JTB Products and Services

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Manufacturing - Custom Parts Business Plan

Financial Plan

JTB's financial plan is based on raising $230,000 by way of private equity to setup the industrial products and services division of the corporation. We are also securing a 12 year loan for $45,000 to cover initial equipment costs necessary to produce our products and services. We expect the Product and Service Division to achieve a small net profit in just over two years.

By year three we expect to be in a strong enough cash position to begin paying dividends to the initial investors, and secure proper lines of credit with other banking resources as the company will need to attract further investment for equipment and expansion. It would be in the company's best interest to repay the initial investors earlier than the plan allows for.

8.1 Important Assumptions

This plan is one of a three part business plan providing details of each business segment for more accurate projections, the main plan is used to show the overall development of the business in its entirety. Key assumptions around which we 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 shows assumptions which play heavily into the businesses long term plan.

If the business can be developed in its entirety in one location would greatly reduce operating costs, and provide 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 distributor 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 we feel we can make better long term arrangements which should better the projected cash position shown.

Note 8.1.1: We have 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 only the projections for the Products and Services Division. We suggest that each plan is reviewed, as each is quite different.

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 30.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0

8.2 Break-even Analysis

The break-even analysis for JTB Products and Services is shown in the following table and chart.

JTB's break even analysis is difficult to project as our industrial products and services are a mix of both labor charged hourly, and outsourced manufactured goods for resale. Initial goals are to bring the hard manufactured product lines to market within 60 days from startup. Additionally, we will begin completing service based orders (labor based) immediately while offering numerous well accepted industrial products for resale through the other divisions.

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. All of the service personnel will be cross-trained with the sales staff, and will be expected to handle clients with a positive and helpful attitude. With this in mind, the goal is to build a solid base for the corporation with our primary products and services while continuing the long term development of our distribution and secondary services business. 

Break-even Analysis
Monthly Revenue Break-even $31,884
Assumptions:
Average Percent Variable Cost 69%
Estimated Monthly Fixed Cost $10,036

8.3 Projected Profit and Loss

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

The Projected Profit and Loss table takes into consideration all of the basic operating costs for the Products and Services Division only. This division will reach the break-even point late in the first year, and become increasingly profitable thereafter. At full capacity in later years, we expect net profit margins between 12% and 19%.

The Profit and Loss in this business plan also includes a full depreciation schedule. Management's eventual 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 bought some starting equipment as long-term assets in the start-up table. We will add some leased equipment as we go, as initial equipment depreciates. 

The Profit and Loss table in this plan does not reflect the burden of management, and management's output - related personnel costs can be found in the plan for the holding company, JTB Technologies, Inc. Please remember when you do review the P&L, that the 3 JTB divisions will actually be operating under one roof. As such, overhead is low, and 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.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $354,705 $461,550 $601,569 $729,944 $902,842
Direct Cost of Sales $199,051 $229,974 $279,739 $342,839 $419,700
Production Payroll $44,000 $57,000 $59,000 $63,000 $66,000
Other Costs of Goods $0 $0 $0 $0 $0
Total Cost of Sales $243,051 $286,974 $338,739 $405,839 $485,700
Gross Margin $111,654 $174,576 $262,830 $324,105 $417,142
Gross Margin % 31.48% 37.82% 43.69% 44.40% 46.20%
Operating Expenses
Sales and Marketing Expenses
Sales and Marketing Payroll $2,750 $4,000 $6,000 $8,000 $10,000
Advertising/Promotion $4,950 $6,000 $7,500 $8,500 $9,500
Other Sales and Marketing Expenses $0 $0 $0 $0 $0
Total Sales and Marketing Expenses $7,700 $10,000 $13,500 $16,500 $19,500
Sales and Marketing % 2.17% 2.17% 2.24% 2.26% 2.16%
General and Administrative Expenses
General and Administrative Payroll $43,200 $43,500 $44,000 $45,000 $45,000
Sales and Marketing and Other Expenses $5,400 $7,200 $8,500 $9,500 $10,200
Depreciation $7,750 $7,750 $7,750 $7,750 $7,750
Rent $8,400 $8,400 $8,400 $8,400 $8,400
Equipment Lease $35,988 $35,988 $35,988 $35,988 $35,988
Utilities $7,200 $7,200 $7,200 $7,200 $7,200
Insurance $4,800 $5,400 $7,200 $9,000 $9,600
Payroll Taxes $0 $0 $0 $0 $0
Other General and Administrative Expenses $0 $0 $0 $0 $0
Total General and Administrative Expenses $112,738 $115,438 $119,038 $122,838 $124,138
General and Administrative % 31.78% 25.01% 19.79% 16.83% 13.75%
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% 1.30% 1.00% 0.82% 0.66%
Total Operating Expenses $120,438 $131,438 $138,538 $145,338 $149,638
Profit Before Interest and Taxes ($8,784) $43,138 $124,292 $178,767 $267,504
EBITDA ($1,034) $50,888 $132,042 $186,517 $275,254
Interest Expense $4,297 $3,938 $3,563 $3,188 $2,813
Taxes Incurred $0 $11,760 $36,219 $52,674 $79,408
Net Profit ($13,081) $27,440 $84,511 $122,906 $185,284
Net Profit/Sales -3.69% 5.95% 14.05% 16.84% 20.52%

