The Supreme Courts

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Multi Sport Complex Business Plan

Financial Plan

We are assuming start-up capital of $336,500 and a long-term (20 year) bank loan of $1,250,000. The remainder of the necessary financing will come through investors.

7.1 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 appendix. From the beginning, we recognize that collection days are critical, but not a factor we can influence easily. At least we are planning on the problem, and dealing with it. Interest rates, tax rates, and personnel burden are based on conservative assumptions.

Some of the more important underlying assumptions are:

  • We assume a strong economy, without major recession.
  • We assume the rate of growth for the number of sport and fitness club memberships will continue.
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 10.00% 10.00% 10.00%
Tax Rate 16.25% 15.00% 16.25%
Other 0 0 0

7.2 Break-even Analysis

The following table and chart summarize our break-even analysis.

Break-even Analysis
Monthly Units Break-even 1,104
Monthly Revenue Break-even $52,752
Assumptions:
Average Per-Unit Revenue $47.78
Average Per-Unit Variable Cost $0.00
Estimated Monthly Fixed Cost $52,752

7.3 Projected Profit and Loss

Our projected profit and loss is shown on the following table. We show a conservative estimate of net profits/sales, with that increasing each year. According to the research done through ** and **, these projections are very conservative and should be easily attained.

The detailed monthly projections are included in the appendix.

** Confidential or proprietary information deleted.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $835,270 $1,028,880 $1,256,836
Direct Cost of Sales $0 $0 $0
Other $0 $0 $0
Total Cost of Sales $0 $0 $0
Gross Margin $835,270 $1,028,880 $1,256,836
Gross Margin % 100.00% 100.00% 100.00%
Expenses
Payroll $360,900 $438,845 $516,692
Sales and Marketing and Other Expenses $85,392 $87,170 $65,068
Depreciation $0 $0 $0
Leased Equipment $48,000 $50,400 $50,400
Repairs and Maintanence $4,800 $5,040 $5,292
Landscape Maintanence $3,600 $3,780 $3,969
Accounting Fees $4,800 $5,040 $5,292
Legal Fees $2,400 $2,520 $2,646
Telephone $3,000 $3,150 $3,307
Utilities (Gas, Electric, Water, Sewer) $54,000 $56,700 $59,535
Insurance $12,000 $12,600 $13,230
Rent $0 $0 $0
Payroll Taxes $54,135 $65,827 $77,504
Other $0 $0 $0
Total Operating Expenses $633,027 $731,072 $802,935
Profit Before Interest and Taxes $202,243 $297,808 $453,901
EBITDA $202,243 $297,808 $453,901
Interest Expense $125,000 $125,000 $125,000
Taxes Incurred $21,135 $25,921 $53,446
Net Profit $56,108 $146,887 $275,455
Net Profit/Sales 6.72% 14.28% 21.92%

7.4 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 $334,108 $411,552 $502,734
Cash from Receivables $444,036 $604,086 $738,511
Subtotal Cash from Operations $778,144 $1,015,638 $1,241,246
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 $778,144 $1,015,638 $1,241,246
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $360,900 $438,845 $516,692
Bill Payments $387,740 $437,246 $462,919
Subtotal Spent on Operations $748,640 $876,091 $979,611
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 $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $748,640 $876,091 $979,611
Net Cash Flow $29,503 $139,547 $261,635
Cash Balance $366,003 $505,550 $767,185

7.5 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 $366,003 $505,550 $767,185
Accounts Receivable $57,126 $70,368 $85,958
Inventory $0 $0 $0
Other Current Assets $0 $0 $0
Total Current Assets $423,130 $575,918 $853,143
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $423,130 $575,918 $853,143
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $30,521 $36,423 $38,194
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $30,521 $36,423 $38,194
Long-term Liabilities $1,250,000 $1,250,000 $1,250,000
Total Liabilities $1,280,521 $1,286,423 $1,288,194
Paid-in Capital $1,250,000 $1,250,000 $1,250,000
Retained Earnings ($2,163,500) ($2,107,392) ($1,960,505)
Earnings $56,108 $146,887 $275,455
Total Capital ($857,392) ($710,505) ($435,050)
Total Liabilities and Capital $423,130 $575,918 $853,143
Net Worth ($857,392) ($710,505) ($435,050)

7.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7991, Sports Programs - Indoor Courts, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 23.18% 22.16% 15.90%
Percent of Total Assets
Accounts Receivable 13.50% 12.22% 10.08% 4.30%
Inventory 0.00% 0.00% 0.00% 3.60%
Other Current Assets 0.00% 0.00% 0.00% 31.10%
Total Current Assets 100.00% 100.00% 100.00% 39.00%
Long-term Assets 0.00% 0.00% 0.00% 61.00%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 7.21% 6.32% 4.48% 34.80%
Long-term Liabilities 295.42% 217.04% 146.52% 27.60%
Total Liabilities 302.63% 223.37% 150.99% 62.40%
Net Worth -202.63% -123.37% -50.99% 37.60%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 100.00% 100.00% 100.00% 0.00%
Selling, General & Administrative Expenses 92.14% 85.72% 77.76% 73.20%
Advertising Expenses 2.87% 2.45% 0.00% 2.40%
Profit Before Interest and Taxes 24.21% 28.94% 36.11% 2.70%
Main Ratios
Current 13.86 15.81 22.34 1.10
Quick 13.86 15.81 22.34 0.73
Total Debt to Total Assets 302.63% 223.37% 150.99% 62.40%
Pre-tax Return on Net Worth -9.01% -24.32% -75.60% 3.00%
Pre-tax Return on Assets 18.26% 30.01% 38.55% 7.90%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 6.72% 14.28% 21.92% n.a
Return on Equity 0.00% 0.00% 0.00% n.a
Activity Ratios
Accounts Receivable Turnover 8.77 8.77 8.77 n.a
Collection Days 58 38 38 n.a
Inventory Turnover 0.00 0.00 0.00 n.a
Accounts Payable Turnover 13.70 12.17 12.17 n.a
Payment Days 27 28 29 n.a
Total Asset Turnover 1.97 1.79 1.47 n.a
Debt Ratios
Debt to Net Worth 0.00 0.00 0.00 n.a
Current Liab. to Liab. 0.02 0.03 0.03 n.a
Liquidity Ratios
Net Working Capital $392,608 $539,495 $814,950 n.a
Interest Coverage 1.62 2.38 3.63 n.a
Additional Ratios
Assets to Sales 0.51 0.56 0.68 n.a
Current Debt/Total Assets 7% 6% 4% n.a
Acid Test 11.99 13.88 20.09 n.a
Sales/Net Worth 0.00 0.00 0.00 n.a
Dividend Payout 0.00 0.00 0.00 n.a