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Table of Contents

1.0 Executive Summary.....................................................................................................................1

Chart: Highlights...........................................................................................................................2
1.1 Mission...........................................................................................................................................2
1.2 Keys to Success.........................................................................................................................2
1.3 Objectives....................................................................................................................................2
2.0 Company Summary......................................................................................................................3
2.1 Start-up Summary....................................................................................................................3
Table: Start-up Funding..............................................................................................................3
Chart: Start-up..............................................................................................................................5
Table: Start-up...............................................................................................................................5
2.2 Company Ownership................................................................................................................5
3.0 Products and Services.................................................................................................................6
4.0 Market Analysis Summary.........................................................................................................6
4.1 Market Segmentation..............................................................................................................6
Chart: Market Analysis (Pie).....................................................................................................7
Table: Market Analysis................................................................................................................7
4.2 Target Market Segment Strategy........................................................................................7
4.3 Service Business Analysis......................................................................................................8
4.3.1 Competition and Buying Patterns...............................................................................8
5.0 Strategy and Implementation Summary.............................................................................8
5.1 Competitive Edge......................................................................................................................9
5.2 Marketing Strategy...................................................................................................................9
5.3 Sales Strategy..........................................................................................................................10
5.3.1 Sales Forecast..................................................................................................................10
Table: Sales Forecast.............................................................................................................10
Chart: Sales Monthly.............................................................................................................11
Chart: Sales by Year..............................................................................................................12
6.0 Web Plan Summary....................................................................................................................12
7.0 Management Summary.............................................................................................................12
7.1 Personnel Plan..........................................................................................................................13
Table: Personnel..........................................................................................................................13
8.0 Financial Plan................................................................................................................................13
8.1 Important Assumptions........................................................................................................14
Table: General Assumptions...................................................................................................14
8.2 Break-even Analysis...............................................................................................................14
Table: Break-even Analysis.....................................................................................................14
Chart: Break-even Analysis....................................................................................................15
8.3 Projected Profit and Loss.....................................................................................................15
Table: Profit and Loss................................................................................................................15
Chart: Profit Monthly.................................................................................................................16
Chart: Profit Yearly.....................................................................................................................17
Chart: Gross Margin Monthly.................................................................................................17
Chart: Gross Margin Yearly.....................................................................................................18
8.4 Projected Cash Flow...............................................................................................................18
Page 1

Table of Contents

Table: Cash Flow.........................................................................................................................18

Chart: Cash...................................................................................................................................19
8.5 Projected Balance Sheet......................................................................................................19
Table: Balance Sheet.................................................................................................................19
8.6 Business Ratios........................................................................................................................20
Table: Ratios.................................................................................................................................20
Table: Sales Forecast...........................................................................................................................1
Table: Personnel....................................................................................................................................2
Table: Personnel....................................................................................................................................2
Table: Profit and Loss..........................................................................................................................3
Table: Profit and Loss..........................................................................................................................3
Table: Cash Flow...................................................................................................................................4
Table: Cash Flow...................................................................................................................................4
Table: Balance Sheet...........................................................................................................................6
Table: Balance Sheet...........................................................................................................................6

Page 2

Cabin Fever

1.0 Executive Summary

This plan provides detailed information on the initial establishment and operation of Cabin Fever
- Child Fun Center. The plan outlines the plans for business growth, methods, procedures for
operation, and infrastructure.
Cabin Fever will offer young families in Bemidji, MN and the surrounding area a quality family
recreation center, with jungle gyms, soft contained play structures, slides, and imaginationinspiring play areas for children ages 2 to 5. All equipment is safety-tested and approved,
employees are trained in child safety and first aid. Parents will have special seating areas where
they can watch their children play actively and safely, even in the coldest, darkest months of
winter, and can purchase snacks and drinks from a limited selection while they wait.
Brian Solum (owner) and Derek Giesbrecht (advisor) are responsible for the design, building,
and development of the daily operations outlined in this plan. Derek is the President of Soft
Play, LLC, a leading indoor playground manufacturer, and has been in the Active Play industry
for many years. He has established Soft Play as the leader in the Family Entertainment
Industry. Brian is a former real estate agent, a father of four, and has over seven years of
experience in the child care industry. Brian will be supported by a team-oriented and customerfocused staff. Cabin Fever will retain the services of a CPA firm to perform professional company
audits, prepare taxes and payroll, and serve as a business consultant to assist in setting
achievable long-range strategic goals.
Based on the current prices in the child recreation market, Cabin Fever has the potential to
make sales of $158,000 the first year. With good management, we expect a revenue growth of
five percent annually. The following ratios apply in the first year:

Gross Margin above 95%

Net Profit Margin above 12%
Pre-tax Return on Assets over 20%
Net Worth over $76,000 by year three

We will minimize risk factors to Cabin Fever's success by:

1. Obtaining sufficient capital to build and cover expenses of initial operation. All investor
capital will be held in escrow until the project is totally funded.
2. Minimizing overhead costs, which increases the bottom line profit.
3. Building a sufficient customer base. We have determined an excellent location using
demographics, and our aggressive marketing program will ensure the desired results.
4. Establishing community involvement to demonstrate how the business will contribute to a
better quality of life.
5. All payments will be cash or check, which eliminates the need for invoicing and collections.

Page 1

Cabin Fever

Chart: Highlights

1.1 Mission
1. To provide the greater Bemidji area with a safe, fun, exciting (and profitable) child
entertainment facility for children ages 2-5, and their parents, which will help children grow
physically, emotionally and mentally through interactive play with their parents, peers and
the facility itself.
2. To listen intently to customer needs regarding the entertainment, activities and facilities
relating to safety, environment and services and act accordingly with respect to those
needs.
3. Develop a system of safety, security and accountability on the property between the staff,
paying clientele and the general public.
1.2 Keys to Success
1.
2.
3.
4.

