Looking for a convenience store business plan? You're in the right place.
A convenience store runs on thin margins and a lot of small decisions. How much cash does it take to open with shelves full? Which departments earn the profit? What happens if the neighborhood spends less than the owner hoped? A blank template does not show what a sensible answer looks like.
In this article we'll walk through a complete sample plan for a neighborhood convenience store in Charlotte, North Carolina, section by section. We'll cover the executive summary, the SWOT analysis and, in particular, all of the financials.
Here's what you'll take away:
- The executive summary: see how to put a store, its funding and its first three years on one page
- The department table: learn which shelves carry the margin and which only bring people in
- The start-up budget: find out why the cash reserve is the biggest line, and what it pays for before the first sale
- The first year, month by month: spot which months lose money before the lease is signed
- The five-year profit, cash flow and balance sheet: understand how stock, payables and leased fixtures show up in the numbers
- The downside case: have an answer ready for "what if sales are 20% short?", along with the steps the owner takes
The store is fictional, and the questions it answers carry over to any store opening.
In this plan
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Executive Summary
Copper Terrace is a neighborhood convenience store that opens on March 1, 2027, in a leased 2,100-square-foot unit in a Charlotte, North Carolina strip center. It sells groceries, snacks and cold drinks, tobacco and vapor products, beer and wine, and lottery tickets. It has no fuel pumps and no food counter. Andre Whitfield owns 100% of it and works the floor himself.
The store needs $275,000: $185,000 of Andre's savings and a $90,000 bank term loan. Of that, $98,000 buys fixtures and build-out, $14,000 pays for legal work, permits and the opening promotion, and $163,000 is held as a cash reserve for the first inventory order, deposits, two months of build-out and a slow first summer.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $857,500 | $1,350,000 | $1,502,000 |
| Net income after start-up costs | ($73,810) | $46,275 | $51,782 |
| Closing cash | $67,409 | $90,701 | $135,597 |
Year 1 is a loss because the store pays rent and payroll for two months before it sells anything and then opens below its break-even level. EBITDA turns positive in July and stays positive. Year 2 is the first profitable year. Margins stay narrow: net income is 3.4% of sales in Years 2 and 3 and reaches 5.1% in Year 5.
If sales run 20% below plan and Andre responds by holding back a hire, trimming hours, cutting his own pay and skipping distributions, the store stays cash-positive in all five years, with a low point of $47,124 at the end of Year 2.
The store wins on location and routine. It is the closest place for milk, a lottery ticket or a six-pack to the apartments and homes around it, and it is open from 6 a.m. to 11 p.m.
What Copper Terrace Is
Legal name: Copper Terrace, Inc., a North Carolina corporation. Owner: Andre Whitfield, 100%. Premises: about 2,100 square feet of leased retail space with a rear stockroom and parking in front. Opening date: March 1, 2027, after a January and February build-out. Stage: pre-opening. The lease is in draft and the two fixture leases are quoted.
The purpose
A store that sells everyday items, cold drinks and a few vices to the people who live within a mile of it, at hours a supermarket does not keep.
Goals to 2031
- Reach about $106,000 of monthly sales by December 2027.
- Earn a profit after tax in the second year, 2028.
- Pay the loan on schedule and bring retained earnings above zero by 2029.
- Keep inventory turning about 11 times a year.
What the shelves carry
| Department | Gross margin the plan uses | Year 1 share of sales |
|---|---|---|
| Grocery, snacks, cold drinks and dairy | 39% | 49% |
| Tobacco and vapor products | 14% | 23% |
| Beer and wine | 24% | 18% |
| Lottery commissions | commission only | 2% |
| Ice, household items, prepaid cards and ATM share | 47% | 8% |
Permits and the rules the store answers to
Beer and wine for off-premises sale and lottery sales each involve a state permit or retailer agreement, issued by the state alcohol commission and the state lottery respectively. Tobacco and vapor sales are governed by federal and state age and product rules, and the store confirms whether any local license also applies. Vapor products carry federal authorization rules that change, so the store buys only from wholesalers that confirm what they may sell. The plan budgets $3,000 for permits before opening and $3,200 a year after that. Each requirement, fee and eligibility rule is confirmed with the issuing agency before the lease is signed, and a permit delay of a month costs the store roughly $26,000 of rent, utilities, salary and other fixed costs with no sales.
