JTB Industrial Sales

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Commercial Catalog Sales Business Plan

Financial Plan

JTB's financial plan is based on raising $181,000 in long-term loans to develop the Industrial Sales Division of the corporation. To maintain Gross Margins of 36% or better, the Industrial Sales Division will also help develop and create P.C.-based Industrial Sales applications and portals in conjunction with our Integrated Technologies division.

Our unique customer applications will help to speed the quotation and purchasing process of the 300,000 industrial products offered in our catalogs. In just over two years the Industrial Sales Division will fully implement a large scale Internet and catalog-based marketing program to develop its client base both locally and nationally, showing a reasonable net profit by year 2. Important elements that will impact the financial plan can include:

  1. How quickly the sales division can pull its operations together, as this division will be situated within the same location as the other divisions. Management will have to develop and cross-train its sales team as quickly as possible.

  2. While we are putting a lot of emphasis on the Internet-based sales and marketing for the long-term plans, we will initially implement a solid direct marketing plan with ads in many industrial magazines and websites.

  3. Although the business is a start-up company, the financial plan is solidly based on past performance when management operated in similar situations. We have taken P&L income and expenses from the previous sales entity, and reduced some corporate overhead expenses such as warehouse and administrative costs, as this division will carry 1/3 of many of the normal operating expenses once established.

JTB's Industrial Sales Division is capable of developing $674,518 in sales by year 5 of the plan, with a solid net worth, and good return on equity. With tough financial planning, financial goals will fully realized when all aspects of the business divisions are in place functioning as a complete corporation.

8.1 Important Assumptions

This plan is one part of a three part business plan providing details of each business segment for more accurate projections. The main plan, JTB Technologies, Inc., is used to show the overall development of the business in its entirety. Key assumptions around which management developed this plan are as follows:

  1. Current business, banking, and economic trends continue to be stable.
  2. Customer buying trends and orders remain strong.
  3. Overhead and other external operating cost grow as projected.
  4. External outsourced costs grow as anticipated.
  5. Internet buying trends continue to grow in the industrial sector.

These factors also play heavily into the business' long-term plan, assuming that the business can be developed in it's entirety in one location. This greatly reduces operating costs, and provides a more flexible staff situation for cross-training and other issues.

Upon reviewing the plan, you may have noticed management has mentioned expansion through the use of its online marketing system via numerous manufacturing  partners throughout the U.S. The possible revenues from this have been added into the projections, but are under-valued for this projection. Also, there have been no revenues added for Military and Governmental purchases, a very large local market. Management's position on the plan's assumptions is we feel we can make better long term arrangements which should better the projected cash position shown.

Note 8.1.1 We have selected a high-quality, networked accounting system with capabilities of having multiple businesses running while still offering full consolidation of the business for accounting purposes. This system is complete with project management capabilities and budgeting. As such, management will implement a budgeted approach for the projects while adjusting costs in JTB's favor wherever possible. 

All financial tables in this plan  include only the projections for the Industrial Sales Division. We suggest that each plan is reviewed, as each is quite different.

General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 0.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0

8.2 Break-even Analysis

JTB's break even analysis is based on our projected direct costs, including shipping and receiving personnel payroll, and first year's sales. We will pass the break-even point in late in the first year, and make increasing profits thereafter.

The initial goal is to bring an established inventory list to market within 30 days from startup along with the addition of numerous well accepted industrial products for resale.  What will set JTB apart from the other industrial entities is its ability for flexibility, expansion, and it's individual divisions with key personnel all under one roof targeting each market segment JTB will pursue.

With this in mind, the goal is to build a solid base for the corporation with our primary products and services while continuing the development phase of our distribution software to be developed by our business development technologies division.

Break-even Analysis
Monthly Revenue Break-even $15,441
Assumptions:
Average Percent Variable Cost 62%
Estimated Monthly Fixed Cost $5,852

8.3 Projected Profit and Loss

Please be sure to read note 8.1.1 in the Important Assumptions, section 8.1 regarding our Accounting system and methodology. The Projected Profit and Loss table takes into consideration all of the basic operating expenses for the Industrial Sales Division only.

