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Men's Salon Business Plan

Financial Plan

The premier element in our financial plan is initiating, maintaining, and improving the factors that create, stabilize, and increase our cash flow:

  1. We must create visibility so as to create customer flow.
  2. We must maintain a dependable, cheerful employee force so as to minimize turnover.
  3. Create a brisk turnaround on our retail products, always maintaining viable stock levels.

7.1 Important Assumptions

The key underlying assumptions of our financial plan shown in the following general assumption table are:

  1. We assume access to equity capital and financing to support our financial plan.
  2. We assume our financial progress based on realistic sales to minimum sales against highest expenses.
  3. We assume there will not be an economic crash that would greatly hinder our target market's access to their personal luxury finds.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 8.50% 8.50% 8.50%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

7.2 Key Financial Indicators

Our most important Key Financial Indicator is when each barber averages seven clients per day and each specialist averages three clients per day.

7.3 Break-even Analysis

For our Break-even Analysis we assume monthly estimated operational costs which include payroll, rent, utilities and other running costs (not including employee draw fund considerations). Payroll alone is only estimated at $9,800 per month, including taxes.

The analysis shows that we need to generate monthly revenues, as shown below, to break even. This total is less than estimated monthly gross. This estimation does not include revenue from any other sources and is based on a barber shop client average of $35 and miscellaneous services average of $50. Our yearly average per client is estimated at $48. Considering our minimal assumptions show a monthly total client average of 1,063, we therefore believe our break-even figures can be readily maintained.

Break-even Analysis
Monthly Revenue Break-even $36,989
Assumptions:
Average Percent Variable Cost 45%
Estimated Monthly Fixed Cost $20,275

7.4 Projected Profit and Loss

There are two important assumptions with our Projected Profit and Loss statement:

  1. Our revenue is based on minimum estimated averages against highest expense expectations.
  2. Our major expense of rent and utilities is fixed for the next five years.
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $799,124 $1,047,172 $1,405,425
Direct Cost of Sales $361,091 $475,410 $637,443
Other Costs of Goods $0 $0 $0
Total Cost of Sales $361,091 $475,410 $637,443
Gross Margin $438,033 $571,762 $767,982
Gross Margin % 54.81% 54.60% 54.64%
Expenses
Payroll $102,870 $105,165 $107,175
Sales and Marketing and Other Expenses $20,000 $15,000 $20,000
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $9,000 $9,000 $9,000
Insurance $12,000 $12,000 $12,000
Rent $84,000 $84,000 $84,000
Payroll Taxes $15,431 $15,775 $16,076
Other $0 $0 $0
Total Operating Expenses $243,301 $240,940 $248,251
Profit Before Interest and Taxes $194,733 $330,822 $519,731
EBITDA $194,733 $330,822 $519,731
Interest Expense $18,464 $17,215 $15,773
Taxes Incurred $52,880 $94,082 $151,187
Net Profit $123,388 $219,525 $352,770
Net Profit/Sales 15.44% 20.96% 25.10%

7.5 Projected Cash Flow

Our business is a luxury, retail-oriented business with clients who will pay primarily with credit cards.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $799,124 $1,047,172 $1,405,425
Subtotal Cash from Operations $799,124 $1,047,172 $1,405,425
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 $10,000 $0 $0
Subtotal Cash Received $809,124 $1,047,172 $1,405,425
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $102,870 $105,165 $107,175
Bill Payments $548,021 $728,194 $944,200
Subtotal Spent on Operations $650,891 $833,359 $1,051,375
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 $14,351 $16,242 $17,678
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $665,242 $849,601 $1,069,053
Net Cash Flow $143,882 $197,571 $336,372
Cash Balance $183,882 $381,453 $717,825

7.6 Projected Balance Sheet

Our Projected Balance Sheet shows we will not have any difficulty meeting our debt obligations as long as our revenue projections are met.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $183,882 $381,453 $717,825
Inventory $38,936 $51,262 $68,734
Other Current Assets $38,000 $38,000 $38,000
Total Current Assets $260,817 $470,715 $824,559
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $260,817 $470,715 $824,559
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $53,781 $60,395 $79,147
Current Borrowing $0 $0 $0
Other Current Liabilities $25,500 $25,500 $25,500
Subtotal Current Liabilities $79,281 $85,895 $104,647
Long-term Liabilities $210,649 $194,407 $176,729
Total Liabilities $289,930 $280,302 $281,376
Paid-in Capital $10,000 $10,000 $10,000
Retained Earnings ($162,500) ($39,112) $180,413
Earnings $123,388 $219,525 $352,770
Total Capital ($29,112) $190,413 $543,183
Total Liabilities and Capital $260,817 $470,715 $824,559
Net Worth ($29,112) $190,413 $543,183

7.7 Business Ratios

The following table contains important business ratios for the barber shop industry, as determined by the Standard Industry Classification (SIC) code, 7241.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 31.04% 34.21% 10.40%
Percent of Total Assets
Inventory 14.93% 10.89% 8.34% 4.60%
Other Current Assets 14.57% 8.07% 4.61% 36.80%
Total Current Assets 100.00% 100.00% 100.00% 53.10%
Long-term Assets 0.00% 0.00% 0.00% 46.90%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 30.40% 18.25% 12.69% 29.70%
Long-term Liabilities 80.76% 41.30% 21.43% 24.70%
Total Liabilities 111.16% 59.55% 34.12% 54.40%
Net Worth -11.16% 40.45% 65.88% 45.60%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 54.81% 54.60% 54.64% 0.00%
Selling, General & Administrative Expenses 39.37% 33.64% 29.54% 69.20%
Advertising Expenses 1.00% 0.00% 0.00% 2.50%
Profit Before Interest and Taxes 24.37% 31.59% 36.98% 4.30%
Main Ratios
Current 3.29 5.48 7.88 2.08
Quick 2.80 4.88 7.22 1.55
Total Debt to Total Assets 111.16% 59.55% 34.12% 54.40%
Pre-tax Return on Net Worth -605.48% 164.70% 92.78% 6.90%
Pre-tax Return on Assets 67.58% 66.62% 61.12% 15.20%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 15.44% 20.96% 25.10% n.a
Return on Equity 0.00% 115.29% 64.94% n.a
Activity Ratios
Inventory Turnover 10.91 10.54 10.62 n.a
Accounts Payable Turnover 11.19 12.17 12.17 n.a
Payment Days 27 28 26 n.a
Total Asset Turnover 3.06 2.22 1.70 n.a
Debt Ratios
Debt to Net Worth 0.00 1.47 0.52 n.a
Current Liab. to Liab. 0.27 0.31 0.37 n.a
Liquidity Ratios
Net Working Capital $181,537 $384,820 $719,912 n.a
Interest Coverage 10.55 19.22 32.95 n.a
Additional Ratios
Assets to Sales 0.33 0.45 0.59 n.a
Current Debt/Total Assets 30% 18% 13% n.a
Acid Test 2.80 4.88 7.22 n.a
Sales/Net Worth 0.00 5.50 2.59 n.a
Dividend Payout 0.00 0.00 0.00 n.a