Jonpaul's
Financial Plan
The premier element in our financial plan is initiating, maintaining, and improving the factors that create, stabilize, and increase our cash flow:
- We must create visibility so as to create customer flow.
- We must maintain a dependable, cheerful employee force so as to minimize turnover.
- Create a brisk turnaround on our retail products, always maintaining viable stock levels.
7.1 Important Assumptions
The key underlying assumptions of our financial plan shown in the following general assumption table are:
- We assume access to equity capital and financing to support our financial plan.
- We assume our financial progress based on realistic sales to minimum sales against highest expenses.
- We assume there will not be an economic crash that would greatly hinder our target market’s access to their personal luxury finds.
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 | 8.50% | 8.50% | 8.50% |
Tax Rate | 30.00% | 30.00% | 30.00% |
Other | 0 | 0 | 0 |
7.2 Key Financial Indicators
Our most important Key Financial Indicator is when each barber averages seven clients per day and each specialist averages three clients per day.

7.3 Break-even Analysis
For our Break-even Analysis we assume monthly estimated operational costs which include payroll, rent, utilities and other running costs (not including employee draw fund considerations). Payroll alone is only estimated at $9,800 per month, including taxes.
The analysis shows that we need to generate monthly revenues, as shown below, to break even. This total is less than estimated monthly gross. This estimation does not include revenue from any other sources and is based on a barber shop client average of $35 and miscellaneous services average of $50. Our yearly average per client is estimated at $48. Considering our minimal assumptions show a monthly total client average of 1,063, we therefore believe our break-even figures can be readily maintained.

Break-even Analysis | |
Monthly Revenue Break-even | $36,989 |
Assumptions: | |
Average Percent Variable Cost | 45% |
Estimated Monthly Fixed Cost | $20,275 |
7.4 Projected Profit and Loss
There are two important assumptions with our Projected Profit and Loss statement:
- Our revenue is based on minimum estimated averages against highest expense expectations.
- Our major expense of rent and utilities is fixed for the next five years.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $799,124 | $1,047,172 | $1,405,425 |
Direct Cost of Sales | $361,091 | $475,410 | $637,443 |
Other Costs of Goods | $0 | $0 | $0 |
Total Cost of Sales | $361,091 | $475,410 | $637,443 |
Gross Margin | $438,033 | $571,762 | $767,982 |
Gross Margin % | 54.81% | 54.60% | 54.64% |
Expenses | |||
Payroll | $102,870 | $105,165 | $107,175 |
Sales and Marketing and Other Expenses | $20,000 | $15,000 | $20,000 |
Depreciation | $0 | $0 | $0 |
Leased Equipment | $0 | $0 | $0 |
Utilities | $9,000 | $9,000 | $9,000 |
Insurance | $12,000 | $12,000 | $12,000 |
Rent | $84,000 | $84,000 | $84,000 |
Payroll Taxes | $15,431 | $15,775 | $16,076 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $243,301 | $240,940 | $248,251 |
Profit Before Interest and Taxes | $194,733 | $330,822 | $519,731 |
EBITDA | $194,733 | $330,822 | $519,731 |
Interest Expense | $18,464 | $17,215 | $15,773 |
Taxes Incurred | $52,880 | $94,082 | $151,187 |
Net Profit | $123,388 | $219,525 | $352,770 |
Net Profit/Sales | 15.44% | 20.96% | 25.10% |
7.5 Projected Cash Flow
Our business is a luxury, retail-oriented business with clients who will pay primarily with credit cards.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $799,124 | $1,047,172 | $1,405,425 |
Subtotal Cash from Operations | $799,124 | $1,047,172 | $1,405,425 |
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 | $10,000 | $0 | $0 |
Subtotal Cash Received | $809,124 | $1,047,172 | $1,405,425 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $102,870 | $105,165 | $107,175 |
Bill Payments | $548,021 | $728,194 | $944,200 |
Subtotal Spent on Operations | $650,891 | $833,359 | $1,051,375 |
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 | $14,351 | $16,242 | $17,678 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $0 | $0 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $665,242 | $849,601 | $1,069,053 |
Net Cash Flow | $143,882 | $197,571 | $336,372 |
Cash Balance | $183,882 | $381,453 | $717,825 |
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 | $183,882 | $381,453 | $717,825 |
Inventory | $38,936 | $51,262 | $68,734 |
Other Current Assets | $38,000 | $38,000 | $38,000 |
Total Current Assets | $260,817 | $470,715 | $824,559 |
Long-term Assets | |||
Long-term Assets | $0 | $0 | $0 |
Accumulated Depreciation | $0 | $0 | $0 |
Total Long-term Assets | $0 | $0 | $0 |
Total Assets | $260,817 | $470,715 | $824,559 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $53,781 | $60,395 | $79,147 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $25,500 | $25,500 | $25,500 |
Subtotal Current Liabilities | $79,281 | $85,895 | $104,647 |
Long-term Liabilities | $210,649 | $194,407 | $176,729 |
Total Liabilities | $289,930 | $280,302 | $281,376 |
Paid-in Capital | $10,000 | $10,000 | $10,000 |
Retained Earnings | ($162,500) | ($39,112) | $180,413 |
Earnings | $123,388 | $219,525 | $352,770 |
Total Capital | ($29,112) | $190,413 | $543,183 |
Total Liabilities and Capital | $260,817 | $470,715 | $824,559 |
Net Worth | ($29,112) | $190,413 | $543,183 |
7.7 Business Ratios
The following table contains important business ratios for the barber shop industry, as determined by the Standard Industry Classification (SIC) code, 7241.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 31.04% | 34.21% | 10.40% |
Percent of Total Assets | ||||
Inventory | 14.93% | 10.89% | 8.34% | 4.60% |
Other Current Assets | 14.57% | 8.07% | 4.61% | 36.80% |
Total Current Assets | 100.00% | 100.00% | 100.00% | 53.10% |
Long-term Assets | 0.00% | 0.00% | 0.00% | 46.90% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 30.40% | 18.25% | 12.69% | 29.70% |
Long-term Liabilities | 80.76% | 41.30% | 21.43% | 24.70% |
Total Liabilities | 111.16% | 59.55% | 34.12% | 54.40% |
Net Worth | -11.16% | 40.45% | 65.88% | 45.60% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 54.81% | 54.60% | 54.64% | 0.00% |
Selling, General & Administrative Expenses | 39.37% | 33.64% | 29.54% | 69.20% |
Advertising Expenses | 1.00% | 0.00% | 0.00% | 2.50% |
Profit Before Interest and Taxes | 24.37% | 31.59% | 36.98% | 4.30% |
Main Ratios | ||||
Current | 3.29 | 5.48 | 7.88 | 2.08 |
Quick | 2.80 | 4.88 | 7.22 | 1.55 |
Total Debt to Total Assets | 111.16% | 59.55% | 34.12% | 54.40% |
Pre-tax Return on Net Worth | -605.48% | 164.70% | 92.78% | 6.90% |
Pre-tax Return on Assets | 67.58% | 66.62% | 61.12% | 15.20% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 15.44% | 20.96% | 25.10% | n.a |
Return on Equity | 0.00% | 115.29% | 64.94% | n.a |
Activity Ratios | ||||
Inventory Turnover | 10.91 | 10.54 | 10.62 | n.a |
Accounts Payable Turnover | 11.19 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 28 | 26 | n.a |
Total Asset Turnover | 3.06 | 2.22 | 1.70 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.00 | 1.47 | 0.52 | n.a |
Current Liab. to Liab. | 0.27 | 0.31 | 0.37 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $181,537 | $384,820 | $719,912 | n.a |
Interest Coverage | 10.55 | 19.22 | 32.95 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.33 | 0.45 | 0.59 | n.a |
Current Debt/Total Assets | 30% | 18% | 13% | n.a |
Acid Test | 2.80 | 4.88 | 7.22 | n.a |
Sales/Net Worth | 0.00 | 5.50 | 2.59 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |