Overview:

As per our research the Adult Day Care facilities have just started to tap into the millions of older

adults that need some care provided during the day when their loved ones are at work. Our new

location to be opened in Allen, TX would be an ideal location within the Collin County as there

are no Adult Day Care centers within Allen, TX.

Happy Horizons, LLC realizes that financing management is the blood stream for successful

business operations. We are planning to have a very strong financial start to cover initial cost

and ensure continuous growth. Initial cash investments of $250,000 will be secured from the

partners. Happy Horizons, LLC will secure additional capital of $200,000 for building lease,

long and short term assets, and maintaining strong cash-flow. Happy Horizons, LLC will

allocate $30,000 for marketing budget 60 days prior to initial opening. We will obtain 7 (a) loan

from SBA; the interest rate will be prime rate (+3%) (Small Business Administration, 2013).

Based on current interest rate we will assume 9% interest rate fully amortized in 3 years.

Obtained funds will be utilized to cover start-up cost and monthly expenses including:

Property Lease

Equipment Purchase

Insurance

Cover deficiency in cash-flow in the first year of operations.

Sales Forecast:

The sales forecast is based upon the demographics of Allen, TX and research which states there

is an increasing demand among people with live in parents who will pay for private services. Our

sales forecast is also based upon a three month starting period of marketing, hiring employees

and preparing the facility in Allen, TX. We will generate revenues from four different services

line. Weekly guest service will generate the main cash stream for the company (98.82%),

registration fee, transportation and hair styling services will generate 1.18% of the total revenue;

however, those are important part of the business plan and services provided to our guests.

Happy Horizons, LLC anticipates starting with 19 guests within the first month of operations.

This will generate an amount of $40,432 in gross sales during the month of operations,

continuous growth is expected through-out the year. With anticipated growth rate of 3% per

month, we are expecting gross sales in the amount of $617,050 generated from 28 guests in the

first year of operations. While shuttle and hair styling are complementing our main service, they

are scheduled to generate annual revenue of $4,477 combined.

Figure 1Collin County Map (courtesy of http://www.cityofallen.org/DocumentCenter/Home/View/157)

Happy Horizons, LLC anticipates continuous growth through-out the operation’s period,

however profitability will begin in the 2nd year.

2014 2015 2016 2017 2018-$500,000

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,0005-Year Financials At-a-Glance

Gross Sales

Gross Profit

Net Profit

Expenses:

Happy Horizons, LLC realizes the importance of the first impression and the importance of

initial investment in high quality equipment and furniture. Costs will include equipment’s, and

furniture’s. Our fixed asset estimated as following:

Capital Purchases

Item CostPurchase

Date

Years

of

Servic

e

Salvage

Value

Facilities Month Year

Interior Construction$65,00

0Dec 2013 5 $0

Interior Designer $5,000 Dec 2013 5 $0

Equipment

Stove $3,000 Jan 2014 5 $0

Dish Washer $800 Jan 2014 5 $0

Microwave Oven $550 Jan 2014 5 $0

Refrigerator $4,000 Jan 2014 5 $0

Garbage Disposal $300 Jan 2014 5 $0

Television 42" $700 Jan 2014 5 $0

Television 72" $1,800 Jan 2014 5 $0

Passenger Cars$18,00

0Jan 2014 5 $0

Minivan$20,00

0Jan 2014 5 $0

Minivan$20,00

0Jan 2014 5 $0

Dining Sets $3,000 Jan 2014 5 $0

Dining Tables $3,000 Jan 2014 5 $0

Great room furniture $5,000 Jan 2014 5 $0

Office furniture$20,00

0Jan 2014 5 $0

Gym Equipment $5,000 Jan 2014 5 $0

Hair Stylist Equipment’s $1,000 Jan 2014 5 $0

Cookware $4,000 Jan 2014 5 $0

Clinic $2,000 Jan 2014 5 $0

Computer

Hardware/Software

Server $2,000 Jan 2014 5 $0

Guests work stations $4,000 Jan 2014 5 $0

Managements Laptops $7,500 Jan 2014 5 $0

Desktops $3,000 Jan 2014 5 $0

Printers $2,000 Jan 2014 5 $0

Security Cameras $1,000 Jan 2014 5 $0

Facility and staffing will consume 75.6% of our monthly expenses. The average rent rate in the

selected area will be $18.20 per sqft. (Show Case, 2013). We will require at least 10,000 sqft.

For our operations, the total annual rent cost $182,000 per year.

