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Play Time for Kids

Executive Summary

This document has been prepared to provide the reader with information about Play Time for Kids, including business structure, company goals, projected growth, venture capital requirements, start-up costs, an investment analysis and the industry trends.

Play Time for Kids has identified the family entertainment industry as its primary interest and to that end the company has focused its efforts on the development of one or more family entertainment centers (FEC) to provide quality family entertainment activities to the communities in the Our County, Big City area.

Focused on family entertainment in a family-oriented community, Play Time for Kids is a company primed to take advantage of an expanding and profitable industry.

Entertainment has become a buzzword of the new millennium. David L. Malmuth, senior vice president of the TrizenHahn Development Corp. has observed, “People are not just interested in buying things. They want an experience, adding that the keys to providing successful experiences are authenticity, fun and participation. Americans have money to spend and will spend it on entertaining themselves. In fact, statistics show that people in the United States spend more on entertainment than on health care or clothing.”

Quality family entertainment is the focus of Play Time for Kids. The construction and commercialization of one initial FEC is factored into the initial development phase detailed within. The company’s proposed FECs will be designed to provide the type of family entertainment and adventure the current market demands.

In addition to other funding and capitalization efforts detailed herein, the Company anticipates that it will seek funds from other sources who may assist in purchasing the building we will initially lease.

A recent census conducted by the U.S. Census Bureau found that from 1999 to 2000, personal consumption and expenditures for amusement and recreation increased by $31.5 billion, with an overall industry gross of $56.2 billion. Source: U.S. Census Bureau, Statistical Abstract of the U.S: 2000 – The National Income and Product Accounts of the U.S., 1929-94, Vol.1.

With our strong management team and our aggressive marketing plan, we project a consistent and minimum annual growth of five percent.

Recreation center business plan, executive summary chart image

1.1 Objectives

The objectives for Play Time for Kids are:

  1. To create a service-based company which exceeds customers’ expectations.
  2. To increase the number of customers by at least 20% per year through superior customer service and word-of mouth referrals.
  3. Have a clientele return rate of 90% by end of first year.
  4. Become an established community destination by end of first year.
  5. Educate the community on what the company has to offer.

The company will become the industry leader in Northeast Our County.

1.2 Mission

To provide excellent child play care in a kid-friendly atmosphere while ensuring our customers, both parent and child, receive excellent service in a playful, educational, and safe environment.

1.3 Keys to Success

The keys to success in our business are:

  • Superior Customer Service: high-quality hourly care and service.
  • Environment: provide a clean, upscale, enjoyable environment conducive to giving professional trusting service.
  • Convenience: offer clients a wide range of services in one environment.
  • Location: provide an easily accessible location for customer convenience.
  • Reputation: credibility, integrity, and 100% dedication.
  • Indoor activities for year-round entertainment.
  • Facility designed to curb overcrowding.
  • Seasoned management team.

The company believes that certain risk factors can be minimized by:

  • Initial capitalization of the company to sustain operations through year one.
  • Low overhead through the use of multi-skilled employees and continual training (i.e., child development classes).
  • Strong customer base through aggressive marketing.
  • Strong community ties and involvement with nonprofit organizations.
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Company Summary

Current Family Entertainment Centers (FECs) have a primary emphasis on hands-on discovery learning through free spontaneous play, but can also incorporate some elements of pure entertainment. Most adults don’t fully understand and appreciate the value of spontaneous play to the social, physical, mental, and emotional development of their children, so these new types of children’s centers are marketed in the U.S. as children’s discovery or edutainment centers. This communicates to the parents that their children will learn by visiting them. Therefore, the parents show up with their children because it’s good for them, and the children show up because it’s just plain fun. Play Time for Kids is a new company that will provide high-level Play Care, Edutainment and Customer Service in the following categories:

  • Play care
  • Educational play with learning
  • Children’s activities
  • Birthday parties
  • Special events
  • Staffing that adds that “personal touch”
  • Photography available for birthday parties and other events (includes digital photos on CD)
  • Souvenirs (T-shirts, hats etc.)
  • Special events
  • Special requests
  • Convenient hours of operation

What will set Play Time for Kids apart from the competition is the commitment to provide all these services in one convenient location.

2.1 Start-up Summary

The company will obtain use of a new structure. Start-up costs will cover a number of details to convert the structure to suit the owner’s concept both visually and functionally. Included in start-up costs are all the necessary expenditures to cover the pre-opening, hiring, staff training, addition and revision of equipment needs, supplying toys, soft play equipment, inventory, and other essentials.

Long-term assets represents the value of the barn and the land on which it sits. Renovations are expensed.

Recreation center business plan, company summary chart image

Start-up
Requirements
Start-up Expenses
Legal Fees $7,300
Insurance $5,800
Rent $2,500
Computer – Administrative $4,000
Marketing and marketing strategy $6,500
Architect/Remodeling $15,000
Equipment (i.e. toys) $8,000
Projector & Screen $1,500
TVs & video game consoles $1,250
Computers – Learning $2,000
Cleaning supplies $900
Office Supplies $1,000
Total Start-up Expenses $55,750
Start-up Assets
Cash Required $65,000
Start-up Inventory $1,000
Other Current Assets $2,500
Long-term Assets $14,000
Total Assets $82,500
Total Requirements $138,250

2.2 Company Ownership

Play Time for Kids is a privately-held S corporation co-owned by Carry Tayker and Wanda Magic. To achieve our objectives, Play Time for Kids seeks financial backing. The loans will be repaid from the cash flow of the business, and will be secured by the assets of the company, and backed by the character, experience, and personal guarantees of the owners.

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Products and Services

The company will set itself apart from other child entertainment facilities that may offer only one or two types of services. Parents desire these services and are frustrated because they must go to several different businesses or travel long distances to find these types of activities. The focus of the company is Play Care and Party Place. The services provided will be exemplary.

The business atmosphere will be clean, friendly and upscale where customers will be comfortable leaving their children. We will offer a personal touch, fun innovative learning through play, and a memorable hassle-free Birthday party.

The business will offer event photos of children’s birthday parties (taken by a professional photographer), a unique concept in this type of industry. The parent will be provided a CD at the end of the party.

Play Time for Kids offers:

  • Movie Theatre
  • Large playscape
  • Playhouse area
  • Staff-led Group activities
  • Theme Nights
  • Art and crafts
  • Karaoke stage
  • Computer Games
  • Playstation 2, XBox, GameCube
  • Separate Toddler area
  • Educational toys and manipulatives
  • Birthday parties

Play Care Rates  (Drop-in)

$7.50 per Hour – One Child (Over 18 Months and potty trained)
$4.00 per Hour – Each Additional Sibling

Membership

$30 Annual Family Registration

Birthday Party A = $200

  • 45 minutes in themed party room
  • Generic colored paper products
  • 100% fruit juice
  • Party attendant
  • Birthday cake (flavor of choice)
  • Balloons
  • Gift Cart
  • Goodie bags

Birthday Party B = $285

  • 45 minutes in themed party room
  • Generic colored paper products
  • 100% fruit juice
  • Party attendant (dressed in customer’s party theme)
  • Birthday cake (flavor of choice, and party theme)
  • Balloons
  • Gift Cart
  • Goodie bags
  • Play Time for Kids T-shirt for the birthday child
  • Reserved parking spot for the birthday child’s parents
  • Event pictures (taken by professional photographer) received on CD
  • Buy One, Get One Free coupon for each party guest to return with a friend

Family Savings Plan Parents may pre-pay for a discount:

  • $110 = $100 (10% DISCOUNT)
  • $230 = $200 (15% DISCOUNT)
  • $360 = $300 (20% DISCOUNT)

Referral Program

Refer a friend who has never been to Play Time for Kids and receive $5 OFF the price of a new membership.

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Market Analysis Summary

Research indicates that the prime market for an FEC is near urban neighborhoods comprised of middle- to upper- income families. These families search for ways to engage their children that are more than just activities their children passively enjoy.  As Howard Gardner writes in his book, The Unschooled Mind: “As institutions, schools have become increasingly anachronistic, while museums have retained the potential to engage students, to teach them, to stimulate their understanding, and, most important, to help them assume responsibility for their own future learning.” This is the idea behind an edutainment facility. Its purpose is to stimulate children so that they can transition from being taught or entertained (passive) to learning through play (active).

4.1 Market Segmentation

The U.S. Census Bureau 2000, and the Our County website provides the following demographic information about NorthEast Our County and the areas surrounding it.

City Population Income Children under 12 Households with children
Big City (ZIP Code 1) 45,874 $72,860 27.24% 8,037
Big City (ZIP Code 2) 23,290 $62,636 22.96% 3,694
City A (ZIP Code 3) 21,571 $36,799 23.56% 2,868
City A (ZIP Code 4) 31,094 $40,648 21.64% 4,282
Town B 3,393 $79,402 24.97% 566
Town C 31,168 $89,644 27.60% 5,467
North Big City Hills 59,591 $63,968 22.02% 9,033
City D 7,889 $65,056 26.80% 1,349
City E 25,834 $63,411 25.81% 4,417

Recreation center business plan, market analysis summary chart image

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Stay Home Moms and Dads 50% 8,000 12,000 18,000 27,000 40,500 50.00%
Elementary Schools 50% 11,200 16,800 25,200 37,800 56,700 50.00%
DayCares 35% 4,935 6,662 8,994 12,142 16,392 35.00%
Parent’s day out programs 10% 1,020 1,122 1,234 1,357 1,493 9.99%
Total 46.25% 25,155 36,584 53,428 78,299 115,085 46.25%

4.2 Target Market Segment Strategy

Our success will be based on our ability to become known within the community. We must focus on the specific market segments whose needs match our offerings. Focusing on targeted segments is the key to our future. Therefore, the focus and marketing message will be the services offered. Once the message is developed, it will be communicated and fulfilled.

Stay at Home Moms and Dads
For a variety of reasons, stay-at-home Moms and Dads are an attractive segment. Parents are looking for a place to take their children to play and learn. They live in the middle class suburbs surrounding the metropolitan area. The market segment customers will lead a lifestyle in which their children play a large part in their lives. The company also focuses on meeting the local community need for child play care and birthday party services within the 10-mile radius of Big City. Flexibility in the program allows children to be dropped off, or to come and play with parent.

Elementary Schools
The company would also like to establish a relationship with the local elementary schools; there are 15 elementary schools in this target area, for possible field trips. The strategy for this market is to provide periodic communications through the PTA channels, which are available to us uniquely due to past service to the PTA. This strategic approach will provide credibility and frequency of communication to our target market.  While this market is not the primary focus, sufficient flexibility to handle this secondary market is important to producing supplemental revenues.

Day Cares
Local Day Care centers in search of field trip alternatives can select the Play Time for Kids as a destination that combines playtime with learning interactions. While this revenue would not be the company’s primary focus, its potential could increase revenue base by building strong community relations. 

Weekend Working Couples
Another segment of our business includes weekend working couples, meaning weekend child care.  This client base could provide a 1% profit for the company since most Day Care centers do not operate on the weekends. This service allows part-time weekend workers and/or fitness center aficionados to drop their children off for several hours. While this market is not a primary focus, sufficient flexibility to handle this market is important to the local “word-of-mouth” marketing strategy.

4.3 Service Business Analysis

Success will be based on the ability to become known within the community. Play Time for Kids must focus on the specific market segments whose needs match its offerings. Focusing on targeted segments is the key to the company’s future. Therefore, marketing messages will be focused on the services offered. We will develop our message, communicate it, and fulfill our commitment to excellence.

Play Time for Kids is part of the Recreation Center industry, which includes everything from bowling, skating, mini-golf, and batting cages to playgrounds and water parks. We provide a much higher level of direct child care than do most other recreation centers, and straddle the line between family entertainment center and daycare facility. As such, we need employees with the child care credentials to satisfy safety-conscious parents, and programs with the “fun” value to lure in repeat customers.

4.3.1 Competition and Buying Patterns

Price, service, certification and reputation are critical success factors in the edutainment/play care services industry. The company will compete well in the defined market by offering competitive prices, high-quality play care services, and leading-edge educational toys with certified, college-educated instructors, and by maintaining an excellent reputation with parents and the community.

Competition for the Play Time for Kids comes in various forms. Chuck E. Cheese, McDonald’s, and Clubhouse for Kids only, are the only places within a 10-mile radius from our company that offer services similar to ours, and all are limited to arcade games and soft play.

Large Chain Children’s Entertainment Venues
The competition in the defined geographic area includes Chuck E. Cheese and McDonald’s. Both of these venues are limited to arcade games and soft play. They offer entertainment value, but little educational value.  Play Time for Kids is differentiated from these types of facilities by offering an interactive environment with components designed to allow children to learn through play. 

Small, Independently Owned Child Play Care Venues
The competition in our area includes Club House for Kids. This venue does offer some learning through play experiences, but it is limited in its direction of activities. Themed rooms allow for free play but there is little interaction with the staff.  Play Time for Kids will be differentiated by offering structured child development activities and play groups guided by Play Time for Kids employees.

Children’s Museums
At one time, Imagisphere Children’s Museum operated nearby. The museum offered learning experiences, but did not have the variety of options Play Time for Kids plans to offer; therefore, they did not experience enough repeat business to sustain profitability.  The company’s differentiating factor is the variety and enhanced entertainment value offered, which leads to increased repeat and referral business.

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Strategy and Implementation Summary

The company will succeed by offering its clients’ children a safe and secure care environment, and close personal attention. The goals of the center are dual-sided: to help parents feel good about the care of their children, and to make it a safe, educational, and fun experience for the child.

5.1 Competitive Edge

Play Time for Kids’ services will be positioned to provide customers with a premium amusement and edutainment experience:

  • Charge a premium price (per industry standards) but not exceed what the market can bear
  • Obtain all appropriate licensing and certifications
  • Thorough pre-hire background screenings performed on all individuals before hired for employment
  • Innovative, unique birthday parties
  • The personal-touch in a family-friendly atmosphere that only Play Time for Kids can provide
  • Play groups, as well as the wealth of child development knowledge, delivered by the Play Time for Kids employees
  • The convenience of drop-in play care, in the same location where parents can take fitness classes

5.2 Marketing Strategy

The company’s marketing strategy is focused on establishing our brand and promoting our image through a variety of marketing channels.  An overview of our marketing strategy includes:

Logo & Identity Development. A professional logo has been developed. This brand will be promoted through a broad mix of identity pieces including business cards, stationery, car signage, and other communications.

