The dojo financial plan is simple. We want to become a profitable business for the owner and any investors. We are moving from a part-time to full-time business and expect our financials to reflect that change. Our growth is predicated on introducing a newly remodeled dojo and a marketing and promotional strategy for the first time. Our goal of 200 members by year-end 2004 is very obtainable and if this goal is met we will have a very profitable business. Our long-term goal is to have enough cash on-hand and a solid credit history to pursue our ultimate goal of expansion.
It was necessary to make certain broad-based assumptions in planning for the future. The financial assumptions are listed below in the table. In addition, we have made several other important assumptions:
The following financial chart shows past and projected three years for the dojo. In the past there was no real marketing effort or business plan. With the introduction of this new business plan we have high expectations for growth. In 2002, we expect to increase membership from 60 to 95, resulting in an increase in sales of 30%. In 2003, we expect full impact of our 2002 plans to take affect and anticipate membership to increase from 95 to 165, resulting in an increase in sales of 77%. In 2004 we expect to meet our goal of 200 members and realize an increase in sales of 31%.
At some point in the future we will make adjustments to our business plan to explore alternatives (as addressed in future services) and will begin to work on reducing overall expenses.
Monthly profit for the first year varies considerably as we aggressively seek improvements and begin marketing our business. However, as year two of the plan approaches, our moves in year one should begin to take hold. Bottom-line profits shown in the chart are deceiving as a significant increase in salary to the owner is reflected (as the dojo changes from a part-time to full-time business). We expect our efforts to control attrition to start affecting our cost of sales, which in-turn will improve our gross margin.
Legal fees in 2002 reflect our change in legal ownership, from a sole proprietorship to a limited liability company. Payroll increases in 2003 and 2004 reflect our change from a part-time business to full-time.
The following table and chart show our break-even point for the next year.
Like profit, our first year monthly cash flow varies considerably. Current cash flow is expected to meet our needs, however we are anticipating a significant increase in cash flow due to a long-term loan ($20,000) in August 2002 to address our immediate remodeling and marketing efforts. This money (planned loan, capital investment) will immediately be put to use and place the dojo into a better cash position in-case something unexpected occurs. In the following years, excess cash will be used to finance our more aggressive future services plans.
The balance sheet in the following table reflect considerable first year activity as we implement the business plan. Long-term liabilities double in the first year as we borrow for improvements and plan implementation, however this liability is workable and in subsequent years remain under control. Net worth increases in 2003 and 2004 based on anticipated increases in sales.
As indicated in our "Service Business Analysis" the Martial Arts industry is not properly reflected in the SIC Code provided (7999). However, with this said, we have made some preliminary business ratio comparisons using the SIC (2000 figures). The results are very favorable.