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Play Time for Kids

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