Construction Business Plan

Fosse Commercial Contractors

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Financial Plan

The following sections are the financial projections for Fosse COmmercial Contractors for the next three years. These tables represent a conservative estimate of revenues, expenses, and growth. We do not anticipate a significant increase in profits until 2006, as we will need time to penetrate our new market. We plan on basing dividend payouts on overall performance and health of the company and may decide to retain such earnings for future growth.

7.1 Important Assumptions

The following is our estimate of our financial assumptions based on previous experience.

General Assumptions
2004 2005 2006
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

7.2 Break-even Analysis

Our break even analysis is based on average monthly fixed costs, which in turn, is based on historical figures, plus our average price per product. This estimate is also based on experience, however because of our wide range of potential projects, its accuracy lessens. The average variable costs are based on industry standards.

Break-even Analysis
Monthly Revenue Break-even $64,451
Assumptions:
Average Percent Variable Cost 72%
Estimated Monthly Fixed Cost $18,043

7.3 Projected Profit and Loss

The following is our best estimate of future revenues and costs, based on current market trends, past performance, and perceived revenue of our new target market. Readers will note that overall profits are quite low for 2004-2006. This is because we estimate we will be paying higher labor costs immediately and the overall revenues will lag somewhat. We will also have fewer initial clients as we attempt to exert our presence in the commercial contracting market. However, we have anticipated this by buffering ourselves with sufficient cash reserves, and we estimate a significant increase in profitability within five years.

Pro Forma Profit and Loss
2004 2005 2006
Sales $743,736 $880,434 $996,495
Direct Cost of Sales $535,525 $648,586 $734,085
Other Costs of Sales $0 $0 $0
Total Cost of Sales $535,525 $648,586 $734,085
Gross Margin $208,211 $231,848 $262,410
Gross Margin % 28.00% 26.33% 26.33%
Expenses
Payroll $180,000 $180,000 $212,400
Sales and Marketing and Other Expenses $2,400 $2,400 $2,400
Depreciation $0 $1,000 $1,000
Rent $0 $0 $0
Utilities $1,320 $1,320 $1,600
Insurance $3,600 $3,800 $4,200
Payroll Taxes $27,000 $27,000 $27,000
Other $2,200 $2,500 $3,000
Total Operating Expenses $216,520 $218,020 $251,600
Profit Before Interest and Taxes ($8,309) $13,828 $10,810
EBITDA ($8,309) $14,828 $11,810
Interest Expense $3,498 $2,964 $2,564
Taxes Incurred $0 $3,259 $2,474
Net Profit ($11,807) $7,605 $5,773
Net Profit/Sales -1.59% 0.86% 0.58%

7.4 Projected Cash Flow

We do not expect to have any serious cash flow problems in the future. We plan on having all short-term debts paid off in 2007 and long-term debts by 2012. The declining cash account during the period covered by this plan, and is to be expected as we build our new customer base. Once we reach a sufficient volume of sales, we will take advantages of economies of scale to decrease costs and improve profit margin.

Pro Forma Cash Flow
2004 2005 2006
Cash Received
Cash from Operations
Cash Sales $483,428 $572,282 $647,722
Cash from Receivables $248,641 $301,751 $343,339
Subtotal Cash from Operations $732,069 $874,033 $991,061
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 $0 $0 $0
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 $732,069 $874,033 $991,061
Expenditures 2004 2005 2006
Expenditures from Operations
Cash Spending $180,000 $180,000 $212,400
Bill Payments $567,657 $667,422 $776,115
Subtotal Spent on Operations $747,657 $847,422 $988,515
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $5,000 $2,000 $2,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $2,400 $2,000 $2,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $755,057 $851,422 $992,515
Net Cash Flow ($22,988) $22,611 ($1,454)
Cash Balance $17,440 $40,051 $38,596

7.5 Projected Balance Sheet

The following is a presentation of assets and liabilities. Because we have low debt, our net worth is higher than other comparable companies.

Pro Forma Balance Sheet
2004 2005 2006
Assets
Current Assets
Cash $17,440 $40,051 $38,596
Accounts Receivable $34,824 $41,224 $46,659
Inventory $35,509 $43,006 $48,676
Other Current Assets $37,991 $37,991 $37,991
Total Current Assets $125,764 $162,273 $171,922
Long-term Assets
Long-term Assets $20,421 $20,421 $20,421
Accumulated Depreciation $8,000 $9,000 $10,000
Total Long-term Assets $12,421 $11,421 $10,421
Total Assets $138,185 $173,694 $182,343
Liabilities and Capital 2004 2005 2006
Current Liabilities
Accounts Payable $25,575 $57,479 $64,355
Current Borrowing $15,000 $13,000 $11,000
Other Current Liabilities $21,677 $21,677 $21,677
Subtotal Current Liabilities $62,252 $92,156 $97,032
Long-term Liabilities $16,639 $14,639 $12,639
Total Liabilities $78,891 $106,795 $109,671
Paid-in Capital $0 $0 $0
Retained Earnings $71,101 $59,294 $66,899
Earnings ($11,807) $7,605 $5,773
Total Capital $59,294 $66,899 $72,671
Total Liabilities and Capital $138,185 $173,694 $182,343
Net Worth $59,294 $66,899 $72,671

