Full of Bologna
Financial Plan
Our financial plan is based on raising approximately $349,000 by way of private equity investment.
We will achieve profitability in just over two years and due to the nature of the exponential growth of access charges, we will realize an excellent percentage net profit on sales by year one.
8.1 Start-up Funding
Total start-up requirements are listed. The start-up costs are to be financed by direct investment and owner investment. The details are included in the following tables.
| Start-up Funding | |
| Start-up Expenses to Fund | $315,431 |
| Start-up Assets to Fund | $63,878 |
| Total Funding Required | $379,309 |
| Assets | |
| Non-cash Assets from Start-up | $23,878 |
| Cash Requirements from Start-up | $40,000 |
| Additional Cash Raised | $0 |
| Cash Balance on Starting Date | $40,000 |
| Total Assets | $63,878 |
| Liabilities and Capital | |
| Liabilities | |
| Current Borrowing | $0 |
| Long-term Liabilities | $0 |
| Accounts Payable (Outstanding Bills) | $0 |
| Other Current Liabilities (interest-free) | $0 |
| Total Liabilities | $0 |
| Capital | |
| Planned Investment | |
| Owner Equity | $30,009 |
| Investor | $349,300 |
| Additional Investment Requirement | $0 |
| Total Planned Investment | $379,309 |
| Loss at Start-up (Start-up Expenses) | ($315,431) |
| Total Capital | $63,878 |
| Total Capital and Liabilities | $63,878 |
| Total Funding | $379,309 |
8.2 Important Assumptions
The financial plan depends on important assumptions, most of which are shown in the following table as annual figures. The key underlying assumptions are:
- We assume a slow-growth economy, without major recession. We assume that The Greensward will open in October with it’s 12,000 people per day traffic.
- We assume that there are no unforseen changes in the expectancy in the popularity of our restaurant.
- We assume access to investments and financing which are sufficient to maintain and fulfill our financial plan as shown in the tables.
| General Assumptions | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Plan Month | 1 | 2 | 3 | 4 | 5 |
| Current Interest Rate | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% |
| Long-term Interest Rate | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% |
| Tax Rate | 30.00% | 30.00% | 30.00% | 30.00% | 30.00% |
| Other | 0 | 0 | 0 | 0 | 0 |
8.3 Break-even Analysis
The following table and chart show our Break-even Analysis.
| Break-even Analysis | |
| Monthly Units Break-even | 4,054 |
| Monthly Revenue Break-even | $45,231 |
| Assumptions: | |
| Average Per-Unit Revenue | $11.16 |
| Average Per-Unit Variable Cost | $3.64 |
| Estimated Monthly Fixed Cost | $30,487 |
8.4 Projected Profit and Loss
Our Pro Forma Profit and Loss statement was constructed from a conservative point-of-view, and is based in large part on past performance of other restaurants. By strengthening our service position, and rebuilding our customer relationships, we will widen our customer base and increase sales.
Month-to-month assumptions for profit and loss are included in the appendices.
| Pro Forma Profit and Loss | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Sales | $1,150,746 | $2,244,555 | $2,468,611 | $2,714,986 | $2,985,766 |
| Direct Cost of Sales | $375,103 | $700,340 | $770,238 | $847,101 | $931,564 |
| Staff Meals | $2,800 | $5,000 | $5,000 | $5,000 | $5,000 |
| Other Costs of Goods/DESCOMM/Bank | $24,000 | $50,000 | $55,000 | $60,000 | $65,000 |
| Total Cost of Sales | $401,903 | $755,340 | $830,238 | $912,101 | $1,001,564 |
| Gross Margin | $748,843 | $1,489,215 | $1,638,373 | $1,802,885 | $1,984,201 |
| Gross Margin % | 65.07% | 66.35% | 66.37% | 66.40% | 66.46% |
| Expenses | |||||
| Payroll | $204,360 | $393,200 | $411,860 | $431,453 | $451,717 |
| Marketing/Promotion | $50,000 | $52,500 | $52,500 | $52,500 | $52,500 |
| Depreciation | $0 | $0 | $0 | $0 | $0 |
