1 When preparing financial forecast for the operations why do you have to

take into considerations the following –

Taxation, Superannuation, Accruing Staff Leave

Lovely Locks is a full service salon. We specialize in coloring and perms,

especially the new spiral perms. We also offer wedding specials, for the
bride, bridesmaids, and mothers of the bride and groom.
Description of your Company:
Service or Product:
λ Lovely Locks provides expert service in the following areas:
λ shampoo and conditioning
λ Haircuts
λ blow wave
λ Perms
λ Coloring
λ Styling
λ Straightening
λ Products
Market Analysis:
The Lovely Locks customers will primarily be working women, who need
to maintain a professional appearance for their employment. We will offer
them haircuts and coloring and perms.
Financial Plan:
Lovely Locks projected Profit and Loss:
Beginning investment: $10,000
Monthly income: $7500
Monthly expenses: $3500
Profit: $4000

Projected Cash Flow

We expect to manage cash flow over the next three years simply by the
growth of the cash flow of the business. The business will generate more
than enough cash flow to cover all of its expenses.

Cash
2 Projected Profit and Loss
The following table shows our very conservative profit and loss projections
for the next three years. The table includes the payments for all
independently contracted stylists and technicians, as well for all regularly
occurring supply expenses associated with service sales.
Profit and Loss
Financial Plan
Our goal is to be a profitable business beginning in the first month. The
business will not have to wait long for clients to learn about it since the
stylists will already have an existing client base.
The financials that are enclosed have a number of assumptions:
Revenues will grow at an annual rate of 15%, increasing 20% in November
and December due to a historical jump in revenues at this time of year. We
anticipate this increase to stay steady throughout the following year to
account for the normal flow of new clients coming into the salon.
We did not use cost of goods sold in our calculations of net service sales,
but included all related recurring expenses, such as payroll and supplies, in
the operating expenses area of the profit and loss table. The only direct
costs in the sales forecast are for projected product sales.
Product sales are a minimal part of our market. We are not quite sure how
much revenue will be derived from products, so we took a low-ball
approach and estimated sales of $800 a month. We are certain that in time
these services will be a large part of our revenue, but to err on the
conservative side, we estimate revenues from these services to be only
$1,500 a month for the first year.
To assure the start-up funds lender that the owners are financially stable, a
personal financial statement is enclosed illustrating other sources of income
that include interest and dividend income from investments ($2,840), salary
income ($29,658), and commission income ($15,000).

6.1 Break-even Analysis

The break-even analysis shows that the salon has a good balance of fixed
costs and sufficient sales strength to remain healthy. This calculation is
focused on service sales, and excludes costs related to product sales. Our
conservative forecast shows the salon just passing the break-even point
throughout most of the first year, but we expect actual sales to be higher.

Management Summary
Trend Setters will be organized and managed in a creative and innovative
fashion to generate very high levels of customer satisfaction, and to create a
working climate conducive to a high degree of personal development and
economic satisfaction for employees.
Training classes to help improve employee product knowledge and skills
will be conducted on a regular basis. As the business grows, the company
will consider offering an employee benefit package to include health and
vacation benefits for everyone.

Management Team
I have been a hairdresser for two years. I did diploma in hairdressing salon
management, and have quickly developed the trade skills that have led to
her success. I love dealing with people, and have the drive, ambition, and
discipline to manage the business and its employees.

Personnel Plan
The personnel plan calls for a receptionist who will greet customers and
receive payments for services and products. There will be five hair stylists.
Everyone but the receptionist will be contract workers, and will be paid a
sliding commission scale based on the amount of revenue created. Future
plans include the hiring of a hair technician as the business expands.
In the first year, assumptions are that there will only be three hair stylists,
until the business can build a reputation that will attract others to work
there.

Marketing Strategy
Our marketing strategy is a simple one: satisfied clients are our best
marketing tool. Pamphlets are distributed in local area and also advertised
as a display window. Most of our clients will be referrals from existing
clients. Our research has shown that word of mouth is the best advertising
for this type of business. We will, however, run specials throughout the
week. We will also ask clients for referrals, and reward them with
discounted or free services depending on the number of clients they bring.
We will also offer discounts to the new clients who have been referred.
Sales Forecast
We expect income to increase steadily over the next three years, as the
reputation of the salon, its stylists and services become apparent to the
general public. Second year revenues also anticipate the addition of one
new stylist.
Note that we list no direct cost of sales here for services, only for products,
since our service costs are more accurately tracked as regular monthly
expenses for supplies in the Profit and Loss table.

1
2 What are some of the Financial Performance Indicators use to monitor
the performance of the business?

1 What sort of Quality criteria’s and procedures should be maintained for

administrati
Products and Services
Trend Setters is considered an upscale full-service hair salon. We will offer a wide range
of services that include:
• Hair: cuts, relaxers, perms, colors, shampoo, conditioning, curling, reconstructing,
weaving, waving.
• Nails: manicures, pedicures, polish, sculptured nails.
• Skin Care: European facials, body waxing, massage.

Competitive Comparison
Trend Setters wants to set itself apart from other hair salons that may offer only one or
two types of services. Having come from such a salon, I has realized, from talking with
my clients, that they desire all of the services that we are proposing, but they remain
frustrated because they must get their hair done at one place, and nails done at another.
Although the focus of Trend Setters is hair services, we do wish to offer our clients the
convenience of these other services in one location.
There are a number of salons like ours, but they are mainly in the very high income parts
of MyTown and surrounding areas. We do not intend to compete with these so called
"Day Spas." We wish to offer a middle ground for those clients who can't quite afford
those high-end luxury salons.
Our business atmosphere will be a relaxing one where clients can kick back and be
pampered. Soft drinks will be offered to clients as they enter for service. Televisions will
be located in the waiting and hair-drying area area.
1

Marketing Strategy
Our marketing strategy is a simple one: satisfied clients are our best marketing tool. When a
leaves our business with a new look, he or she is broadcasting our name and quality to the pu
of our clients will be referrals from existing clients.
No major advertising campaigns are anticipated. Our research has shown that word of mouth
advertising for this type of business. We will, however, run specials throughout the week. We
ask clients for referrals, and reward them with discounted or free services depending on the n
clients they bring. We will also offer discounts to the new clients who have been referred. Th
plans for a lottery that will offer a free trip to, say, Cancun. A client would simply refer new c
us, and we will place a card in a box for each client he or she brings. The more they bring, th
chances they have of winning the trip.