8.4 Projected Cash Flow

JTB's projected cash flow reflects the business' cash position. Please remember when you review this table, it is for the Products and Services Division only. The table shows our planned repayment of the 12 year loan and dividends to investors beginning in year 3.

When reviewing the projected cash flow, its important to note that 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 line it desires while utilizing its internal personnel one 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 $88,676 $115,387 $150,392 $182,486 $225,711
Cash from Receivables $207,172 $328,433 $427,943 $526,156 $648,442
Subtotal Cash from Operations $295,848 $443,821 $578,335 $708,642 $874,153
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 $0 $0 $0
Subtotal Cash Received $295,848 $443,821 $578,335 $708,642 $874,153
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $89,950 $104,500 $109,000 $116,000 $121,000
Bill Payments $260,345 $346,477 $402,835 $487,427 $594,783
Subtotal Spent on Operations $350,295 $450,977 $511,835 $603,427 $715,783
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 $3,750 $3,750 $3,750 $3,750 $3,750
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $0 $20,000 $50,000 $80,000
Subtotal Cash Spent $354,045 $454,727 $535,585 $657,177 $799,533
Net Cash Flow ($58,197) ($10,906) $42,750 $51,465 $74,620
Cash Balance $112,453 $101,547 $144,298 $195,763 $270,383

8.5 Projected Balance Sheet

JTB Products and Services' 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.

As projected in the Balance Sheet, the products and services division builds its cash position while also developing a sound net worth. As the industrial Products and Services Division is a manufacturing setting, this business plan reflects the development of a large amount of hard, non-cash assets, excluding ending year 5 receivables. 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. 

This division is also 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. We have chosen not to show the breakdown of these finer details in the plan.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $112,453 $101,547 $144,298 $195,763 $270,383
Accounts Receivable $58,857 $76,586 $99,820 $121,121 $149,811
Inventory $37,048 $42,803 $52,066 $63,177 $78,141
Other Current Assets $5,000 $5,000 $5,000 $5,000 $5,000
Total Current Assets $213,358 $225,937 $301,184 $385,061 $503,335
Long-term Assets
Long-term Assets $45,000 $45,000 $45,000 $45,000 $45,000
Accumulated Depreciation $7,750 $15,500 $23,250 $31,000 $38,750
Total Long-term Assets $37,250 $29,500 $21,750 $14,000 $6,250
Total Assets $250,608 $255,437 $322,934 $399,061 $509,585
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $45,789 $26,927 $33,663 $40,636 $49,625
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $45,789 $26,927 $33,663 $40,636 $49,625
Long-term Liabilities $41,250 $37,500 $33,750 $30,000 $26,250
Total Liabilities $87,039 $64,427 $67,413 $70,636 $75,875
Paid-in Capital $230,000 $230,000 $230,000 $230,000 $230,000
Retained Earnings ($53,350) ($66,431) ($58,990) ($24,480) $18,426
Earnings ($13,081) $27,440 $84,511 $122,906 $185,284
Total Capital $163,569 $191,010 $255,520 $328,426 $433,710
Total Liabilities and Capital $250,608 $255,437 $322,934 $399,061 $509,585
Net Worth $163,569 $191,010 $255,520 $328,426 $433,710

8.6 Business Ratios

The following table shows standard business ratios for the years of our plan, and a comparison column for data from Manufacturing Industries, nec (SIC Code 3999).

