Mr Bakery Master Business Plan — Break-Even
Break-even at 2,347 units a day against 3,150 planned by Year 5, and what that margin of safety means for the build.
Break-Even
Jump to section
- Overview & contents
- i. Important Notice
- 1. Executive Summary
- 2. A Note on the Name
- 3. The Market and Why Scale Is the Enemy
- 4. The Product Strategy
- 5. SWOT and Competitive Position
- 6. Route to Market
- 7. Unit Economics and Prime Cost
- 8. Returns: The Wholesale Bakery Tax
- 9. Energy
- 10. The Five-Year Build and Its Gates
- 11. Funding
- 12. People and Production
- 13. Food Safety and Compliance
- 14. Financial Projections
- 15. Break-Even
- 16. Sensitivity and Scenarios
- 17. Risk Management
- 18. Implementation Timeline
- 19. Returns
- 20. Key Performance Indicators
- 21. Key Assumptions
- 22. Conclusion
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Capital Schedules
- C. Appendix C: Funding and Debt Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
|
Measure |
Value |
Basis |
|---|---|---|
|
Variable cost |
(61.8% of revenue) |
Ingredients, packaging, energy, distribution, maintenance and the variable share of labour |
|
Contribution margin |
38.2% |
What each additional rand of revenue leaves behind |
|
Fixed cost base, Year 5 |
R4.64m |
Rent, overhead and the fixed share of labour |
|
Break-even revenue |
R12.14m |
Fixed cost divided by the contribution margin |
|
Break-even output |
2 154 units a day |
At the Year 5 mix and an average price of R18.42 |
|
Margin of safety |
31.6% |
Against the Year 5 plan of 3 150 units a day |
|
Interest, Year 5 |
R417’000 |
Across seven facilities |
|
Break-even revenue including finance cost |
R13.23m |
The operative measure |
|
Break-even output including finance cost |
2 347 units a day |
|
|
Margin of safety including finance cost |
25.5% |
Against the Year 5 plan |
|
Plan, Year 1 |
880 units a day |
Well below the Year 5 break-even line |
The Year 1 figure is the one to sit with. At 880 units a day the operation is well below the Year 5 break-even line, which is why Year 1 shows an EBITDA loss and why the opening funding must carry it. A bakery is a fixed-cost business: the oven, the rent, the head baker and the vehicle cost the same whether they produce 880 units or 2 200.
15.1 What moves break-even
|
Change |
Effect on break-even output |
Comment |
|---|---|---|
|
Prime cost one point lower |
Roughly 60 units a day lower |
The most powerful controllable lever |
|
Returns one point lower |
Roughly 35 units a day lower |
Costs nothing but route discipline |
|
Overhead R100 000 lower |
Roughly 75 units a day lower |
Also the easiest number to let drift upward |
|
Energy one point higher |
Roughly 60 units a day higher |
Largely outside management control |
|
Retail share five points higher |
Roughly 90 units a day lower |
No returns, no distribution, no credit |
|
Average price one per cent higher |
Roughly 55 units a day lower |
Mix management rather than price increases |
Overhead and prime cost dominate. A bakery that holds overhead flat for one additional year while volume grows moves its break-even more than any pricing decision available to it, which is the arithmetic behind the Year 2 gate requiring EBITDA to be positive before the second route is added.