Location
Service
Safety
Cash

1.3 Objectives
1. Attract 30% of my target market to use "Cabin Fever" 1.5 times per month in the 1st year.
Based upon the most recent census and demographic statistics available for this region,
achieving this objective would mean attracting 3,600 paying children and 1,080 adults
through the door the 1st year.
2. Gain market share of 40% by 3rd year.
3. Reduce debt load 37% by end of 3rd year.

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Cabin Fever

2.0 Company Summary

Cabin Fever - Child Fun Center is a start-up business that will be owned, operated and managed
by Brian Solum. Cabin Fever is an adult supervised children's play center that offers a series of
parent/child activities devoted to the physical, emotional and social development of children.
We plan to offer a large, full scale play structure for the child and a smaller play structure for
toddlers. In addition, we will also offer nominal vending, snacks and beverages for customers.
The facilities are designed to entertain, exercise and stimulate children while reinforcing good
social skills in a group play environment.
Cabin Fever offers a unique service in that there is no other program like it in the city of Bemidji
or outlying areas. Though the city does have a restaurant with a small scale facility and run
some classes for children through their parks and recreation department along with a
gymnastics facility open to the public, they are not part of a comprehensive program for kids
and parents. Cabin Fever will be a year round, indoor facility that hopes to be located in the
booming commercial center northwest of town.
Over the past five years, there has been tremendous housing growth in the Bemidji area. Most
these units are being bought or rented by families with young children. Brian Solum is starting
Cabin Fever to offer parents and children a safe and exciting environment in which to spend
time together and play.
Brian is a parent of three boys and has over seven years experience in the child care industry.
He also has four years in a customer service based profession (real estate sales) with an
additional two years sales management experience so he is currently capable of handling the
sales/management, finance/administration and safety/customer relations areas, respectively.

Working Name: Cabin Fever - Child Fun Center

Location: Hoping for northwest Bemidji location near major shopping area, motels and
airport.
History: Start-up business for Bemidji, MN but this type of business has been successful in
over 8,500 cities in the US and is also internationally in the UK, Spain, Australia, Canada,
France and Japan.
Services: Active Play = Fun, physical, social and mental entertainment to kids and parents
along with modest food/beverage sales.
Customers: Children ages 2-5 and their parents.

2.1 Start-up Summary

The start-up expenses for Cabin Fever include, play equipment, payroll, utilities, legal services,
debt service and office materials needed for the facility. Brian Solum will invest $32,000. In
addition, Brian will secure up to $100,800 in long-term financing to fund the enterprise. We will
incur another $8,000 in short-term debt to finish financing.
Long-term assets includes most play equipment, and a larger service counter for the cafe area.
Current assets includes furniture, lighting fixtures, some of the less durable play equipment,
and appliances for the cafe area.

Page 3

Cabin Fever

Table: Start-up Funding

Start-up Funding
Start-up Expenses to Fund
Start-up Assets to Fund
Total Funding Required

$17,800
$123,000
$140,800

Assets
Non-cash Assets from Start-up
Cash Requirements from Start-up
Additional Cash Raised
Cash Balance on Starting Date
Total Assets

$115,000
$8,000
$0
$8,000
$123,000

Liabilities and Capital

Liabilities
Current Borrowing
Long-term Liabilities
Accounts Payable (Outstanding Bills)
Other Current Liabilities (interest-free)
Total Liabilities

$8,000
$100,800
$0
$0
$108,800

Capital
Planned Investment
Brian Solum
Other
Additional Investment Requirement
Total Planned Investment

$32,000
$0
$0
$32,000

Loss at Start-up (Start-up Expenses)

Total Capital

($17,800)
$14,200

Total Capital and Liabilities

$123,000

Total Funding

$140,800

Page 4

Cabin Fever

Chart: Start-up

Table: Start-up

Start-up
Requirements
Start-up Expenses
Legal
Stationery etc.
Brochures / Advertising
Insurance
Payroll
Utilities / Phone
Research and Development
Expensed Play/Operating Equipment
Office Supplies
Total Start-up Expenses

$2,000
$250
$1,500
$1,200
$2,400
$1,450
$2,000
$5,000
$2,000
$17,800

Start-up Assets
Cash Required
Other Current Assets
Long-term Assets
Total Assets

$8,000
$25,000
$90,000
$123,000

Total Requirements

$140,800

2.2 Company Ownership

Ownership and legal establishment is anticipated as a Sole Proprietorship and will be owned,
operated and managed by Brian Solum with financial backing from a silent partner.

