Corporate Fitness
Financial Plan
- Consulting revenue will make up approximately 85 to 90 percent of total revenue, with the rest coming from service revenue.
- Salaries and rent are the two major expenses, while depreciation is another significant cost. Although the purchasing of fitness, medical, and office equipment is expensive, constant replacement will be needed to maintain a competitive edge.
- In order to maintain steady gross margins, salaries and advertising expenses are not likely to increase within the first two years of operation, unless cash flows significantly increase.
7.1 Important Assumptions
Three assumptions for Corporate Fitness are:
- A constantly growing economy without any major recession or boom.
- No unpredictable changes in fitness, medical, or office equipment.
- No major national or global events that threaten the stability and health of the country and its citizens.
General Assumptions | |||
Year 1 | Year 2 | Year 3 | |
Plan Month | 1 | 2 | 3 |
Current Interest Rate | 3.00% | 3.00% | 3.00% |
Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
Tax Rate | 25.00% | 25.00% | 25.00% |
Other | 0 | 0 | 0 |
7.2 Key Financial Indicators
The most important financial indicators are net increase in cash and net income. Net increase from cash will exemplify the relationship between net income and net cash from operating activities. The greater the increase is, Corporate Fitness has that level of financial strength at that point in time.

7.3 Break-even Analysis
Corporate Fitness’ break-even point is computed in the table below, comparing sales and monthly expenses. Sales forecasts indicate that units sold and monthly sales are expected to be much greater than the break-even point mentioned in the table.

Break-even Analysis | |
Monthly Revenue Break-even | $26,683 |
Assumptions: | |
Average Percent Variable Cost | 6% |
Estimated Monthly Fixed Cost | $25,050 |
7.4 Projected Profit and Loss
Sales are predicted to increase each month with first year annual sales totaling close to a half-million dollars. Gross margin, likewise, is expected to increase correspondingly.
Compared to total sales, net profit will increase each month and is predicted to increase for 1995 through 1997.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $539,075 | $650,750 | $825,600 |
Direct Cost of Sales | $33,000 | $44,000 | $55,000 |
Other Costs of Sales | $0 | $0 | $0 |
Total Cost of Sales | $33,000 | $44,000 | $55,000 |
Gross Margin | $506,075 | $606,750 | $770,600 |
Gross Margin % | 93.88% | 93.24% | 93.34% |
Expenses | |||
Payroll | $150,000 | $150,000 | $150,000 |
Marketing/Promotion | $25,200 | $25,200 | $25,200 |
Depreciation | $7,200 | $7,200 | $7,200 |
Rent | $60,000 | $60,000 | $6,000 |
Utilities | $25,200 | $25,200 | $25,200 |
Insurance | $5,400 | $5,400 | $5,400 |
Leased Equipment | $27,600 | $27,600 | $27,600 |
Payroll Taxes | $0 | $0 | $0 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $300,600 | $300,600 | $246,600 |
Profit Before Interest and Taxes | $205,475 | $306,150 | $524,000 |
EBITDA | $212,675 | $313,350 | $531,200 |
Interest Expense | $10,449 | $8,500 | $7,500 |
Taxes Incurred | $48,757 | $74,413 | $129,125 |
Net Profit | $146,270 | $223,238 | $387,375 |
Net Profit/Sales | 27.13% | 34.30% | 46.92% |
7.5 Projected Cash Flow
Ordinary cash flow will increase significantly while expenses remain relatively static, with only minimal increases. We plan to take out a short-term loan to cover our receivables and other contingencies in month one, and repay it in month 12.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $215,630 | $260,300 | $330,240 |
Cash from Receivables | $230,395 | $371,174 | $465,179 |
Subtotal Cash from Operations | $446,025 | $631,474 | $795,419 |
Additional Cash Received | |||
Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
New Current Borrowing | $36,000 | $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 | $482,025 | $631,474 | $795,419 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $150,000 | $150,000 | $150,000 |
Bill Payments | $206,122 | $277,578 | $280,145 |
Subtotal Spent on Operations | $356,122 | $427,578 | $430,145 |
Additional Cash Spent | |||
Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
