We are assuming start-up will be financed by the investors and continued financing will come through long-term loan (interest rate around 7%).
8.1 Important Assumptions
The financial plan depends on important assumptions. The monthly assumptions are included in the appendix. Interest rates, tax rates, and personnel burden are based on conservative assumptions.
Some of the important underlying assumptions are:
We assume a slow growth economy, without major recession.
We assume the rate of growth for the number of golf memberships will continue.
General Assumptions
Year 1
Year 2
Year 3
Plan Month
1
2
3
Current Interest Rate
12.00%
12.00%
12.00%
Long-term Interest Rate
7.00%
7.00%
7.00%
Tax Rate
34.58%
35.00%
34.58%
Personnel Burden
0
0
0
Other
0
0
0
8.2 Break-even Analysis
For our Break-even Analysis, we assume monthly running costs which include our full payroll, rent, and utilities, and an estimation of other running costs.
Margins are harder to assume.
The table shows what we need to sell per month to break-even, according to these assumptions. This is about two-thirds of our planned sales level, so we believe we can maintain it.
It should be emphasized that revenue from equipment selling, beverage, sponsorship and equipment rental is not taken into account in order to cover the worst case.
Break-even Analysis
Monthly Revenue Break-even
$19,756
Assumptions:
Average Percent Variable Cost
12%
Estimated Monthly Fixed Cost
$17,429
8.3 Projected Profit and Loss
Our projected profit and loss is shown on the Profit and Loss table. We show a conservative estimated net profit in the first year. According to the research carried out by our team, these projections are conservative and should be easily attained. The monthly estimates are included in the appendix.
Pro Forma Profit and Loss
Year 1
Year 2
Year 3
Sales
$239,150
$345,525
$503,768
Direct Cost of Sales
$28,165
$42,345
$63,440
Other Costs of Goods
$0
$0
$0
Total Cost of Sales
$28,165
$42,345
$63,440
Gross Margin
$210,985
$303,180
$440,328
Gross Margin %
88.22%
87.74%
87.41%
Expenses
Payroll
$109,000
$157,650
$194,231
Sales and Marketing and Other Expenses
$6,000
$12,000
$18,000
Depreciation
$15,000
$15,000
$15,000
Rent (site)
$48,000
$48,000
$48,000
Supplies (Office & Janitorial)
$1,200
$1,200
$1,200
Web Site Expenses
$600
$660
$725
Utilities
$3,000
$3,300
$3,630
Insurance (fire,damages, loss)
$10,000
$3,300
$3,630
Payroll Taxes
$16,350
$9,545
$10,022
Other
$0
$0
$0
Total Operating Expenses
$209,150
$250,655
$294,438
Profit Before Interest and Taxes
$23,435
$52,525
$145,890
EBITDA
$38,435
$67,525
$160,890
Interest Expense
$9,573
$9,030
$8,330
Taxes Incurred
$5,451
$15,223
$47,573
Net Profit
$8,411
$28,272
$89,987
Net Profit/Sales
3.52%
8.18%
17.86%
8.4 Projected Cash Flow
The following cash flow projections show our annual amounts only. For more detailed monthly projections please see the appendix.
Cash flow projections are critical to our success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month, and the other the monthly balance. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendix.
Pro Forma Cash Flow
Year 1
Year 2
Year 3
Cash Received
Cash from Operations
Cash Sales
$239,150
$345,525
$503,768
Subtotal Cash from Operations
$239,150
$345,525
$503,768
Additional Cash Received
Non Operating (Other) Income
$21,600
$0
$0
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
$260,750
$345,525
$503,768
Expenditures
Year 1
Year 2
Year 3
Expenditures from Operations
Cash Spending
$109,000
$157,650
$194,231
Bill Payments
$108,669
$152,388
$199,623
Subtotal Spent on Operations
$217,669
$310,038
$393,854
Additional Cash Spent
Non Operating (Other) Expense
$0
$0
$0
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
$6,000
$10,000
$10,000
Purchase Other Current Assets
$0
$0
$0
Purchase Long-term Assets
$0
$0
$0
Dividends
$0
$0
$0
Subtotal Cash Spent
$223,669
$320,038
$403,854
Net Cash Flow
$37,081
$25,487
$99,914
Cash Balance
$51,081
$76,568
$176,482
8.5 Projected Balance Sheet
The balance sheet in the following table shows managed but sufficient growth of net worth, and a sufficiently healthy financial position. The monthly estimates are included in the appendix.
Pro Forma Balance Sheet
Year 1
Year 2
Year 3
Assets
Current Assets
Cash
$51,081
$76,568
$176,482
Other Current Assets
$0
$0
$0
Total Current Assets
$51,081
$76,568
$176,482
Long-term Assets
Long-term Assets
$65,000
$65,000
$65,000
Accumulated Depreciation
$15,000
$30,000
$45,000
Total Long-term Assets
$50,000
$35,000
$20,000
Total Assets
$101,081
$111,568
$196,482
Liabilities and Capital
Year 1
Year 2
Year 3
Current Liabilities
Accounts Payable
$19,670
$11,885
$16,812
Current Borrowing
$0
$0
$0
Other Current Liabilities
$0
$0
$0
Subtotal Current Liabilities
$19,670
$11,885
$16,812
Long-term Liabilities
$134,000
$124,000
$114,000
Total Liabilities
$153,670
$135,885
$130,812
Paid-in Capital
$200,000
$200,000
$200,000
Retained Earnings
($261,000)
($252,589)
($224,317)
Earnings
$8,411
$28,272
$89,987
Total Capital
($52,589)
($24,317)
$65,670
Total Liabilities and Capital
$101,081
$111,568
$196,482
Net Worth
($52,589)
($24,317)
$65,670
8.6 Business Ratios
The table follows with our main business ratios. These are compared with the Industry Profile ratios as determined for the Golf Course Industry, NAICS code 713910. We do intend to improve gross margin, and inventory turnover.
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