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1.1 Objectives......................................................................................................................................21.2 Mission ..........................................................................................................................................21.3 Keys to Success ............................................................................................................................2
2.0 Company Summary .................................................................................................................................32.1 Company Ownership .....................................................................................................................32.2 Start-up Summary..........................................................................................................................3
6.0 Management Summary .........................................................................................................................126.1 Personnel Plan ............................................................................................................................12
Table: Personnel......................................................................................................................137.0 Financial Plan .......................................................................................................................................13
7.7 Business Ratios ...........................................................................................................................21Table: Ratios............................................................................................................................22
Table: Profit and Loss ...................................................................................................................................3Table: Cash Flow ..........................................................................................................................................4Table: Balance Sheet....................................................................................................................................5
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1.0 Executive Summary
OverviewParkdale Meats, is a startup specialty butcher shop to be launched in the coming year. It willsell a wide menu of meats to customers including medium- and high-income residents ofParkdale, as well as high-income residents of neighboring towns, and high-end caterers.
The CompanyParkdale 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 fifteenyears experience in butcher shops and Eryka Auroch, an experienced retail food-servicemanager. Auroch will serve as the company's CEO and Suidae as the company's COO.
Products and ServiceParkdale Meats will sell aged beef, free-range poultry, fresh pork and domestic lamb. Uponrequest, the store will sell wild game such as buffalo, alligator, kangaroo, quail, and otherspecially requested items. The products will be purchased from suppliers within a 100-mile radiusof 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 throughspecial orders in order to make sure all customers leave satisfied.
The MarketThe meat and poultry industry is the largest segment of U.S. agriculture. Total meat and poultryproduction in 2007 reached more than 91 billion pounds. U.S. meat consumption was 55% redmeat (beef, veal, lamb, pork, and mutton), 8.2% fish, and 36.8% poultry in 2007. Meat is soldthrough retail establishments including restaurants, grocery stores, and butcher shops. Independent butcher shops have decreased in number over the last ten years, as sales ofmeet 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 provideonly basic options through these larger retailers.
CompetitionCompetitors 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 asan understanding of the craft of butchering. Coupled with Eryka Auroch's understanding offood 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 itsniche market.
Financial ConsiderationsFunding for the launch of the business will be provided primarily by equity from the twopartners. Each will contribute in equal share from their savings to launch the business. Theremainder of financing will be made up in temporary credit card debt taken on by the twofounders and accounts payable from delayed payments on start-up costs. The business seeks abusiness loan to finance the purchase of the equipment needed.
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The business will reach positive cash flow in its 8th month of operation, allowing for expeditedrepayment of its loan obligations, as well as for dividends to be paid to the owners. Revenue willtop $XXXXX and profit will reach about $XXXX in the third year of operation.
1.1 Objectives
Parkdale Meats will measure its success by its ability to achieve the following objectives:
1. Build sales to $XXXXX annually within three years.2. Receive 60% of sales through advance orders, either by phone or Internet, with 40% of
sales through walk-up traffic.3. Achieve cash flow break-even within six months.4. Become profitable by the second year of operation.
1.2 Mission
Parkdale Meats is a specialty butcher shop which seeks to serve the highest quality meats, cutto customer specifications, and become the foremost specialty meats provider in the greaterParkdale area.
1.3 Keys to Success
Parkdale Meats must follow these principles in order to achieve success in its market:
1. Maintain high quality standards for its suppliers and continuously monitor this quality.2. Preserve meats in optimal conditions to maintain freshness while in the store.3. 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
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person, over the phone, or through Internet orders.
2.0 Company Summary
Parkdale Meats is a startup specialty butcher shop to be launched in the coming year. It will sellaged beef, free-range poultry, fresh pork and domestic lamb. Upon request, the store will sellwild 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-incomeresidents of neighboring towns, and high-end caterers and restaurants.
The store will be managed and directed by Robert Suidae, a veteran butcher with fifteenyears experience in butcher shops and Eryka Auroch, an experienced retail food-servicemanager. Auroch will serve as the company's CEO and Suidae as the company's COO.
2.1 Company Ownership
Parkdale Meats is established as a limited liability company with 49% ownership by Robert Suidaeand 51% ownership by Eryka Auroch. The partners will share in management responsibilities withfinal decisions falling to Eryka Auroch where there are differences of opinion. The partnershipagreement allows for one partner to buy out the other in the case that the partnership mustbe dissolved and sets predetermined methods to determine the company's valuation in that case.
2.2 Start-up Summary
The following summary table shows the projected start-up costs over the three months prior tothe store's opening.
Start-up expenses for Parkdale Meats include initial insurance premiums covering both generalliability and product liability, as well as business renter's insurance, rent for 1 month's securityand 2 months to allow for build-out of the retail space, pre-launch marketing to cover flyers, adirect 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 forconsultation and permitting.
Inventory on-hand at any given time must be low as all meats must be kept extremely freshand so will be ordered on a weekly basis or even more often. Other current assets include officeand store furniture, shelving, a computer, phone system, and tools. Long-term assets includethe refrigerator unit for the shop, refrigerated display cases, window displays, store fixtures, arefrigerated 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 businessreaches break-even.
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Table: Start-up
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 $80,000
Start-up Inventory $2,000
Other Current Assets $20,000
Long-term Assets $80,000
Total Assets $182,000
Total Requirements $214,800
3.0 Products
Parkdale Meats will provide the following products on a regular basis:
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 haveminimal 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 isthe possibility of certain items running out because of high sales and going out of stock until newshipments may arise. The sales staff will offer suggestions of substitutions or help customersfulfill their orders through special orders in order to make sure all customers leave satisfied.
4.0 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 poultryproduction in 2007 reached more than 91 billion pounds.
In 2007, the meat and poultry industry processed9 billion chickens34.2 million cattle271 million turkeys2.7 million sheep
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109 million hogs and lambs
In 2007, American meat companies produced36.6 billion pounds of chicken26.5 billion pounds of beef21.9 billion pounds of pork6 billion pounds of turkey334 million pounds of veal, lamb and mutton
Top Livestock Producing States 2007Cattle - Colorado, Texas and NebraskaHog - Iowa, North Carolina and IllinoisChicken - Georgia, Arkansas and AlabamaTurkey - Minnesota, North Carolina and ArkansasThere are 6,032 federally inspected meat and poultry slaughtering and processing plants in theUnited 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 butchershops. Independent butcher shops have decreased in number over the last ten years, as salesof 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 provideonly basic options through these larger retailers.
4.1 Market Segmentation
Parkdale potential customers are divided into the following groups as shown in the marketanalysis 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 inParkdale (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 $100,000in 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.
Table: Market Analysis
Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
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 High-Income
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%
Total 2.50% 59,085 60,564 62,081 63,635 65,227 2.50%
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4.2 Target Market Segment Strategy
Market segmentation for Parkdale Meats is based on the specific market opportunity in theParkdale area. While low-income households are perfectly content with purchasing the meatoptions at local grocery stores and big box retailers, households with a greater level ofdisposable income are interested in expanding their options for home cooked meats. Furthermore, these customers entertain in their homes to a greater extent than low-incomehouseholds 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 ifthey have higher levels of disposable income to allow for the time and gas expense of thistravel. 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 upscalerestaurants seek high-quality specialty meats at wholesale prices. Parkdale Meats will sell in bulkto catering businesses and restaurants at a substantial discount from retail prices, while stillallowing for margin. Caterers and restaurants will be required to order in advance to allow forspecialty orders of meats and not deplete the products available at the retail location forimmediate purchase.
4.3 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. Withinlivestock production, there is a classic, livestock price cycle. Prices rise and fall as producersraise more animals in response to high prices or low supply, and then cease producing whenlivestock inventories become high and prices fall. At the low points in the livestock pricecycle, some livestock producers have called for reviews of meat packing industry structure to
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determine if the structure may be causing a price decline. Each review has found that industrystructure is not to blame for livestock prices. Rather, the basic laws of supply and demand mostoften are the cause."
Elsewhere, researchers find a wave of consolidation occurring in the meat industry since the1990s, spurred by the growth of several major grocery chains such as Wal-Mart.
In general, "consumers are eagerly buying more conveniently prepared food products ofconsistent quality, despite the sluggish growth of overall food spending" write researchersBarkema, Drabenstott and Novack, "...and nearly 40 percent of the consumer's food dollar isspent in restaurants and other eating establishments".
Despite, and in fact because, of these changes, there is a growing need for sales of specialtymeats to the niche market who can afford and desire them, as they are no longer served wellby grocery stores and large retailers.
4.3.1 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 greaterParkdale 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 bycustomers interested in buying meat along with all of their grocery and food needs, and nottraveling far from their home. These customers will sacrifice some quality and options for priceand convenience.
