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.

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.




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.

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 |