Financial Model / Spreadsheet for new small Shop

Pizza Shop Talk The Think Tank
1

I posted this on pizzamaking.com and it was suggested to post it here as well…

I’m investigating opening a small pizza-only shop/stand at a Florida beach (few years out), and am starting my due diligence.

I’ve learned a lot by searching through the posts on this forum (and others), but was wondering if anyone would mind sharing a copy of their financial model / spreadsheet? I don’t need/want to see your personal data, and am more interested in the overall structure, including some of the line items particular to the business that I may not have considered, or if some of my assumptions may not be accurate.

Using my wonderful MBA skills, I’ve created a generic small biz template, but I would rather take a look at one that has been refined from real world use.

Also, if anyone has any business plan suggestions/examples, or recommendations based on your experiences (what should you have done, or not done), I would love to hear them.

Thanks,
BT

2

If your plan is a few years out, my first suggestion would be to get a part time job in a well run store.

Financial model for pizza is not very complicated:

Sales-COGS= Gross profit. Typical COGS depends on whether you roll all consumables together or separate out supplies and paper etc. All together, most stores run between 28% and 32%. That is not menu cost, it is all costs including waste.

Labor
Includes wages, emp share of taxes, unemployment, work comp. Varies a lot by region and business type and whether you pay a manager or run the place yourself. We run about 22% not including a manager. 18% when we are busy, quite a bit more in our off-season.

Rent
Includes common area expenses

Insurance
General liability, hired and non-owned auto, could include employment practices, business interuption and other things

Maintainance and Repairs

Marketing
Most places spend at least 4% of sales. We spend 6%.

Mileage and Auto
One way or another you pay for this if you deliver.

Telephone and internet

Utilities

Banking and CC charges

Dues, memberhsips etc
Local Chamber dues, other associations like tennant associations

Licenses and fees
City, county, state inpsections, tax licenses etc

I am sure I am forgetting severl things, but others will chime in.

3

KISS, keep it simple:

Sales

  • COGS
    = NET Sales
  • Labor
  • Expenses
    = GROSS Profit

*Sales are AFTER paying our your sales tax. For people looking to purchase businesses, see how many are trying to pass sales + sales tax as total sales. Paying taxes on sales are not added to your sales.

*Expenses are all business expenses, ie, rent, insurance, fees, advertising, utilities, merchant and banking fees, licenses, maintenance & repair, etc…

4

This isn’t correct at all in terms of accounting terminology.

Sales

  • Returns and Allowances
    = Net Sales
  • COGS
    = Gross Profit
  • Operating Expenses
    = Earnings before interest, taxes, depreciation and amortization (EBITDA)
  • Depreciation
  • Amortization
    = EBIT (Operating Cash Flow)
  • Interest
  • Taxes
    = Net Income (Net Profit)
5

Piper, are you baiting me? lol.

Should I spell out the KISS fully for you??

My reply wasn’t about accounting terms. I just want ‘some’ people to know that the standard rent, phone, insurance, etc… method of planning isn’t so good. There are many posts here, where people talk about fixed and variable costs, which I think can lead to trouble. They should group ALL expenses into one for planning.

You should also inform everyone that the taxes - you listed - are not sales taxes, I can see confusion coming already.

Oh, and please enlighten us on returns and allowances. For instance, where would a refund go? You sold it, collected sales & tax, then refunded the sale + tax. Net exchange = zero. As for keeping it simple, how is your comment keeping anything simple? Returns and allowances, for most of us, are insignificant.

6

No thanks, I’m a proponent of GAAP - Generally Accepted Accounting Principles. Not surprisingly, the IRS is a proponent of that as well.

No, you posted something completely incorrect and I posted the correct information. Sales minus COGS = Net Sales? The bottom line of your P & L is GROSS profit? Talk about confusing people! People come here for accurate information and that’s what they should receive. If I see something that I know is incorrect I think I owe it to the community to correct it. It has nothing to do with you. I have absolutely no interest in trying to educate you - but if you post blatantly incorrect information I’m going to correct it.

My reply wasn’t about accounting terms. I just want ‘some’ people to know that the standard rent, phone, insurance, etc… method of planning isn’t so good. There are many posts here, where people talk about fixed and variable costs, which I think can lead to trouble. They should group ALL expenses into one for planning.

Now I’m starting to think that you’re baiting me. There is no chance of making a proper business plan or forecast if you aren’t accounting for fixed and variable costs separately.

Oh, and please enlighten us on returns and allowances. For instance, where would a refund go? You sold it, collected sales & tax, then refunded the sale + tax. Net exchange = zero. As for keeping it simple, how is your comment keeping anything simple? Returns and allowances, for most of us, are insignificant.

Do you ever give out discounts or coupons? That would be posted to the Returns and Allowances account if you are using proper accounting. Keeping it separate allows you to 1) Obviously track discounts and 2) Monitor ideal vs. actual food costs.

I really don’t know why I keep bothering responding to you. You know everything :roll:

7

Piper, I may have moved some terms around, but the intent was to keep it simple. To give my plan. Which I did.

Would you feel better if I post a link to General Accounting? bah.

People come here for accurate information and that’s what they should receive.
Some people come here for advice or a different view.

There is no chance of making a proper business plan or forecast if you aren’t accounting for fixed and variable costs separately.
So says you. Works wonderfully for me. But again, I’m rather simple. Choose whatever formula you like, 30% FC, 30% labor, 30% expenses… 15% fixed, 15% variable, whatever… I don’t care what you like, I’m just sharing whats easier for me.

Do you ever give out discounts or coupons?
Sure, and I account for them correctly. But in submitting a simple approach, they are statistically insignificant. So for the plan, they’re not addressed.

I really don’t know why I keep bothering responding to you. You know everything :roll:
Sure you do, because its your job to make sure everything I think and say corresponds to the Piper manual. :roll:

You know, there’s a lot I read, that I don’t necessarily agree with or even like. Most of the time, I don’t reply, because of, well, really, what effect would it have? I also read and analyze different approaches, but don’t necessarily think they apply to me.

I find most of your replies to me, unexceptional and mildly annoying.

8

Thanks for the assistance so far! I do plan to get a part time gig in a pizza shop. I’m currently shopping for one that’s well run and as similar as possible to what I intend to open.

I’m all for KISS, but as with most things, the devil is in the details. I expect there may be some pretty complex models out there, then again, maybe I’m asking the wrong questions. Are there some universally accepted ‘pizza financial ratios’? You’ve already stated some percentages for cogs, labor/etc… Any general rules of thumb to pay attention to? I’ve seen similar comparisons, but mainly only for full service restaurants…Not exactly an apples/apples comparison, then again, maybe they’re not that far off.

Thanks!
BT

9

Next Celebrity Death Match. Piper vs Pizza 2007

OFF TOPIC!

10

Nobody attacked your opinion. You’ll never see me argue with anybody here over an opinion - I prefer to drink those in. However, you gave an incorrect defintion in your original post. That may cause somebody with more knowledge of the subject matter to come along and correct it. “Gross Profit”[/url] and “Net Sales” are terms that have actual [url=http://www.investopedia.com/terms/n/netsales.asp]definitions.

It’s not a personal attack against you or your opinion. If you’re giving advice to somebody looking to create a business plan that he may be taking to a bank or investors it’s probably a good idea to ensure he is receiving factual information. Should we let him walk into a bank or an investor’s office and show that he doesn’t know how to calculate Gross Profit?

You want to keep things simple, fantastic. That doesn’t mean we shouldn’t relay correct accounting terms that have an actual definition.

“Opinion” is “I think COGS should be under 28%”. People may agree or disagree with you, and you can have a debate about it. Saying “Net Sales” is equal to “Sales minus COGS” is the same as saying 1 + 1 = 3. It has nothing to do with opinion, it is just incorrect. That’s all I pointed out. It has nothing to do with the “Piper Manual”, it has to do with the dictionary.

It’s like if somebody were to come along and post that October only has five full weekends every 823 years without doing the requisite 10 seconds of research to confirm it. That wouldn’t be an opinion, it would just be factually incorrect, and somebody that has access to a multi-year calendar in the bottom right hand corner of their computer monitor would probably come along and correct that person post-haste. But that would probably never happen.

Damn, just sit back and say “hey, I learned something.” Geez.

11

When I first opened, I made great use of this book: The Restaurant Book by James Rudnick, Richard Ware (1986, Book, Illustrated). You can find it on Ebay for super cheap. I bet shipping will cost more than the book.

It shows how to lay out financial statements and make projections for a restaurant - which is nice since most business start up books are too general to be of great use. Some of the thoughts/examples presented in the book may be a little dated, but the numbers and concepts are still solid. Also, it tries to show you what the day-to-day life of a restaurant owner can look like (Run, you fool. Run!).

I would gladly send you my copy, but I loaned it to a Canadian and never got it back…

12

Thanks! I appreciate the feedback. I’ve been sent a couple spreadsheet people have been using…some are fairly simple, and some are really complex. If I get something I think would be useful to anyone, I’ll post a link.

Now if I could just perfect my ‘bakery pizza’ recipe…
Thanks
BT

13

Damn, just sit back and say “hey, I learned something.” Geez.

How about, I just misplaced your ‘terms’. I see and read them every week. The basic formula I described is still the same. You can spell G A A P correctly 10,000 times a week but still not earn a frick’n penny. I don’t get on people, many, who have severe grammatical disorders, so please, get off my back. INSTEAD OF, that’s not the correct definition, why not say, “according to my references, a. b. c., the correct definition is…” You know, when it comes to accounting, if multi-billion dollar companies (GM, ENRON, not to mention, many others) don’t know where their money is, how successful are the accounting EXPERTS? <---- Question for Piper, not the general public.