Total all expenses

This is the sum of TOTAL OPERATING EXPENSES and OTHER EXPENSES.

7. NET PROFIT/LOSS PRE-TAX

This is the GROSS MARGIN minus TOTAL ALL EXPENSES.

As can be seen by the financial information and summaries presented, Pizzeria Fresco is a business that offers a product that has the capability of producing income and profit, even from its conservative sales and revenue forecasts. Thus, it is a business that financially presents itself as having the potential and ability to repay the requested loan in the set time period.

TABLES INSERTED
NOTES AND EXPLANATIONS FOR Pizzeria Fresco CASH FLOW STATEMENT (PROJECTION)

A cashflow statement for Pizzeria Fresco is presented in Table 3. The first year is detailed by month while the following two years are presented by quarter.

Pizzeria Fresco beginning cash balance as of June 2004 is $93,372.00, which the owner is contributing from the outset.

For the first two months of June and July 2004, Pizzeria Fresco will be in its pre-opening phase, and will be utilizing major one-time expenditures of $102,115.00 for one-time start-up costs including fixtures and equipment, decoration and remodeling, utility and lease deposits, professional services, licenses and fees (as explained in detail on page X-X).

Beginning inventory disbursements of $4,257.00 is incurred in Month 2 (as detailed on pages X-X).

For the first month, while the business is in its build-out period, the only disbursements incurred are expected to be telephone and utilities and monthly payments on insurance, as detailed on pages X and X, respectively, on the Income Statement Explanations. In addition, the amount of $500.00 is allotted for miscellaneous costs that may arise.

For month two, the same disbursements are expected, in addition to beginning the advertising and promotion campaign at the cost of $1,000.00. Miscellaneous costs remain at $500.00 to cover any potential costs that are yet undetermined.

A loan amount of $100,000.00 will offset the initial start-up costs not covered by the beginning $93,372.00 balance, in addition to providing additional money toward the desired minimum cash balance of $87,000 (or the amount of working capital to cover three months’ expenses.)

The cumulative cash balance at the start of sales (month ending July, 2004), is expected to be $78,396.00.

For the first year of operation, estimated monthly expenses constitutes an average of $29,000.00. Broken down, anticipated disbursements include:

Direct materials (see detailed explanation on page X and ingredient lists on pages X and X).

Payroll (see explanation on page 37).

Payroll taxes (see explanation on page 37).

Supplies (see explanation on page 38).

Rent (see explanation on page 37).

Telephone and utilities (see explanation on page 37).

Insurance (see explanation on page 38).

Advertising and promotion (see explanations on pages 37; and page X and X for detailed marketing strategies).

Maintenance (see explanations on page 39).

Professional fees (see explanations on page 39).

Miscellaneous costs (see explanations on page 39).

Installments on the loan: The loan requirement of Pizzeria Fresco to be repaid in five years at an expected interest rate of 7.5%, results in monthly payments of $2,004.00 which includes principle and interest.

Excepting the first month of operations, following Pizzeria Fresco’s August 2004 opening, sales are expected to exceed total disbursements, with sales projected between $36,880.00 in August 2004 to a high of $46,320 in May 2005.

For the year ending May 31, 2006, each of the four quarters have projected sales of approximately 10% above those of the previous (first) year; and for the year ending May 31, 2007, again, each of the four quarters have projected sales of approximately 10% above those of the previous (second) year.

With a conservative approach to anticipated sales, these cash flow projections reflect an overall favorable return from the outset. From prior experience and knowledge, sales are expected to exceed disbursements continuously and maintain a steady growth rate. The result is a business that has the potential to cover all monthly disbursements and the ability to repay the full loan amount within the five-year period.

[1] This plan was prepared by Allison Lehr of the Field Center for Entrepreneurship, New York University, under the direction of Prof. Ed Rogoff.

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