Commercial Contractor Business Plan

Twin Brothers Construction

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Financial Plan

The brothers have long-term experience in the local construction industry. They are willing to invest heavily in this new company and their accumulated experience will insure success for the new venture. It will be important to watch closely the salaries and regular expenses to assure that the company will not suffer from lack of sufficient cash to fund its operations.

  1. We assume a conservative entrance and steady growth in the market.
  2. We assume a slow financial progress based on initially conservative sales against highest expenses.
  3. We assume there will not be an economic crash that would greatly hinder our target market's access to their personal luxury finds.

The following sections describe the financials for TBC:

8.1 Projected Profit and Loss

Twin Brothers Construction is in the early stage of development, thus initial projections have only been made based on the sales projections and efficient cost control measures in place. Our first year monthly net profits will become positive by October, but we will still close the year with negative profit. This is primarily because of personnel expenses, which include salaries and the cost of sales for sub-contractors.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $267,000 $488,750 $772,938
Direct Cost of Sales $112,200 $177,500 $265,575
Other $0 $0 $0
Total Cost of Sales $112,200 $177,500 $265,575
Gross Margin $154,800 $311,250 $507,363
Gross Margin % 57.98% 63.68% 65.64%
Expenses
Payroll $83,850 $149,000 $219,000
Sales and Marketing and Other Expenses $7,500 $10,000 $0
Depreciation $0 $0 $0
Gasoline and oil $3,600 $3,750 $4,800
Telephone $1,500 $2,400 $3,500
Utilities $4,800 $11,250 $10,282
Insurance $9,000 $8,226 $24,000
Rent $7,478 $20,000 $25,000
Payroll Taxes $6,522 $0 $0
Website Maintenance & Support $4,200 $6,000 $9,375
Consultants $6,000 $7,500 $9,000
Advertising $6,000 $1,980 $3,500
Misc. Other Expenses $1,800 $2,500 $267,127
Total Operating Expenses $142,250 $222,606 $575,584
Profit Before Interest and Taxes $12,550 $88,644 ($68,222)
EBITDA $12,550 $88,644 ($68,222)
Interest Expense $625 $7,500 $11,250
Taxes Incurred $3,578 $24,343 $0
Net Profit $8,348 $56,801 ($79,472)
Net Profit/Sales 3.13% 11.62% -10.28%

8.2 Break-even Analysis

During the first year of operations, the break-even monthly sales volume is estimated as shown below. Our average percent variable reflects our cost of sales which covers contracted construction payroll costs.

Break-even Analysis
Monthly Revenue Break-even $20,446
Assumptions:
Average Percent Variable Cost 42%
Estimated Monthly Fixed Cost $11,854

8.3 Projected Cash Flow

We have set our initial Cash at $50,000 so that we have flexibility in handling any unexpected changes in cash flow in the early months to cover expenses. The following table outlines are cash flow estimates.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $267,000 $488,750 $772,938
Subtotal Cash from Operations $267,000 $488,750 $772,938
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $75,000 $0 $75,000
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $342,000 $488,750 $847,938
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $83,850 $149,000 $219,000
Bill Payments $152,974 $281,521 $604,604
Subtotal Spent on Operations $236,824 $430,521 $823,604
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $100,000 $0 $100,000
Dividends $0 $0 $0
Subtotal Cash Spent $336,824 $430,521 $923,604
Net Cash Flow $5,176 $58,229 ($75,667)
Cash Balance $55,176 $113,405 $37,738

8.4 Projected Balance Sheet

The following table outlines our Balance Sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $55,176 $113,405 $37,738
Other Current Assets $5,000 $5,000 $5,000
Total Current Assets $60,176 $118,405 $42,738
Long-term Assets
Long-term Assets $100,000 $100,000 $200,000
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $100,000 $100,000 $200,000
Total Assets $160,176 $218,405 $242,738
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $21,828 $23,256 $52,061
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $21,828 $23,256 $52,061
Long-term Liabilities $75,000 $75,000 $150,000
Total Liabilities $96,828 $98,256 $202,061
Paid-in Capital $90,000 $90,000 $90,000
Retained Earnings ($35,000) ($26,652) $30,149
Earnings $8,348 $56,801 ($79,472)
Total Capital $63,348 $120,149 $40,677
Total Liabilities and Capital $160,176 $218,405 $242,738
Net Worth $63,348 $120,149 $40,677