When we produced the table, we developed our sales model around discount structures we had previously received while operating our previous distributorship. This distributorship directly represented and stocked many lines. For the purposes of the business plan's projected sales portion of the P&L, we calculated our direct cost of goods sold using historical discount information. As we cannot anticipate our actual discount schedules from each vendor, we feel we can further reduce our direct costs of goods sold by an additional 15% - 20% once established as a direct distributor.

The projected table shows an average Gross Margin of 36%, but we feel we will be able to arrange much better terms. With this considered, the long term goal has not changed and is reflected in years 2006, and 2007. Please note the large jump in sales for year 2006; this is attributed to a large development of catalog clients. With consideration given to note 8.1.1, management  feels it can produce a more robust corporation when all of the components of the business plan are combined.

Other considerations only partially considered in the P&L are the payroll for management and management's output. The upper managements payroll is accounted for in the plan for the holding company, and work will be spread over the 3 divisions. Please remember when you do review the Profit and Loss statement, that the three JTB divisions will actually be operating under one roof. As such, management's role will be to fill in all areas of sales and production wherever needed to complete orders.

Management's operating schedule will also be overlapped to "keep our doors open" more operating hours than any of the other 9 to 5 competitors. Management anticipates running at least 50 hours per week, allowing us to develop more business on the west coast.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $206,525 $347,300 $433,420 $542,963 $674,518
Direct Cost of Sales $128,259 $212,185 $263,461 $315,420 $407,383
Production Payroll $9,600 $9,600 $18,800 $18,800 $22,500
Other Costs of Goods $0 $0 $0 $0 $0
Total Cost of Sales $137,859 $221,785 $282,261 $334,220 $429,883
Gross Margin $68,666 $125,515 $151,159 $208,743 $244,635
Gross Margin % 33.25% 36.14% 34.88% 38.45% 36.27%
Operating Expenses
Sales and Marketing Expenses
Sales and Marketing Payroll $39,000 $44,000 $59,500 $66,000 $71,500
Advertising/Promotion $3,000 $4,800 $4,800 $4,800 $4,800
Other Sales and Marketing Expenses $0 $0 $0 $0 $0
Total Sales and Marketing Expenses $42,000 $48,800 $64,300 $70,800 $76,300
Sales and Marketing % 20.34% 14.05% 14.84% 13.04% 11.31%
General and Administrative Expenses
General and Administrative Payroll $0 $0 $0 $0 $0
Sales and Marketing and Other Expenses $0 $2,500 $3,000 $3,500 $4,000
Depreciation $1,950 $1,950 $1,950 $1,950 $1,950
Rent $9,000 $9,000 $9,000 $9,000 $9,000
Utilities $4,100 $4,800 $5,600 $6,000 $6,500
Insurance $3,000 $4,000 $5,000 $6,000 $7,000
Payroll Taxes $6,570 $9,405 $12,750 $14,400 $16,200
CPA - Accounting and Payroll $3,600 $3,800 $4,000 $4,000 $4,000
Other $0 $0 $0 $0 $0
Total General and Administrative Expenses $28,220 $35,455 $41,300 $44,850 $48,650
General and Administrative % 13.66% 10.21% 9.53% 8.26% 7.21%
Other Expenses:
Other Payroll $0 $0 $0 $0 $0
Consultants $0 $0 $0 $0 $0
Other Other Expenses $0 $0 $0 $0 $0
Total Other Expenses $0 $0 $0 $0 $0
Other % 0.00% 0.00% 0.00% 0.00% 0.00%
Total Operating Expenses $70,220 $84,255 $105,600 $115,650 $124,950
Profit Before Interest and Taxes ($1,554) $41,260 $45,559 $93,093 $119,685
EBITDA $396 $43,210 $47,509 $95,043 $121,635
Interest Expense $17,536 $16,538 $15,496 $14,454 $13,413
Taxes Incurred $0 $7,417 $9,019 $23,592 $31,882
Net Profit ($19,090) $17,306 $21,044 $55,047 $74,391
Net Profit/Sales -9.24% 4.98% 4.86% 10.14% 11.03%

8.4 Projected Cash Flow

JTB's projected cash flow reflects a strong cash balance throughout the plan, please remember when you review this table, it is for the Industrial Sales Division only.

