Gymnastics Jump-Start

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Gymnastics Instruction Business Plan

Financial Plan

The following sections will outline the Financial Plan of Gymnastics Jump-Start.

7.1 Start-up Funding

Total start-up expenses and assets required will be funded as shown in the Start-up Funding table, below. Wanda Bounce will invest $25,000. Bea Flip will invest $25,000. In addition, gym will secure a $36,600 long-term loan (7 years at 10% interest). 

Start-up Funding
Start-up Expenses to Fund $36,600
Start-up Assets to Fund $50,000
Total Funding Required $86,600
Assets
Non-cash Assets from Start-up $40,000
Cash Requirements from Start-up $10,000
Additional Cash Raised $0
Cash Balance on Starting Date $10,000
Total Assets $50,000
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $36,600
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $36,600
Capital
Planned Investment
Owner 1 $25,000
Owner 2 $25,000
Additional Investment Requirement $0
Total Planned Investment $50,000
Loss at Start-up (Start-up Expenses) ($36,600)
Total Capital $13,400
Total Capital and Liabilities $50,000
Total Funding $86,600

7.2 Important Assumptions

  • We are assuming steady growth from the 3 counties we service.
  • We are assuming adequate funding to sustain us during start-up.
  • We are assuming that the popularity of gymnastics does not decrease.
  • We are assuming that there will be no other private gyms starting up in close proximity to us.

7.3 Break-even Analysis

Table 7.3 summarizes the break-even analysis. The Break-even Analysis is based on the average of the first-year figures for total sales, and by operating expenses. Our variable costs are relatively low and our main operating costs are salaries for teachers.

Break-even Analysis
Monthly Revenue Break-even $11,973
Assumptions:
Average Percent Variable Cost 31%
Estimated Monthly Fixed Cost $8,306

7.4 Projected Profit and Loss

As the Profit and Loss table shows, the company expects to continue its steady growth in profitability over the next three years of operations. Aside from payroll, Rent and Insurance are our largest expenses. The rent for the studio we have chosen is reasonable for the square footage, which will allow us to conduct multiple classes (or classes and birthday parties) at the same time. Insurance demands when dealing with young children and physical activity are high, but the owners' prior experience will keep these costs affordable.

Payroll taxes are based on wages and salaries for all employees, including hourly teachers (shown here as direct cost of sales).

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $211,603 $300,344 $389,080
Direct Cost of Sales $64,809 $92,755 $133,244
Other Costs of Sales $3,360 $3,840 $4,320
Total Cost of Sales $68,169 $96,595 $137,564
Gross Margin $143,434 $203,749 $251,516
Gross Margin % 67.78% 67.84% 64.64%
Expenses
Payroll $41,280 $68,000 $81,120
Marketing/Promotion $5,000 $5,000 $5,000
Depreciation $4,000 $4,000 $4,000
Rent $24,000 $24,000 $24,000
Utilities $3,600 $3,700 $3,800
Insurance $19,992 $21,992 $22,992
Payroll Taxes $0 $0 $0
Other $1,800 $2,100 $2,500
Total Operating Expenses $99,672 $128,792 $143,412
Profit Before Interest and Taxes $43,762 $74,957 $108,104
EBITDA $47,762 $78,957 $112,104
Interest Expense $3,377 $2,876 $2,353
Taxes Incurred $12,116 $21,624 $31,725
Net Profit $28,270 $50,457 $74,026
Net Profit/Sales 13.36% 16.80% 19.03%

7.5 Projected Cash Flow

The cash flow projection shows that provisions for ongoing expenses are adequate to meet the needs of the company as the business generates sufficient cash flow to support operations. The table shows the planned repayment of our long-term loan over seven years.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $158,702 $225,258 $291,810
Cash from Receivables $42,899 $70,891 $93,076
Subtotal Cash from Operations $201,601 $296,149 $384,886
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 $201,601 $296,149 $384,886
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $41,280 $68,000 $81,120
Bill Payments $125,633 $175,686 $225,656
Subtotal Spent on Operations $166,913 $243,686 $306,776
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 $5,230 $5,230 $5,230
Purchase Other Current Assets $2,000 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $174,143 $248,916 $312,006
Net Cash Flow $27,458 $47,233 $72,879
Cash Balance $37,458 $84,691 $157,570

7.6 Projected Balance Sheet

The following table presents the Balance Sheet for Gymnastics Jump-Start. Our cash, retained earnings, and net worth will increase steadily as we establish a stable, returning customer base.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $37,458 $84,691 $157,570
Accounts Receivable $10,002 $14,197 $18,391
Other Current Assets $2,000 $2,000 $2,000
Total Current Assets $49,460 $100,888 $177,962
Long-term Assets
Long-term Assets $40,000 $40,000 $40,000
Accumulated Depreciation $4,000 $8,000 $12,000
Total Long-term Assets $36,000 $32,000 $28,000
Total Assets $85,460 $132,888 $205,962
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $12,420 $14,621 $18,899
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $12,420 $14,621 $18,899
Long-term Liabilities $31,370 $26,140 $20,910
Total Liabilities $43,791 $40,761 $39,809
Paid-in Capital $50,000 $50,000 $50,000
Retained Earnings ($36,600) ($8,330) $42,127
Earnings $28,270 $50,457 $74,026
Total Capital $41,670 $92,127 $166,153
Total Liabilities and Capital $85,460 $132,888 $205,962
Net Worth $41,670 $92,127 $166,153

7.7 Business Ratios

The following table outlines some of the more important ratios from the Gymnastic instruction industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 7999.1109.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 41.94% 29.54% 4.94%
Percent of Total Assets
Accounts Receivable 11.70% 10.68% 8.93% 5.13%
Other Current Assets 2.34% 1.51% 0.97% 36.35%
Total Current Assets 57.88% 75.92% 86.41% 43.63%
Long-term Assets 42.12% 24.08% 13.59% 56.37%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 14.53% 11.00% 9.18% 21.68%
Long-term Liabilities 36.71% 19.67% 10.15% 31.17%
Total Liabilities 51.24% 30.67% 19.33% 52.85%
Net Worth 48.76% 69.33% 80.67% 47.15%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 67.78% 67.84% 64.64% 100.00%
Selling, General & Administrative Expenses 54.42% 51.04% 45.62% 76.74%
Advertising Expenses 0.00% 0.00% 0.00% 2.84%
Profit Before Interest and Taxes 20.68% 24.96% 27.78% 2.11%
Main Ratios
Current 3.98 6.90 9.42 1.05
Quick 3.98 6.90 9.42 0.69
Total Debt to Total Assets 51.24% 30.67% 19.33% 62.49%
Pre-tax Return on Net Worth 96.92% 78.24% 63.65% 2.98%
Pre-tax Return on Assets 47.26% 54.24% 51.35% 7.95%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 13.36% 16.80% 19.03% n.a
Return on Equity 67.84% 54.77% 44.55% n.a
Activity Ratios
Accounts Receivable Turnover 5.29 5.29 5.29 n.a
Collection Days 57 59 61 n.a
Accounts Payable Turnover 11.12 12.17 12.17 n.a
Payment Days 27 28 27 n.a
Total Asset Turnover 2.48 2.26 1.89 n.a
Debt Ratios
Debt to Net Worth 1.05 0.44 0.24 n.a
Current Liab. to Liab. 0.28 0.36 0.47 n.a
Liquidity Ratios
Net Working Capital $37,040 $86,267 $159,063 n.a
Interest Coverage 12.96 26.07 45.95 n.a
Additional Ratios
Assets to Sales 0.40 0.44 0.53 n.a
Current Debt/Total Assets 15% 11% 9% n.a
Acid Test 3.18 5.93 8.44 n.a
Sales/Net Worth 5.08 3.26 2.34 n.a
Dividend Payout 0.00 0.00 0.00 n.a