Operating Pro Forma

An operating proforma is usually developed in order for investors to get a clear understanding of what they cn expect prior to an actual financial commitment. It provides an educated guess of what kind of returns on investment can be expected. Many times the projected operating proforma will be the deciding factor on whether or not to move forward with the intended development.

An operating proforma also provides clear specific financial goals that operators set for themselves for measurable results. It sets established parameters that determine the expected financial success or failure of the business. The operating proforma focuses specifically on operations and provides projections of the net income that might be available for payment of fixed costs.

Estimates of revenues and expenses are based on combined qualitative and quantitative analysis. The approach should be conservative on revenues and aggressive on expenses so costs will not be underestimated.

The spa industry is not the place for high level, quick and easy returns on investment. For each success story there is usually a corresponding failure. A well planned and well managed spa does not usually have significant returns on investment until the third year of operation.

A realistic goal is to attempt to break-even in the first year of operation—realize 10-15% operating profit in the second year and hopefully reach 25-30% in the third and stabilizing year of operation. A large size spa can take up to five years to reach stabilization.