THE ROSE SPA

“Feel Relax”
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Contents

Executive summary 5
Ch 1 The company 5
1.1 History 5
1.2 Mission statement 5
1.3 Product and service 6
1.4 Current Status 6
1.5 Legal Status and ownership 6
1.6 Basic Corporation information 6
1.7 Company structure 7

Ch 2 Industry Analysis
2.1 Industry definition 7
2.2 Industry size, growth and sales projections 7
2.3 Industry characteristics 8
2.4 Industry trends 8

Ch 3 Market Analysis
3.1 Marketing segmentation and target market selection 8
3.2 Buyer behavior 8
3.3 Competitor analysis 9
3.4 Estimation of annual sales and market share 9

Ch 4 Marketing Plan
4.1 Market strategy 10
4.1.1 Position strategy 10
4.1.2 Points of differentiation 10
4.2 Pricing strategy 10
4.3 Sales process and promotion mix 11
4.4 Distribution and sales 11

Ch 5 Operations and Product Development Plan

5.1 Operations plan 12
5.2 Product ( or service ) development plan 12

Ch 6 Financial analysis
6.1 Start up Expenses 13
6.2 Assumption sheet 14
6.3 Pro forma financial statement 15
6.3.1 Opening Day Balance Sheet (beginning of year) 16
6.3.2 Profit and Loss projection (12 months) 16
6.3.3 Cash flow (12 months) 17
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6.3.4 Projected balance sheet (end of year) 17
6.4 Ratio analysis 18
6.5 Break Even Analysis 19
6.6 Profit Projection (5 years) 20
Recommendation
Review
Appendix
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Executive Summary

THE ROSE Spa is a new upscale destination in Freeway in coimbatore, offering a complete
day spa experience. We offer seven ultra-boutique, ultra-comfortable treatment rooms with the
finest spa linens and equipment. We offer massage in a variety of styles - traditional Massage,
Deep Tissue work, Hot Stone Massage, Reflexology, Sports, Pregnancy and others. We also offer
facial and body treatments, like a Vitamin C Antioxidant Facial Treatment. The rose Spa has the
latest in anti-aging products and techniques but does not offer services on hair such as cutting,
styling and coloring. The only time a pedicure would be provided, is when it's part of a full
treatment like Calendula Foot and Leg Reflexology Treatment. In fact, for location, we prefer
being located near hair and nail salon for co-marketing opportunities.
This business plan has been developed to track progress prior to grand opening and following
through with a five-year projection. In addition, this plan has been written to for Spa's successful.

1. The company

1.1 History

The timing is right for starting this new venture. We are patiently searching for six months for
the perfect location, one was finally found in January 2012 in R.S.Puram coimbatore. The demand
from the owner's clients, as well as the ambitions of us, and the procurement of highly professional
and qualified beauticians and healthy, has made this business one of great potential.
We have been working in a famous upscale spa in our Town. We have been creating a large client
following through hard work and dedication. Our talented team of beauticians and physicians has
what it takes to make this venture an extremely successful one. We expect our growing reputation
to lead to new clients and beauticians to support our anticipated growth.
To achieve our objectives, we are seeking additional loan financing. This loan will be paid from
the cash flow from the business and will be collateralized by the assets of the company, and
backed by the character, experience, and personal guarantees of the owners.

1.2 Mission statement

Our mission is to run a profitable business by providing high-end therapeutic massage and
beautiful services in a caring, upscale, professional environment. We offer massage in a variety of
styles - traditional Massage, Sports Massage, Deep Tissue work, Sports Massage, Hot Stone
Massage, Reflexology, and others. Our licensed aestheticians offer the latest in skin treatments,
body treatments and anti-aging therapies.
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Our goal is to tailor the client's experience based on initial interview information, as well as
feedback during the treatments, to ensure the client's comfort and satisfaction, and to increase
repeat business. We are mindful of the overall experience - using only the finest oils and lotions,
beauty treatments and aromatherapies. Special lighting, music, decor, and textiles are used
throughout the spa to complete the comfortable, plush environment and enhance the client's overall
spa experience.
1.3 Products and services
The rose Spa offers therapeutic massage services, body treatments, facials and anti-aging
treatments. Services are provided by licensed therapists and aestheticians who are independently
contracted and paid on a commission basis. The upside of the commissioned employee is that
there is very little overhead without sales; employees only make money when the business makes
money.
We also offer a full retail line that complements the services menu. Products included are high-
end cosmetics, creams, candles, and other beauty products. These high-end items tend to have
50% mark - up, or higher.

1.4 Current status

The rose Spa is a new destination offering customers the combination of massage, body
treatments, facials and anti-aging treatments. The settings are upscale, beautiful and serene. We
cater to both men and women and offer the latest in skin care products and therapies.
R.S.Puram coimbatore, where we plan to locate, has a daily traffic count of 10,000 cars. It is also
only two blocks from a commuter train stop, and has an upscale hair and nail salon which would
complement our services nicely.

1.5 Legal status and ownership

The rose Spa is a privately held partnership, owned by Ms. Arunya and Ms. Gayathri. In the
course of fund raising, we will explore the feasibility of both a partnership, and a limited liability
partnership.

1.6 Basic corporate information

After spending several months searching for a spa to purchase, we decided to start a The
rose Spa from the ground up. The bulk of the start-up costs will be invested by us and
the remainder will be funded through short-term financing. Details are provided
Other Current Assets purchased at start-up are as follows:
Note –Rs.000lac

Massage table equipment - Rs3,795 (5 complete)

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Aesthetician Equipment - Rs2,800 (2 room setup)
Decor and Furnishings - Rs13,000
Envision Software & Equipment - Rs4,000
Signage - Rs3,500
Back bar Supplies - Rs5,000

2. Industry analysis

2.1 Industry definition

The rose Spa our sole purpose is to provide guests with lifestyle improvements and health
enhancement through professionally administered spa services, physical fitness, education,
nutritional advice on a residential basis.

2.2 Industry size, growth and sales projections

Nowadays in coimbatore we are more concerning about our health and this makes this kind of
business very popular recently and it tends to be larger and larger from metropolis to downtown.
The Target group is particular in Women because as we know well that they like to pamper
themselves to be “Good-looking” without concerning cost According to this, it is rapidly growing
the sales could be lower due to many competitions. For the rose Spa we have placed ours as a
medium Spa and Beauty industry.

Staffs of Spa industry and health care is projected to increase 27 percent through 2014 in
coimbatore, compared with 14 percent for all industries combined The slowest growing
industry segment to 69 percent in the much smaller Spa health care services.

About 40,000 establishments Spa care industry; they vary greatly in terms of size, staffing patterns,
and organizational structures. About 76 percent of Spa care establishments are offices of
physicians, or other health practitioners. Although hospitals constitute only 2 percent of all health
care establishments.

2.3 Industry characteristics

We are part of the retail health and beauty industry that we have served at our The rose Spa
Facility and delivered to local hotels also medical spa focus mainly on massage therapy, facials
and Resurfacing
2.4 Industry trends

In the rapidly changing health care industry in coimbatore, technological advances have made
many new procedures and methods of diagnosis and treatment possible. Spa development plans,
such as less invasive surgical techniques, skin grafts, so we are willing to continue to increase the
longevity and improve the quality of life of many customers. In addition, advances in information
technology continue to improve customers and worker efficiency with devices such as hand-held
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computers to maintain and track customers who are unaware of us as well as star beyond our
competitors and any threat.

3 Market Analysis

3.1 Marketing segmentation and target market selection

We are primarily targeting potential clients within our facility’s zone with a household income
over Rs5,000. Our secondary market will include visitors staying in a local hotel. Within
Coimbatore approximately 14% of the population has never tried a massage. We will assume that a
conservative 70% of these two categories has tried a massage and would undergo one again, if
offered appealing services at the right price. Our market Analysis table thus reflects 70% of the
local and visiting population who might be targeted.

3.2 Buyer behavior

Within this task, clients who use spa services fall into four basic groups:
1. Clients pampering themselves Massage Therapy, and facial treatments (We have a contact
of professional referral in area)
Often also seeing a chiropractor or physical therapist (more often referral from
chiropractor)
In some case, insurance will pay for short-term therapy only, although clients will
normally supplement out-of-
pocket
Individuals with medium disposable income
Sometimes have chronic pain or old injury issues
Massage 1 - 4 times a month for relaxation
Huge anti-aging and beauty market potential
Traffic continues to be a huge problem in Metropolis and our therapies are valuable
for this segment of the population
Local hotels that do not offer spa services will be able to refer to our local facility or
use our out-call services.

2. Clients who prefer alternative health care

Use massage as preventative health care
Use other alternative practices - e.g. acupuncture, Chiropractor, Naturopath,
Herbalist, etc.
Try to have massage as regularly as they can afford - usually once per month
Commuters in Metropolis suffer through some of the worst traffic in the country. As
the population grows, the traffic worsens and the need for massage therapies increases.
Extended hours will capitalize on those who want an appointment on their way home from
work.
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3. Serious Athletes
Injury and workout recovery also preventative.
Many serious runners, surfers, bicyclists and college athletes in the local area.
Massage for improved performance - great for word-of mouth referrals if they see
results.

3.3 Competitor analysis

Customers choose spa services based on proximity to their daily commute, quality and an
exceptional experience. With our combined services, we expect to dominate Party Spa
market. There is not one direct competitor of this nature within the area where we are intending to
locate.
The closest competitor is the Leelawadee Spa which is a Hair salon that offers additional,
limited, spa services. The Siam Hotel also offers massage treatments, but we will mostly cater to
visitors to the area and not the local residential base. Finally, Ravanda Spa, located in Plaza
Center is not a traditional day spa but combines a day spa with a female gymnasium. No men are
allowed at Ravanda Spa, either. The going rate for massage in Freeway County is Rs70-Rs90 per
hour which is slightly above most of the other residential areas in Metropolis which can even be as
low as Rs40 per hour in saturated or low-income areas.

4 Marketing Plan

4.1 Market strategy

Our strategy is to implement the most aggressive marketing and networking in the community
followed by the best services in the business. Our prices are competitive for the area, and our
personnel plan, which includes using a pool of skilled, commissioned therapists and aestheticians,
will give us a financial advantage.

4.1.1 Position strategy and Points of differentiation

Local Advertising & Seasonal Promotions - Local newspaper advertising, local fliers, grand
opening party and promotion for first 30 days. Continue regular advertising and plan for seasonal
events like Song Grand Festival, Mother's Day and New Year's.
Local Networking - Charities, women's groups, country clubs, wedding planners.
Health Care Referrals-Prior to opening, work current contacts and create new contacts with
health care providers, especially chiropractors. Also, become a Provider with health insurance
companies that offer Alternative Care to their members. Most people don't know that massage
therapy is usually paid by insurance when billed correctly and when prescribed by a physician.
The Rose Spa already has practice management software to handle medically billable massage.
When the insurance does not cover the entire amount of a service the client will pay the
difference. For that reason, we will not want to participate with any health insurance that require
write-off for amounts over the usual and customary fee (which tends to be too low). A list of
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acceptable insurance company plans will be maintained and those clients will be able to handle
massage therapy through their insurance. Any opportunity to convince allopathic physicians to
see massage as having long-term healing benefits for their patients will also be taken, since
they hold key to having massage paid for as medically necessary. The client will also help drive
that with the physicians if they are properly educated.
Hotel Referrals - Hotels that do not offer their own spa services will send their guests to our
spa or use our out-call spa services. Prior to opening, we will make contacts with managers and
concierges at local hotels to ensure they are aware of the services available. Promotions will be
offered to professionals in these industries to build relationships.
Online Website - our spa will show up on major website in Coimbatore e.g. Mthai.com,
Kapook.com and in the phone directory (Yellow pages). The website will have a full menu of
services and eventually have the ability to schedule appointments on-line. The spa software we are
using will allow a user to see the schedule and make and appointment without making a phone
call.
Location traffic - It is imperative that we be located in a high-traffic strip mall that is high-
end, modern, and clean. We prefer locating near a complementary business like a nail or hair salon
that does not offer any massage or facial treatments.