Sales Forecast
The following table and charts show our projected sales. We expect income to increase stead
the next three years, as the reputation of the salon, its stylists and services become apparent t
general public. Second year revenues also anticipate the addition of one new stylist.
Note that we list no direct cost of sales here for services, only for products, since our service
more accurately tracked as regular monthly expenses for supplies in the Profit and Loss table

Sales Forecast
Sales Forecast

FY 1997
FY 1998
FY 1999
Sales

Owner
$49,600
$57,040
$65,596
Stylist #1
$49,600
$57,040
$65,596
Barber #1
$16,800
$19,320
$22,218
Stylist #2
$22,800
$25,622
$29,465
Stylist #3
$0
$22,000
$24,000
Nails and massage
$18,000
$20,000
$22,000
Product Sales
$9,600
$10,000
$11,000
Total Sales
$166,400
$211,022
$239,875

Direct Cost of Sales

FY 1997
FY 1998
FY 1999
Product Costs
$4,320
$4,300
$4,400
Other
$0
$0
$0
Subtotal Direct Cost of Sales
$4,320
$4,300
$4,400

Sales Monthly

Sales by Year

Management Summary
Trend Setters will be organized and managed in a creative and innovative fashion to generate
levels of customer satisfaction, and to create a working climate conducive to a high degree o
development and economic satisfaction for employees.
Training classes to help improve employee product knowledge and skills will be conducted o
basis. As the business grows, the company will consider offering an employee benefit packag
include health and vacation benefits for everyone.

Management Team
Stacey T. Spinale: Owner. Stacey has been a beautician for two years. A graduate of X Beaut
in 1994, she has quickly developed the trade skills that have led to her success. She loves de
people, and has the drive, ambition, and discipline to manage the business and its employees
career is her life -- her calling.
Frank D. Spinale, Jr.: Owner. Frank has a Bachelor's degree in Finance from the University o
MyTown. He has extensive experience managing people and businesses. He has worked as a
consultant for Company A., and he is the owner of a financial services company with over 12
and over $1.2 million under management.

5.2 Personnel Plan

The personnel plan calls for a receptionist who will greet customers and receive payments fo
and products. There will be five hair stylists, one barber, one nail technician, one facialist, an
massage therapist. Everyone but the receptionist will be contract workers, and will be paid a
commission scale based on the amount of revenue created. Future plans include the hiring of
technician as the business expands.
In the first year, assumptions are that there will only be three hair stylists, a barber, and part t
facial, and massage technician until the business can build a reputation that will attract others
there.

Personnel
Personnel Plan

FY 1997
FY 1998
FY 1999
Owner (Stylist)
$24,000
$25,000
$26,000
Receptionist
$14,400
$15,120
$15,876
Shampoo Tech
$8,000
$12,400
$13,000
Total People
0
0
0
 Total Payroll
$46,400
$52,520
$54,876

6.0 Financial Plan

Our goal is to be a profitable business beginning in the first month. The business will not have
to wait long for clients to learn about it since the stylists will already have an existing client
base.
The financials that are enclosed have a number of assumptions:
Revenues will grow at an annual rate of 15%, increasing 20% in November and December
due to a historical jump in revenues at this time of year. We anticipate this increase to stay
steady throughout the following year to account for the normal flow of new clients coming
into the salon. Estimates for sales revenue and growth are intentionally low, while anticipated
expenses are exaggerated to the high side to illustrate a worst case scenario.
We did not use cost of goods sold in our calculations of net service sales, but included all
related recurring expenses, such as payroll and supplies, in the operating expenses area of the
profit and loss table. The only direct costs in the sales forecast are for projected product sales.
Product sales are a minimal part of our market. We are not quite sure how much revenue will
be derived from products, so we took a low-ball approach and estimated sales of $800 a
month. Also in the sales projections table are services such as nails and massages. We are not
quite sure how much revenue these two services will generate. We are certain that in time
these services will be a large part of our revenue, but to err on the conservative side, we
estimate revenues from these services to be only $1,500 a month for the first year.
To assure the start-up funds lender that the owners are financially stable, a personal financial
statement is enclosed illustrating other sources of income that include interest and dividend
income from investments ($2,840), salary income ($29,658), and commission income
($15,000).

6.1 Break-even Analysis

The break-even analysis shows that Trend Setters has a good balance of fixed costs and
sufficient sales strength to remain healthy. This calculation is focused on service sales, and
excludes costs related to product sales. Our conservative forecast shows the salon just passing
the break-even point throughout most of the first year, but we expect actual sales to be higher.

Break-even Analysis

Break-even Analysis
Break-even Analysis
Monthly Revenue Break-even
$13,590

Assumptions:

Average Percent Variable Cost

3%
Estimated Monthly Fixed Cost
$13,237

6.2 Projected Profit and Loss

The following table shows our very conservative profit and loss projections for the next three
years. The table includes the payments for all independently contracted stylists and
technicians, as well for all regularly occurring supply expenses associated with service sales.