$318,000.00

$47,700.00$7,000.00

$5,000.00

$182,004.00

$12,000.00

$36,330.00

$12,000.00

$3,600.00$18,000.00 $1,200.00 $2,400.00 $15,533.16

Happy Horizons - Monthly ExpensesSalaries and wagesPayroll taxesProfessional servicesMarketing and advertisingRentMaintenanceDepreciationInsuranceTelephone serviceUtilitiesOffice suppliesPostage and shippingInterest on loans

Revenue:

Company revenue will be generated primarily from registration and weekly fees collected from

guests, charge of $100 per applicant will collected at the time of registration and an amount of

$100 per day that will cover the tuition. Company will consider discounted monthly tuition after

2 years of operations. Maximum capacity of the center will be 75 guests; this will create revenue

of $2,328,485 per year.

Our projected gross income beginning the 2nd year of operation will be $64,455 per month, this

amount will cover the entire expense and the company will reach its break-even point. Happy

Horizons, LLC realizes that the income generated from operations in the first year will not be

sufficient to sustain its financial obligations. The secured financing of $200,000 will aid

operations expenses in the first year until the business reaches break-even point.

Break-even Estimates

Year (1) 2014 - 2015

Monthly Average

$60,095.1

4

Year (2) 2015 - 2016

Monthly Average

$62,855.8

7

Ratio Analysis:

At a quick review at the table below, the company will have a healthy current ratio to meet its

short term liabilities and debt. The first year reflects healthier current ratio due to the loan

collected to help with the operations. Our cash turnover ratio indicates that our invested amount

will not yield sufficient return in the first year of operations, the year after every invested dollar

will turn 2.51 times. Since shareholders invested with large initial cash amount, Happy Horizons,

LLC has a great leverage based on the debt to equity ratio. After completing the first year in

business, company’s operations will yield good return on investment, sales, and assets; this will

generate good cash liquidity which will enable the company to invest in more locations and add

more services for the guests. (Investopedia, 2013)

Key Ratios

Year 1 (2014-2015) Current Ratio

CashTurnover

Debt toEquity

Return onInvestment

Return onSales

Return onAssets

1st Quarter 6.76 0.37 0.45 -11% -33% -7%2nd Quarter 6.11 0.46 0.45 -7% -18% -5%3rd Quarter 5.70 0.53 0.42 -3% -8% -2%4th Quarter 5.41 0.60 0.38 -1% -3% -1%

Year 2 (2015-2016) 3.83 2.51 0.27 34% 18% 27%

Year 3 (2016-2017) 3.95 1.76 0.30 68% 43% 52%

Year 4 (2017-2018) 3.37 1.25 0.41 72% 59% 51%

Year 5 (2018-2019) 3.22 0.88 0.45 55% 63% 38%

Growth Potential:

After completion the 3rd year of operations, we will assess current assets and current liabilities.

This will allow for close evaluation of the company. We will use our leverage and market

knowledge to opening new facility to service more guests. New location will accommodate 75

guests, once we reach this milestone; we will be able to eliminate items from operation’s that

does not yield required return for stakeholders. Pre-marketing campaign will precede our grand-

opening; the new location would reach break-even point within 180 days of operations.

Cash Flow

The cash flow is based upon the assumptions and analysis of the operations of Happy Horizons,

LLC. The rent will be $15,167 a month and will begin funding of operations with a loan of

$200,000 and the partner’s will each invest $50,000 for a total investment of $250,000. It is

expected that Happy Horizons, LLC operations will provide adequate cash flow. This

capitalization is more than adequate to support the start-up and operation of Happy Horizons

LLC.

Happy Horizons, LLC is projecting sales for the first quarter of operations during which time it

will hire and train employees, complete its build-out, and will start its marketing. It is projected

that there will be a slow buildup starting with approximately 19 guests and steady growth over a

five-year-period. With the expected investment and borrowing Happy Horizons, LLC will start

with approximately $450,000, and then start to build up a cash balance over the five year period.

The number provided below are based upon the assumption that the investors do not withdraw

any of their investment or returns and the $200,000 loan is paid in full at the end of the three year

period.

Expected Cash Balances at Year End

2014 2015 2016 2017 2018

Projected Year Cash Balance $196,095 $389,858 $1,025,162 $2,322,015 $3,890,682

Balance Sheet

By having a substantial amount of cash flow during its first year of operations and being fairly

sustainable during the first five years we expect to pay off the $200k loan by end of the third

year. The operations of Happy Horizons, LLC should remain fairly constant over a five year

period with the only major change being an increase in the number of employees to support the

growth of additional guests.