Big box retailers serve clients interested in the lowest price and able to sacrifice someconvenience (longer waits and longer travel times) for the lowest price. They offer meats of thesame range of options and quality as grocery stores.
Red's Meats has been in existence for 25 years and primarily serves customers who value thestore's history. These customers have typically been buying meats at Red's for at least fiveyears 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 servecaterers 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 meatand not poultry. They sell meats to caterers and restaurants, but these businesses wouldlikely consider using a different vendor which could provide a wider range of options. BayAvenue Butchers has high prices for its retail meats and serves only high-income households.
Indirect competitors (and also potential competitors) include restaurants, as consumersinterested in specialty meats may choose to eat out instead of cook the meal themselves.
5.0 Strategy and Implementation Summary
To implement its plan, Parkdale Meats will attempt to:
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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 andrestaurants).
3. Business customers and retail customers will be grown as separate revenue streams,but will reinforce each other.
5.1 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 asan understanding of the craft of butchering. He has trained a number of assistant butchers whohave gone on to take head positions at grocery stores and butcher shops. Coupled with ErykaAuroch's understanding of food service management, sales record in business to businesssales, and financial acumen, the pair will have an edge over the town's other butcher shopsand grocery stores within its niche market.
5.2 Marketing Strategy
The marketing strategy of Parkdale Meats is to establish anticipation of the store's opening inthe 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 FoodProvider 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.
5.3 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 themarketing plan section. At an operational level, orders will be taken in person by clerks workingthe floor of the store (two on duty at any given time), or by the office clerk over the phone orInternet. Orders for specific cuts will be transmitted from these clerks to the butchers onduty who will prepare the cuts. They will be packaged, priced, and prepared for sale by the floorclerks.
Customers will be greeted with a standard greeting and served to meet their satisfaction with
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the greatest care taken to provide quick service to walk-in customers. A machine will givenumbers to waiting customers so they can be served in an orderly fashion. Waiting customerswill 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 tocaterers 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 maximizethis revenue stream to increase profits, rather than because of commissions on sales.
5.3.1 Sales Forecast
The sales forecast table represents the business scaling up sales quickly in the first year asthe community recognizes the high quality of its products and as in-roads are made with thedozens of area caterers and restaurants.
Retail sales will be the greatest driver of sales growth and represents the best margins for thebusiness, with a 100% markup over cost. Special orders are more expensive to provide, butwill provide a vital line of business that will encourage high-income customers to use thestore. 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 throughbulk ordering and the ease of working with businesses in an ongoing way. The cost of sales tobusinesses 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 brandname it establishes will allow caterers and restaurants to advertise the fact that they purchasetheir meats from Parkdale Meats without any fear, as customers will see it as a mark of quality.
Table: Sales Forecast
Sales Forecast
Year 1 Year 2 Year 3
Sales
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
Direct Cost of Sales 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
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5.4 Milestones
Eryka Auroch will manage all marketing and sales activities. As discussed earlier, thebusiness's website must be completed month's before opening to provide information for thosewho see flyers and ads prior to the launch. Search engine marketing will be an ongoingexpense after the launch, and business prospecting by Eryka Auroch will be continued as neededto establish a foundation of restaurants and caterers to sell to.
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Table: Milestones
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
6.0 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 includetraining sales staff, managing all marketing programs, and being the liaise to the websitedeveloper and accountant for the business.
Robert Suidae, COO, will design the store's floor plan, plan, order and install all equipmentpurchases, establish operations procedures, train butchering staff and operations staff, andestablish relationships with all suppliers.
Two employees will initially include a full-time sales/operations clerk and one assistant butcher.
6.1 Personnel Plan
The personnel forecast reflects modest raises for all staff each year. The CEO and COO will be
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primarily compensated through profits. It is expected that lower-level staff may turn over, butthe positions will be systematized to an extent that this does not disrupt the business.
Table: Personnel
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
7.0 Financial Plan
The business will grow after startup from its own cash flow. Significant growth is possible inthe initial target markets before there is a need to take on additional staff or move to a largerfacility. These are possibilities after the first three years, as is opening an additional retaillocation in an area that will not compete with Parkdale Meats' first location.
7.1 Start-up Funding
Funding for the launch of the business will be provided primarily by equity from the twopartners. 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 twofounders and accounts payable from delayed payments on start-up costs.
The business seeks a business loan to finance the purchase of the equipment needed. Theseassets can be held as collateral in this loan.