Principal Repayment of Current Borrowing | $36,000 | $0 | $0 |
Other Liabilities Principal Repayment | $0 | $0 | $0 |
Long-term Liabilities Principal Repayment | $10,000 | $10,000 | $10,000 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $9,600 | $9,600 | $9,600 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $411,722 | $447,178 | $449,745 |
Net Cash Flow | $70,303 | $184,295 | $345,675 |
Cash Balance | $80,303 | $264,599 | $610,273 |
7.6 Projected Balance Sheet
The balance sheet indicates that at the end of the first year of operation, net worth will be positive and constantly increasing through the end of 1997.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $80,303 | $264,599 | $610,273 |
Accounts Receivable | $93,050 | $112,326 | $142,507 |
Other Current Assets | $0 | $0 | $0 |
Total Current Assets | $173,353 | $376,925 | $752,780 |
Long-term Assets | |||
Long-term Assets | $9,600 | $19,200 | $28,800 |
Accumulated Depreciation | $7,200 | $14,400 | $21,600 |
Total Long-term Assets | $2,400 | $4,800 | $7,200 |
Total Assets | $175,753 | $381,725 | $759,980 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $29,483 | $22,217 | $23,098 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $29,483 | $22,217 | $23,098 |
Long-term Liabilities | $90,000 | $80,000 | $70,000 |
Total Liabilities | $119,483 | $102,217 | $93,098 |
Paid-in Capital | $200,000 | $200,000 | $200,000 |
Retained Earnings | ($290,000) | ($143,730) | $79,507 |
Earnings | $146,270 | $223,238 | $387,375 |
Total Capital | $56,270 | $279,507 | $666,882 |
Total Liabilities and Capital | $175,753 | $381,725 | $759,980 |
Net Worth | $56,270 | $279,507 | $666,882 |
7.7 Business Ratios
The following table outlines some of Corporate Fitness’ more important business ratios. The final column, Industry Profile, details specific ratios based on the Physical Fitness Facilities industry as it is classified by the Standard Industry Classification (SIC) code, 7991. These ratios indicate strong financial growth and an impressive chance for investment opportunities, making expansion and further development both very possible.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 20.72% | 26.87% | 4.96% |
Percent of Total Assets | ||||
Accounts Receivable | 52.94% | 29.43% | 18.75% | 5.74% |
Other Current Assets | 0.00% | 0.00% | 0.00% | 34.12% |
Total Current Assets | 98.63% | 98.74% | 99.05% | 39.86% |
Long-term Assets | 1.37% | 1.26% | 0.95% | 60.14% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 16.78% | 5.82% | 3.04% | 21.71% |
Long-term Liabilities | 51.21% | 20.96% | 9.21% | 29.51% |
Total Liabilities | 67.98% | 26.78% | 12.25% | 51.22% |
Net Worth | 32.02% | 73.22% | 87.75% | 48.78% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 93.88% | 93.24% | 93.34% | 100.00% |
Selling, General & Administrative Expenses | 66.74% | 58.93% | 46.42% | 72.76% |
Advertising Expenses | 1.34% | 1.11% | 0.87% | 2.44% |
Profit Before Interest and Taxes | 38.12% | 47.05% | 63.47% | 3.01% |
Main Ratios | ||||
Current | 5.88 | 16.97 | 32.59 | 1.05 |
Quick | 5.88 | 16.97 | 32.59 | 0.73 |
Total Debt to Total Assets | 67.98% | 26.78% | 12.25% | 2.72% |
Pre-tax Return on Net Worth | 346.59% | 106.49% | 77.45% | 61.25% |
Pre-tax Return on Assets | 110.97% | 77.98% | 67.96% | 7.03% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 27.13% | 34.30% | 46.92% | n.a |
Return on Equity | 259.94% | 79.87% | 58.09% | n.a |
Activity Ratios | ||||
Accounts Receivable Turnover | 3.48 | 3.48 | 3.48 | n.a |
Collection Days | 55 | 96 | 94 | n.a |
Accounts Payable Turnover | 7.99 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 35 | 29 | n.a |
Total Asset Turnover | 3.07 | 1.70 | 1.09 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 2.12 | 0.37 | 0.14 | n.a |
Current Liab. to Liab. | 0.25 | 0.22 | 0.25 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $143,870 | $354,707 | $729,682 | n.a |
Interest Coverage | 19.67 | 36.02 | 69.87 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.33 | 0.59 | 0.92 | n.a |
Current Debt/Total Assets | 17% | 6% | 3% | n.a |
Acid Test | 2.72 | 11.91 | 26.42 | n.a |
Sales/Net Worth | 9.58 | 2.33 | 1.24 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |