Building a Better Business Plan From the Sparkle in Your Eye through the Terrible Two's Mark Machlis Monte Zwang HONEY, I WANT TO HAVE A BUSINESS. 1
BUSINESS PLANNING MARKET RESEARCH 2
FIRST, SOME BASICS MANAGING MONEY BEGINS WITH UNDERSTANDING A SIMPLE CONCEPT. MONEY IN. MONEY OUT. SOMETHING LEFT. A BUDGET.. Identifies Operational Issues That Require Planning Forecasts Future Cash Needs Allows You to Monitor and Adjust Your Plan In Real Time Helps You Identify and Evaluate Financial Options. Keeps You On Track 3
WHERE S THE CASH? $ s IN $ s OUT WORKING CAPITAL SPA SALES PRE-OPENING $ s INDIRECT COST GROSS MARGIN $ s DIRECT COST $ s IN OPERATIONS NET PROFIT DEBT SERVICE $ S YOU GET TO KEEP BUILD A PRE-OPENING BUDGET 4
BUILD AN OPERATING BUDGET 5
TESTING, GROWTH, BOUNDARIES Financial 9-1-1 This market is unforgiving. You are operating without a safety net. Going forward without a working budget is not going to provide the targets you need to operate. 6
THE 6 NUMBERS YOU NEED TO KNOW Breakeven Sales Labor Cost Gross Profit Margin Overhead Expenses Net Profit Debt Service BUDGET SALES 12 BUDGET MONTHS SALES OUT 12 MONTHS OUT Work Completed, Product Delivered, Money Earned - Documented with Sales Receipt, Invoice Categories Services. Product Seasonality Number of Services vs. Capacity, Occupancy 7
DIRECT COSTS; MONEY OUT COSTS THAT DIRECTLY RELATE TO SALES: Direct Labor Subcontractor (1099) Payments Front Desk Labor Payroll Taxes Employee Benefits Back Bar, Operating Supplies Inventory Purchase Largest expenses on your Income Statement. Should be no more than 60 65 % of Sales. 8
DIRECT COSTS LABOR COST What is your labor cost? Evaluate your compensation plan It absolutely cannot exceed 42% of your service and product sales. Are tools in place to monitor them? 9
GROSS MARGIN PROFIT MARGIN Is there at least a 30% to 40% margin in your business? 10
INDIRECT COSTS; MONEY OUT Costs that do not fluctuate with sales: Indirect Costs (Overhead Expenses) Occur Every Month Rent Utilities Insurance Office supplies Repairs and Maintenance Advertising & Promotion Professional Fees Should not be more than 35% of Sales 11
WORKING CAPITAL - AM I PROFITABLE? MONEY IN: SALES (COLLECTIONS) (Minus) Equals (Minus) Equals MONEY OUT: DIRECT COSTS GROSS MARGIN MONEY OUT: INDIRECT COST WORKING CAPITAL (BEFORE DEBT SERVICE) (NET PROFIT, FEASIBILITY) WORKING CAPITAL (BEFORE DEBT SERVICE) Plus (Minus) Equals BEGINNING CASH POSITION - (TOTAL OF ALL ACCOUNTS) MONEY OUT: DEBT SERVICE WORKING CAPITAL AFTER DEBT SERVICE (THIS IS WHAT YOU GET TO KEEP.) 12
DEALING WITH DEBT Debt is Accounts Payable, Notes, Loans, Credit Cards, Leases, Lines of Credit Evaluate Debt Separately from Business Operations. If you can t afford it, don t buy it. Any contract, lease, bank note, equipment lease and credit card payment can be re-negotiated 13
BREAKEVEN IS VITAL If you don t know what it is, you can t hit it USING THE BUDGET AS A TOOL UNDERSTAND WHERE YOU ARE FINANCIALLY LOOK AT ALL OPTIONS HONESTLY. BRING THE PIECES OF THE PUZZLE INTO BALANCE ADJUST THE BUDGET TO THE REALITY OF YOUR SITUATION 14
MONEY, MONEY, WHO HAS THE MONEY? 15
THIS IS WHAT MY SPA WILL LOOK LIKE PAGE 1 ASSEMBLING THE BUSINESS PLAN PAGE 2 PAGE 3 PAGE 4 PAGE 5 VISION STATEMENT: NARRATIVE OF YOUR DREAM BIOS PERSONAL FINANCIAL DATA RENDERING FLOOR PLAN VISUAL BUDGET PRE- OPENING BUDGET OPERATING BUDGET PAGE 6 PAGE 7 PAGE 8 PAGE 9 PAGE 10 BUDGET SUMMARY OF DEBT AND ROI MARKET RESEARCH COMPARABLE OPERATIONS MARKET RESEARCH UNIQUE SELLING QUALITIES LOCATION ANALYSIS LEASE ACQUISITION VALUATION SUMMARY 16
BANK IT, BUILD IT, OPEN IT THE TUCKMAN MODEL 2. Storming 3. Norming All the developmental stages of a business are an integral part of the planning process Know the stages and they will serve you Respect for the stages improves reaction 1. Forming 4. Performing 5. Adjourning 17
TOUGH LOVE: THE DOLLAR HEART MANAGING THE TERRIBLE TWOS TIMELY REVIEWS SAYING NO! 18
Blue sheet YOUR EXIT IS PART OF INITIAL PLANNING 19
Monte Zwang 206.963.1017 Monte@WellnessCapital.com Mark Machlis 801.860.7658 Mark@WellnessCapital.com www.wellnesscapital.com We would be happy to speak with you anytime. 20