Our biggest savings of the year
Igneous Rock Gym
Financial Plan
Igneous Rock Gym sales are projected to grow at a conservative rate of 8% per year. The current gym’s size can sustain this rate for at least 10 years.
After start-up, Igneous Rock Gym may look to create more opportunities for growth by opening a climbing gear retail shop or small coffee shop within its premises. Funding for this and other possible expansions will be done through loans to the owners.
7.1 Start-up Funding
Cole Granite and Micah Quartz plan on personally funding the entire start-up cost. Their initial investments of $70,000 each will come from taking out second mortgages on their houses and supplementing this amount from personal saving accounts.
Start-up Funding | |
Start-up Expenses to Fund | $25,000 |
Start-up Assets to Fund | $115,000 |
Total Funding Required | $140,000 |
Assets | |
Non-cash Assets from Start-up | $92,000 |
Cash Requirements from Start-up | $23,000 |
Additional Cash Raised | $0 |
Cash Balance on Starting Date | $23,000 |
Total Assets | $115,000 |
Liabilities and Capital | |
Liabilities | |
Current Borrowing | $0 |
Long-term Liabilities | $0 |
Other Current Liabilities (interest-free) | $0 |
Total Liabilities | $0 |
Capital | |
Planned Investment | |
Micah Quartz | $70,000 |
Cole Granite | $70,000 |
Additional Investment Requirement | $0 |
Total Planned Investment | $140,000 |
Loss at Start-up (Start-up Expenses) | ($25,000) |
Total Capital | $115,000 |
Total Capital and Liabilities | $115,000 |
Total Funding | $140,000 |
7.2 Break-even Analysis
Our monthly Break-even point is shown below. With extremely low variable costs, the primary monthly expense comes from fixed costs.

Break-even Analysis | |
Monthly Units Break-even | 197 |
Monthly Revenue Break-even | $15,095 |
Assumptions: | |
Average Per-Unit Revenue | $76.63 |
Average Per-Unit Variable Cost | $3.84 |
Estimated Monthly Fixed Cost | $14,338 |
7.3 Projected Profit and Loss
In the first year of business, Igneous Rock Gym will see an initial strong growth in sales followed by a slow, steady growth. The sales spike in January is due to the increased focus on fitness that traditionally happens during this month. Summers tend to be slower months for memberships; however, summer camps and an increase in birthday parties will make up for this loss in revenue.
Climbing gyms are expensive to start, but the cost of sales is very low. Due to the following reasons general operating expenses for a climbing gym are also low:
- Less than prime real estate is needed for site
- Staffing needs per customer are very low and volunteers are readily available
- High word-of-mouth marketing leads to less paid marketing
- Equipment and climbing walls have long lifespans
All of these factors combine to make it realistic that Igneous Rock Gym will be profitable in its first year of business.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $254,032 | $273,296 | $294,939 |
Direct Cost of Sales | $12,744 | $13,709 | $14,801 |
Other Costs of Sales | $3,600 | $4,200 | $4,800 |
Total Cost of Sales | $16,344 | $17,909 | $19,601 |
Gross Margin | $237,688 | $255,387 | $275,338 |
Gross Margin % | 93.57% | 93.45% | 93.35% |
Expenses | |||
Payroll | $79,050 | $86,620 | $89,610 |
Marketing/Promotion | $3,150 | $4,000 | $5,000 |
Depreciation | $3,600 | $3,600 | $3,600 |
Rent | $52,800 | $52,800 | $52,800 |
Utilities | $4,800 | $5,200 | $6,000 |
Insurance | $13,200 | $15,500 | $16,500 |
Payroll Taxes | $11,858 | $13,000 | $13,500 |
Other | $3,600 | $4,200 | $4,800 |
Total Operating Expenses | $172,058 | $184,920 | $191,810 |
Profit Before Interest and Taxes | $65,631 | $70,467 | $83,528 |
EBITDA | $69,231 | $74,067 | $87,128 |
Interest Expense | $0 | $0 | $0 |
Taxes Incurred | $19,689 | $21,140 | $25,058 |
Net Profit | $45,942 | $49,327 | $58,470 |
Net Profit/Sales | 18.08% | 18.05% | 19.82% |
7.4 Projected Cash Flow
As seen in the following chart, Igneous Rock Gym will enjoy a strong positive cash flow following its first month of operation. This is due to the fact that there is no need to purchase goods. It is also important to note that Igneous Rock Gym will have no need to give its members terms, and therefore, all payments will be made by cash, check, credit card, or EFT.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $254,032 | $273,296 | $294,939 |
Subtotal Cash from Operations | $254,032 | $273,296 | $294,939 |
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 | $254,032 | $273,296 | $294,939 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $204,490 | $220,369 | $232,869 |
Subtotal Spent on Operations | $204,490 | $220,369 | $232,869 |
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 | $204,490 | $220,369 | $232,869 |
Net Cash Flow | $49,542 | $52,927 | $62,070 |
Cash Balance | $72,542 | $125,469 | $187,538 |
7.5 Projected Balance Sheet
The balance sheet shows the healthy growth of Igneous Rock Gym’s net worth, and its strong financial position.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $72,542 | $125,469 | $187,538 |
Other Current Assets | $2,000 | $2,000 | $2,000 |
Total Current Assets | $74,542 | $127,469 | $189,538 |
Long-term Assets | |||
Long-term Assets | $90,000 | $90,000 | $90,000 |
Accumulated Depreciation | $3,600 | $7,200 | $10,800 |
Total Long-term Assets | $86,400 | $82,800 | $79,200 |
Total Assets | $160,942 | $210,269 | $268,738 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $0 | $0 | $0 |
Long-term Liabilities | $0 | $0 | $0 |
Total Liabilities | $0 | $0 | $0 |
Paid-in Capital | $140,000 | $140,000 | $140,000 |
Retained Earnings | ($25,000) | $20,942 | $70,269 |
Earnings | $45,942 | $49,327 | $58,470 |
Total Capital | $160,942 | $210,269 | $268,738 |
Total Liabilities and Capital | $160,942 | $210,269 | $268,738 |
Net Worth | $160,942 | $210,269 | $268,738 |
7.6 Business Ratios
The following table outlines some of the more important ratios from the Athletic Clubs and Gymnasiums, Membership industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 7991.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 7.58% | 7.92% | 10.91% |
Percent of Total Assets | ||||
Other Current Assets | 1.24% | 0.95% | 0.74% | 29.68% |
Total Current Assets | 46.32% | 60.62% | 70.53% | 39.03% |
Long-term Assets | 53.68% | 39.38% | 29.47% | 60.97% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 0.00% | 0.00% | 0.00% | 24.30% |
Long-term Liabilities | 0.00% | 0.00% | 0.00% | 23.97% |
Total Liabilities | 0.00% | 0.00% | 0.00% | 48.27% |
Net Worth | 100.00% | 100.00% | 100.00% | 51.73% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 93.57% | 93.45% | 93.35% | 100.00% |
Selling, General & Administrative Expenses | 75.48% | 75.40% | 73.53% | 71.17% |
Advertising Expenses | 0.00% | 0.00% | 0.00% | 2.77% |
Profit Before Interest and Taxes | 25.84% | 25.78% | 28.32% | 2.47% |
Main Ratios | ||||
Current | 0.00 | 0.00 | 0.00 | 1.04 |
Quick | 0.00 | 0.00 | 0.00 | 0.71 |
Total Debt to Total Assets | 0.00% | 0.00% | 0.00% | 62.60% |
Pre-tax Return on Net Worth | 40.78% | 33.51% | 31.08% | 3.34% |
Pre-tax Return on Assets | 40.78% | 33.51% | 31.08% | 8.94% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 18.08% | 18.05% | 19.82% | n.a |
Return on Equity | 28.55% | 23.46% | 21.76% | n.a |
Activity Ratios | ||||
Accounts Payable Turnover | 8.87 | 12.17 | 12.17 | n.a |
Total Asset Turnover | 1.58 | 1.30 | 1.10 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.00 | 0.00 | 0.00 | n.a |
Current Liab. to Liab. | 0.00 | 0.00 | 0.00 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $74,542 | $127,469 | $189,538 | n.a |
Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.63 | 0.77 | 0.91 | n.a |
Current Debt/Total Assets | 0% | 0% | 0% | n.a |
Acid Test | 0.00 | 0.00 | 0.00 | n.a |
Sales/Net Worth | 1.58 | 1.30 | 1.10 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |