Roller Skate Rink Business Plan

START YOUR OWN BUSINESS PLAN

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Financial Plan

The financial plan contains these essential factors:

  1. A growth rate of 5% for the year 2004.
  2. Do not depend on credit lines to support cash flow.
  3. An average sales per business day (305 days per year) in excess of $1,000.

8.1 Important Assumptions

The financial plan depends on Important Assumptions, most of which are shown in the following table. The key underlying assumptions are:

  • We assume a slow-growth economy, without major recession.
  • We assume there will not be any direct competitors for at least several years.
  • We assume access to equity capital and financing sufficient to maintain our financial plan as shown in the tables.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 8.00% 8.00% 8.00%
Long-term Interest Rate 15.00% 15.00% 15.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

8.2 Break-even Analysis

Our Break-even Analysis is shown below.

Break-even Analysis
Monthly Revenue Break-even $35,022
Assumptions:
Average Percent Variable Cost 11%
Estimated Monthly Fixed Cost $31,332

8.3 Projected Profit and Loss

The most important assumption in the Projected Profit and Loss statement is a steady growth into 2006. The increase in gross margin is based on an agressive marketing approach, and it is critical.

Month-by-month assumptions for profit and loss are included in the appendix.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $405,000 $467,000 $515,000
Direct Cost of Sales $42,680 $46,840 $53,100
Other Costs of Goods $0 $0 $0
Total Cost of Sales $42,680 $46,840 $53,100
Gross Margin $362,320 $420,160 $461,900
Gross Margin % 89.46% 89.97% 89.69%
Expenses
Payroll $205,200 $219,000 $234,000
Sales and Marketing and Other Expenses $50,000 $60,000 $65,000
Depreciation $0 $0 $0
Rent $42,000 $45,000 $48,000
Utilities $12,000 $14,000 $14,000
Insurance $12,000 $14,000 $16,000
Payroll Taxes $30,780 $32,850 $35,100
Other $24,000 $30,000 $35,000
Total Operating Expenses $375,980 $414,850 $447,100
Profit Before Interest and Taxes ($13,660) $5,310 $14,800
EBITDA ($13,660) $5,310 $14,800
Interest Expense $0 $0 $0
Taxes Incurred $0 $1,593 $4,440
Net Profit ($13,660) $3,717 $10,360
Net Profit/Sales -3.37% 0.80% 2.01%

8.4 Projected Cash Flow

The following table and chart illustrate McKenzie Roller Rink's cash flow situation. Cash Flow will be negative for year one as we start up the business and slowly create awareness about our facility. We have planned for this with enough extra cash to keep the cash balance positive.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $405,000 $467,000 $515,000
Subtotal Cash from Operations $405,000 $467,000 $515,000
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 $405,000 $467,000 $515,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $205,200 $219,000 $234,000
Bill Payments $207,429 $243,718 $269,060
Subtotal Spent on Operations $412,629 $462,718 $503,060
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 $412,629 $462,718 $503,060
Net Cash Flow ($7,629) $4,282 $11,940
Cash Balance $86,371 $90,653 $102,593

8.5 Projected Balance Sheet

The balance sheet is quite solid. We do not project any real trouble meeting our debt obligations - as long as we can achieve our specific objectives.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $86,371 $90,653 $102,593
Inventory $4,114 $4,515 $5,118
Other Current Assets $2,000 $2,000 $2,000
Total Current Assets $92,485 $97,168 $109,711
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $92,485 $97,168 $109,711
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $19,145 $20,111 $22,294
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $19,145 $20,111 $22,294
Long-term Liabilities $0 $0 $0
Total Liabilities $19,145 $20,111 $22,294
Paid-in Capital $120,000 $120,000 $120,000
Retained Earnings ($33,000) ($46,660) ($42,943)
Earnings ($13,660) $3,717 $10,360
Total Capital $73,340 $77,057 $87,417
Total Liabilities and Capital $92,485 $97,168 $109,711
Net Worth $73,340 $77,057 $87,417

8.6 Business Ratios

Business Ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7999, Roller Rinks are shown for comparison.

The following will enable us to keep on track. If we fail in any of these areas, we will need to re-evaluate our business model:

  1. Gross margins at or above 88%.
  2. Do not depend on credit line to meet cash requirements.
  3. Month-to-month annual comparisons indicate an increase of 5% or greater.
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 15.31% 10.28% 5.73%
Percent of Total Assets
Inventory 4.45% 4.65% 4.67% 2.87%
Other Current Assets 2.16% 2.06% 1.82% 33.26%
Total Current Assets 100.00% 100.00% 100.00% 43.21%
Long-term Assets 0.00% 0.00% 0.00% 56.79%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 20.70% 20.70% 20.32% 21.91%
Long-term Liabilities 0.00% 0.00% 0.00% 28.81%
Total Liabilities 20.70% 20.70% 20.32% 50.72%
Net Worth 79.30% 79.30% 79.68% 49.28%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 89.46% 89.97% 89.69% 100.00%
Selling, General & Administrative Expenses 92.83% 89.17% 87.68% 76.43%
Advertising Expenses 0.00% 0.00% 0.00% 2.77%
Profit Before Interest and Taxes -3.37% 1.14% 2.87% 1.89%
Main Ratios
Current 4.83 4.83 4.92 1.18
Quick 4.62 4.61 4.69 0.80
Total Debt to Total Assets 20.70% 20.70% 20.32% 1.76%
Pre-tax Return on Net Worth -18.63% 6.89% 16.93% 61.12%
Pre-tax Return on Assets -14.77% 5.46% 13.49% 4.52%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -3.37% 0.80% 2.01% n.a
Return on Equity -18.63% 4.82% 11.85% n.a
Activity Ratios
Inventory Turnover 10.91 10.86 11.02 n.a
Accounts Payable Turnover 11.10 12.17 12.17 n.a
Payment Days 29 29 29 n.a
Total Asset Turnover 4.38 4.81 4.69 n.a
Debt Ratios
Debt to Net Worth 0.26 0.26 0.26 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $73,340 $77,057 $87,417 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.23 0.21 0.21 n.a
Current Debt/Total Assets 21% 21% 20% n.a
Acid Test 4.62 4.61 4.69 n.a
Sales/Net Worth 5.52 6.06 5.89 n.a
Dividend Payout 0.00 0.00 0.00 n.a