Pizzeria del Causamali
Financial Plan
The financial picture is quite encouraging. We will be slow to take on debt and heavily investing our own assets, but with our increase in sales we do expect to apply for a credit line with the bank, to a limit of $50,000. The credit line is supported by assets.
8.1 Important Assumptions
The financial plan depends on important assumptions, most of which are shown in the following table. The key underlying assumptions are:
- We assume a fairly high-growth economy for pizza in the Deauville area, given the lack of competition and interest in having a pizza restaurant available in the area and pent-up demand.
- We assume, of course, that there are no unforeseen changes in technology to make our products immediately obsolete.
- We assume access to equity capital and financing sufficient to maintain our financial plan as shown in the tables.
General Assumptions | |||
Year 1 | Year 2 | Year 3 | |
Plan Month | 1 | 2 | 3 |
Current Interest Rate | 6.00% | 6.00% | 6.00% |
Long-term Interest Rate | 5.00% | 5.00% | 5.00% |
Tax Rate | 30.00% | 30.00% | 30.00% |
Other | 0 | 0 | 0 |
8.2 Break-even Analysis
Our break-even analysis is based on running costs, the “burn-rate” costs we incur to keep the business running, not on theoretical fixed costs that would be relevant only if we were closing. The essential insight here is that our sales level seems to be running comfortably above break-even.

Break-even Analysis | |
Monthly Revenue Break-even | $16,283 |
Assumptions: | |
Average Percent Variable Cost | 24% |
Estimated Monthly Fixed Cost | $12,454 |
8.3 Projected Profit and Loss
We expect to be profitable in the first year, with profits increasing over the next two years, as we establish a loyal customer base.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $240,673 | $258,055 | $276,120 |
Direct Cost of Sales | $56,587 | $59,416 | $62,387 |
Other Costs of Goods | $0 | $0 | $0 |
Total Cost of Sales | $56,587 | $59,416 | $62,387 |
Gross Margin | $184,087 | $198,639 | $213,733 |
Gross Margin % | 76.49% | 76.98% | 77.41% |
Expenses | |||
Payroll | $105,720 | $111,006 | $116,556 |
Sales and Marketing and Other Expenses | $7,250 | $7,250 | $7,500 |
Depreciation | $2,040 | $1,836 | $1,652 |
Rent | $14,400 | $14,400 | $14,400 |
Utilities | $7,200 | $7,200 | $7,200 |
Insurance | $4,200 | $4,500 | $4,800 |
Payroll Taxes | $8,042 | $8,444 | $8,866 |
Website Hosting and Maintenance | $600 | $50 | $50 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $149,452 | $154,686 | $161,024 |
Profit Before Interest and Taxes | $34,635 | $43,954 | $52,709 |
EBITDA | $36,675 | $45,790 | $54,361 |
Interest Expense | $1,088 | $700 | $225 |
Taxes Incurred | $10,064 | $12,976 | $15,745 |
Net Profit | $23,483 | $30,278 | $36,739 |
Net Profit/Sales | 9.76% | 11.73% | 13.31% |
8.4 Projected Cash Flow
The following table and chart is the projected cash flow for three years.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $240,673 | $258,055 | $276,120 |
Subtotal Cash from Operations | $240,673 | $258,055 | $276,120 |
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 | $240,673 | $258,055 | $276,120 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $105,720 | $111,006 | $116,556 |
Bill Payments | $105,383 | $114,835 | $120,750 |
Subtotal Spent on Operations | $211,103 | $225,841 | $237,306 |
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 | $6,000 | $10,000 | $9,000 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $0 | $0 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $217,103 | $235,841 | $246,306 |
