The Supreme Courts
Financial Plan
We are assuming start-up capital of $336,500 and a long-term (20 year) bank loan of $1,250,000. The remainder of the necessary financing will come through investors.
7.1 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 days are critical, but not a factor we can influence easily. At least we are planning on the problem, and dealing with it. Interest rates, tax rates, and personnel burden are based on conservative assumptions.
Some of the more important underlying assumptions are:
- We assume a strong economy, without major recession.
- We assume the rate of growth for the number of sport and fitness club memberships will continue.
| 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 | 16.25% | 15.00% | 16.25% |
| Other | 0 | 0 | 0 |
7.2 Break-even Analysis
The following table and chart summarize our break-even analysis.
| Break-even Analysis | |
| Monthly Units Break-even | 1,104 |
| Monthly Revenue Break-even | $52,752 |
| Assumptions: | |
| Average Per-Unit Revenue | $47.78 |
| Average Per-Unit Variable Cost | $0.00 |
| Estimated Monthly Fixed Cost | $52,752 |
7.3 Projected Profit and Loss
Our projected profit and loss is shown on the following table. We show a conservative estimate of net profits/sales, with that increasing each year. According to the research done through ** and **, these projections are very conservative and should be easily attained.
The detailed monthly projections are included in the appendix.
** Confidential or proprietary information deleted.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $835,270 | $1,028,880 | $1,256,836 |
| Direct Cost of Sales | $0 | $0 | $0 |
| Other | $0 | $0 | $0 |
| Total Cost of Sales | $0 | $0 | $0 |
| Gross Margin | $835,270 | $1,028,880 | $1,256,836 |
| Gross Margin % | 100.00% | 100.00% | 100.00% |
| Expenses | |||
| Payroll | $360,900 | $438,845 | $516,692 |
| Sales and Marketing and Other Expenses | $85,392 | $87,170 | $65,068 |
| Depreciation | $0 | $0 | $0 |
| Leased Equipment | $48,000 | $50,400 | $50,400 |
| Repairs and Maintanence | $4,800 | $5,040 | $5,292 |
| Landscape Maintanence | $3,600 | $3,780 | $3,969 |
| Accounting Fees | $4,800 | $5,040 | $5,292 |
| Legal Fees | $2,400 | $2,520 | $2,646 |
| Telephone | $3,000 | $3,150 | $3,307 |
| Utilities (Gas, Electric, Water, Sewer) | $54,000 | $56,700 | $59,535 |
| Insurance | $12,000 | $12,600 | $13,230 |
| Rent | $0 | $0 | $0 |
| Payroll Taxes | $54,135 | $65,827 | $77,504 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $633,027 | $731,072 | $802,935 |
| Profit Before Interest and Taxes | $202,243 | $297,808 | $453,901 |
| EBITDA | $202,243 | $297,808 | $453,901 |
| Interest Expense | $125,000 | $125,000 | $125,000 |
| Taxes Incurred | $21,135 | $25,921 | $53,446 |
| Net Profit | $56,108 | $146,887 | $275,455 |
| Net Profit/Sales | 6.72% | 14.28% | 21.92% |
7.4 Projected Cash Flow
The following cash flow projections show our annual amounts only. For more detailed monthly projections please see the appendix.
Cash flow projections are critical to our success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month, and the other the monthly balance. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendix.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $334,108 | $411,552 | $502,734 |
| Cash from Receivables | $444,036 | $604,086 | $738,511 |
| Subtotal Cash from Operations | $778,144 | $1,015,638 | $1,241,246 |
| 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 | $778,144 | $1,015,638 | $1,241,246 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $360,900 | $438,845 | $516,692 |
| Bill Payments | $387,740 | $437,246 | $462,919 |
| Subtotal Spent on Operations | $748,640 | $876,091 | $979,611 |
| 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 | $748,640 | $876,091 | $979,611 |
| Net Cash Flow | $29,503 | $139,547 | $261,635 |
| Cash Balance | $366,003 | $505,550 | $767,185 |
7.5 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 | $366,003 | $505,550 | $767,185 |
| Accounts Receivable | $57,126 | $70,368 | $85,958 |
| Inventory | $0 | $0 | $0 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $423,130 | $575,918 | $853,143 |
| Long-term Assets | |||
| Long-term Assets | $0 | $0 | $0 |
| Accumulated Depreciation | $0 | $0 | $0 |
| Total Long-term Assets | $0 | $0 | $0 |
| Total Assets | $423,130 | $575,918 | $853,143 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $30,521 | $36,423 | $38,194 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $30,521 | $36,423 | $38,194 |
| Long-term Liabilities | $1,250,000 | $1,250,000 | $1,250,000 |
| Total Liabilities | $1,280,521 | $1,286,423 | $1,288,194 |
| Paid-in Capital | $1,250,000 | $1,250,000 | $1,250,000 |
| Retained Earnings | ($2,163,500) | ($2,107,392) | ($1,960,505) |
| Earnings | $56,108 | $146,887 | $275,455 |
| Total Capital | ($857,392) | ($710,505) | ($435,050) |
| Total Liabilities and Capital | $423,130 | $575,918 | $853,143 |
| Net Worth | ($857,392) | ($710,505) | ($435,050) |
7.6 Business Ratios
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7991, Sports Programs – Indoor Courts, are shown for comparison.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 23.18% | 22.16% | 15.90% |
| Percent of Total Assets | ||||
| Accounts Receivable | 13.50% | 12.22% | 10.08% | 4.30% |
| Inventory | 0.00% | 0.00% | 0.00% | 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 | 7.21% | 6.32% | 4.48% | 34.80% |
| Long-term Liabilities | 295.42% | 217.04% | 146.52% | 27.60% |
| Total Liabilities | 302.63% | 223.37% | 150.99% | 62.40% |
| Net Worth | -202.63% | -123.37% | -50.99% | 37.60% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 100.00% | 100.00% | 100.00% | 0.00% |
| Selling, General & Administrative Expenses | 92.14% | 85.72% | 77.76% | 73.20% |
| Advertising Expenses | 2.87% | 2.45% | 0.00% | 2.40% |
| Profit Before Interest and Taxes | 24.21% | 28.94% | 36.11% | 2.70% |
| Main Ratios | ||||
| Current | 13.86 | 15.81 | 22.34 | 1.10 |
| Quick | 13.86 | 15.81 | 22.34 | 0.73 |
| Total Debt to Total Assets | 302.63% | 223.37% | 150.99% | 62.40% |
| Pre-tax Return on Net Worth | -9.01% | -24.32% | -75.60% | 3.00% |
| Pre-tax Return on Assets | 18.26% | 30.01% | 38.55% | 7.90% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 6.72% | 14.28% | 21.92% | n.a |
| Return on Equity | 0.00% | 0.00% | 0.00% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 8.77 | 8.77 | 8.77 | n.a |
| Collection Days | 58 | 38 | 38 | n.a |
| Inventory Turnover | 0.00 | 0.00 | 0.00 | n.a |
| Accounts Payable Turnover | 13.70 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 28 | 29 | n.a |
| Total Asset Turnover | 1.97 | 1.79 | 1.47 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.00 | 0.00 | 0.00 | n.a |
| Current Liab. to Liab. | 0.02 | 0.03 | 0.03 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $392,608 | $539,495 | $814,950 | n.a |
| Interest Coverage | 1.62 | 2.38 | 3.63 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.51 | 0.56 | 0.68 | n.a |
| Current Debt/Total Assets | 7% | 6% | 4% | n.a |
| Acid Test | 11.99 | 13.88 | 20.09 | n.a |
| Sales/Net Worth | 0.00 | 0.00 | 0.00 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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