Trade Area and Competing Stores
The trade area
The store sits on a collector road facing newer apartment buildings, with single-family streets behind them. The trade area is the households within about a mile, plus drivers on the road. The nearest convenience options are gas-station shops that residents reach by crossing the road or driving, and the nearest supermarket is a longer drive. Chain convenience stores and discount stores also serve the area, so the store's edge is the short walk, not exclusivity. Before signing the lease, Andre counts households and daily traffic from Census and state transportation data. The plan itself carries no population figure.
What a shopper has instead
| Alternative | What it offers | Why a shopper picks it | How this store differs by design |
|---|---|---|---|
| Supermarkets | Wide range and lower shelf prices | Weekly stock-up | Nearer, faster, open late for the single item |
| Gas-station shops | Convenience at the pump | Already filling up | No pumps, so the stop is for the store itself |
| Dollar and discount stores | Low prices on staples | Price | A fuller counter of cold drinks, beer, tobacco and lottery, though some discount chains stock these too |
| Chain convenience stores | Brand and loyalty programs | Habit | An owner on the floor and a smaller, local range |
| Delivery apps | Delivery to the door | No trip needed | Immediate, and no delivery fee |
The table describes what each option offers and how this store positions itself. It is not a ranking, and prices change often and are not quoted.
SWOT
| Strengths | Weaknesses |
|---|---|
| Owner on the floor most hours | Single location, single manager |
| Walkable from the apartments across the road | No customer base before opening |
| Two big refrigeration items leased, so less cash tied up | Thin margin, and little room for a bad year |
| Opportunities | Threats |
|---|---|
| Apartment residents who now drive for small purchases | A chain opening at the same corner |
| Beer, wine and cold drinks for margin | Tobacco volumes that may soften and vapor rules that may change |
| A loyalty program that tracks repeat buyers | Theft and cash handling |
The Regulars and the Passers-By
Households within a mile
Residents of the apartments and nearby houses, most of whom pass the store on the way home. They buy small baskets often: milk, bread, a drink, a pack.
Shift workers and commuters
People who need a drink and a snack at 6 a.m. or a bottle of water at 10 p.m., and a lottery ticket on the way.
The daily regular
The shopper who comes every day for the same pack, the same drink and the same paper. Andre learns the order.
What a shopper asks of the store
Open shelves, a clean and well-lit floor, a short line and no surprise at the register.
Winning the Regulars
Opening weeks
An opening weekend with a discount on a few staples, a loyalty sign-up at the counter and flyers to the apartment buildings in the trade area.
How sales are built
Year 1 sales of $857,500 are about 9,000 transactions a month over the ten trading months, at a $9.50 ticket. Year 3's $1,502,000 is about 410 a day at a ticket that has risen about 3% a year to roughly $10.10, which needs about 1,400 households visiting twice a week. Each household that comes twice a week is worth about $1,050 of sales a year. December 2027 runs at about 360 transactions a day, close to nine-tenths of Year 3 volume after ten months, which is the quickest part of the plan to miss; the downside case below tests a store 20% short.
Marketing spend and what it buys
Year 1 marketing is $15,500: $6,500 of launch spend paid from start-up capital plus $9,000 of running costs. That is 1.8% of Year 1 sales, and it falls to about 0.4% to 0.5% from Year 2. The store relies on being seen from the road, so the spend goes to signs, the opening and loyalty rewards.
| Item | Year 1 spend | What it is for |
|---|---|---|
| Opening weekend and flyers (launch) | $4,000 | Introductions to the apartment buildings and nearby offices |
| Signage and window promotions (launch) | $2,500 | Visibility from the road |
| Loyalty program rewards | $4,000 | A free item after a set number of purchases, to turn visits into habit |
| Local listings and social media | $2,000 | An accurate map listing, hours and photos |
| Community sponsorships | $3,000 | A youth team and a neighborhood event |
Keeping the range right
Andre reviews the five fastest and five slowest products each week. Slow lines go on special and then off the shelf.