Balance Sheet

2014 2015 2016 2017 2018

Assets

Current Assets $157,514 $293,173 $839,357 $2,000,405 $3,409,620

Fixed Assets $145,320 $108,990 $88,660 $48,330 $8,000

Total Assets $302,834 $402,163 $928,017 $2,048,735 $3,417,620

Liabilities Current Liabilities $66,488 $129,803 $263,985 $649,963 $1,115,590

Long-Term Liabilities $72,725 0 0 0 0

Total Liabilities $139,213 $129,803 $263,985 $649,963 $1,115,590

Net Worth

Paid-In Capital $250,000 $250,000 $250,000 $250,000 $250,000 Retained Earnings -$86,380 $22,361 $414,032 $1,148,772 $2,052,030

Total Net Worth $163,620 $272,361 $664,032 $1,398,772 $2,302,030

Total Net Liabilities and Net Worth

$302,834 $402,163 $928,017 $2,048,735 $3,417,620

Income Statement

Happy Horizons, LLC expects a positive cash flow through its 5 years of operations and negative

accounting income until the beginning of second year of operations. The start-up costs and sales

growth creates a typical circumstance where Happy Horizons, LLC is able to fund operations in

the first year but will not make profits until the second year of operations.

Analysis of the Sales Projections indicates that the breakeven point for profitability is 29 guests

which can be reached at the beginning of year 2 in January 2015. As the income increases it

corresponds to the growth of the number of guests. The facility can accommodate 75 guests.

Expected Sales and Gross Revenue

2014 2015 2016 2017 2018

Total Guests 287 409 584 821 900

Gross Revenue 624,817 932,273 1,394,556 2,057,947 2,373,730

The size of Happy Horizons, LLC will easily accommodate the number of guests required to

meet the pro forma calculation of income and cash flow. At the end of the fifth year if the

partner’s decide to sell off the business or offer franchise to other investors, this income

statement analysis provides important insights into how effectively management is controlling

expenses, the amount of interest income and expense, and the taxes paid.

Income and Expenses

2014 2015 2016 2017 2018

Income Net Sales

COGS

$618,157

$45,677

$922,335

$68,220

$1,379,728

$101,877

$2,036,104

$150,163

$2,348,187

$174,903

Gross Profit $572,480 $854,114 $1,277,852 $1,885,941 $2,173,284

Expenses Employee

Salary $318,000 $327,540 $343,095 $430,097 $479,467

Rent $182,004 $182,004 $182,004 $182,004 $182,004

Other $160,763 $171,666 $161,588 $171,045 $181,450

Total Expenses $660,767 $691,036 $686,687 $783,146 $842,921Net Income

before Taxes $(88,287) $163,078 $591,164 $1,102,795 $1,330,363

Less: Provision for Taxes 0 $57,077 $206,908 $385,978 $465,627

Net Profit $(88,287) $106,001 $384,257 $716,817 $864,736

Valuation after Five Years

Happy Horizons, LLC is expected to generate $864,736 in cash at the end of the 5th year after

paying off expenses and the $200,000 loan off. At the end of 5 years partners will value the

business and income.  The business is expecting that the baby boomer generation will provide

customers to Happy Horizons, LLC for at least 20 years after it opens its door to the public.

The valuation will be calculated using the Discounted Cash Flow approach.  This analysis

assumes that both the costs and the revenues will increase with inflation at approximately the

same rate over time, thereby alleviating the need to adjust the net present value of the cash flows

for inflation.  Discounted rate taking into consideration the prime rate and risk premium. 

Opportunity cost of 10% was assumed, company will be valued at $2,078,061.92.

Discount Rate 10%Initial Investment -$450,000.002014 - Year 1 -$88,287.182015 - Year 2 $163,078.002016 - Year 3 $591,164.002017 - Year 4 $1,102,975.002018 - Year 5 $1,330,363.00NPV $2,078,061.92

Exit Strategy

The partners of Happy Horizons, LLC plan to operate the business for a five-year period after

which it will offer franchises to other investors who want to follow our business model. Happy

Horizons, LLC will be setup as a Limited Liability Company and will obtain appropriate licenses

in the state of Texas. Federal taxation will be selected as a partnership and each member will

have the right of first refusal to purchase any other member's interest if such member desires to

sell their membership interest. If the investment environment is favorable, the Limited Liability

Company can convert to a corporation and sell stock. Each investor will receive an interest in the

new corporation in an ownership interest percentage equal to their ownership interest percentage

in the Limited Liability Company.

