U&Me Dance
Financial Plan
- We plan to use our own start-up cash to finance the business. The Majestic is a turn key building for this type of business, requiring very limited contract work for us to bring in. A kitchen space and office window are to be negotiated with the building owner. Our start-up requirements are business assets, teaching supplies, and advertising.
- We want to finance growth mainly through cash flow.
8.1 Important Assumptions
The financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions. The monthly assumptions are included in the appendix. From the beginning, we recognize that collection of payments for dance lesson packages is critical, however, not a factor we can influence easily. Interest rates, tax rates, and personnel burden are based on conservative assumptions.
Three of the more important underlying assumptions are:
- We assume that people in Whatcom County and more importantly, Bellingham, will be interested in learning to dance and will give us a try.
- We assume that the area will continue to grow, as in the past, and at the projected rate of 5% per year.
- We assume that the Majestic will continue to be rented for events as in the past.
General Assumptions | |||
Year 1 | Year 2 | Year 3 | |
Plan Month | 1 | 2 | 3 |
Current Interest Rate | 10.00% | 10.00% | 10.00% |
Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
Tax Rate | 30.00% | 30.00% | 30.00% |
Other | 0 | 0 | 0 |
8.2 Break-even Analysis
We will need an average of thirty new students each month taking the introductory classes. Of these thirty students, we are anticipating that 25% will stay to take additional classes (i.e. Social Foundation, Bronze, etc.). We realize that we may have a slow start, until the word gets out about our business, and therefore, will take a few months to “ramp up” to thirty new students.

Break-even Analysis | |
Monthly Revenue Break-even | $22,393 |
Assumptions: | |
Average Percent Variable Cost | 10% |
Estimated Monthly Fixed Cost | $20,150 |
8.3 Projected Profit and Loss
Our projected profit and loss is shown on the following table, with sales increasing at a rate of 15% year over year. If we are able to meet our sales forecast, we will begin making a profit almost immediately. Traditionally in the dance business the slower months are in the mid-summer. However, the facility rental is higher in the Summer and should, therefore, supplement the slower teaching months.
The detailed monthly projections are included in the appendix.



Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $301,990 | $347,289 | $399,382 |
Direct Cost of Sales | $30,244 | $34,780 | $39,997 |
Other Production Expenses | $0 | $0 | $0 |
Total Cost of Sales | $30,244 | $34,780 | $39,997 |
Gross Margin | $271,746 | $312,509 | $359,385 |
Gross Margin % | 89.99% | 89.99% | 89.99% |
Expenses | |||
Payroll | $98,150 | $112,000 | $124,000 |
Sales and Marketing and Other Expenses | $45,100 | $45,800 | $52,500 |
Depreciation | $3,540 | $3,540 | $3,540 |
Utilities | $9,000 | $10,000 | $11,000 |
Telephone | $2,400 | $2,400 | $2,400 |
Insurance | $1,800 | $1,800 | $1,800 |
Rent | $72,000 | $72,000 | $74,712 |
Payroll Taxes | $9,815 | $11,200 | $12,400 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $241,805 | $258,740 | $282,352 |
Profit Before Interest and Taxes | $29,941 | $53,769 | $77,033 |
EBITDA | $33,481 | $57,309 | $80,573 |
Interest Expense | ($550) | ($1,700) | ($2,900) |
Taxes Incurred | $9,147 | $16,641 | $23,980 |
Net Profit | $21,344 | $38,828 | $55,953 |
Net Profit/Sales | 7.07% | 11.18% | 14.01% |
8.4 Projected Cash Flow
Cash flow projections are critical to our success. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendix. The business will generate more than enough cash flow to cover all of its expenses. The monthly cash flow is shown in the following chart, with one bar representing the cash flow per month, and the other the monthly cash balance.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $301,990 | $347,289 | $399,382 |
Subtotal Cash from Operations | $301,990 | $347,289 | $399,382 |
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 | $301,990 | $347,289 | $399,382 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $98,150 | $112,000 | $124,000 |
Bill Payments | $163,661 | $192,360 | $214,001 |
Subtotal Spent on Operations | $261,811 | $304,360 | $338,001 |
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 | $11,000 | $12,000 | $12,000 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $0 | $0 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $272,811 | $316,360 | $350,001 |
Net Cash Flow | $29,179 | $30,929 | $49,381 |
Cash Balance | $39,929 | $70,858 | $120,239 |
8.5 Projected Balance Sheet
The balance sheet in the following table shows managed but sufficient growth of net worth, and a sufficiently healthy financial position. The monthly estimates are included in the appendix.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $39,929 | $70,858 | $120,239 |
Other Current Assets | $12,000 | $12,000 | $12,000 |
Total Current Assets | $51,929 | $82,858 | $132,239 |
Long-term Assets | |||
Long-term Assets | $17,700 | $17,700 | $17,700 |
Accumulated Depreciation | $3,540 | $7,080 | $10,620 |
Total Long-term Assets | $14,160 | $10,620 | $7,080 |
Total Assets | $66,089 | $93,478 | $139,319 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $15,296 | $15,856 | $17,744 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $15,296 | $15,856 | $17,744 |
Long-term Liabilities | ($11,000) | ($23,000) | ($35,000) |
Total Liabilities | $4,296 | ($7,144) | ($17,256) |
Paid-in Capital | $50,000 | $50,000 | $50,000 |
Retained Earnings | ($9,550) | $11,794 | $50,622 |
Earnings | $21,344 | $38,828 | $55,953 |
Total Capital | $61,794 | $100,622 | $156,575 |
Total Liabilities and Capital | $66,089 | $93,478 | $139,319 |
Net Worth | $61,794 | $100,622 | $156,575 |
8.6 Business Ratios
The following table outlines some of the more important ratios from the Fine Art Schools industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 7911.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 15.00% | 15.00% | 16.60% |
Percent of Total Assets | ||||
Other Current Assets | 18.16% | 12.84% | 8.61% | 33.90% |
Total Current Assets | 78.57% | 88.64% | 94.92% | 43.80% |
Long-term Assets | 21.43% | 11.36% | 5.08% | 56.20% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 23.14% | 16.96% | 12.74% | 36.40% |
Long-term Liabilities | -16.64% | -24.60% | -25.12% | 22.60% |
Total Liabilities | 6.50% | -7.64% | -12.39% | 59.00% |
Net Worth | 93.50% | 107.64% | 112.39% | 41.00% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 89.99% | 89.99% | 89.99% | 0.00% |
Selling, General & Administrative Expenses | 82.92% | 78.80% | 75.98% | 70.60% |
Advertising Expenses | 7.95% | 6.91% | 7.51% | 3.60% |
Profit Before Interest and Taxes | 9.91% | 15.48% | 19.29% | 3.90% |
Main Ratios | ||||
Current | 3.40 | 5.23 | 7.45 | 1.40 |
Quick | 3.40 | 5.23 | 7.45 | 1.01 |
Total Debt to Total Assets | 6.50% | -7.64% | -12.39% | 59.00% |
Pre-tax Return on Net Worth | 49.34% | 55.13% | 51.05% | 3.70% |
Pre-tax Return on Assets | 46.14% | 59.34% | 57.37% | 8.90% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 7.07% | 11.18% | 14.01% | n.a |
Return on Equity | 34.54% | 38.59% | 35.74% | n.a |
Activity Ratios | ||||
Accounts Payable Turnover | 11.70 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 29 | 28 | n.a |
Total Asset Turnover | 4.57 | 3.72 | 2.87 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.07 | -0.07 | -0.11 | n.a |
Current Liab. to Liab. | 3.56 | 0.00 | 0.00 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $36,634 | $67,002 | $114,495 | n.a |
Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.22 | 0.27 | 0.35 | n.a |
Current Debt/Total Assets | 23% | 17% | 13% | n.a |
Acid Test | 3.40 | 5.23 | 7.45 | n.a |
Sales/Net Worth | 4.89 | 3.45 | 2.55 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |