Residential Remodeling Business Plan

Anywhere Remodeling

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Financial Plan

The most important element in the financial plan is the critical need for improving several of the key factors that impact cash flow:

  1. Anywhere Remodeling must do a better job of collecting deposits and asking for (demanding) prompt payment from the customers.
  2. We must bring the gross margin up to 35%. This is related to improving the marketing program which will generate higher quality leads and jobs.

8.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the General Assumptions table below. The key underlying assumptions are:

  • A slow-growth economy, without major recession.
  • There are no unforeseen changes in technology to make our services immediately obsolete (very unlikely).
  • We assume access to equity capital and financing sufficient to maintain our financial plan as shown in the tables.
General Assumptions
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Plan Month 1 2 3 4 5
Current Interest Rate 7.00% 7.00% 7.00% 7.00% 7.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 25.00% 25.00% 25.00% 25.00% 25.00%
Other 0 0 0 0 0

8.2 Break-even Analysis

The break-even analysis can be found below.

Break-even Analysis
Monthly Revenue Break-even $113,038
Assumptions:
Average Percent Variable Cost 54%
Estimated Monthly Fixed Cost $52,121

8.3 Projected Profit and Loss

The most important assumption in the Projected Profit and Loss statement is the gross margin, which is supposed to increase, up quite a bit from the last year. The increase in gross margin is based on changing our sales mix due to increased target marketing based on 5% assumptions between years.

Month-by-month assumptions for profit and loss are included in the appendices.

Pro Forma Profit and Loss
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Sales $1,328,403 $1,496,903 $1,666,998 $1,822,098 $1,982,202
Direct Cost of Sales $715,885 $805,135 $895,541 $978,094 $1,063,327
Other Costs of Goods $0 $0 $0 $0 $0
Total Cost of Sales $715,885 $805,135 $895,541 $978,094 $1,063,327
Gross Margin $612,517 $691,768 $771,457 $844,004 $918,875
Gross Margin % 46.11% 46.21% 46.28% 46.32% 46.36%
Expenses
Payroll $366,810 $421,654 $443,846 $467,206 $491,796
Advertising $11,890 $7,023 $7,393 $7,782 $8,191
Depreciation $8,856 $9,322 $9,813 $10,329 $10,873
Marketing $13,757 $8,122 $8,550 $9,000 $9,473
Bad Debts $2,244 $2,362 $2,486 $2,617 $2,755
Donations $2,364 $2,488 $2,619 $2,757 $2,902
Entertainment 50% $2,100 $2,211 $2,327 $2,449 $2,578
Employee Benefits $65,729 $52,152 $54,897 $57,786 $60,828
Equipment Buy/Rental $3,880 $3,082 $3,244 $3,415 $3,595
Interest/Bank Charges ($204) ($215) ($226) ($238) ($250)
Tool Repair/Replacement $2,760 $2,905 $3,058 $3,219 $3,389
Computer/Hardware/Software Consultants $8,602 $6,836 $7,196 $7,574 $7,973
Dues/Sub/Licenses/Royalties/Trade Assoc $2,840 $2,990 $3,147 $3,313 $3,487
Corp & Business Taxes $2,104 $2,214 $2,331 $2,454 $2,583
Legal Expenses $1,309 $1,378 $1,451 $1,527 $1,608
Accounting Expenses $2,331 $2,453 $2,582 $2,718 $2,861
Rent of Office/Warehouse Space $14,520 $15,284 $16,089 $16,935 $17,827
Repairs/Maintenance $1,137 $1,197 $1,260 $1,326 $1,396
Communications $9,357 $9,850 $10,368 $10,914 $11,488
Utilities $930 $979 $1,030 $1,084 $1,142
Office Expenses $8,416 $8,859 $9,325 $9,816 $10,332
Miscellaneous/Other $4,589 $4,831 $5,085 $5,353 $5,634
Liability Insurance $7,512 $7,907 $8,324 $8,762 $9,223
Vehicle Expenses & Insurance $10,392 $10,939 $11,515 $12,121 $12,759
Liability Insurance for employees $504 $531 $558 $588 $619
Vehicle Expenses & Insurance $4,044 $4,257 $4,481 $4,717 $4,965
Insurance - General (#43) $1,020 $1,074 $1,130 $1,190 $1,252
Payroll Taxes $65,659 $75,476 $79,448 $83,630 $88,031
Total Operating Expenses $625,452 $668,161 $703,328 $740,345 $779,309
Profit Before Interest and Taxes ($12,935) $23,607 $68,129 $103,658 $139,566
EBITDA ($4,079) $32,929 $77,942 $113,988 $150,439
Interest Expense $0 $0 $0 $0 $0
Taxes Incurred $0 $5,902 $17,032 $25,915 $34,892
Net Profit ($12,935) $17,705 $51,097 $77,744 $104,675
Net Profit/Sales -0.97% 1.18% 3.07% 4.27% 5.28%