There are several possible exit strategies:

If the heirs of the original partners of Happy Horizons, LLC want to continue to

operate the company, the partners can create separate Limited Family partnerships

and place their ownership interests in their own limited family partnerships for the

benefit of their heirs.

If the franchise plan is successful, the original partners of Happy Horizons, LLC may

decide to convert the Limited Liability Company to a corporation and sell stock

through an IPO in the open stock market.

The employees of Happy Horizons, LLC may decide they want to purchase

ownership interests in Happy Horizons, LLC and the original partners can sell the

company to the employees, or other investors.

If the company is not successful, the only major liability will be the lease. The

original partners may decide to close the doors if the business is not successful and

negotiate favorable terms for cancellation of the lease and distribute any remaining

assets or equipment to the original partners.

It is expected that Happy Horizons, LLC will be successful and will pay off all its debt in

a timely fashion. The ultimate goal for Happy Horizons, LLC is to franchise the concept,

convert to a corporation and become a publically traded company through an IPO.

Appendix A – Balance Sheet

Balance Sheet

ASSETSCurrent Assets

Cash $227,927Accounts Receivable $0Inventory -$8,025Other Current Assets $0Total Current Assets $219,901

Fixed AssetsLand $0Facilities $70,000Equipment $92,150Computers & Telecommunications $19,500

(Less Accumlated Depreciation) $9,083Total Fixed Assets $172,568

Other Assets $0TOTAL ASSETS $392,469

LIABILITIESCurrent Liabilities

Short-Term Notes Payable $62,164Income Taxes Due $0Other Current Liabilities $0Total Current Liabilities $62,164

Long-Term LiabilitiesLong-Term Notes Payable $123,146Other Long-Term Liabilities $0Total Long-Term Liabilities $123,146

NET WORTHPaid-In Capital $250,000Retained Earnings -$42,842Total Net Worth $207,158

TOTAL LIABILITIES AND NET WORTH $392,469

Happy Horizons, LLCFirst Quarter

2014

Appendix B – Income Statement

Income Statements 2014

January February March April May June July August September October November December TOTAL

INCOMEGross Sales $43,100 $43,461 $45,621 $47,782 $49,944 $52,106 $54,268 $54,180 $56,443 $58,607 $58,520 $60,784 $624,817

(Commissions) $24 $25 $25 $26 $27 $28 $29 $30 $30 $31 $32 $33 $341(Returns and allowances) $419 $441 $463 $484 $506 $528 $550 $550 $572 $594 $595 $617 $6,320

Net Sales $42,657 $42,995 $45,133 $47,272 $49,411 $51,550 $53,689 $53,601 $55,841 $57,981 $57,894 $60,135 $618,157(Cost of Goods) $3,035 $3,190 $3,346 $3,502 $3,658 $3,815 $3,971 $3,978 $4,135 $4,292 $4,299 $4,456 $45,677

GROSS PROFIT $39,623 $39,805 $41,787 $43,770 $45,752 $47,735 $49,718 $49,623 $51,706 $53,689 $53,595 $55,678 $572,480

EXPENSES - General and AdministrativeSalaries and wages $26,500 $26,500 $26,500 $26,500 $26,500 $26,500 $26,500 $26,500 $26,500 $26,500 $26,500 $26,500 $318,000Employee benefits $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Payroll taxes $3,975 $3,975 $3,975 $3,975 $3,975 $3,975 $3,975 $3,975 $3,975 $3,975 $3,975 $3,975 $47,700Professional services $583 $583 $583 $583 $583 $583 $583 $583 $583 $583 $583 $583 $7,000Marketing and advertising $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $2,500 $2,500 $5,000Rent $15,167 $15,167 $15,167 $15,167 $15,167 $15,167 $15,167 $15,167 $15,167 $15,167 $15,167 $15,167 $182,004Equipment rental $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Maintenance $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $12,000Depreciation $3,028 $3,028 $3,028 $3,028 $3,028 $3,028 $3,028 $3,028 $3,028 $3,028 $3,028 $3,028 $36,330Insurance $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $12,000Telephone service $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $3,600Utilities $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $18,000Office supplies $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $1,200Postage and shipping $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $2,400Travel $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Entertainment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Interest on loans $1,500 $1,464 $1,427 $1,390 $1,353 $1,315 $1,277 $1,239 $1,201 $1,162 $1,123 $1,084 $15,533Other (change title here) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Other (change title here) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0TOTAL EXPENSES $54,853 $54,816 $54,780 $54,743 $54,705 $54,668 $54,630 $54,592 $54,553 $54,515 $56,976 $56,937 $660,767Net income before taxes -$15,230 -$15,012 -$12,993 -$10,973 -$8,953 -$6,933 -$4,912 -$4,969 -$2,847 -$825 -$3,381 -$1,258 -$88,287

