Electrical Contractor Business Plan

Premiere Electric

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Financial Plan

The financial plan is presented in the following topics.

8.1 Break-even Analysis

The following table and chart show the break-even figures for Premiere Electric.

Break-even Analysis
Monthly Revenue Break-even $9,365
Assumptions:
Average Percent Variable Cost 35%
Estimated Monthly Fixed Cost $6,087

8.2 Projected Profit and Loss

The following table and chart outline the projected profit and loss for three years.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $84,987 $120,000 $160,000
Direct Cost of Sales $29,745 $39,600 $52,800
Other Production Expenses $0 $0 $0
Total Cost of Sales $29,745 $39,600 $52,800
Gross Margin $55,242 $80,400 $107,200
Gross Margin % 65.00% 67.00% 67.00%
Expenses
Payroll $42,000 $44,940 $48,086
Sales and Marketing and Other Expenses $1,100 $2,000 $3,000
Depreciation $2,748 $2,748 $2,748
Leased Equipment $12,000 $12,000 $12,000
Utilities $2,400 $2,400 $2,400
Insurance $0 $0 $0
Rent $6,500 $6,500 $6,500
Payroll Taxes $6,300 $6,741 $7,213
Other $0 $0 $0
Total Operating Expenses $73,048 $77,329 $81,947
Profit Before Interest and Taxes ($17,806) $3,071 $25,253
EBITDA ($15,058) $5,819 $28,001
Interest Expense $2,200 $2,200 $2,200
Taxes Incurred $0 $261 $6,916
Net Profit ($20,006) $610 $16,137
Net Profit/Sales -23.54% 0.51% 10.09%

8.3 Projected Balance Sheet

The table shows projected balance sheet for three years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $7,274 $8,720 $25,034
Accounts Receivable $9,188 $12,973 $17,297
Other Current Assets $0 $0 $0
Total Current Assets $16,461 $21,693 $42,331
Long-term Assets
Long-term Assets $22,000 $22,000 $22,000
Accumulated Depreciation $2,748 $5,496 $8,244
Total Long-term Assets $19,252 $16,504 $13,756
Total Assets $35,713 $38,197 $56,087
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $4,020 $5,893 $7,646
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $4,020 $5,893 $7,646
Long-term Liabilities $22,000 $22,000 $22,000
Total Liabilities $26,020 $27,893 $29,646
Paid-in Capital $40,000 $40,000 $40,000
Retained Earnings ($10,300) ($30,306) ($29,697)
Earnings ($20,006) $610 $16,137
Total Capital $9,694 $10,303 $26,441
Total Liabilities and Capital $35,713 $38,197 $56,087
Net Worth $9,694 $10,303 $26,441

8.4 Projected Cash Flow

The following table and chart show the projected cash flow for Premiere Electric.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $21,247 $30,000 $40,000
Cash from Receivables $54,553 $86,215 $115,676
Subtotal Cash from Operations $75,800 $116,215 $155,676
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 $75,800 $116,215 $155,676
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $42,000 $44,940 $48,086
Bill Payments $56,226 $69,829 $91,276
Subtotal Spent on Operations $98,226 $114,769 $139,362
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 $0 $0 $0
Subtotal Cash Spent $98,226 $114,769 $139,362
Net Cash Flow ($22,426) $1,446 $16,314
Cash Balance $7,274 $8,720 $25,034