7.6 Business Ratios

The following is a presentation of industry standard ratios vs. our own projections. Our SIC industry class is currently Commercial and office building, new construction - 1542.0101. For the most part, we follow the industry averages. We expect to see higher growths than average over the next two years due to our new ventures. Also our company is relatively debt-free, meaning we have higher than average net worth.

Ratio Analysis
2004 2005 2006 Industry Profile
Sales Growth 30.03% 18.38% 13.18% 4.60%
Percent of Total Assets
Accounts Receivable 25.20% 23.73% 25.59% 24.47%
Inventory 25.70% 24.76% 26.69% 26.16%
Other Current Assets 27.49% 21.87% 20.83% 37.01%
Total Current Assets 91.01% 93.42% 94.28% 87.64%
Long-term Assets 8.99% 6.58% 5.72% 12.36%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 45.05% 53.06% 53.21% 40.60%
Long-term Liabilities 12.04% 8.43% 6.93% 12.11%
Total Liabilities 57.09% 61.48% 60.15% 52.71%
Net Worth 42.91% 38.52% 39.85% 47.29%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 28.00% 26.33% 26.33% 15.22%
Selling, General & Administrative Expenses 29.58% 25.47% 25.75% 7.62%
Advertising Expenses 0.00% 0.00% 0.00% 0.24%
Profit Before Interest and Taxes -1.12% 1.57% 1.08% 1.94%
Main Ratios
Current 2.02 1.76 1.77 1.93
Quick 1.45 1.29 1.27 0.94
Total Debt to Total Assets 57.09% 61.48% 60.15% 4.32%
Pre-tax Return on Net Worth -19.91% 16.24% 11.35% 56.40%
Pre-tax Return on Assets -8.54% 6.25% 4.52% 9.90%
Additional Ratios 2004 2005 2006
Net Profit Margin -1.59% 0.86% 0.58% n.a
Return on Equity -19.91% 11.37% 7.94% n.a
Activity Ratios
Accounts Receivable Turnover 7.47 7.47 7.47 n.a
Collection Days 59 45 46 n.a
Inventory Turnover 10.91 16.52 16.01 n.a
Accounts Payable Turnover 22.20 12.17 12.17 n.a
Payment Days 28 22 28 n.a
Total Asset Turnover 5.38 5.07 5.46 n.a
Debt Ratios
Debt to Net Worth 1.33 1.60 1.51 n.a
Current Liab. to Liab. 0.79 0.86 0.88 n.a
Liquidity Ratios
Net Working Capital $63,512 $70,117 $74,889 n.a
Interest Coverage -2.38 4.67 4.22 n.a
Additional Ratios
Assets to Sales 0.19 0.20 0.18 n.a
Current Debt/Total Assets 45% 53% 53% n.a
Acid Test 0.89 0.85 0.79 n.a
Sales/Net Worth 12.54 13.16 13.71 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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General Assumptions
2004 2005 2006
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0
Break-even Analysis
Monthly Revenue Break-even $64,451
Assumptions:
Average Percent Variable Cost 72%
Estimated Monthly Fixed Cost $18,043
Pro Forma Profit and Loss
2004 2005 2006
Sales $743,736 $880,434 $996,495
Direct Cost of Sales $535,525 $648,586 $734,085
Other Costs of Sales $0 $0 $0
Total Cost of Sales $535,525 $648,586 $734,085
Gross Margin $208,211 $231,848 $262,410
Gross Margin % 28.00% 26.33% 26.33%
Expenses
Payroll $180,000 $180,000 $212,400
Sales and Marketing and Other Expenses $2,400 $2,400 $2,400
Depreciation $0 $1,000 $1,000
Rent $0 $0 $0
Utilities $1,320 $1,320 $1,600
Insurance $3,600 $3,800 $4,200
Payroll Taxes $27,000 $27,000 $27,000
Other $2,200 $2,500 $3,000
Total Operating Expenses $216,520 $218,020 $251,600
Profit Before Interest and Taxes ($8,309) $13,828 $10,810
EBITDA ($8,309) $14,828 $11,810
Interest Expense $3,498 $2,964 $2,564
Taxes Incurred $0 $3,259 $2,474
Net Profit ($11,807) $7,605 $5,773
Net Profit/Sales -1.59% 0.86% 0.58%
Pro Forma Cash Flow
2004 2005 2006
Cash Received
Cash from Operations
Cash Sales $483,428 $572,282 $647,722
Cash from Receivables $248,641 $301,751 $343,339
Subtotal Cash from Operations $732,069 $874,033 $991,061
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 $0 $0 $0
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 $732,069 $874,033 $991,061
Expenditures 2004 2005 2006
Expenditures from Operations
Cash Spending $180,000 $180,000 $212,400
Bill Payments $567,657 $667,422 $776,115
Subtotal Spent on Operations $747,657 $847,422 $988,515
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $5,000 $2,000 $2,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $2,400 $2,000 $2,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $755,057 $851,422 $992,515
Net Cash Flow ($22,988) $22,611 ($1,454)
Cash Balance $17,440 $40,051 $38,596
Pro Forma Balance Sheet
2004 2005 2006
Assets
Current Assets
Cash $17,440 $40,051 $38,596
Accounts Receivable $34,824 $41,224 $46,659
Inventory $35,509 $43,006 $48,676
Other Current Assets $37,991 $37,991 $37,991
Total Current Assets $125,764 $162,273 $171,922
Long-term Assets
Long-term Assets $20,421 $20,421 $20,421
Accumulated Depreciation $8,000 $9,000 $10,000
Total Long-term Assets $12,421 $11,421 $10,421
Total Assets $138,185 $173,694 $182,343
Liabilities and Capital 2004 2005 2006
Current Liabilities
Accounts Payable $25,575 $57,479 $64,355
Current Borrowing $15,000 $13,000 $11,000
Other Current Liabilities $21,677 $21,677 $21,677
Subtotal Current Liabilities $62,252 $92,156 $97,032
Long-term Liabilities $16,639 $14,639 $12,639
Total Liabilities $78,891 $106,795 $109,671
Paid-in Capital $0 $0 $0
Retained Earnings $71,101 $59,294 $66,899
Earnings ($11,807) $7,605 $5,773
Total Capital $59,294 $66,899 $72,671
Total Liabilities and Capital $138,185 $173,694 $182,343
Net Worth $59,294 $66,899 $72,671
Ratio Analysis
2004 2005 2006 Industry Profile
Sales Growth 30.03% 18.38% 13.18% 4.60%
Percent of Total Assets
Accounts Receivable 25.20% 23.73% 25.59% 24.47%
Inventory 25.70% 24.76% 26.69% 26.16%
Other Current Assets 27.49% 21.87% 20.83% 37.01%
Total Current Assets 91.01% 93.42% 94.28% 87.64%
Long-term Assets 8.99% 6.58% 5.72% 12.36%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 45.05% 53.06% 53.21% 40.60%
Long-term Liabilities 12.04% 8.43% 6.93% 12.11%
Total Liabilities 57.09% 61.48% 60.15% 52.71%
Net Worth 42.91% 38.52% 39.85% 47.29%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 28.00% 26.33% 26.33% 15.22%
Selling, General & Administrative Expenses 29.58% 25.47% 25.75% 7.62%
Advertising Expenses 0.00% 0.00% 0.00% 0.24%
Profit Before Interest and Taxes -1.12% 1.57% 1.08% 1.94%
Main Ratios
Current 2.02 1.76 1.77 1.93
Quick 1.45 1.29 1.27 0.94
Total Debt to Total Assets 57.09% 61.48% 60.15% 4.32%
Pre-tax Return on Net Worth -19.91% 16.24% 11.35% 56.40%
Pre-tax Return on Assets -8.54% 6.25% 4.52% 9.90%
Additional Ratios 2004 2005 2006
Net Profit Margin -1.59% 0.86% 0.58% n.a
Return on Equity -19.91% 11.37% 7.94% n.a
Activity Ratios
Accounts Receivable Turnover 7.47 7.47 7.47 n.a
Collection Days 59 45 46 n.a
Inventory Turnover 10.91 16.52 16.01 n.a
Accounts Payable Turnover 22.20 12.17 12.17 n.a
Payment Days 28 22 28 n.a
Total Asset Turnover 5.38 5.07 5.46 n.a
Debt Ratios
Debt to Net Worth 1.33 1.60 1.51 n.a
Current Liab. to Liab. 0.79 0.86 0.88 n.a
Liquidity Ratios
Net Working Capital $63,512 $70,117 $74,889 n.a
Interest Coverage -2.38 4.67 4.22 n.a
Additional Ratios
Assets to Sales 0.19 0.20 0.18 n.a
Current Debt/Total Assets 45% 53% 53% n.a
Acid Test 0.89 0.85 0.79 n.a
Sales/Net Worth 12.54 13.16 13.71 n.a
Dividend Payout 0.00 0.00 0.00 n.a