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Cabin Fever

3.0 Products and Services

The service I am selling is called "Active Play."
Physical Active Play for children
Playing is fun at any age. If you don't believe me, consider what you do to relieve the stress of
an active day at work or school, or how you vacation, or what you spend your money on, if you
have a hobby or interest. Or, if you have children, just watch how exuberant, carefree and
energized they are when they are having a good time. However, there are other benefits to
Active Play besides just having a good time. Studies have shown that it is also a major factor
in the appropriate mental, social, emotional and physical development of children. When
children are engaged in play, they are presented with various situations, interactions and
challenges. As they develop competencies in these areas, they are honing the same social,
mental and physical skills they'll need in other aspects of life.
Vicarious Active Play for Parents
There was a saying in my house when I grew up: "If mama ain't happy, ain't nobody happy." I
think what was meant by this was that we could drive her nuts on occasion, and when she was
"nuts" we all suffered. Those occasions were typically when, as children, we were bored or
stuck in the house. Therefore, I believe that this business is also selling fun, rest, and a social
outlet for parents. When the kids are occupied, happy parents can enjoy a book, the
newspaper, or a friend's conversation over a cup of coffee or lunch. However, parents are also
encouraged to participate with their children on the equipment themselves. Due to the nature
and size of some equipment, it is able to withstand and support adults. The youngest children,
in particular, will be happiest and most secure when playing with a parent.
Coffee, tea, juice, and snacks
We have a small cafe area where parents can purchase food and drinks from a (very) small
menu, including kid-friendly items like peanut butter and jelly or cheese and
tomato sandwiches, animal crackers, fresh carrot and celery matchsticks, and muffins from a
local bakery. The items are either pre-made or require very little assembly. It is important to us
to offer only healthy and appropriate snacks. We are currently planning to offer only a couple
different kinds of coffee and tea, but if we get enough interest, we may invest in an espresso
machine later on, and train our part-time help as baristas, since the current trend toward
gourmet coffees includes young parents.
4.0 Market Analysis Summary
My market research was directly retrieved from the 2000 US Census, 2002 NARC Census and
the BASC 2000 Demographics Study. Per the same data, and to get an accurate idea of current
(2003) data, my totals incorporated the projected 1.3% annual growth rate to the
demographics. My data was then targeted to the selected townships that use Bemidji for
schooling and shopping. They were typically townships within a 24-mile radius around Bemidji.
My projected income data from this demographic assumes that only one parent of the
households will accompany their children to the facility.
4.1 Market Segmentation
My market demographic is 100% targeted to families, specifically, households with children in
the 2 - 5 year-old age group in the Bemidji area.

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Cabin Fever

Chart: Market Analysis (Pie)

Table: Market Analysis

Market Analysis
Potential Customers

Growth

Children
Parents
Other
Total

1%
1%
0%
1.30%

Year 1

Year 2

Year 3

Year 4

Year 5

4,000
1,200
0
5,200

4,052
1,216
0
5,268

4,105
1,232
0
5,337

4,158
1,248
0
5,406

4,212
1,264
0
5,476

CAGR
1.30%
1.31%
0.00%
1.30%

4.2 Target Market Segment Strategy

Our research into the local market has indicated that a concentrated target marketing effort will
yield the best results. We are therefore focusing on the 1,200 households surrounding Bemidji
with 4,000 children between 2 and 5 years of age. Children in this age range are typically not
yet in school yet, and in need of diverse means of recreation, including "play groups" with
children of their parents' friends. As members of this demographic, my wife and I fully
understand the need and benefit of offering our children diverse recreational and physical
outlets. From experience, this demographic will look for and seek out recreational opportunities
for their children for not only the child's benefit, but for the parent's benefit as well. Out-ofhome facilities that can entertain kids and give parents needed respite are in high demand.
This market is greatly under-served with respect to the services Cabin Fever plans to offer in
the greater Bemidji area. The school system can provide this type of recreation to an extent,
and there are some businesses that have recreational outlets. However, it is my observation
that similar facilities are either too small, seasonal, have health hazards, or are not geared to
younger children and their family. Winter is long here, and weather is unpredictable. "Cabin
Fever" will be a preferred destination for families looking for something new, fun, and exciting
for themselves and their children, especially if it promotes physical and social growth.

Page 7

Cabin Fever

4.3 Service Business Analysis

About Soft Contained Play Equipment (Soft Play)
Soft Contained Play Equipment is a visually stimulating and mentally exciting configuration of
tubes, slides, ladders, nets and mazes. It also incorporates devices which apply the kids' own
energies to make something move mechanically, like a sign or a front-end loader or a fire truck
steering wheel. Some equipment is also designed to stimulate the child's playful creativity such
as the double-sided Fantasy Role Play Panel and the Magic Ball Popper. The whole approach of
Soft Contained Play Equipment is to design their equipment through the eyes of a child. It is
then developed through consultation with child development experts and adheres to ASTM
F1918-98 safety requirements.
The Business
As previously mentioned, Cabin Fever is all about family recreation, specifically, child
development and fun. As parents continue to look for fun and exciting activities for their kids
the family entertainment center (FEC) has become increasingly popular. FECs have traditionally
encompassed multiple attractions such as bowling, skating, mini-golf, batting cages, etc... but
the one development that has really spurred the popularity of the FEC is soft contained play
equipment. Soft contained play systems continue to be major draws to recent FECs. Kids love
the fun and interactive play they provide, while parents appreciate the increased safety
measures.
Local Competitors
There is a competitive market in the Family Recreation industry in Bemidji. Currently there is a
roller-rink, seasonal water park, bowling ally, Gym-Bin, BSU Rec-center and a few city
organized activities on a seasonal basis. However, there is no facility dedicated exclusively to
building the social, physical, and mental interactions of children ages 2-5 and their parents in
an exciting and stimulating environment.
4.3.1 Competition and Buying Patterns
Families make choices for family recreation activities based on cost, availability of activities
appropriate for the entire household, and fun. Currently in Bemidji, activities for children under
5 are an after-thought. There may be a smaller wading pool at one end of the water park, or a
special roller-skating class for 4 and 5 year olds. This discrepancy is most keenly felt by parents
in the winter, when normal outdoor activities are curtailed for the youngest children. At the
moment, parents of small children must choose between a small array of limited activities on a
schedule not of their choosing, if they want any out-of-home play.
Safety is another major concern for parents of young children. Activities and venues that are
perfectly safe for 10-year-olds may be extreme hazards for very young children. The need to be
right next to their child during every moment of play in any of the existing offerings does not
alow parents any respite or recreation.
5.0 Strategy and Implementation Summary
Emphasize Customer Service
Cabin Fever will differentiate themselves from other facilities. We will establish our business
offering as a clear and viable alternative for our target market.