Provision for taxes on income $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0NET PROFIT -$15,230 -$15,012 -$12,993 -$10,973 -$8,953 -$6,933 -$4,912 -$4,969 -$2,847 -$825 -$3,381 -$1,258 -$88,287

Appendix C – Cash Flow

Cash Flow 2014

January February March April May June July August September October November December TOTAL

CASH RECEIPTSIncome from Sales

Cash Sales $43,100 $43,461 $45,621 $47,782 $49,944 $52,106 $54,268 $54,180 $56,443 $58,607 $58,520 $60,784 $624,817

Collections $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Cash from Sales $43,100 $43,461 $45,621 $47,782 $49,944 $52,106 $54,268 $54,180 $56,443 $58,607 $58,520 $60,784 $624,817Income from Financing

Interest Income $3 $200 $190 $182 $175 $171 $168 $165 $164 $164 $163 $163 $1,907

Loan Proceeds $200,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $200,000

Equity Capital Investments $250,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $250,000

Total Cash from Financing $450,003 $200 $190 $182 $175 $171 $168 $165 $164 $164 $163 $163 $451,907

Other Cash Receipts $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

TOTAL CASH RECEIPTS $493,103 $43,660 $45,811 $47,964 $50,119 $52,276 $54,436 $54,345 $56,607 $58,771 $58,683 $60,948 $1,076,724

CASH DISBURSEMENTSInventory $500 $515 $530 $546 $563 $580 $597 $615 $633 $652 $672 $692 $7,096

Operating Expenses $50,325 $50,325 $50,325 $50,325 $50,325 $50,325 $50,325 $50,325 $50,325 $50,325 $52,825 $52,825 $608,904

Commissions/Returns & Allow ances $443 $466 $488 $511 $533 $556 $579 $580 $603 $626 $627 $650 $6,660

Capital Purchases $181,650 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $181,650

Loan Payments $6,360 $6,360 $6,360 $6,360 $6,360 $6,360 $6,360 $6,360 $6,360 $6,360 $6,360 $6,360 $76,319

Income Tax Payments $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Investor Dividend Payments $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Ow ner's Draw $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

TOTAL CASH DISBURSEMENTS $239,278 $57,666 $57,704 $57,742 $57,781 $57,821 $57,861 $57,880 $57,921 $57,963 $60,484 $60,527 $880,629

NET CASH FLOW $253,825 -$14,006 -$11,893 -$9,778 -$7,662 -$5,545 -$3,425 -$3,535 -$1,314 $808 -$1,801 $421 $196,095

Opening Cash Balance $0 $253,825 $239,819 $227,927 $218,148 $210,486 $204,942 $201,516 $197,981 $196,667 $197,475 $195,674

Cash Receipts $493,103 $43,660 $45,811 $47,964 $50,119 $52,276 $54,436 $54,345 $56,607 $58,771 $58,683 $60,948

Cash Disbursements $239,278 $57,666 $57,704 $57,742 $57,781 $57,821 $57,861 $57,880 $57,921 $57,963 $60,484 $60,527

ENDING CASH BALANCE $253,825 $239,819 $227,927 $218,148 $210,486 $204,942 $201,516 $197,981 $196,667 $197,475 $195,674 $196,095 $196,095

References:

(2013, 11 28). Retrieved from Investopedia: http://www.investopedia.com/

Show Case. (2013, 11 11). Listings. Retrieved from http://www.showcase.com/: http://www.showcase.com/#&&/wEXAQURV29ya2Zsb3dIaXN0b3J5SUQFJDM0NzY0MzdkLTAwOGMtNGNhYi04ZDRmLTczNDZkMTNhM2M3ZZDkAcNccan3jJYAVpbhYGd2rvb/

Small Business Administration. (2013, 11 2). 7(a) Loan Amounts, Fees & Interest Rates. Retrieved from www.SBA.gov: http://www.sba.gov/content/7a-loan-amounts-fees-interest-rates