Fiberglass World, Inc.

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Construction Manufacturer Business Plan

Financial Plan

Funding Requirements and Uses:

The company is seeking first round financing for the purpose of acquiring starting inventory of raw materials, purchasing land, building construction, utility hook-up and site improvement, machinery and equipment, working capital, legal and accounting, and miscellaneous start-up expenses. The company will require additional investment or loans for Phase II, set to begin during the fourth year of operation.

7.1 Important Assumptions

The following table outlines important assumptions for Fiberglass World.

General Assumptions
Year 1 Year 2 Year 3
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 39.17% 40.00% 39.17%
Other 0 0 0

7.2 Break-even Analysis

Break-even Analysis
Monthly Revenue Break-even $275,977
Assumptions:
Average Percent Variable Cost 56%
Estimated Monthly Fixed Cost $121,670

7.3 Projected Profit and Loss

The following table presents year-end profit and loss projections for Fiberglass World. For a monthly analysis, please see the appendix at the end of the plan.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $5,952,000 $13,633,000 $13,633,000
Direct Cost of Sales $3,327,942 $7,802,670 $7,617,112
Royalties $0 $0 $2,044,800
Total Cost of Sales $3,327,942 $7,802,670 $9,661,912
Gross Margin $2,624,058 $5,830,330 $3,971,088
Gross Margin % 44.09% 42.77% 29.13%
Expenses
Payroll $300,000 $380,000 $545,000
Sales and Marketing and Other Expenses $857,541 $1,371,697 $1,605,710
Depreciation $55,000 $55,000 $55,000
Leased Equipment $15,000 $16,500 $18,150
Utilities $50,000 $157,000 $180,550
Insurance $109,500 $257,200 $422,920
Rent $28,000 $35,000 $36,750
Payroll Taxes $45,000 $57,000 $81,750
Other $0 $0 $0
Total Operating Expenses $1,460,041 $2,329,397 $2,945,830
Profit Before Interest and Taxes $1,164,017 $3,500,933 $1,025,258
EBITDA $1,219,017 $3,555,933 $1,080,258
Interest Expense $53,413 $68,990 $82,250
Taxes Incurred $431,700 $1,372,777 $369,345
Net Profit $678,904 $2,059,166 $573,663
Net Profit/Sales 11.41% 15.10% 4.21%

7.4 Projected Cash Flow

The cash flow projections for Fiberglass World are outlined in the following table and chart.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $5,952,000 $13,633,000 $13,633,000
Cash from Receivables $0 $0 $0
Subtotal Cash from Operations $5,952,000 $13,633,000 $13,633,000
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $50,000 $85,000 $85,000
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $47,600 $47,600 $47,600
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 $6,049,600 $13,765,600 $13,765,600
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $300,000 $380,000 $545,000
Bill Payments $4,728,411 $11,048,606 $12,369,809
Subtotal Spent on Operations $5,028,411 $11,428,606 $12,914,809
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 $0 $0 $0
Dividends $17,000 $17,000 $17,000
Subtotal Cash Spent $5,045,411 $11,445,606 $12,931,809
Net Cash Flow $1,004,189 $2,319,994 $833,791
Cash Balance $1,039,189 $3,359,183 $4,192,973

7.5 Projected Balance Sheet

The table below shows our projected balance sheet for three years. Monthly figures for the first year are included in the appendices.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $1,039,189 $3,359,183 $4,192,973
Accounts Receivable $0 $0 $0
Inventory $320,314 $751,007 $733,147
Other Current Assets $0 $0 $0
Total Current Assets $1,359,503 $4,110,190 $4,926,120
Long-term Assets
Long-term Assets $300,000 $300,000 $300,000
Accumulated Depreciation $55,000 $110,000 $165,000
Total Long-term Assets $245,000 $190,000 $135,000
Total Assets $1,604,503 $4,300,190 $5,061,120
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $429,999 $950,920 $1,022,587
Current Borrowing $100,000 $185,000 $270,000
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $529,999 $1,135,920 $1,292,587
Long-term Liabilities $523,600 $571,200 $618,800
Total Liabilities $1,053,599 $1,707,120 $1,911,387
Paid-in Capital $321,000 $321,000 $321,000
Retained Earnings ($449,000) $212,904 $2,255,070
Earnings $678,904 $2,059,166 $573,663
Total Capital $550,904 $2,593,070 $3,149,733
Total Liabilities and Capital $1,604,503 $4,300,190 $5,061,120
Net Worth $550,904 $2,593,070 $3,149,733

7.6 Business Ratios

The following table outlines important ratios from the roofing, siding and insulation industry, as determined by the Standard Industry Classification (SIC) Index #5033, Roofing, Siding, and Insulation.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 129.05% 0.00% 14.50%
Percent of Total Assets
Accounts Receivable 0.00% 0.00% 0.00% 29.10%
Inventory 19.96% 17.46% 14.49% 26.30%
Other Current Assets 0.00% 0.00% 0.00% 25.10%
Total Current Assets 84.73% 95.58% 97.33% 80.50%
Long-term Assets 15.27% 4.42% 2.67% 19.50%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 33.03% 26.42% 25.54% 46.10%
Long-term Liabilities 32.63% 13.28% 12.23% 11.10%
Total Liabilities 65.67% 39.70% 37.77% 57.20%
Net Worth 34.33% 60.30% 62.23% 42.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 44.09% 42.77% 29.13% 17.60%
Selling, General & Administrative Expenses 32.89% 27.66% 24.98% 9.60%
Advertising Expenses 4.26% 2.28% 2.75% 0.20%
Profit Before Interest and Taxes 19.56% 25.68% 7.52% 2.00%
Main Ratios
Current 2.57 3.62 3.81 1.58
Quick 1.96 2.96 3.24 0.86
Total Debt to Total Assets 65.67% 39.70% 37.77% 57.20%
Pre-tax Return on Net Worth 201.60% 132.35% 29.94% 5.50%
Pre-tax Return on Assets 69.22% 79.81% 18.63% 12.80%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 11.41% 15.10% 4.21% n.a
Return on Equity 123.23% 79.41% 18.21% n.a
Activity Ratios
Accounts Receivable Turnover 0.00 0.00 0.00 n.a
Collection Days 0 0 0 n.a
Inventory Turnover 10.91 14.57 10.26 n.a
Accounts Payable Turnover 12.00 12.17 12.17 n.a
Payment Days 27 22 29 n.a
Total Asset Turnover 3.71 3.17 2.69 n.a
Debt Ratios
Debt to Net Worth 1.91 0.66 0.61 n.a
Current Liab. to Liab. 0.50 0.67 0.68 n.a
Liquidity Ratios
Net Working Capital $829,504 $2,974,270 $3,633,533 n.a
Interest Coverage 21.79 50.75 12.47 n.a
Additional Ratios
Assets to Sales 0.27 0.32 0.37 n.a
Current Debt/Total Assets 33% 26% 26% n.a
Acid Test 1.96 2.96 3.24 n.a
Sales/Net Worth 10.80 5.26 4.33 n.a
Dividend Payout 0.03 0.01 0.03 n.a