Baseball Batting Cages Business Plan

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Financial Plan

The following section outlines the financial plan for Barney's Bullpen:

  • Start-up funding of $78,000 is required. $36,000 of the start-up is for the purchase of the Iron Mike Pitching equipment and associated netting, control panel, other required equipment. Rent, utilities, and advertising are the only monthly expenses listed in the start-up requirements. Insurance will be an annual expense.
  • The start-up capital will be obtained through a combination of investor contributions ($8,000) and an SBA long-term loan ($70,000).

8.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions. The monthly assumptions are included in the appendices. From the beginning, we recognize that repeat business, weather, economic conditions, and growth of youth sports will determine our success. These reasons are why we have chosen a conservative revenue stream. 

Two of the more important underlying assumptions are:

  • We assume a strong economy, without major recession.
  • We assume, of course, that there are no unforeseen changes in the growth of classic baseball participation to make our services immediately obsolete.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 8.00% 8.00% 8.00%
Long-term Interest Rate 8.00% 8.00% 8.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

8.2 Break-even Analysis

The following chart and table summarize our break-even analysis. This projection is based on very conservative estimates of revenue.

Break-even Analysis
Monthly Revenue Break-even $14,659
Assumptions:
Average Percent Variable Cost 2%
Estimated Monthly Fixed Cost $14,313

8.3 Projected Profit and Loss

Our projected profit and loss is shown on the following table, with sales increasing from more than $200K the first year to more than $300K the third year. We show a profit in the first year with a relatively low sales forecast.

We are projecting very conservatively. The detailed monthly projections are included in the appendices.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $237,884 $270,273 $312,852
Direct Cost of Sales $5,620 $5,710 $6,250
Other Costs of Sales $0 $0 $0
Total Cost of Sales $5,620 $5,710 $6,250
Gross Margin $232,264 $264,563 $306,602
Gross Margin % 97.64% 97.89% 98.00%
Expenses
Payroll $56,000 $61,400 $63,600
Marketing/Promotion $4,600 $5,500 $6,000
Depreciation $5,143 $5,143 $5,143
Rent $86,004 $88,000 $92,000
Utilities $6,000 $6,000 $6,000
Insurance $0 $10,000 $10,000
Payroll Taxes $0 $0 $0
Equipment Repair and Maintenance $3,034 $4,225 $4,858
Ball and bat replacement $1,050 $1,811 $2,082
Other (incl. property taxes) $9,925 $10,000 $10,000
Total Operating Expenses $171,755 $192,078 $199,683
Profit Before Interest and Taxes $60,509 $72,485 $106,919
EBITDA $65,652 $77,628 $112,062
Interest Expense $5,250 $4,200 $3,080
Taxes Incurred $16,578 $20,485 $31,152
Net Profit $38,681 $47,799 $72,687
Net Profit/Sales 16.26% 17.69% 23.23%

8.4 Projected Cash Flow

The following section shows the cash flow projections for Barney's Bullpen for the first three years. These include repayment of the principal on a 5-year $70,000 SBA loan in equal monthly payments of $1,167, which we start repaying after the first three months of operations.

Cash flow projections are critical to our success. Our cash balance will reach its minimum in mid-2004, during a low season in the first year of operations. We believe that if we manage our cash wisely during this critical period, the following months' cash flows should be sufficient to cover all our expenses.

The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendices.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $214,096 $243,246 $281,567
Cash from Receivables $18,150 $26,260 $30,276
Subtotal Cash from Operations $232,245 $269,505 $311,843
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $232,245 $269,505 $311,843
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $56,000 $61,400 $63,600
Bill Payments $124,245 $156,929 $170,149
Subtotal Spent on Operations $180,245 $218,329 $233,749
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 $10,500 $14,000 $14,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $4,600 $7,200
Subtotal Cash Spent $190,745 $236,929 $254,949
Net Cash Flow $41,500 $32,576 $56,894
Cash Balance $44,500 $77,076 $133,970

8.5 Projected Balance Sheet

The balance sheet in the following table shows conservative growth of net worth, and a sufficiently healthy financial position. The monthly estimates are included in the appendices.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $44,500 $77,076 $133,970
Accounts Receivable $5,639 $6,406 $7,416
Other Current Assets $11,150 $11,150 $11,150
Total Current Assets $61,289 $94,633 $152,536
Long-term Assets
Long-term Assets $36,000 $36,000 $36,000
Accumulated Depreciation $5,143 $10,286 $15,429
Total Long-term Assets $30,857 $25,714 $20,571
Total Assets $92,146 $120,347 $173,108
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $13,815 $12,816 $14,089
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $13,815 $12,816 $14,089
Long-term Liabilities $59,500 $45,500 $31,500
Total Liabilities $73,315 $58,316 $45,589
Paid-in Capital $8,000 $8,000 $8,000
Retained Earnings ($27,850) $6,231 $46,831
Earnings $38,681 $47,799 $72,687
Total Capital $18,831 $62,031 $127,518
Total Liabilities and Capital $92,146 $120,347 $173,108
Net Worth $18,831 $62,031 $127,518

8.6 Business Ratios

The following table shows the projected businesses ratios along with comparisons for our industry, baseball batting cages (SIC Code 7999.9903). We expect to maintain healthy ratios for profitability, risk, and return.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 13.62% 15.75% 5.73%
Percent of Total Assets
Accounts Receivable 6.12% 5.32% 4.28% 7.08%
Other Current Assets 12.10% 9.26% 6.44% 33.26%
Total Current Assets 66.51% 78.63% 88.12% 43.21%
Long-term Assets 33.49% 21.37% 11.88% 56.79%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 14.99% 10.65% 8.14% 21.91%
Long-term Liabilities 64.57% 37.81% 18.20% 28.81%
Total Liabilities 79.56% 48.46% 26.34% 50.72%
Net Worth 20.44% 51.54% 73.66% 49.28%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 97.64% 97.89% 98.00% 100.00%
Selling, General & Administrative Expenses 63.80% 76.90% 76.28% 76.43%
Advertising Expenses 2.16% 1.90% 1.64% 2.77%
Profit Before Interest and Taxes 25.44% 26.82% 34.18% 1.89%
Main Ratios
Current 4.44 7.38 10.83 1.18
Quick 4.44 7.38 10.83 0.80
Total Debt to Total Assets 79.56% 48.46% 26.34% 1.76%
Pre-tax Return on Net Worth 293.44% 110.08% 81.43% 61.12%
Pre-tax Return on Assets 59.97% 56.74% 59.99% 4.52%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 16.26% 17.69% 23.23% n.a
Return on Equity 205.41% 77.06% 57.00% n.a
Activity Ratios
Accounts Receivable Turnover 4.22 4.22 4.22 n.a
Collection Days 57 81 81 n.a
Accounts Payable Turnover 9.99 12.17 12.17 n.a
Payment Days 27 31 29 n.a
Total Asset Turnover 2.58 2.25 1.81 n.a
Debt Ratios
Debt to Net Worth 3.89 0.94 0.36 n.a
Current Liab. to Liab. 0.19 0.22 0.31 n.a
Liquidity Ratios
Net Working Capital $47,474 $81,816 $138,447 n.a
Interest Coverage 11.53 17.26 34.71 n.a
Additional Ratios
Assets to Sales 0.39 0.45 0.55 n.a
Current Debt/Total Assets 15% 11% 8% n.a
Acid Test 4.03 6.88 10.30 n.a
Sales/Net Worth 12.63 4.36 2.45 n.a
Dividend Payout 0.00 0.10 0.10 n.a