8.5 Business Ratios

The following Ratios table includes industry profile comparison ratios for Commercial and Office Building Contractors (Standard Industry Code #1542).

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 83.05% 58.15% -3.57%
Percent of Total Assets
Other Current Assets 3.12% 2.29% 2.06% 39.87%
Total Current Assets 37.57% 54.21% 17.61% 91.45%
Long-term Assets 62.43% 45.79% 82.39% 8.55%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 13.63% 10.65% 21.45% 34.87%
Long-term Liabilities 46.82% 34.34% 61.79% 15.42%
Total Liabilities 60.45% 44.99% 83.24% 50.29%
Net Worth 39.55% 55.01% 16.76% 49.71%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 57.98% 63.68% 65.64% 17.83%
Selling, General & Administrative Expenses 50.39% 31.80% 27.73% 7.07%
Advertising Expenses 4.95% 6.32% 5.54% 0.25%
Profit Before Interest and Taxes 4.70% 18.14% -8.83% 1.85%
Main Ratios
Current 2.76 5.09 0.82 2.34
Quick 2.76 5.09 0.82 1.12
Total Debt to Total Assets 60.45% 44.99% 83.24% 57.63%
Pre-tax Return on Net Worth 18.83% 67.54% -195.37% 4.01%
Pre-tax Return on Assets 7.45% 37.15% -32.74% 9.46%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 3.13% 11.62% -10.28% n.a
Return on Equity 13.18% 47.28% -195.37% n.a
Activity Ratios
Accounts Payable Turnover 8.01 12.17 12.17 n.a
Payment Days 27 29 22 n.a
Total Asset Turnover 1.67 2.24 3.18 n.a
Debt Ratios
Debt to Net Worth 1.53 0.82 4.97 n.a
Current Liab. to Liab. 0.23 0.24 0.26 n.a
Liquidity Ratios
Net Working Capital $38,348 $95,149 ($9,323) n.a
Interest Coverage 20.08 11.82 -6.06 n.a
Additional Ratios
Assets to Sales 0.60 0.45 0.31 n.a
Current Debt/Total Assets 14% 11% 21% n.a
Acid Test 2.76 5.09 0.82 n.a
Sales/Net Worth 4.21 4.07 19.00 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $267,000 $488,750 $772,938
Direct Cost of Sales $112,200 $177,500 $265,575
Other $0 $0 $0
Total Cost of Sales $112,200 $177,500 $265,575
Gross Margin $154,800 $311,250 $507,363
Gross Margin % 57.98% 63.68% 65.64%
Expenses
Payroll $83,850 $149,000 $219,000
Sales and Marketing and Other Expenses $7,500 $10,000 $0
Depreciation $0 $0 $0
Gasoline and oil $3,600 $3,750 $4,800
Telephone $1,500 $2,400 $3,500
Utilities $4,800 $11,250 $10,282
Insurance $9,000 $8,226 $24,000
Rent $7,478 $20,000 $25,000
Payroll Taxes $6,522 $0 $0
Website Maintenance & Support $4,200 $6,000 $9,375
Consultants $6,000 $7,500 $9,000
Advertising $6,000 $1,980 $3,500
Misc. Other Expenses $1,800 $2,500 $267,127
Total Operating Expenses $142,250 $222,606 $575,584
Profit Before Interest and Taxes $12,550 $88,644 ($68,222)
EBITDA $12,550 $88,644 ($68,222)
Interest Expense $625 $7,500 $11,250
Taxes Incurred $3,578 $24,343 $0
Net Profit $8,348 $56,801 ($79,472)
Net Profit/Sales 3.13% 11.62% -10.28%
Break-even Analysis
Monthly Revenue Break-even $20,446
Assumptions:
Average Percent Variable Cost 42%
Estimated Monthly Fixed Cost $11,854
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $267,000 $488,750 $772,938
Subtotal Cash from Operations $267,000 $488,750 $772,938
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $75,000 $0 $75,000
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $342,000 $488,750 $847,938
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $83,850 $149,000 $219,000
Bill Payments $152,974 $281,521 $604,604
Subtotal Spent on Operations $236,824 $430,521 $823,604
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $100,000 $0 $100,000
Dividends $0 $0 $0
Subtotal Cash Spent $336,824 $430,521 $923,604
Net Cash Flow $5,176 $58,229 ($75,667)
Cash Balance $55,176 $113,405 $37,738
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $55,176 $113,405 $37,738
Other Current Assets $5,000 $5,000 $5,000
Total Current Assets $60,176 $118,405 $42,738
Long-term Assets
Long-term Assets $100,000 $100,000 $200,000
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $100,000 $100,000 $200,000
Total Assets $160,176 $218,405 $242,738
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $21,828 $23,256 $52,061
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $21,828 $23,256 $52,061
Long-term Liabilities $75,000 $75,000 $150,000
Total Liabilities $96,828 $98,256 $202,061
Paid-in Capital $90,000 $90,000 $90,000
Retained Earnings ($35,000) ($26,652) $30,149
Earnings $8,348 $56,801 ($79,472)
Total Capital $63,348 $120,149 $40,677
Total Liabilities and Capital $160,176 $218,405 $242,738
Net Worth $63,348 $120,149 $40,677
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 83.05% 58.15% -3.57%
Percent of Total Assets
Other Current Assets 3.12% 2.29% 2.06% 39.87%
Total Current Assets 37.57% 54.21% 17.61% 91.45%
Long-term Assets 62.43% 45.79% 82.39% 8.55%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 13.63% 10.65% 21.45% 34.87%
Long-term Liabilities 46.82% 34.34% 61.79% 15.42%
Total Liabilities 60.45% 44.99% 83.24% 50.29%
Net Worth 39.55% 55.01% 16.76% 49.71%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 57.98% 63.68% 65.64% 17.83%
Selling, General & Administrative Expenses 50.39% 31.80% 27.73% 7.07%
Advertising Expenses 4.95% 6.32% 5.54% 0.25%
Profit Before Interest and Taxes 4.70% 18.14% -8.83% 1.85%
Main Ratios
Current 2.76 5.09 0.82 2.34
Quick 2.76 5.09 0.82 1.12
Total Debt to Total Assets 60.45% 44.99% 83.24% 57.63%
Pre-tax Return on Net Worth 18.83% 67.54% -195.37% 4.01%
Pre-tax Return on Assets 7.45% 37.15% -32.74% 9.46%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 3.13% 11.62% -10.28% n.a
Return on Equity 13.18% 47.28% -195.37% n.a
Activity Ratios
Accounts Payable Turnover 8.01 12.17 12.17 n.a
Payment Days 27 29 22 n.a
Total Asset Turnover 1.67 2.24 3.18 n.a
Debt Ratios
Debt to Net Worth 1.53 0.82 4.97 n.a
Current Liab. to Liab. 0.23 0.24 0.26 n.a
Liquidity Ratios
Net Working Capital $38,348 $95,149 ($9,323) n.a
Interest Coverage 20.08 11.82 -6.06 n.a
Additional Ratios
Assets to Sales 0.60 0.45 0.31 n.a
Current Debt/Total Assets 14% 11% 21% n.a
Acid Test 2.76 5.09 0.82 n.a
Sales/Net Worth 4.21 4.07 19.00 n.a
Dividend Payout 0.00 0.00 0.00 n.a