The revenue is totally depended on the amount of clients come to spa everyday. Reference to other equivalent spa (example: ANam TQ spa) which is the same level, I estimate that when the spa operates stable, we will have average 25 – 35 clients per day and we plan to reach this target at month seventh from grand opening day thus in order to calculate the revenue per day, I assume that at the time which we reach the stable operation, the spa will have average 25 clients/day.
Reference to the owners and managers of other spas, normally, we can estimate the average amount which a client spent once they come to a spa by the price of standard service of this spa. This standard service is often base on the package of body massage which included sauna/steam bath. In our spa, this standard service defined by a package of body massage which included Eco Hot Bed and its price is VND 550,000. Thus we can estimate the revenue per day in stable mode of operation:
Revenue/day = average clients per day x price of standard package = 25 x 550 = 13,750 (VND 1,000)
Then we can estimate monthly revenue and yearly revenue Revenue/month = Revenue/day x 30 days
= 13,750 x 30 = 412,500 (VND 1,000) Revenue/year = Revenue/month x 12 months
= 412,500 x 12 = 4,950,000 (VND 1,000)
This is the estimated revenue in the second financial year when the spa achieves stable mode of operation. In the first year, because we will face to the tough time in the early months from the grand opening day and only achieve the target revenue in the month seventh thus we estimate that the revenue in first financial year is just 70% of revenue second financial year.
Therefore we can estimate the revenue in first financial year as below:
Revenue (1st year) = Revenue (2nd year) x 70%
Revenue (1st year) = 4,950,000 x 70% = 3,465,000(VND 1,000)
Assume that for the year 3 to year 6, the annual revenue’s growth rate is 10% and from year 7 to year 10, the correspondence growth rate is 7% then we will have the revenue (Re) from year 1 to year 10 as shown in table below:
Table 6-2: Revenue in 10 years (Unit: VND 1,000)
year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 Re 3,465,000 4,950,000 5,445,000 5,989,500 6,588,450 7,247,295 7,754,606 8,297,428 8,878,248 9,499,725
(Source: Author’s calculation)
Figure 6-1: Revenue in period of 10 years (Unit VND 1,000)
0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 9,000,000 10,000,000
year 1
year 2
year 3
year 4
year 5
year 6
year 7
year 8
year 9
year 10
Revenue in period of 10 years (VND 1,000)
(Source: Author’s calculation)
6.2.2 Expenditure Analysis
The detail Expenditures (in stable mode of operation) in 2nd financial year is expressed as the table below:
Table 6-3: Expenditures (Unit: VND 1,000)
Expenditures Description Monthly No of Month Yearly
Variable cost 40,000 480,000
Cost of goods sold (9.5% Revenue) 40,000 12 480,000
Operation Cost 207,100 2,485,200
House rental fee 90,000 12 1,080,000 Electricity + Water fees 10,000 12 120,000
Salary 97,100 12 1,165,200
Other cost 10,000 12 120,000
Depreciation 43,352 520,220
Depreciation (LTA) 38,433 12 461,200 Depreciation (OTA) 4,918 12 59,020
Total Cost 290,452 3,485,420
(Source: Author’s calculation)
This is the service industry then the Cost of good sold (variable cost) is low (about 9.5% of Revenue – reference to other spas’ owners).
6.2.3 Profit & Loss (P&L) Analysis a. P&L in 1st financial year:
The P&L in 1st financial year is shown as below
Table 6-4: P&L in 1st financial year (Unit: VND 1,000)
Revenue 3,465,000
Cost of goods sold (about 9.5% of Revenue) 330,000
Gross margin 3,135,000
Operation cost 2,485,200
EBITDA 649,800 Depreciation 520,220 EBIT 129,580
Corporate Tax (25% EBIT) 32,395
Net Income 97,185
(Source: Author’s calculation)
b. P&L in 2nd financial year and period of 10 years:
The P&L in 2nd financial year is shown as below
Table 6-5: P&L in 2nd financial year (Unit: VND 1,000)
Revenue 4,950,000
Cost of goods sold (about 9.5% of Revenue) 480,000
Gross margin 4,470,000
Operation cost 2,485,200
EBITDA 1,984,800
Depreciation 520,220
EBIT 1,464,580
Corporate Tax (25% EBIT) 366,145
Net Income 1,098,435
(Source: Author’s calculation)
Assume that the Net Income (NI) has a growth rate as the same as the growth rate of revenue which mean from year 3 to year 6 the annual growth rate is 10% and from year 7 to year 10 the annual growth rate is 7% thus we have the Net Income (NI) in 10 years as shown in table below
Table 6-6: Net Income in 10 years (Unit: VND 1,000)
year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 NI 97,185 1,098,435 1,208,279 1,329,106 1,462,017 1,608,219 1,720,794 1,841,250 1,970,137 2,108,047
(Source: Author’s calculation)
Figure 6-2: Net income in period of 10 years (VND 1,000)
0 500,000 1,000,000 1,500,000 2,000,000 2,500,000
year 1
year 2
year 3
year 4
year 5
year 6
year 7
year 8
year 9
year 10 Net Income in period of 10 years (Unit: VND 1,000)
(Source: Author’s calculation)
c. Ratio Analysis in 2nd financial year:
EBITDA/Revenue = 1,984,800/4,950,000 = 40%
EBIT/Revenue = 1,464,580/4,950,000 = 29.58%
Net Income/Revenue = 1,098,435/4,950,000 = 22.19%
6.2.4 Break-even Point Analysis
In this case, the break even point (counted per month) is defined as the numbers of turns of client per month (N) which make balance the equations below:
Revenue (Re) = Fixed cost (FC) + Variable cost (VC) => Re = Operation cost (OC) + Depreciation (De) + VC
=> Re = OC + De + Re x 9.5% (Variable cost = Revenue x 9.5% as assumption above)
=> Price x N = OC + De + Price x N x 9.5% (N = No of clients / month) => N = (OC + De)/ (Price x (1-9.5%))
=> N = (207,100 + 43,352)/(550 x 90.5%) = 503 (turns of client)