Page 8

Cabin Fever

Build a Relationship-Oriented Business

Build long-term relationships with clients, not just an occasional visit. Let them become
dependent on Cabin Fever. Make them understand the value of our services.
Focus on Target Markets
We need to focus our offerings on the young family who want a place outside the home to have
fun, relax, and experience top quality play equipment services.
Differentiate and Fulfill the Promise
We can't just market and sell service, we have to deliver as well. We need to make sure we
have the service-intensive business we claim to have.
5.1 Competitive Edge
Cabin Fever's competitive edge is its positioning as a strategic ally with our customers. By
building a business based on long-standing relationships with satisfied customers, we
simultaneously build defenses against competition. The longer the relationship stands, the more
we help our customers understand what we offer them and why they should both frequent
Cabin Fever, and refer it to other families. In close-knit communities like Bemidji, reputation is
extremely important, and word-of-mouth advertising is invaluable. The 2 other factors in our
competitive edge are:

Location: Best location of any child type activity center -- At the intersection of Interstate
Highways 2 and 71 in the prime business district of the area.

Service: Equipment and facilities to appropriately entertain the age group as well amenities
catering to adults and parents in the same building. No other indoor facility in Bemidji offers
such diverse services and facilities under one roof.

I do not expect parents to choose Cabin Fever exclusively over these other facilities 100% of
the time, but I do believe that Soft Play equipment would be the facility of choice for play
groups, birthday parties, and child recreation in the Bemidji area. There is also the possibility of
Social Government Services and other health professionals directing their clients to the facility
for potential therapy issues.
5.2 Marketing Strategy
Technically, my customers can come from anywhere: male and female, all races, every income
level, and can be local residents or tourists to the area. That is why our marketing plan will
start at the construction phase; by keeping in mind: if it looks fun, people will come. Thus the
main factor to success is demonstrating that a person can enjoy themselves at the center while
participating in an activity they choose. Realistically, I expect that initial customers will be more
educated and affluent than the area's average, since those types of family are generally the
most concerned with providing appropriate stimulation for their very young children. We will
therefore make sure to post flyers and advertisements where this group can see them.
By being on site full-time for the first year, I can make sure that customers are satisfied and
can also gather information from them about the types of entertainment they most desire. This
type of first-hand market research will prove invaluable in attracting more customers and
retaining existing ones. A good experience for parents and children will produce best kind of
advertising: word-of-mouth recommendations.

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Cabin Fever

We will supplement this informal marketing with announcements, advertisements in the local
newspapers and our website:

Print Advertising: The Bemidji Pioneer, our local daily newspaper with a circulation of over
22,000, will feature daily ads 2 weeks prior to grand opening and weekly ones thereafter.

Direct Mailing/Phone: Mailing lists relating to my target market are available and would
be utilized weekly prior to and upon grand opening and on a monthly basis thereafter. Also,
mailings and phone contact would be made to local youth organizations such as church
groups, scouts and other social clubs that serve children.

Signage: Because Bemidji is a vacation destination, the tourism market could be

substantial. Roadside billboards on Highways 71 and 2 would be implemented on the four
major conduits into town. Also, all local hotels, motels and resorts would be solicited to
provide signage.

Other Businesses: A relationship with the other businesses in town that cater to birthday
parties (Party Store, Special Occasions, pizza restaurants) would be established to try and
promote traffic to the facility. Advertising discounts will be offered in exchange for their
service.

5.3 Sales Strategy

Cabin Fever will provide a venue in which young children can really enjoy their leisure time by
participating in fun and exciting activities that require minimum strength or physical ability.
Supported with great service and offered at competitive prices, I believe we have the winning
combination.
Once customers choose to come to our location, they have already made a choice to buy our
services. We get them there with marketing; we get them back again and again by continuing
to offer high-quality, safe, and fun experiences for and with their young children. Our sales
strategy involves continuing informal surveys of our customers about their preferences and
needs, and keeping an open mind about changes in the adult areas. We may, in the future,
institute a small cafe-type service, or offer space for young family book clubs, and so on,
depending on feedback from parents.
5.3.1 Sales Forecast
My sales forecast assumes that, on average, 37% of my market (1,465 children, out of a
possible 4,000) will visit 1.5 times per month, at an admission price per child of $4.75. We
project that parents will spend an average of $4 per visit on food and beverages, at a 20% cost
of goods. This would allow me an 80% markup on food and beverages, a reasonable amount
given the savings we will get from doing prep work ourselves in the mornings.
Sales will be higher in the winter months, when outdoor competition and free activities are
limited, and lower in the summer. In keeping with my sales goals, I anticipate reaching 40% of
my market by the 3rd year.

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Cabin Fever

Table: Sales Forecast

Sales Forecast
Year 1

Year 2

Year 3

$125,222
$33,170
$158,392

$131,483
$34,829
$166,312

$138,057
$36,570
$174,627

Year 1
$0
$6,634
$6,634

Year 2
$0
$6,966
$6,966

Year 3
$0
$7,314
$7,314

Sales
Child Admission
Additional Parent Spending
Total Sales
Direct Cost of Sales
Child Admission
Additional Parent Spending
Subtotal Direct Cost of Sales

Chart: Sales Monthly

Page 11

Cabin Fever

Chart: Sales by Year

6.0 Web Plan Summary

We are currently working on developing a website for Cabin Fever. A friend of the family is
doing the design work for free, and Brian's wife (who has a thorough knowledge of HTML) will
update the content regularly - we do not plan on including any e-commerce capabilities, since
they are unnecessary; the website is primarily a marketing tool. We plan to launch our website
early in 2005.
7.0 Management Summary
Management: Initially, and for the first year, of operation I anticipate acting as
owner/operator/manager. In the future, depending on cash flow or if a gap in service is
identified, a FT manager would be implemented to work alongside myself and the rest of the
team. Management will be responsible for overseeing all business aspects including but not
limited to: Deposits, marketing, safety, scheduling, customer service and staff support and
training, cleaning and general maintenance, food prep and service. Minimum qualifications are:
1.
2.
3.
4.
5.
6.