Profit and Loss

Pro Forma Profit and Loss

FY 1997
FY 1998
FY 1999
Sales
$166,400
$211,022
$239,875
Direct Costs of Goods
$4,320
$4,300
$4,400
Other
$0
$0
$0

------------
------------
------------
Cost of Goods Sold
$4,320
$4,300
$4,400

Gross Margin
$162,080
$206,722
$235,475
Gross Margin %
97.40%
97.96%
98.17%

Expenses

Payroll
$46,400
$52,520
$54,876
Marketing/Promotion
$22,800
$24,000
$26,000
Depreciation
$8,146
$8,146
$8,146
Leased Equipment
$0
$0
$0
Utilities
$4,200
$4,200
$4,200
Insurance
$1,200
$1,200
$1,200
Rent
$22,740
$22,740
$22,740
Independently Contracted Stylists
$40,400
$55,000
$69,000
Supplies
$6,000
$6,000
$6,000
Payroll Taxes
$6,960
$7,878
$8,231
Other
$0
$0
$0

------------
------------
------------
Total Operating Expenses
$158,846
$181,684
$200,393

Profit Before Interest and Taxes

$3,234
$25,038
$35,082
EBITDA
$11,380
$33,184
$43,228
Interest Expense
$0
$0
$0
Taxes Incurred
$911
$7,011
$9,881

Net Profit
$2,323
$18,027
$25,200
Net Profit/Sales
1.40%
8.54%
10.51%

6.3 Projected Cash Flow

We expect to manage cash flow over the next three years simply by the growth of the cash
flow of the business. The business will generate more than enough cash flow to cover all of its
expenses.

Cash

Cash Flow
Pro Forma Cash Flow

FY 1997
FY 1998
FY 1999
Cash Received
Cash from Operations

Cash Sales
$166,400
$211,022
$239,875
Subtotal Cash from Operations
$166,400
$211,022
$239,875

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
$166,400
$211,022
$239,875

Expenditures
FY 1997
FY 1998
FY 1999

Expenditures from Operations

Cash Spending
$46,400
$52,520
$54,876
Bill Payments
$100,334
$130,649
$150,064
Subtotal Spent on Operations
$146,734
$183,169
$204,940

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
$0
$0
Subtotal Cash Spent
$158,734
$195,169
$216,940

Net Cash Flow

$7,666
$15,853
$22,935
Cash Balance
$8,166
$24,019
$46,953

6.4 Projected Balance Sheet

As shown in the balance sheet, we expect a healthy growth in net worth.

Balance Sheet
Pro Forma Balance Sheet

FY 1997
FY 1998
FY 1999
Assets

Current Assets

Cash
$8,166
$24,019
$46,953
Other Current Assets
$600
$600
$600
Total Current Assets
$8,766
$24,619
$47,553

Long-term Assets
Long-term Assets
$59,500
$59,500
$59,500
Accumulated Depreciation
$8,146
$16,292
$24,438
Total Long-term Assets
$51,354
$43,208
$35,062
Total Assets
$60,120
$67,827
$82,615

Liabilities and Capital

FY 1997
FY 1998
FY 1999

Current Liabilities

Accounts Payable
$9,197
$10,876
$12,465
Current Borrowing
$0
$0
$0
Other Current Liabilities
$0
$0
$0
Subtotal Current Liabilities
$9,197
$10,876
$12,465

Long-term Liabilities
$49,917
$37,917
$25,917
Total Liabilities
$59,114
$48,793
$38,382

Paid-in Capital
$500
$500
$500
Retained Earnings
($1,817)
$506
$18,533
Earnings
$2,323
$18,027
$25,200
Total Capital
$1,006
$19,033
$44,233
Total Liabilities and Capital
$60,120
$67,827
$82,615
Net Worth
$1,006
$19,033
$44,233

6.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the
Standard Industrial Classification (SIC) Index code 7231, Beauty Shops, are shown for
comparison.

Ratios
Ratio Analysis

FY 1997
FY 1998
FY 1999
Industry Profile
Sales Growth
0.00%
26.82%
13.67%
7.50%

Percent of Total Assets

Other Current Assets

1.00%
0.88%
0.73%
36.10%
Total Current Assets
14.58%
36.30%
57.56%
52.40%
Long-term Assets
85.42%
63.70%
42.44%
47.60%
Total Assets
100.00%
100.00%
100.00%
100.00%

Current Liabilities
15.30%
16.04%
15.09%
31.90%
Long-term Liabilities
83.03%
55.90%
31.37%
26.80%
Total Liabilities
98.33%
71.94%
46.46%
58.70%
Net Worth
1.67%
28.06%
53.54%
41.30%

Percent of Sales
Sales
100.00%
100.00%
100.00%
100.00%
Gross Margin
97.40%
97.96%
98.17%
0.00%
Selling, General & Administrative Expenses
98.09%
92.51%
90.52%
73.40%
Advertising Expenses
2.08%
1.67%
1.60%
2.50%
Profit Before Interest and Taxes
1.94%
11.87%
14.62%
3.20%

Main Ratios

Current
0.95
2.26
3.82
1.79
Quick
0.95
2.26
3.82
1.34
Total Debt to Total Assets
98.33%
71.94%
46.46%
58.70%
Pre-tax Return on Net Worth
321.52%
131.55%
79.31%
5.20%
Pre-tax Return on Assets
5.38%
36.91%
42.46%
12.50%

Additional Ratios
FY 1997
FY 1998
FY 1999

Net Profit Margin

1.40%
8.54%
10.51%
n.a
Return on Equity
230.94%
94.72%
56.97%
n.a

Activity Ratios
Accounts Payable Turnover
11.91
12.17
12.17
n.a
Payment Days
27
28
28
n.a
Total Asset Turnover
2.77
3.11
2.90
n.a

Debt Ratios

Debt to Net Worth

58.77
2.56
0.87
n.a
Current Liab. to Liab.
0.16
0.22
0.32
n.a

Liquidity Ratios
Net Working Capital
($431)
$13,742
$35,088
n.a
Interest Coverage
0.00
0.00
0.00
n.a

Additional Ratios

Assets to Sales
0.36
0.32
0.34
n.a
Current Debt/Total Assets
15%
16%
15%
n.a
Acid Test
0.95
2.26
3.82
n.a
Sales/Net Worth
165.43
11.09
5.42
n.a
Dividend Payout
0.00
0.00

.2 Projected Profit and Loss

The following table shows our very conservative profit and loss projections for the next three
The table includes the payments for all independently contracted stylists and technicians, as w
regularly occurring supply expenses associated with service sales.