4.2 Pricing strategy

Products Minutes Price

Hand Spa 45 400

Foot Spa 60 600

Body Relaxation
• Body Scrub 60 1200-1500
• Body Wrap 60 1200-1500
• Massage
- Swedish Massage 90 1200-1500
- Aroma Massage 90 1200-1500
- Stone Massage 90 2700-3500

Special Treatment
• Anti-stress 60 1300
• Facial Treatment 60 1300-2000
• Royal Thai Massage 60 1300-1500

Spa Products

• Soap
• Body lotion
• Body scrub
• Oil
• Scent candle
• Pot pouri (บุหงา)
10
- 200
- 400
- 400
- 300
- 50
- 50

We define it as several levels strategies follow:

Premium Pricing
We use a high price where there is uniqueness about the product or service to approach a
substantial competitive advantage exists. Such high prices are charge for luxuries such as
rooms, beautician courses and delivery service.
Penetration Pricing
The price charged for services is set artificially low in order to gain market share. Once this is
achieved, the price is increased.
Economy Pricing
This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. We
have economy services for, such as hands massage.
Price Skimming
Charge a high price because we have a substantial competitive advantage. However, the
advantage is not sustainable. The high price tends to attract new competitors into the market.
Once other spas were tempted into the market and the services were produced at a lower unit
cost.
Promotional Pricing
Pricing to promote our services is a very common application. There are many promotional
pricing including approaches such as Buy One Get One Free.

4.3 Sales process and promotion mix

We have at our disposal four major methods of promotion. Taken together these comprise the
promotion mix of each method is offered while in the next section a comparison of each method of
promotion is presented.
• Advertising – we pay promotions using multimedia deliver the The Rose Spa’s message
such as health magazines. While we have involved one-way communication with mass
feedback opportunity for the customer experiencing that the advent of Internet such as
Lotus’s website, community profiles (Fackebook,Youtube) that allow customers to provide
quick feedback.
• Sales Promotion – we involve the use of special short-term techniques in the form of
incentives, to encourage customers to respond or undertake some activity. For instance, the
use of retail coupons with expiration dates requires customers to act while the incentive is
still valid.
• Public Relations – we also referred to as publicity, this type of promotion uses third-party
sources, and particularly the news media, to offer a favorable mention of our company or
services without direct payment to the publisher of the information.
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• Personal Selling – we involve personal contact between company alliance and those who
have a role in purchase decisions (member of a company buying center). Often this occurs
face-to-face or via telephone, though newer technologies allow this to occur online via video
conferencing or text chat.

4.4 Distribution and sales

If, as it has been said, the top item which determine success in business is location then a busy
location at Plaza center in a thriving residential community represents our top marketing
strategy. We are focusing on the sales, marketing and management and delegating the massage and
aesthetician therapies to employees--business profitability potential is exponentially maximized
over a one or two person operation by a direct care-giver without any marketing, management or
sales background.
As the owners, we have done extensive market research and visited some of the best spas in and
have taken ideas from the best to offer an upscale, ultra-amenity, spa experience. Once a client
experiences the comfortable, high-end level of personalized care that we offer, we are confident
that we will have a return client.

5 Operations and Product Development Plan

5.1 Operations plan

The Rose Spa Operations Development Plan is designed to provide for upgrading and
development of all those function, standards, services, systems, and regulatory activities which
will allow safe, timely and economical integration of The Rose Spa into all-weather operations in
Spa community. We describe a five-year development program our objectives are to improve our
services System so as to enable us to utilize our unique employees’s capabilities. It includes the
collection of ingredients treatment (both near and long term) for ensuring full integration into The
Rose Spa of this rapidly growing segment of aviation. These areas are covered in the plan: (1)
Technical Operations; (2) communication Systems Development; (3) Cost Control; (4) Weather
Environment; (5) Spa Services Certification Standards; (6) Risk reduction.

5.2 Service development plan

Strategy

To raise the profile of The Rose Spa this will help by improving uptake of services and
increasing public consideration of customers. This Services Development Plan is intended to serve
our strategy and therefore indirectly to increase the The Rose Spa’s effectiveness. In developing a
Services Development Plan we have built the following ideas in mind.

Sustainability – effective service provision should depend as little as possible upon

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the individuals annually elected as CEO Officers.
Specificity – we are seeking to offer services which will appeal specifically to our clients.
Long-term financial returns – we are investing now in order to establish stable and diverse
income streams for the future.

Plans
To implement this strategy we are developing plans in the following:

Management

If once plan have been agreed we will seek the advice of other relevant authorities in drawing up
an operating schedule for the proper management of all our activities.

Provision of Services

Purpose

Significant revenue on those items upon which it does make a profit (e.g. ingredients, Staffs)
Nevertheless The Rose Spa provides a number of popular and valuable member services

Service Provision

This view emphasizes that a range of services is available it’s not just a service material but also
service mind.
We are friend this redefinition has begun , has led to substantially increased turnover since the start
of term (against comparable recent periods). This indicates that service uptake has increased, as
well as improving the financial viability of the activity.

Coffee Bar

Purpose

The Rose Spa is looking at ways to increase involvement of workers and university students, to
increase uptake of the services it offers and to attempt to make more relationship community. At
the same time we are keen to ensure sustainability and to develop systems which will handle
increased activity without consuming the time of elected us. In pursuing these aims we would like
to consider the possibility of providing a coffee bar during customer’s relaxing.

Consultation

We would like to seek advice from Health officers.

Timescale
.
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We and relevant workers are keen to actively pursue each of the activities described, and wishes
to present the plans for their information, for approval, and for any advice which members wish to
offer on the content of the plans and how best to take them forward.

6 Financial analysis
The following are the financial analysis.
6.1 Start up Expenses
Start-up
Note-Rs000lac

Requirements

Start-up Expenses
Legal Rs2,500
Printing, stationery, bags, grand opening coupons Rs3,500
Brochures Rs500
Construction/Design Rs45,000
Insurance Rs2,000
Rent Rs17,000
Research and Development Rs0
Advertising Rs5,000
Accountant Rs950
Linens Rs4,000
Other Rs0
Total Start-up Expenses Rs80,450

Start-up Assets
Cash Required Rs35,000
Start-up Inventory Rs6,000
Other Current Assets Rs32,095
Long-term Assets Rs0
Total Assets Rs73,095

Total Requirements Rs153,545

Start-up Funding
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Start-up Expenses to Fund Rs80,450

Start-up Assets to Fund Rs73,095
Total Funding Required Rs153,545

Assets
Non-cash Assets from Start-up Rs38,095
Cash Requirements from Start-up Rs35,000
Additional Cash Raised Rs11,455
Cash Balance on Starting Date Rs46,455
Total Assets Rs84,550

Liabilities and Capital

Liabilities
Current Borrowing Rs35,000
Long-term Liabilities Rs0
Accounts Payable (Outstanding Bills) Rs0
Other Current Liabilities (interest-free) Rs0
Total Liabilities Rs35,000

Capital

Planned Investment
Owner Investment from Sale of Home Rs130,000
N/A Rs0
Additional Investment Requirement Rs0
Total Planned Investment Rs130,000

Loss at Start-up (Start-up Expenses) (Rs80,450)

Total Capital Rs49,550
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Total Capital and Liabilities Rs84,550

Total Funding Rs165,000

6.2 Assumption sheet

The financial plan depends on important assumptions, most of which are shown in the following
table as annual assumptions. We assume cash payments for all services, except for the 1% of sales
projected as insurance reimbursements, with collection days at 90. The collection days are for
insurance billings only. Interest rates, tax rates, and personnel burden are based on conservative
assumptions.
Two of the more important underlying assumptions are:
-We assume a strong economy, without major recession.
-We assume, of course, that there are no changes to the Medical/insurance Industry, such as the
nationalization of health care.

General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 7.00% 7.00% 7.00% 7.00% 7.00%
Long-term Interest Rate 5.65% 5.65% 5.65% 5.65% 5.65%
Tax Rate 28.17% 28.00% 28.17% 28.00% 28.17%
Other 0 0 0 0 0

6.3 Pro forma financial statement

6.3.1 Opening Day Balance Sheet (beginning of year)

Assets Liabilities and Owners' Equity
Cash Rs30,0 Liabilities
00
Accounts Rs30,2 Notes Payable
Receivable 00
Accounts Payable
Total liabilities Rs54,
000
Tools and equipment Owners' equity
Rs12,841
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Capital Stock Rs10,00
0
Retained
Earnings Rs20,550
Total owners' equity Rs30,
000
Total Rs73,0 Total Rs84,
59 550

6.3.2 Profit and Loss projection (12 months)

Because we are paying our service-provider on commission, our variable costs will exceed our
fixed costs. This keeps our overhead low, and means we are paying only for hours when they
actually provide services. Keeping such a large pool of reliable massage therapists and
aestheticians as we are recruiting will keep us from losing business with no-shows, especially since
we will schedule our contractors, as much as possible, for full days or half - days, rather than
individual appointments.
Fixed expenses are the customary: rent, electric, advertising, insurance. There are four main areas
of income: massage, aesthetician retail and out call. Massage and aesthetician services are Rs65
per service minimum, with 55% of that going to the service provider. The basis for the
sales projections is a conservative estimate of 7 services per day the first month in business and
53 services per day by the end of the first year. At 53 services per day we would still only be
operating 75% to capacity with 7 treatment rooms operating 7 days a week, 8-10 hours per day.
On retail services/product, the gross margin is consistently 50% across the board. The retail lines
go in conjunction with the spa services as an extension of the spa experience. The more customer’s
sales will be driven. These high-end spa services are hard to find items that generate repeat
purchases.

Profit and Loss projection

Year 1 Year 2 Year 3 Year 4 Year 5
Sales Rs823,685 Rs857,000 Rs900,000 Rs946,000 Rs982,000
Direct Cost of Sales Rs65,644 Rs59,925 Rs73,175 Rs86,400 Rs99,575
Massage Therapists'
Rs290,307 Rs302,500 Rs308,000 Rs316,250 Rs319,000
commission
Aestheticians' commission Rs70,964 Rs72,000 Rs74,000 Rs74,400 Rs76,000
Out-call Services commission Rs15,340 Rs17,550 Rs19,500 Rs22,750 Rs24,050
Total Cost of Sales Rs442,254 Rs451,975 Rs474,675 Rs499,800 Rs518,625

Gross Margin Rs381,431 Rs405,025 Rs425,325 Rs446,200 Rs463,375

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Gross Margin % 46.31% 47.26% 47.26% 47.17% 47.19%

Expenses
Payroll Rs137,510 Rs145,000 Rs155,000 Rs160,000 Rs167,000
Marketing/Promotion Rs7,500 Rs5,000 Rs5,000 Rs8,000 Rs5,000
Depreciation Rs0 Rs50 Rs50 Rs50 Rs50
Rent Rs66,000 Rs66,000 Rs66,000 Rs66,000 Rs66,000
Utilities Rs3,000 Rs3,100 Rs3,200 Rs3,300 Rs3,400
Advertising Rs3,000 Rs3,000 Rs3,000 Rs3,000 Rs3,000
Insurance Rs1,500 Rs700 Rs700 Rs700 Rs700
Payroll Taxes Rs0 Rs0 Rs0 Rs0 Rs0
Phone Rs1,500 Rs1,600 Rs1,700 Rs1,800 Rs1,900
Software Support Rs0 Rs495 Rs495 Rs495 Rs495
Other Rs6,700 Rs6,700 Rs6,700 Rs6,700 Rs6,700

Total Operating Expenses Rs226,710 Rs231,645 Rs241,845 Rs250,045 Rs254,245

Profit Before Interest and

Rs154,721 Rs173,380 Rs183,480 Rs196,155 Rs209,130
Taxes
EBITDA Rs154,721 Rs173,430 Rs183,530 Rs196,205 Rs209,180
Interest Expense Rs2,132 Rs1,568 Rs980 Rs392 Rs49
Taxes Incurred Rs42,612 Rs48,107 Rs51,404 Rs54,814 Rs58,891

Net Profit Rs109,978 Rs123,705 Rs131,096 Rs140,949 Rs150,190

Net Profit/Sales 13.35% 14.43% 14.57% 14.90% 15.29%

6.3.3 Cash flow (12 months)

Based on our conservative sales forecasts, the following Cash Flow table shows The Rose Spa
with a consistently positive Cash Flow. After two months, the spa will show a consistent increase
in the cash balance. Because the business is a partnership, our draw is obviously the area of cash
flow where adjustments can be made if Cash Flow becomes tight.
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6.3.4 Projected balance sheet

The only Accounts Receivable carried is any Insurance Billings that are not paid during the
month. Although some insurance companies pay promptly, within 10 working days, others take
more than 6 weeks to pay. We have set our collection days for this small percentage of non-cash
sales at 90 days, to be conservative.
The Balance Sheet shows a steady increase in earnings and net worth over the next five years.
Note-Rs.000

Pro Forma Balance Sheet

Year 1 Year 2 Year 3 Year 4 Year 5
Assets

Current Assets
Cash Rs213,263 Rs293,531 Rs414,568 Rs547,351 Rs697,823
Accounts Receivable Rs10,123 Rs10,759 Rs10,357 Rs11,876 Rs11,301
Inventory Rs12,441 Rs11,357 Rs13,868 Rs14,577 Rs15,132
Other Current Assets Rs32,095 Rs32,095 Rs32,095 Rs32,095 Rs32,095
Total Current Assets Rs267,923 Rs347,742 Rs470,888 Rs605,899 Rs756,351

Long-term Assets
Long-term Assets Rs0 Rs2,000 Rs4,000 Rs4,000 Rs4,000
Accumulated Depreciation Rs0 Rs50 Rs100 Rs150 Rs200
Total Long-term Assets Rs0 Rs1,950 Rs3,900 Rs3,850 Rs3,800
Total Assets Rs267,923 Rs349,692 Rs474,788 Rs609,749 Rs760,151
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Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5

Current Liabilities
Accounts Payable Rs81,795 Rs48,260 Rs50,660 Rs53,072 Rs54,683
Current Borrowing Rs26,600 Rs18,200 Rs9,800 Rs1,400 Rs0
Other Current Liabilities Rs0 Rs0 Rs0 Rs0 Rs0
Subtotal Current Liabilities Rs108,395 Rs66,460 Rs60,460 Rs54,472 Rs54,683

Long-term Liabilities Rs0 Rs0 Rs0 Rs0 Rs0

Total Liabilities Rs108,395 Rs66,460 Rs60,460 Rs54,472 Rs54,683

Paid-in Capital Rs130,000 Rs130,000 Rs130,000 Rs130,000 Rs130,000

Retained Earnings (Rs80,450) Rs29,528 Rs153,232 Rs284,328 Rs425,277
Earnings Rs109,978 Rs123,705 Rs131,096 Rs140,949 Rs150,190
Total Capital Rs159,528 Rs283,232 Rs414,328 Rs555,277 Rs705,467
Total Liabilities and Capital Rs267,923 Rs349,692 Rs474,788 Rs609,749 Rs760,151

Net Worth Rs159,528 Rs283,232 Rs414,328 Rs555,277 Rs705,467

6.4 Ratio analysis

The following table shows the projected businesses ratios. We expect to maintain healthy ratios
for profitability, risk, and return. The ratios for the initial year of growth are, of course, not as
favorable as the second year. Industry profile ratios based on the Standard Industrial Classification
(SIC) code 7991.0103, Spas, are shown for comparison.

Ratio Analysis
Industry
Year 1 Year 2 Year 3 Year 4 Year 5
Profile
Sales Growth 0.00% 4.04% 5.02% 5.11% 3.81% 3.43%

Percent of Total Assets

Accounts Receivable 3.78% 3.08% 2.18% 1.95% 1.49% 4.05%
Inventory 4.64% 3.25% 2.92% 2.39% 1.99% 4.35%
Other Current Assets 11.98% 9.18% 6.76% 5.26% 4.22% 30.50%
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Total Current Assets 100.00% 99.44% 99.18% 99.37% 99.50% 38.90%
Long-term Assets 0.00% 0.56% 0.82% 0.63% 0.50% 61.10%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Current Liabilities 40.46% 19.01% 12.73% 8.93% 7.19% 20.63%

Long-term Liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 25.37%
Total Liabilities 40.46% 19.01% 12.73% 8.93% 7.19% 46.00%
Net Worth 59.54% 80.99% 87.27% 91.07% 92.81% 54.00%

Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 46.31% 47.26% 47.26% 47.17% 47.19% 100.00%
Selling, General &
90.28% 94.36% 90.99% 0.00% 0.00% 69.59%
Administrative Expenses
Advertising Expenses 0.00% 0.01% 0.01% 0.01% 0.01% 2.76%
Profit Before Interest and
18.78% 20.23% 20.39% 20.74% 21.30% 4.07%
Taxes

Main Ratios
Current 2.47 5.23 7.79 11.12 13.83 1.17
Quick 2.36 5.06 7.56 10.86 13.55 0.82
Total Debt to Total Assets 40.46% 19.01% 12.73% 8.93% 7.19% 58.83%
Pre-tax Return on Net Worth 95.65% 60.66% 44.05% 35.25% 29.64% 4.43%
Pre-tax Return on Assets 56.95% 49.13% 38.44% 32.11% 27.51% 10.76%

Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5

Net Profit Margin 13.35% 14.43% 14.57% 14.90% 15.29% n.a
Return on Equity 68.94% 43.68% 31.64% 25.38% 21.29% n.a

Activity Ratios
Accounts Receivable Turnover 2.39 2.39 2.39 2.39 2.39 n.a
Collection Days 77 148 156 143 157 n.a
Inventory Turnover 10.15 5.04 5.80 6.07 6.70 n.a
Accounts Payable Turnover 7.12 12.17 12.17 12.17 12.17 n.a
 21
Payment Days 27 40
Total Asset Turnover 3.07 2.45 1

Debt Ratios
Debt to Net Worth 0.68 0.23 0
Current Liability to Liability 1.00 1.00 1

Liquidity Ratios
Net Working Capital Rs159,528 Rs281,282 Rs410,4
Interest Coverage 72.59 110.57 187

6.5 Break Even Analysis

The break-even analysis table shows what we need to make in sales to meet costs. Our variable
costs include both the direct costs shown in the Sales Forecast table, for linens, ingredients,
equipment, but also include the commissions paid to contracted massage therapists and
aestheticians. We should surpass the break-even point by month four of operations.
Contribution Margin and Break-even Analysis
 Assume that variable cost is 30% of total revenue.

Variable Costs 1,568,160

Fixed Costs 1,151,840
Contribution per service ( average price of service that 1
customer would use) 665.5
Break-Even in number of customers 1,730

Summary:
The Rose Spa will be successful. This business plan has documented that the establishment

of The Rose Spa is feasible. All of the critical factors such as industry trends, marketing analysis,

competitive analysis, management expertise, and financial analysis support this conclusion.

We invite you to attend our grand opening. We promise that we will make the
experience.”The Rose Spa”-Feel Relax