Financial Feasibility Analysis Examples for a Restaurant Business
Feasibility analysis is a study of the economic and financial viability of a new business or project.While a business plan mostly includes conceptual aspects of a planned business, such as e.g. competitors, strengths, weaknesses, threats and opportunities, a financial feasibility analysis focuses on the financial part.
What is Feasibility Analysis?
Before an investment is carried out, it is necessary to determine whether the planned investment is feasible. Financial feasibility is often a predominant factor in feasibility analysis, as most investments do not realize if no profits are generated for the investors. Financial feasibility analysis will provide for an overall financial perspective of the business when it operates in the future. This will allow the investor to fully comprehend the following:
What includes financial feasibility for a restaurant business?
Financial Feasibility Analysis Examples for a restaurant comprises the following:
•Start-up Costs and Funding Assumptions - It should highlight all costs incurred during startup, including long-term investments for building refurbishment, kitchen equipment, tables, furniture, and tableware. It shall also include training costs, licenses, advertising, and so on. While funding assumptions should consist of how much of your funding came from bank financing, embedded interest, and your equity.
•Personnel Plan Assumptions - composed of direct labor cost and overhead cost. It should detail the headcount of personnel like cook, waiters, dishwasher, maintenance, etc. It shall also include payroll costs of staff.
•Sales and Cost Assumptions – It provides the forecast of revenues and expenses over five or ten years. Split customer sales into local, resident, and tourist to quickly identify the most significant contributor in your income, enabling you to plan strategically. Meanwhile, cost includes the cost of goods sold, payroll, rent, utilities, entertainment, taxes, etc.
•Depreciation – shall also be in detail to proportionately spread the depreciation over the life of an asset.
•Funding – it will show a dashboard of sources and uses of the funds. From which of your expenses has the most significant impact on your funding.
•Financial Statements – includes projected Income Statement, Balance Sheet, and Cash Flow statement.This provides a full picture about the expected financial scenarios.
•Break-even analysis - helps you to calculate by when and under hat conditions you can reasonable expect that your restaurant will become profitable. Break-even analysis calculates the required number of customers to cover all costs and reach profitability.
•Financial Ratios –based on the financial projections the financial ratios can be calculated. This will allow to better understand if such business will have sufficient liquidity, if the level of indebtedness is adequate and how efficiently a business can operate.
•Returns – the financial plan needs to calculate what returns business owners and shareholders can expect from investing in the business. Only if the expected returns are sufficient, investors will invest.
These financial feasibility analysis examples will allow you to think beyond your imagination. Sooner or later, these would be your actual figures once you have gained critical know-how of the restaurant business's overall perspective.
Conclusion: Financial Feasibility Analysis is a useful guide in decision-making
The bottom line of financial feasibility analysis is to assists decision-makers make an informed decision. It shall provide you with in-depth insight into the business's financial aspect and navigate your direction in pursuing the most profitable opportunities.
Before an investment is carried out, it is necessary to determine whether the planned investment is feasible. Financial feasibility is often a predominant factor in feasibility analysis, as most investments do not realize if no profits are generated for the investors. Financial feasibility analysis will provide for an overall financial perspective of the business when it operates in the future. This will allow the investor to fully comprehend the following:
- How much capital is required to begin the business?
- How much capital is required to operate the business?
- How much would be the return on investment?
- How long will it take to recover their investment?
Financial Feasibility Analysis Examples for a restaurant comprises the following:
•Start-up Costs and Funding Assumptions - It should highlight all costs incurred during startup, including long-term investments for building refurbishment, kitchen equipment, tables, furniture, and tableware. It shall also include training costs, licenses, advertising, and so on. While funding assumptions should consist of how much of your funding came from bank financing, embedded interest, and your equity.
•Personnel Plan Assumptions - composed of direct labor cost and overhead cost. It should detail the headcount of personnel like cook, waiters, dishwasher, maintenance, etc. It shall also include payroll costs of staff.
•Sales and Cost Assumptions – It provides the forecast of revenues and expenses over five or ten years. Split customer sales into local, resident, and tourist to quickly identify the most significant contributor in your income, enabling you to plan strategically. Meanwhile, cost includes the cost of goods sold, payroll, rent, utilities, entertainment, taxes, etc.
•Depreciation – shall also be in detail to proportionately spread the depreciation over the life of an asset.
•Funding – it will show a dashboard of sources and uses of the funds. From which of your expenses has the most significant impact on your funding.
•Financial Statements – includes projected Income Statement, Balance Sheet, and Cash Flow statement.This provides a full picture about the expected financial scenarios.
•Break-even analysis - helps you to calculate by when and under hat conditions you can reasonable expect that your restaurant will become profitable. Break-even analysis calculates the required number of customers to cover all costs and reach profitability.
•Financial Ratios –based on the financial projections the financial ratios can be calculated. This will allow to better understand if such business will have sufficient liquidity, if the level of indebtedness is adequate and how efficiently a business can operate.
•Returns – the financial plan needs to calculate what returns business owners and shareholders can expect from investing in the business. Only if the expected returns are sufficient, investors will invest.
These financial feasibility analysis examples will allow you to think beyond your imagination. Sooner or later, these would be your actual figures once you have gained critical know-how of the restaurant business's overall perspective.
Conclusion: Financial Feasibility Analysis is a useful guide in decision-making
The bottom line of financial feasibility analysis is to assists decision-makers make an informed decision. It shall provide you with in-depth insight into the business's financial aspect and navigate your direction in pursuing the most profitable opportunities.
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