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7.0 Financial Plan
We expect to raise £30,000 of our own capital, and to borrow £100,000 guaranteed by the SBA as a 10-year loan. This provides the bulk of the start-up financing required.
7.1 Break-even Analysis
Our break-even analysis is based on the average of the first-year numbers for total sales by meal served, total cost of sales, and all operating expenses. These are presented as per-unit revenue, per-unit cost, and fixed costs. We realise that this is not really the same as fixed cost, but these conservative assumptions make for a better estimate of real risk.
Break-even Analysis
Break-even Analysis
| Break-even Analysis: |
| Monthly Units Break-even | 14,028 |
| Monthly Revenue Break-even | £146,453 |
| | |
| Assumptions: | |
| Average Per-Unit Revenue | £10.44 |
| Average Per-Unit Variable Cost | £8.34 |
| Estimated Monthly Fixed Cost | £29,459 |
7.2 Projected Profit and Loss
As the profit and loss table shows, we expect to become barely profitable in the second year of business, and to make an acceptable profit in the third year.
Profit and Loss
| Pro Forma Profit and Loss |
| | 2001 | 2002 | 2003 |
| Sales | £367,560 | £565,000 | £730,000 |
| Direct Cost of Sales | £51,592 | £79,250 | £102,250 |
| Other | £0 | £0 | £0 |
| | ------------ | ------------ | ------------ |
| Total Cost of Sales | £51,592 | £79,250 | £102,250 |
| Gross Margin | £315,969 | £485,750 | £627,750 |
| Gross Margin % | 85.96% | 85.97% | 85.99% |
| Expenses: | | | |
| Payroll | £282,000 | £357,000 | £410,000 |
| Sales and Marketing and Other Expenses | £27,000 | £35,830 | £72,122 |
| Depreciation | £1,000 | £1,050 | £1,103 |
| Utilities | £1,200 | £1,260 | £1,323 |
| Payroll Taxes (National Insurance) | £42,300 | £53,550 | £61,500 |
| Other | £0 | £0 | £0 |
| | ------------ | ------------ | ------------ |
| Total Operating Expenses | £353,500 | £448,690 | £546,047 |
| Profit Before Interest and Taxes | (£37,532) | £37,060 | £81,703 |
| Interest Expense | £10,000 | £9,500 | £8,250 |
| Taxes Incurred | £0 | £6,890 | £18,669 |
| Net Profit | (£47,532) | £20,670 | £54,784 |
| Net Profit/Sales | -12.93% | 3.66% | 7.50% |
Profit Monthly
7.3 Projected Cash Flow
The cash flow projection shows that starting cost and provisions for ongoing expenses are adequate to meet our needs until the business itself generates its own cash flow sufficient to support operations.
Cash Flow
| Pro Forma Cash Flow |
| | 2001 | 2002 | 2003 |
| | | | |
| Cash Received | | | |
| Cash from Operations: | | | |
| Cash Sales | £367,560 | £565,000 | £730,000 |
| Cash from Receivables | £0 | £0 | £0 |
| Subtotal Cash from Operations | £367,560 | £565,000 | £730,000 |
| | | | |
| Additional Cash Received | | | |
| VAT, VAT, HST/GST Received | £0 | £0 | £0 |
| New Current Borrowing | £0 | £0 | £0 |
| New Other Liabilities (interest-free) | £0 | £0 | £0 |
| New Fixed liabilities | £0 | £0 | £0 |
| Sales of Other Current Assets | £0 | £0 | £0 |
| Sales of Fixed assets | £0 | £0 | £0 |
| New Investment Received | £0 | £0 | £0 |
| Subtotal Cash Received | £367,560 | £565,000 | £730,000 |
| | | | |
| Expenditures | 2001 | 2002 | 2003 |
| Expenditures from Operations: | | | |
| Cash Spending | £8,979 | £13,273 | £20,231 |
| Payment of Accounts Payable | £395,818 | £525,084 | £645,906 |
| Subtotal Spent on Operations | £404,797 | £538,357 | £666,137 |
| | | | |
| Additional Cash Spent | | | |
| VAT, VAT, HST/GST Paid Out | £0 | £0 | £0 |
| Principal Repayment of Current Borrowing | £0 | £0 | £0 |
| Other Liabilities Principal Repayment | £0 | £0 | £0 |
| Fixed liabilities Principal Repayment | £0 | £10,000 | £15,000 |
| Purchase Other Current Assets | £0 | £0 | £0 |
| Purchase Fixed assets | £0 | £0 | £0 |
| Dividends | £0 | £0 | £0 |
| Subtotal Cash Spent | £404,797 | £548,357 | £681,137 |
| | | | |
| Net Cash Flow | (£37,237) | £16,643 | £48,863 |
| Cash Balance | £50,763 | £67,405 | £116,268 |
Cash
7.4 Projected Balance Sheet
The table shows projected balance sheet for three years.
