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:
Commercial lending is currently set at 7% for long term (20 year) lending.
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.
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.
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.
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.
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.