This post is the first in a series that is going to run through everything that is required in a restaurant business plan financial statements package and the way we go about creating it using our restaurant business plan software.
You don’t need our software to benefit from these lessons but I will be showing how we take the basic information you provide about your plans for your restaurant and turn it into accountant ready financial statements using our Excel based software so you can see the amount of work and steps involved if you choose to do it by hand.
You can also see how so much of it is restaurant specific that trying to replicate this with a generic business plan program is going to very difficult and unsatisfactory to say the least.
OK, let’s get started!
Just so you understand- the numbers a user enters are the ones in the white boxes where the numbers are in blue. The calculations done by the software are the numbers in black. Not all the boxes have to be filled in, either. On each page and in the user guide our program explains EXACTLY what to fill in, where to get the numbers and how to estimate anything you don’t know for sure until you can find out.
The very first thing we ask you to do is complete a personal financial worksheet. It looks like this:
It is essentially a personal balance sheet where on the left side you add up all your assets and the right side you add up your debts. Whatever it comes out to equals your net worth.
Doing this exercise is helpful in a couple of ways. First, you get a clear picture of your own financial health, which is something that is going to come up whether you are seeking investors or a bank loan or a combination of the two. It let’s you know how much you can comfortably invest in the venture and how much debt you are already carrying which impacts your ability to borrow more.
If the answer to the net worth question is “not much” or “negative” don’t worry. All this means is that you are going to have to align yourself with some people who are willing to overlook this (investors) or work with you for a sweat equity contribution (partners) or else help you with the collateral for your loan (co-signers).
There is always a way around anything if you are persistent and serious about starting a restaurant and just focus on doing it.
The next step is to determine how much of a loan you can get based on the amount you and any potential investors can contribute. Even if you can pay for the whole thing without a loan, borrowing money is not a bad idea. For one thing, it gives you that much bigger of a cushion and for another it increases the return on the money you do invest.
Don’t worry if that doesn’t make a lot of sense right now just figure out how much you can borrow. For a brand new restaurant it is hard to get a loan for more than 50% unless you are borrowing for a building and land as well. When you buy an existing restaurant you can typically borrow 80% of the deal value.
In the next section we are going to look at loan payments, interest rates and the possibility of having more than one loan on the business (yes- that can make sense in certain cases!).