Child Safety, First Aid / CPR certified

Three years management experience
Mature, responsible adult
Enthusiastic, flexible and self motivated
Knowledge of marketing
High sense of professionalism

FT Employees: Based on my assumed hours of operation, I anticipate hiring one FT employee

working a 45 hour week. I will look for adults interested and experienced with children who are
child safety CPR and first aid certified. Responsibilities will include but are not limited to:
Checking in and greeting customers as they arrive, general cleaning and light maintenance,
food service. Minimum qualifications are:

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Cabin Fever

1. Mature, responsible adult

2. Experience with children in a play setting
3. Child Safety First Aid / CPR certified
PT Employees: Again, based on assumed hours of operation I anticipate needing at least two
PT employees to fill potential gaps in busy times and work weekend hours. While the business
could be run with one PT employee I would hire one extra in the need of special circumstances
such as holiday, party or weekend crowds as well as filling in for illness and vacation
possibilities. Responsibilities would include but not be limited to: Checking in and greeting
customers as they arrive, general cleaning and light maintenance. Minimum qualifications would
be:
1. Mature, responsible adult
2. Experience with children in a play setting
3. Child Safety First Aid / CPR certified

7.1 Personnel Plan

The company will make gradual investments in personnel on a need basis, always keeping in
mind the number of children and parents serviced at the facility with respect to cash flow.
Additional full-time paid management will be addressed after the first year of operation and an
additional PT employee is built in to the Personnel Table. As owner, I do plan on being on site
full-time and will fill the managerial role.
I am committed to paying my employees a fair and equitable wage for their hard work, and
giving them benefits such as sick time and vacation time.
Table: Personnel

Personnel Plan
Year 1

Year 2

Year 3

Owner/Manager
FT Employee
PT Employee
PT Employee
Other
Total People

$20,000
$24,000
$7,200
$7,200
$0
4

$25,000
$25,000
$7,200
$7,200
$0
4

$30,000
$26,000
$7,200
$7,200
$0
4

Total Payroll

$58,400

$64,400

$70,400

8.0 Financial Plan

The most important element in my financial plan is initiating, maintaining, and improving the
factors that create, stabilize, and increase the cash flow. These items are:
1. High visibility so as to create customer flow.
2. A trained, enthusiastic and knowledgeable staff that answers to customer needs to keep
them coming back again and again.
3. Annual modernization and update of the facility equipment to create new experiences for
children.

Page 13

Cabin Fever

8.1 Important Assumptions

Commercial lending is currently set at 7% for long term (20 year) lending.
Table: General Assumptions

General Assumptions
Plan Month
Current Interest Rate
Long-term Interest Rate
Tax Rate
Other

Year 1

Year 2

Year 3

1
7.00%
7.00%
30.00%
0

2
7.00%
7.00%
30.00%
0

3
7.00%
7.00%
30.00%
0

8.2 Break-even Analysis

The Break Even chart assumes fixed monthly expenses of approximately $9,600. The expenses
are the total of estimated monthly utilities, phone, payroll, legal, insurance, marketing and rent
figures. Variable monthly costs are shown as a percentage of total sales. Average Monthly Sales
for the first year are anticipated around $13,200 and the break even point would be at
$10,069, leaving adequate room and cash flow for possible costs initially overlooked. These
figures show a comfortable cushion for operating expenses.
Table: Break-even Analysis

Break-even Analysis
Monthly Revenue Break-even

$9,329

Assumptions:
Average Percent Variable Cost
Estimated Monthly Fixed Cost

4%
$8,938

Page 14

Cabin Fever

Chart: Break-even Analysis

8.3 Projected Profit and Loss

The company will show a profit in the first year of operation. The yearly analysis is indicated in
the table below, and the monthly analysis can be found in the appendix. Our most significant
operating expenses will be payroll, marketing, and rent. We project a modest net profit
increasing gradually over the next three years as we streamline operations.
Table: Profit and Loss

Pro Forma Profit and Loss

Year 1

Year 2

Year 3

Sales
Direct Cost of Sales
Other Costs of Goods
Total Cost of Sales

$158,392
$6,634
$0
$6,634

$166,312
$6,966
$0
$6,966

$174,627
$7,314
$0
$7,314

Gross Margin
Gross Margin %

$151,758
95.81%

$159,346
95.81%

$167,313
95.81%

Payroll
Marketing/Promotion
Depreciation
Rent
Utilities / Phone / Internet
Insurance
Payroll Taxes
CPA
Website hosting
Office Expenses

$58,400
$12,668
$6,960
$12,000
$7,680
$4,800
$0
$3,000
$250
$1,500

$64,400
$13,089
$7,000
$12,000
$7,680
$4,800
$0
$3,000
$300
$1,500

$70,400
$13,521
$7,000
$12,000
$7,680
$4,800
$0
$3,000
$325
$1,500

Total Operating Expenses

$107,258

$113,769

$120,226

Expenses

Page 15

Cabin Fever

Profit Before Interest and Taxes

EBITDA
Interest Expense
Taxes Incurred

$44,500
$51,460
$7,105
$11,218

$45,577
$52,577
$6,202
$11,812

$47,087
$54,087
$5,259
$12,548

Net Profit
Net Profit/Sales

$26,176
16.53%

$27,562
16.57%

$29,279
16.77%

Chart: Profit Monthly

Page 16

Cabin Fever

Chart: Profit Yearly

Chart: Gross Margin Monthly

Page 17

Cabin Fever

Chart: Gross Margin Yearly

8.4 Projected Cash Flow

Long Term Debt: My long term debt payments are based on a 10-year note, principle balance
of $100,800 @ 7% interest. Principal repayments are shown below, while interest is listed in
the profit and Loss. Although the yearly projections indicate a straight-line repayment, we may
pay off more principal after year one, depending on cash flow.
Capital Improvements: Making changes to the play structure will need to occur as to keep
the facility fresh and new for customers. These changes will take place on an annual basis after
the first year with the liquidation of old play materials and the acquisition of new ones.
Table: Cash Flow