Profit and Loss

Pro Forma Profit and Loss

FY 1997
FY 1998
FY 1999
Sales
$166,400
$211,022
$239,875
Direct Costs of Goods
$4,320
$4,300
$4,400
Other
$0
$0
$0

------------
------------
------------
Cost of Goods Sold
$4,320
$4,300
$4,400

Gross Margin
$162,080
$206,722
$235,475
Gross Margin %
97.40%
97.96%
98.17%

Expenses

Payroll
$46,400
$52,520
$54,876
Marketing/Promotion
$22,800
$24,000
$26,000
Depreciation
$8,146
$8,146
$8,146
Leased Equipment
$0
$0
$0
Utilities
$4,200
$4,200
$4,200
Insurance
$1,200
$1,200
$1,200
Rent
$22,740
$22,740
$22,740
Independently Contracted Stylists
$40,400
$55,000
$69,000
Supplies
$6,000
$6,000
$6,000
Payroll Taxes
$6,960
$7,878
$8,231
Other
$0
$0
$0

------------
------------
------------
Total Operating Expenses
$158,846
$181,684
$200,393

Profit Before Interest and Taxes

$3,234
$25,038
$35,082
EBITDA
$11,380
$33,184
$43,228
Interest Expense
$0
$0
$0
Taxes Incurred
$911
$7,011
$9,881

Net Profit
$2,323
$18,027
$25,200
Net Profit/Sales
1.40%
8.54%
10.51%

6.3 Projected Cash Flow

We expect to manage cash flow over the next three years simply by the growth of the cash fl
business. The business will generate more than enough cash flow to cover all of its expenses.

Cash

Cash Flow
Pro Forma Cash Flow

FY 1997
FY 1998
FY 1999
Cash Received

Cash from Operations

Cash Sales
$166,400
$211,022
$239,875
Subtotal Cash from Operations
$166,400
$211,022
$239,875

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
$166,400
$211,022
$239,875
Expenditures
FY 1997
FY 1998
FY 1999

Expenditures from Operations

Cash Spending
$46,400
$52,520
$54,876
Bill Payments
$100,334
$130,649
$150,064
Subtotal Spent on Operations
$146,734
$183,169
$204,940

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
$0
$0
Subtotal Cash Spent
$158,734
$195,169
$216,940

Net Cash Flow

$7,666
$15,853
$22,935
Cash Balance
$8,166
$24,019
$46,953

6.4 Projected Balance Sheet

As shown in the balance sheet, we expect a healthy growth in net worth.

Balance Sheet
Pro Forma Balance Sheet

FY 1997
FY 1998
FY 1999
Assets

Current Assets

Cash
$8,166
$24,019
$46,953
Other Current Assets
$600
$600
$600
Total Current Assets
$8,766
$24,619
$47,553

Long-term Assets

Long-term Assets
$59,500
$59,500
$59,500
Accumulated Depreciation
$8,146
$16,292
$24,438
Total Long-term Assets
$51,354
$43,208
$35,062
Total Assets
$60,120
$67,827
$82,615

Liabilities and Capital

FY 1997
FY 1998
FY 1999

Current Liabilities

Accounts Payable
$9,197
$10,876
$12,465
Current Borrowing
$0
$0
$0
Other Current Liabilities
$0
$0
$0
Subtotal Current Liabilities
$9,197
$10,876
$12,465

Long-term Liabilities
$49,917
$37,917
$25,917
Total Liabilities
$59,114
$48,793
$38,382

Paid-in Capital
$500
$500
$500
Retained Earnings
($1,817)
$506
$18,533
Earnings
$2,323
$18,027
$25,200
Total Capital
$1,006
$19,033
$44,233
Total Liabilities and Capital
$60,120
$67,827
$82,615

Net Worth
$1,006
$19,033
$44,233

6.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on th
Industrial Classification (SIC) Index code 7231, Beauty Shops, are shown for comparison.

Ratios
Ratio Analysis

FY 1997
FY 1998
FY 1999
Industry Profile
Sales Growth
0.00%
26.82%
13.67%
7.50%

Percent of Total Assets

Other Current Assets

1.00%
0.88%
0.73%
36.10%
Total Current Assets
14.58%
36.30%
57.56%
52.40%
Long-term Assets
85.42%
63.70%
42.44%
47.60%
Total Assets
100.00%
100.00%
100.00%
100.00%
Current Liabilities
15.30%
16.04%
15.09%
31.90%
Long-term Liabilities
83.03%
55.90%
31.37%
26.80%
Total Liabilities
98.33%
71.94%
46.46%
58.70%
Net Worth
1.67%
28.06%
53.54%
41.30%

Percent of Sales

Sales
100.00%
100.00%
100.00%
100.00%
Gross Margin
97.40%
97.96%
98.17%
0.00%
Selling, General & Administrative Expenses
98.09%
92.51%
90.52%
73.40%
Advertising Expenses
2.08%
1.67%
1.60%
2.50%
Profit Before Interest and Taxes
1.94%
11.87%
14.62%
3.20%

Main Ratios

Current
0.95
2.26
3.82
1.79
Quick
0.95
2.26
3.82
1.34
Total Debt to Total Assets
98.33%
71.94%
46.46%
58.70%
Pre-tax Return on Net Worth
321.52%
131.55%
79.31%
5.20%
Pre-tax Return on Assets
5.38%
36.91%
42.46%
12.50%

Additional Ratios
FY 1997
FY 1998
FY 1999

Net Profit Margin

1.40%
8.54%
10.51%
n.a
Return on Equity
230.94%
94.72%
56.97%
n.a

Activity Ratios

Accounts Payable Turnover

11.91
12.17
12.17
n.a
Payment Days
27
28
28
n.a
Total Asset Turnover
2.77
3.11
2.90
n.a

