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Gymnastics Jump-Start

Executive Summary

Gymnastics Jump-Start will serve children in the Detroit Metropolitan area. We will help them to become more disciplined and focused, and improve their overall health. Gymnastics Jump-Start is a private gym whose main focus is on gymnastics; however, various types of dance and total body conditioning are also taught. This gym will have Olympic gymnastic equipment for both boys and girls.

We start each student with the core elements of gymnastics, followed by total body conditioning and more difficult tricks. Creativity in teaching methods will set us apart from our competitors, using both repetition and variation. We believe that a child must have fun and truly enjoy what he or she is doing to learn successfully. Our teachers will be trained in more unique methods of teaching that produce the same, if not better, physical effect on the children, but provide a better mental effect. The gymnasium will be open for parent observation, but they will be asked to stay in a confined area as a safety precaution.

Gymnastics Jump-Start will be making a profit within the first year of business. After the completion of the first year we expect to have a fairly regular clientele base. As the number of children in our classes increases, we will add extra teachers. If growing classes mean hiring and training new teachers, then that’s what we will do. As current gymnastics teachers at other gyms, we have a very strong relationship with our customers and will do whatever we can to keep them coming back to us. Our class prices will be lower than our competitors but our business will still make an excellent profit.

Owners Wanda Bounce and Bea Flip have both been competitive gymnasts. We understand the way that private and public gyms are run since we have worked in both of them. With combined gymnastics coaching experience of over 25 years, we understand what our customers want and need. We understand how children learn best from the mistakes our teachers made when we competed in gymnastics. We understand that sometimes you have to throw the book out the window and do what works best to accomplish your set goal while teaching. We have found that there is definitely a market for private gyms in Oakland County. We know this simply by the fact that we both grew up in this county and were inconvenienced by driving long distances to get to a private gym to take lessons. We believe our gym will be successful due to the experience we have gained working at various gymnastics facilities in and around the Detroit Metropolitan area.

To fund the start-up costs for Gymnastics Jump-Start, the owners will each invest $25,000. In addition, we are seeking a seven-year loan of $36,600 to help cover the initial equipment purchases necessary to open a high-caliber private gymnasium. Details of the repayment can be found in the financial plan.

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1.1 Keys to Success

Our main keys to success include:

  • Maintaining a reputable and untarnished reputation in the community
  • Competitive pricing
  • Flexible hours
  • Ample and secure parking
  • Easy access
  • Target high traffic areas for maximum public exposure
  • Design facilities to curb overcrowding
  • Seasoned management team
  • Personalized relationships with customers

We can minimize certain risk factors by:

  • Initial capitalization of the company to sustain operations through year one
  • Low overhead through the use of multi-skilled employees and continual training
  • Strong customer base through aggressive marketing
  • Strong community ties and involvement
  • Eliminate collection costs by establishing cash/credit/debit-card-only facilities

1.2 Mission

Gymnastics Jump-Start offers a place where people can learn gymnastics, meet new people, have fun and feel comfortable. We offer a varied gymnastics and conditioning program with price options for all levels of interest, but with greater emphasis on group classes. Our instructors have access to continual training with some of the area’s top professional coaches. This provides our students with up-to-date tricks and technique. Gymnastics Jump-Start welcomes a diversity of people and maintains a non-smoking and alcohol/drug free environment.

1.3 Objectives

The objectives of Gymnastics Jump-Start are the following:

  • Exceed 60% class capacity by the end of the first year of operation.
  • Acquire 300+ participants by the end of the first year of operation.
  • Increase membership by 20% by the end of the second year of operation.
  • Provide gymnastics training for students at all levels, from beginner to advanced.
  • Provide continual training, benefits and incentives for staff to encourage a long-term commitment of employees.

Company Summary

Gymnastics Jump-Start, soon to be located in Bouncetown, Michigan, will provide the community with a comfortable, friendly environment in which to learn all levels of gymnastics. Gymnastics Jump-Start will offer private gymnastics instruction, group classes, birthday parties, sleepovers, drop-in clinics, cheerleading classes, and conditioning classes. Gymnastics, as a sport, has become increasingly popular worldwide due to the public’s exposure from the Summer Olympics. As a result, the gym can expect to expand numbers of children largely when the next Summer Olympics come around. We expect most of our customers to come from Oakland County where we are located, but we also expect some business from Macomb and Wayne County. Gymnastics Jump-Start will appeal mainly to the 1-18 year old age group, all types of abilities and backgrounds, and children looking for creative self expression, exercise and/or social opportunities through gymnastics.

2.1 Company Ownership

Gymnastics Jump-Start is a privately owned limited liability partnership with each of the principal officers holding an equal share in the company. Gymnastics Jump-Start is owned and operated by Wanda Bounce and Bea Flip.

2.2 Start-up Summary

The start-up expenses for Gymnastics Jump-Start are focused primarily on equipment and padded floor surfaces for the classes. We are buying $40,000 worth of equipment as long-term assets, and another $30,000 as expensed equipment which will need to be replaced every three-four years.

Gymnastics instruction business plan, company summary chart image

Start-up
Requirements
Start-up Expenses
Legal $1,000
Stationery etc. $500
Insurance $1,000
Rent $2,000
Computer $100
Gymnastics Equipment $30,000
Other $2,000
Total Start-up Expenses $36,600
Start-up Assets
Cash Required $10,000
Other Current Assets $0
Long-term Assets $40,000
Total Assets $50,000
Total Requirements $86,600

Services

Gymnastics Jump-Start is dedicated to bringing the fun and challenge of gymnastics to Oakland County at an affordable cost. We will offer private and group gymnastics classes for social through competitive level gymnasts. Gymnastics Jump-Start will offer its students a variety of instructional choices. By offering them several options, we can best serve their individual needs and financial limitations.

Private Lessons
This offer students the best value for their investment. With a private lesson,the students will work one-on-one with an instructor, receiving personalized instruction and immediate correction. In learning the best methods, one-on-one, both beginning and advanced students will find they progress faster and more easily. Private lessons must be arranged by the instructor who will teach the lesson. Price varies depending on instructor’s experience.

Parent & Tot
This 45 minute class is designed to enhance your child’s motor, listening, and social skills through fun gymnastics oriented activities (an adult is expected to actively participate with their child). This class is offered to children ages 16 months up to 3 years. The price is $75 for a 10 week session.

Preschool
This hour long class is the introduction to basic gymnastics skills with 5 levels to achieve. Activities include tumbling, low bar, floor beam, and motor skills. For 3 year olds there are 6 students per instructor. For 4 year olds through kindergarten there are 8 students per instructor. This class is offered to children ages 3 years old to kindergarten. The price is $100 for a 10 week session. We also offer advanced preschool which a child must get instructor approval to join. This class runs 90 minutes and is $128 (this is also a 10 week session).

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Girls
This 90 minute class consists of basic, intermediate, and advanced gymnastics skills with 6 levels to achieve. Activities include vault, bars, beam, tumbling, trampoline and dance. There are 8 students per instructor. This class is offered to girls ages 1st grade to 12 years old. The price is $128 for a 10 week session.

Boys
This 90 minute class consists of basic, intermediate, and advanced gymnastics skills with 6 levels to achieve. Activities include single bar, rings, parallel bars, tumbling, vault, and trampoline. There are 8 students per instructor. This class is offered to boys ages 6 years old and up. The price is $128 for a 10 week session.

Tumbling
This 75 minute class is designed for boys and girls to learn basic through advanced tumbling skills and trampoline. Skills include handstands, cartwheels, round-offs, back handsprings, back tucks, etc. There are 8 students per instructor. This class is offered to all children ages 6 years old and up. The price is $115 for a 10 week session.

Cheernastics
This is a 60 minute tumbling class for cheer squads of 8 or more with an emphasis on back handsprings. The cheer coach will need to contact our office to set up the day and time for their squad. The price will vary depending on the number of girls in the squad. Cheer squads of all ages are welcome.

Cheer
This 60 minute class is for individuals interested in learning basic, intermediate, or advanced cheer techniques. Class includes training for flexibility, jumps, and stunts. This class is offered to a variety of ages. The class is $100 for a 10 week session.

Adult Gymnastics
This 75 minute class is designed for anyone interested in learning or relearning basic to intermediate tumbling skills. There are 8 students per instructor. This class is $115 for a 10 week session.

Birthday Parties
This is an excellent way to celebrate a child’s birthday. The first 60 minutes include games, trampolines, and fun gymnastics activities. The final 30 minutes are for refreshments, food, and gifts provided by the parents. We provide the party room, decorations, and clean up. Birthday parties have a maximum limit of 20 children and cost $150.

Field trips
This is designed to introduce a group to basic gymnastics skills. This is 60 minutes long. The price will vary depending on the size of the group.

Market Analysis Summary

Gymnastics Jump-Start is a business that has become necessary in today’s fast-paced world. People are always on the go these days and don’t tend to take care of themselves anymore. America has a large rate of obesity in not only adults but also children. Being overweight can cause many health issues as well as social issues for children. An overweight child will reach an age when they start to feel very unsure in themselves. Everybody goes through a stage like this, but this could be more intense to an overweight child. Also, there is an increase in the number of children with diabetes. Diabetes is occurring more and more in America’s overweight children. Children need to stay active these days, especially with all of technologies advancements. Now children can just sit around the house and watch TV and DVD’s or they can play games on anything from the computer to Playstation® to Xbox®. Children are not active as much when they can sit around their house and entertain themselves as opposed to going outside and play baseball or soccer. There is no doubt that there is room and need in the market for a private gymnastics gym.

