butcher shop business plan

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:

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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.

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. 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 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, 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. 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 $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

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 processed9 billion chickens 34.2 million cattle 271 million turkeys 2.7 million sheep109 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 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 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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Target Market Segment Strategy

Market segmentation for Parkdale Meats is based on the specific market opportunity in the Parkdale area. While low-income 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

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




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


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 $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 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




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


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

Utilities $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%

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


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 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

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 Liabilities 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

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


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 Liabilities

Accounts Payable $64,010 $49,951 $65,296

Current Borrowing $16,000 $0 $0

Other Current Liabilities $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

Total Capital $52,414 $65,258 $93,802

Total Liabilities and Capital $166,425 $135,877 $166,434

Net Worth $52,414 $65,258 $93,802




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

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 Liabilities 48.08% 36.76% 39.23% 37.13%

Long-term Liabilities 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%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin -9.36% 7.62% 11.85% n.a

Return on Equity -85.45% 96.30% 137.04% n.a

Activity Ratios

Inventory Turnover 48.00 30.94 36.40 n.a

Accounts Payable Turnover 5.94 12.17 12.17 n.a

Payment Days 27 34 26 n.a

Total Asset Turnover 2.88 6.07 6.52 n.a

Debt Ratios

Debt to Net Worth 2.18 1.08 0.77 n.a

Current Liab. to Liab. 0.70 0.71 0.90 n.a

Liquidity Ratios

Net Working Capital $14,454 $22,006 $45,258 n.a

Interest Coverage -4.80 23.82 132.15 n.a

Additional Ratios

Assets to Sales 0.35 0.16 0.15 n.a

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

Sales

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

Total 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 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 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

Business Meats $0 $1,800 $2,980 $4,019 $5,370 $7,008 $9,534 $12,053 $14,639 $17,487 $20,718 $25,386

Subtotal 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




Personnel Plan

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9Month

10Month

11Month

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 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11Month

12

Sales $7,000 $11,400 $15,046 $18,794 $23,465 $29,098 $36,790 $45,170 $54,496 $65,261 $77,871 $94,31

9

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 $52,87

6

Other Costs of Sales $350 $570 $752 $940 $1,173 $1,455 $1,840 $2,259 $2,725 $3,263 $3,894 $4,716

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 $57,59

2

Gross Margin $2,950 $4,590 $5,986 $7,442 $9,250 $11,428 $14,370 $17,601 $21,223 $25,421 $30,351 $36,72

7

Gross Margin % 42.14% 40.26% 39.79% 39.60% 39.42% 39.28% 39.06% 38.97% 38.95% 38.95% 38.98% 38.94%

Expenses

Payroll $12,200 $12,200 $12,200 $12,200 $12,200 $12,200 $12,200 $12,200 $12,200 $12,200 $12,200 $12,20

0

Marketing/Promotion $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500

Depreciation $670 $670 $670 $670 $670 $670 $670 $670 $670 $670 $670 $670

Rent $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

Payroll Taxes 15% $1,830 $1,830 $1,830 $1,830 $1,830 $1,830 $1,830 $1,830 $1,830 $1,830 $1,830 $1,830

Other $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500

Total Operating Expenses $18,700 $18,700 $18,700 $18,700 $18,700 $18,700 $18,700 $18,700 $18,700 $18,700 $18,700 $18,70

0

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 $18,02

7

EBITDA ($15,080) ($13,440) ($12,044) ($10,588) ($8,780) ($6,602) ($3,660) ($429) $3,193 $7,391 $12,321 $18,69

7

Interest Expense $804 $775 $746 $717 $688 $658 $629 $600 $571 $542 $513 $483

Taxes Incurred $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 $17,54

3

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%

Pro Forma Cash Flow


Cash Received

Cash from Operations

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

Additional Cash Received

Sales Tax, VAT, HST/GST Received

7.00% $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

Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Expenditures from Operations

Cash Spending $12,200 $12,200 $12,200 $12,200 $12,200 $12,200 $12,200 $12,200 $12,200 $12,200 $12,200 $12,200

Bill Payments $5,120 $9,757 $14,120 $16,228 $18,524 $21,509 $25,118 $30,145 $35,375 $41,207 $47,983 $55,978

Subtotal Spent on Operations $17,320 $21,957 $26,320 $28,428 $30,724 $33,709 $37,318 $42,345 $47,575 $53,407 $60,183 $68,178

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out

$490 $798 $1,053 $1,316 $1,643 $2,037 $2,575 $3,162 $3,815 $4,568 $5,451 $6,602

Principal Repayment of Current Borrowing

$2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000

Other Liabilities Principal Repayment

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Long-term Liabilities Principal Repayment

$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

Subtotal Cash Spent $20,310 $25,255 $29,873 $32,244 $34,867 $38,246 $42,393 $48,007 $53,889 $60,475 $68,133 $77,281

Net Cash Flow ($12,820) ($13,057) ($13,774) ($12,134) ($9,759) ($7,111) ($3,028) $325 $4,421 $9,354 $15,189 $23,640

Cash Balance $67,180 $54,122 $40,348 $28,214 $18,455 $11,344 $8,316 $8,641 $13,062 $22,417 $37,605 $61,246

Pro Forma Balance Sheet


Assets Starting Balances

Current Assets

Cash $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

Inventory $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

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

Long-term Assets

Long-term Assets $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

Accumulated Depreciation $0 $670 $1,340 $2,010 $2,680 $3,350 $4,020 $4,690 $5,360 $6,030 $6,700 $7,370 $8,040

Total Long-term Assets $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

Total Assets $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

Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

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

Other Current Liabilities $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

Paid-in Capital $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

Retained Earnings ($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)

Earnings $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)

Total Capital $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

Total Liabilities and Capital $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

Net Worth $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

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