Galerie de Beaute
Financial Plan
The cash flow projections show a steady growth. The pace and rate is consistent. At this rate this gives the Management the time needed to research other locations, establish a strong position when researching financing related to purchase the next location.
7.1 Important Assumptions
The General Assumptions assumes current interest rates are 5%, long term interest rates are 7% and the tax rate is 30%.
General Assumptions | |||
Year 1 | Year 2 | Year 3 | |
Plan Month | 1 | 2 | 3 |
Current Interest Rate | 5.00% | 5.00% | 5.00% |
Long-term Interest Rate | 7.00% | 7.00% | 7.00% |
Tax Rate | 30.00% | 30.00% | 30.00% |
Other | 0 | 0 | 0 |
7.2 Projected Profit and Loss
Projected profit and loss assumes long-term interest expense at 7%, it also includes owners’ salaries and taxes. Net profit is calculated after tax. Expenses include triple net lease fees of $2/sq ft, which is approximately $9,600 per year. After several months of operation net profit growth from month to month ranges from approximately 10%-20%. After year 1 net profits continue growth in the range of 10%-15%.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $212,980 | $234,277 | $257,705 |
Direct Cost of Sales | $15,061 | $16,567 | $18,224 |
Other Costs of Sales | $0 | $0 | $0 |
Total Cost of Sales | $15,061 | $16,567 | $18,224 |
Gross Margin | $197,918 | $217,710 | $239,481 |
Gross Margin % | 92.93% | 92.93% | 92.93% |
Expenses | |||
Payroll | $48,000 | $72,000 | $80,000 |
Sales and Marketing and Other Expenses | $3,600 | $3,600 | $3,600 |
Depreciation | $9,600 | $9,600 | $9,600 |
Rent | $47,916 | $52,701 | $55,096 |
Utilities | $29,450 | $0 | $0 |
Insurance | $1,500 | $1,500 | $1,500 |
Maintenance Contract | $6,000 | $6,000 | $6,000 |
Triple Net Lease Fees | $9,600 | $9,600 | $9,600 |
Payroll Taxes | $8,100 | $11,700 | $12,900 |
Other | $2,700 | $2,700 | $2,700 |
Total Operating Expenses | $166,466 | $169,401 | $180,996 |
Profit Before Interest and Taxes | $31,452 | $48,309 | $58,485 |
EBITDA | $41,052 | $57,909 | $68,085 |
Interest Expense | $6,545 | $5,740 | $4,900 |
Taxes Incurred | $7,472 | $12,771 | $16,076 |
Net Profit | $17,435 | $29,798 | $37,510 |
Net Profit/Sales | 8.19% | 12.72% | 14.56% |
7.3 Break-even Analysis
The break-even analysis of Galerie de Beaute is an illustration of the number of units which are required to be leased at an average rent of $975/month. With 12 units leased, this will cover the fixed costs (i.e. rent, insurance, security, maintenance), variable cost related to triple net leasing of $2/sq ft, water and electricity and the owners’ salaries of $4,000/month.

Break-even Analysis | |
Monthly Revenue Break-even | $14,928 |
Assumptions: | |
Average Percent Variable Cost | 7% |
Estimated Monthly Fixed Cost | $13,872 |
7.4 Projected Cash Flow
Cash flow begins with an adequate cash balance; is negative for four months, then becomes positive. One-hundred fifty five thousand dollars has been invested by the partners. The owners will receive year-end dividend payouts beginning in the second fiscal year. The long-term debt of $100,000 will be repaid over the course of eight years at an interest rate of 7%. The net cash flow is listed before interest and taxes.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $212,980 | $234,277 | $257,705 |
Subtotal Cash from Operations | $212,980 | $234,277 | $257,705 |
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 | $212,980 | $234,277 | $257,705 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $48,000 | $72,000 | $80,000 |
Bill Payments | $124,577 | $126,147 | $129,961 |
Subtotal Spent on Operations | $172,577 | $198,147 | $209,961 |
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 | $12,000 | $12,000 | $12,000 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $0 | $0 | $0 |
Dividends | $0 | $8,000 | $12,000 |
Subtotal Cash Spent | $184,577 | $218,147 | $233,961 |
Net Cash Flow | $28,403 | $16,131 | $23,744 |
Cash Balance | $68,403 | $84,533 | $108,277 |
7.5 Projected Balance Sheet
The nature of Galerie de Beaute’s business is to carry no inventory; salon unit leases are paid current; thus there are no accounts receivables; and limited long-term assets in equipment on the books are depreciated over five years. In the future we may purchase a building for a 2nd location if demand requires.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $68,403 | $84,533 | $108,277 |
Other Current Assets | $2,000 | $2,000 | $2,000 |
Total Current Assets | $70,403 | $86,533 | $110,277 |
Long-term Assets | |||
Long-term Assets | $44,000 | $44,000 | $44,000 |
Accumulated Depreciation | $9,600 | $19,200 | $28,800 |
Total Long-term Assets | $34,400 | $24,800 | $15,200 |
Total Assets | $104,803 | $111,333 | $125,477 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $13,367 | $10,100 | $10,734 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $13,367 | $10,100 | $10,734 |
Long-term Liabilities | $88,000 | $76,000 | $64,000 |
Total Liabilities | $101,367 | $86,100 | $74,734 |
Paid-in Capital | $140,000 | $140,000 | $140,000 |
Retained Earnings | ($154,000) | ($144,565) | ($126,766) |
Earnings | $17,435 | $29,798 | $37,510 |
Total Capital | $3,435 | $25,234 | $50,743 |
Total Liabilities and Capital | $104,803 | $111,333 | $125,477 |
Net Worth | $3,435 | $25,234 | $50,743 |
7.6 Business Ratios
The ratios are not relevant to Galerie de Beaute for several reasons. Galerie de Beaute does not possess inventory to be evaluated in that fashion. Galerie de Beaute possesses limited equipment long-term assets, but does not carry accounts receivables. Because salon malls are fairly new there are no industry indicators for comparisons; therefore the ratio table is not a good indicator. The Industry Profiles shown correspond to SIC code 6512.0200, Operators of Nonresidential Buildings, chosen because our company is sub-leasing business real estate space to independent business entrepreneurs.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 10.00% | 10.00% | 3.46% |
Percent of Total Assets | ||||
Other Current Assets | 1.91% | 1.80% | 1.59% | 19.37% |
Total Current Assets | 67.18% | 77.72% | 87.89% | 22.19% |
Long-term Assets | 32.82% | 22.28% | 12.11% | 77.81% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 12.75% | 9.07% | 8.55% | 6.80% |
Long-term Liabilities | 83.97% | 68.26% | 51.01% | 51.69% |
Total Liabilities | 96.72% | 77.34% | 59.56% | 58.49% |
Net Worth | 3.28% | 22.66% | 40.44% | 41.51% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 92.93% | 92.93% | 92.93% | 100.00% |
Selling, General & Administrative Expenses | 80.50% | 76.48% | 75.05% | 63.74% |
Advertising Expenses | 0.00% | 0.00% | 0.00% | 0.37% |
Profit Before Interest and Taxes | 14.77% | 20.62% | 22.69% | 3.52% |
Main Ratios | ||||
Current | 5.27 | 8.57 | 10.27 | 1.84 |
Quick | 5.27 | 8.57 | 10.27 | 1.44 |
Total Debt to Total Assets | 96.72% | 77.34% | 59.56% | 68.83% |
Pre-tax Return on Net Worth | 725.08% | 168.70% | 105.60% | 1.15% |
Pre-tax Return on Assets | 23.77% | 38.24% | 42.71% | 3.68% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 8.19% | 12.72% | 14.56% | n.a |
Return on Equity | 507.55% | 118.09% | 73.92% | n.a |
Activity Ratios | ||||
Accounts Payable Turnover | 10.32 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 35 | 29 | n.a |
Total Asset Turnover | 2.03 | 2.10 | 2.05 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 29.51 | 3.41 | 1.47 | n.a |
Current Liab. to Liab. | 0.13 | 0.12 | 0.14 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $57,035 | $76,434 | $99,543 | n.a |
Interest Coverage | 4.81 | 8.42 | 11.94 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.49 | 0.48 | 0.49 | n.a |
Current Debt/Total Assets | 13% | 9% | 9% | n.a |
Acid Test | 5.27 | 8.57 | 10.27 | n.a |
Sales/Net Worth | 62.00 | 9.28 | 5.08 | n.a |
Dividend Payout | 0.00 | 0.27 | 0.32 | n.a |