4.1 Market Segmentation

Gymnastics Jump-Start has determined that its potential customers will mainly come from children 18 years old and under in Oakland County. The majority of customers will come from Oakland County, however when completing the market analysis table I added in Macomb and Wayne County. I expect these counties will make up less then 30% of our customers.

Gymnastics instruction business plan, market analysis summary chart image

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
local children ages 18 and under 1% 304,383 307,427 310,501 313,606 316,742 1.00%
Wayne and Macomb Counties children ages 18 and under 1% 764,219 771,861 779,580 787,376 795,250 1.00%
Total 1.00% 1,068,602 1,079,288 1,090,081 1,100,982 1,111,992 1.00%

4.2 Service Business Analysis

The reason I decided that I wanted to open Gymnastics Jump-Start in Oakland County is that there are no real private gyms in the area. On the opposite side of Oakland County from Bouncetown there is one private gym, but I wanted to create a more centralized business. In this industry there are two options: public gyms and private gyms. The public gyms are the city recreation centers and facilities like the YMCA’s and YWCA’s. As I stated before, there is only really one other private gym close in the general area. Most recreation centers or cities do have some sort of a gymnastics program, but this could simply mean that it is as basic as a preschool program.

4.2.1 Competition and Buying Patterns

The public programs tend to be cheaper, but the equipment tends to be not as ‘top of the line’ as the private gyms. These public centers can only train children until they reach a certain point; then they must go to a private gym for training on advanced skills and equipment. In my experience I have found that private gyms have better trained staff and better quality equipment. I have come to that conclusion by both teaching and training in a public and private gym. The public gyms are cheaper but the training the children receive isn’t as good.

If a child is really serious about becoming a competitive gymnast they should attend private gym. The private gyms are more expensive but the classes are smaller and the skill level taught is higher. If a child is just doing gymnastics for fun and is not serious to compete then a public gym is fine. Having a child in gymnastics for them to gain from the social aspect is a great idea. In a private gym the child will also be exposed to the social aspect. There would be no reason to pay the expensive price of a private gym when the child could benefit the same from a public gym socially if that is the main desire.

4.3 Target Market Segment Strategy

Gymnastics Jump-Start is located in Oakland County, which by default means that most of our customers are coming from Oakland County. We also expect children from close surrounding counties like Macomb and Wayne. We do not expect anyone from other Counties to attend classes with us because the distance is too far for many people to travel for gymnastics classes. We will target children 18 years old and under in Oakland, Macomb, and Wayne County. The reason for targeting this age group is that any age after 18 most gymnasts stop competing or practicing regularly. Gymnastics is very rough on the body, by the age of 18 if you have not gotten injured your are normally burned out and lose interest in high level gymnastics. Now this isn’t always the case and I make gymnastics sound bad by saying that, but it’s the truth. Even with that being the case, there is still a large number of children who would like to make gymnastics part of their youth.

Strategy and Implementation Summary

Gymnastics Jump-Start will succeed by offering its clients’ children a safe, fun environment to learn gymnastics with close personalized attention from trained teachers. The goals of the gym are two-fold:

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  • To help parents feel good about the environment in which they have placed their children and the physical and social benefits gained there.
  • To make it a safe, educational, and fun experience for the child.

5.1 Competitive Edge

Gymnastics Jump-Start’ competitive advantage will be our focus on low-level competitive gymnastics. This will allow the teachers to focus their attention on the less advanced children and classes. We will build strong classes that teach the basics. If children are not taught the basics correctly in gymnastics, they will advance to higher levels sloppy with their skills. We would like to focus our programs on the beginning classes, unlike most private gyms, which are mostly high-level competitive. In these private gym the beginning classes tend to be pushed around on the different apparatus for the convenience of the competitive gymnasts. A high level competitive gym will train girls that are much more advanced; such girls could be advanced as Olympic hopefuls.

We would also like to build strong relationships with the children and their families. That may seem like a hard thing to accomplish, but when you teach the same children for multiple sessions and years you would be surprised at how much you will learn about them. Most of this information will just be volunteered by the parents after or before classes when they just come up and talk with myself or one of the other teachers. If strong relationships are built the parents will be less likely to take their child out of our gym and send them to another for any reason.

5.2 Marketing Strategy

Our customers can come from ages 16 months to 18 years old, male and female, all races, every income level and can be local residents or connected county residents. That is why our marketing plan started at the construction phase, by keeping in mind that if it looks fun, people will come. Thus the main factor to our success is simply that a child can enjoy themselves at our gym while participating in gymnastics which will stimulate their mind and body. Public relations is a vital part of our management team, by assuring that customer satisfaction is provided and gathering information from the public about the types of classes that are most desired. This can provide our company with the means to stay in touch with the community and be ready to meet their desires.

5.3 Sales Strategy

Gymnastics Jump-Start will make a significant profit through the excellent teaching and care of children. Even though Gymnastics Jump-Start charges less than other private gyms, the company will see profit within the first year due to beneficial word-of-mouth advertising. Gymnastics Jump-Start also expects to take customers from the private gym and the public recreation center at which both Wanda Bounce and Bea Flip currently work.  The company expects to double its’ clientele every six months, for the first 18 months.

5.3.1 Sales Forecast

This sales forecast is based on the numbers of sales made by a private gym for which I work. It is assumed that for the first 3 years, our business will consistently grow in number of students. The first year in the sales forecast is based on half the current clientele of the private gym for which I currently work. I believe our numbers, given time, will exceed those of this private gym. I see no reason why this data would not be accurate.

Our cost of sales includes the hourly wages paid to teachers besides the owners. These amounts are based on rates negotiated with potential teachers, which vary depending on the number of children attending each session. These costs also take into account the teaching hours put in by the owners – an individual teacher is actually receiving 40-50% of the class fee, but Bea and Wanda will teach many of these classes for a small, flat salary. We also have a receptionist, but her salary is separate from the teachers. These salaries are listed separately, in the Personnel table.

The sales forecast table below shows that in 2008 our projected sales will be $211,603 and the direct cost of sales will be $64,809.

Gymnastics instruction business plan, strategy and implementation summary chart image

Gymnastics instruction business plan, strategy and implementation summary chart image

Sales Forecast
Year 1 Year 2 Year 3
Sales
Parent and Tot $6,386 $8,818 $11,250
Preschool $64,829 $89,515 $114,200
Girls $58,131 $80,266 $102,400
Boys $11,637 $16,059 $20,480
Tumbling and Adult Gymnastics $26,113 $36,057 $46,000
Birthday Parties and Field Trips $7,806 $10,778 $13,750
Cheerleading $14,192 $19,596 $25,000
Advanced Girls $22,509 $39,255 $56,000
Total Sales $211,603 $300,344 $389,080
Direct Cost of Sales Year 1 Year 2 Year 3
Preschool gymnastics teachers $21,365 $29,500 $50,180
Beginner girls, boy, and tumbling teachers $28,764 $39,715 $50,664
Advanced girls teachers $14,680 $23,540 $32,400
Subtotal Direct Cost of Sales $64,809 $92,755 $133,244

5.4 Milestones

The Milestones table is specific in detail, allowing for the smooth flow of functions that are necessary to set up the gym on schedule for the Grand Opening. Each function is scheduled for the proper execution and time needed to complete each task. Each manager has specific duties assigned specifically to her area of expertise. 

Gymnastics instruction business plan, strategy and implementation summary chart image

Milestones
Milestone Start Date End Date Budget Manager Department
Legal 1/5/2008 1/7/2008 $1,000 Both Department
Class schedule planning 1/5/2008 3/15/2008 $0 Wanda Department
File for city permit 3/15/2008 3/17/2008 $200 Wanda Department
Equipment purchase and delivery 3/20/2008 3/28/2008 $70,000 Both Department
Equipment set-up 3/28/2008 3/31/2008 $0 Both Department
Negotiate lease 1/8/2008 5/1/2008 $0 Both Department
Train staff 4/1/2008 5/1/2008 $4,000 Bea Department
Registry for classes 4/1/2008 5/1/2008 $0 Bea Department
Grand opening 5/1/2008 5/1/2008 $2,000 Both Department
Totals $77,200

Management Summary

The two principals, Wanda Bounce and Bea Flip, have impeccable credentials in this industry. This will benefit Gymnastics Jump-Start in two ways:

  1. Clients will be brought from previous employers
  2. The experience each has will attract new clients

Bea Flip has extensive experience in sales and marketing within the private and public gymnastics industry. Wanda Bounce has extensive experience in the area of management, finance and administration, also in the private and public gymnastics industry.

6.1 Personnel Plan

Bea Flip will teach full-time (20 classes/week), as well as filling her managerial duties. Wanda Bounce will teach 5-6 classes per week and handle the main managerial, administrative, and accounting functions, in coordination with our receptionist. Both of the owners will take a reduced salary in the first year.