When reviewing the projected cash flow, it is important to note that the largest growth in sales is from our catalog sales program, as this is not really segmented for review. Additional segmentation information can be found in the market segmentation table in section 4.1, and in the milestones section 5.6.

Purchasing operates on a cost plus scenario marking up services to be re-sold, similar to the services area of our Industrial Products and Services Division. As the cash flow projects only the base products described in the business plan, it is highly probable JTB will be involved with more outsourced products and manufacturer partnering in years 2 thru 5, furthering our potential profitability.

Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $20,653 $34,730 $43,342 $54,296 $67,452
Cash from Receivables $147,150 $286,175 $373,931 $468,128 $582,400
Subtotal Cash from Operations $167,802 $320,905 $417,273 $522,424 $649,852
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0
Subtotal Cash Received $167,802 $320,905 $417,273 $522,424 $649,852
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $48,600 $53,600 $78,300 $84,800 $94,000
Bill Payments $162,310 $287,556 $337,505 $408,226 $511,084
Subtotal Spent on Operations $210,910 $341,156 $415,805 $493,026 $605,084
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $10,416 $10,416 $10,416 $10,416 $10,416
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0
Subtotal Cash Spent $221,326 $351,572 $426,221 $503,442 $615,500
Net Cash Flow ($53,524) ($30,667) ($8,948) $18,982 $34,351
Cash Balance $62,076 $31,408 $22,460 $41,442 $75,794

8.5 Projected Balance Sheet

JTB's projected balance sheet shows a strong cash development capability over the projected 5 year plan. The projected balance sheet, like the rest of the business plan, assumes the business remains at its startup location during the first five years of operations, keeping costs relatively fixed for the projections. Again, as mentioned in the Important Assumptions section 8.1, management still feels it can develop a stronger situation than what is reflected.

JTB's Industrial Sales Division will maintain a stable cash position over the next five years while developing a positive net worth. As the Industrial Sales Division is essentially an office setting, there really is no need to develop large numbers of assets other than what is required at startup. During the life of the plan, inventory requirements may change as we offer our clients different purchasing options. Any differences in cash flow and inventory would show that the cash is tied up in inventory. With this in mind, we would try to keep the required inventory down to reasonable levels wherever possible.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $62,076 $31,408 $22,460 $41,442 $75,794
Accounts Receivable $38,723 $65,118 $81,265 $101,804 $126,471
Inventory $29,852 $41,361 $51,356 $64,336 $79,924
Other Current Assets $5,500 $5,500 $5,500 $5,500 $5,500
Total Current Assets $136,150 $143,387 $160,582 $213,082 $287,688
Long-term Assets
Long-term Assets $19,500 $19,500 $19,500 $19,500 $19,500
Accumulated Depreciation $1,950 $3,900 $5,850 $7,800 $9,750
Total Long-term Assets $17,550 $15,600 $13,650 $11,700 $9,750
Total Assets $153,700 $158,987 $174,232 $224,782 $297,438
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $25,106 $23,503 $28,120 $34,039 $42,720
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $25,106 $23,503 $28,120 $34,039 $42,720
Long-term Liabilities $170,584 $160,168 $149,752 $139,336 $128,920
Total Liabilities $195,690 $183,671 $177,872 $173,375 $171,640
Paid-in Capital $0 $0 $0 $0 $0
Retained Earnings ($22,900) ($41,990) ($24,684) ($3,640) $51,407
Earnings ($19,090) $17,306 $21,044 $55,047 $74,391
Total Capital ($41,990) ($24,684) ($3,640) $51,407 $125,798
Total Liabilities and Capital $153,700 $158,987 $174,232 $224,782 $297,438
Net Worth ($41,990) ($24,684) ($3,640) $51,407 $125,798

8.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5961.9905, Catalog Sales, are shown for comparison.

JTB's business ratios are compared to an established industry profile, our ratios differ in some areas as the industry profile ratios most likely is reflective of a complete business with a full overhead. Our ratios are lighter in overhead and assets, as most of the heavy assets are in our Industrial Products and Services Division, and are not shown in this divisions balance sheet.

Our sales growth is substantially greater as we are adding new products and services each year to the plan, and our Gross average margins of 36% are in line with the profile. Overall we feel our ratios are better than the industry as we have maximized our marketing budgets and marketing avenues while keeping costs in check. Further maximization comes in the form of training the sales staff on maintaining profit per order levels when processing orders. Our unique order processing makes for streamlined repeat ordering by customers further allowing our staff to process orders more efficiently, while reducing the internal costs of processing orders.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 68.16% 24.80% 25.27% 24.23% 2.88%
Percent of Total Assets
Accounts Receivable 25.19% 40.96% 46.64% 45.29% 42.52% 12.87%
Inventory 19.42% 26.02% 29.48% 28.62% 26.87% 36.42%
Other Current Assets 3.58% 3.46% 3.16% 2.45% 1.85% 28.07%
Total Current Assets 88.58% 90.19% 92.17% 94.79% 96.72% 77.36%
Long-term Assets 11.42% 9.81% 7.83% 5.21% 3.28% 22.64%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 16.33% 14.78% 16.14% 15.14% 14.36% 38.38%
Long-term Liabilities 110.99% 100.74% 85.95% 61.99% 43.34% 17.46%
Total Liabilities 127.32% 115.53% 102.09% 77.13% 57.71% 55.84%
Net Worth -27.32% -15.53% -2.09% 22.87% 42.29% 44.16%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 33.25% 36.14% 34.88% 38.45% 36.27% 41.33%
Selling, General & Administrative Expenses 10.98% 8.55% 8.16% 7.16% 6.33% 24.67%
Advertising Expenses 12.20% 10.45% 12.64% 11.75% 10.87% 2.06%
Profit Before Interest and Taxes -0.75% 11.88% 10.51% 17.15% 17.74% 1.22%
Main Ratios
Current 5.42 6.10 5.71 6.26 6.73 1.75
Quick 4.23 4.34 3.88 4.37 4.86 0.70
Total Debt to Total Assets 127.32% 115.53% 102.09% 77.13% 57.71% 62.87%
Pre-tax Return on Net Worth 45.46% -100.16% -825.90% 152.97% 84.48% 2.83%
Pre-tax Return on Assets -12.42% 15.55% 17.25% 34.98% 35.73% 7.62%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin -9.24% 4.98% 4.86% 10.14% 11.03% n.a
Return on Equity 0.00% 0.00% 0.00% 107.08% 59.14% n.a
Activity Ratios
Accounts Receivable Turnover 4.80 4.80 4.80 4.80 4.80 n.a
Collection Days 40 61 68 68 69 n.a
Inventory Turnover 6.70 5.96 5.68 5.45 5.65 n.a
Accounts Payable Turnover 7.37 12.17 12.17 12.17 12.17 n.a
Payment Days 28 31 28 27 27 n.a
Total Asset Turnover 1.34 2.18 2.49 2.42 2.27 n.a
Debt Ratios
Debt to Net Worth 0.00 0.00 0.00 3.37 1.36 n.a
Current Liab. to Liab. 0.13 0.13 0.16 0.20 0.25 n.a
Liquidity Ratios
Net Working Capital $111,044 $119,884 $132,462 $179,043 $244,968 n.a
Interest Coverage -0.09 2.49 2.94 6.44 8.92 n.a
Additional Ratios
Assets to Sales 0.74 0.46 0.40 0.41 0.44 n.a
Current Debt/Total Assets 16% 15% 16% 15% 14% n.a
Acid Test 2.69 1.57 0.99 1.38 1.90 n.a
Sales/Net Worth 0.00 0.00 0.00 10.56 5.36 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a

8.7 Long-term Plan

JTB's Industrial Sales Division's long term plan has been projected out to a 10 year review to highlight the businesses long term results, and the added potential of the manufacturing partnerships.

  1. Gross Sales over $800,000 by year 8 of this plan.
  2. Gross Margins over $280,000 by year 7 of this plan.
  3. Net Income over $100,000 by year 5 of this plan.
  4. Current Assets over $390,000 by year 5 of the plan.
  5. Equity of over $360,000 by year 7 of this plan.