Mark Machlis Monte Zwang

3/19/2009
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.
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3/19/2009
BUSINESS PLANNING
MARKET RESEARCH
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3/19/2009
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
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3/19/2009
WHERE’S THE CASH?
$’s
IN
SPA
SALES
WORKING
CAPITAL
$’s
OUT
PRE-OPENING
GROSS
MARGIN
$’s
INDIRECT
COST
$’s
DIRECT
COST
$’s
IN
OPERATIONS
DEBT SERVICE
$’S
YOU
GET TO KEEP
NET PROFIT
BUILD A PRE-OPENING BUDGET
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3/19/2009
BUILD AN OPERATING BUDGET
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3/19/2009
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.
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3/19/2009
THE 6 NUMBERS YOU NEED TO KNOW
Breakeven Sales
Labor Cost
Gross Profit Margin
Overhead Expenses
Net Profit
Debt Service
BUDGET SALES
BUDGET
SALES
12
MONTHS
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
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3/19/2009
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.
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3/19/2009
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?
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3/19/2009
GROSS MARGIN – PROFIT MARGIN
Is there at least a
30% to 40% margin in your business?
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3/19/2009
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
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3/19/2009
W ORKING CAPITAL - AM I PROFITABLE?
M ONEY IN: SALES (COLLECTIONS)
(Minus)
M ONEY OUT: DIRECT COSTS
Equals
GROSS M ARGIN
(Minus)
M ONEY OUT: INDIRECT COST
Equals
WORKING CAPITAL (BEFORE DEBT SERVICE)
(NET PROFIT , FEASIBILITY)
WORKING CAPITAL (B EFORE DEBT SERVICE)
Plus
B EGINNING CASH POSITION - (TOTAL OF ALL A CCOUNTS)
(Minus)
MONEY OUT: DEBT S ERVICE
Equals
WORKING CAPITAL AFTER DEBT SERVICE
(THIS IS WHAT YOU GET TO KEEP.)
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3/19/2009
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
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3/19/2009
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
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3/19/2009
MONEY, MONEY, WHO HAS THE MONEY?
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3/19/2009
THIS IS WHAT MY SPA WILL LOOK LIKE
ASSEMBLING THE BUSINESS PLAN
PAGE 1
PAGE 2
PAGE 3
PAGE 4
PAGE 5
VISION
STATEMENT:
NARRATIVE
OF YOUR
DREAM
BIOS
RENDERING
BUDGET
BUDGET
PERSONAL
FINANCIAL
DATA
FLOOR PLAN
PREOPENING
OPERATING
BUDGET
PAGE 6
PAGE 7
PAGE 8
PAGE 9
PAGE 10
BUDGET
MARKET
RESEARCH
MARKET
RESEARCH
LOCATION
ANALYSIS
SUMMARY
COMPARABLE
OPERATIONS
UNIQUE
SELLING
QUALITIES
LEASE
ACQUISITION
VALUATION
SUMMARY OF
DEBT AND ROI
VISUAL
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3/19/2009
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
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3/19/2009
TOUGH LOVE: THE DOLLAR HEART
MANAGING THE TERRIBLE TWOS
TIMELY REVIEWS
SAYING “NO”!
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3/19/2009
 Blue sheet
YOUR EXIT IS PART OF INITIAL PLANNING
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3/19/2009
Monte Zwang
206.963.1017
[email protected]
Mark Machlis
801.860.7658
[email protected]
www.WellnessCapital.com
We would be happy to speak with you anytime.
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