Music Theater Business Plan

Market Plaza Showplace

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Financial Plan

The base operation is a "cash cow" with no accounts receivable or the burdensome collection efforts that accompany A/R management. Future services will be added with positive financial impact to the base operation when opportunities arise.

We expect to add revenue-producing services and activities during the first year that have not been covered in this business plan. These services will be a natural compliment to our operation and significantly add to our base revenue from regular productions. They include audio and video recording services, possible syndication of productions, sponsored radio and/or TV programs, and advertising for local merchants. Financing for new services will be arranged through cash flow, sponsorship, or outside interests.

7.1 Important Assumptions

The financial plan assumes private investor funding, a 15-year facility mortgage and founder investment for consultants, travel, business plan, and other planning costs.

Once in operation, the business will be self-sustaining and require no further financial assistance for this plan. General assumptions follow:

7.2 Break-even Analysis

The following chart and table summarize our Break-even Analysis. We have decided to treat fixed costs for this start-up plan to include the normal running costs each month for a more practical analysis. The average price per unit assumes that standard ticket prices will be $13.00 adults, $12.00 seniors and $11.00 for children under 12 years of age. The variable cost per unit assumes artist and musician fees and sales taxes to average $4.20 per ticket sold. Considering the start-up costs and the conservative position of the plan, we don't expect to reach break-even until several months into the business operation.

The break-even assumes variable costs as shown below. This assumption is probably too high, and therefore conservative, because it is based on the highest local pay scale for musicians and artists. We will employ high-quality musicians for less than the maximum pay scale.

Also, the effects of additional revenue opportunities are not considered in the Break-even Analysis. The executive team will actively pursue other revenue producing opportunities and expect substantial success in this effort.

Break-even Analysis
Monthly Revenue Break-even $20,684
Assumptions:
Average Percent Variable Cost 35%
Estimated Monthly Fixed Cost $13,504

7.3 Projected Profit and Loss

Our projected profit and loss is shown on the following table projecting a reasonable profit the first year. Revenues are conservative as they include only the base operation (two shows per week) and minimal special event hosting. The executive team believes that actual experience will include a minimum of three shows per week with the possibility of daily successful shows and or special events. Increases in the base operation in the second and third years consider sold out performances and additional special and private events.

Our cost of sales should be somewhat lower, and gross margin higher, than in this projection due to our commitment to careful management of entertainer and musician costs. However, we prefer to project conservative so that we maintain a positive cash flow and to allow for less than expected performance.

Dividends are not applicable in an S Corporation. Net earnings are distributed directly to shareholders. However the company will consider shareholder requests to defer income or provide pretax investment opportunities.

The detailed monthly projections are included in the appendix.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $484,400 $912,000 $954,000
Direct Cost of Sales $168,140 $314,400 $324,900
Other $0 $0 $0
Total Cost of Sales $168,140 $314,400 $324,900
Gross Margin $316,260 $597,600 $629,100
Gross Margin % 65.29% 65.53% 65.94%
Expenses
Payroll $80,500 $150,000 $162,000
Sales and Marketing and Other Expenses $35,000 $60,000 $60,000
Depreciation $0 $0 $0
Leased Equipment $3,500 $6,000 $6,000
Utilities $14,000 $24,000 $24,000
Insurance $7,000 $12,000 $12,000
Rent $5,950 $10,200 $10,200
Payroll Taxes $16,100 $30,000 $32,400
Other $0 $0 $0
Total Operating Expenses $162,050 $292,200 $306,600
Profit Before Interest and Taxes $154,210 $305,400 $322,500
EBITDA $154,210 $305,400 $322,500
Interest Expense $0 $0 $0
Taxes Incurred $7,711 $15,270 $22,844
Net Profit $146,500 $290,130 $299,656
Net Profit/Sales 30.24% 31.81% 31.41%

7.4 Projected Cash Flow

The monthly cash flow for the first year is shown in the illustration. The cash flow does not reflect distribution of earnings in the three years depicted. Shareholders may elect full distribution, partial distribution or pretax investment options to be made available by the company. The table that follows includes annual amounts only.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $484,400 $912,000 $954,000
Subtotal Cash from Operations $484,400 $912,000 $954,000
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 $484,400 $912,000 $954,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $80,500 $150,000 $162,000
Bill Payments $224,355 $468,632 $490,661
Subtotal Spent on Operations $304,855 $618,632 $652,661
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 $304,855 $618,632 $652,661
Net Cash Flow $179,545 $293,368 $301,339
Cash Balance $232,045 $525,413 $826,752

7.5 Projected Balance Sheet

The balance sheet in the following table shows an attractive growth of net worth, and a healthy financial position with the conservative plan. The executive team believes and has the commitment to exceed the position projected in this plan. The monthly estimates are included in the appendix.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $232,045 $525,413 $826,752
Other Current Assets $6,000 $6,000 $6,000
Total Current Assets $238,045 $531,413 $832,752
Long-term Assets
Long-term Assets $923,000 $923,000 $923,000
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $923,000 $923,000 $923,000
Total Assets $1,161,045 $1,454,413 $1,755,752
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $35,546 $38,784 $40,467
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $35,546 $38,784 $40,467
Long-term Liabilities $639,200 $639,200 $639,200
Total Liabilities $674,746 $677,984 $679,667
Paid-in Capital $423,000 $423,000 $423,000
Retained Earnings ($83,200) $63,300 $353,430
Earnings $146,500 $290,130 $299,656
Total Capital $486,300 $776,430 $1,076,086
Total Liabilities and Capital $1,161,045 $1,454,413 $1,755,752
Net Worth $486,299 $776,429 $1,076,086

7.6 Business Ratios

The following are several important business ratios for the years of this plan. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7922, Theatrical Producers and Services, are shown for comparison. No analysis by management is offered at this writing.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 88.27% 4.61% 15.20%
Percent of Total Assets
Other Current Assets 0.52% 0.41% 0.34% 32.50%
Total Current Assets 20.50% 36.54% 47.43% 41.30%
Long-term Assets 79.50% 63.46% 52.57% 58.70%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 3.06% 2.67% 2.30% 34.70%
Long-term Liabilities 55.05% 43.95% 36.41% 27.90%
Total Liabilities 58.12% 46.62% 38.71% 62.60%
Net Worth 41.88% 53.38% 61.29% 37.40%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 65.29% 65.53% 65.94% 0.00%
Selling, General & Administrative Expenses 35.05% 33.71% 33.83% 74.90%
Advertising Expenses 1.45% 1.32% 1.26% 2.90%
Profit Before Interest and Taxes 31.84% 33.49% 33.81% 2.00%
Main Ratios
Current 6.70 13.70 20.58 1.29
Quick 6.70 13.70 20.58 0.85
Total Debt to Total Assets 58.12% 46.62% 38.71% 62.60%
Pre-tax Return on Net Worth 31.71% 39.33% 29.97% 2.30%
Pre-tax Return on Assets 13.28% 21.00% 18.37% 6.00%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 30.24% 31.81% 31.41% n.a
Return on Equity 30.13% 37.37% 27.85% n.a
Activity Ratios
Accounts Payable Turnover 7.24 12.17 12.17 n.a
Payment Days 27 29 29 n.a
Total Asset Turnover 0.42 0.63 0.54 n.a
Debt Ratios
Debt to Net Worth 1.39 0.87 0.63 n.a
Current Liab. to Liab. 0.05 0.06 0.06 n.a
Liquidity Ratios
Net Working Capital $202,500 $492,629 $792,286 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 2.40 1.59 1.84 n.a
Current Debt/Total Assets 3% 3% 2% n.a
Acid Test 6.70 13.70 20.58 n.a
Sales/Net Worth 1.00 1.17 0.89 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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Break-even Analysis
Monthly Revenue Break-even $20,684
Assumptions:
Average Percent Variable Cost 35%
Estimated Monthly Fixed Cost $13,504
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $484,400 $912,000 $954,000
Direct Cost of Sales $168,140 $314,400 $324,900
Other $0 $0 $0
Total Cost of Sales $168,140 $314,400 $324,900
Gross Margin $316,260 $597,600 $629,100
Gross Margin % 65.29% 65.53% 65.94%
Expenses
Payroll $80,500 $150,000 $162,000
Sales and Marketing and Other Expenses $35,000 $60,000 $60,000
Depreciation $0 $0 $0
Leased Equipment $3,500 $6,000 $6,000
Utilities $14,000 $24,000 $24,000
Insurance $7,000 $12,000 $12,000
Rent $5,950 $10,200 $10,200
Payroll Taxes $16,100 $30,000 $32,400
Other $0 $0 $0
Total Operating Expenses $162,050 $292,200 $306,600
Profit Before Interest and Taxes $154,210 $305,400 $322,500
EBITDA $154,210 $305,400 $322,500
Interest Expense $0 $0 $0
Taxes Incurred $7,711 $15,270 $22,844
Net Profit $146,500 $290,130 $299,656
Net Profit/Sales 30.24% 31.81% 31.41%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $484,400 $912,000 $954,000
Subtotal Cash from Operations $484,400 $912,000 $954,000
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 $484,400 $912,000 $954,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $80,500 $150,000 $162,000
Bill Payments $224,355 $468,632 $490,661
Subtotal Spent on Operations $304,855 $618,632 $652,661
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 $304,855 $618,632 $652,661
Net Cash Flow $179,545 $293,368 $301,339
Cash Balance $232,045 $525,413 $826,752
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $232,045 $525,413 $826,752
Other Current Assets $6,000 $6,000 $6,000
Total Current Assets $238,045 $531,413 $832,752
Long-term Assets
Long-term Assets $923,000 $923,000 $923,000
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $923,000 $923,000 $923,000
Total Assets $1,161,045 $1,454,413 $1,755,752
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $35,546 $38,784 $40,467
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $35,546 $38,784 $40,467
Long-term Liabilities $639,200 $639,200 $639,200
Total Liabilities $674,746 $677,984 $679,667
Paid-in Capital $423,000 $423,000 $423,000
Retained Earnings ($83,200) $63,300 $353,430
Earnings $146,500 $290,130 $299,656
Total Capital $486,300 $776,430 $1,076,086
Total Liabilities and Capital $1,161,045 $1,454,413 $1,755,752
Net Worth $486,299 $776,429 $1,076,086
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 88.27% 4.61% 15.20%
Percent of Total Assets
Other Current Assets 0.52% 0.41% 0.34% 32.50%
Total Current Assets 20.50% 36.54% 47.43% 41.30%
Long-term Assets 79.50% 63.46% 52.57% 58.70%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 3.06% 2.67% 2.30% 34.70%
Long-term Liabilities 55.05% 43.95% 36.41% 27.90%
Total Liabilities 58.12% 46.62% 38.71% 62.60%
Net Worth 41.88% 53.38% 61.29% 37.40%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 65.29% 65.53% 65.94% 0.00%
Selling, General & Administrative Expenses 35.05% 33.71% 33.83% 74.90%
Advertising Expenses 1.45% 1.32% 1.26% 2.90%
Profit Before Interest and Taxes 31.84% 33.49% 33.81% 2.00%
Main Ratios
Current 6.70 13.70 20.58 1.29
Quick 6.70 13.70 20.58 0.85
Total Debt to Total Assets 58.12% 46.62% 38.71% 62.60%
Pre-tax Return on Net Worth 31.71% 39.33% 29.97% 2.30%
Pre-tax Return on Assets 13.28% 21.00% 18.37% 6.00%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 30.24% 31.81% 31.41% n.a
Return on Equity 30.13% 37.37% 27.85% n.a
Activity Ratios
Accounts Payable Turnover 7.24 12.17 12.17 n.a
Payment Days 27 29 29 n.a
Total Asset Turnover 0.42 0.63 0.54 n.a
Debt Ratios
Debt to Net Worth 1.39 0.87 0.63 n.a
Current Liab. to Liab. 0.05 0.06 0.06 n.a
Liquidity Ratios
Net Working Capital $202,500 $492,629 $792,286 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 2.40 1.59 1.84 n.a
Current Debt/Total Assets 3% 3% 2% n.a
Acid Test 6.70 13.70 20.58 n.a
Sales/Net Worth 1.00 1.17 0.89 n.a
Dividend Payout 0.00 0.00 0.00 n.a