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Executive Summary Overview Parkdale Meats, is a startup specialty butcher shop to be launched in the coming year. It will sell a wide menu of meats to customers including medium- and high-income residents of Parkdale, as well as high-income residents of neighboring towns, and high-end caterers. The Company Parkdale Meats is established as a limited liability company owned by its two co-founders. The store will be managed and directed by Robert Suidae, a veteran butcher with fifteen years experience in butcher shops and Eryka Auroch, an experienced retail food-service manager. Auroch will serve as the company's CEO and Suidae as the company's COO. Products and Service Parkdale Meats will sell aged beef, free-range poultry, fresh pork and domestic lamb. Upon request, the store will sell wild game such as buffalo, alligator, kangaroo, quail, and other specially requested items. The products will be purchased from suppliers within a 100-mile radius of the store to have minimal impact on the environment and to maintain product freshness. Products will be purchased as whole animals and butchered in the store by trained butchers. The sales staff will offer suggestions of substitutions or help customers fulfill their orders through special orders in order to make sure all customers leave satisfied. The Market The meat and poultry industry is the largest segment of U.S. agriculture. Total meat and poultry production in 2007 reached more than 91 billion pounds. U.S. meat consumption was 55% red meat (beef, veal, lamb, pork, and mutton), 8.2% fish, and 36.8% poultry in 2007. Meat is sold through retail establishments including restaurants, grocery stores, and butcher shops. Independent butcher shops have decreased in number over the last ten years, as sales of meet have fallen slightly and moved increasingly to grocery stores and big box retailers. However, this has created an opportunity for specialty butcher shops in markets which provide only basic options through these larger retailers. Competition Competitors for Parkdale Meats fall into the following categories:
Grocery Stores - 7 stores in greater Parkdale area Big box retailers (Wal-Mart and Costco) Butcher shops (Red's Meats and Bay Avenue Butchers)
Parkdale Meats will establish its competitive edge through the expertise of its founders. Robert Suidae brings with him existing relationships with the best suppliers of meat as well as an understanding of the craft of butchering. Coupled with Eryka Auroch's understanding of food service management, sales record in business to business sales, and financial acumen, the pair will have an edge over the town's other butcher shops and grocery stores within its niche market. Financial Considerations Funding for the launch of the business will be provided primarily by equity from the two partners. Each will contribute in equal share from their savings to launch the business. The remainder of financing will be made up in temporary credit card debt taken on by the two founders and accounts payable from delayed payments on start-up costs. The business seeks a business loan to finance the purchase of the equipment needed.
The business will reach positive cash flow in its 8th month of operation, allowing for expedited repayment of its loan obligations, as well as for dividends to be paid to the owners. Revenue will top $XXXXX and profit will reach about $XXXX in the third year of operation.
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Objectives Parkdale Meats will measure its success by its ability to achieve the following objectives: 1. 2. 3. 4.
Build sales to $XXXXX annually within three years. Receive 60% of sales through advance orders, either by phone or Internet, with 40% of sales through walkup traffic. Achieve cash flow break-even within six months. Become profitable by the second year of operation.
Mission Parkdale Meats is a specialty butcher shop which seeks to serve the highest quality meats, cut to customer specifications, and become the foremost specialty meats provider in the greater Parkdale area.
Keys to Success Parkdale Meats must follow these principles in order to achieve success in its market: 1. 2. 3.
Maintain high quality standards for its suppliers and continuously monitor this quality. Preserve meats in optimal conditions to maintain freshness while in the store. Maintain excellence in the skill of butchering meats through hiring, training, and supervision of staff.
4.
Listen carefully to customer needs and respond with custom-cut products, whether in person, over the phone, or through Internet orders.
Company Summary Parkdale Meats is a startup specialty butcher shop to be launched in the coming year. It will sell aged beef, freerange poultry, fresh pork and domestic lamb. Upon request, the store will sell wild game such as buffalo, alligator, kangaroo, quail, and other specially requested items. Customers will include medium- and high-income residents of Parkdale, as well as high-income residents of neighboring towns, and high-end caterers and restaurants. The store will be managed and directed by Robert Suidae, a veteran butcher with fifteen years experience in butcher shops and Eryka Auroch, an experienced retail food-service manager. Auroch will serve as the company's CEO and Suidae as the company's COO.
Company Ownership Parkdale Meats is established as a limited liability company with 49% ownership by Robert Suidae and 51% ownership by Eryka Auroch. The partners will share in management responsibilities with final decisions falling to Eryka Auroch where there are differences of opinion. The partnership agreement allows for one partner to buy out the other in the case that the partnership must be dissolved and sets predetermined methods to determine the company's valuation in that case.
