JTB Technologies

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Holding Company Business Plan

Financial Plan

J-Tech's financial plan is based on raising $445,000 (USD) by way of private equity to develop JTB Technologies, Inc.  Additionally, the plan calls for $253,150 (USD) for equipment; these funds will be obtained via a long-term loan.  Each division's requirements are shown below:

  1. To develop the Industrial Sales Division of the corporation, JTB's financial plan is based on receiving $181,000 (USD) in long-term loans. To maintain Gross Margins of 36% or better, the Industrial Sales Division will also help develop and create Internet-based industrial sales applications and portals in conjunction with our Integrated Technologies Division.

  2. To develop the Products and Services Division of the corporation, JTB's financial plan is based on raising $230,000 (USD) by way of private equity to set up the products and services division of the corporation. An additional $45,000 for equipment will be obtained as a long-term loan. These operational costs are shown in the operating statements projected in this plan. Management expects to achieve a small but stable net profit on sales in just over two years.

  3. To develop the Integrated Technologies Division of the corporation, JTB's financial plan is based on raising $225,000 (USD) by way of private equity and $27,150 in long-term loans. To maintain Gross Margins of 36% or better, the business development technologies division will develop, market and support  P.C.-based industrial sales applications, and marketing portals.These products or business modules will be developed  in conjunction with our industrial sales and industrial products' divisions input, using our other divisions as a model and test bed. Our unique customer applications will help to speed the quotation and purchasing process of the 300,000 industrial products offered in our industrial division's catalogs.

The consolidated financial plan combines all divisional operating costs, including personnel, equipment, location costs, depreciation etc. For accuracy and organizational  reasons, we have developed three related sub-plans, as each provides exact details of each sub-division goals and position within the corporation. JTB Technologies, Inc. will behave more like a holding company. For this overall plan, the industry profile selected for comparison purposes was an automotive parts and supplies manufacturer, since our combined companies are very similar to this in terms of developing, manufacturing, servicing, and marketing tangible machinery products for end-users. After year five of the plan, management hopes to develop or purchase other divisions.

By the end of FY 2 of this plan, JTB will have developed sales revenue of  $1,008,798 (USD) with a Gross Margin on sales of 39.35%. By the end of FY 3 of this plan JTB will have developed sales growth of 29% over year one, and sales of $1,303,319 (USD), while the Gross Margin on sales has increased as the corporation improves on overall performance.

The exit for this plan has been left open; this can be discussed in detail after the plans' review. I would provide a full recalculated version based on the investors' requirements. Further discussion on the patented products' actual values, and expected percentages of the investors' ownership are left open as well.

8.1 Important Assumptions

As this main plan is comprised of 3 sub-plans providing details of each business segment for more accurate projections, the main plan is used to show the overall development and growth of the business. The key factor in the assumptions is the ability of the business to be developed in its entirety in one location. This greatly reduces operating costs, and provides a more flexible staff situation for cross-training and other issues. We suggest that each plan is reviewed, as each is quite different.

All Profit and Loss tables in this main plan include the numbers from the sub-plans, and take into consideration all of the operating expenses.

Key assumptions around which we have developed this plan are as follows:

  1. Current business, banking, and economic trends continue to be stable.
  2. Customer buying trends and orders remain strong.
  3. Overhead and other external operating cost grow as projected.
  4. External outsourced costs grow as anticipated.
  5. Internet buying trends continue to grow in the industrial sector.

The General Assumptions table below is utilized by the business plan to perform calculations on the expected conditions in the business plan. These factors also play heavily into the business' long-term plan, assuming the business can be developed in its entirety in one location. This greatly reduces operating costs, and provides a more flexible staff situation for cross-training and other issues.

Upon reviewing the plan, you may have noticed management has mentioned expansion through use of its online marketing system via numerous channel partners throughout the U.S. The possible revenues from this have not been added into any projections. Management's position on the plan's assumptions is that we can make better long-term arrangements, which should better the projected cash position shown.

General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 0.00% 30.00% 0.00% 30.00% 0.00%
Other 0 0 0 0 0

8.1.1 Assumptions Notation

Additional comments regarding the business plan assumptions, Break-even analysis, and the Projected Profit and Loss and our intended accounting system implementation: Management has selected a high-quality, networked accounting system with capabilities of having multiple businesses running while still offering full consolidation of the business for accounting purposes.

This system is complete with project management capabilities and budgeting; as such, management will implement a budgeted approach for the projects while adjusting costs in JTB's favor wherever possible. 

All Profit and Loss tables in this plan include all of the projections from JTB's three divisions. We suggest that each plan is reviewed, as each is quite different.

8.2 Key Financial Indicators

As this plan includes three sub-divisions, the corporations overall financial health is comfortably averaged out between the three divisions during the first two years of  business.

The key financial indicators include:

  1. Sales growth in this plan does extremely well, as the business offers a broad range of products and services. Growth of approximately 37% per year can also be attributed to the unique marketing products that we will develop and use in our marketing process to reach customers all over the U.S.
  2. Gross Margins in this plan average 38% annually, and are attributed to our products and services selections and how they apply to their individual markets. Our intranet-based inside sales and marketing products provide our sales staff with the ability to calculate the margins per order placed while processing orders. Product and Vendor selections play a key role in profitability as well.
  3. Operating Expenses in this plan remain stable as the projected personnel plan, and operating expenses are essentially fixed during the first five years of the plan.
  4. Inventory Turnover in the business plan shows good control over the planned inventory, and short and JIT ordering is not a problem. In many cases, we will implement vendor drop shipments, further lessening the need for additional inventory. Some inventory lag could occur if a client wants inventory on hand for special products; we would then be required to stock these products.
  5. Collection Days are set to average 45 days. One key goal will be for the business to target financially healthy businesses. We also anticipate a very large market of small order purchases placed with credit card or e-check via the internet.

8.3 Break-even Analysis

As a start-up, JTB's break-even analysis is difficult to project, as our industrial products are mixed with product development lead times, and the initial time to market. The major factor in our break-even point is the long lead-time for JTB's software development. We expect to reach break-even for the entire corporation early in the second year. 

The initial goal is to bring the hard products to market within 60 days from startup along with the addition of numerous well-accepted industrial products for resale.  What will set JTB apart from the other industrial entities is its ability for flexibility, expansion, and its individual divisions with key individuals all under one roof targeting each market segment JTB will pursue.

With this in mind, the goal is to build a solid base for the corporation with our primary products and services while continuing the development phase of our distribution software.

Break-even Analysis
Monthly Revenue Break-even $49,492
Assumptions:
Average Percent Variable Cost 57%
Estimated Monthly Fixed Cost $21,059

8.4 Projected Profit and Loss

Please be sure to read note 8.1.1 in the Important Assumptions, section 8.1 regarding our Accounting system and methodology.

The Projected Profit and Loss table takes into consideration all of the basic operating costs for the entire corporation and all of its divisions. The P&L in this business plan also includes a full depreciation schedule while remaining profitable. When management produced the table, we would have preferred to project a softer startup with more of a gradual expense growth as we added equipment and services.

Management's goal is to work with a leasing company that will provide a construction type loan/lease situation allowing us time to hand-select the best possible equipment while minimizing the cash outlay during this process. For the purposes of this plan, and to maintain a conservative approach, we have expensed this equipment in the start-up table. With this considered, the long term goal has not changed and is reflected in year 2006.

With consideration given to note 8.1.1, management still feels it can produce a better-structured corporation than what is shown in the existing business plan. Other considerations not included in the P&L are the burden of management, and management's output. Please remember when you do review the P&L, that the 3 JTB divisions will actually be operating under one roof. As such, management's role will be to fill in, in all areas of production wherever needed to complete orders.

Management's operating schedule will also be overlapped to "keep our doors open" more operating hours than any of the other 9 to 5 operations. Management anticipates running at least 50 hours per week allowing us to develop more business on the west coast' which is also not calculated in the P&L.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $584,434 $1,008,798 $1,303,319 $1,604,704 $2,020,771
Direct Cost of Sales $335,758 $477,954 $598,419 $724,310 $917,610
Production Payroll $148,400 $129,400 $140,200 $148,100 $156,800
Contracted Graphics Development $4,500 $4,500 $4,500 $4,500 $4,500
Total Cost of Sales $488,658 $611,854 $743,119 $876,910 $1,078,910
Gross Margin $95,776 $396,944 $560,200 $727,794 $941,861
Gross Margin % 16.39% 39.35% 42.98% 45.35% 46.61%
Operating Expenses
Sales and Marketing Expenses
Sales and Marketing Payroll $54,850 $98,000 $118,500 $129,000 $138,500
Advertising/Promotion $13,800 $18,000 $24,300 $25,300 $26,300
Other Sales and Marketing Expenses $0 $0 $0 $0 $0
. $0 $0 $0 $0 $0
Total Sales and Marketing Expenses $68,650 $116,000 $142,800 $154,300 $164,800
Sales and Marketing % 11.75% 11.50% 10.96% 9.62% 8.16%
General and Administrative Expenses
General and Administrative Payroll $59,000 $62,500 $64,000 $67,000 $69,000
Sales and Marketing and Other Expenses $8,400 $14,700 $23,500 $25,000 $30,200
Depreciation $10,696 $10,700 $10,700 $10,700 $10,700
Rent (consolidated) $26,400 $26,400 $26,400 $26,400 $26,400
Utilities (consolidated) $14,300 $15,000 $15,800 $16,200 $16,700
Equipment lease Ind Prod Div $35,988 $35,988 $35,988 $35,988 $35,988
Prototype and Printing Equipment $10,710 $12,852 $12,852 $12,852 $12,852
Insurance (consolidated) $12,000 $18,000 $20,000 $22,000 $24,000
Payroll Taxes (consolidated) $0 $0 $0 $0 $0
CPA - Accounting and Payroll $4,200 $4,400 $4,600 $4,600 $4,600
Off-site secure backup storage $360 $400 $400 $400 $400
Computer maintenance and software upgrades $2,000 $3,000 $4,000 $5,000 $6,000
Total General and Administrative Expenses $184,054 $203,940 $218,240 $226,140 $236,840
General and Administrative % 31.49% 20.22% 16.74% 14.09% 11.72%
Other Expenses:
Other Payroll $0 $0 $0 $0 $0
Consultants $0 $6,000 $6,000 $6,000 $6,000
Other Other Expenses $0 $0 $0 $0 $0
Total Other Expenses $0 $6,000 $6,000 $6,000 $6,000
Other % 0.00% 0.59% 0.46% 0.37% 0.30%
Total Operating Expenses $252,704 $325,940 $367,040 $386,440 $407,640
Profit Before Interest and Taxes ($156,928) $71,004 $193,160 $341,354 $534,221
EBITDA ($146,232) $81,704 $203,860 $352,054 $544,921
Interest Expense $24,425 $22,849 $21,202 $19,556 $17,909
Taxes Incurred $0 $14,447 $0 $96,539 $0
Net Profit ($181,353) $33,709 $171,958 $225,259 $516,312
Net Profit/Sales -31.03% 3.34% 13.19% 14.04% 25.55%

8.5 Projected Cash Flow

The projected cash flow comfortably reflects the businesses position to repay the initial investors near year 4 and 5 of the plan; please remember when you review this table, it is for the entire corporation. When reviewing the projected cash flow, its important to note the largest growth in sales is  from outsourced manufacturing as this is not really segmented for review. Additional segmentation information can be found in the market segmentation table in section 4.1.

The outsourced manufacturing allows the company to have the product lines it desires while utilizing its internal personnel on the more profitable services to be offered. The outsourced products operate under a fixed cost situation, while the services area will for the most part be working in a cost plus situation filling special and rush requests that carry a much higher shop rate. As the cash flow projects only the base products described in the business plan, its highly probable JTB will be involved with more outsourced products in years two through five, furthering our potential profitability.

Please review section 8.1 regarding the Important Assumptions to get a better feel for the explained projected cash flow. 

Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $146,109 $252,200 $325,830 $401,176 $505,193
Cash from Receivables $329,424 $677,524 $922,609 $1,147,369 $1,438,049
Subtotal Cash from Operations $475,532 $929,723 $1,248,439 $1,548,545 $1,943,242
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0
New Investment Received $0 $0 $350,000 $0 $0
Subtotal Cash Received $475,532 $929,723 $1,598,439 $1,548,545 $1,943,242
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $262,250 $289,900 $322,700 $344,100 $364,300
Bill Payments $449,376 $723,975 $809,928 $1,029,456 $1,155,538
Subtotal Spent on Operations $711,626 $1,013,875 $1,132,628 $1,373,556 $1,519,838
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $16,428 $16,466 $16,466 $16,466 $16,466
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $0 $320,000 $70,000 $160,000
Subtotal Cash Spent $728,054 $1,030,341 $1,469,094 $1,460,022 $1,696,304
Net Cash Flow ($252,522) ($100,618) $129,345 $88,523 $246,938
Cash Balance $243,728 $143,110 $272,455 $360,978 $607,916

8.6 Projected Balance Sheet

JTB's projected balance sheet shows a strong cash development capability over the projected 5 year plan. The projected balance sheet, like the rest of the business plan, assumes the business remains at its startup location during the first five years of operations, keeping costs relatively fixed for the projections. Again, as mentioned in the Important Assumptions section 8.1, management still feels it can develop a stronger situation than what is reflected here.

The business will build its cash position while also developing a strong net worth. Total assets exceed $1 Million by year 5 as well. A full depreciation schedule and payment schedule is included to depreciate the long-term assets.  

During the life of the plan, inventory requirements may change as we offer our clients different purchasing options and build our inventory of used products. Any differences in cash flow and inventory would show that the cash is tied up in inventory. With this in mind, we would try to keep the required inventory down to reasonable levels wherever possible. 

The products and services division is a service oriented segment of the business. Many of the services offered are tied to particular product lines offered, allowing the business to create multiple income streams throughout the development of the plan. For segmentation purposes, some products have both labor and materials to manufacture a product, some have labor only when providing a service. The segmentation shown in the plan does not break the finer details of this down. This is also the case with the other two divisions as well; both can provide labor-based services with their product offering as well.

The overall projected balance sheet reflects a strong corporation capable of fully repaying the original investors, and a corporation that can attract further investors later in the plan if desired. The long-term plan for the corporation looks good as the continued growth of our distributor partner program is beginning to show good growth as well.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $243,728 $143,110 $272,455 $360,978 $607,916
Accounts Receivable $108,902 $187,977 $242,857 $299,017 $376,546
Inventory $65,223 $92,846 $116,247 $143,129 $180,239
Other Current Assets $17,000 $17,000 $17,000 $17,000 $17,000
Total Current Assets $434,854 $440,933 $648,560 $820,123 $1,181,701
Long-term Assets
Long-term Assets $79,500 $79,500 $79,500 $79,500 $79,500
Accumulated Depreciation $10,696 $21,396 $32,096 $42,796 $53,496
Total Long-term Assets $68,804 $58,104 $47,404 $36,704 $26,004
Total Assets $503,658 $499,037 $695,964 $856,827 $1,207,705
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $89,189 $67,326 $78,761 $100,831 $111,863
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $89,189 $67,326 $78,761 $100,831 $111,863
Long-term Liabilities $236,722 $220,256 $203,790 $187,324 $170,858
Total Liabilities $325,911 $287,582 $282,551 $288,155 $282,721
Paid-in Capital $455,000 $455,000 $805,000 $805,000 $805,000
Retained Earnings ($95,900) ($277,253) ($563,545) ($461,587) ($396,328)
Earnings ($181,353) $33,709 $171,958 $225,259 $516,312
Total Capital $177,747 $211,455 $413,413 $568,672 $924,984
Total Liabilities and Capital $503,658 $499,037 $695,964 $856,827 $1,207,705
Net Worth $177,747 $211,455 $413,413 $568,672 $924,984

8.7 Business Ratios

For comparison, we have used the industry profile for an automotive parts supplier and manufacturer. JTB Technologies is very similar with distribution as a supplier (Ind sales division), and manufacturing automotive products (products and service div), with the exception of our marketing division JTB Integrated Technologies.

The averaged ratios of the 3 divisions reflect a strong growth with regards to its Gross Margins as these margins are made up of many elements combining distribution, products, and services in this plan. Initially we are slightly lower on the Gross margin in comparison to the industry profile partially due to new equipment debt load, and the training period to reach full capacity.

Our long-term assets will decline below industry profiles as equipment is paid down, but our overall Debt to Asset ratios are much better than the industry in overall results as leaner manufacturing and better coordinated use of our channel partners come into play allowing for more growth without incurring additional expense.

Our General and Administrative ratios are initially higher than the industry, but this personnel plays an essential role as the business grows towards its growth and outsourcing goals. Also the industry standard profile could reflect more automation than we have at this point, their requirements could reflect less personnel.  