8.5 Business Ratios

The following table provides important ratios for the industry, as determined by the Standard Industry Classification (SIC) Index, 4911, Electrical Services.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 41.20% 33.33% -1.20%
Percent of Total Assets
Accounts Receivable 25.73% 33.96% 30.84% 5.10%
Other Current Assets 0.00% 0.00% 0.00% 26.70%
Total Current Assets 46.09% 56.79% 75.47% 32.80%
Long-term Assets 53.91% 43.21% 24.53% 67.20%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 11.26% 15.43% 13.63% 21.10%
Long-term Liabilities 61.60% 57.60% 39.22% 38.10%
Total Liabilities 72.86% 73.03% 52.86% 59.20%
Net Worth 27.14% 26.97% 47.14% 40.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 65.00% 67.00% 67.00% 57.80%
Selling, General & Administrative Expenses 88.54% 66.49% 56.91% 22.80%
Advertising Expenses 1.29% 1.67% 1.88% 0.10%
Profit Before Interest and Taxes -20.95% 2.56% 15.78% 11.10%
Main Ratios
Current 4.10 3.68 5.54 1.45
Quick 4.10 3.68 5.54 1.09
Total Debt to Total Assets 72.86% 73.03% 52.86% 59.20%
Pre-tax Return on Net Worth -206.39% 8.45% 87.19% 4.10%
Pre-tax Return on Assets -56.02% 2.28% 41.10% 10.20%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -23.54% 0.51% 10.09% n.a
Return on Equity -206.39% 5.92% 61.03% n.a
Activity Ratios
Accounts Receivable Turnover 6.94 6.94 6.94 n.a
Collection Days 58 45 46 n.a
Accounts Payable Turnover 14.99 12.17 12.17 n.a
Payment Days 27 25 27 n.a
Total Asset Turnover 2.38 3.14 2.85 n.a
Debt Ratios
Debt to Net Worth 2.68 2.71 1.12 n.a
Current Liab. to Liab. 0.15 0.21 0.26 n.a
Liquidity Ratios
Net Working Capital $12,442 $15,799 $34,685 n.a
Interest Coverage -8.09 1.40 11.48 n.a
Additional Ratios
Assets to Sales 0.42 0.32 0.35 n.a
Current Debt/Total Assets 11% 15% 14% n.a
Acid Test 1.81 1.48 3.27 n.a
Sales/Net Worth 8.77 11.65 6.05 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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Break-even Analysis
Monthly Revenue Break-even $9,365
Assumptions:
Average Percent Variable Cost 35%
Estimated Monthly Fixed Cost $6,087
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $84,987 $120,000 $160,000
Direct Cost of Sales $29,745 $39,600 $52,800
Other Production Expenses $0 $0 $0
Total Cost of Sales $29,745 $39,600 $52,800
Gross Margin $55,242 $80,400 $107,200
Gross Margin % 65.00% 67.00% 67.00%
Expenses
Payroll $42,000 $44,940 $48,086
Sales and Marketing and Other Expenses $1,100 $2,000 $3,000
Depreciation $2,748 $2,748 $2,748
Leased Equipment $12,000 $12,000 $12,000
Utilities $2,400 $2,400 $2,400
Insurance $0 $0 $0
Rent $6,500 $6,500 $6,500
Payroll Taxes $6,300 $6,741 $7,213
Other $0 $0 $0
Total Operating Expenses $73,048 $77,329 $81,947
Profit Before Interest and Taxes ($17,806) $3,071 $25,253
EBITDA ($15,058) $5,819 $28,001
Interest Expense $2,200 $2,200 $2,200
Taxes Incurred $0 $261 $6,916
Net Profit ($20,006) $610 $16,137
Net Profit/Sales -23.54% 0.51% 10.09%
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $7,274 $8,720 $25,034
Accounts Receivable $9,188 $12,973 $17,297
Other Current Assets $0 $0 $0
Total Current Assets $16,461 $21,693 $42,331
Long-term Assets
Long-term Assets $22,000 $22,000 $22,000
Accumulated Depreciation $2,748 $5,496 $8,244
Total Long-term Assets $19,252 $16,504 $13,756
Total Assets $35,713 $38,197 $56,087
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $4,020 $5,893 $7,646
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $4,020 $5,893 $7,646
Long-term Liabilities $22,000 $22,000 $22,000
Total Liabilities $26,020 $27,893 $29,646
Paid-in Capital $40,000 $40,000 $40,000
Retained Earnings ($10,300) ($30,306) ($29,697)
Earnings ($20,006) $610 $16,137
Total Capital $9,694 $10,303 $26,441
Total Liabilities and Capital $35,713 $38,197 $56,087
Net Worth $9,694 $10,303 $26,441
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $21,247 $30,000 $40,000
Cash from Receivables $54,553 $86,215 $115,676
Subtotal Cash from Operations $75,800 $116,215 $155,676
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 $75,800 $116,215 $155,676
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $42,000 $44,940 $48,086
Bill Payments $56,226 $69,829 $91,276
Subtotal Spent on Operations $98,226 $114,769 $139,362
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 $0 $0 $0
Subtotal Cash Spent $98,226 $114,769 $139,362
Net Cash Flow ($22,426) $1,446 $16,314
Cash Balance $7,274 $8,720 $25,034
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 41.20% 33.33% -1.20%
Percent of Total Assets
Accounts Receivable 25.73% 33.96% 30.84% 5.10%
Other Current Assets 0.00% 0.00% 0.00% 26.70%
Total Current Assets 46.09% 56.79% 75.47% 32.80%
Long-term Assets 53.91% 43.21% 24.53% 67.20%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 11.26% 15.43% 13.63% 21.10%
Long-term Liabilities 61.60% 57.60% 39.22% 38.10%
Total Liabilities 72.86% 73.03% 52.86% 59.20%
Net Worth 27.14% 26.97% 47.14% 40.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 65.00% 67.00% 67.00% 57.80%
Selling, General & Administrative Expenses 88.54% 66.49% 56.91% 22.80%
Advertising Expenses 1.29% 1.67% 1.88% 0.10%
Profit Before Interest and Taxes -20.95% 2.56% 15.78% 11.10%
Main Ratios
Current 4.10 3.68 5.54 1.45
Quick 4.10 3.68 5.54 1.09
Total Debt to Total Assets 72.86% 73.03% 52.86% 59.20%
Pre-tax Return on Net Worth -206.39% 8.45% 87.19% 4.10%
Pre-tax Return on Assets -56.02% 2.28% 41.10% 10.20%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -23.54% 0.51% 10.09% n.a
Return on Equity -206.39% 5.92% 61.03% n.a
Activity Ratios
Accounts Receivable Turnover 6.94 6.94 6.94 n.a
Collection Days 58 45 46 n.a
Accounts Payable Turnover 14.99 12.17 12.17 n.a
Payment Days 27 25 27 n.a
Total Asset Turnover 2.38 3.14 2.85 n.a
Debt Ratios
Debt to Net Worth 2.68 2.71 1.12 n.a
Current Liab. to Liab. 0.15 0.21 0.26 n.a
Liquidity Ratios
Net Working Capital $12,442 $15,799 $34,685 n.a
Interest Coverage -8.09 1.40 11.48 n.a
Additional Ratios
Assets to Sales 0.42 0.32 0.35 n.a
Current Debt/Total Assets 11% 15% 14% n.a
Acid Test 1.81 1.48 3.27 n.a
Sales/Net Worth 8.77 11.65 6.05 n.a
Dividend Payout 0.00 0.00 0.00 n.a