Balance Sheet
| Pro Forma Balance Sheet |
| | | | |
| Assets | | | |
| Current Assets | 2001 | 2002 | 2003 |
| Cash | £50,763 | £67,405 | £116,268 |
| Other Current Assets | £50,000 | £50,000 | £50,000 |
| Total Current Assets | £100,763 | £117,405 | £166,268 |
| Fixed assets | | | |
| Fixed assets | £0 | £0 | £0 |
| Accumulated Depreciation | £1,000 | £2,050 | £3,153 |
| Total Fixed assets | (£1,000) | (£2,050) | (£3,153) |
| Total Assets | £99,763 | £115,355 | £163,116 |
| | | | |
| Liabilities and Capital | | | |
| Current Liabilities | 2001 | 2002 | 2003 |
| Accounts Payable | £10,294 | £15,217 | £23,194 |
| Current Borrowing | £0 | £0 | £0 |
| Other Current Liabilities | £0 | £0 | £0 |
| Subtotal Current Liabilities | £10,294 | £15,217 | £23,194 |
| | | | |
| Fixed liabilities | £100,000 | £90,000 | £75,000 |
| Total Liabilities | £110,294 | £105,217 | £98,194 |
| | | | |
| Paid-in Capital | £40,000 | £40,000 | £40,000 |
| Retained Earnings | (£3,000) | (£50,532) | (£29,862) |
| Earnings | (£47,532) | £20,670 | £54,784 |
| Total Capital | (£10,532) | £10,139 | £64,922 |
| Total Liabilities and Capital | £99,763 | £115,355 | £163,116 |
| Net Worth | (£10,532) | £10,139 | £64,922 |
7.5 Business Ratios
Business ratios for the years of this plan are shown below. Industry Profile ratios based on the Standard Industrial Classification (SIC) code 5813, Eating Places, are shown for comparison.
Ratios
| Ratio Analysis |
| | 2001 | 2002 | 2003 | Industry Profile |
| Sales Growth | 0.00% | 53.72% | 29.20% | 7.60% |
| | | | | |
| Percent of Total Assets | | | | |
| Accounts Receivable | 0.00% | 0.00% | 0.00% | 4.50% |
| Stock | 0.00% | 0.00% | 0.00% | 3.60% |
| Other Current Assets | 50.12% | 43.34% | 30.65% | 35.60% |
| Total Current Assets | 101.00% | 101.78% | 101.93% | 43.70% |
| Fixed assets | -1.00% | -1.78% | -1.93% | 56.30% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| | | | | |
| Current Liabilities | 10.32% | 13.19% | 14.22% | 32.70% |
| Fixed liabilities | 100.24% | 78.02% | 45.98% | 28.50% |
| Total Liabilities | 110.56% | 91.21% | 60.20% | 61.20% |
| Net Worth | -10.56% | 8.79% | 39.80% | 38.80% |
| | | | | |
| Percent of Sales | | | | |
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 85.96% | 85.97% | 85.99% | 60.50% |
| Selling, General & Administrative Expenses | 98.90% | 82.32% | 78.45% | 39.80% |
| Advertising Expenses | 0.65% | 1.77% | 6.16% | 3.20% |
| Profit Before Interest and Taxes | -10.21% | 6.56% | 11.19% | 0.70% |
| | | | | |
| Main Ratios | | | | |
| Current | 9.79 | 7.72 | 7.17 | 0.98 |
| Quick | 9.79 | 7.72 | 7.17 | 0.65 |
| Total Debt to Total Assets | 110.56% | 91.21% | 60.20% | 61.20% |
| Pre-tax Return on Net Worth | 451.33% | 271.84% | 113.14% | 1.70% |
| Pre-tax Return on Assets | -47.64% | 23.89% | 45.03% | 4.30% |
| | | | | |
| Additional Ratios | 2001 | 2002 | 2003 | |
| Net Profit Margin | -12.93% | 3.66% | 7.50% | n.a |
| Return on Equity | 0.00% | 203.88% | 84.38% | n.a |
| | | | | |
| Activity Ratios | | | | |
| Accounts Receivable Turnover | 0.00 | 0.00 | 0.00 | n.a |
| Collection Days | 0 | 0 | 0 | n.a |
| Stock Turnover | 0.00 | 0.00 | 0.00 | n.a |
| Accounts Payable Turnover | 39.35 | 34.83 | 28.19 | n.a |
| Payment Days | 5 | 9 | 11 | n.a |
| Total Asset Turnover | 3.68 | 4.90 | 4.48 | n.a |
| | | | | |
| Debt Ratios | | | | |
| Debt to Net Worth | 0.00 | 10.38 | 1.51 | n.a |
| Current Liab. to Liab. | 0.09 | 0.14 | 0.24 | n.a |
| | | | | |
| Liquidity Ratios | | | | |
| Net Working Capital | £90,469 | £102,189 | £143,075 | n.a |
| Interest Coverage | -3.75 | 3.90 | 9.90 | n.a |
| | | | | |
| Additional Ratios | | | | |
| Assets to Sales | 0.27 | 0.20 | 0.22 | n.a |
| Current Debt/Total Assets | 10% | 13% | 14% | n.a |
| Acid Test | 9.79 | 7.72 | 7.17 | n.a |
| Sales/Net Worth | 0.00 | 55.73 | 11.24 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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