Partnership Programs. The company will develop community partnerships to offer discounts to the clients of other businesses that cater to our target market, such as:

  • Local hospitals which provide birthing classes
  • Local fitness centers without child care
  • Local elementary schools (there are 15 within a 10-mile radius)
  • Pediatrics offices, pediatric dentistry and pediatric orthodontist offices

Brochures.  A brochure will be designed to communicate our presence, the services we offer, and the clients we serve in the community. 

Flyers.  Flyers will be designed for posting at community locations that attract high traffic volumes of consumers within our target market, such as:

  • Local grocery stores and dry cleaners
  • OB/Gyn offices
  • Local child care centers
  • Local children’s clothing stores (i.e., Kid to Kid and Babies R Us)
  • Local stores that carry children’s items (i.e., Target, Wal-Mart, and Kohl’s)
  • Local children’s programs (Keller Point, Emler Swim Center, YMCA, and Texas Tumblers Gymnastics, Dance centers)
  • Libraries ~ children’s books section
  • Local bookstores ~ children’s book section (i.e., Barnes and Noble, and Teachers Tools)
  • Fitness Centers ~ child care area (if they have one)

Advertising.  Ads will be placed in publications that cater to the demographics of our target market, including:

  • Big City Child
  • Dallas Child
  • Positively Parenting
  • Kids Directory

Public Relations.  As owners, we will promote our company and it’s benefits to the community through efforts to have articles published in new media and efforts to gain coverage on local radio and television programming. Potential media outlets include:

  • Big City Star-Telegram Newspaper
  • Big City Child: A magazine serving families of Our County
  • Big City Small Business Times
  • Womens Directory
  • Local schools PTA newsletters

Direct Mail.  Direct mail channels will be used to initially introduce our presence to the community and attract first time visitors. The need for this type of advertising will taper off as repeat and referral business increases.

Website.  All brochures, flyers and other marketing tools will promote our website, detailing our services that benefit the community. Our website will also provide all information about us, our operational hours, schedules of events, and a registration form for online enrollment.

Email.  Email will be used to connect with our clients frequently through monthly newsletters and updates on upcoming events and special offers.

Events.  Special events, including a grand opening and special holiday parties, will be promoted to increase visibility in the community and to attract first time or infrequent visitors.

5.3 Sales Strategy

The company will make its primary profit through the excellent play care and edutainment of children. Even though our pricing strategies are set at competitive levels, the company expects to gain revenue within the first year by word-of-mouth advertising. The company expects to double its clientele every 6 months during the first 18 months after opening for business.

Play Time for Kids offers a unique solution that will be introduced to the market through targeted advertising, direct mail, website optimization and direct sales. The venue provides families the ability to enjoy their leisure time participating in activities together or leaving their children to explore on their own.

5.3.1 Sales Forecast

The strongest revenue during the first quarter of operation will be birthday party sales and membership fees. Afterwards, word-of-mouth and local advertising will gain market share for the company, with parents using the daily drop-in service, day cares using it as a field trip destination, and monthly holiday-themed parties.

We anticipate increasing margins in years two and three, through greater efficiency and obtaining bulk rates on paper products.

Recreation center business plan, strategy and implementation summary chart image

Recreation center business plan, strategy and implementation summary chart image

Sales Forecast
Year 1 Year 2 Year 3
Sales
Birthday party A $203,864 $244,637 $293,564
Birthday Party B $289,701 $347,641 $417,169
Free Play with parents $18,240 $21,888 $26,266
Membership fee $21,288 $25,546 $30,655
Drop-in Playcare $30,177 $36,212 $43,455
Total Sales $563,271 $675,924 $811,109
Direct Cost of Sales Year 1 Year 2 Year 3
Birthday Paper Products $49,356 $53,305 $63,966
Birthday foods and beverages $34,550 $35,537 $35,537
Media Rental for Parties (movies, karaoke) $64,163 $76,996 $92,395
CDs for Parties $240 $320 $366
Costume Rentals $2,468 $2,961 $3,554
Cakes $24,678 $35,607 $42,728
Subtotal Direct Cost of Sales $175,456 $204,726 $238,546

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Web Plan Summary

The Play Time for Kids website will be the virtual brochure for the company, as well as its online “home.”

It will showcase the company’s value proposition and reinforce the qualifications and experience of the organization and staff, as well as provide a comprehensive overview of the services provided to potential and current clients. The site may also provide access to online parent resources and a community calendar.

The key to the website strategy will be combining a very well designed front-end, with a back-end capable of collecting contact information for continued communication with those interested in our services.