Debt Ratios

Debt to Net Worth

58.77
2.56
0.87
n.a
Current Liab. to Liab.
0.16
0.22
0.32
n.a

Liquidity Ratios

Net Working Capital

($431)
$13,742
$35,088
n.a
Interest Coverage
0.00
0.00
0.00
n.a

Additional Ratios

Assets to Sales
0.36
0.32
0.34
n.a
Current Debt/Total Assets
15%
16%
15%
n.a
Acid Test
0.95
2.26
3.82
n.a
Sales/Net Worth
165.43
11.09
5.42
n.a
Dividend Payout
0.00
0.00
0.00

Projected Cash Flow

We expect to manage cash flow over the next three years simply by the growth of the cash fl
business. The business will generate more than enough cash flow to cover all of its expenses.
Cash

Cash Flow
Pro Forma Cash Flow

FY 1997
FY 1998
FY 1999
Cash Received

Cash from Operations

Cash Sales
$166,400
$211,022
$239,875
Subtotal Cash from Operations
$166,400
$211,022
$239,875

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
$166,400
$211,022
$239,875

Expenditures
FY 1997
FY 1998
FY 1999

Expenditures from Operations

Cash Spending
$46,400
$52,520
$54,876
Bill Payments
$100,334
$130,649
$150,064
Subtotal Spent on Operations
$146,734
$183,169
$204,940

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
$0
$0
Subtotal Cash Spent
$158,734
$195,169
$216,940

Net Cash Flow

$7,666
$15,853
$22,935
Cash Balance
$8,166
$24,019
$46,953

6.4 Projected Balance Sheet

As shown in the balance sheet, we expect a healthy growth in net worth.

Balance Sheet
Pro Forma Balance Sheet

FY 1997
FY 1998
FY 1999
Assets

Current Assets

Cash
$8,166
$24,019
$46,953
Other Current Assets
$600
$600
$600
Total Current Assets
$8,766
$24,619
$47,553

Long-term Assets

Long-term Assets
$59,500
$59,500
$59,500
Accumulated Depreciation
$8,146
$16,292
$24,438
Total Long-term Assets
$51,354
$43,208
$35,062
Total Assets
$60,120
$67,827
$82,615

Liabilities and Capital

FY 1997
FY 1998
FY 1999

Current Liabilities
Accounts Payable
$9,197
$10,876
$12,465
Current Borrowing
$0
$0
$0
Other Current Liabilities
$0
$0
$0
Subtotal Current Liabilities
$9,197
$10,876
$12,465

Long-term Liabilities
$49,917
$37,917
$25,917
Total Liabilities
$59,114
$48,793
$38,382

Paid-in Capital
$500
$500
$500
Retained Earnings
($1,817)
$506
$18,533
Earnings
$2,323
$18,027
$25,200
Total Capital
$1,006
$19,033
$44,233
Total Liabilities and Capital
$60,120
$67,827
$82,615

Net Worth
$1,006
$19,033
$44,233

6.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on th
Industrial Classification (SIC) Index code 7231, Beauty Shops, are shown for comparison.

Ratios
Ratio Analysis

FY 1997
FY 1998
FY 1999
Industry Profile
Sales Growth
0.00%
26.82%
13.67%
7.50%

Percent of Total Assets

Other Current Assets
1.00%
0.88%
0.73%
36.10%
Total Current Assets
14.58%
36.30%
57.56%
52.40%
Long-term Assets
85.42%
63.70%
42.44%
47.60%
Total Assets
100.00%
100.00%
100.00%
100.00%

Current Liabilities
15.30%
16.04%
15.09%
31.90%
Long-term Liabilities
83.03%
55.90%
31.37%
26.80%
Total Liabilities
98.33%
71.94%
46.46%
58.70%
Net Worth
1.67%
28.06%
53.54%
41.30%

Percent of Sales

Sales
100.00%
100.00%
100.00%
100.00%
Gross Margin
97.40%
97.96%
98.17%
0.00%
Selling, General & Administrative Expenses
98.09%
92.51%
90.52%
73.40%
Advertising Expenses
2.08%
1.67%
1.60%
2.50%
Profit Before Interest and Taxes
1.94%
11.87%
14.62%
3.20%

Main Ratios
Current
0.95
2.26
3.82
1.79
Quick
0.95
2.26
3.82
1.34
Total Debt to Total Assets
98.33%
71.94%
46.46%
58.70%
Pre-tax Return on Net Worth
321.52%
131.55%
79.31%
5.20%
Pre-tax Return on Assets
5.38%
36.91%
42.46%
12.50%

Additional Ratios
FY 1997
FY 1998
FY 1999

Net Profit Margin

1.40%
8.54%
10.51%
n.a
Return on Equity
230.94%
94.72%
56.97%
n.a

Activity Ratios

Accounts Payable Turnover

11.91
12.17
12.17
n.a
Payment Days
27
28
28
n.a
Total Asset Turnover
2.77
3.11
2.90
n.a

Debt Ratios

Debt to Net Worth

58.77
2.56
0.87
n.a
Current Liab. to Liab.
0.16
0.22
0.32
n.a

Liquidity Ratios

Net Working Capital

($431)
$13,742
$35,088
n.a
Interest Coverage
0.00
0.00
0.00
n.a

Additional Ratios

Assets to Sales
0.36
0.32
0.34
n.a
Current Debt/Total Assets
15%
16%
15%
n.a
Acid Test
0.95
2.26
3.82
n.a
Sales/Net Worth
165.43
11.09
5.42
n.a
Dividend Payout
0.00
0.00
0.00
n.a
TPA’s advice on business plans has recently been published across 2 issues
of the Forum for Private Business news letter. Please scroll down to read
the entire article.
We’ll need to see your business plan…my what?
As marketing and business strategists, David Perry and John Thornton of
Warrington based Thornton Perry Associates have seen a fair few business
plans in their time; they have also written a few…
Whether you are starting out, looking at an acquisition or looking for
expansion finance, the chances are that along the way someone is going to
ask for a business plan. But just what are they expecting to see? There are
many Internet sites offering ready made business plans; “insert your
company name here and press print”, but the end result is seldom of any
substance. Your accountant will produce a set of figures for you but is
unlikely to include more than a page of explanation which you will probably
have to write for them.
Everybody has a different view on what is required and exactly what should
be included. This can range from a few pages of hastily scribbled figures to
a glossy 50 page sales brochure. We have seen both ends of the scale: a 200
page rambling pile of paper with figures showing offices in America and
Japan in month two to a blank sheet of paper and the vaguest of ideas. You
need to start with a clear vision, but that’s perhaps a subject for another
time...
As in all business, the key is to know your audience.
If your existing bank wants to know that you have given some thought to
why you need a few thousand extra and how and when you expect to pay it
back, then a simple financial forecast may be all that is required.
If, on the other hand, you are looking to raise a substantial investment from
business angels, equity partners or other investors the document has to sell
the proposition and demonstrate that you know what you are doing. In some
fields potential investors, particularly in America, gauge the quality of the
plan by weight; if it is less than half a ton it is not worth looking at. In all
instances no-one is going to read the whole thing straight away. Unless the
first couple of pages make them interested and confident that the rest is
worth reading it will simply not be read and your killer argument on page
36 will be overlooked.
If you are looking for “Angel” finance the sexiness of the market can often
be more important than the potential return. A wealthy potential investor
with an interest in fashion may well be more likely to invest in the launch of
your niche jewellery range that in a high return web-based industrial
insurance project despite bigger potential returns. Your plan has to be as
attractive as your product. Irrespective of the style and market, your
business plan should include the following:
Executive summary
This is the first part to be read and the last part to be written. Imagine you
have 30 seconds to pitch an idea to a movie producer in Hollywood or 20
seconds on the X in front of Simon Cowell.

Once the plan has been completed it should be summarised into a punchy
one-pager. It should include a line to the effect of, “finance of ｣x is required
to fund this project, ｣y of which will be provided by the directors.” OK a
bit scary, but they need to see that you are willing to put your own cash in
even if the funding you are providing is only on the balance sheet. They also
need to know right at the beginning just how much cash you want. The rest
explains why.

If the project is complex or the investment multi-million a separate synopsis

document can be produced. This needs to be an overview in two or three
pages which can be hawked around potential investors to see if there is any
interest before hitting them with the whole caboodle.
It will cut down the print cost if nothing else.

Objectives
Once again this is a summary of your aims. It should explain exactly and
clearly what you are setting out to do and where you anticipate the plan will
get you.
By this time the reader should know what you are about, whether you are
an engineer or a hairdresser.

Product / concept description

Whether you are launching a new product or looking to buy an existing
business the next section should briefly explain what it is or what it does;
don’t expect them to know just because you do.
Don’t get hung up on confidentiality. If you want someone to give you their
money you have to trust them: but make sure they sign a full non-disclosure
agreement first!
If you are looking to buy an existing business a brief history of the business
should be included to set the scene and explain how it can be improved
under your leadership.

Principal Directors
Often overlooked but of vital importance. Confidence is needed that you
and your partners have the necessary skills and experience to pull it off. If
you have a great plan for mining rocks on Mars but only have experience of
flower arranging you are going to struggle to convince a backer!
Personal profiles should be to the point and emphasise relevant experience
and qualifications. Often the mistake is made of simply including a CV. You
are not applying for a job and no-one cares how many o-levels you have!
Readers will interpret a CV in their own way. Do the job for them. Write as
if you are talking about someone else, someone you admire.

If your plan is to open a recording studio:

