory turnover, payment days, and accounts receivable management. Our projected same-day collection is critical, and also reasonable and expected in the restaurant industry. We don’t expect to need that much continued support even when we reach the less profitable months, as they are expected.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $1,319,635 | $1,785,000 | $2,345,000 |
Subtotal Cash from Operations | $1,319,635 | $1,785,000 | $2,345,000 |
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 | $1,319,635 | $1,785,000 | $2,345,000 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $226,350 | $248,985 | $273,884 |
Bill Payments | $455,248 | $717,511 | $938,543 |
Subtotal Spent on Operations | $681,598 | $966,496 | $1,212,426 |
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 | $0 | $0 | $0 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $0 | $0 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $681,598 | $966,496 | $1,212,426 |
Net Cash Flow | $638,037 | $818,504 | $1,132,574 |
Cash Balance | $660,037 | $1,478,541 | $2,611,115 |
7.5 Projected Balance Sheet
The projected Balance Sheet is quite solid. We do not project any real trouble meeting our debt obligations, as long as we can achieve our specific goals.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $660,037 | $1,478,541 | $2,611,115 |
Inventory | $25,988 | $47,085 | $64,641 |
Other Current Assets | $0 | $0 | $0 |
Total Current Assets | $686,025 | $1,525,626 | $2,675,755 |
Long-term Assets | |||
Long-term Assets | $45,000 | $45,000 | $45,000 |
Accumulated Depreciation | $0 | $0 | $0 |
Total Long-term Assets | $45,000 | $45,000 | $45,000 |
Total Assets | $731,025 | $1,570,626 | $2,720,755 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $55,531 | $59,282 | $78,740 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $55,531 | $59,282 | $78,740 |
Long-term Liabilities | $0 | $0 | $0 |
Total Liabilities | $55,531 | $59,282 | $78,740 |
Paid-in Capital | $115,000 | $115,000 | $115,000 |
Retained Earnings | ($61,450) | $560,494 | $1,396,344 |
Earnings | $621,944 | $835,850 | $1,130,671 |
Total Capital | $675,494 | $1,511,344 | $2,642,016 |
Total Liabilities and Capital | $731,025 | $1,570,626 | $2,720,755 |
Net Worth | $675,494 | $1,511,344 | $2,642,016 |
7.6 Business Ratios
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5812, Eating places, are shown for comparison.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 35.26% | 31.37% | 7.60% |
Percent of Total Assets | ||||
Inventory | 3.56% | 3.00% | 2.38% | 3.60% |
Other Current Assets | 0.00% | 0.00% | 0.00% | 35.60% |
Total Current Assets | 93.84% | 97.13% | 98.35% | 43.70% |
Long-term Assets | 6.16% | 2.87% | 1.65% | 56.30% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 7.60% | 3.77% | 2.89% | 32.70% |
Long-term Liabilities | 0.00% | 0.00% | 0.00% | 28.50% |
Total Liabilities | 7.60% | 3.77% | 2.89% | 61.20% |
Net Worth | 92.40% | 96.23% | 97.11% | 38.80% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 85.44% | 80.50% | 79.63% | 60.50% |
Selling, General & Administrative Expenses | 38.33% | 65.53% | 56.44% | 39.80% |
Advertising Expenses | 0.00% | 0.00% | 0.00% | 3.20% |
Profit Before Interest and Taxes | 62.82% | 62.44% | 64.65% | 0.70% |
Main Ratios | ||||
Current | 12.35 | 25.74 | 33.98 | 0.98 |
Quick | 11.89 | 24.94 | 33.16 | 0.65 |
Total Debt to Total Assets | 7.60% | 3.77% | 2.89% | 61.20% |
Pre-tax Return on Net Worth | 122.73% | 73.74% | 57.38% | 1.70% |
Pre-tax Return on Assets | 113.41% | 70.96% | 55.72% | 4.30% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 47.13% | 46.83% | 48.22% | n.a |
Return on Equity | 92.07% | 55.31% | 42.80% | n.a |
Activity Ratios | ||||
Inventory Turnover | 10.81 | 9.52 | 8.55 | n.a |
Accounts Payable Turnover | 8.92 | 12.17 | 12.17 | n.a |
Payment Days | 28 | 29 | 26 | n.a |
Total Asset Turnover | 1.81 | 1.14 | 0.86 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.08 | 0.04 | 0.03 | n.a |
Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $630,494 | $1,466,344 | $2,597,016 | n.a |
Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.55 | 0.88 | 1.16 | n.a |
Current Debt/Total Assets | 8% | 4% | 3% | n.a |
Acid Test | 11.89 | 24.94 | 33.16 | n.a |
Sales/Net Worth | 1.95 | 1.18 | 0.89 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |