Ascend Strength & Conditioning Business Plan — Break-Even and Debt Service
The member count needed to cover the cost base, and debt service across the twelve-month capital moratorium.
Break-Even and Debt Service
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- Overview & contents
- i. Important Notice and Basis of Preparation
- 1. Executive Summary
- 2. Market and Positioning
- 3. How a Studio Actually Makes Money
- 4. Churn and the Retention Engine
- 5. SWOT and Competitive Position
- 6. Operations and the Capacity Build
- 7. Compliance and Consumer Protection
- 8. Management and Team
- 9. Financial Plan
- 10. Break-Even and Debt Service
- 11. Investment Analysis
- 12. Sensitivity and Scenario Analysis
- 13. Risk Analysis
- 14. Implementation Roadmap
- 15. Key Performance Indicators
- 16. Key Assumptions
- 17. Conclusion and Recommendation
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Capacity and Unit Economics Schedules
- C. Appendix C: Funding, Debt and Working Capital Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
- 10.1 Break-even
- 10.2 Debt service
10.1 Break-even
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
|---|---|---|---|---|---|
|
Gross margin |
27.7% |
55.7% |
57.1% |
62.8% |
65.0% |
|
Overhead plus debt service, R |
3 104 000 |
3 905 264 |
4 935 264 |
5 255 264 |
5 495 261 |
|
Break-even revenue including debt service, R |
11 205 776 |
7 011 246 |
8 643 194 |
8 368 255 |
8 454 248 |
|
Planned revenue, R |
3 739 000 |
7 154 000 |
9 897 000 |
12 211 000 |
12 881 000 |
|
Break-even as a share of planned revenue |
299.7% |
98.0% |
87.3% |
68.5% |
65.6% |
|
Equivalent members at break-even |
615 |
377 |
434 |
403 |
387 |
|
Headroom, R |
(7 466 776) |
142 754 |
1 253 806 |
3 842 745 |
4 426 752 |
Break-even is crossed during Year 2, when planned revenue of R7.15 million clears a break-even of R7.00 million. By Year 5 break-even sits at 65.6 per cent of planned revenue — a margin of safety of R4.43 million, which in operating terms is roughly 387 members against a plan of 613. That margin exists because the gross margin has ramped from 27.7 per cent to 65.0 per cent while overhead has grown by only 68 per cent.
|
Break-even measure at Year 5 |
Value |
Interpretation |
|---|---|---|
|
Gross margin |
65.0% |
After coach remuneration, personal training revenue share, acquisition and collection failure |
|
Break-even revenue including debt service |
R8 454 248 |
Against R12 881 000 planned |
|
Break-even as a share of planned revenue |
65.6% |
A margin of safety of 34.4 points |
|
Equivalent members |
387 members |
Against a plan of 613, holding price and margin at plan |
|
Break-even monthly churn |
5.07% |
The point at which cumulative five-year profit turns negative |
10.2 Debt service
|
R |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|---|---|---|---|---|---|
|
Opening balance |
2 400 000 |
2 400 000 |
1 908 736 |
1 351 151 |
718 292 |
|
Interest at 13.5% |
324 000 |
324 000 |
257 679 |
182 405 |
96 969 |
|
Capital repaid |
— (moratorium) |
491 264 |
557 585 |
632 859 |
718 292 |
|
Total debt service |
324 000 |
815 264 |
815 264 |
815 264 |
815 261 |
|
Closing balance |
2 400 000 |
1 908 736 |
1 351 151 |
718 292 |
0 |
|
of which current portion |
491 264 |
557 585 |
632 859 |
718 292 |
0 |
|
of which non-current portion |
1 908 736 |
1 351 151 |
718 292 |
0 |
0 |
|
EBITDA |
(1 744 000) |
897 000 |
1 527 000 |
3 230 000 |
3 693 000 |
|
Debt service cover |
n/a — EBITDA negative |
1.10x |
1.87x |
3.96x |
4.53x |
|
Gearing |
48.2% |
44.0% |
32.8% |
13.1% |
0.0% |
Gearing peaks at 47.6 per cent at the end of Year 2 and falls to 9.9 per cent by Year 5. Debt is deliberately modest at R2.4 million against a R6.63 million capital budget, because fit-out and the third studio build-out together are 57 per cent of that budget and are lease improvements a financier cannot repossess and resell.