Don’t write: “I went to Manchester poly to study medicine but dropped out
to join a band. I wasn’t very good so I worked on the mixing desk.”
Do write: “After studying medicine at Manchester, John launched a
successful career in the music industry where he gained valuable experience
in digital mixing and production.”
Include qualifications and memberships where relevant and don’t be shy of
mentioning other attributes if they give you a greater reason to be a success.
If you are planning an organic green grocer, mentioning your time spent
working on your allotment may be more relevant than your degree in music.
Where there are a number of directors, try to demonstrate a balance of
abilities such as product and market awareness, salesmanship and book
keeping.
Mention age if it is important. A mixture of youthful energy and experience
is handy if it is a long term project and demonstrates that the directors
won’t be in their dotage before it is completed.
Investors expect directors to be hands-on but if you are going to oversee
things and employ a specialist to run the day to day business include their
credentials here as well. It is important for an investor to know that the
business is going to be run by competent people.
The Market
Let readers know you have thought about it. This section can be quite big
depending on your sector. Look at every market associated with your
business. Show the market sizes but most importantly demonstrate that it is
expanding. If it isn’t why do you want to get into it? Throw everything
including the kitchen sink into this bit. It shows that your business has
massive potential and you have thought of everything.
Unless there is a good reason to avoid it, such as it’s a dog walking
business, include market statistics on the rest of the world not just Britain or
your area. In an Internet age there are not many products or services that
cannot reach a global market. (You could franchise your dog walking
business model to say, Italy, where dog owner ship is very high!) You don’t
have to plan to conquer the world in the first year but it demonstrates that
potential can be much greater in the future. Even if you are a fruit and veg
shop potential changes in supply from overseas is relevant.
Lots of pie charts and diagrams are always useful. They add colour and
break up a dull read. Include charts and tables on the socio-demographic
profile of your customer base. It shows that you understand who your
customer is.
Marketing
Once you have demonstrated the market for your business you can then go
on to explain how you intend to get to it.
Cover all aspects but make sure you don’t forget PR and on-line. Include a
section on launch marketing explaining exactly how you expect people to
immediately know what you are doing.
If you have identified multiple markets explain your marketing campaign for
each of them.
Summarise your marketing activities in a chart showing markets, activities
and phases. This will effectively be your marketing plan.
Administration and procedures
Explain how your business will be run. Include a big and complex business
process flow chart. It is unlikely that anyone will go through it but it has
two advantages: It looks like you know what you are doing and it helps you
understand what you are doing too!
Financial factors
At last the figures! Summarise key ratios and funding requirements. Key
ratios are gross and net profit and most importantly ROI (Return on
Investment). Depending on your industry you may want to show other
ratios such as staff to turnover. Make sure that these are at least in line with
the industry norm though.
If you like you can summarise the 3 year P&L and cash flow projections
into a simple graph as long as the net profit line eventually goes upwards
and the cash flow eventually gets above the X axis.
At least three years projected profit and loss and cash flow projections
broken down by month will be needed. If it is a long term project totals for
years four and beyond should be acceptable. This is similar to the “few
pages of scribbled figures” plan but much more impressive as an appendix
to a fully thought out document.
Accountants will go straight to this so it has to be readable. As the
document is likely to be portrait, a monthly P&L is unlikely to fit easily
across a page. It should be attached therefore as a landscape spreadsheet.
Make sure you can justify the figures! If you haven’t created them yourself
ensure that you fully understand why your light heat and power costs have
increase in year 2 (Anticipation of a 25% increase in energy costs.) Equally
important; make sure that nothing has been left out which could embarrass
you later.
Presentation
Presentation is everything. Pages should be numbered showing page x of y
and sections should be indexed with sub sections where required. It’s not a
legal document so don’t get carried away and number each paragraph
though. Include a table of contents between the cover and the executive
summary.
When you have done all the words and figures and checked and re-checked
them think about your audience and how it will look to them.
Spend some time and thought on the presentation of the plan and don’t
forget the front cover. Depending on your audience it could be either bright
and glamorous or efficient and businesslike. Either way a splash of colour
makes it stand out on a desk.
Don’t cut costs on printing. Converting a word document to an acrobat file
will make the print that bit crisper. Invest in decent paper; it adds to the
weight as well as the quality.
Have it ring bound with a cardboard back and an acetate front. This means
it can be read easily and opened out flat but it does mean that you can’t add
or replace pages so check it again before you produce lots of copies.
Finally don’t forget that a business plan isn’t a business! You now have to
go out and do it. If all this is overwhelming or you don’t feel sufficiently
creative you can always get someone else to research and write it for you.
As I said at the beginning we’ve written a few in our time…

Start-up

Requirements

Start-up Expenses
Rent deposit $1,817
Other $0
Total Start-up $1,817
Expenses

Start-up Assets
Cash Required $500
Other Current $600
Assets
Long-term Assets $59,500
Total Assets $60,600

Total $62,417
Requirements

Start-up Funding
Start-up Expenses to Fund$1,817
Start-up Assets to Fund $60,600
Total Funding Required $62,417

Objectives

1. Achieve $31,000 in sales the third month after opening by performing 14 services per day.

2. Achieve $62,550 in sales the six month after opening by performing 29 services per day.

3. Have a local client return rate of 90% by the end of the first six months.

4. Become an established community Spa destination by the end of the first 12 months.

5. Perform 53 services per day by the end of the first year.

1.2 Mission

Our mission is to run a profitable business by providing high-end therapeutic massage and aesthetician services in a caring, up
professional environment. We offer massage in a variety of styles - traditional Swedish Massage, Sports Massage, Deep Tissue
Massage, Hot Stone Massage, Reflexology, and others. Our licensed aestheticians offer the latest in skin treatments, body treat
anti-aging therapies.

Our goal is to tailor the client's experience based on initial interview information, as well as feedback during the treatments, to
client's comfort and satisfaction, and to increase repeat business. We are mindful of the overall experience - using only the fine
lotions, beauty treatments and aromatherapies. Special lighting, music, decor, and textiles are used throughout the spa to comp
comfortable, plush environment and enhance the client's overall spa experience.

1.3 Keys to Success

 1 Marketing, Marketing, Marketing - Owner is a proven, 15-year sales executive. Marketing will be
strength to our success and a huge competitive edge.
2 Professionalism: Which includes everything from maintaining confidentiality, to hiring the very best
Aestheticians.
3 Individual Attention: Each client's experience will be tailored to his or her preference.
4 Repeat business/Recommendations: giving the kind of service that brings people back for regular
and encourages clients to recommend us to friends, and other health professionals to recommend
5 Unique Treatments: We have the latest in techniques with the best products from around the world
6 Fantastic Location: Freeway County.

A well-worded objective will be Specific, Measurable, Attainable/Achievable, Realistic and T

bound (SMART).
An example of an objective statement might be to "upgrade the helpdesk telephone system b
December 31 to achieve average client wait times of no more than two minutes".
• Note that the objective is much more concrete and specific than the goal statement.
• The objective is measurable in terms of the average client wait times the new phone s
is trying to achieve.
• We must assume that the objective is achievable and realistic.
• The objective is time-bound, and should be completed by December 31.

While the existence of a shared mission is extremely useful, many strategy specialists
question the requirement for a written mission statement. However, there are many
models of strategic planning that start with mission statements, so it is useful to examine
them here.
• A Mission statement tells you the fundamental purpose of the organization. It
concentrates on the present. It defines the customer and the critical processes.
It informs you of the desired level of performance.
• A Vision statement outlines what the organization wants to be. It concentrates
on the future. It is a source of inspiration. It provides clear decision-making
criteria.
Many people mistake vision statement for mission statement. The Vision describes a
future identity while the Mission serves as an ongoing and time-independent guide. The
Mission describes why it is important to achieve the Vision. A Mission statement defines
the purpose or broader goal for being in existence or in the business and can remain the
same for decades if crafted

Hairdressers usually work in very busy hair salons and spend a lot of time on their feet. Working hours often include
a substantial amount of overtime and weekend work. Basic duties of a hairdresser include cutting, colouring and
blow-drying hair. Hairdressers also advise clients on how to care for their hair and suggest which products to use
according to the type and condition of the hair. They also style hair for special events like weddings or gala evenings.
In this career one needs a good understanding of skin types to avoid possible reactions to chemicals, such as those
used in colouring products, as well as a good knowledge of health and hygiene regulations. Hairdressers who run
their own business need to have general bookkeeping and management skills.