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Table: Start-up Funding
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 $102,000
Cash Requirements from Start-up $80,000
Additional Cash Raised $0
Cash Balance on Starting Date $80,000
Total Assets $182,000
Liabilities and Capital
Liabilities
Current Borrowing $40,000
Long-term Liabil ities $40,000
Accounts Payable (Outstanding Bills) $4,800
Other Current Liabil ities (interest-free) $0
Total Liabil ities $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 Liabil ities $182,000
Total Funding $214,800
7.2 Important Assumptions
Interest rates and the tax rate reflect the current economic environment that Parkdale Meatswill operate within.
7.3 Break-even Analysis
Due to the monthly break even in sales, overall company break even is expected in the tenthmonth of operation.
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Table: Break-even Analysis
Break-even Analysis
Monthly Revenue Break-even $42,371
Assumptions:
Average Percent Variable Cost 56%
Estimated Monthly Fixed Cost $18,700
7.4 Projected Profit and Loss
Additional direct cost of sales reflects the costs of packaging, gas for deliveries, credit cardtransaction 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 willdrop after that. Most expenses will show small increases each year as the business will remain inthe same location over the first three years. Profit will rise sharply over the first three yearsas sales are spread over these relatively stable expenses.
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Table: Profit and Loss
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%
Expenses
Payroll $146,400 $150,000 $154,000
Marketing/Promotion $18,000 $13,000 $14,000
Depreciation $8,040 $8,040 $8,040
Rent $19,200 $20,160 $21,168
Util ities $2,400 $2,520 $2,646
Insurance $2,400 $2,520 $2,646
Payroll Taxes $21,960 $22,500 $23,100
Other $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
Interest Expense $7,725 $3,933 $1,400
Taxes Incurred $0 $26,933 $55,090
Net Profit ($44,786) $62,844 $128,544
Net Profit/Sales -9.36% 7.62% 11.85%
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7.5 Projected Cash Flow
The business will pay back its current borrowing in credit card debt over the first and secondyears of operation, and its long-term loan over the first three years of operation, after smallerpayments in the first year.
Cash on hand will allow for dividends to be paid to the partners in the second and third yearsof operation.
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Table: Cash Flow
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
Additional Cash Received
Sales Tax, VAT, HST/GST Received $33,510 $57,750 $75,950
New Current Borrowing $0 $0 $0
New Other Liabil ities (interest-free) $0 $0 $0
New Long-term Liabil ities $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
Expenditures Year 1 Year 2 Year 3
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
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $33,510 $57,750 $75,950
Principal Repayment of Current Borrowing $24,000 $16,000 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabil ities Principal Repayment $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
Cash Balance $61,246 $35,113 $73,691
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7.6 Projected Balance Sheet
The balance sheet shows long-term liabilities will be paid off over the first three years andretained earnings will increase in the company, despite dividends being paid. The business willincreasingly develop means to finance its own growth in future years.
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Table: Balance Sheet
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
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
Long-term Assets
Long-term Assets $80,000 $80,000 $80,000
Accumulated Depreciation $8,040 $16,080 $24,120
Total Long-term Assets $71,960 $63,920 $55,880
Total Assets $166,425 $135,877 $166,434
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabil ities
Accounts Payable $64,010 $49,951 $65,296
Current Borrowing $16,000 $0 $0
Other Current Liabil ities $0 $0 $0
Subtotal Current Liabil ities $80,010 $49,951 $65,296
Long-term Liabil ities $34,000 $20,668 $7,336
Total Liabil ities $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
Total Capital $52,414 $65,258 $93,802
Total Liabil ities and Capital $166,425 $135,877 $166,434
Net Worth $52,414 $65,258 $93,802
7.7 Business Ratios
The business ratios for Parkdale Meats are compared here against specialty food stores of over$1 million annual revenue.
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Table: Ratios
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 72.34% 31.52% -0.06%
Percent of Total Assets
Inventory 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%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabil ities 48.08% 36.76% 39.23% 37.13%
Long-term Liabil ities 20.43% 15.21% 4.41% 30.43%
Total Liabilities 68.51% 51.97% 43.64% 67.55%
Net Worth 31.49% 48.03% 56.36% 32.45%
Percent of Sales
Sales 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%
Advertising Expenses 3.76% 1.58% 1.29% 0.29%
Profit Before Interest and Taxes -7.74% 11.36% 17.05% 1.72%
Main Ratios
Current 1.18 1.44 1.69 1.90
Quick 1.02 1.10 1.43 1.28
Total Debt to Total Assets 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%
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