8.4 Projected Cash Flow

The cash flow depends on assumptions for payment days and accounts receivable management. The projected 75-day collection days is critical, and it is also reasonable.

Pro Forma Cash Flow
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Cash Received
Cash from Operations
Cash Sales $332,101 $374,226 $416,749 $455,524 $495,551
Cash from Receivables $1,500,397 $1,093,388 $1,220,682 $1,339,614 $1,458,822
Subtotal Cash from Operations $1,832,498 $1,467,614 $1,637,432 $1,795,138 $1,954,373
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 $1,832,498 $1,467,614 $1,637,432 $1,795,138 $1,954,373
Expenditures FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Expenditures from Operations
Cash Spending $366,810 $421,654 $443,846 $467,206 $491,796
Bill Payments $948,152 $1,049,306 $1,152,871 $1,258,223 $1,365,979
Subtotal Spent on Operations $1,314,962 $1,470,960 $1,596,716 $1,725,429 $1,857,775
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 $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0
Subtotal Cash Spent $1,314,962 $1,470,960 $1,596,716 $1,725,429 $1,857,775
Net Cash Flow $517,536 ($3,346) $40,715 $69,709 $96,598
Cash Balance $700,964 $697,618 $738,333 $808,042 $904,640

8.5 Projected Balance Sheet

The Projected Balance Sheet is quite solid. We do not project any real trouble meeting our debt obligations--as long as we can achieve our specific objectives.

Pro Forma Balance Sheet
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Assets
Current Assets
Cash $700,964 $697,618 $738,333 $808,042 $904,640
Accounts Receivable $230,904 $260,193 $289,760 $316,719 $344,549
Other Current Assets $31,380 $31,380 $31,380 $31,380 $31,380
Total Current Assets $963,249 $989,191 $1,059,473 $1,156,141 $1,280,569
Long-term Assets
Long-term Assets $145,879 $145,879 $145,879 $145,879 $145,879
Accumulated Depreciation $65,735 $75,057 $84,870 $95,199 $106,072
Total Long-term Assets $80,144 $70,822 $61,009 $50,680 $39,807
Total Assets $1,043,393 $1,060,013 $1,120,482 $1,206,821 $1,320,376
Liabilities and Capital FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Current Liabilities
Accounts Payable $87,239 $86,155 $95,527 $104,122 $113,002
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $87,239 $86,155 $95,527 $104,122 $113,002
Long-term Liabilities $0 $0 $0 $0 $0
Total Liabilities $87,239 $86,155 $95,527 $104,122 $113,002
Paid-in Capital $20,000 $20,000 $20,000 $20,000 $20,000
Retained Earnings $949,088 $936,153 $953,858 $1,004,955 $1,082,699
Earnings ($12,935) $17,705 $51,097 $77,744 $104,675
Total Capital $956,153 $973,858 $1,024,955 $1,102,699 $1,207,374
Total Liabilities and Capital $1,043,393 $1,060,013 $1,120,482 $1,206,821 $1,320,376
Net Worth $956,153 $973,858 $1,024,955 $1,102,699 $1,207,374

8.6 Business Ratios

The table follows with our main business ratios. We do intend to improve gross profit and collection days.

