Our biggest savings of the year
Cabin Fever
Financial Plan
The most important element in my financial plan is initiating, maintaining, and improving the factors that create, stabilize, and increase the cash flow. These items are:
- High visibility so as to create customer flow.
- A trained, enthusiastic and knowledgeable staff that answers to customer needs to keep them coming back again and again.
- Annual modernization and update of the facility equipment to create new experiences for children.
8.1 Important Assumptions
Commercial lending is currently set at 7% for long term (20 year) lending.
General Assumptions | |||
Year 1 | Year 2 | Year 3 | |
Plan Month | 1 | 2 | 3 |
Current Interest Rate | 7.00% | 7.00% | 7.00% |
Long-term Interest Rate | 7.00% | 7.00% | 7.00% |
Tax Rate | 30.00% | 30.00% | 30.00% |
Other | 0 | 0 | 0 |
8.2 Break-even Analysis
The Break Even chart assumes fixed monthly expenses of approximately $9,600. The expenses are the total of estimated monthly utilities, phone, payroll, legal, insurance, marketing and rent figures. Variable monthly costs are shown as a percentage of total sales. Average Monthly Sales for the first year are anticipated around $13,200 and the break even point would be at $10,069, leaving adequate room and cash flow for possible costs initially overlooked. These figures show a comfortable cushion for operating expenses.

Break-even Analysis | |
Monthly Revenue Break-even | $9,329 |
Assumptions: | |
Average Percent Variable Cost | 4% |
Estimated Monthly Fixed Cost | $8,938 |
8.3 Projected Profit and Loss
The company will show a profit in the first year of operation. The yearly analysis is indicated in the table below, and the monthly analysis can be found in the appendix. Our most significant operating expenses will be payroll, marketing, and rent. We project a modest net profit increasing gradually over the next three years as we streamline operations.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $158,392 | $166,312 | $174,627 |
Direct Cost of Sales | $6,634 | $6,966 | $7,314 |
Other Costs of Goods | $0 | $0 | $0 |
Total Cost of Sales | $6,634 | $6,966 | $7,314 |
Gross Margin | $151,758 | $159,346 | $167,313 |
Gross Margin % | 95.81% | 95.81% | 95.81% |
Expenses | |||
Payroll | $58,400 | $64,400 | $70,400 |
Marketing/Promotion | $12,668 | $13,089 | $13,521 |
Depreciation | $6,960 | $7,000 | $7,000 |
Rent | $12,000 | $12,000 | $12,000 |
Utilities / Phone / Internet | $7,680 | $7,680 | $7,680 |
Insurance | $4,800 | $4,800 | $4,800 |
Payroll Taxes | $0 | $0 | $0 |
CPA | $3,000 | $3,000 | $3,000 |
Website hosting | $250 | $300 | $325 |
Office Expenses | $1,500 | $1,500 | $1,500 |
Total Operating Expenses | $107,258 | $113,769 | $120,226 |
Profit Before Interest and Taxes | $44,500 | $45,577 | $47,087 |
EBITDA | $51,460 | $52,577 | $54,087 |
Interest Expense | $7,105 | $6,202 | $5,259 |
Taxes Incurred | $11,218 | $11,812 | $12,548 |
Net Profit | $26,176 | $27,562 | $29,279 |
Net Profit/Sales | 16.53% | 16.57% | 16.77% |
8.4 Projected Cash Flow
Long Term Debt: My long term debt payments are based on a 10-year note, principle balance of $100,800 @ 7% interest. Principal repayments are shown below, while interest is listed in the profit and Loss. Although the yearly projections indicate a straight-line repayment, we may pay off more principal after year one, depending on cash flow.