JTB's Products and Services Division's ratios reflect a strong growth with regards to its Gross Margins.

In the long term, our Long Term Assets decline below industry profiles as equipment is paid down, but our overall Debt to Asset ratios are 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 much 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, thus our requirement for more personnel.  

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 30.12% 30.34% 21.34% 23.69% -0.33%
Percent of Total Assets
Accounts Receivable 23.49% 29.98% 30.91% 30.35% 29.40% 23.08%
Inventory 14.78% 16.76% 16.12% 15.83% 15.33% 15.97%
Other Current Assets 2.00% 1.96% 1.55% 1.25% 0.98% 34.94%
Total Current Assets 85.14% 88.45% 93.26% 96.49% 98.77% 73.99%
Long-term Assets 14.86% 11.55% 6.74% 3.51% 1.23% 26.01%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 18.27% 10.54% 10.42% 10.18% 9.74% 23.82%
Long-term Liabilities 16.46% 14.68% 10.45% 7.52% 5.15% 17.66%
Total Liabilities 34.73% 25.22% 20.88% 17.70% 14.89% 41.48%
Net Worth 65.27% 74.78% 79.12% 82.30% 85.11% 58.52%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 31.48% 37.82% 43.69% 44.40% 46.20% 36.34%
Selling, General & Administrative Expenses 39.96% 31.88% 29.64% 27.56% 25.68% 17.49%
Advertising Expenses 2.22% 2.31% 2.42% 2.44% 2.35% 1.27%
Profit Before Interest and Taxes -2.48% 9.35% 20.66% 24.49% 29.63% 3.23%
Main Ratios
Current 4.66 8.39 8.95 9.48 10.14 2.18
Quick 3.85 6.80 7.40 7.92 8.57 1.33
Total Debt to Total Assets 34.73% 25.22% 20.88% 17.70% 14.89% 50.82%
Pre-tax Return on Net Worth -8.00% 20.52% 47.25% 53.46% 61.03% 7.44%
Pre-tax Return on Assets -5.22% 15.35% 37.39% 44.00% 51.94% 15.13%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin -3.69% 5.95% 14.05% 16.84% 20.52% n.a
Return on Equity -8.00% 14.37% 33.07% 37.42% 42.72% n.a
Activity Ratios
Accounts Receivable Turnover 4.52 4.52 4.52 4.52 4.52 n.a
Collection Days 38 71 71 74 73 n.a
Inventory Turnover 12.00 5.76 5.90 5.95 5.94 n.a
Accounts Payable Turnover 6.69 12.17 12.17 12.17 12.17 n.a
Payment Days 27 41 27 27 27 n.a
Total Asset Turnover 1.42 1.81 1.86 1.83 1.77 n.a
Debt Ratios
Debt to Net Worth 0.53 0.34 0.26 0.22 0.17 n.a
Current Liab. to Liab. 0.53 0.42 0.50 0.58 0.65 n.a
Liquidity Ratios
Net Working Capital $167,569 $199,010 $267,520 $344,426 $453,710 n.a
Interest Coverage -2.04 10.96 34.89 56.08 95.11 n.a
Additional Ratios
Assets to Sales 0.71 0.55 0.54 0.55 0.56 n.a
Current Debt/Total Assets 18% 11% 10% 10% 10% n.a
Acid Test 2.57 3.96 4.44 4.94 5.55 n.a
Sales/Net Worth 2.17 2.42 2.35 2.22 2.08 n.a
Dividend Payout 0.00 0.00 0.24 0.41 0.43 n.a

8.7 Long-term Plan

JTB's Product and Services Division's long term plan has been projected out to a 10 year review to highlight the businesses long term results, and the added potential of the distributor partnerships. Additionally, the 4th & 5th year cash position can be shown for pay-out analysis of the initial investors; this plan also give a much better equity picture.

  1. Gross Sales over $900,000 by year 6 of this plan.
  2. Gross Margins over $450,000 by year 5 of this plan.
  3. Net Income over $160,000 by year 6 of this plan.
  4. Current Assets over $600,000 by year 6 of the plan.
  5. Equity of over $600,000 by year 7 of this plan.