Net Cash Flow | $23,570 | $22,214 | $29,813 |
Cash Balance | $46,670 | $68,884 | $98,698 |
8.5 Projected Balance Sheet
As shown in the balance sheet in the following table, we expect a healthy growth in net worth. The monthly projections are in the appendices.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $46,670 | $68,884 | $98,698 |
Inventory | $1,720 | $1,806 | $1,896 |
Other Current Assets | $5,250 | $5,250 | $5,250 |
Total Current Assets | $53,640 | $75,940 | $105,844 |
Long-term Assets | |||
Long-term Assets | $20,300 | $20,300 | $20,300 |
Accumulated Depreciation | $2,040 | $3,876 | $5,528 |
Total Long-term Assets | $18,260 | $16,424 | $14,772 |
Total Assets | $71,900 | $92,364 | $120,616 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $9,267 | $9,454 | $9,967 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $9,267 | $9,454 | $9,967 |
Long-term Liabilities | $19,000 | $9,000 | $0 |
Total Liabilities | $28,267 | $18,454 | $9,967 |
Paid-in Capital | $46,000 | $46,000 | $46,000 |
Retained Earnings | ($25,850) | ($2,367) | $27,911 |
Earnings | $23,483 | $30,278 | $36,739 |
Total Capital | $43,633 | $73,911 | $110,649 |
Total Liabilities and Capital | $71,900 | $92,364 | $120,616 |
Net Worth | $43,633 | $73,911 | $110,649 |
8.6 Business Ratios
Standard business ratios are included in the following table. Industry profile ratios are shown for comparison, and are based on Standard Industrial Classification (SIC) code 5812.0600, Pizza Restaurants. The ratios show a plan for balanced, healthy growth. Our return on sales and return on assets remain strong in percentage terms.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 7.22% | 7.00% | 5.24% |
Percent of Total Assets | ||||
Inventory | 2.39% | 1.96% | 1.57% | 3.54% |
Other Current Assets | 7.30% | 5.68% | 4.35% | 34.82% |
Total Current Assets | 74.60% | 82.22% | 87.75% | 43.85% |
Long-term Assets | 25.40% | 17.78% | 12.25% | 56.15% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 12.89% | 10.24% | 8.26% | 20.80% |
Long-term Liabilities | 26.43% | 9.74% | 0.00% | 28.42% |
Total Liabilities | 39.31% | 19.98% | 8.26% | 49.22% |
Net Worth | 60.69% | 80.02% | 91.74% | 50.78% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 76.49% | 76.98% | 77.41% | 61.18% |
Selling, General & Administrative Expenses | 39.83% | 39.27% | 38.77% | 38.56% |
Advertising Expenses | 0.00% | 0.00% | 0.00% | 2.28% |
Profit Before Interest and Taxes | 14.39% | 17.03% | 19.09% | 1.44% |
Main Ratios | ||||
Current | 5.79 | 8.03 | 10.62 | 0.99 |
Quick | 5.60 | 7.84 | 10.43 | 0.67 |
Total Debt to Total Assets | 39.31% | 19.98% | 8.26% | 52.80% |
Pre-tax Return on Net Worth | 76.88% | 58.52% | 47.43% | 2.77% |
Pre-tax Return on Assets | 46.66% | 46.83% | 43.51% | 5.88% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 9.76% | 11.73% | 13.31% | n.a |
Return on Equity | 53.82% | 40.97% | 33.20% | n.a |
Activity Ratios | ||||
Inventory Turnover | 31.29 | 33.70 | 33.70 | n.a |
Accounts Payable Turnover | 11.35 | 12.17 | 12.17 | n.a |
Payment Days | 30 | 30 | 29 | n.a |
Total Asset Turnover | 3.35 | 2.79 | 2.29 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.65 | 0.25 | 0.09 | n.a |
Current Liab. to Liab. | 0.33 | 0.51 | 1.00 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $44,373 | $66,487 | $95,877 | n.a |
Interest Coverage | 31.85 | 62.79 | 234.26 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.30 | 0.36 | 0.44 | n.a |
Current Debt/Total Assets | 13% | 10% | 8% | n.a |
Acid Test | 5.60 | 7.84 | 10.43 | n.a |
Sales/Net Worth | 5.52 | 3.49 | 2.50 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |