The cash flow projections show a steady growth. The pace and rate is consistent. At this rate this gives the Management the time needed to research other locations, establish a strong position when researching financing related to purchase the next location.
The General Assumptions assumes current interest rates are 5%, long term interest rates are 7% and the tax rate is 30%.
Projected profit and loss assumes long-term interest expense at 7%, it also includes owners' salaries and taxes. Net profit is calculated after tax. Expenses include triple net lease fees of $2/sq ft, which is approximately $9,600 per year. After several months of operation net profit growth from month to month ranges from approximately 10%-20%. After year 1 net profits continue growth in the range of 10%-15%.
The break-even analysis of Galerie de Beaute is an illustration of the number of units which are required to be leased at an average rent of $975/month. With 12 units leased, this will cover the fixed costs (i.e. rent, insurance, security, maintenance), variable cost related to triple net leasing of $2/sq ft, water and electricity and the owners' salaries of $4,000/month.
Cash flow begins with an adequate cash balance; is negative for four months, then becomes positive. One-hundred fifty five thousand dollars has been invested by the partners. The owners will receive year-end dividend payouts beginning in the second fiscal year. The long-term debt of $100,000 will be repaid over the course of eight years at an interest rate of 7%. The net cash flow is listed before interest and taxes.
The nature of Galerie de Beaute's business is to carry no inventory; salon unit leases are paid current; thus there are no accounts receivables; and limited long-term assets in equipment on the books are depreciated over five years. In the future we may purchase a building for a 2nd location if demand requires.
The ratios are not relevant to Galerie de Beaute for several reasons. Galerie de Beaute does not possess inventory to be evaluated in that fashion. Galerie de Beaute possesses limited equipment long-term assets, but does not carry accounts receivables. Because salon malls are fairly new there are no industry indicators for comparisons; therefore the ratio table is not a good indicator. The Industry Profiles shown correspond to SIC code 6512.0200, Operators of Nonresidential Buildings, chosen because our company is sub-leasing business real estate space to independent business entrepreneurs.