The majority of our personnel costs are listed in the Sales Forecast, under Direct Cost of Sales. Teachers are paid hourly wages based on the number of students attending each session, at a percentage rate. Gymnastics Jump-Start expects to make gradual investments in gymnastic teachers over the next three years, always keeping in mind the number of children in need of care at the center. These numbers may fluctuate depending on the number of children in classes and the number of teachers that can teach multiple classes in a week.

Personnel Plan
Year 1 Year 2 Year 3
Receptionist $17,280 $20,000 $21,120
Wanda Bounce $12,000 $24,000 $30,000
Bea Flip $12,000 $24,000 $30,000
Total People 8 9 9
Total Payroll $41,280 $68,000 $81,120

Financial Plan

The following sections will outline the Financial Plan of Gymnastics Jump-Start.

7.1 Start-up Funding

Total start-up expenses and assets required will be funded as shown in the Start-up Funding table, below. Wanda Bounce will invest $25,000. Bea Flip will invest $25,000. In addition, gym will secure a $36,600 long-term loan (7 years at 10% interest). 

Start-up Funding
Start-up Expenses to Fund $36,600
Start-up Assets to Fund $50,000
Total Funding Required $86,600
Assets
Non-cash Assets from Start-up $40,000
Cash Requirements from Start-up $10,000
Additional Cash Raised $0
Cash Balance on Starting Date $10,000
Total Assets $50,000
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $36,600
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $36,600
Capital
Planned Investment
Owner 1 $25,000
Owner 2 $25,000
Additional Investment Requirement $0
Total Planned Investment $50,000
Loss at Start-up (Start-up Expenses) ($36,600)
Total Capital $13,400
Total Capital and Liabilities $50,000
Total Funding $86,600

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7.2 Important Assumptions

  • We are assuming steady growth from the 3 counties we service.
  • We are assuming adequate funding to sustain us during start-up.
  • We are assuming that the popularity of gymnastics does not decrease.
  • We are assuming that there will be no other private gyms starting up in close proximity to us.

7.3 Break-even Analysis

Table 7.3 summarizes the break-even analysis. The Break-even Analysis is based on the average of the first-year figures for total sales, and by operating expenses. Our variable costs are relatively low and our main operating costs are salaries for teachers.

Gymnastics instruction business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even $11,973
Assumptions:
Average Percent Variable Cost 31%
Estimated Monthly Fixed Cost $8,306

7.4 Projected Profit and Loss

As the Profit and Loss table shows, the company expects to continue its steady growth in profitability over the next three years of operations. Aside from payroll, Rent and Insurance are our largest expenses. The rent for the studio we have chosen is reasonable for the square footage, which will allow us to conduct multiple classes (or classes and birthday parties) at the same time. Insurance demands when dealing with young children and physical activity are high, but the owners’ prior experience will keep these costs affordable.

Payroll taxes are based on wages and salaries for all employees, including hourly teachers (shown here as direct cost of sales).

Gymnastics instruction business plan, financial plan chart image

Gymnastics instruction business plan, financial plan chart image

Gymnastics instruction business plan, financial plan chart image

Gymnastics instruction business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $211,603 $300,344 $389,080
Direct Cost of Sales $64,809 $92,755 $133,244
Other Costs of Sales $3,360 $3,840 $4,320
Total Cost of Sales $68,169 $96,595 $137,564
Gross Margin $143,434 $203,749 $251,516
Gross Margin % 67.78% 67.84% 64.64%
Expenses
Payroll $41,280 $68,000 $81,120
Marketing/Promotion $5,000 $5,000 $5,000
Depreciation $4,000 $4,000 $4,000
Rent $24,000 $24,000 $24,000
Utilities $3,600 $3,700 $3,800
Insurance $19,992 $21,992 $22,992
Payroll Taxes $0 $0 $0
Other $1,800 $2,100 $2,500
Total Operating Expenses $99,672 $128,792 $143,412
Profit Before Interest and Taxes $43,762 $74,957 $108,104
EBITDA $47,762 $78,957 $112,104
Interest Expense $3,377 $2,876 $2,353
Taxes Incurred $12,116 $21,624 $31,725
Net Profit $28,270 $50,457 $74,026
Net Profit/Sales 13.36% 16.80% 19.03%

7.5 Projected Cash Flow

The cash flow projection shows that provisions for ongoing expenses are adequate to meet the needs of the company as the business generates sufficient cash flow to support operations. The table shows the planned repayment of our long-term loan over seven years.

Gymnastics instruction business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $158,702 $225,258 $291,810
Cash from Receivables $42,899 $70,891 $93,076
Subtotal Cash from Operations $201,601 $296,149 $384,886
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 $201,601 $296,149 $384,886
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $41,280 $68,000 $81,120
Bill Payments $125,633 $175,686 $225,656
Subtotal Spent on Operations $166,913 $243,686 $306,776
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 $5,230 $5,230 $5,230
Purchase Other Current Assets $2,000 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $174,143 $248,916 $312,006
Net Cash Flow $27,458 $47,233 $72,879
Cash Balance $37,458 $84,691 $157,570

7.6 Projected Balance Sheet

The following table presents the Balance Sheet for Gymnastics Jump-Start. Our cash, retained earnings, and net worth will increase steadily as we establish a stable, returning customer base.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $37,458 $84,691 $157,570
Accounts Receivable $10,002 $14,197 $18,391
Other Current Assets $2,000 $2,000 $2,000
Total Current Assets $49,460 $100,888 $177,962
Long-term Assets
Long-term Assets $40,000 $40,000 $40,000
Accumulated Depreciation $4,000 $8,000 $12,000
Total Long-term Assets $36,000 $32,000 $28,000
Total Assets $85,460 $132,888 $205,962
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $12,420 $14,621 $18,899
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $12,420 $14,621 $18,899
Long-term Liabilities $31,370 $26,140 $20,910
Total Liabilities $43,791 $40,761 $39,809
Paid-in Capital $50,000 $50,000 $50,000
Retained Earnings ($36,600) ($8,330) $42,127
Earnings $28,270 $50,457 $74,026
Total Capital $41,670 $92,127 $166,153
Total Liabilities and Capital $85,460 $132,888 $205,962
Net Worth $41,670 $92,127 $166,153

7.7 Business Ratios

The following table outlines some of the more important ratios from the Gymnastic instruction industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 7999.1109.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 41.94% 29.54% 4.94%
Percent of Total Assets
Accounts Receivable 11.70% 10.68% 8.93% 5.13%
Other Current Assets 2.34% 1.51% 0.97% 36.35%
Total Current Assets 57.88% 75.92% 86.41% 43.63%
Long-term Assets 42.12% 24.08% 13.59% 56.37%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 14.53% 11.00% 9.18% 21.68%
Long-term Liabilities 36.71% 19.67% 10.15% 31.17%
Total Liabilities 51.24% 30.67% 19.33% 52.85%
Net Worth 48.76% 69.33% 80.67% 47.15%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 67.78% 67.84% 64.64% 100.00%
Selling, General & Administrative Expenses 54.42% 51.04% 45.62% 76.74%
Advertising Expenses 0.00% 0.00% 0.00% 2.84%
Profit Before Interest and Taxes 20.68% 24.96% 27.78% 2.11%
Main Ratios
Current 3.98 6.90 9.42 1.05
Quick 3.98 6.90 9.42 0.69
Total Debt to Total Assets 51.24% 30.67% 19.33% 62.49%
Pre-tax Return on Net Worth 96.92% 78.24% 63.65% 2.98%
Pre-tax Return on Assets 47.26% 54.24% 51.35% 7.95%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 13.36% 16.80% 19.03% n.a
Return on Equity 67.84% 54.77% 44.55% n.a
Activity Ratios
Accounts Receivable Turnover 5.29 5.29 5.29 n.a
Collection Days 57 59 61 n.a
Accounts Payable Turnover 11.12 12.17 12.17 n.a
Payment Days 27 28 27 n.a
Total Asset Turnover 2.48 2.26 1.89 n.a
Debt Ratios
Debt to Net Worth 1.05 0.44 0.24 n.a
Current Liab. to Liab. 0.28 0.36 0.47 n.a
Liquidity Ratios
Net Working Capital $37,040 $86,267 $159,063 n.a
Interest Coverage 12.96 26.07 45.95 n.a
Additional Ratios
Assets to Sales 0.40 0.44 0.53 n.a
Current Debt/Total Assets 15% 11% 9% n.a
Acid Test 3.18 5.93 8.44 n.a
Sales/Net Worth 5.08 3.26 2.34 n.a
Dividend Payout 0.00 0.00 0.00 n.a

Appendix

Sales Forecast
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales
Parent and Tot 0% $450 $464 $477 $492 $506 $522 $537 $553 $570 $587 $605 $623
Preschool 0% $4,568 $4,705 $4,846 $4,992 $5,141 $5,296 $5,454 $5,618 $5,787 $5,960 $6,139 $6,323
Girls 0% $4,096 $4,219 $4,345 $4,476 $4,610 $4,748 $4,891 $5,038 $5,189 $5,344 $5,505 $5,670
Boys 0% $820 $845 $870 $896 $923 $951 $979 $1,008 $1,039 $1,070 $1,102 $1,135
Tumbling and Adult Gymnastics 0% $1,840 $1,895 $1,952 $2,011 $2,071 $2,133 $2,197 $2,263 $2,331 $2,401 $2,473 $2,547
Birthday Parties and Field Trips 0% $550 $567 $583 $601 $619 $638 $657 $676 $697 $718 $739 $761
Cheerleading 0% $1,000 $1,030 $1,061 $1,093 $1,126 $1,159 $1,194 $1,230 $1,267 $1,305 $1,344 $1,384
Advanced Girls 0% $1,586 $1,634 $1,683 $1,733 $1,785 $1,839 $1,894 $1,951 $2,009 $2,069 $2,131 $2,195
Total Sales $14,910 $15,357 $15,818 $16,293 $16,781 $17,285 $17,803 $18,337 $18,888 $19,454 $20,038 $20,639
Direct Cost of Sales Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Preschool gymnastics teachers 30% $1,505 $1,551 $1,597 $1,645 $1,694 $1,745 $1,798 $1,851 $1,907 $1,964 $2,023 $2,084
Beginner girls, boy, and tumbling teachers 30% $2,027 $2,088 $2,150 $2,215 $2,281 $2,350 $2,420 $2,493 $2,567 $2,645 $2,724 $2,806
Advanced girls teachers 40% $1,034 $1,065 $1,097 $1,130 $1,164 $1,199 $1,235 $1,272 $1,310 $1,350 $1,390 $1,432
Subtotal Direct Cost of Sales $4,567 $4,704 $4,845 $4,990 $5,140 $5,294 $5,453 $5,616 $5,785 $5,958 $6,137 $6,321
Personnel Plan
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Receptionist 0% $1,440 $1,440 $1,440 $1,440 $1,440 $1,440 $1,440 $1,440 $1,440 $1,440 $1,440 $1,440
Wanda Bounce 0% $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Bea Flip 0% $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Total People 8 8 8 8 8 8 8 8 8 8 8 8
Total Payroll $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440

Pro Forma Profit and Loss
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales $14,910 $15,357 $15,818 $16,293 $16,781 $17,285 $17,803 $18,337 $18,888 $19,454 $20,038 $20,639
Direct Cost of Sales $4,567 $4,704 $4,845 $4,990 $5,140 $5,294 $5,453 $5,616 $5,785 $5,958 $6,137 $6,321
Other Costs of Sales $280 $280 $280 $280 $280 $280 $280 $280 $280 $280 $280 $280
Total Cost of Sales $4,847 $4,984 $5,125 $5,270 $5,420 $5,574 $5,733 $5,896 $6,065 $6,238 $6,417 $6,601
Gross Margin $10,063 $10,374 $10,693 $11,023 $11,362 $11,711 $12,071 $12,441 $12,823 $13,216 $13,621 $14,038
Gross Margin % 67.49% 67.55% 67.60% 67.65% 67.70% 67.75% 67.80% 67.85% 67.89% 67.93% 67.97% 68.02%
Expenses
Payroll $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440
Marketing/Promotion $2,000 $200 $200 $200 $700 $200 $200 $200 $200 $500 $200 $200
Depreciation $333 $333 $333 $333 $333 $333 $333 $333 $333 $333 $333 $337
Rent $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Utilities $250 $250 $250 $250 $250 $250 $400 $400 $400 $400 $250 $250
Insurance $1,666 $1,666 $1,666 $1,666 $1,666 $1,666 $1,666 $1,666 $1,666 $1,666 $1,666 $1,666
Payroll Taxes 15% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150
Total Operating Expenses $9,839 $8,039 $8,039 $8,039 $8,539 $8,039 $8,189 $8,189 $8,189 $8,489 $8,039 $8,043
Profit Before Interest and Taxes $224 $2,335 $2,654 $2,984 $2,823 $3,672 $3,882 $4,252 $4,634 $4,727 $5,582 $5,995
EBITDA $557 $2,668 $2,987 $3,317 $3,156 $4,005 $4,215 $4,585 $4,967 $5,060 $5,915 $6,332
Interest Expense $301 $298 $294 $290 $287 $283 $280 $276 $272 $269 $265 $261
Taxes Incurred ($23) $611 $708 $808 $761 $1,017 $1,081 $1,193 $1,308 $1,337 $1,595 $1,720
Net Profit ($54) $1,426 $1,652 $1,885 $1,775 $2,372 $2,521 $2,783 $3,053 $3,121 $3,722 $4,013
Net Profit/Sales -0.36% 9.28% 10.44% 11.57% 10.58% 13.72% 14.16% 15.18% 16.16% 16.04% 18.57% 19.45%

Pro Forma Cash Flow
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Cash Received
Cash from Operations
Cash Sales $11,183 $11,518 $11,864 $12,219 $12,586 $12,964 $13,352 $13,753 $14,166 $14,591 $15,028 $15,479
Cash from Receivables $0 $124 $3,731 $3,843 $3,958 $4,077 $4,200 $4,326 $4,455 $4,589 $4,727 $4,868
Subtotal Cash from Operations $11,183 $11,642 $15,595 $16,063 $16,544 $17,041 $17,552 $18,079 $18,621 $19,180 $19,755 $20,348
Additional Cash Received
Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $11,183 $11,642 $15,595 $16,063 $16,544 $17,041 $17,552 $18,079 $18,621 $19,180 $19,755 $20,348
Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Expenditures from Operations
Cash Spending $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440 $3,440
Bill Payments $373 $11,156 $10,166 $10,401 $10,654 $11,230 $11,152 $11,518 $11,790 $12,078 $12,560 $12,553
Subtotal Spent on Operations $3,813 $14,596 $13,606 $13,841 $14,094 $14,670 $14,592 $14,958 $15,230 $15,518 $16,000 $15,993
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $436 $436 $436 $436 $436 $436 $436 $436 $436 $436 $436 $437
Purchase Other Current Assets $0 $0 $2,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $4,249 $15,032 $16,042 $14,277 $14,530 $15,106 $15,028 $15,394 $15,666 $15,954 $16,436 $16,430
Net Cash Flow $6,934 ($3,390) ($447) $1,786 $2,014 $1,935 $2,524 $2,685 $2,955 $3,226 $3,319 $3,917
Cash Balance $16,934 $13,544 $13,097 $14,883 $16,897 $18,832 $21,356 $24,041 $26,996 $30,221 $33,541 $37,458

Pro Forma Balance Sheet
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Assets Starting Balances
Current Assets
Cash $10,000 $16,934 $13,544 $13,097 $14,883 $16,897 $18,832 $21,356 $24,041 $26,996 $30,221 $33,541 $37,458
Accounts Receivable $0 $3,728 $7,443 $7,666 $7,896 $8,133 $8,377 $8,628 $8,887 $9,153 $9,428 $9,711 $10,002
Other Current Assets $0 $0 $0 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Total Current Assets $10,000 $20,661 $20,986 $22,762 $24,778 $27,030 $29,208 $31,984 $34,928 $38,149 $41,649 $45,252 $49,460
Long-term Assets
Long-term Assets $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000
Accumulated Depreciation $0 $333 $666 $999 $1,332 $1,665 $1,998 $2,331 $2,664 $2,997 $3,330 $3,663 $4,000
Total Long-term Assets $40,000 $39,667 $39,334 $39,001 $38,668 $38,335 $38,002 $37,669 $37,336 $37,003 $36,670 $36,337 $36,000
Total Assets $50,000 $60,328 $60,320 $61,763 $63,446 $65,365 $67,210 $69,653 $72,264 $75,152 $78,319 $81,589 $85,460
Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Current Liabilities
Accounts Payable $0 $10,818 $9,820 $10,046 $10,280 $10,859 $10,768 $11,125 $11,388 $11,660 $12,142 $12,125 $12,420
Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $0 $10,818 $9,820 $10,046 $10,280 $10,859 $10,768 $11,125 $11,388 $11,660 $12,142 $12,125 $12,420
Long-term Liabilities $36,600 $36,164 $35,729 $35,293 $34,857 $34,421 $33,986 $33,550 $33,114 $32,679 $32,243 $31,807 $31,370
Total Liabilities $36,600 $46,982 $45,548 $45,339 $45,137 $45,280 $44,754 $44,675 $44,503 $44,338 $44,385 $43,932 $43,791
Paid-in Capital $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000
Retained Earnings ($36,600) ($36,600) ($36,600) ($36,600) ($36,600) ($36,600) ($36,600) ($36,600) ($36,600) ($36,600) ($36,600) ($36,600) ($36,600)
Earnings $0 ($54) $1,372 $3,024 $4,909 $6,684 $9,056 $11,578 $14,361 $17,414 $20,535 $24,256 $28,270
Total Capital $13,400 $13,346 $14,772 $16,424 $18,309 $20,084 $22,456 $24,978 $27,761 $30,814 $33,935 $37,656 $41,670
Total Liabilities and Capital $50,000 $60,328 $60,320 $61,763 $63,446 $65,365 $67,210 $69,653 $72,264 $75,152 $78,319 $81,589 $85,460
Net Worth $13,400 $13,346 $14,772 $16,424 $18,309 $20,084 $22,456 $24,978 $27,761 $30,814 $33,935 $37,656 $41,670