Start-up Summary The following summary table shows the projected start-up costs over the three months prior to the store's opening. Start-up expenses for Parkdale Meats include initial insurance premiums covering both general liability and product liability, as well as business renter's insurance, rent for 1 month's security and 2 months to allow for build-out of the retail space, pre-launch marketing to cover flyers, a direct mail campaign, and advertisements in local papers, the development of a website with e-commerce capabilities to take orders and sell meats directly, and the normal legal expenses for consultation and permitting. Inventory on-hand at any given time must be low as all meats must be kept extremely fresh and so will be ordered on a weekly basis or even more often. Other current assets include office and store furniture, shelving, a computer, phone system, and tools. Long-term assets include the refrigerator unit for the shop, refrigerated display cases, window displays, store fixtures, a refrigerated delivery van and additional investments in improvements to the retail location. A significant amount of cash is required to fund the first year of operations until the business reaches break-even.
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Start-up Requirements
Start-up Expenses
Legal
$10,000
Stationery etc.
$1,000
Insurance
$2,000
Rent
$4,800
Pre-Launch Marketing
$5,000
Website Development
$10,000
Total Start-up Expenses
$32,800
Start-up Assets
Cash Required
Start-up Inventory
$80,000
$2,000
Other Current Assets
$20,000
Long-term Assets
$80,000
Total Assets
$182,000
Total Requirements
$214,800
Products Parkdale Meats will provide the following products on a regular basis: Aged Beef:
Filet Mignon Kebab London Broil Porterhouse Steak Rib-Eye Steak Roast Beef Shell Steak Sirloin Burger Sirloin Steak Skirt Steak Strip Steak
T-Bone Steak
Domestic Lamb:
Chop Flank Leg
Fresh Pork:
Boiling Bacon Chop Rasher Sausage
Free-Range Poultry:
Chicken Kiev Chicken Cordon Bleu Cutlet Kebab
Upon request, the store will sell wild game such as buffalo, alligator, kangaroo, quail and more. All products can be cut to the customer's specifications. The products will be purchased from suppliers within a 100-mile radius of the store to have minimal impact on the environment through trucking costs and to maintain product freshness. Products will be purchased as whole animals and butchered in the store by trained butchers. They will be sold while fresh. While products may be replenished within a few days, there is the possibility of certain items running out because of high sales and going out of stock until new shipments may arise. The sales staff will offer suggestions of substitutions or help customers fulfill their orders through special orders in order to make sure all customers leave satisfied.
Market Analysis Summary The American Meat Institute provides the following statistics about the American meat industry: The meat and poultry industry is the largest segment of U.S. agriculture. Total meat and poultry production in 2007 reached more than 91 billion pounds. In 2007, the meat and poultry industry processed 9 billion chickens 34.2 million cattle 271 million turkeys 2.7 million sheep 109 million hogs and lambs In 2007, American meat companies produced 36.6 billion pounds of chicken 26.5 billion pounds of beef 21.9 billion pounds of pork 6 billion pounds of turkey 334 million pounds of veal, lamb and mutton
Top Livestock Producing States 2007 Cattle - Colorado, Texas and Nebraska Hog - Iowa, North Carolina and Illinois Chicken - Georgia, Arkansas and Alabama Turkey - Minnesota, North Carolina and Arkansas There are 6,032 federally inspected meat and poultry slaughtering and processing plants in the United States. U.S. meat consumption was 55% red meat (beef, veal, lamb, pork, and mutton), 8.2% fish, and 36.8% poultry in 2007. Americans spend 6.4% of disposable income on food at home. Meat is sold through retail establishments including restaurants, grocery stores, and butcher shops. Independent butcher shops have decreased in number over the last ten years, as sales of meet have fallen slightly and moved increasingly to grocery stores and big box retailers. However, this has created an opportunity for specialty butcher shops in markets which provide only basic options through these larger retailers.
Market Segmentation Parkdale potential customers are divided into the following groups as shown in the market analysis table: Parkdale High-Income Households: Annual household income of over $100,000 in Parkdale (80% of which consist of two adults). Parkdale Medium-Income Households: Annual household income of $50,000 to $100,000 in Parkdale (50% of which consist of two adults and 50% of which consist of one adult). Neighboring Town High-Income Households: Annual household income of over $100,000 in the five towns bordering Parkdale (80% of which consist of two adults). Caterers: Upscale catering businesses in a 15 mile radius of Parkdale. Restaurants: Upscale restaurants in a 15 mile radius of Parkdale.
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Market Analysis
Year 1
Year 2
Year 3
Year 4
Year 5
Potential Customers
Growth
Parkdale High-Income Households
3%
9,000
9,225
9,456
9,692
9,934
2.50%
Parkdale Medium-Income Households
3%
25,000
25,625
26,266
26,923
27,596
2.50%
Neighboring Town HighIncome Households
3%
25,000
25,625
26,266
26,923
27,596
2.50%
Caterers
4%
25
26
27
28
29
3.78%
Restaurants
5%
60
63
66
69
72
4.66%
2.50%
59,085
60,564
62,081
63,635
65,227
2.50%
Total
CAGR
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Target Market Segment Strategy Market segmentation for Parkdale Meats is based on the specific market opportunity in the Parkdale area. While lowincome households are perfectly content with purchasing the meat options at local grocery stores and big box retailers, households with a greater level of disposable income are interested in expanding their options for home
cooked meats. Furthermore, these customers entertain in their homes to a greater extent than low-income households and prefer to offer high-quality or rarer meat options at these events. It is expected that customers from neighboring towns will be more likely to travel to Parkdale if they have higher levels of disposable income to allow for the time and gas expense of this travel. For this reason, high-income households will be targeted at first in neighboring towns. Caterers, especially those serving high-end corporate and private events, and upscale restaurants seek high-quality specialty meats at wholesale prices. Parkdale Meats will sell in bulk to catering businesses and restaurants at a substantial discount from retail prices, while still allowing for margin. Caterers and restaurants will be required to order in advance to allow for specialty orders of meats and not deplete the products available at the retail location for immediate purchase.
Industry Analysis The American Meat Institute provides the following analysis: "The meat industry is unique because it relies on live animals as its raw materials. Within livestock production, there is a classic, livestock price cycle. Prices rise and fall as producers raise more animals in response to high prices or low supply, and then cease producing when livestock inventories become high and prices fall. At the low points in the livestock price cycle, some livestock producers have called for reviews of meat packing industry structure to determine if the structure may be causing a price decline. Each review has found that industry structure is not to blame for livestock prices. Rather, the basic laws of supply and demand most often are the cause." Elsewhere, researchers find a wave of consolidation occurring in the meat industry since the 1990s, spurred by the growth of several major grocery chains such as Wal-Mart. In general, "consumers are eagerly buying more conveniently prepared food products of consistent quality, despite the sluggish growth of overall food spending" write researchers Barkema, Drabenstott and Novack, "...and nearly 40 percent of the consumer's food dollar is spent in restaurants and other eating establishments". Despite, and in fact because, of these changes, there is a growing need for sales of specialty meats to the niche market who can afford and desire them, as they are no longer served well by grocery stores and large retailers.
Competition and Buying Patterns Competitors for Parkdale Meats fall into the following categories:
Grocery Stores (Stop & Shop, A & P, Gorman's Market, etc.) - 7 stores in greater Parkdale area Big box retailers (Wal-Mart and Costco) Butcher shops (Red's Meats and Bay Avenue Butchers)
Grocery stores provide basic meat options at relatively low prices. They are chosen by customers interested in buying meat along with all of their grocery and food needs, and not traveling far from their home. These customers will sacrifice some quality and options for price and convenience. Big box retailers serve clients interested in the lowest price and able to sacrifice some convenience (longer waits and longer travel times) for the lowest price. They offer meats of the same range of options and quality as grocery stores. Red's Meats has been in existence for 25 years and primarily serves customers who value the store's history. These customers have typically been buying meats at Red's for at least five years and live within five miles of the store in Parkdale. The customers are aging, on average. Because its meats are only slightly higher quality than grocery stores, Red's does not serve caterers and restaurants, but sells products primarily to medium income households.
Bay Avenue Butchers was established ten years ago and focuses only on high-quality red meat and not poultry. They sell meats to caterers and restaurants, but these businesses would likely consider using a different vendor which could provide a wider range of options. Bay Avenue Butchers has high prices for its retail meats and serves only high-income households. Indirect competitors (and also potential competitors) include restaurants, as consumers interested in specialty meats may choose to eat out instead of cook the meal themselves.
Strategy and Implementation Summary To implement its plan, Parkdale Meats will attempt to: 1. Establish its retail location by signing a lease once funding is secured. 2. Begin by targeting high-income residents of Parkdale and the surrounding towns, as well as medium-income residents of Parkdale and business customers (upscale caterers and restaurants). 3. Business customers and retail customers will be grown as separate revenue streams, but will reinforce each other.
Competitive Edge Parkdale Meats will establish its competitive edge through the expertise of its founders. Robert Suidae brings with him existing relationships with the best suppliers of meat as well as an understanding of the craft of butchering. He has trained a number of assistant butchers who have gone on to take head positions at grocery stores and butcher shops. Coupled with Eryka Auroch's understanding of food service management, sales record in business to business sales, and financial acumen, the pair will have an edge over the town's other butcher shops and grocery stores within its niche market.
Marketing Strategy The marketing strategy of Parkdale Meats is to establish anticipation of the store's opening in the community so that it can hit the ground running with retail sales immediately upon launch. To that end, the following tactics will be used:
Direct mail of flyers to a select list of 5,000 high income households.
Advertisements in local newspapers and magazines.
Flyers in the downtown area around the site of the store.
Launch of the website in anticipation of opening.
Yellow Pages listing.
To market to businesses, Parkdale Meats will join the local Chamber of Commerce and Food Provider organizations to network and market to other members. After opening, the following tactics will be used going forward:
Direct mail to additional households with higher incomes.
Search engine marketing via local Google ads.
Email newsletter describing developments in meat offerings to business customers and certain households.
Sales Strategy The sales strategy for the business includes both retail sales and business sales strategies. Retail sales will be based on the marketing of the store and its location, explained in the marketing plan section. At an operational level, orders will be taken in person by clerks working the floor of the store (two on duty at any given time), or by the office clerk over the phone or Internet. Orders for specific cuts will be transmitted from these clerks to the butchers on duty who will prepare the cuts. They will be packaged, priced, and prepared for sale by the floor clerks. Customers will be greeted with a standard greeting and served to meet their satisfaction with the greatest care taken to provide quick service to walk-in customers. A machine will give numbers to waiting customers so they can be served in an orderly fashion. Waiting customers will have a few seats in the store to sit in while waiting. The business sales strategy relies on prospecting by Eryka Auroch to establish sales to caterers and restaurants. She will research, contact, and present to these businesses, drawing on her past sales experience. As a partner of the business, she will work to maximize this revenue stream to increase profits, rather than because of commissions on sales.
Sales Forecast The sales forecast table represents the business scaling up sales quickly in the first year as the community recognizes the high quality of its products and as in-roads are made with the dozens of area caterers and restaurants. Retail sales will be the greatest driver of sales growth and represents the best margins for the business, with a 100% markup over cost. Special orders are more expensive to provide, but will provide a vital line of business that will encourage high-income customers to use the store. Their cost of sales will be 60% of sales. Products sold to businesses will be sold at lower rates, but costs will also be reduced through bulk ordering and the ease of working with businesses in an ongoing way. The cost of sales to businesses will be 60% as well. This category, including both catering and restaurant sales, will represent a larger portion of sales than retail sales. The presence of the store and the brand name it establishes will allow caterers and restaurants to advertise the fact that they purchase their meats from Parkdale Meats without any fear, as customers will see it as a mark of quality.
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Sales Forecast
Year 1
Year 2
Year 3
Retail Regular Sales
$197,904
$300,000
$375,000
Retail Special Orders
$79,151
$150,000
$185,000
Catering Business Sales
$71,840
$150,000
$200,000
Restaurant Sales
$129,816
$225,000
$325,000
Total Sales
$478,711
$825,000
$1,085,000
Year 1
Year 2
Year 3
Retail Meats
$98,952
$150,000
$187,500
Special Order Meats
$47,491
$90,000
$111,000
Business Meats
$120,994
$225,000
$315,000
Subtotal Direct Cost of Sales
$267,436
$465,000
$613,500
Sales
Direct Cost of Sales
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Milestones Eryka Auroch will manage all marketing and sales activities. As discussed earlier, the business's website must be completed month's before opening to provide information for those who see flyers and ads prior to the launch. Search engine marketing will be an ongoing expense after the launch, and business prospecting by Eryka Auroch will be continued as needed to establish a foundation of restaurants and caterers to sell to.
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Milestones
Milestone
Start Date
End Date
Budget
Manager
Department
Website Development
8/1/2009
10/1/2009
$10,000
EA
Sales
Design Flyers and Ads
8/1/2009
9/1/2009
$1,000
EA
Sales
Direct Mail Campaign
9/1/2009
10/1/2009
$2,000
EA
Sales
Newspaper Ad Campaign
9/1/2009
10/1/2009
$2,000
EA
Sales
Search Engine Marketing
10/1/2009
9/30/2010
$10,000
EA
Sales
Business Sales Prospecting
9/15/2009
12/1/2009
$500
EA
Sales
Totals
$25,500
Management Summary The management of Parkdale Meats will consist of Eryka Auroch and Robert Suidae. Eryka Auroch, CEO, will manage sales, marketing, and finances for the business. This will include training sales staff, managing all marketing programs, and being the liaise to the website developer and accountant for the business. Robert Suidae, COO, will design the store's floor plan, plan, order and install all equipment purchases, establish operations procedures, train butchering staff and operations staff, and establish relationships with all suppliers. Two employees will initially include a full-time sales/operations clerk and one assistant butcher.
Personnel Plan The personnel forecast reflects modest raises for all staff each year. The CEO and COO will be primarily compensated through profits. It is expected that lower-level staff may turn over, but the positions will be systematized to an extent that this does not disrupt the business.
Personnel Plan
Year 1
Year 2
Year 3
CEO
$36,000
$36,000
$36,000
COO
$36,000
$36,000
$36,000
Assistant Butcher
$38,400
$40,000
$42,000
Sales & Operations Staff
$36,000
$38,000
$40,000
Total People
4
4
4
Total Payroll
$146,400
$150,000
$154,000
Financial Plan The business will grow after startup from its own cash flow. Significant growth is possible in the initial target markets before there is a need to take on additional staff or move to a larger facility. These are possibilities after the first three years, as is opening an additional retail location in an area that will not compete with Parkdale Meats' first location.
Start-up Funding Funding for the launch of the business will be provided primarily by equity from the two partners. Each will contribute in equal share from their savings to launch the business.
The remainder of financing will be made up in temporary credit card debt taken on by the two founders and accounts payable from delayed payments on start-up costs.
The business seeks a business loan to finance the purchase of the equipment needed. These assets can be held as collateral in this loan.
Start-up Funding
Start-up Expenses to Fund
$32,800
Start-up Assets to Fund
$182,000
Total Funding Required
$214,800
Assets
Non-cash Assets from Start-up
Cash Requirements from Start-up
Additional Cash Raised
Cash Balance on Starting Date
Total Assets
$102,000
$80,000
$0
$80,000
$182,000
Liabilities and Capital
Liabilities
Current Borrowing
$40,000
Long-term Liabilities
$40,000
Accounts Payable (Outstanding Bills)
$4,800
Other Current Liabilities (interest-free)
$0
Total Liabilities
$84,800
Capital
Planned Investment
Robert Suidae
$65,000
Eryka Auroch
$0
Additional Investment Requirement
$65,000
Total Planned Investment
$130,000
Loss at Start-up (Start-up Expenses)
($32,800)
Total Capital
$97,200
Total Capital and Liabilities
$182,000
Total Funding
$214,800
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Important Assumptions Interest rates and the tax rate reflect the current economic environment that Parkdale Meats will operate within.
Break-even Analysis Due to the monthly break even in sales, overall company break even is expected in the tenth month of operation.
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Break-even Analysis
Monthly Revenue Break-even
$42,371
Assumptions:
Average Percent Variable Cost
56%
Estimated Monthly Fixed Cost
$18,700
Projected Profit and Loss Additional direct cost of sales reflects the costs of packaging, gas for deliveries, credit card transaction fees, and other direct costs of the meat preparation and order fulfillment processes. Gross margins are based on the industry markup for butchered meats. Marketing expenses will be higher in the first year to announce the opening of the firm and will drop after that. Most expenses will show small increases each year as the business will remain in the same location over the first three years. Profit will rise sharply over the first three years as sales are spread over these relatively stable expenses.
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Pro Forma Profit and Loss
Year 1
Year 2
Year 3
Sales
$478,711
$825,000
$1,085,000
Direct Cost of Sales
$267,436
$465,000
$613,500
Other Costs of Sales
$23,936
$41,250
$54,250
Total Cost of Sales
$291,372
$506,250
$667,750
Gross Margin
$187,339
$318,750
$417,250
Gross Margin %
39.13%
38.64%
38.46%
$146,400
$150,000
$154,000
$18,000
$13,000
$14,000
$8,040
$8,040
$8,040
$19,200
$20,160
$21,168
Utilities
$2,400
$2,520
$2,646
Insurance
$2,400
$2,520
$2,646
$21,960
$22,500
$23,100
$6,000
$6,300
$6,615
Total Operating Expenses
$224,400
$225,040
$232,215
Profit Before Interest and Taxes
($37,061)
$93,710
$185,035
EBITDA
($29,021)
$101,750
$193,075
$7,725
$3,933
$1,400
$0
$26,933
$55,090
Expenses
Payroll
Marketing/Promotion
Depreciation
Rent
Payroll Taxes
Other
Interest Expense
Taxes Incurred
Net Profit
Net Profit/Sales
($44,786)
$62,844
$128,544
-9.36%
7.62%
11.85%
Projected Cash Flow The business will pay back its current borrowing in credit card debt over the first and second years of operation, and its long-term loan over the first three years of operation, after smaller payments in the first year. Cash on hand will allow for dividends to be paid to the partners in the second and third years of operation.
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Pro Forma Cash Flow
Year 1
Year 2
Year 3
Cash Received
Cash from Operations
Cash Sales
$478,711
$825,000
$1,085,000
Subtotal Cash from Operations
$478,711
$825,000
$1,085,000
$33,510
$57,750
$75,950
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
$512,221
$882,750
$1,160,950
Year 1
Year 2
Year 3
Additional Cash Received
Sales Tax, VAT, HST/GST Received
Expenditures
Expenditures from Operations
Cash Spending
$146,400
$150,000
$154,000
Bill Payments
$321,065
$621,800
$779,090
Subtotal Spent on Operations
$467,465
$771,800
$933,090
Sales Tax, VAT, HST/GST Paid Out
$33,510
$57,750
$75,950
Principal Repayment of Current Borrowing
$24,000
$16,000
$0
$0
$0
$0
$6,000
$13,332
$13,332
Purchase Other Current Assets
$0
$0
$0
Purchase Long-term Assets
$0
$0
$0
Dividends
$0
$50,000
$100,000
Subtotal Cash Spent
$530,975
$908,882
$1,122,372
Net Cash Flow
($18,754)
($26,132)
$38,578
$61,246
$35,113
$73,691
Additional Cash Spent
Other Liabilities Principal Repayment
Long-term Liabilities Principal Repayment
Cash Balance
Projected Balance Sheet
The balance sheet shows long-term liabilities will be paid off over the first three years and retained earnings will increase in the company, despite dividends being paid. The business will increasingly develop means to finance its own growth in future years.