Pro Forma Cash Flow

Year 1

Year 2

Year 3

$158,392
$158,392

$166,312
$166,312

$174,627
$174,627

$0
$0
$0
$0
$0
$0
$0
$158,392

$0
$0
$0
$0
$6,000
$0
$0
$172,312

$0
$0
$0
$0
$6,000
$0
$0
$180,627

Year 1

Year 2

Year 3

Cash Received
Cash from Operations
Cash Sales
Subtotal Cash from Operations
Additional Cash Received
Sales Tax, VAT, HST/GST Received
New Current Borrowing
New Other Liabilities (interest-free)
New Long-term Liabilities
Sales of Other Current Assets
Sales of Long-term Assets
New Investment Received
Subtotal Cash Received
Expenditures

Page 18

Cabin Fever

Expenditures from Operations

Cash Spending
Bill Payments
Subtotal Spent on Operations

$58,400
$63,026
$121,426

$64,400
$65,644
$130,044

$70,400
$67,898
$138,298

$0
$2,665
$0
$10,800
$0
$0
$0
$134,891

$0
$2,670
$0
$10,800
$0
$12,000
$0
$155,514

$0
$2,665
$0
$10,800
$0
$12,000
$0
$163,763

$23,501
$31,501

$16,798
$48,299

$16,864
$65,163

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out
Principal Repayment of Current Borrowing
Other Liabilities Principal Repayment
Long-term Liabilities Principal Repayment
Purchase Other Current Assets
Purchase Long-term Assets
Dividends
Subtotal Cash Spent
Net Cash Flow
Cash Balance

Chart: Cash

8.5 Projected Balance Sheet

My Projected Balance Sheet shows that I should not have any difficulty meeting my debt
obligations. My Marketing Plan should be sufficient to meet the projections. Most significantly,
Cabin Fever's net worth will increase to approximately $77,500 by year three.
Table: Balance Sheet

Pro Forma Balance Sheet

Year 1

Year 2

Year 3

Assets

Page 19

Cabin Fever

Current Assets
Cash
Other Current Assets
Total Current Assets

$31,501
$25,000
$56,501

$48,299
$19,000
$67,299

$65,163
$13,000
$78,163

$90,000
$6,960
$83,040
$139,541

$102,000
$13,960
$88,040
$155,339

$114,000
$20,960
$93,040
$171,203

Year 1

Year 2

Year 3

$3,830
$5,335
$0
$9,165

$5,536
$2,665
$0
$8,201

$5,585
$0
$0
$5,585

$90,000
$99,165

$79,200
$87,401

$68,400
$73,985

$32,000
($17,800)
$26,176
$40,376
$139,541

$32,000
$8,376
$27,562
$67,939
$155,339

$32,000
$35,939
$29,279
$97,218
$171,203

$40,376

$67,939

$97,218

Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets
Liabilities and Capital
Current Liabilities
Accounts Payable
Current Borrowing
Other Current Liabilities
Subtotal Current Liabilities
Long-term Liabilities
Total Liabilities
Paid-in Capital
Retained Earnings
Earnings
Total Capital
Total Liabilities and Capital
Net Worth

8.6 Business Ratios

The following table outlines some of the more important ratios from the Recreation Center
industry. The final column, Industry Profile, details specific ratios based on the industry as it is
classified by the Standard Industry Classification (SIC) code, 7999.
We project a higher ratio of long-term to short-term liabilities than is the industry standard. We
also project higher expenses for operating expenses and advertising; part of this discrepancy is
the result of being a start-up, with no existing reputation. Another is our committment to pay
employees a fair wage with decent benefits, including sick time and vacation time. All asset to
liability ratios indicate a high ability to pay our creditors.
Table: Ratios

Ratio Analysis
Year 1

Year 2

Year 3

Industry Profile

n.a.

5.00%

5.00%

4.94%

Other Current Assets

Total Current Assets
Long-term Assets
Total Assets

17.92%
40.49%
59.51%
100.00%

12.23%
43.32%
56.68%
100.00%

7.59%
45.66%
54.34%
100.00%

36.35%
43.63%
56.37%
100.00%

Current Liabilities
Long-term Liabilities
Total Liabilities
Net Worth

6.57%
64.50%
71.07%
28.93%

5.28%
50.99%
56.26%
43.74%

3.26%
39.95%
43.21%
56.79%

21.68%
31.17%
52.85%
47.15%

Sales Growth
Percent of Total Assets

Page 20

Cabin Fever

Percent of Sales
Sales
Gross Margin
Selling, General & Administrative Expenses
Advertising Expenses
Profit Before Interest and Taxes

100.00%
95.81%
79.29%
4.42%
28.09%

100.00%
95.81%
79.24%
4.21%
27.40%

100.00%
95.81%
79.04%
4.01%
26.96%

100.00%
100.00%
76.74%
2.84%
2.11%

6.16
6.16
71.07%
92.62%
26.80%

8.21
8.21
56.26%
57.96%
25.35%

14.00
14.00
43.21%
43.02%
24.43%

1.05
0.69
62.49%
2.98%
7.95%

Main Ratios
Current
Quick
Total Debt to Total Assets
Pre-tax Return on Net Worth
Pre-tax Return on Assets
Additional Ratios