6.1 Website Marketing Strategy

The Play Time for Kids website address will be used on all corporate and promotional materials. The website should be used to support all the newly developed messages and should have “active” content that brings people back to the site as an information resource. This activity will be supported by the marketing plan through the development of newsletters, promotional events, and public relations.

6.2 Development Requirements

The Play Time for Kids website will be initially developed by a professional marketing agency that provides creative design and technical development resources. ABC Communications will create and maintain the website, DEF Hosting will host the site and provide the technical back end. The company will maintain a simple, user-friendly interface that is fun and inviting to our target audience. The website logos and graphics will be consistent with printed promotional materials.

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Management Summary

Carry Tayker and Wanda Magic have extensive experience in management of Child Care and Family Entertainment Centers, respectively. Their attached resumes detail this experience in the Big City area.

7.1 Personnel Plan

As the Personnel Plan shows, the company expects to make gradual investments in personnel over the next three years, always keeping in mind the number of children in need of care. In addition to the owners, we will need one full-time manager and 6 full-time care workers.

Personnel Plan
Year 1 Year 2 Year 3
Carry Tayker $13,008 $20,000 $35,000
Wanda Magic $14,070 $20,000 $35,000
Manager $38,000 $40,000 $43,000
Full-time child-care workers $158,400 $162,000 $165,000
Part-time child-care workers $48,000 $50,000 $50,000
Future child-care employees $0 $40,000 $60,000
Total People 13 15 17
Total Payroll $271,478 $332,000 $388,000

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Financial Plan

The company’s financial plan is based on conservative estimates and assumptions. We plan to combine owner investment and loans to fund our start-up requirements and to sustain the business to break-even, within 8 months to a year.

8.1 Start-up Funding

Total start-up expenses and assets required will be funded as shown in the Start-up Funding table, below. The $50,000 of Current Borrowing will be repaid within 3 years; the long-term liabilities will be repaid within 6 years.

Start-up Funding
Start-up Expenses to Fund $55,750
Start-up Assets to Fund $82,500
Total Funding Required $138,250
Assets
Non-cash Assets from Start-up $17,500
Cash Requirements from Start-up $65,000
Additional Cash Raised $0
Cash Balance on Starting Date $65,000
Total Assets $82,500
Liabilities and Capital
Liabilities
Current Borrowing $50,000
Long-term Liabilities $38,250
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $88,250
Capital
Planned Investment
Angela Redmon $15,000
BeJe Denson $35,000
Additional Investment Requirement $0
Total Planned Investment $50,000
Loss at Start-up (Start-up Expenses) ($55,750)
Total Capital ($5,750)
Total Capital and Liabilities $82,500
Total Funding $138,250

8.2 Important Assumptions

  • The company assumes steady growth from good management.
  • The company is assuming adequate loans to sustain it during start-up.
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 30.00% 30.00% 30.00%
Other 0 0 0

8.3 Break-even Analysis

The Break-even Analysis is based on the average of the first-year figures for total sales by units, and by operating expenses. These are presented as per-unit revenue, per-unit cost, and fixed costs. These conservative assumptions make for a more accurate estimate of real risk. With these projections, we should surpass the break-even point in September of our first year.

Recreation center business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even $43,645
Assumptions:
Average Percent Variable Cost 31%
Estimated Monthly Fixed Cost $30,050

8.4 Business Ratios

The following table outlines some of the more important ratios from the Recreation Center industry (also referred to as Family Entertainment Centers). The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 7999.9910.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 20.00% 20.00% 2.76%
Percent of Total Assets
Inventory 0.00% 0.00% 0.00% 3.27%
Other Current Assets 2.95% 3.41% 2.72% 30.63%
Total Current Assets 83.62% 81.32% 85.42% 38.44%
Long-term Assets 16.38% 18.68% 14.58% 61.56%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 53.53% 41.45% 17.13% 26.66%
Long-term Liabilities 37.54% 34.74% 20.77% 24.71%
Total Liabilities 91.07% 76.18% 37.90% 51.37%
Net Worth 8.93% 23.82% 62.10% 48.63%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 68.74% 69.61% 70.49% 100.00%
Selling, General & Administrative Expenses 66.38% 68.14% 65.61% 74.21%
Advertising Expenses 0.02% 0.00% 0.00% 2.76%
Profit Before Interest and Taxes 4.73% 2.88% 7.36% 2.23%
Main Ratios
Current 1.56 1.96 4.99 0.96
Quick 1.56 1.96 4.99 0.65
Total Debt to Total Assets 91.07% 76.18% 37.90% 64.43%
Pre-tax Return on Net Worth 251.25% 80.88% 99.14% 3.01%
Pre-tax Return on Assets 22.43% 19.26% 61.57% 8.47%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 2.37% 1.46% 4.88% n.a
Return on Equity 175.87% 56.62% 69.40% n.a
Activity Ratios
Inventory Turnover 0.00 0.00 0.00 n.a
Accounts Payable Turnover 22.94 24.33 24.33 n.a
Payment Days 13 14 14 n.a
Total Asset Turnover 6.64 9.21 8.82 n.a
Debt Ratios
Debt to Net Worth 10.20 3.20 0.61 n.a
Current Liab. to Liab. 0.59 0.54 0.45 n.a
Liquidity Ratios
Net Working Capital $25,543 $29,249 $62,784 n.a
Interest Coverage 3.51 3.63 19.48 n.a
Additional Ratios
Assets to Sales 0.15 0.11 0.11 n.a
Current Debt/Total Assets 54% 41% 17% n.a
Acid Test 1.56 1.96 4.99 n.a
Sales/Net Worth 74.33 38.69 14.21 n.a
Dividend Payout 0.00 0.00 0.00 n.a

