Equipment Rental Sales Business Plan

Equipment Rental

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Financial Plan

ER was capitalized with $5,000 when it was formed in May 1997. A strong knowledge of the area and supply and demand needs led to the formation of the company. Most items purchased to this date (truck, trailer, computer, office supplies, envelopes, and stationery) have been financed through personal funds, and a $4,000 line of credit with Hibernia Bank.

ER's first sales placed $5,145 into the business account, most of which was used to pay off initial purchases with the balance being used for office and truck expenses such as telephone bill, postage, and fuel. As of April 1, 2000, the truck has been paid in full along with several of the smaller home use items. The company has generated sales in the amount of $52,490 with cost being $38,870 and a profit of $13,620 (97-98 Income Tax Return).

Funding Requirements and Uses
The company is seeking a loan/credit line in the amount of $300,000 for the purpose of expanding the business. Expansion plans include the purchase of additional land and construction of a larger shop/service area, increase rental inventory, and hiring of additional personnel including a mechanic and delivery driver. The table below provides a breakdown of the use of funds.

Use of Funds

Purchase land 25' X 175' on the north side of existing building

$7,000

Erect shop area 25' X 32' on land w/concrete slab, office area

$10,000

Shop equipment

$14,000

Rental inventory

$60,000

Consolidate regions loan, Hibernia L. O. C., current equipment purchases Bosch electric breaker, 3.0 KW generator, shop items

$50,000

Advertising

 $7,000

Balance for working capital, employee training, office equipment modernization, maintenance inventory (i.e.: oil, air, and hydraulic filters), unforeseen building/maintenance expense

$152,000

Shop equipment to include: air compressor, air tools and accessories, blow torch, welding machine and accessories, 1 1/2 ton chain hoist, oil/water separator, holding tank, assorted hand tools, washing vat, chain saw sharpener and repair accessories.

Rental inventory to include: Trash and diaphragm pumps 2 ea. 2" and 3", 3/4" submersible pump and accessories, 3 hp. concrete vibrator, 2-48" concrete power trowels, Case 580L or JD 310 Backhoe, small trailer and larger trailer, 1-ton Ford F350 or F450 Diesel delivery truck, air compressor, 90 lb. air hammer and accessories, rotovator for tractor, 1 push mower, 1 lawn tractor.

8.1 General Assumptions

The following table lists the general assumptions.

General Assumptions
2000 2001 2002
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

8.2 Key Financial Indicators

The following chart shows the important benchmarks for Equipment Rental.

8.3 Break-even Analysis

The table and chart below contain the Break-even Analysis for Equipment Rental.

Break-even Analysis
Monthly Revenue Break-even $13,981
Assumptions:
Average Percent Variable Cost 16%
Estimated Monthly Fixed Cost $11,684

8.4 Projected Profit and Loss

The Projected Profit and Loss can be seen in the following table and charts.

Pro Forma Profit and Loss
2000 2001 2002
Sales $210,000 $420,000 $840,000
Direct Cost of Sales $34,500 $66,000 $162,000
Other Production Expenses $3,000 $42,000 $126,000
Total Cost of Sales $37,500 $108,000 $288,000
Gross Margin $172,500 $312,000 $552,000
Gross Margin % 82.14% 74.29% 65.71%
Expenses
Payroll $57,600 $62,610 $73,100
Sales and Marketing and Other Expenses $14,000 $31,000 $82,598
Depreciation $0 $0 $0
Supplies and equipment $9,924 $19,851 $39,702
Utilities $1,602 $2,403 $3,604
Telephone $7,812 $7,810 $7,810
Insurance $14,448 $21,688 $32,533
Repairs and Maintenance $10,932 $20,397 $30,596
Services $2,832 $2,833 $2,833
Rent $12,420 $12,420 $12,420
Payroll Taxes $8,640 $9,392 $10,965
Other $0 $0 $0
Total Operating Expenses $140,210 $190,404 $296,161
Profit Before Interest and Taxes $32,290 $121,597 $255,839
EBITDA $32,290 $121,597 $255,839
Interest Expense $29,938 $23,065 $18,365
Taxes Incurred $706 $29,559 $71,242
Net Profit $1,646 $68,972 $166,232
Net Profit/Sales 0.78% 16.42% 19.79%

8.5 Cash Flow

The following table and chart are the Projected Cash Flow figures for Equipment Rental.

Pro Forma Cash Flow
2000 2001 2002
Cash Received
Cash from Operations
Cash Sales $42,000 $84,000 $168,000
Cash from Receivables $157,400 $316,400 $632,800
Subtotal Cash from Operations $199,400 $400,400 $800,800
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $149,000 $20,000 $20,000
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $151,000 $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 $499,400 $420,400 $820,800
Expenditures 2000 2001 2002
Expenditures from Operations
Cash Spending $57,600 $62,610 $73,100
Bill Payments $134,408 $274,735 $580,262
Subtotal Spent on Operations $192,008 $337,345 $653,362
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $45,248 $30,000 $60,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $29,100 $19,000 $25,000
Purchase Other Current Assets $58,000 $2,000 $22,000
Purchase Long-term Assets $91,000 $4,000 $9,000
Dividends $65,000 $10,000 $20,000
Subtotal Cash Spent $480,356 $402,345 $789,362
Net Cash Flow $19,044 $18,055 $31,438
Cash Balance $21,544 $39,600 $71,038

8.6 Projected Balance Sheet

ER's projected balance sheets for 2000-2002.

Pro Forma Balance Sheet
2000 2001 2002
Assets
Current Assets
Cash $21,544 $39,600 $71,038
Accounts Receivable $19,600 $39,200 $78,400
Inventory $2,000 $3,826 $9,391
Other Current Assets $64,000 $66,000 $88,000
Total Current Assets $107,144 $148,626 $246,829
Long-term Assets
Long-term Assets $99,000 $103,000 $112,000
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $99,000 $103,000 $112,000
Total Assets $206,144 $251,626 $358,829
Liabilities and Capital 2000 2001 2002
Current Liabilities
Accounts Payable $8,346 $23,856 $49,827
Current Borrowing $113,252 $103,252 $63,252
Other Current Liabilities $3,700 $3,700 $3,700
Subtotal Current Liabilities $125,298 $130,808 $116,779
Long-term Liabilities $131,900 $112,900 $87,900
Total Liabilities $257,198 $243,708 $204,679
Paid-in Capital $0 $0 $0
Retained Earnings ($52,700) ($61,054) ($12,082)
Earnings $1,646 $68,972 $166,232
Total Capital ($51,054) $7,918 $154,150
Total Liabilities and Capital $206,144 $251,626 $358,829
Net Worth ($51,054) $7,918 $154,150

8.7 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7359, [Equipment Rental and Leasing, nec], are shown for comparison.

