Frame & Field Studios Business Plan — Break-Even and Debt Service

Break-even at 39.9% utilisation against a planned 71%, and debt service across the ramp to full capacity.

Break-Even and Debt Service

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8.1 Break-even
8.2 Debt service

8.1 Break-even

Figure 17. EBITDA against photographer utilisation at full headcount.

Break-even measure	Value	Interpretation
Contribution per billable day	R14 066	67.2% of the day rate
Fixed cash costs at full headcount	R9 773 024	Payroll is 69.2% of it
Break-even billable days	695 days	A year
Break-even utilisation	39.9%	Against a planned 71%
Equivalent fully utilised photographers	3.00	Of 7.5 on the payroll
Editors required at break-even	2.61	Of 4.5; editing binds even here
Margin of safety at maturity	41.8%	How far billable days can fall
Utilisation at which editing caps output	69%	Above this the extra days cannot be delivered

	Year 1	Year 2	Year 3	Year 4	Year 5
Fixed cash costs, R	6 202 891	7 821 726	9 607 479	11 010 324	12 245 362
Contribution per billable day, R	14 072	14 224	14 397	14 557	14 715
Break-even billable days	441	550	667	756	832
Break-even utilisation	63.4%	52.7%	47.9%	46.6%	47.8%
Billable days planned	398	664	929	1 062	1 195
Margin of safety	-10.8%	17.2%	28.2%	28.8%	30.4%

The equivalent-headcount figure is worth stating plainly: 695 billable days is three fully utilised photographers of the seven and a half on the payroll. The other four and a half are not surplus — they exist because no photographer bills every working day and because the mix requires different skills — but the arithmetic means the studio can absorb the complete idleness of more than half its shooting capacity before it loses money.

Figure 18. Gross profit against the fixed cost base.

Gross profit covers fixed cash costs 0.90 times in Year 1 and 1.44 times by Year 5. The operating leverage is real but modest by the standards of a capital-intensive business, because the largest cost in this studio scales with the team rather than sitting fixed against it: eleven of the sixteen permanent staff are photographers and editors, and each additional one raises both capacity and cost. That is what caps the margin at 19.1 per cent and it is also what makes the downside survivable — a studio that loses revenue can shed the capacity that was producing it, which a factory cannot.

8.2 Debt service

R	Year 1	Year 2	Year 3	Year 4	Year 5
Opening balance	5 960 000	5 044 292	4 007 527	2 833 702	1 504 697
Interest at 13.22%	787 912	666 855	529 795	374 615	198 921
Capital repaid	915 708	1 036 765	1 173 825	1 329 005	1 504 697
Total debt service	1 703 620	1 703 620	1 703 620	1 703 620	1 703 618
Closing balance	5 044 292	4 007 527	2 833 702	1 504 697	0
of which current portion	1 036 765	1 173 825	1 329 005	1 504 697	0
of which non-current portion	4 007 527	2 833 702	1 504 697	0	0
EBITDA	(602 241)	1 622 728	3 767 790	4 448 903	5 338 585
Debt service cover	-0.35x	0.95x	2.21x	2.61x	3.13x
Gearing	82.8%	85.4%	64.5%	28.4%	0.0%

A lender is financing a client list that does not yet exist

Cover of negative 0.35 times in Year 1 and 0.95 times in Year 2 is below any standard covenant, and 1.30 times is cleared only in Year 3 at 2.21 times. That is not a modelling artefact; it is what building a photography client base looks like. The security position is also weaker than most asset-backed lending: R6 940 000 of equipment against R11 860 000 of funding, and cameras and computers depreciate fast and resell at a discount. Three things make the structure workable. Equity is 49.7 per cent of the funding, so the lender sits behind R5 900 000 of first-loss capital. The R3 600 000 working capital facility is committed at drawdown rather than sought in Year 2 from a position of weakness. And covenants are tested from Year 3, when the business first has earnings to be measured against.

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