8.5 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. Although the last three months of 2006 will generate a net profit, it is not expected to be high enough to counteract outflows in the first three quarters. However, the second and third years, even with additional employees to handle the extra business, should generate increasing profits.

 

Recreation center business plan, financial plan chart image

Recreation center business plan, financial plan chart image

Recreation center business plan, financial plan chart image

Recreation center business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $563,271 $675,924 $811,109
Direct Cost of Sales $175,456 $204,726 $238,546
Other Costs of Sales $600 $700 $800
Total Cost of Sales $176,056 $205,426 $239,346
Gross Margin $387,215 $470,498 $571,763
Gross Margin % 68.74% 69.61% 70.49%
Expenses
Payroll $271,478 $332,000 $388,000
Marketing/Promotion $4,000 $4,000 $4,000
Depreciation $100 $200 $300
Rent $60,000 $60,000 $60,000
Utilities $15,219 $17,000 $18,000
Insurance $5,800 $5,800 $5,800
Payroll Taxes $0 $27,000 $30,000
Other $4,000 $5,000 $6,000
Total Operating Expenses $360,597 $451,000 $512,100
Profit Before Interest and Taxes $26,618 $19,498 $59,663
EBITDA $26,718 $19,698 $59,963
Interest Expense $7,577 $5,369 $3,063
Taxes Incurred $5,712 $4,239 $16,980
Net Profit $13,328 $9,891 $39,620
Net Profit/Sales 2.37% 1.46% 4.88%

8.6 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. These cash flow projections depend upon receiving the loans necessary to fund our start-up requirements. The table, below, shows the anticipated repayment of the loans.

Recreation center business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $563,271 $675,924 $811,109
Subtotal Cash from Operations $563,271 $675,924 $811,109
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 $563,271 $675,924 $811,109
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $271,478 $332,000 $388,000
Bill Payments $265,272 $332,206 $381,161
Subtotal Spent on Operations $536,750 $664,206 $769,161
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $16,656 $16,660 $16,684
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $6,385 $6,385 $6,385
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $559,791 $687,251 $792,230
Net Cash Flow $3,479 ($11,327) $18,879
Cash Balance $68,479 $57,152 $76,032

8.7 Projected Balance Sheet

Our projected balance sheet is presented in the table below. Although we do not become fully profitable until year two, we expect a steady increase in net worth over the foreseeable future.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $68,479 $57,152 $76,032
Inventory $0 $0 $0
Other Current Assets $2,500 $2,500 $2,500
Total Current Assets $70,979 $59,652 $78,532
Long-term Assets
Long-term Assets $14,000 $14,000 $14,000
Accumulated Depreciation $100 $300 $600
Total Long-term Assets $13,900 $13,700 $13,400
Total Assets $84,879 $73,352 $91,932
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $12,092 $13,719 $15,747
Current Borrowing $33,344 $16,684 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $45,436 $30,403 $15,747
Long-term Liabilities $31,865 $25,480 $19,095
Total Liabilities $77,301 $55,883 $34,842
Paid-in Capital $50,000 $50,000 $50,000
Retained Earnings ($55,750) ($42,422) ($32,531)
Earnings $13,328 $9,891 $39,620
Total Capital $7,578 $17,469 $57,089
Total Liabilities and Capital $84,879 $73,352 $91,932
Net Worth $7,578 $17,469 $57,089

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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
Birthday party A 0% $15,200 $15,504 $15,814 $16,130 $16,453 $16,782 $17,118 $17,460 $17,809 $18,165 $18,529 $18,899
Birthday Party B 0% $21,600 $22,032 $22,473 $22,922 $23,381 $23,848 $24,325 $24,812 $25,308 $25,814 $26,330 $26,857
Free Play with parents 0% $1,360 $1,387 $1,415 $1,443 $1,472 $1,502 $1,532 $1,562 $1,593 $1,625 $1,658 $1,691
Membership fee 0% $1,500 $1,545 $1,591 $1,639 $1,688 $1,739 $1,791 $1,845 $1,900 $1,957 $2,016 $2,076
Drop-in Playcare 0% $2,250 $2,295 $2,341 $2,388 $2,435 $2,484 $2,534 $2,585 $2,636 $2,689 $2,743 $2,798
Total Sales $41,910 $42,763 $43,634 $44,523 $45,429 $46,355 $47,299 $48,263 $49,247 $50,251 $51,275 $52,321
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
Birthday Paper Products 10% $3,680 $3,754 $3,829 $3,905 $3,983 $4,063 $4,144 $4,227 $4,312 $4,398 $4,486 $4,576
Birthday foods and beverages 7% $2,576 $2,628 $2,680 $2,734 $2,788 $2,844 $2,901 $2,959 $3,018 $3,079 $3,140 $3,203
Media Rental for Parties (movies, karaoke) 13% $4,784 $4,880 $4,977 $5,077 $5,178 $5,282 $5,388 $5,495 $5,605 $5,717 $5,832 $5,948
CDs for Parties $20 $20 $20 $20 $20 $20 $20 $20 $20 $20 $20 $20
Costume Rentals 1% $184 $188 $191 $195 $199 $203 $207 $211 $216 $220 $224 $229
Cakes 5% $1,840 $1,877 $1,914 $1,953 $1,992 $2,032 $2,072 $2,114 $2,156 $2,199 $2,243 $2,288
Subtotal Direct Cost of Sales $13,084 $13,345 $13,612 $13,884 $14,161 $14,444 $14,732 $15,026 $15,327 $15,633 $15,945 $16,263
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
Carry Tayker 2% $1,026 $1,036 $1,046 $1,057 $1,067 $1,078 $1,089 $1,100 $1,111 $1,122 $1,133 $1,144
Wanda Magic 2% $1,109 $1,120 $1,132 $1,143 $1,154 $1,166 $1,178 $1,189 $1,201 $1,213 $1,225 $1,238
Manager 5% $3,167 $3,167 $3,167 $3,167 $3,167 $3,167 $3,167 $3,167 $3,167 $3,167 $3,167 $3,167
Full-time child-care workers 3% $13,200 $13,200 $13,200 $13,200 $13,200 $13,200 $13,200 $13,200 $13,200 $13,200 $13,200 $13,200
Part-time child-care workers 3% $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000
Future child-care employees 3% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total People 13 13 13 13 13 13 13 13 13 13 13 13
Total Payroll $22,502 $22,523 $22,545 $22,566 $22,588 $22,611 $22,633 $22,656 $22,679 $22,702 $22,725 $22,749

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 $41,910 $42,763 $43,634 $44,523 $45,429 $46,355 $47,299 $48,263 $49,247 $50,251 $51,275 $52,321
Direct Cost of Sales $13,084 $13,345 $13,612 $13,884 $14,161 $14,444 $14,732 $15,026 $15,327 $15,633 $15,945 $16,263
Other Costs of Sales $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50
Total Cost of Sales $13,134 $13,395 $13,662 $13,934 $14,211 $14,494 $14,782 $15,076 $15,377 $15,683 $15,995 $16,313
Gross Margin $28,776 $29,368 $29,972 $30,589 $31,218 $31,861 $32,517 $33,187 $33,870 $34,568 $35,280 $36,008
Gross Margin % 68.66% 68.68% 68.69% 68.70% 68.72% 68.73% 68.75% 68.76% 68.78% 68.79% 68.81% 68.82%
Expenses
Payroll $22,502 $22,523 $22,545 $22,566 $22,588 $22,611 $22,633 $22,656 $22,679 $22,702 $22,725 $22,749
Marketing/Promotion $333 $333 $333 $333 $333 $333 $333 $333 $333 $333 $333 $333
Depreciation $8 $8 $8 $8 $8 $8 $8 $8 $8 $8 $8 $8
Rent $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000
Utilities $1,200 $1,212 $1,224 $1,236 $1,249 $1,261 $1,274 $1,287 $1,299 $1,312 $1,326 $1,339
Insurance $483 $483 $483 $483 $483 $483 $483 $483 $483 $483 $483 $483
Payroll Taxes 15% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other $333 $333 $333 $333 $333 $333 $333 $333 $333 $333 $333 $333
Total Operating Expenses $29,860 $29,893 $29,927 $29,961 $29,996 $30,030 $30,065 $30,101 $30,136 $30,173 $30,209 $30,246
Profit Before Interest and Taxes ($1,084) ($526) $45 $628 $1,223 $1,831 $2,452 $3,086 $3,734 $4,396 $5,071 $5,762
EBITDA ($1,076) ($517) $53 $636 $1,231 $1,839 $2,460 $3,094 $3,742 $4,404 $5,080 $5,770
Interest Expense $719 $703 $687 $671 $655 $639 $623 $607 $591 $575 $559 $543
Taxes Incurred ($541) ($369) ($193) ($13) $170 $357 $549 $744 $943 $1,146 $1,354 $1,566
Net Profit ($1,262) ($860) ($450) ($31) $397 $834 $1,280 $1,735 $2,200 $2,674 $3,158 $3,653
Net Profit/Sales -3.01% -2.01% -1.03% -0.07% 0.87% 1.80% 2.71% 3.60% 4.47% 5.32% 6.16% 6.98%

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 $41,910 $42,763 $43,634 $44,523 $45,429 $46,355 $47,299 $48,263 $49,247 $50,251 $51,275 $52,321
Subtotal Cash from Operations $41,910 $42,763 $43,634 $44,523 $45,429 $46,355 $47,299 $48,263 $49,247 $50,251 $51,275 $52,321
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 $41,910 $42,763 $43,634 $44,523 $45,429 $46,355 $47,299 $48,263 $49,247 $50,251 $51,275 $52,321
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 $22,502 $22,523 $22,545 $22,566 $22,588 $22,611 $22,633 $22,656 $22,679 $22,702 $22,725 $22,749
Bill Payments $10,487 $20,425 $21,326 $21,769 $22,222 $22,684 $23,156 $23,637 $24,129 $24,630 $25,142 $25,665
Subtotal Spent on Operations $32,988 $42,948 $43,871 $44,336 $44,810 $45,295 $45,789 $46,293 $46,807 $47,332 $47,867 $48,414
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 $1,388 $1,388 $1,388 $1,388 $1,388 $1,388 $1,388 $1,388 $1,388 $1,388 $1,388 $1,388
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $532 $532 $532 $532 $532 $532 $532 $532 $532 $532 $532 $533
Purchase Other Current Assets $0 $0 $0 $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 $34,908 $44,868 $45,791 $46,256 $46,730 $47,215 $47,709 $48,213 $48,727 $49,252 $49,787 $50,335
Net Cash Flow $7,002 ($2,105) ($2,157) ($1,733) ($1,301) ($860) ($410) $50 $520 $999 $1,488 $1,986
Cash Balance $72,002 $69,897 $67,740 $66,007 $64,706 $63,846 $63,436 $63,486 $64,006 $65,005 $66,493 $68,479

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 $65,000 $72,002 $69,897 $67,740 $66,007 $64,706 $63,846 $63,436 $63,486 $64,006 $65,005 $66,493 $68,479
Inventory $1,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Current Assets $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500
Total Current Assets $68,500 $74,502 $72,397 $70,240 $68,507 $67,206 $66,346 $65,936 $65,986 $66,506 $67,505 $68,993 $70,979
Long-term Assets
Long-term Assets $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000
Accumulated Depreciation $0 $8 $17 $25 $33 $42 $50 $58 $67 $75 $83 $92 $100
Total Long-term Assets $14,000 $13,992 $13,983 $13,975 $13,967 $13,958 $13,950 $13,942 $13,933 $13,925 $13,917 $13,908 $13,900
Total Assets $82,500 $88,493 $86,380 $84,215 $82,474 $81,164 $80,296 $79,878 $79,920 $80,431 $81,422 $82,901 $84,879
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 $9,176 $9,843 $10,048 $10,257 $10,470 $10,687 $10,910 $11,137 $11,368 $11,604 $11,846 $12,092
Current Borrowing $50,000 $48,612 $47,224 $45,836 $44,448 $43,060 $41,672 $40,284 $38,896 $37,508 $36,120 $34,732 $33,344
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $50,000 $57,788 $57,067 $55,884 $54,705 $53,530 $52,359 $51,194 $50,033 $48,876 $47,724 $46,578 $45,436
Long-term Liabilities $38,250 $37,718 $37,186 $36,654 $36,122 $35,590 $35,058 $34,526 $33,994 $33,462 $32,930 $32,398 $31,865
Total Liabilities $88,250 $95,506 $94,253 $92,538 $90,827 $89,120 $87,417 $85,720 $84,027 $82,338 $80,654 $78,976 $77,301
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 ($55,750) ($55,750) ($55,750) ($55,750) ($55,750) ($55,750) ($55,750) ($55,750) ($55,750) ($55,750) ($55,750) ($55,750) ($55,750)
Earnings $0 ($1,262) ($2,123) ($2,572) ($2,603) ($2,206) ($1,372) ($92) $1,643 $3,843 $6,517 $9,676 $13,328
Total Capital ($5,750) ($7,012) ($7,873) ($8,322) ($8,353) ($7,956) ($7,122) ($5,842) ($4,107) ($1,907) $767 $3,926 $7,578
Total Liabilities and Capital $82,500 $88,493 $86,380 $84,215 $82,474 $81,164 $80,296 $79,878 $79,920 $80,431 $81,422 $82,901 $84,879
Net Worth ($5,750) ($7,012) ($7,873) ($8,322) ($8,353) ($7,956) ($7,122) ($5,842) ($4,107) ($1,907) $767 $3,926 $7,578

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