Capital Improvements: Making changes to the play structure will need to occur as to keep the facility fresh and new for customers. These changes will take place on an annual basis after the first year with the liquidation of old play materials and the acquisition of new ones.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $158,392 | $166,312 | $174,627 |
Subtotal Cash from Operations | $158,392 | $166,312 | $174,627 |
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 | $6,000 | $6,000 |
Sales of Long-term Assets | $0 | $0 | $0 |
New Investment Received | $0 | $0 | $0 |
Subtotal Cash Received | $158,392 | $172,312 | $180,627 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $58,400 | $64,400 | $70,400 |
Bill Payments | $63,026 | $65,644 | $67,898 |
Subtotal Spent on Operations | $121,426 | $130,044 | $138,298 |
Additional Cash Spent | |||
Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
Principal Repayment of Current Borrowing | $2,665 | $2,670 | $2,665 |
Other Liabilities Principal Repayment | $0 | $0 | $0 |
Long-term Liabilities Principal Repayment | $10,800 | $10,800 | $10,800 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $0 | $12,000 | $12,000 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $134,891 | $155,514 | $163,763 |
Net Cash Flow | $23,501 | $16,798 | $16,864 |
Cash Balance | $31,501 | $48,299 | $65,163 |
8.5 Projected Balance Sheet
My Projected Balance Sheet shows that I should not have any difficulty meeting my debt obligations. My Marketing Plan should be sufficient to meet the projections. Most significantly, Cabin Fever’s net worth will increase to approximately $77,500 by year three.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $31,501 | $48,299 | $65,163 |
Other Current Assets | $25,000 | $19,000 | $13,000 |
Total Current Assets | $56,501 | $67,299 | $78,163 |
Long-term Assets | |||
Long-term Assets | $90,000 | $102,000 | $114,000 |
Accumulated Depreciation | $6,960 | $13,960 | $20,960 |
Total Long-term Assets | $83,040 | $88,040 | $93,040 |
Total Assets | $139,541 | $155,339 | $171,203 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $3,830 | $5,536 | $5,585 |
Current Borrowing | $5,335 | $2,665 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $9,165 | $8,201 | $5,585 |
Long-term Liabilities | $90,000 | $79,200 | $68,400 |
Total Liabilities | $99,165 | $87,401 | $73,985 |
Paid-in Capital | $32,000 | $32,000 | $32,000 |
Retained Earnings | ($17,800) | $8,376 | $35,939 |
Earnings | $26,176 | $27,562 | $29,279 |
Total Capital | $40,376 | $67,939 | $97,218 |
Total Liabilities and Capital | $139,541 | $155,339 | $171,203 |
Net Worth | $40,376 | $67,939 | $97,218 |
8.6 Business Ratios
The following table outlines some of the more important ratios from the Recreation Center industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 7999.
We project a higher ratio of long-term to short-term liabilities than is the industry standard. We also project higher expenses for operating expenses and advertising; part of this discrepancy is the result of being a start-up, with no existing reputation. Another is our committment to pay employees a fair wage with decent benefits, including sick time and vacation time. All asset to liability ratios indicate a high ability to pay our creditors.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 5.00% | 5.00% | 4.94% |
Percent of Total Assets | ||||
Other Current Assets | 17.92% | 12.23% | 7.59% | 36.35% |
Total Current Assets | 40.49% | 43.32% | 45.66% | 43.63% |
Long-term Assets | 59.51% | 56.68% | 54.34% | 56.37% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 6.57% | 5.28% | 3.26% | 21.68% |
Long-term Liabilities | 64.50% | 50.99% | 39.95% | 31.17% |
Total Liabilities | 71.07% | 56.26% | 43.21% | 52.85% |
Net Worth | 28.93% | 43.74% | 56.79% | 47.15% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 95.81% | 95.81% | 95.81% | 100.00% |
Selling, General & Administrative Expenses | 79.29% | 79.24% | 79.04% | 76.74% |
Advertising Expenses | 4.42% | 4.21% | 4.01% | 2.84% |
Profit Before Interest and Taxes | 28.09% | 27.40% | 26.96% | 2.11% |
Main Ratios | ||||
Current | 6.16 | 8.21 | 14.00 | 1.05 |
Quick | 6.16 | 8.21 | 14.00 | 0.69 |
Total Debt to Total Assets | 71.07% | 56.26% | 43.21% | 62.49% |
Pre-tax Return on Net Worth | 92.62% | 57.96% | 43.02% | 2.98% |
Pre-tax Return on Assets | 26.80% | 25.35% | 24.43% | 7.95% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 16.53% | 16.57% | 16.77% | n.a |
Return on Equity | 64.83% | 40.57% | 30.12% | n.a |
Activity Ratios | ||||
Accounts Payable Turnover | 17.45 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 25 | 30 | n.a |
Total Asset Turnover | 1.14 | 1.07 | 1.02 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 2.46 | 1.29 | 0.76 | n.a |
Current Liab. to Liab. | 0.09 | 0.09 | 0.08 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $47,336 | $59,099 | $72,578 | n.a |
Interest Coverage | 6.26 | 7.35 | 8.95 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.88 | 0.93 | 0.98 | n.a |
Current Debt/Total Assets | 7% | 5% | 3% | n.a |
Acid Test | 6.16 | 8.21 | 14.00 | n.a |
Sales/Net Worth | 3.92 | 2.45 | 1.80 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |