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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.

Spa health club business plan, financial plan chart image

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.

Spa health club business plan, financial plan chart image

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.

Spa health club business plan, financial plan chart image

Spa health club business plan, financial plan chart image

Spa health club business plan, financial plan chart image

Spa health club business plan, financial plan chart image

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.

Spa health club business plan, financial plan chart image

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