Visions
Financial Plan
The plan for Visions’ financial future is steady growth. With a foundation of start-up investment from angel investors, VS has a solid cash base from which to establish itself and build name recognition. The eventual goal is to go public with a product line and locations around the country. The company will break-even shortly after the second year, making the location self supporting.
Leasing the location with the option to purchase the property is ideal for the company. The equipment, including exercise equipment, was purchased with start-up funds, leaving VS with little monthly costs beyond rent, utilities, and payroll. VS has a small staff of service providers whose payroll is subsidized by tips from clients. The managers are paid modestly,with their pay tied to the success of the company.
7.1 Important Assumptions
The main assumptions are the continued market need and the ability to deliver. We have included financial assumptions below.
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 8.00% | 8.00% | 8.00% |
| Long-term Interest Rate | 7.25% | 7.25% | 7.25% |
| Tax Rate | 25.42% | 25.00% | 25.42% |
| Other | 0 | 0 | 0 |
7.2 Key Financial Indicators
Key to the financial success of VS is continued annual growth. While there are times of the year, especially holidays, where sales are expected to rise substantially, annual growth is imperative. The direct costs of providing our services is small, so increasing the number of clients receiving services will aid the bottom line. The inventory turnover increase shown in the chart is the result of rounding, our inventory remains steady at approximately two months in stock.
7.3 Break-even Analysis
The Break-even Analysis in this plan makes many assumptions to achieve an estimate. Almost all cost in the operations will remained fixed. Salary for employees, lease, and utility costs are all considered as fixed costs.
| Break-even Analysis | |
| Monthly Units Break-even | 2,653 |
| Monthly Revenue Break-even | $53,005 |
| Assumptions: | |
| Average Per-Unit Revenue | $19.98 |
| Average Per-Unit Variable Cost | $0.36 |
| Estimated Monthly Fixed Cost | $52,060 |
7.4 Projected Profit and Loss
We expect to return increasing profits over the next three years.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $420,668 | $699,600 | $946,500 |
| Direct Cost of Sales | $7,500 | $12,400 | $16,300 |
| Other | $0 | $0 | $0 |
| Total Cost of Sales | $7,500 | $12,400 | $16,300 |
| Gross Margin | $413,168 | $687,200 | $930,200 |
| Gross Margin % | 98.22% | 98.23% | 98.28% |
| Expenses | |||
| Payroll | $336,000 | $372,000 | $425,000 |
| Sales and Marketing and Other Expenses | $98,520 | $107,000 | $112,000 |
| Depreciation | $0 | $0 | $0 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $40,200 | $45,000 | $45,000 |
| Insurance | $12,000 | $12,000 | $12,000 |
| Rent | $54,000 | $54,000 | $54,000 |
| Payroll Taxes | $84,000 | $93,000 | $106,250 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $624,720 | $683,000 | $754,250 |
| Profit Before Interest and Taxes | ($211,553) | $4,200 | $175,950 |
| EBITDA | ($211,553) | $4,200 | $175,950 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $0 | $1,050 | $44,721 |
| Net Profit | ($211,553) | $3,150 | $131,229 |
| Net Profit/Sales | -50.29% | 0.45% | 13.86% |
7.5 Projected Cash Flow
The following chart and table show the cash flow for Visions.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $420,668 | $699,600 | $946,500 |
| Subtotal Cash from Operations | $420,668 | $699,600 | $946,500 |
| 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 | $420,668 | $699,600 | $946,500 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $336,000 | $372,000 | $425,000 |
| Bill Payments | $272,635 | $323,767 | $385,657 |
| Subtotal Spent on Operations | $608,635 | $695,767 | $810,657 |
| 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 | $608,635 | $695,767 | $810,657 |
| Net Cash Flow | ($187,968) | $3,833 | $135,843 |
| Cash Balance | $312,033 | $315,865 | $451,708 |
7.6 Projected Balance Sheet
The following table shows the projected Balance sheet.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $312,033 | $315,865 | $451,708 |
| Inventory | $1,500 | $2,480 | $3,260 |
| Other Current Assets | $75,000 | $75,000 | $75,000 |
| Total Current Assets | $388,533 | $393,345 | $529,968 |
| Long-term Assets | |||
| Long-term Assets | $0 | $0 | $0 |
| Accumulated Depreciation | $0 | $0 | $0 |
| Total Long-term Assets | $0 | $0 | $0 |
| Total Assets | $388,533 | $393,345 | $529,968 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $25,085 | $26,748 | $32,141 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $25,085 | $26,748 | $32,141 |
| Long-term Liabilities | $0 | $0 | $0 |
| Total Liabilities | $25,085 | $26,748 | $32,141 |
| Paid-in Capital | $600,000 | $600,000 | $600,000 |
| Retained Earnings | ($25,000) | ($236,553) | ($233,403) |
| Earnings | ($211,553) | $3,150 | $131,229 |
| Total Capital | $363,448 | $366,598 | $497,827 |
| Total Liabilities and Capital | $388,533 | $393,345 | $529,968 |
| Net Worth | $363,448 | $366,598 | $497,827 |
7.7 Business Ratios
Industry profile ratios based on the Standard Industrial Classification (SIC) code 7991, Physical Fitness Facilities, are shown for comparison.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 66.31% | 35.29% | 15.90% |
| Percent of Total Assets | ||||
| Inventory | 0.39% | 0.63% | 0.62% | 3.60% |
| Other Current Assets | 19.30% | 19.07% | 14.15% | 31.10% |
| Total Current Assets | 100.00% | 100.00% | 100.00% | 39.00% |
| Long-term Assets | 0.00% | 0.00% | 0.00% | 61.00% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 6.46% | 6.80% | 6.06% | 34.80% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 27.60% |
| Total Liabilities | 6.46% | 6.80% | 6.06% | 62.40% |
| Net Worth | 93.54% | 93.20% | 93.94% | 37.60% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 98.22% | 98.23% | 98.28% | 0.00% |
| Selling, General & Administrative Expenses | 148.51% | 97.78% | 84.34% | 73.20% |
| Advertising Expenses | 18.54% | 11.44% | 8.45% | 2.40% |
| Profit Before Interest and Taxes | -50.29% | 0.60% | 18.59% | 2.70% |
| Main Ratios | ||||
| Current | 15.49 | 14.71 | 16.49 | 1.10 |
| Quick | 15.43 | 14.61 | 16.39 | 0.73 |
| Total Debt to Total Assets | 6.46% | 6.80% | 6.06% | 62.40% |
| Pre-tax Return on Net Worth | -58.21% | 1.15% | 35.34% | 3.00% |
| Pre-tax Return on Assets | -54.45% | 1.07% | 33.20% | 7.90% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | -50.29% | 0.45% | 13.86% | n.a |
| Return on Equity | -58.21% | 0.86% | 26.36% | n.a |
| Activity Ratios | ||||
| Inventory Turnover | 3.53 | 6.23 | 5.68 | n.a |
| Accounts Payable Turnover | 11.67 | 12.17 | 12.17 | n.a |
| Payment Days | 28 | 29 | 27 | n.a |
| Total Asset Turnover | 1.08 | 1.78 | 1.79 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.07 | 0.07 | 0.06 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $363,448 | $366,598 | $497,827 | n.a |
| Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.92 | 0.56 | 0.56 | n.a |
| Current Debt/Total Assets | 6% | 7% | 6% | n.a |
| Acid Test | 15.43 | 14.61 | 16.39 | n.a |
| Sales/Net Worth | 1.16 | 1.91 | 1.90 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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