Milestones
- March 2027: doors open, $56,000 of sales.
- July 2027: $88,000 of sales and the first month of positive EBITDA.
- December 2027: $106,000 of sales.
A Week at the Counter
The unit
About 2,100 square feet at roughly $27 a square foot a year all in, which covers base rent, common-area charges and property tax ($57,000 in Year 1), on a ten-year lease made of a five-year term and a five-year option, with a personal guarantee. The bank wants the lease to outlast its seven-year loan.
A day in the store
Deliveries arrive in the early morning, from distributors for tobacco and beer and from a grocery wholesaler for the rest. Andre counts them in, checks each invoice against the order and prices new items before the 6 a.m. opening. Cash is counted and banked each night. Sales tax collected is held for the state and is not counted as revenue.
Systems
A point-of-sale system tied to a price book, a back-office tool for ordering and a cloud camera system. Software costs $5,400 in Year 1.
Controls
Age checks are scanned at the register for tobacco, vapor and alcohol. Two people close the store. Tobacco is counted weekly, because it is small and easy to take, and the rest of the inventory monthly.
Who works the floor
Andre works about 50 hours a week. A full-time clerk and three part-timers cover the rest of the 119 open hours from opening, with a fourth part-timer from month 14 and a fifth from month 26. The week is about 150 scheduled hours at opening, 170 from month 14 and 190 from month 26, plus relief cover, which means one person on the floor for most hours and two on weekday evenings and weekend peaks.
Fixtures and equipment
The shelving, reach-in coolers, counter and point-of-sale are bought and depreciated. The walk-in beverage cooler and the ice system are leased for $860 a month together. Leasing keeps about $37,000 of equipment cost out of the opening budget and puts repairs with the lessor; five years of payments total about $51,600, and the difference pays for the lessor's financing and repairs.
Insurance
General liability, property, liquor liability and crime coverage, budgeted at $12,500 in Year 1. Workers' compensation sits in the payroll on-cost.
Andre Whitfield and the Team
The owner
Andre spent nine years in store roles for a regional convenience-store chain, including four as a store manager. He ran ordering, scheduling and cash control for a store of similar size. His $175,000 investment is savings. He is leaving the chain to run his own store and be on the floor himself.
Where the experience is thin
Andre has not negotiated a lease, bought tobacco or beer on his own account, or built a loyalty program from nothing. The plan covers these with a retail lawyer for the lease, a wholesaler's representative for ordering, and a loyalty program supplied by the point-of-sale vendor.
If Andre is out
The full-time clerk can open and close the store and make a deposit. Relief cover, budgeted at $5,000 in Year 1, pays a trusted former store manager an hourly rate for sick days and vacations.
Outside help
A part-time bookkeeper reviews the books each month, and an accountant files the returns and reviews the numbers each quarter.
Ownership and the bank
Andre owns 100% of Copper Terrace, Inc. and gives the bank a personal guarantee. The loan carries a covenant to deliver quarterly accounts. The corporation is the plan's modeled structure; a single-owner store may choose a pass-through election with its accountant.
Financial plan
One five-year model sits behind every table below: monthly for the first year, yearly after that. The inputs come first, so each figure can be traced back to its reason.
Funding the store
| Use of funds | Amount |
|---|---|
| Shelving, gondolas, owned reach-in coolers and counter | $47,000 |
| POS and back-office system, safe, cameras and signage | $21,000 |
| Flooring, lighting and counter millwork | $30,000 |
| Legal: entity, lease review, supplier agreements | $4,500 |
| Retail permits and business licenses | $3,000 |
| Grand opening, signage promotions and loyalty set-up | $6,500 |
| Cash reserve: opening stock, build-out months and the slow ramp | $163,000 |
| Total uses | $275,000 |
| Source of funds | Amount |
|---|---|
| Andre Whitfield's savings | $185,000 |
| Bank term loan | $90,000 |
| Total sources | $275,000 |
Andre Whitfield puts in $185,000 of his own savings, 67% of the $275,000 total, and borrows $90,000 from a bank over seven years at 10.75%, interest-only for the first six months. The rate is the plan's own figure, not a quoted lending rate. The bank takes a personal guarantee and a lien on the fixtures, and asks for a lease long enough to outlast the loan: ten years, as a five-year term and a five-year option. The walk-in beverage cooler and the ice system are leased rather than bought, so they appear as a monthly payment in the profit and loss and not in the use of funds. The $163,000 reserve is the largest line. It pays for about $53,000 of opening inventory, any lease and utility deposits, and about $73,000 of operating losses before EBITDA turns positive in July. The rest is the margin that lets the store survive the downside case below: a store 20% short of plan still ends every year with cash. The model's monthly view has no inventory timing, so the Year 1 low point is a hand estimate of roughly $46,000 at the end of June, against a year-end balance of $67,409. That is about one and a half months of fixed costs. In the downside case the hand-estimated low point is roughly $49,000 in September.
Where the figures come from
- Sales come from five departments. Grocery, snacks, cold drinks and dairy carry a 39% gross margin; tobacco and vapor products 14%; beer and wine 24%; ice, household items and prepaid cards 47%, which allows for prepaid cards that earn only a small commission. Lottery sales are shown as the commission only, which is why that line has no cost of goods. The model holds one blended margin of 32.4% in every year. Weighted by each year's department mix, the rates above give about 31.9% in Year 2, so gross profit is roughly $6,000 generous that year; Year 3 is within about $1,000, and by Year 5 the mix gives about 33.0%, roughly $10,000 conservative.
- The store opens March 1, 2027, after two months of build-out. Monthly sales climb from $56,000 in March to $106,000 in December, and Year 1 totals $857,500. December annualizes to about $1.27 million, and Year 2 ($1,350,000) is about 6% above that run rate. Growth after that is 11%, 8% and 9%. Year 2 is mostly the full-year effect of the opening ramp. From Year 3, about 3 points of each year's growth is the plan's own price rise on the average ticket; the rest comes from repeat visits, not from new departments or a bigger marketing budget.
- The average ticket is $9.50 in Year 1 and rises about 3% a year with prices, to roughly $10.10 in Year 3. At that ticket, Year 3 sales of $1,502,000 are about 410 transactions a day, or roughly $4,100 a day. That volume needs about 1,400 households visiting twice a week, so the owner counts households and traffic within about a mile before signing the lease. December 2027 runs at about 360 transactions a day, close to nine-tenths of Year 3 volume after ten months, which is the quickest part of the plan to miss, and the downside case tests it. Each household that visits twice a week is worth about $1,050 of sales a year. The ticket and the visit rate are the plan's own figures, not published benchmarks.
- Lottery commissions are $17,200 in Year 1 and $22,000 in Year 3. At a commission rate of about 6% (the state lottery sets the actual rate, so confirm it), that is roughly $290,000 to $370,000 of ticket sales a year.
- Tobacco and vapor products fall from 23% of sales in Year 1 to about 20% in Year 5, because the plan does not count on category growth. In Year 3 they are 22% of sales and about 9% of gross profit.
- Inventory is carried at 6.2% of annual sales, about 11 turns a year or 34 days of goods. Supplier payables average 9 days, because distributors of some categories can ask for payment on or shortly after delivery. Card settlements take 2 days. Inventory is modeled as a share of annual sales, so the $53,165 Year 1 closing balance is about three weeks of December cost of goods, and Year 2 builds it to $83,700.
- Payroll adds 27% to wages for payroll taxes, workers' compensation and a basic benefits allowance (15% for the part-timers). Clerks are budgeted at about $14.40 an hour full-time and $14 an hour part-time. Annual raises of 3% are charged as a separate line from Year 2, and relief cover for sick days and vacations is a separate $5,000 line in Year 1. Andre's $55,000 salary is in the costs from month one, so profit here means what remains after he is paid.
- Rent is about 2,100 square feet at roughly $27 a square foot a year, all in, rising 3% a year, so rent is 6.6% of sales in Year 1 and 4% by Year 3. Card fees run at about 1.3% to 1.5% of sales and shrink, spoilage and cash short at 1.5%, which is the low end of what stores with tobacco and beer can see, so each extra half point costs about $7,500 a year at Year 3 volume. Professional fees of $8,000 in Year 1 cover a monthly bookkeeper, the accountant and a payroll service, and a separate line carries pest control, trash and janitorial service.
- The two leased fixtures cost $860 a month together on five-year terms: $620 for the beverage cooler and $240 for the ice system. Lease payments are charged as an operating cost, and the lessor handles repairs.
- Copper Terrace, Inc. is modeled as a C corporation because the model taxes profit at corporate rates: the federal rate of 21% plus a 2.25% state rate, with Year 1's operating loss carried forward in full. The state rate is an illustrative figure, since North Carolina's corporate rate may step down under current law and should be confirmed. A single-owner store may instead elect pass-through treatment, so the entity and the tax figures are confirmed with an accountant before the plan is used.
- No distributions are paid in the five years. Retained earnings turn positive in Year 3, and cash builds from $67,409 at the end of Year 1 to $273,190 at the end of Year 5, which the plan holds as a reserve and which an owner could draw on as dividends from Year 3 once the bank agrees. The loan runs to term.
Sales by department
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Grocery, snacks, cold drinks and dairy | $423,900 | $715,000 | $820,000 | $905,000 | $1,006,000 |
| Tobacco and vapor products | $197,400 | $318,000 | $330,000 | $340,000 | $345,000 |
| Beer and wine | $152,900 | $225,000 | $250,000 | $265,000 | $285,000 |
| Lottery commissions (net of ticket value) | $17,200 | $20,000 | $22,000 | $23,000 | $24,000 |
| Ice, household items, prepaid cards and ATM share | $66,100 | $72,000 | $80,000 | $87,000 | $100,000 |
| Total revenue | $857,500 | $1,350,000 | $1,502,000 | $1,620,000 | $1,760,000 |
| Growth on prior year | – | 57% | 11% | 8% | 9% |
Grocery, snacks and cold drinks are the base at 49% of Year 1 sales and the largest share of gross profit. Tobacco and vapor bring foot traffic at a thin margin, and beer and wine add margin on a few high-ticket items. Lottery commissions are small but carry no cost of goods, and each ticket buyer is a repeat visitor.
The first twelve months
| Month | Grocery, snacks, cold drinks and dairy | Tobacco and vapor products | Beer and wine | Lottery commissions (net of ticket value) | Ice, household items, prepaid cards and ATM share | Total revenue | EBITDA |
|---|---|---|---|---|---|---|---|
| Jan 2027 | $0 | $0 | $0 | $0 | $0 | $0 | ($26,287) |
| Feb 2027 | $0 | $0 | $0 | $0 | $0 | $0 | ($26,287) |
| Mar 2027 | $27,700 | $12,900 | $10,000 | $1,100 | $4,300 | $56,000 | ($8,138) |
| Apr 2027 | $31,600 | $14,700 | $11,400 | $1,300 | $4,900 | $63,900 | ($5,577) |
| May 2027 | $36,100 | $16,800 | $13,000 | $1,500 | $5,600 | $73,000 | ($2,628) |
| Jun 2027 | $40,000 | $18,600 | $14,400 | $1,600 | $6,200 | $80,800 | ($100) |
| Jul 2027 | $43,500 | $20,200 | $15,700 | $1,800 | $6,800 | $88,000 | $2,234 |
| Aug 2027 | $45,900 | $21,400 | $16,600 | $1,900 | $7,200 | $93,000 | $3,854 |
| Sep 2027 | $47,400 | $22,100 | $17,100 | $1,900 | $7,400 | $95,900 | $4,794 |
| Oct 2027 | $48,900 | $22,800 | $17,600 | $2,000 | $7,600 | $98,900 | $5,766 |
| Nov 2027 | $50,400 | $23,500 | $18,200 | $2,000 | $7,900 | $102,000 | $6,771 |
| Dec 2027 | $52,400 | $24,400 | $18,900 | $2,100 | $8,200 | $106,000 | $8,068 |
January and February carry rent, utilities, the owner's salary and the other fixed lines with no sales, so EBITDA (profit before interest, depreciation and tax) is negative by $26,287 in each; the figure includes the variable cost lines spread evenly, which the model cannot time. March through June are still negative. EBITDA turns positive in July at $2,234 and grows every month after that, reaching $8,068 in December. Interest and depreciation keep net income negative for the whole year. The six months to June lose $73,017 at the EBITDA level, and the first inventory order is paid at the same time, so cash is at its lowest in early summer. The year-end balance of $67,409 comes after those months.
Who is on the schedule
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Owner-operator and store manager | $55,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Full-time clerk (day and weekend shifts) | $30,000 | Month 2 | 1 | 1 | 1 | 1 | 1 |
| Part-time clerk, evenings (20 hours a week) | $14,600 | Month 3 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Part-time clerk, weekends and mornings (20 hours a week) | $14,600 | Month 3 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Part-time clerk, closing shift (20 hours a week) | $14,600 | Month 3 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Peak-hour part-time clerk, first (20 hours a week) | $14,600 | Month 14 | – | 0.5 | 0.5 | 0.5 | 0.5 |
| Peak-hour part-time clerk, second (20 hours a week) | $14,600 | Month 26 | – | – | 0.5 | 0.5 | 0.5 |
| Total payroll incl. on-costs | $146,750 | $173,711 | $190,501 | $191,900 | $191,900 |
The store is open 6 a.m. to 11 p.m., about 119 hours a week. Andre works about 50 of them from month one. A full-time clerk starts in month 2 to help with stocking and set-up, and three part-time clerks of 20 hours each start in month 3, at the opening: one on evenings, one on weekends and mornings, and one on the closing shift so that two people close the store. That is about 150 scheduled hours a week at opening, so most hours run with one person on the floor and the second covers the weekday evenings and weekend peaks. Early deliveries are counted in by whoever opens. Relief cover is budgeted separately. A fourth part-timer joins in month 14, when monthly sales are running near $112,000, and a fifth in month 26, when they are near $125,000, so that evening and weekend peaks have two people on the floor. That takes the week to about 170 scheduled hours and then 190. The plan adds no further hires: Andre stays on the floor through Year 5.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $857,500 | $1,350,000 | $1,502,000 | $1,620,000 | $1,760,000 |
| Direct costs (cost of goods: inventory purchased for resale) | ($579,580) | ($912,458) | ($1,015,194) | ($1,094,950) | ($1,189,575) |
| Gross profit | $277,920 | $437,542 | $486,806 | $525,050 | $570,425 |
| Payroll incl. on-costs | ($146,750) | ($173,711) | ($190,501) | ($191,900) | ($191,900) |
| Rent | ($57,000) | ($58,700) | ($60,500) | ($62,300) | ($64,200) |
| Utilities | ($18,000) | ($18,600) | ($19,200) | ($19,800) | ($20,400) |
| Marketing | ($9,000) | ($6,500) | ($6,500) | ($6,800) | ($7,000) |
| Insurance | ($12,500) | ($13,000) | ($13,600) | ($14,200) | ($14,800) |
| Professional fees | ($8,000) | ($8,400) | ($8,800) | ($9,200) | ($9,600) |
| Software subscriptions | ($5,400) | ($5,600) | ($5,800) | ($6,000) | ($6,200) |
| Card processing and bank fees | ($12,500) | ($17,900) | ($19,600) | ($21,200) | ($23,100) |
| Shrink, spoilage and cash short | ($12,900) | ($20,300) | ($22,500) | ($24,300) | ($26,400) |
| Fixture lease payments (beverage cooler and ice system) | ($9,500) | ($10,300) | ($10,300) | ($10,300) | ($10,300) |
| Cooler servicing and repairs | ($3,500) | ($5,000) | ($6,000) | ($6,500) | ($7,000) |
| Permits, licenses and business property tax | ($3,200) | ($3,200) | ($3,300) | ($3,400) | ($3,500) |
| Store supplies, bags and cleaning | ($5,000) | ($6,500) | ($7,000) | ($7,500) | ($8,100) |
| Pest control, trash and janitorial service | ($3,000) | ($3,600) | ($3,700) | ($3,800) | ($3,900) |
| Alarm monitoring, phone and internet | ($4,200) | ($4,400) | ($4,500) | ($4,700) | ($4,800) |
| Relief cover for sick days and vacations | ($5,000) | ($6,000) | ($6,200) | ($6,400) | ($6,600) |
| Equipment replacement | $0 | ($3,000) | ($4,000) | ($8,000) | ($5,000) |
| Annual pay raises (3% a year) | $0 | ($5,211) | ($11,602) | ($17,794) | ($24,085) |
| EBITDA | ($37,530) | $67,620 | $83,203 | $100,956 | $133,540 |
| Depreciation | ($12,714) | ($12,714) | ($12,714) | ($12,714) | ($12,714) |
| Interest | ($9,566) | ($8,630) | ($7,425) | ($6,083) | ($4,590) |
| Income tax | $0 | $0 | ($11,281) | ($18,714) | ($26,476) |
| Net income before start-up costs | ($59,810) | $46,275 | $51,782 | $63,445 | $89,760 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($14,000) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($73,810) | $46,275 | $51,782 | $63,445 | $89,760 |
Year 1 loses $59,810 before start-up costs and $73,810 after them, because two months of costs carry no sales and the first four trading months run below break-even. Year 2 is the first profitable year at $46,275. Net income is 3.4% of sales in Years 2 and 3, 3.9% in Year 4 and 5.1% in Year 5, after Andre's $55,000 salary and 3% yearly pay raises. The margin does not widen early because the two added part-timers and the pay raises take payroll to 13% of sales; it improves from Year 4, when payroll stops growing apart from the raises while sales keep rising. Income tax starts in Year 3, after Year 1's operating loss is used.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($104,669) | $33,964 | $56,773 | $70,163 | $95,360 |
| Fixtures, coolers and build-out | ($98,000) | $0 | $0 | $0 | $0 |
| Funding received | $275,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | ($4,923) | ($10,672) | ($11,877) | ($13,219) | ($14,712) |
| Owner distributions | $0 | $0 | $0 | $0 | $0 |
| Net change in cash | $67,409 | $23,292 | $44,896 | $56,944 | $80,648 |
| Closing cash | $67,409 | $90,701 | $135,597 | $192,541 | $273,190 |
Closing cash stays positive at every year end: $67,409, $90,701, $135,597, $192,541 and $273,190. Inventory and payables grow with sales, which absorbs part of each year's profit, but cash still rises every year. No distributions are paid, so the cash that builds is the reserve against a bad year, a cooler failure or a change in supplier terms.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $67,409 | $90,701 | $135,597 | $192,541 | $273,190 |
| Accounts receivable | $4,699 | $7,397 | $8,230 | $8,877 | $9,644 |
| Inventory (grocery, tobacco, beer and wine) | $53,165 | $83,700 | $93,124 | $100,440 | $109,120 |
| Fixtures, coolers and build-out (net) | $85,286 | $72,571 | $59,857 | $47,143 | $34,429 |
| Total assets | $210,558 | $254,370 | $296,808 | $349,001 | $426,382 |
| Supplier payables (wholesale and distributor invoices) | $14,291 | $22,499 | $25,032 | $26,999 | $29,332 |
| Bank loan | $85,077 | $74,406 | $62,528 | $49,309 | $34,597 |
| Paid-in capital | $185,000 | $185,000 | $185,000 | $185,000 | $185,000 |
| Retained earnings | ($73,810) | ($27,535) | $24,248 | $87,693 | $177,453 |
| Total liabilities and equity | $210,558 | $254,370 | $296,808 | $349,001 | $426,382 |
Margins and break-even
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -4.4% | 5.0% | 5.5% | 6.2% | 7.6% |
| Net margin (before start-up costs) | -7.0% | 3.4% | 3.4% | 3.9% | 5.1% |
| Payroll incl. pay raises as share of revenue | 17% | 13% | 13% | 13% | 12% |
| Revenue per full-time equivalent at year end | $245,000 | $337,500 | $333,778 | $360,000 | $391,111 |
| Average monthly revenue | $71,458 | $112,500 | $125,167 | $135,000 | $146,667 |
| Monthly revenue needed to cover operating costs | $81,108 | $95,114 | $103,774 | $109,042 | $112,331 |
| Debt service cover (EBITDA / interest + principal) | -2.6x | 3.5x | 4.3x | 5.2x | 6.9x |
The row above measures operating costs only. Year 1 averages $71,458 of sales a month across twelve months against $81,108 needed, so it loses money; over the ten trading months it averages $85,750, which is why EBITDA turns positive from July. Year 2 averages $112,500 against $95,114 needed. Add interest and loan principal ($19,302 in Year 2) and the requirement is about $100,600 a month, so Year 2 sales could fall about 11% before the store stopped covering its debt payments. Debt service coverage is negative in Year 1 because EBITDA is negative while interest is paid, then 3.5x in Year 2, 4.3x in Year 3 and 5.2x or more from Year 4.
Sales 20% below plan
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $686,000 | $1,080,000 | $1,201,600 | $1,296,000 | $1,408,000 |
| Net income before start-up costs | ($83,050) | $12,218 | $39,144 | $49,546 | $63,923 |
| Net income after start-up costs | ($97,050) | $12,218 | $39,144 | $49,546 | $63,923 |
| Closing cash | $52,883 | $47,124 | $80,926 | $125,170 | $181,404 |
This case cuts sales in every department by 20% in every year. The response is the one an owner-operator can make: the two peak-hour part-timers are never hired, the three part-time schedules drop from 20 to 15 hours as the store closes an hour earlier, marketing is cut by 20%, Andre takes a 20% pay cut, and card fees, shrink and supplies fall in line with sales. The cuts apply from opening, so the case shows what an owner could do having seen the shortfall in the first weeks, not a late reaction. On those terms the store makes a loss in Year 1 and a profit from Year 2, below the base case in every year, and year-end cash never falls below $47,124. Equity ends Year 1 at $87,950. Debt service coverage is negative in Year 1, then 1.7x in Year 2, 3.1x in Year 3 and 3.8x or more after that, so Andre would go to the bank before the end of Year 1, ahead of any covenant test, to ask for a deferral of the first principal payments.
Sources
- North Carolina Alcoholic Beverage Control Commission, retail permits for beer and wine. Permit classes, fees and eligibility are not quoted.
- North Carolina Education Lottery, retailer information. Commission and licensing terms are not quoted.
- U.S. Food and Drug Administration, tobacco retailer information, including the federal minimum age of 21 for tobacco products and the authorization status of vapor products.
- North Carolina Department of Revenue, corporate income tax rates. The 2.25% in the model is an illustrative state rate; the state's scheduled reductions are not quoted.
- Rent, wages, card fees, shrink, margins and ticket size are this plan's own figures, not drawn from a published source.
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