70 Financials and Assumptions One of the biggest issues business owners must

70 financials and assumptions one of the biggest

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7.0 Financials and Assumptions One of the biggest issues business owners must make sure and manage, are their finances (Arumugam, 2012). According to our conservative estimates, Sassy’s Bar and Grill is expected to maintain a healthy financial position over the next five years. The business will be initially financed by a CDC/504 10 year term loan acquired through the SBA loan program and a total capital investment of $120,000. Michael and Paula Bradford are putting up $50,000 of the $120,000 on their own. Cash flow generated from business operation will be used to repay the loan. In addition, cash flow will be used to finance additional growth once the initial loan is paid off. We have prepared financial statements according to regular accounting practices with reasonable estimated used when necessary. Inventory will be accounted for on a first in, first out basis. Sales Forecast We realize part of being a new startup means that business in the beginning will be slow. Therefore, we estimated about 10 to 15 percent capacity until we become familiar in the community and build a regular customer base. As the months pass, as steady amount of growth will occur and we predict we will begin to see a profit by the second half of the first year. Our projected sales are based on a conservative percentage of our maximum seating capacity and all the net sales of lunch, dinner, beverages, appetizers, desserts, and retail merchandise. The maximum seating capacity for the restaurant is 120 for 1 lunch and 240 for 2 dinner services. Maximum lunch potential is $25,020 per month and maximum two-dinner capacity is $100,440. 21
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BUSINESS PLAN This does not include beverages, appetizers, desserts, or alcohol. However, our sales forecast on the next page, does look at the sales of all products. 22
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BUSINESS PLAN 23
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BUSINESS PLAN Projected Profit and Loss Break Even Analysis For our break-even analysis, we estimate operating costs of approximately $14,350 a month, which includes payroll, utilities, insurance, rent, and other expenses. We need to reach at least 20 percent capacities for both lunch and dinner with a total of $32,886 per month to break even, based on our assumptions. Since our normal maximum seating capacity for lunch service is 120 and two dinner services are 240 all day, we only need to serve 24 lunch customers and 48 dinner customers to break even. We expect to accomplish that within our first six months. 24
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BUSINESS PLAN Break Even Analysis: 20% capacity Item Total Sales Cost per unit Lunch $166.80 $67.20 Dinner $669.60 $235.20 Appetizers $85.68 $29.95 Dessert $8.53 $3.02 Beverages $86.40 $21.60 Alcohol $43.20 $25.92 Retail $36.00 $12.60 Total 1 day $1096.21 $395.49 Total 1 month $32, 886.30 $11,864.70 Profit $21,021.60 Bills: $14, 350 Projected Cash Flow Maintaining adequate cash flow to meet our payment obligations is one of our main concerns. In addition, extra cash is always needed to prepare for the expected things. Our conservative projections show that we will be able to generate enough cash with extra for reserve.
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