The career of a somatologist covers many different aspects and avenues. This can make it a very exciting career
choice for those of you who get bored easily. Somatologists have a thorough knowledge of different skin types, as
well as which skin care products are suitable for each client. They also give massage and body treatments, remove
unwanted hair, tint eyelashes and eyebrows, give manicures and pedicures, as well as offer many other treatments
such as waxing. Most somatologists work in clean, well-lit beauty clinics. Somatologists will also need to learn
certain skills if, for example, working with electrical equipment such as electrolysis machines for hair removal.

Make-up artists need to have a thorough

To create a profitable restaurant with an exciting atmosphere, great food, and

excellent service where people truly enjoy coming to eat. To provide a safe,
healthy, and rewarding workplace for our employees."

"Growing from strength to strength, XXX is dedicated to improving the quality of life, making it better,
safer and easier."
-- Submitted by Shaniz

"To provide high quality products that combine performance with value pricing, while establishing a
successful relationship with our customers and our suppliers.
To constantly strive to meet or exceed our customer needs and expectations of price, service, and
selection. To this end, we will perform periodic reviews of the marketplace to improve our offerings.
To stay ahead of the competition by innovating new products and services based on the needs of our
customers and market demand."

OUR MISSION IS TO MAXIMIZE CUSTOMER AND SHAREHOLDER VALUE THROUGH

WORLD CLASS MANUFACTURING PRACTICES: CONTINUALLY STRIVING FOR
EXCELLENCE IN THE PRODUCTS AND SERVICES WE PROVIDE. or OUR MISSION IS TO
LEAD BY EXAMPLE THROUGH A COMMITMENT THAT EMPOWERS THE ORGANIZATION
AT EVERY LEVEL TO STRIVE FOR THE HIGHEST LEVELS OF QUALITY, CUSTOMER CARE
AND SHAREHOLDER VALUE."

For a restaurant: "Our restaurant is a place where people come to relax, have a good time, and enjoy a
great meal. From the moment our customers walk in the door, they are greeted by a warm atmosphere,
subtle music, and friendly and courteous staff.

We cater to large groups that are out to have fun, as well as romantic dinners for people celebrating a
special occasion. The restaurant is packed full of customers, and yet we efficiently avoid long delays
while they are being seated and while their food is prepared.

The lighting, table arrangements, atmosphere, and decorations all encourage our customers to relax, let
go of their concerns, and open up to new taste sensations. We provide exceptional service all night long.

When they are done, we take care of their check quickly and efficiently. They leave happy, satisfied, but
not overly bloated or full. They leave with the desire of just one more bite of our wonderful food."

"In every single act I seek to

Within the next 12 months evolve the existing method of service into an environment that:

Promotes and nurtures service excellence.

Builds and maintains a customer-oriented culture.

Understands that service excellence at the front lines has to start with the concept of service excellence
at the level of top management.

Acknowledge that the service excellence concept must be a key part of the very structure and operation
of the organization.

Understands that people and systems in the organization must be constantly tuned to customer needs
and to management's evolving concept of service excellence."

"The classroom is on

Those who are employed in salon manager jobs may perform some or all of the
following tasks:
• determine the short and long term goals of the salon
• define the actions that will best achieve the goals set
• delegate tasks to personnel
• demonstrate and reinforce excellent customer service
• oversee the daily operations of the salon
• manage and monitor all areas of salon operations
• deal with the clients' special requests
• hire and train new employees
• procure supplies and equipment
• motivate employees to be productive
• ensure effective management of resources
• answer client queries on salon services
• maintain cleanliness of equipment and work place
• manage and monitor all computer inputs and client databases
• implement and reinforce safety measures in the work place
• ensure client satisfaction

Cover Sheet:

Lovely Locks is a full service salon. We specialize in coloring and perms, especially
the new spiral perms. We also offer wedding specials, for the bride, bridesmaids, and
mothers of the bride and groom. We have nail technicians in the salon who offer a full
spectrum of acrylics and manicures. Check our web site, www.LovelyLocks.com for
our monthly specials.

Description of your Company:

Susie Hairstyler owns lovely Locks. Located at 1111 Main Street, Your Town, State,
Zip. Business has been at this location since January 2003. Phone number is XXX-
XXX-XXXX. Fax number is XXX-XXX-XXXX. Email address is
Susie@yahoo.com.

Service or Product:

Lovely Locks provides expert service in the following areas:

• Haircuts

• Perms

• Coloring

• Styling

• Manicures and Pedicures

• Facials and skin care products

Market Analysis:

The Lovely Locks customers will primarily be working women, who need to maintain
a professional appearance for their employment. We will offer them total body care,
from the top of their head, with haircuts and coloring and perms, to their toes, with
pedicures.

Plan and Follow Through:

Lovely Locks management will be Susie Hairstylist, and an assistant manager, and a
part time bookkeeper.

At our location, hairdressers will lease five stations on a monthly basis. Four stations
will be leased on a monthly basis by nail technicians.

Susie Hairstylist has a huge following of customers and will use one station
exclusively for her clients.

E-commerce:

Lovely Locks has a website: www.LovelyLocks.com. It is updated each month with

articles about hairstyles, the latest hot products, and the current “sale”.

Financial Plan:

Lovely Locks projected Profit and Loss:

Beginning investment: $10,000

Monthly income: $7500

Monthly expenses: $3500

Profit: $4000