Pro Forma Balance Sheet
Year 1
Year 2
Year 3
Cash
$61,246
$35,113
$73,691
Inventory
$13,219
$16,844
$16,863
Other Current Assets
$20,000
$20,000
$20,000
Total Current Assets
$94,465
$71,957
$110,554
$80,000
$80,000
$80,000
Accumulated Depreciation
$8,040
$16,080
$24,120
Total Long-term Assets
$71,960
$63,920
$55,880
$166,425
$135,877
$166,434
Assets
Current Assets
Long-term Assets
Long-term Assets
Total Assets
Liabilities and Capital
Year 1
Year 2
Year 3
Accounts Payable
$64,010
$49,951
$65,296
Current Borrowing
$16,000
$0
$0
$0
$0
$0
Subtotal Current Liabilities
$80,010
$49,951
$65,296
Long-term Liabilities
$34,000
$20,668
$7,336
Total Liabilities
$114,010
$70,619
$72,632
Paid-in Capital
$130,000
$130,000
$130,000
Retained Earnings
($32,800)
($127,586)
($164,742)
Earnings
($44,786)
$62,844
$128,544
$52,414
$65,258
$93,802
$166,425
$135,877
$166,434
$52,414
$65,258
$93,802
Current Liabilities
Other Current Liabilities
Total Capital
Total Liabilities and Capital
Net Worth
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Business Ratios The business ratios for Parkdale Meats are compared here against specialty food stores of over $1 million annual revenue.
Ratio Analysis
Year 1
Year 2
Year 3
Industry Profile
n.a.
72.34%
31.52%
-0.06%
7.94%
12.40%
10.13%
23.32%
Other Current Assets
12.02%
14.72%
12.02%
33.42%
Total Current Assets
56.76%
52.96%
66.43%
82.61%
Long-term Assets
43.24%
47.04%
33.57%
17.39%
100.00%
100.00%
100.00%
100.00%
Current Liabilities
48.08%
36.76%
39.23%
37.13%
Long-term Liabilities
20.43%
15.21%
4.41%
30.43%
Sales Growth
Percent of Total Assets
Inventory
Total Assets
Total Liabilities
68.51%
51.97%
43.64%
67.55%
Net Worth
31.49%
48.03%
56.36%
32.45%
100.00%
100.00%
100.00%
100.00%
Gross Margin
39.13%
38.64%
38.46%
19.29%
Selling, General & Administrative Expenses
48.49%
31.02%
26.61%
8.62%
3.76%
1.58%
1.29%
0.29%
-7.74%
11.36%
17.05%
1.72%
Current
1.18
1.44
1.69
1.90
Quick
1.02
1.10
1.43
1.28
68.51%
51.97%
43.64%
67.55%
Pre-tax Return on Net Worth
-85.45%
137.57%
195.77%
26.22%
Pre-tax Return on Assets
-26.91%
66.07%
110.33%
8.51%
Year 1
Year 2
Year 3
Percent of Sales
Sales
Advertising Expenses
Profit Before Interest and Taxes
Main Ratios
Total Debt to Total Assets
Additional Ratios
Net Profit Margin
-9.36%
7.62%
11.85%
n.a
Return on Equity
-85.45%
96.30%
137.04%
n.a
48.00
30.94
36.40
n.a
5.94
12.17
12.17
n.a
27
34
26
n.a
2.88
6.07
6.52
n.a
Debt to Net Worth
2.18
1.08
0.77
n.a
Current Liab. to Liab.
0.70
0.71
0.90
n.a
$14,454
$22,006
$45,258
n.a
-4.80
23.82
132.15
n.a
0.35
0.16
0.15
n.a
Activity Ratios
Inventory Turnover
Accounts Payable Turnover
Payment Days
Total Asset Turnover
Debt Ratios
Liquidity Ratios
Net Working Capital
Interest Coverage
Additional Ratios
Assets to Sales
Current Debt/Total Assets
48%
37%
39%
n.a
Acid Test
1.02
1.10
1.43
n.a
Sales/Net Worth
9.13
12.64
11.57
n.a
Dividend Payout
0.00
0.80
0.78
n.a
Appendix
Sales Forecast
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
Month 7
Month 8
Month 9 Month 10 Month 11 Month 12
Retail Regular Sales
$5,000
$6,000
$7,200
$8,640
$10,368
$12,442
$14,930
$17,916
$21,499
$25,799
$30,959
$37,151
Retail Special Orders
$2,000
$2,400
$2,880
$3,456
$4,147
$4,976
$5,971
$7,165
$8,598
$10,318
$12,382
$14,858
Catering Business Sales
$0
$1,000
$1,675
$2,252
$2,887
$3,911
$5,601
$6,756
$8,546
$9,932
$12,588
$16,693
Restaurant Sales
$0
$2,000
$3,291
$4,446
$6,063
$7,769
$10,289
$13,333
$15,853
$19,213
$21,942
$25,617
$7,000
$11,400
$15,046
$18,794
$23,465
$29,098
$36,790
$45,170
$54,496
$65,261
$77,871
$94,319
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
Month 7
Month 8
Month 9 Month 10 Month 11 Month 12
Sales
Total Sales
Direct Cost of Sales
Retail Meats
$2,500
$3,000
$3,600
$4,320
$5,184
$6,221
$7,465
$8,958
$10,750
$12,900
$15,480
$18,576
Special Order Meats
$1,200
$1,440
$1,728
$2,074
$2,488
$2,986
$3,583
$4,299
$5,159
$6,191
$7,429
$8,915
$0
$1,800
$2,980
$4,019
$5,370
$7,008
$9,534
$12,053
$14,639
$17,487
$20,718
$25,386
$3,700
$6,240
$8,308
$10,413
$13,042
$16,214
$20,581
$25,310
$30,548
$36,577
$43,627
$52,876
Business Meats
Subtotal Direct Cost of Sales
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Personnel Plan
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
Month 7
Month 8
Month 9
Month 10
Month 11
Month 12
CEO
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
COO
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
Assistant Butcher
$3,200
$3,200
$3,200
$3,200
$3,200
$3,200
$3,200
$3,200
$3,200
$3,200
$3,200
$3,200
Sales & Operations Staff
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
Total People
4
4
4
4
4
4
4
4
4
4
4
4
Total Payroll
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
Pro Forma Profit and Loss
Month 2
Month 3
Month 4
Month 5
Month 6
Month 7
Month 8
Month 9
Month 10
Sales
$7,000
$11,400
$15,046
$18,794
$23,465
$29,098
$36,790
$45,170
$54,496
$65,261
$77,871 $94,319
Direct Cost of Sales
$3,700
$6,240
$8,308
$10,413
$13,042
$16,214
$20,581
$25,310
$30,548
$36,577
$43,627 $52,876
Other Costs of Sales
$350
$570
$752
$940
$1,173
$1,455
$1,840
$2,259
$2,725
$3,263
Total Cost of Sales
$4,050
$6,810
$9,060
$11,352
$14,216
$17,669
$22,421
$27,569
$33,272
$39,840
$47,520 $57,592
Gross Margin
$2,950
$4,590
$5,986
$7,442
$9,250
$11,428
$14,370
$17,601
$21,223
$25,421
$30,351 $36,727
42.14%
40.26%
39.79%
39.60%
39.42%
39.28%
39.06%
38.97%
38.95%
38.95%
38.98% 38.94%
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200 $12,200
$1,500
$1,500
$1,500
$1,500
$1,500
$1,500
$1,500
$1,500
$1,500
$1,500
$1,500
$1,500
$670
$670
$670
$670
$670
$670
$670
$670
$670
$670
$670
$670
$1,600
$1,600
$1,600
$1,600
$1,600
$1,600
$1,600
$1,600
$1,600
$1,600
$1,600
$1,600
Utilities
$200
$200
$200
$200
$200
$200
$200
$200
$200
$200
$200
$200
Insurance
$200
$200
$200
$200
$200
$200
$200
$200
$200
$200
$200
$200
$1,830
$1,830
$1,830
$1,830
$1,830
$1,830
$1,830
$1,830
$1,830
$1,830
$1,830
$1,830
Gross Margin %
Month 11
Month 12
Month 1
$3,894
$4,716
Expenses
Payroll
Marketing/Promotion
Depreciation
Rent
Payroll Taxes
15%
Other
$500
$500
$500
$500
$500
$500
$500
$500
$500
$500
$18,700
$18,700
$18,700
$18,700
$18,700
$18,700
$18,700
$18,700
$18,700
$18,700
$18,700 $18,700
Profit Before Interest and Taxes
($15,750)
($14,110)
($12,714)
($11,258)
($9,450)
($7,272)
($4,330)
($1,099)
$2,523
$6,721
$11,651 $18,027
EBITDA
($15,080)
($13,440)
($12,044)
($10,588)
($8,780)
($6,602)
($3,660)
($429)
$3,193
$7,391
$12,321 $18,697
$804
$775
$746
$717
$688
$658
$629
$600
$571
$542
$513
$483
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Net Profit
($16,554)
($14,885)
($13,460)
($11,975)
($10,138)
($7,930)
($4,960)
($1,699)
$1,953
$6,180
$11,138 $17,543
Net Profit/Sales
-236.49%
-130.57%
-89.46%
-63.71%
-43.20%
-27.25%
-13.48%
-3.76%
3.58%
9.47%
14.30% 18.60%
Total Operating Expenses
Interest Expense
Taxes Incurred
$500
$500
Pro Forma Cash Flow
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
Month 7
Month 8
Month 9
Month 10 Month 11 Month 12
Cash Sales
$7,000
$11,400
$15,046
$18,794
$23,465
$29,098
$36,790
$45,170
$54,496
$65,261
$77,871
$94,319
Subtotal Cash from Operations
$7,000
$11,400
$15,046
$18,794
$23,465
$29,098
$36,790
$45,170
$54,496
$65,261
$77,871
$94,319
Cash Received
Cash from Operations
Additional Cash Received
Sales Tax, VAT, HST/GST Received
$490
$798
$1,053
$1,316
$1,643
$2,037
$2,575
$3,162
$3,815
$4,568
$5,451
$6,602
New Current Borrowing
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
New Other Liabilities (interest-free)
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
New Long-term Liabilities
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Sales of Other Current Assets
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Sales of Long-term Assets
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
New Investment Received
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Subtotal Cash Received
$7,490
$12,198
$16,099
$20,110
$25,108
$31,135
$39,366
$48,332
$58,311
$69,830
$83,322
$100,921
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
Month 7
Month 8
Month 9
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$12,200
$5,120
$9,757
$14,120
$16,228
$18,524
$21,509
$25,118
$30,145
$35,375
$41,207
$47,983
$55,978
$17,320
$21,957
$26,320
$28,428
$30,724
$33,709
$37,318
$42,345
$47,575
$53,407
$60,183
$68,178
$490
$798
$1,053
$1,316
$1,643
$2,037
$2,575
$3,162
$3,815
$4,568
$5,451
$6,602
$2,000
$2,000
$2,000
$2,000
$2,000
$2,000
$2,000
$2,000
$2,000
$2,000
$2,000
$2,000
Expenditures
7.00%
Month 10 Month 11 Month 12
Expenditures from Operations
Cash Spending
Bill Payments
Subtotal Spent on Operations
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out
Principal Repayment of Current
Borrowing
Other Liabilities Principal Repayment
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$500
$500
$500
$500
$500
$500
$500
$500
$500
$500
$500
$500
Purchase Other Current Assets
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Purchase Long-term Assets
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Dividends
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$20,310
$25,255
$29,873
$32,244
$34,867
$38,246
$42,393
$48,007
$53,889
$60,475
$68,133
$77,281
($12,820)
($13,057)
($13,774)
($12,134)
($9,759)
($7,111)
($3,028)
$325
$4,421
$9,354
$15,189
$23,640
$67,180
$54,122
$40,348
$28,214
$18,455
$11,344
$8,316
$8,641
$13,062
$22,417
$37,605
$61,246
Long-term Liabilities Principal Repayment
Subtotal Cash Spent
Net Cash Flow
Cash Balance
Pro Forma Balance Sheet
Assets
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
Month 7
Month 8
Month 9
Month 10
Month 11
Month 12
$80,000
$67,180
$54,122
$40,348
$28,214
$18,455
$11,344
$8,316
$8,641
$13,062
$22,417
$37,605
$61,246
$2,000
$925
$1,560
$2,077
$2,603
$3,261
$4,054
$5,145
$6,328
$7,637
$9,144
$10,907
$13,219
Starting Balances
Current Assets
Cash
Inventory
Other Current Assets
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
Total Current Assets
$102,000
$88,105
$75,683
$62,425
$50,818
$41,716
$35,398
$33,462
$34,969
$40,699
$51,561
$68,512
$94,465
$80,000
$80,000
$80,000
$80,000
$80,000
$80,000
$80,000
$80,000
$80,000
$80,000
$80,000
$80,000
$80,000
$0
$670
$1,340
$2,010
$2,680
$3,350
$4,020
$4,690
$5,360
$6,030
$6,700
$7,370
$8,040
$80,000
$79,330
$78,660
$77,990
$77,320
$76,650
$75,980
$75,310
$74,640
$73,970
$73,300
$72,630
$71,960
$182,000
$167,435
$154,343
$140,415
$128,138
$118,366
$111,378
$108,772
$109,609
$114,669
$124,861
$141,142
$166,425
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
Month 7
Month 8
Month 9
Month 10
Month 11
Month 12
Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets
Liabilities and Capital
Current Liabilities
Accounts Payable
$4,800
$9,289
$13,582
$15,614
$17,811
$20,677
$24,119
$28,973
$34,009
$39,617
$46,128
$53,771
$64,010
Current Borrowing
$40,000
$38,000
$36,000
$34,000
$32,000
$30,000
$28,000
$26,000
$24,000
$22,000
$20,000
$18,000
$16,000
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Subtotal Current Liabilities
$44,800
$47,289
$49,582
$49,614
$49,811
$50,677
$52,119
$54,973
$58,009
$61,617
$66,128
$71,771
$80,010
Long-term Liabilities
$40,000
$39,500
$39,000
$38,500
$38,000
$37,500
$37,000
$36,500
$36,000
$35,500
$35,000
$34,500
$34,000
Total Liabilities
$84,800
$86,789
$88,582
$88,114
$87,811
$88,177
$89,119
$91,473
$94,009
$97,117
$101,128
$106,271
$114,010
$130,000
$130,000
$130,000
$130,000
$130,000
$130,000
$130,000
$130,000
$130,000
$130,000
$130,000
$130,000
$130,000
Other Current Liabilities
Paid-in Capital
Retained Earnings
Earnings
Total Capital
Total Liabilities and Capital
Net Worth
($32,800)
($32,800)
($32,800)
($32,800)
($32,800)
($32,800)
($32,800)
($32,800)
($32,800)
($32,800)
($32,800)
($32,800)
($32,800)
$0
($16,554)
($31,439)
($44,899)
($56,874)
($67,011)
($74,941)
($79,901)
($81,600)
($79,647)
($73,467)
($62,329)
($44,786)
$97,200
$80,646
$65,761
$52,301
$40,326
$30,189
$22,259
$17,299
$15,600
$17,553
$23,733
$34,871
$52,414
$182,000
$167,435
$154,343
$140,415
$128,138
$118,366
$111,378
$108,772
$109,609
$114,669
$124,861
$141,142
$166,425
$97,200
$80,646
$65,761
$52,301
$40,326
$30,189
$22,259
$17,299
$15,600
$17,553
$23,733
$34,871
$52,414