Ratio Analysis
2000 2001 2002 Industry Profile
Sales Growth 110.00% 100.00% 100.00% 7.07%
Percent of Total Assets
Accounts Receivable 9.51% 15.58% 21.85% 27.61%
Inventory 0.97% 1.52% 2.62% 3.96%
Other Current Assets 31.05% 26.23% 24.52% 44.65%
Total Current Assets 51.98% 59.07% 68.79% 76.22%
Long-term Assets 48.02% 40.93% 31.21% 23.78%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 60.78% 51.98% 32.54% 33.47%
Long-term Liabilities 63.98% 44.87% 24.50% 16.23%
Total Liabilities 124.77% 96.85% 57.04% 49.70%
Net Worth -24.77% 3.15% 42.96% 50.30%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 82.14% 74.29% 65.71% 100.00%
Selling, General & Administrative Expenses 81.36% 57.86% 45.92% 84.88%
Advertising Expenses 3.33% 5.71% 6.90% 1.01%
Profit Before Interest and Taxes 15.38% 28.95% 30.46% 1.94%
Main Ratios
Current 0.86 1.14 2.11 1.73
Quick 0.84 1.11 2.03 1.33
Total Debt to Total Assets 124.77% 96.85% 57.04% 57.72%
Pre-tax Return on Net Worth -4.61% 1244.37% 154.05% 3.77%
Pre-tax Return on Assets 1.14% 39.16% 66.18% 8.92%
Additional Ratios 2000 2001 2002
Net Profit Margin 0.78% 16.42% 19.79% n.a
Return on Equity 0.00% 871.06% 107.84% n.a
Activity Ratios
Accounts Receivable Turnover 8.57 8.57 8.57 n.a
Collection Days 59 32 32 n.a
Inventory Turnover 4.44 22.66 24.51 n.a
Accounts Payable Turnover 16.03 12.17 12.17 n.a
Payment Days 29 20 22 n.a
Total Asset Turnover 1.02 1.67 2.34 n.a
Debt Ratios
Debt to Net Worth 0.00 30.78 1.33 n.a
Current Liab. to Liab. 0.49 0.54 0.57 n.a
Liquidity Ratios
Net Working Capital ($18,154) $17,818 $130,050 n.a
Interest Coverage 1.08 5.27 13.93 n.a
Additional Ratios
Assets to Sales 0.98 0.60 0.43 n.a
Current Debt/Total Assets 61% 52% 33% n.a
Acid Test 0.68 0.81 1.36 n.a
Sales/Net Worth 0.00 53.04 5.45 n.a
Dividend Payout 39.49 0.14 0.12 n.a
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General Assumptions
2000 2001 2002
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 $13,981
Assumptions:
Average Percent Variable Cost 16%
Estimated Monthly Fixed Cost $11,684
Pro Forma Profit and Loss
2000 2001 2002
Sales $210,000 $420,000 $840,000
Direct Cost of Sales $34,500 $66,000 $162,000
Other Production Expenses $3,000 $42,000 $126,000
Total Cost of Sales $37,500 $108,000 $288,000
Gross Margin $172,500 $312,000 $552,000
Gross Margin % 82.14% 74.29% 65.71%
Expenses
Payroll $57,600 $62,610 $73,100
Sales and Marketing and Other Expenses $14,000 $31,000 $82,598
Depreciation $0 $0 $0
Supplies and equipment $9,924 $19,851 $39,702
Utilities $1,602 $2,403 $3,604
Telephone $7,812 $7,810 $7,810
Insurance $14,448 $21,688 $32,533
Repairs and Maintenance $10,932 $20,397 $30,596
Services $2,832 $2,833 $2,833
Rent $12,420 $12,420 $12,420
Payroll Taxes $8,640 $9,392 $10,965
Other $0 $0 $0
Total Operating Expenses $140,210 $190,404 $296,161
Profit Before Interest and Taxes $32,290 $121,597 $255,839
EBITDA $32,290 $121,597 $255,839
Interest Expense $29,938 $23,065 $18,365
Taxes Incurred $706 $29,559 $71,242
Net Profit $1,646 $68,972 $166,232
Net Profit/Sales 0.78% 16.42% 19.79%
Pro Forma Cash Flow
2000 2001 2002
Cash Received
Cash from Operations
Cash Sales $42,000 $84,000 $168,000
Cash from Receivables $157,400 $316,400 $632,800
Subtotal Cash from Operations $199,400 $400,400 $800,800
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $149,000 $20,000 $20,000
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $151,000 $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 $499,400 $420,400 $820,800
Expenditures 2000 2001 2002
Expenditures from Operations
Cash Spending $57,600 $62,610 $73,100
Bill Payments $134,408 $274,735 $580,262
Subtotal Spent on Operations $192,008 $337,345 $653,362
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $45,248 $30,000 $60,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $29,100 $19,000 $25,000
Purchase Other Current Assets $58,000 $2,000 $22,000
Purchase Long-term Assets $91,000 $4,000 $9,000
Dividends $65,000 $10,000 $20,000
Subtotal Cash Spent $480,356 $402,345 $789,362
Net Cash Flow $19,044 $18,055 $31,438
Cash Balance $21,544 $39,600 $71,038
Pro Forma Balance Sheet
2000 2001 2002
Assets
Current Assets
Cash $21,544 $39,600 $71,038
Accounts Receivable $19,600 $39,200 $78,400
Inventory $2,000 $3,826 $9,391
Other Current Assets $64,000 $66,000 $88,000
Total Current Assets $107,144 $148,626 $246,829
Long-term Assets
Long-term Assets $99,000 $103,000 $112,000
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $99,000 $103,000 $112,000
Total Assets $206,144 $251,626 $358,829
Liabilities and Capital 2000 2001 2002
Current Liabilities
Accounts Payable $8,346 $23,856 $49,827
Current Borrowing $113,252 $103,252 $63,252
Other Current Liabilities $3,700 $3,700 $3,700
Subtotal Current Liabilities $125,298 $130,808 $116,779
Long-term Liabilities $131,900 $112,900 $87,900
Total Liabilities $257,198 $243,708 $204,679
Paid-in Capital $0 $0 $0
Retained Earnings ($52,700) ($61,054) ($12,082)
Earnings $1,646 $68,972 $166,232
Total Capital ($51,054) $7,918 $154,150
Total Liabilities and Capital $206,144 $251,626 $358,829
Net Worth ($51,054) $7,918 $154,150
Ratio Analysis
2000 2001 2002 Industry Profile
Sales Growth 110.00% 100.00% 100.00% 7.07%
Percent of Total Assets
Accounts Receivable 9.51% 15.58% 21.85% 27.61%
Inventory 0.97% 1.52% 2.62% 3.96%
Other Current Assets 31.05% 26.23% 24.52% 44.65%
Total Current Assets 51.98% 59.07% 68.79% 76.22%
Long-term Assets 48.02% 40.93% 31.21% 23.78%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 60.78% 51.98% 32.54% 33.47%
Long-term Liabilities 63.98% 44.87% 24.50% 16.23%
Total Liabilities 124.77% 96.85% 57.04% 49.70%
Net Worth -24.77% 3.15% 42.96% 50.30%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 82.14% 74.29% 65.71% 100.00%
Selling, General & Administrative Expenses 81.36% 57.86% 45.92% 84.88%
Advertising Expenses 3.33% 5.71% 6.90% 1.01%
Profit Before Interest and Taxes 15.38% 28.95% 30.46% 1.94%
Main Ratios
Current 0.86 1.14 2.11 1.73
Quick 0.84 1.11 2.03 1.33
Total Debt to Total Assets 124.77% 96.85% 57.04% 57.72%
Pre-tax Return on Net Worth -4.61% 1244.37% 154.05% 3.77%
Pre-tax Return on Assets 1.14% 39.16% 66.18% 8.92%
Additional Ratios 2000 2001 2002
Net Profit Margin 0.78% 16.42% 19.79% n.a
Return on Equity 0.00% 871.06% 107.84% n.a
Activity Ratios
Accounts Receivable Turnover 8.57 8.57 8.57 n.a
Collection Days 59 32 32 n.a
Inventory Turnover 4.44 22.66 24.51 n.a
Accounts Payable Turnover 16.03 12.17 12.17 n.a
Payment Days 29 20 22 n.a
Total Asset Turnover 1.02 1.67 2.34 n.a
Debt Ratios
Debt to Net Worth 0.00 30.78 1.33 n.a
Current Liab. to Liab. 0.49 0.54 0.57 n.a
Liquidity Ratios
Net Working Capital ($18,154) $17,818 $130,050 n.a
Interest Coverage 1.08 5.27 13.93 n.a
Additional Ratios
Assets to Sales 0.98 0.60 0.43 n.a
Current Debt/Total Assets 61% 52% 33% n.a
Acid Test 0.68 0.81 1.36 n.a
Sales/Net Worth 0.00 53.04 5.45 n.a
Dividend Payout 39.49 0.14 0.12 n.a