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Recycling Waste Materials Business Plan

Mid-Atlantic Recycling

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Financial Plan

Our financial plan is based on receiving several loans to purchase/fabricate the production equipment, provide initial operating capital, and establish the customer base.

We will achieve profitability early in the first year and due to the expected high growth rate, we will realize strong profits on sales by year three.

8.1 Start-up Funding

The start-up funding will be provided as follows: Owner equity investment of in the form of a loan from the Regional Council of Governments Revolving Loan Fund; this loan is secured by the owner's real estate assets. The  Regional Revolving Loan Fund is an economic development fund sponsored by three West Virginia counties:  Mercer, Greenbrier, and Monroe.

The balance of funding will be provided through an SBA guaranteed loan. Details of funding are shown in the table below.

Start-up Funding
Start-up Expenses to Fund $92,180
Start-up Assets to Fund $907,820
Total Funding Required $1,000,000
Assets
Non-cash Assets from Start-up $826,920
Cash Requirements from Start-up $80,900
Additional Cash Raised $0
Cash Balance on Starting Date $80,900
Total Assets $907,820
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $850,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $850,000
Capital
Planned Investment
Owner $150,000
Other $0
Additional Investment Requirement $0
Total Planned Investment $150,000
Loss at Start-up (Start-up Expenses) ($92,180)
Total Capital $57,820
Total Capital and Liabilities $907,820
Total Funding $1,000,000

8.2 Use of Funds

The bulk of our Start-up funding will be used for capital asset purchases, listed in the table below.

Use of Funds
Use Amount
Processing Plants 2 x $190,460 $380,920
Processing Plants built in-house 2 x $40,000 $80,000
Skid Truck 2 x $73,000 (avg price) $146,000
Sheds 48'x72' 4 x $18,500 $74,000
Backhoe $40,000
Front-end Loader 2 x $50,000 $100,000
Tandem Dump Trailer $6,000
Total $826,920

8.3 Important Assumptions

The table below presents some assumptions used in the financial calculations of this business plan.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 7.00% 7.00% 7.00%
Long-term Interest Rate 7.00% 7.00% 7.00%
Tax Rate 25.00% 25.00% 25.00%
Other 0 0 0

8.4 Break-even Analysis

The chart and table below contain the break-even analysis for Mid-Atlantic Recycling.

Break-even Analysis
Monthly Units Break-even 2,180
Monthly Revenue Break-even $62,905
Assumptions:
Average Per-Unit Revenue $28.85
Average Per-Unit Variable Cost $3.15
Estimated Monthly Fixed Cost $56,029

8.5 Projected Profit and Loss

The following table summarizes our anticipated profit and loss for the first three years. A monthly profit and loss projection for the first year of operations is included in the appendices.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $1,121,168 $2,555,069 $5,108,918
Direct Cost of Sales $122,550 $297,853 $612,688
Other Costs of Goods $0 $0 $0
Total Cost of Sales $122,550 $297,853 $612,688
Gross Margin $998,618 $2,257,215 $4,496,230
Gross Margin % 89.07% 88.34% 88.01%
Expenses
Payroll $374,053 $766,326 $1,422,040
Sales and Marketing and Other Expenses $12,000 $24,000 $48,000
Depreciation $165,384 $325,384 $645,384
Rent $0 $40,000 $100,000
Utilities $18,000 $36,000 $72,000
Insurance $18,000 $36,000 $72,000
Payroll Taxes $56,108 $114,949 $213,306
Maintanence and Repair $4,800 $9,600 $20,000
Other $24,000 $48,000 $96,000
Total Operating Expenses $672,345 $1,400,259 $2,688,730
Profit Before Interest and Taxes $326,273 $856,956 $1,807,500
EBITDA $491,657 $1,182,340 $2,452,884
Interest Expense $57,217 $52,956 $48,223
Taxes Incurred $67,264 $201,000 $439,819
Net Profit $201,792 $603,000 $1,319,458
Net Profit/Sales 18.00% 23.60% 25.83%

8.6 Projected Cash Flow

The chart and table below project increasing cash flow throughout the first three years of plan implementation. The second and third years of operation reflect large long-term asset purchases which reflects our intent to expand the business by opening additional facilities in those years. This expansion will be funded by business revenue with no anticipated need for outside financing.