| Employee Healthcare | $21,000 | $40,000 | $41,000 | $40,000 | $40,000 |
| Rent | $16,500 | $72,000 | $72,000 | $72,000 | $72,000 |
| Utilities and Security Services | $22,700 | $34,680 | $36,414 | $38,234 | $40,146 |
| Ceramic, Glass and Silver Upkeep | $1,000 | $9,000 | $9,000 | $9,000 | $9,000 |
| Accounting Fees | $2,500 | $5,000 | $5,000 | $5,000 | $5,000 |
| Manager Comps & Grease Handouts | $17,500 | $30,000 | $30,000 | $30,000 | $30,000 |
| Dues and Subscriptions | $600 | $2,000 | $2,000 | $2,000 | $2,000 |
| Legal Expenses | $0 | $5,000 | $5,000 | $5,000 | $5,000 |
| Flowers | $2,400 | $2,000 | $2,000 | $2,000 | $2,000 |
| Travel Expense | $0 | $4,000 | $4,000 | $4,000 | $4,000 |
| Exterminating | $150 | $300 | $300 | $300 | $300 |
| Fines and Penalties | $100 | $300 | $300 | $300 | $300 |
| Payroll Processing | $610 | $1,200 | $1,250 | $1,300 | $1,350 |
| Insurance, Licensure & RE Taxes | $4,900 | $20,500 | $21,500 | $22,500 | $23,500 |
| Payroll Taxes | $0 | $56,964 | $53,844 | $53,844 | $53,844 |
| Maintenance Costs/Repairs | $12,000 | $49,500 | $49,500 | $49,500 | $49,500 |
| Linen and Dry Cleaning | $1,125 | $1,800 | $1,800 | $1,800 | $1,800 |
| Computer Upkeep/Upgrade | $0 | $12,200 | $12,000 | $12,200 | $12,200 |
| Dish and Cleaning Supplies | $2,400 | $13,800 | $14,000 | $14,200 | $14,400 |
| Office Products Upkeep | $1,200 | $7,000 | $7,000 | $7,000 | $7,000 |
| Paper Product Deliveries | $4,800 | $9,600 | $10,000 | $10,400 | $10,800 |
| Total Operating Expenses | $365,845 | $822,544 | $842,268 | $864,531 | $888,357 |
| Profit Before Interest and Taxes | $382,998 | $666,671 | $796,105 | $938,354 | $1,095,844 |
| EBITDA | $382,998 | $666,671 | $796,105 | $938,354 | $1,095,844 |
| Interest Expense | $0 | $0 | $0 | $0 | $0 |
| Taxes Incurred | $114,899 | $200,001 | $238,831 | $281,506 | $328,753 |
| Net Profit | $268,099 | $466,670 | $557,273 | $656,848 | $767,091 |
| Net Profit/Sales | 23.30% | 20.79% | 22.57% | 24.19% | 25.69% |
8.5 Projected Cash Flow
Because we are treating the new company as a start-up, the cash balance for FY2005 is somewhat exaggerated by the instant influx of new capital. Subsequent years however show a healthy growth in cash flow, mainly due to increased sales.
| Pro Forma Cash Flow | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Cash Received | |||||
| Cash from Operations | |||||
| Cash Sales | $1,150,746 | $2,244,555 | $2,468,611 | $2,714,986 | $2,985,766 |
| Subtotal Cash from Operations | $1,150,746 | $2,244,555 | $2,468,611 | $2,714,986 | $2,985,766 |
| Additional Cash Received | |||||
| Sales Tax, VAT, HST/GST Received | $69,045 | $134,673 | $148,117 | $162,899 | $179,146 |
| New Current Borrowing | $0 | $0 | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 | $0 | $0 |
| Sales of Other Current Assets | $10,300 | $12,000 | $13,000 | $14,000 | $15,000 |
| Sales of Long-term Assets | $0 | $0 | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 | $0 | $0 |
| Subtotal Cash Received | $1,230,091 | $2,391,228 | $2,629,727 | $2,891,885 | $3,179,912 |
| Expenditures | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Expenditures from Operations | |||||
| Cash Spending | $204,360 | $393,200 | $411,860 | $431,453 | $451,717 |
| Bill Payments | $570,420 | $1,380,599 | $1,493,514 | $1,619,145 | $1,758,632 |
| Subtotal Spent on Operations | $774,780 | $1,773,799 | $1,905,374 | $2,050,598 | $2,210,349 |
| Additional Cash Spent | |||||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $0 | $0 | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 | $0 | $0 |
| Subtotal Cash Spent | $774,780 | $1,773,799 | $1,905,374 | $2,050,598 | $2,210,349 |
| Net Cash Flow | $455,311 | $617,429 | $724,353 | $841,288 | $969,562 |
| Cash Balance | $495,311 | $1,112,740 | $1,837,093 | $2,678,380 | $3,647,942 |
8.6 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 objectives.