Our sales growth is substantially greater as we are adding new products and services each year to the plan, and our Gross average margins are also higher than the profile, due to the high profitability in our marketing products and services.

Overall our ratios are better than the industry as we have maximized our marketing budgets and marketing avenues while keeping costs in check. Further maximization comes in the form of training the sales staff on maintaining profit per order levels when processing orders. Our unique order processing Intranet, and Internet package makes for streamlined repeat ordering by customers further allowing our staff to process orders more efficiently, while reducing the internal costs of processing orders.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 72.61% 29.20% 23.12% 25.93% 2.95%
Percent of Total Assets
Accounts Receivable 21.62% 37.67% 34.90% 34.90% 31.18% 24.07%
Inventory 12.95% 18.61% 16.70% 16.70% 14.92% 46.47%
Other Current Assets 3.38% 3.41% 2.44% 1.98% 1.41% 15.56%
Total Current Assets 86.34% 88.36% 93.19% 95.72% 97.85% 86.10%
Long-term Assets 13.66% 11.64% 6.81% 4.28% 2.15% 13.90%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 17.71% 13.49% 11.32% 11.77% 9.26% 45.21%
Long-term Liabilities 47.00% 44.14% 29.28% 21.86% 14.15% 15.13%
Total Liabilities 64.71% 57.63% 40.60% 33.63% 23.41% 60.34%
Net Worth 35.29% 42.37% 59.40% 66.37% 76.59% 39.66%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 16.39% 39.35% 42.98% 45.35% 46.61% 19.32%
Selling, General & Administrative Expenses 47.42% 36.01% 29.79% 31.32% 21.06% 11.47%
Advertising Expenses 2.36% 1.78% 1.86% 1.58% 1.30% 0.31%
Profit Before Interest and Taxes -26.85% 7.04% 14.82% 21.27% 26.44% 0.58%
Main Ratios
Current 4.88 6.55 8.23 8.13 10.56 1.76
Quick 4.14 5.17 6.76 6.71 8.95 0.67
Total Debt to Total Assets 64.71% 57.63% 40.60% 33.63% 23.41% 64.48%
Pre-tax Return on Net Worth -102.03% 22.77% 41.59% 56.59% 55.82% 1.69%
Pre-tax Return on Assets -36.01% 9.65% 24.71% 37.56% 42.75% 4.75%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin -31.03% 3.34% 13.19% 14.04% 25.55% n.a
Return on Equity -102.03% 15.94% 41.59% 39.61% 55.82% n.a
Activity Ratios
Accounts Receivable Turnover 4.02 4.02 4.02 4.02 4.02 n.a
Collection Days 42 72 80 82 81 n.a
Inventory Turnover 9.99 6.05 5.72 5.59 5.68 n.a
Accounts Payable Turnover 6.01 10.43 10.43 10.43 10.43 n.a
Payment Days 31 41 32 31 33 n.a
Total Asset Turnover 1.16 2.02 1.87 1.87 1.67 n.a
Debt Ratios
Debt to Net Worth 1.83 1.36 0.68 0.51 0.31 n.a
Current Liab. to Liab. 0.27 0.23 0.28 0.35 0.40 n.a
Liquidity Ratios
Net Working Capital $345,665 $373,607 $569,799 $719,292 $1,069,838 n.a
Interest Coverage -6.42 3.11 9.11 17.46 29.83 n.a
Additional Ratios
Assets to Sales 0.86 0.49 0.53 0.53 0.60 n.a
Current Debt/Total Assets 18% 13% 11% 12% 9% n.a
Acid Test 2.92 2.38 3.68 3.75 5.59 n.a
Sales/Net Worth 3.29 4.77 3.15 2.82 2.18 n.a
Dividend Payout 0.00 0.00 1.86 0.31 0.31 n.a

8.8 Long-term Plan

The long-term outlook for JTB Technologies, Inc. looks strong with continued growth in all areas. Our long-term goals for the corporation after year five of the plan would be to consider how to better position the business in its marketplace. Year five of our plan does include the addition of several satellite offices. We will monitor their performance closely and consider developing more of these highly profitable arrangements. 

With our base firmly established here, our location can serve as the master model and training facility for developing other locations in the U.S. The logistical problems sometimes encountered with our products and services could also be improved with regional locations, making our offerings more attractive to potential clients.