The row labelled "Long-term Liabilities Principal Repayment" reflects repayment of the SBA guaranteed 504 Debenture Program loan.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $448,467 $1,022,028 $2,043,567
Cash from Receivables $542,495 $1,366,516 $2,768,762
Subtotal Cash from Operations $990,962 $2,388,544 $4,812,329
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 $990,962 $2,388,544 $4,812,329
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $374,053 $766,326 $1,422,040
Bill Payments $357,477 $843,317 $1,684,617
Subtotal Spent on Operations $731,530 $1,609,643 $3,106,657
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 $60,859 $65,258 $69,976
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $800,000 $1,600,000
Dividends $20,000 $30,000 $40,000
Subtotal Cash Spent $812,388 $2,504,901 $4,816,633
Net Cash Flow $178,574 ($116,357) ($4,303)
Cash Balance $259,474 $143,117 $138,814

8.7 Projected Balance Sheet

The following table projects healthy growth in sales and net worth.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $259,474 $143,117 $138,814
Accounts Receivable $130,206 $296,731 $593,320
Inventory $13,494 $32,796 $67,463
Other Current Assets $0 $0 $0
Total Current Assets $403,174 $472,644 $799,597
Long-term Assets
Long-term Assets $826,920 $1,626,920 $3,226,920
Accumulated Depreciation $165,384 $490,768 $1,136,152
Total Long-term Assets $661,536 $1,136,152 $2,090,768
Total Assets $1,064,710 $1,608,796 $2,890,365
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $35,957 $72,301 $144,387
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $35,957 $72,301 $144,387
Long-term Liabilities $789,141 $723,883 $653,908
Total Liabilities $825,098 $796,184 $798,294
Paid-in Capital $150,000 $150,000 $150,000
Retained Earnings ($112,180) $59,612 $622,612
Earnings $201,792 $603,000 $1,319,458
Total Capital $239,612 $812,612 $2,092,070
Total Liabilities and Capital $1,064,710 $1,608,796 $2,890,365
Net Worth $239,612 $812,612 $2,092,070

8.8 Business Ratios

The following table outlines some of the more important ratios from the Recycling, waste materials industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 4953.9905.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 127.89% 99.95% 7.24%
Percent of Total Assets
Accounts Receivable 12.23% 18.44% 20.53% 4.89%
Inventory 1.27% 2.04% 2.33% 0.35%
Other Current Assets 0.00% 0.00% 0.00% 31.71%
Total Current Assets 37.87% 29.38% 27.66% 36.95%
Long-term Assets 62.13% 70.62% 72.34% 63.05%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 3.38% 4.49% 5.00% 18.58%
Long-term Liabilities 74.12% 45.00% 22.62% 26.10%
Total Liabilities 77.50% 49.49% 27.62% 44.68%
Net Worth 22.50% 50.51% 72.38% 55.32%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 89.07% 88.34% 88.01% 34.70%
Selling, General & Administrative Expenses 72.77% 64.88% 61.97% 14.39%
Advertising Expenses 0.00% 0.00% 0.00% 0.25%
Profit Before Interest and Taxes 29.10% 33.54% 35.38% 1.59%
Main Ratios
Current 11.21 6.54 5.54 1.10
Quick 10.84 6.08 5.07 0.89
Total Debt to Total Assets 77.50% 49.49% 27.62% 63.47%
Pre-tax Return on Net Worth 112.29% 98.94% 84.09% 1.16%
Pre-tax Return on Assets 25.27% 49.98% 60.87% 3.16%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 18.00% 23.60% 25.83% n.a
Return on Equity 84.22% 74.21% 63.07% n.a
Activity Ratios
Accounts Receivable Turnover 5.17 5.17 5.17 n.a
Collection Days 57 51 53 n.a
Inventory Turnover 10.91 12.87 12.22 n.a
Accounts Payable Turnover 10.94 12.17 12.17 n.a
Payment Days 27 22 23 n.a
Total Asset Turnover 1.05 1.59 1.77 n.a
Debt Ratios
Debt to Net Worth 3.44 0.98 0.38 n.a
Current Liab. to Liab. 0.04 0.09 0.18 n.a
Liquidity Ratios
Net Working Capital $367,217 $400,344 $655,210 n.a
Interest Coverage 5.70 16.18 37.48 n.a
Additional Ratios
Assets to Sales 0.95 0.63 0.57 n.a
Current Debt/Total Assets 3% 4% 5% n.a
Acid Test 7.22 1.98 0.96 n.a
Sales/Net Worth 4.68 3.14 2.44 n.a
Dividend Payout 0.10 0.05 0.03 n.a
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Start-up Funding
Start-up Expenses to Fund $92,180
Start-up Assets to Fund $907,820
Total Funding Required $1,000,000
Assets
Non-cash Assets from Start-up $826,920
Cash Requirements from Start-up $80,900
Additional Cash Raised $0
Cash Balance on Starting Date $80,900
Total Assets $907,820
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $850,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $850,000
Capital
Planned Investment
Owner $150,000
Other $0
Additional Investment Requirement $0
Total Planned Investment $150,000
Loss at Start-up (Start-up Expenses) ($92,180)
Total Capital $57,820
Total Capital and Liabilities $907,820
Total Funding $1,000,000
Use of Funds
Use Amount
Processing Plants 2 x $190,460 $380,920
Processing Plants built in-house 2 x $40,000 $80,000
Skid Truck 2 x $73,000 (avg price) $146,000
Sheds 48'x72' 4 x $18,500 $74,000
Backhoe $40,000
Front-end Loader 2 x $50,000 $100,000
Tandem Dump Trailer $6,000
Total $826,920
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 7.00% 7.00% 7.00%
Long-term Interest Rate 7.00% 7.00% 7.00%
Tax Rate 25.00% 25.00% 25.00%
Other 0 0 0
Break-even Analysis
Monthly Units Break-even 2,180
Monthly Revenue Break-even $62,905
Assumptions:
Average Per-Unit Revenue $28.85
Average Per-Unit Variable Cost $3.15
Estimated Monthly Fixed Cost $56,029
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $1,121,168 $2,555,069 $5,108,918
Direct Cost of Sales $122,550 $297,853 $612,688
Other Costs of Goods $0 $0 $0
Total Cost of Sales $122,550 $297,853 $612,688
Gross Margin $998,618 $2,257,215 $4,496,230
Gross Margin % 89.07% 88.34% 88.01%
Expenses
Payroll $374,053 $766,326 $1,422,040
Sales and Marketing and Other Expenses $12,000 $24,000 $48,000
Depreciation $165,384 $325,384 $645,384
Rent $0 $40,000 $100,000
Utilities $18,000 $36,000 $72,000
Insurance $18,000 $36,000 $72,000
Payroll Taxes $56,108 $114,949 $213,306
Maintanence and Repair $4,800 $9,600 $20,000
Other $24,000 $48,000 $96,000
Total Operating Expenses $672,345 $1,400,259 $2,688,730
Profit Before Interest and Taxes $326,273 $856,956 $1,807,500
EBITDA $491,657 $1,182,340 $2,452,884
Interest Expense $57,217 $52,956 $48,223
Taxes Incurred $67,264 $201,000 $439,819
Net Profit $201,792 $603,000 $1,319,458
Net Profit/Sales 18.00% 23.60% 25.83%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $448,467 $1,022,028 $2,043,567
Cash from Receivables $542,495 $1,366,516 $2,768,762
Subtotal Cash from Operations $990,962 $2,388,544 $4,812,329
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 $990,962 $2,388,544 $4,812,329
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $374,053 $766,326 $1,422,040
Bill Payments $357,477 $843,317 $1,684,617
Subtotal Spent on Operations $731,530 $1,609,643 $3,106,657
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 $60,859 $65,258 $69,976
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $800,000 $1,600,000
Dividends $20,000 $30,000 $40,000
Subtotal Cash Spent $812,388 $2,504,901 $4,816,633
Net Cash Flow $178,574 ($116,357) ($4,303)
Cash Balance $259,474 $143,117 $138,814
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $259,474 $143,117 $138,814
Accounts Receivable $130,206 $296,731 $593,320
Inventory $13,494 $32,796 $67,463
Other Current Assets $0 $0 $0
Total Current Assets $403,174 $472,644 $799,597
Long-term Assets
Long-term Assets $826,920 $1,626,920 $3,226,920
Accumulated Depreciation $165,384 $490,768 $1,136,152
Total Long-term Assets $661,536 $1,136,152 $2,090,768
Total Assets $1,064,710 $1,608,796 $2,890,365
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $35,957 $72,301 $144,387
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $35,957 $72,301 $144,387
Long-term Liabilities $789,141 $723,883 $653,908
Total Liabilities $825,098 $796,184 $798,294
Paid-in Capital $150,000 $150,000 $150,000
Retained Earnings ($112,180) $59,612 $622,612
Earnings $201,792 $603,000 $1,319,458
Total Capital $239,612 $812,612 $2,092,070
Total Liabilities and Capital $1,064,710 $1,608,796 $2,890,365
Net Worth $239,612 $812,612 $2,092,070
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 127.89% 99.95% 7.24%
Percent of Total Assets
Accounts Receivable 12.23% 18.44% 20.53% 4.89%
Inventory 1.27% 2.04% 2.33% 0.35%
Other Current Assets 0.00% 0.00% 0.00% 31.71%
Total Current Assets 37.87% 29.38% 27.66% 36.95%
Long-term Assets 62.13% 70.62% 72.34% 63.05%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 3.38% 4.49% 5.00% 18.58%
Long-term Liabilities 74.12% 45.00% 22.62% 26.10%
Total Liabilities 77.50% 49.49% 27.62% 44.68%
Net Worth 22.50% 50.51% 72.38% 55.32%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 89.07% 88.34% 88.01% 34.70%
Selling, General & Administrative Expenses 72.77% 64.88% 61.97% 14.39%
Advertising Expenses 0.00% 0.00% 0.00% 0.25%
Profit Before Interest and Taxes 29.10% 33.54% 35.38% 1.59%
Main Ratios
Current 11.21 6.54 5.54 1.10
Quick 10.84 6.08 5.07 0.89
Total Debt to Total Assets 77.50% 49.49% 27.62% 63.47%
Pre-tax Return on Net Worth 112.29% 98.94% 84.09% 1.16%
Pre-tax Return on Assets 25.27% 49.98% 60.87% 3.16%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 18.00% 23.60% 25.83% n.a
Return on Equity 84.22% 74.21% 63.07% n.a
Activity Ratios
Accounts Receivable Turnover 5.17 5.17 5.17 n.a
Collection Days 57 51 53 n.a
Inventory Turnover 10.91 12.87 12.22 n.a
Accounts Payable Turnover 10.94 12.17 12.17 n.a
Payment Days 27 22 23 n.a
Total Asset Turnover 1.05 1.59 1.77 n.a
Debt Ratios
Debt to Net Worth 3.44 0.98 0.38 n.a
Current Liab. to Liab. 0.04 0.09 0.18 n.a
Liquidity Ratios
Net Working Capital $367,217 $400,344 $655,210 n.a
Interest Coverage 5.70 16.18 37.48 n.a
Additional Ratios
Assets to Sales 0.95 0.63 0.57 n.a
Current Debt/Total Assets 3% 4% 5% n.a
Acid Test 7.22 1.98 0.96 n.a
Sales/Net Worth 4.68 3.14 2.44 n.a
Dividend Payout 0.10 0.05 0.03 n.a