Year 1

Year 2

Year 3

Net Profit Margin

Return on Equity

16.53%
64.83%

16.57%
40.57%

16.77%
30.12%

n.a
n.a

17.45
27
1.14

12.17
25
1.07

12.17
30
1.02

n.a
n.a
n.a

2.46
0.09

1.29
0.09

0.76
0.08

n.a
n.a

$47,336
6.26

$59,099
7.35

$72,578
8.95

n.a
n.a

0.88
7%
6.16
3.92
0.00

0.93
5%
8.21
2.45
0.00

0.98
3%
14.00
1.80
0.00

n.a
n.a
n.a
n.a
n.a

Activity Ratios
Accounts Payable Turnover
Payment Days
Total Asset Turnover
Debt Ratios
Debt to Net Worth
Current Liab. to Liab.
Liquidity Ratios
Net Working Capital
Interest Coverage
Additional Ratios
Assets to Sales
Current Debt/Total Assets
Acid Test
Sales/Net Worth
Dividend Payout

Page 21

Table: Sales Forecast

Sales Forecast
Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$8,550
$2,160
$10,710

$9,894
$2,711
$12,605

$10,986
$3,244
$14,230

$12,456
$3,574
$16,030

$13,296
$3,840
$17,136

$12,944
$3,498
$16,442

$11,532
$2,442
$13,974

$9,908
$2,410
$12,318

$9,740
$2,646
$12,386

$9,880
$2,659
$12,539

$7,962
$1,962
$9,924

$8,074
$2,026
$10,100

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Additional Parent Spending

$432

$542

$649

$715

$768

$700

$488

$482

$529

$532

$392

$405

Subtotal Direct Cost of Sales

$432

$542

$649

$715

$768

$700

$488

$482

$529

$532

$392

$405

Sales
Child Admission
Additional Parent Spending
Total Sales
Direct Cost of Sales
Child Admission

0%
0%

Page 1

Table: Personnel

Personnel Plan
Owner/Manager
FT Employee
PT Employee
PT Employee
Other
Total People
Total Payroll

0%
0%
0%
0%
0%

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$0
$2,000
$600
$600
$0
4

$0
$2,000
$600
$600
$0
4

$2,000
$2,000
$600
$600
$0
4

$2,000
$2,000
$600
$600
$0
4

$2,000
$2,000
$600
$600
$0
4

$2,000
$2,000
$600
$600
$0
4

$2,000
$2,000
$600
$600
$0
4

$2,000
$2,000
$600
$600
$0
4

$2,000
$2,000
$600
$600
$0
4

$2,000
$2,000
$600
$600
$0
4

$2,000
$2,000
$600
$600
$0
4

$2,000
$2,000
$600
$600
$0
4

$3,200

$3,200

$5,200

$5,200

$5,200

$5,200

$5,200

$5,200

$5,200

$5,200

$5,200

$5,200

Page 2

Table: Profit and Loss

Pro Forma Profit and Loss

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$10,710

$12,605

$14,230

$16,030

$17,136

$16,442

$13,974

$12,318

$12,386

$12,539

$9,924

$10,100

$432

$542

$649

$715

$768

$700

$488

$482

$529

$532

$392

$405

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$432

$542

$649

$715

$768

$700

$488

$482

$529

$532

$392

$405

Gross Margin

$10,278

$12,063

$13,581

$15,315

$16,368

$15,742

$13,485

$11,836

$11,857

$12,007

$9,531

$9,694

Gross Margin %

95.97%

95.70%

95.44%

95.54%

95.52%

95.75%

96.51%

96.09%

95.73%

95.76%

96.05%

95.99%

$3,200

$3,200

$5,200

$5,200

$5,200

$5,200

$5,200

$5,200

$5,200

$5,200

$5,200

$5,200

$857
$580

$1,008
$580

$1,138
$580

$1,282
$580

$1,370
$580

$1,315
$580

$1,118
$580

$985
$580

$990
$580

$1,003
$580

$794
$580

$808
$580

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$640

$640

$640

$640

$640

$640

$640

$640

$640

$640

$640

$640

Sales
Direct Cost of Sales
Other Costs of Goods
Total Cost of Sales

Expenses
Payroll
Marketing/Promotion
Depreciation

8%

Rent
Utilities / Phone / Internet
Insurance

$1,200

$0

$0

$1,200

$0

$0

$1,200

$0

$0

$1,200

$0

$0

Payroll Taxes
CPA

15%

$0
$250

$0
$250

$0
$250

$0
$250

$0
$250

$0
$250

$0
$250

$0
$250

$0
$250

$0
$250

$0
$250

$0
$250

Website hosting
Office Expenses

15%

$0
$125

$0
$125

$25
$125

$25
$125

$25
$125

$25
$125

$25
$125

$25
$125

$25
$125

$25
$125

$25
$125

$25
$125

Total Operating Expenses

$7,852

$6,803

$8,958

$10,302

$9,190

$9,135

$10,138

$8,805

$8,810

$10,023

$8,614

$8,628

Profit Before Interest and Taxes

$2,426

$5,260

$4,623

$5,013

$7,178

$6,607

$3,347

$3,031

$3,047

$1,984

$917

$1,066

EBITDA

$3,006

$5,840

$5,203

$5,593

$7,758

$7,187

$3,927

$3,611

$3,627

$2,564

$1,497

$1,646

Interest Expense

$628

$622

$615

$608

$602

$595

$589

$582

$576

$569

$563

$556

Taxes Incurred

$539

$1,392

$1,202

$1,321

$1,973

$1,804

$828

$735

$741

$425

$106

$153

Net Profit

$1,259

$3,247

$2,805

$3,083

$4,603

$4,208

$1,931

$1,714

$1,730

$991

$248

$357

Net Profit/Sales

11.75%

25.76%

19.72%

19.23%

26.86%

25.59%

13.82%

13.91%

13.97%

7.90%

2.50%

3.54%

Page 3

Table: Cash Flow

Pro Forma Cash Flow

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Cash Sales

$10,710

$12,605

$14,230

$16,030

$17,136

$16,442

$13,974

$12,318

$12,386

$12,539

$9,924

$10,100

Subtotal Cash from Operations

$10,710

$12,605

$14,230

$16,030

$17,136

$16,442

$13,974

$12,318

$12,386

$12,539

$9,924

$10,100

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

New Other Liabilities (interest-free)

