Health Club Business Plan

Corporate Fitness

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Financial Plan

7.0 Financial Plan

• Consulting revenue will make up approximately 85 to 90 percent of total revenue, with the rest coming from service revenue.
• Salaries and rent are the two major expenses, while depreciation is another significant cost that will increase as the company develops. Although the purchasing of fitness, medical, and office equipment is expensive, constant replacement will be needed to minimize depreciation costs and maintain a competitive edge.
• In order to maintain steady gross margins, salaries and advertising expenses are not likely to increase within the first two years of operation, unless cash flows significantly increase.

7.1 Important Assumptions

Three assumptions for Corporate Fitness are:

1. A constantly growing economy without any major recession or boom.
2. No unpredictable changes in fitness, medical, or office equipment.
3. No major national or global events that threaten the stability and health of the country and its citizens.

General Assumptions

General Assumptions
	1995	1996	1997
Plan Month	1	2	3
Current Interest Rate	3.00%	3.00%	3.00%
Long-term Interest Rate	10.00%	10.00%	10.00%
Tax Rate	25.42%	25.00%	25.42%
Other	0	0	0

7.2 Key Financial Indicators

The most important financial indicators are net increase in cash and net income. Net increase from cash will exemplify the relationship between net income and net cash from operating activities. The greater the increase is, Corporate Fitness has that level of financial strength at that point in time.

Benchmarks



7.3 Break-even Analysis

Corporate Fitness' break-even point is computed in the table below, comparing sales and monthly expenses. Sales forecasts indicate that units sold and monthly sales are expected to be much greater than the break-even point mentioned in the table.

Break-even Analysis



Break-even Analysis

Break-even Analysis
Monthly Revenue Break-even	$28,681
Assumptions:
Average Percent Variable Cost	6%
Estimated Monthly Fixed Cost	$26,925

7.4 Projected Profit and Loss

Sales are predicted to increase each month with first year annual sales totaling close to a half-million dollars. Gross margin, likewise, is expected to increase correspondingly.

Compared to total sales, net profit will increase each month and is predicted to increase for 1995 through 1997.

Profit and Loss

Pro Forma Profit and Loss
	1995	1996	1997
Sales	$539,075	$650,750	$825,600
Direct Cost of Sales	$33,000	$44,000	$55,000
Other	$0	$0	$0
	------------	------------	------------
Total Cost of Sales	$33,000	$44,000	$55,000
Gross Margin	$506,075	$606,750	$770,600
Gross Margin %	93.88%	93.24%	93.34%
Expenses
Payroll	$150,000	$150,000	$150,000
Sales and Marketing and Other Expenses	$25,200	$25,200	$25,200
Depreciation	$7,200	$7,200	$7,200
Insurance	$5,400	$5,400	$5,400
Rent	$60,000	$60,000	$60,000
Other	$0	$0	$0
Utilities	$25,200	$25,200	$25,200
Leased Equipment	$27,600	$27,600	$27,600
Payroll Taxes	$22,500	$22,500	$22,500
Other	$0	$0	$0
	------------	------------	------------
Total Operating Expenses	$323,100	$323,100	$323,100
Profit Before Interest and Taxes	$182,975	$283,650	$447,500
EBITDA	$190,175	$290,850	$454,700
Interest Expense	$10,926	$12,531	$14,174
Taxes Incurred	$42,424	$67,780	$110,137
Net Profit	$129,625	$203,339	$323,189
Net Profit/Sales	24.05%	31.25%	39.15%

Profit Monthly



Profit Yearly



Gross Margin Monthly



Gross Margin Yearly



7.5 Projected Cash Flow

With cash flow increasing significantly and expenses remaining relatively static with only minimal increases, cash flow will experience a similar increase for each period of financial evaluation.

Cash flow is expected to more than double in 1995 and increase substantially in 1996, with corresponding positive cash balances.

Cash



Cash Flow

Pro Forma Cash Flow
	1995	1996	1997
Cash Received
Cash from Operations
Cash Sales	$215,630	$260,300	$330,240
Cash from Receivables	$230,395	$371,174	$465,179
Subtotal Cash from Operations	$446,025	$631,474	$795,419
Additional Cash Received
Sales Tax, VAT, HST/GST Received	$0	$0	$0
New Current Borrowing	$27,000	$24,750	$24,750
New Other Liabilities (interest-free)	$72,575	$85,755	$93,450
New Long-term Liabilities	$9,000	$9,000	$9,000
Sales of Other Current Assets	$0	$0	$0
Sales of Long-term Assets	$0	$0	$0
New Investment Received	$39,500	$30,000	$30,000
Subtotal Cash Received	$594,100	$780,979	$952,619
Expenditures	1995	1996	1997
Expenditures from Operations
Cash Spending	$150,000	$150,000	$150,000
Bill Payments	$221,243	$297,364	$340,690
Subtotal Spent on Operations	$371,243	$447,364	$490,690
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out	$0	$0	$0
Principal Repayment of Current Borrowing	$0	$0	$0
Other Liabilities Principal Repayment	$0	$0	$0
Long-term Liabilities Principal Repayment	$0	$0	$0
Purchase Other Current Assets	$0	$0	$0
Purchase Long-term Assets	$21,700	$9,600	$9,600
Dividends	$0	$0	$0
Subtotal Cash Spent	$392,943	$456,964	$500,290
Net Cash Flow	$201,157	$324,014	$452,329
Cash Balance	$211,157	$535,171	$987,500

7.6 Projected Balance Sheet

The balance sheet indicates that at the end of the first year of operation, net worth will be positive and constantly increasing through the end of 1997.

Balance Sheet

Pro Forma Balance Sheet
	1995	1996	1997
Assets
Current Assets
Cash	$211,157	$535,171	$987,500
Accounts Receivable	$93,050	$112,326	$142,507
Other Current Assets	$0	$0	$0
Total Current Assets	$304,207	$647,497	$1,130,007
Long-term Assets
Long-term Assets	$21,700	$31,300	$40,900
Accumulated Depreciation	$7,200	$14,400	$21,600
Total Long-term Assets	$14,500	$16,900	$19,300
Total Assets	$318,707	$664,397	$1,149,307
Liabilities and Capital	1995	1996	1997
Current Liabilities
Accounts Payable	$31,006	$23,853	$28,373
Current Borrowing	$27,000	$51,750	$76,500
Other Current Liabilities	$72,575	$158,330	$251,780
Subtotal Current Liabilities	$130,581	$233,933	$356,653
Long-term Liabilities	$109,000	$118,000	$127,000
Total Liabilities	$239,581	$351,933	$483,653
Paid-in Capital	$239,500	$269,500	$299,500
Retained Earnings	($290,000)	($160,375)	$42,964
Earnings	$129,625	$203,339	$323,189
Total Capital	$79,125	$312,464	$665,653
Total Liabilities and Capital	$318,707	$664,397	$1,149,307
Net Worth	$79,125	$312,464	$665,653

7.7 Business Ratios

The following table outlines some of Corporate Fitness' more important business ratios. The final column, Industry Profile, details specific ratios based on the Physical Fitness Facilities industry as it is classified by the Standard Industry Classification (SIC) code, 7991. These ratios indicate strong financial growth and an impressive chance for investment opportunities, making expansion and further development both very possible.

Ratios

Ratio Analysis
	1995	1996	1997	Industry Profile
Sales Growth	0.00%	20.72%	26.87%	4.96%
Percent of Total Assets
Accounts Receivable	29.20%	16.91%	12.40%	5.74%
Other Current Assets	0.00%	0.00%	0.00%	31.21%
Total Current Assets	95.45%	97.46%	98.32%	39.86%
Long-term Assets	4.55%	2.54%	1.68%	60.14%
Total Assets	100.00%	100.00%	100.00%	100.00%
Current Liabilities	40.97%	35.21%	31.03%	21.71%
Long-term Liabilities	34.20%	17.76%	11.05%	29.51%
Total Liabilities	75.17%	52.97%	42.08%	51.22%
Net Worth	24.83%	47.03%	57.92%	48.78%
Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	93.88%	93.24%	93.34%	100.00%
Selling, General & Administrative Expenses	69.94%	61.99%	53.97%	72.76%
Advertising Expenses	2.78%	2.31%	1.82%	2.44%
Profit Before Interest and Taxes	33.94%	43.59%	54.20%	3.01%
Main Ratios
Current	2.33	2.77	3.17	1.05
Quick	2.33	2.77	3.17	0.73
Total Debt to Total Assets	75.17%	52.97%	42.08%	2.72%
Pre-tax Return on Net Worth	217.44%	86.77%	65.10%	61.25%
Pre-tax Return on Assets	53.98%	40.81%	37.70%	7.03%
Additional Ratios	1995	1996	1997
Net Profit Margin	24.05%	31.25%	39.15%	n.a
Return on Equity	163.82%	65.08%	48.55%	n.a
Activity Ratios
Accounts Receivable Turnover	3.48	3.48	3.48	n.a
Collection Days	55	96	94	n.a
Accounts Payable Turnover	8.14	12.17	12.17	n.a
Payment Days	27	34	28	n.a
Total Asset Turnover	1.69	0.98	0.72	n.a
Debt Ratios
Debt to Net Worth	3.03	1.13	0.73	n.a
Current Liab. to Liab.	0.55	0.66	0.74	n.a
Liquidity Ratios
Net Working Capital	$173,625	$413,564	$773,353	n.a
Interest Coverage	16.75	22.64	31.57	n.a
Additional Ratios
Assets to Sales	0.59	1.02	1.39	n.a
Current Debt/Total Assets	41%	35%	31%	n.a
Acid Test	1.62	2.29	2.77	n.a
Sales/Net Worth	6.81	2.08	1.24	n.a
Dividend Payout	0.00	0.00	0.00	n.a