Location: Kellogg, ID
For Sale Website:
The attached spreadsheet model is for the My Big Fat Greek Deli located in Kellogg, ID, and is currently listed for sale at $79,900. This model includes a pro forma income statement and balance sheet for the deli based on market assumptions in the area and an analysis of the costs of capital and internal rate of return forecasted for the deli. The model allows variables to be changed for all major inputs of the computations, and includes citations for assumed values in the models.
In the model with the input values chosen, the deli would have a weighted average cost of capital (WACC) equal to 3.88%, and has an internal rate of return (IRR) equal to 4.84%. The cost of capital may be adjusted by changing the debt and equity proportions. There are no adjustments in the debt and equity amounts that will make the WACC and the IRR equal. We therefore deemed this step unnecessary.
Using our forecast, we have determined that My Big Fat Greek Deli would be a profitable business venture. However, we would mention some possible shortcomings of such a business. The first concern would be location. Kellogg, ID is a remote town in the north western panhandle of Idaho with a very small population (2,000). In order to break-even, the Deli would have to have an average of 54 customers per day or 374 customers per week. A large amount of sales would need to come from non-local visitors. However, Kellogg does offer many outdoor attractions that bring in a substantial amount of tourism. The second concern would be the low cost of rent currently being paid. If for some reason My Big Fat Greek Deli was no longer able to rent its current location, there would be either a building cost or a much higher rental rate.