How to Build a Financial Model Based On Market Size

Understanding your total market size is key to being able to build a reliable financial model for a new Restaurant or Bar. Without this knowledge anything you put together is pure speculation. With the information available at OnTapReport.com combined with some industry specific numbers you can create a model that is realistic and is easily supported by facts. With this in hand, getting financing or raising capital for your new venture will be much easier.

Follow These Steps To Build Your Model

  1. Determine the area your restaurant will serve using distance (1 mile radius, 3 mile radius, etc.) from each location you are considering.
  2. Calculate the total sales for the area you will serve. If you’re opening your Restaurant or Bar in Texas you’re lucky because this information is available from OnTapReport.com. If you will be opening outside of Texas you will need to see what information is available from public filings or other data sources.
  3. Once you know the total market, calculate the market share of each of the competitors in your market. OnTapReport.com provides this information as well. This will give you a baseline understanding of how much of the market each individual establishment has and allow you to make a more educated guess at what percent of the market you will realistically be able to capture.
  4. Look at the historical sales by month for the entire market that you will serve for the last 2-3 years. Use this historical information to estimate what the entire market sales may be in the future.
  5. Use the estimated future sales numbers for the market to estimate your sales by multiplying your estimated total market sales by the market share percentage that you believe is easily obtainable. This will provide you with your estimated monthly sales numbers. If you’re using data from OnTapReport.com, remember that this is just alcoholic beverage sales. To convert this to total Food & Beverage sales you will need to estimate the percentage of sales that alcohol will make of your total sales and divide the monthly alcohol sales number by this percentage. Generally this number is around 30%, but depending on your location, concept, hours of operation and other factors this number can vary widely.


    Using data from OnTapReport.com you would use this formula:

    Monthly Sales = (Total Beverage Sales * Est Market Share)/Est Beverage Sales %

  6. Now that you have your estimated monthly sales you can work backwards using industry average percentages for food, alcohol, labor, marketing expenses, etc. for your type of restaurant or bar to calculate expenses based on the estimated monthly sales you calculated in step 5. Then subtract out your monthly rent, electricity, water, etc. costs based on the location you are analyzing and you will have a pretty solid estimate of your profit/loss for the new venture.

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Search on-site alcoholic beverage sales numbers for ~20,000 Texas restaurants, bars and nightclubs for free!