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SoulSpace

Financial Plan

The premier element in our financial plan is initiating, maintaining, and improving the factors that create, stabilize, and increase our cash flow:

  1. We must create visibility so as to create customer flow.
  2. We must maintain a dependable, happy employee force so as to minimize turnover.
  3. Create a brisk turnaround on our retail and art products, always maintaining viable stock levels.

7.1 Important Assumptions

The key underlying assumptions of our financial plan shown in the following general assumptions table are:

  1. We assume access to equity capital and financing to support our financial plan.
  2. We assume our financial progress based on realistic sales to minimum sales against highest expenses.
  3. We assume there will not be an economic crash that would greatly hinder our target market’s access to their personal luxury funds.
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 2.50% 0.00% 2.50%
Other 0 0 0

7.2 Key Financial Indicators

Our most important Key Financial Indicator is when each stylist averages seven customers per day and each therapist averages three customers per day.

Health spa business plan, financial plan chart image

7.3 Break-even Analysis

For our Break-even Analysis we assume estimated monthly operational costs which include payroll, rent, utilities, and other running costs (not including employee draw fund considerations). Payroll alone is only estimated to about 1/2 of those costs.

The analysis shows what we need to generate in revenues per month to break even. This total is 13% less than estimated monthly store gross. This estimation does not include revenue from any other store sources, and is based on a salon customer average of $36 and spa customer average of $60.

Our average per customer revenue is estimated at $39. Considering our minimal assumptions show a monthly total customer average of 1,922, we therefore believe our break-even figures can be readily maintained.

Health spa business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even $73,567
Assumptions:
Average Percent Variable Cost 60%
Estimated Monthly Fixed Cost $29,525

7.4 Projected Profit and Loss

There are two important assumptions with our Projected Profit and Loss statement:

  1. We expect to have to pay out from the Draw Fund occasionally.
  2. Our revenue is based on minimum estimated averages against highest expense expectations.
Health spa business plan, financial plan chart image

Health spa business plan, financial plan chart image

Health spa business plan, financial plan chart image

Health spa business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $900,000 $1,750,000 $2,000,000
Direct Cost of Sales $538,800 $1,050,000 $1,200,000
Other $0 $0 $0
Total Cost of Sales $538,800 $1,050,000 $1,200,000
Gross Margin $361,200 $700,000 $800,000
Gross Margin % 40.13% 40.00% 40.00%
Expenses
Payroll $155,910 $171,176 $171,176
Sales and Marketing and Other Expenses $34,000 $39,000 $41,000
Depreciation $0 $0 $0
Rent $120,000 $120,000 $120,000
Leased Equipment $0 $0 $0
Utilities $9,000 $9,000 $9,000
Insurance $12,000 $12,000 $12,000
Payroll Taxes $23,387 $25,676 $25,676
Other $0 $0 $0
Total Operating Expenses $354,297 $376,852 $378,852
Profit Before Interest and Taxes $6,904 $323,148 $421,148
EBITDA $6,904 $323,148 $421,148
Interest Expense $0 $0 $0
Taxes Incurred ($2,907) $0 $10,529
Net Profit $9,810 $323,148 $410,619
Net Profit/Sales 1.09% 18.47% 20.53%

7.5 Projected Cash Flow

Considering our business is a luxury, retail-oriented business with customers who will pay primarily with credit cards, our cash flow is not dependant on the issuance of invoices and the vagaries of Accounts Payable. We will need a minimum of financing to cover the cash flows of the first year of operations. After that, the cash flow becomes continual.

Health spa business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $900,000 $1,750,000 $2,000,000
Subtotal Cash from Operations $900,000 $1,750,000 $2,000,000
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 $900,000 $1,750,000 $2,000,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $155,910 $171,176 $171,176
Bill Payments $719,414 $1,263,200 $1,423,005
Subtotal Spent on Operations $875,324 $1,434,376 $1,594,181
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 $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $875,324 $1,434,376 $1,594,181
Net Cash Flow $24,676 $315,624 $405,819
Cash Balance $84,676 $400,299 $806,118

7.6 Projected Balance Sheet

Our Projected Balance Sheet shows we will not have any difficulty meeting our debt obligations as long as our revenue projections are met.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $84,676 $400,299 $806,118
Inventory $54,450 $106,111 $121,269
Other Current Assets $0 $0 $0
Total Current Assets $139,126 $506,410 $927,387
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $139,126 $506,410 $927,387
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $63,316 $107,452 $117,811
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $63,316 $107,452 $117,811
Long-term Liabilities $0 $0 $0
Total Liabilities $63,316 $107,452 $117,811
Paid-in Capital $160,000 $160,000 $160,000
Retained Earnings ($94,000) ($84,190) $238,958
Earnings $9,810 $323,148 $410,619
Total Capital $75,810 $398,958 $809,577
Total Liabilities and Capital $139,126 $506,410 $927,387
Net Worth $75,810 $398,958 $809,577

7.7 Business Ratios

The follow table contains important business ratios for the physical fitness facilities industry, as determined by the Standard Industry Classification (SIC) code, 7991.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 94.44% 14.29% 15.90%
Percent of Total Assets
Inventory 39.14% 20.95% 13.08% 3.60%
Other Current Assets 0.00% 0.00% 0.00% 31.10%
Total Current Assets 100.00% 100.00% 100.00% 39.00%
Long-term Assets 0.00% 0.00% 0.00% 61.00%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 45.51% 21.22% 12.70% 34.80%
Long-term Liabilities 0.00% 0.00% 0.00% 27.60%
Total Liabilities 45.51% 21.22% 12.70% 62.40%
Net Worth 54.49% 78.78% 87.30% 37.60%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 40.13% 40.00% 40.00% 0.00%
Selling, General & Administrative Expenses 39.37% 21.53% 18.94% 73.20%
Advertising Expenses 1.11% 0.86% 0.85% 2.40%
Profit Before Interest and Taxes 0.77% 18.47% 21.06% 2.70%
Main Ratios
Current 2.20 4.71 7.87 1.10
Quick 1.34 3.73 6.84 0.73
Total Debt to Total Assets 45.51% 21.22% 12.70% 62.40%
Pre-tax Return on Net Worth 9.11% 81.00% 52.02% 3.00%
Pre-tax Return on Assets 4.96% 63.81% 45.41% 7.90%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 1.09% 18.47% 20.53% n.a
Return on Equity 12.94% 81.00% 50.72% n.a
Activity Ratios
Inventory Turnover 10.91 13.08 10.56 n.a
Accounts Payable Turnover 12.36 12.17 12.17 n.a
Payment Days 27 24 29 n.a
Total Asset Turnover 6.47 3.46 2.16 n.a
Debt Ratios
Debt to Net Worth 0.84 0.27 0.15 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $75,810 $398,958 $809,577 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.15 0.29 0.46 n.a
Current Debt/Total Assets 46% 21% 13% n.a
Acid Test 1.34 3.73 6.84 n.a
Sales/Net Worth 11.87 4.39 2.47 n.a
Dividend Payout 0.00 0.00 0.00 n.a