Wasatch Family Fun Center

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Amusement Park Business Plan

Financial Plan

It is anticipated that the multi-million dollar loan that the company will seek to secure will cover the business start-up costs and provide funds for operating expenses for the first year.  Management projects that it will need to obtain additional  investment capital to fund the loan and long-term assets. 

The Highlights chart that accompanies the Executive Summary sets forth the company's anticipated profitability analysis.  Management believes that even minimal revenues should be sufficient to offer investors an acceptable return on investment.

7.1 Important Assumptions

NOTES FOR PROJECTIONS
All sales projections/assumptions are based on operating at 35% +/- of capacity. Refer to the Sales Forecast topic for demographic break down and average cost per person.

  1. The figure of $890,000 shown in the Start-up Funding table under Current Borrowing, is the start-up investment, amortized with a 19% interest rate and paid off in five years.
  2. Our long-term commercial loan is amortized at 10% interest over 20 years.
  3. All pricing has been set by industry standards and the local market.
  4. Revenues are strictly a projection based on gross possible players per venue and then using 35% +/- of that capacity for our base calculation.
  5. Contract services include: payroll, pest control, trash removal, cable TV.
  6. Employees needed and wages have been projected for full time and eight hour shifts.  All payroll will be done through a payroll company, therefore giving a flatter rate and making it easier to project.
  7. Weber County tax rates are:
    1. Real Estate tax $10.00 per $1,000 of assessed value.
    2. Personal Property tax base is .009% of cost of equipment.
    3. Business License is $50.00 for first 10,000 sq ft & $5.00 per every additional 1,000 sq. ft. of building space.
  8. The income tax rate is estimated before deductions and overhead assumptions are included.
General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 19.00% 19.00% 19.00% 19.00% 19.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 32.75% 33.00% 32.75% 33.00% 32.75%
Other 0 0 0 0 0

7.2 Valuation

In the following Investment Analysis Table, one should note that the entire (gross loan + points) amount of our long-term liabilities ($4,542,500) is the figure we used to determine the Net Present Value (NPV) and the Internal Rate of Return (IRR) of our company's projected values.

Investment Analysis
Start Year 1 Year 2 Year 3 Year 4 Year 5
Initial Investment
Investment $4,542,500 $0 $0 $774,000 $0 $0
Dividends $0 $0 $774,000 $0 $0 $0
Ending Valuation $0 $7,370,000 $8,110,000 $11,400,000 $11,050,000 $12,475,000
Combination as Income Stream ($4,542,500) $7,370,000 $8,884,000 $10,626,000 $11,050,000 $12,475,000
Percent Equity Acquired 0%
Net Present Value (NPV) $15,893,745
Internal Rate of Return (IRR) 178%
Assumptions
Discount Rate 10.00%
Valuation Earnings Multiple 10 10 10 10 10
Valuation Sales Multiple 2 2 2 2 2
Investment (calculated) $965,000 $0 $0 $774,000 $0 $0
Dividends $0 $774,000 $0 $0 $0
Calculated Earnings-based Valuation $7,380,000 $8,110,000 $11,440,000 $11,050,000 $12,220,000
Calculated Sales-based Valuation $7,120,000 $7,480,000 $11,590,000 $12,170,000 $12,780,000
Calculated Average Valuation $7,250,000 $7,795,000 $11,515,000 $11,610,000 $12,500,000

7.3 Key Financial Indicators

These benchmark indicators give I&B Investments a sense of relative comparison for five years of projections.

7.4 Break-even Analysis

Important notice concerning Break-even Analysis

The figures represented in this analysis are connected to the costs presented in the Start-up, Start-up Funding, and Use of Funds tables.

The following chart shows what we need to produce from sales per month to break-even (according to the assumptions).  That is less than 1/2 of our planned 2003 sales level and less than 1/3 +/- for the years beyond.  We strongly believe we can succeed and provide handsome returns for our owners/investors.

For the Break-even Analysis, we assume our per month fixed costs include most of management's payroll, loan payments, investor repayments and an estimation of other basic expenses. 

Margins are harder to assume. Our overall average of $8.50 (goods/services sold to each person) is based on the local market average number of sales and with an average cost of 20% ($8.50 - $1.70 = $6.80 gross profit per each good/services sold). 

We believe that not only will we entertain a much higher number of customers monthly than required by this break-even chart, we believe that we are going to possibly double the amount projected in our cash flow charts in this business plan, because we are going to be the only facilities of its kind within a 50 mile radius. 

Break-even Analysis
Monthly Revenue Break-even $51,010
Assumptions:
Average Percent Variable Cost 32%
Estimated Monthly Fixed Cost $34,725

7.5 Projected Profit and Loss

Important notes regarding Depreciation & Payroll Burden

  1. The depreciation of assets was calculated separately from this Profit and Loss statement. Due to the fact of some accounting issues pertaining to our industry and this program. It appeared to be deducting our depreciation as hard cash expenses and not soft money (tax deduction). Therefore the cash tables did not appear to be reflecting a true statement of cash flow as per our industry (see further explanation below).
  2. Payroll Burden (overhead/taxes) has been excluded from the Profit and Loss table based on the fact that payroll cost and taxes were pre-calculated and included in the personnel plan table. The basic reason for us doing this is, we plan on using a payroll company. Thus all employee payroll fees, taxes, insurances and other payroll burdens are charged as a flat fee (our industry average fee is: wages + 15% +/- .5%).

As per depreciation figures, our preliminary assessment using a standard 200% declining balance on equipment and assets gives us a first year figure of $190,000 +/-. This figure is considered our income tax deductible base and will adjust each year depending on taxable items, gross income, actual values and depreciation of assets.

Upon reviewing the next table (Profit & Loss), one should note that the company is making a profit in the first month of operation. The yearly analysis is indicated in the table below. The monthly analyses can be found in the appendix.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $3,561,108 $3,739,163 $5,795,703 $6,085,488 $6,389,763
Direct Cost of Sales $1,136,888 $1,193,733 $1,850,286 $1,942,800 $2,039,940
Operations Payroll $388,656 $408,089 $836,582 $878,411 $922,332
Known expenses $0 $0 $0 $0 $0
Total Cost of Sales $1,525,544 $1,601,821 $2,686,868 $2,821,211 $2,962,272
Gross Margin $2,035,564 $2,137,342 $3,108,836 $3,264,277 $3,427,491
Gross Margin % 57.16% 57.16% 53.64% 53.64% 53.64%
Operating Expenses
Sales and Marketing Expenses
Sales and Marketing Payroll $55,200 $57,960 $60,858 $63,901 $67,096
Advertising/Promotion $18,000 $18,900 $29,295 $30,760 $32,298
Travel $1,800 $1,890 $2,930 $3,076 $3,230
Miscellaneous $6,000 $6,300 $9,765 $10,253 $10,766
Total Sales and Marketing Expenses $81,000 $85,050 $102,848 $107,990 $113,389
Sales and Marketing % 2.27% 2.27% 1.77% 1.77% 1.77%
General and Administrative Expenses
General and Administrative Payroll $171,120 $179,676 $326,605 $342,935 $360,082
Sales and Marketing and Other Expenses $0 $0 $0 $0 $0
Depreciation $0 $0 $0 $0 $0
Utilities $14,400 $15,120 $23,436 $24,608 $25,838
Insurance $14,760 $15,498 $24,022 $25,223 $26,484
Telephone $9,600 $10,080 $15,624 $16,405 $17,225
Payroll Taxes $0 $0 $0 $0 $0
Other General and Administrative Expenses $0 $0 $0 $0 $0
Total General and Administrative Expenses $209,880 $220,374 $389,687 $409,171 $429,629
General and Administrative % 5.89% 5.89% 6.72% 6.72% 6.72%
Other Expenses:
Other Payroll $77,280 $81,144 $166,345 $174,662 $183,396
Consultants $0 $0 $0 $0 $0
Office Supplies $2,400 $2,520 $3,906 $4,101 $4,306
Postal Fees $1,800 $1,890 $2,930 $3,076 $3,230
Professional Fees $3,600 $3,780 $5,859 $6,152 $6,460
Housekeeping Supplies $12,720 $13,356 $20,702 $21,737 $22,824
Unknown $3,000 $3,150 $4,883 $5,127 $5,383
Bad Checks $600 $630 $977 $1,025 $1,077
Bank Card Fees $600 $630 $977 $1,025 $1,077
Business License $420 $441 $684 $718 $754
Facility Maintenance $18,000 $18,900 $29,295 $30,760 $32,298
Contract/Consultants $5,400 $5,670 $8,789 $9,228 $9,689
Total Other Expenses $125,820 $132,111 $245,344 $257,611 $270,492
Other % 3.53% 3.53% 4.23% 4.23% 4.23%
Total Operating Expenses $416,700 $437,535 $737,878 $774,772 $813,511
Profit Before Interest and Taxes $1,618,864 $1,699,807 $2,370,958 $2,489,505 $2,613,981
EBITDA $1,618,864 $1,699,807 $2,370,958 $2,489,505 $2,613,981
Interest Expense $519,346 $489,761 $670,033 $839,570 $797,376
Taxes Incurred $361,116 $399,315 $557,053 $544,479 $594,938
Net Profit $738,401 $810,731 $1,143,872 $1,105,457 $1,221,667
Net Profit/Sales 20.74% 21.68% 19.74% 18.17% 19.12%

7.6 Projected Cash Flow

The company's estimated cash flow analysis is outlined in the following table, including the cost and increase in sales and profits made from Phase 2. I&B Investments low overhead will ensure positive cash balance.

Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $3,561,108 $3,739,163 $5,795,703 $6,085,488 $6,389,763
Subtotal Cash from Operations $3,561,108 $3,739,163 $5,795,703 $6,085,488 $6,389,763
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $4,386,000 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0
New Investment Received $0 $0 $774,000 $0 $0
Subtotal Cash Received $3,561,108 $3,739,163 $10,955,703 $6,085,488 $6,389,763
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $692,256 $726,869 $1,390,390 $1,459,909 $1,532,905
Bill Payments $2,054,748 $2,096,316 $3,174,328 $3,498,861 $3,625,734
Subtotal Spent on Operations $2,747,004 $2,823,185 $4,564,718 $4,958,770 $5,158,639
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $117,854 $135,758 $163,922 $197,927 $67,125
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $60,434 $65,126 $146,052 $161,678 $178,607
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $774,000 $0 $0 $0
Subtotal Cash Spent $2,925,292 $3,798,069 $4,874,692 $5,318,375 $5,404,371
Net Cash Flow $635,816 ($58,905) $6,081,011 $767,113 $985,392
Cash Balance $835,816 $776,910 $6,857,922 $7,625,035 $8,610,427

7.7 Projected Balance Sheet

Estimated balance sheets for the years 2003-2008 including Phase 2 in the year 2006 are provided below.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $835,816 $776,910 $6,857,922 $7,625,035 $8,610,427
Other Current Assets $0 $0 $0 $0 $0
Total Current Assets $835,816 $776,910 $6,857,922 $7,625,035 $8,610,427
Long-term Assets
Long-term Assets $5,077,925 $5,077,925 $5,077,925 $5,077,925 $5,077,925
Accumulated Depreciation $0 $0 $0 $0 $0
Total Long-term Assets $5,077,925 $5,077,925 $5,077,925 $5,077,925 $5,077,925
Total Assets $5,913,741 $5,854,835 $11,935,847 $12,702,960 $13,688,352
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $75,702 $180,950 $268,064 $289,325 $298,783
Current Borrowing $772,146 $636,388 $472,466 $274,539 $207,414
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $847,848 $817,338 $740,530 $563,864 $506,197
Long-term Liabilities $3,592,066 $3,526,940 $7,766,888 $7,605,210 $7,426,603
Total Liabilities $4,439,914 $4,344,278 $8,507,418 $8,169,074 $7,932,800
Paid-in Capital $965,000 $965,000 $1,739,000 $1,739,000 $1,739,000
Retained Earnings ($229,575) ($265,174) $545,557 $1,689,429 $2,794,886
Earnings $738,401 $810,731 $1,143,872 $1,105,457 $1,221,667
Total Capital $1,473,826 $1,510,557 $3,428,429 $4,533,886 $5,755,552
Total Liabilities and Capital $5,913,741 $5,854,835 $11,935,847 $12,702,960 $13,688,352
Net Worth $1,473,826 $1,510,557 $3,428,429 $4,533,886 $5,755,552

7.8 Business Ratios

The company's projected business ratios are provided in the table below.  The final column, Industry Profile, shows significant ratios for the Amusement and Entertainment Industry, as determined by the Standard Industry Classification (SIC) Index code 7999.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 5.00% 55.00% 5.00% 5.00% 15.20%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 0.00% 0.00% 34.40%
Total Current Assets 14.13% 13.27% 57.46% 60.03% 62.90% 42.90%
Long-term Assets 85.87% 86.73% 42.54% 39.97% 37.10% 57.10%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 14.34% 13.96% 6.20% 4.44% 3.70% 36.40%
Long-term Liabilities 60.74% 60.24% 65.07% 59.87% 54.25% 23.30%
Total Liabilities 75.08% 74.20% 71.28% 64.31% 57.95% 59.70%
Net Worth 24.92% 25.80% 28.72% 35.69% 42.05% 40.30%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 57.16% 57.16% 53.64% 53.64% 53.64% 55.05%
Selling, General & Administrative Expenses 36.47% 35.48% 33.98% 35.47% 34.59% 76.60%
Advertising Expenses 0.51% 0.51% 0.51% 0.51% 0.51% 2.60%
Profit Before Interest and Taxes 45.46% 45.46% 40.91% 40.91% 40.91% 2.00%
Main Ratios
Current 0.99 0.95 9.26 13.52 17.01 1.17
Quick 0.99 0.95 9.26 13.52 17.01 0.75
Total Debt to Total Assets 75.08% 74.20% 71.28% 64.31% 57.95% 59.70%
Pre-tax Return on Net Worth 74.60% 80.11% 49.61% 36.39% 31.56% 102.42%
Pre-tax Return on Assets 18.59% 20.67% 14.25% 12.99% 13.27% 30.73%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin 20.74% 21.68% 19.74% 18.17% 19.12% 19.85%
Return on Equity 50.10% 53.67% 33.36% 24.38% 21.23% 36.53%
Activity Ratios
Accounts Payable Turnover 28.14 12.17 12.17 12.17 12.17 0.00%
Payment Days 27 21 25 29 30 n.a
Total Asset Turnover 0.60 0.64 0.49 0.48 0.47 54.69%
Debt Ratios
Debt to Net Worth 3.01 2.88 2.48 1.80 1.38 224.01%
Current Liab. to Liab. 0.19 0.19 0.09 0.07 0.06 8.98%
Liquidity Ratios
Net Working Capital ($12,033) ($40,428) $6,117,392 $7,061,171 $8,104,230 424088221.24%
Interest Coverage 3.12 3.47 3.54 2.97 3.28 327.40%
Additional Ratios
Assets to Sales 1.66 1.57 2.06 2.09 2.14 186.01%
Current Debt/Total Assets 14% 14% 6% 4% 4% 6.45%
Acid Test 0.99 0.95 9.26 13.52 17.01 1651.43%
Sales/Net Worth 2.42 2.48 1.69 1.34 1.11 180.94%
Dividend Payout 0.00 0.95 0.00 0.00 0.00 19.09%