| Pro Forma Balance Sheet | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Assets | |||||
| Current Assets | |||||
| Cash | $495,311 | $1,112,740 | $1,837,093 | $2,678,380 | $3,647,942 |
| Inventory | $14,331 | $26,756 | $29,427 | $32,364 | $35,591 |
| Other Current Assets | ($10,300) | ($22,300) | ($35,300) | ($49,300) | ($64,300) |
| Total Current Assets | $499,342 | $1,117,196 | $1,831,219 | $2,661,444 | $3,619,234 |
| Long-term Assets | |||||
| Long-term Assets | $0 | $0 | $0 | $0 | $0 |
| Accumulated Depreciation | $0 | $0 | $0 | $0 | $0 |
| Total Long-term Assets | $0 | $0 | $0 | $0 | $0 |
| Total Assets | $499,342 | $1,117,196 | $1,831,219 | $2,661,444 | $3,619,234 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Current Liabilities | |||||
| Accounts Payable | $98,320 | $114,831 | $123,464 | $133,942 | $145,495 |
| Current Borrowing | $0 | $0 | $0 | $0 | $0 |
| Other Current Liabilities | $69,045 | $203,718 | $351,835 | $514,734 | $693,880 |
| Subtotal Current Liabilities | $167,364 | $318,549 | $475,299 | $648,675 | $839,374 |
| Long-term Liabilities | $0 | $0 | $0 | $0 | $0 |
| Total Liabilities | $167,364 | $318,549 | $475,299 | $648,675 | $839,374 |
| Paid-in Capital | $379,309 | $379,309 | $379,309 | $379,309 | $379,309 |
| Retained Earnings | ($315,431) | ($47,332) | $419,338 | $976,611 | $1,633,459 |
| Earnings | $268,099 | $466,670 | $557,273 | $656,848 | $767,091 |
| Total Capital | $331,977 | $798,647 | $1,355,920 | $2,012,768 | $2,779,859 |
| Total Liabilities and Capital | $499,342 | $1,117,196 | $1,831,219 | $2,661,444 | $3,619,234 |
| Net Worth | $331,977 | $798,647 | $1,355,920 | $2,012,768 | $2,779,859 |
8.7 Business Ratios
The company’s projected business ratios are provided in the table below. The final column, Industry Profile, shows significant ratios for the Restaurant industry, as determined by the Standard Industry Classification (SIC) Index code 5812.0108, Italian Restaurants.
| Ratio Analysis | ||||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Industry Profile | |
| Sales Growth | 0.00% | 95.05% | 9.98% | 9.98% | 9.97% | 7.41% |
| Percent of Total Assets | ||||||
| Inventory | 2.87% | 2.39% | 1.61% | 1.22% | 0.98% | 3.70% |
| Other Current Assets | -2.06% | -2.00% | -1.93% | -1.85% | -1.78% | 33.73% |
| Total Current Assets | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 41.73% |
| Long-term Assets | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 58.27% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 33.52% | 28.51% | 25.96% | 24.37% | 23.19% | 17.03% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 22.99% |
| Total Liabilities | 33.52% | 28.51% | 25.96% | 24.37% | 23.19% | 40.02% |
| Net Worth | 66.48% | 71.49% | 74.04% | 75.63% | 76.81% | 59.98% |
| Percent of Sales | ||||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 65.07% | 66.35% | 66.37% | 66.40% | 66.46% | 63.75% |
| Selling, General & Administrative Expenses | 41.78% | 45.56% | 43.79% | 42.21% | 40.76% | 42.43% |
| Advertising Expenses | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 2.93% |
| Profit Before Interest and Taxes | 33.28% | 29.70% | 32.25% | 34.56% | 36.70% | 2.33% |
| Main Ratios | ||||||
| Current | 2.98 | 3.51 | 3.85 | 4.10 | 4.31 | 1.31 |
| Quick | 2.90 | 3.42 | 3.79 | 4.05 | 4.27 | 0.84 |
| Total Debt to Total Assets | 33.52% | 28.51% | 25.96% | 24.37% | 23.19% | 49.91% |
| Pre-tax Return on Net Worth | 115.37% | 83.48% | 58.71% | 46.62% | 39.42% | 5.87% |
| Pre-tax Return on Assets | 76.70% | 59.67% | 43.47% | 35.26% | 30.28% | 11.73% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Net Profit Margin | 23.30% | 20.79% | 22.57% | 24.19% | 25.69% | n.a |
| Return on Equity | 80.76% | 58.43% | 41.10% | 32.63% | 27.59% | n.a |
| Activity Ratios | ||||||
| Inventory Turnover | 19.19 | 34.09 | 27.42 | 27.42 | 27.42 | n.a |
| Accounts Payable Turnover | 6.80 | 12.17 | 12.17 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 28 | 29 | 29 | 29 | n.a |
| Total Asset Turnover | 2.30 | 2.01 | 1.35 | 1.02 | 0.82 | n.a |
| Debt Ratios | ||||||
| Debt to Net Worth | 0.50 | 0.40 | 0.35 | 0.32 | 0.30 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||||
| Net Working Capital | $331,977 | $798,647 | $1,355,920 | $2,012,768 | $2,779,859 | n.a |
| Interest Coverage | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | n.a |
| Additional Ratios | ||||||
| Assets to Sales | 0.43 | 0.50 | 0.74 | 0.98 | 1.21 | n.a |
| Current Debt/Total Assets | 34% | 29% | 26% | 24% | 23% | n.a |
| Acid Test | 2.90 | 3.42 | 3.79 | 4.05 | 4.27 | n.a |
| Sales/Net Worth | 3.47 | 2.81 | 1.82 | 1.35 | 1.07 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | n.a |
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