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

New Long-term Liabilities

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Sales of Other Current Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Sales of Long-term Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

New Investment Received

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Subtotal Cash Received

$10,710

$12,605

$14,230

$16,030

$17,136

$16,442

$13,974

$12,318

$12,386

$12,539

$9,924

$10,100

Expenditures

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$3,200

$3,200

$5,200

$5,200

$5,200

$5,200

$5,200

$5,200

$5,200

$5,200

$5,200

$5,200

$189

$5,668

$5,581

$5,695

$7,153

$6,743

$6,447

$6,215

$4,825

$4,906

$5,706

$3,898

$3,389

$8,868

$10,781

$10,895

$12,353

$11,943

$11,647

$11,415

$10,025

$10,106

$10,906

$9,098

Cash Received
Cash from Operations

Additional Cash Received

Sales Tax, VAT, HST/GST Received
New Current Borrowing

0.00%

Expenditures from Operations

Cash Spending
Bill Payments
Subtotal Spent on Operations
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out
Principal Repayment of Current Borrowing
Other Liabilities Principal Repayment

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$222

$222

$222

$222

$222

$222

$222

$222

$222

$222

$222

$223

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$900

$900

$900

$900

$900

$900

$900

$900

$900

$900

$900

$900

Purchase Other Current Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Purchase Long-term Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Dividends

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$4,511

$9,990

$11,903

$12,017

$13,475

$13,065

$12,769

$12,537

$11,147

$11,228

$12,028

$10,221

Long-term Liabilities Principal Repayment

Subtotal Cash Spent

Net Cash Flow

$6,199

$2,615

$2,327

$4,013

$3,661

$3,377

$1,205

($219)

$1,239

$1,311

($2,105)

($121)

Cash Balance

$14,199

$16,814

$19,141

$23,154

$26,815

$30,192

$31,396

$31,177

$32,416

$33,727

$31,622

$31,501

Page 4

Page 5

Table: Balance Sheet

Pro Forma Balance Sheet

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$8,000
$25,000
$33,000

$14,199
$25,000
$39,199

$16,814
$25,000
$41,814

$19,141
$25,000
$44,141

$23,154
$25,000
$48,154

$26,815
$25,000
$51,815

$30,192
$25,000
$55,192

$31,396
$25,000
$56,396

$31,177
$25,000
$56,177

$32,416
$25,000
$57,416

$33,727
$25,000
$58,727

$31,622
$25,000
$56,622

$31,501
$25,000
$56,501

$90,000
$0
$90,000
$123,000

$90,000
$580
$89,420
$128,619

$90,000
$1,160
$88,840
$130,654

$90,000
$1,740
$88,260
$132,401

$90,000
$2,320
$87,680
$135,834

$90,000
$2,900
$87,100
$138,915

$90,000
$3,480
$86,520
$141,712

$90,000
$4,060
$85,940
$142,336

$90,000
$4,640
$85,360
$141,537

$90,000
$5,220
$84,780
$142,196

$90,000
$5,800
$84,200
$142,927

$90,000
$6,380
$83,620
$140,242

$90,000
$6,960
$83,040
$139,541

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$0
$8,000
$0
$8,000

$5,482
$7,778
$0
$13,260

$5,392
$7,556
$0
$12,948

$5,456
$7,334
$0
$12,790

$6,928
$7,112
$0
$14,040

$6,528
$6,890
$0
$13,418

$6,238
$6,668
$0
$12,906

$6,054
$6,446
$0
$12,500

$4,663
$6,224
$0
$10,887

$4,714
$6,002
$0
$10,716

$5,576
$5,780
$0
$11,356

$3,766
$5,558
$0
$9,324

$3,830
$5,335
$0
$9,165

Long-term Liabilities
Total Liabilities

$100,800
$108,800

$99,900
$113,160

$99,000
$111,948

$98,100
$110,890

$97,200
$111,240

$96,300
$109,718

$95,400
$108,306

$94,500
$107,000

$93,600
$104,487

$92,700
$103,416

$91,800
$103,156

$90,900
$100,224

$90,000
$99,165

Paid-in Capital
Retained Earnings
Earnings
Total Capital
Total Liabilities and Capital

$32,000
($17,800)
$0
$14,200
$123,000

$32,000
($17,800)
$1,259
$15,459
$128,619

$32,000
($17,800)
$4,505
$18,705
$130,654

$32,000
($17,800)
$7,311
$21,511
$132,401

$32,000
($17,800)
$10,394
$24,594
$135,834

$32,000
($17,800)
$14,997
$29,197
$138,915

$32,000
($17,800)
$19,205
$33,405
$141,712

$32,000
($17,800)
$21,136
$35,336
$142,336

$32,000
($17,800)
$22,850
$37,050
$141,537

$32,000
($17,800)
$24,580
$38,780
$142,196

$32,000
($17,800)
$25,571
$39,771
$142,927

$32,000
($17,800)
$25,819
$40,019
$140,242

$32,000
($17,800)
$26,176
$40,376
$139,541

$14,200

$15,459

$18,705

$21,511

$24,594

$29,197

$33,405

$35,336

$37,050

$38,780

$39,771

$40,019

$40,376

Assets

Starting Balances

Current Assets
Cash
Other Current Assets
Total Current Assets
Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets
Liabilities and Capital
Current Liabilities
Accounts Payable
Current Borrowing
Other Current Liabilities
Subtotal Current Liabilities

Net Worth

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