Ratio Analysis
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Industry Profile
Sales Growth 77.12% 12.68% 11.36% 9.30% 8.79% -2.88%
Percent of Total Assets
Accounts Receivable 22.13% 24.55% 25.86% 26.24% 26.09% 11.37%
Other Current Assets 3.01% 2.96% 2.80% 2.60% 2.38% 25.23%
Total Current Assets 92.32% 93.32% 94.56% 95.80% 96.99% 76.82%
Long-term Assets 7.68% 6.68% 5.44% 4.20% 3.01% 23.18%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 8.36% 8.13% 8.53% 8.63% 8.56% 44.21%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 12.47%
Total Liabilities 8.36% 8.13% 8.53% 8.63% 8.56% 56.68%
Net Worth 91.64% 91.87% 91.47% 91.37% 91.44% 43.32%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 46.11% 46.21% 46.28% 46.32% 46.36% 16.88%
Selling, General & Administrative Expenses 26.96% 27.77% 28.42% 13.06% 13.02% 5.45%
Advertising Expenses 0.87% 0.87% 0.86% 0.00% 0.00% 0.23%
Profit Before Interest and Taxes -0.97% 1.58% 4.09% 5.69% 7.04% 0.91%
Main Ratios
Current 11.04 11.48 11.09 11.10 11.33 1.59
Quick 11.04 11.48 11.09 11.10 11.33 0.57
Total Debt to Total Assets 8.36% 8.13% 8.53% 8.63% 8.56% 59.20%
Pre-tax Return on Net Worth -1.35% 2.42% 6.65% 9.40% 11.56% 1.93%
Pre-tax Return on Assets -1.24% 2.23% 6.08% 8.59% 10.57% 4.72%
Additional Ratios FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Net Profit Margin -0.97% 1.18% 3.07% 4.27% 5.28% n.a
Return on Equity -1.35% 1.82% 4.99% 7.05% 8.67% n.a
Activity Ratios
Accounts Receivable Turnover 4.31 4.31 4.31 4.31 4.31 n.a
Collection Days 88 80 80 81 81 n.a
Accounts Payable Turnover 11.07 12.17 12.17 12.17 12.17 n.a
Payment Days 29 30 29 29 29 n.a
Total Asset Turnover 1.27 1.41 1.49 1.51 1.50 n.a
Debt Ratios
Debt to Net Worth 0.09 0.09 0.09 0.09 0.09 n.a
Current Liab. to Liab. 1.00 1.00 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $876,009 $903,036 $963,946 $1,052,019 $1,167,566 n.a
Interest Coverage 0.00 0.00 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.79 0.71 0.67 0.66 0.67 n.a
Current Debt/Total Assets 8% 8% 9% 9% 9% n.a
Acid Test 8.39 8.46 8.06 8.06 8.28 n.a
Sales/Net Worth 1.39 1.54 1.63 1.65 1.64 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a

8.7 Long-term Plan

The long-term plan is shown in the Appendix.

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General Assumptions
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Plan Month 1 2 3 4 5
Current Interest Rate 7.00% 7.00% 7.00% 7.00% 7.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 25.00% 25.00% 25.00% 25.00% 25.00%
Other 0 0 0 0 0
Break-even Analysis
Monthly Revenue Break-even $113,038
Assumptions:
Average Percent Variable Cost 54%
Estimated Monthly Fixed Cost $52,121
Pro Forma Profit and Loss
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Sales $1,328,403 $1,496,903 $1,666,998 $1,822,098 $1,982,202
Direct Cost of Sales $715,885 $805,135 $895,541 $978,094 $1,063,327
Other Costs of Goods $0 $0 $0 $0 $0
Total Cost of Sales $715,885 $805,135 $895,541 $978,094 $1,063,327
Gross Margin $612,517 $691,768 $771,457 $844,004 $918,875
Gross Margin % 46.11% 46.21% 46.28% 46.32% 46.36%
Expenses
Payroll $366,810 $421,654 $443,846 $467,206 $491,796
Advertising $11,890 $7,023 $7,393 $7,782 $8,191
Depreciation $8,856 $9,322 $9,813 $10,329 $10,873
Marketing $13,757 $8,122 $8,550 $9,000 $9,473
Bad Debts $2,244 $2,362 $2,486 $2,617 $2,755
Donations $2,364 $2,488 $2,619 $2,757 $2,902
Entertainment 50% $2,100 $2,211 $2,327 $2,449 $2,578
Employee Benefits $65,729 $52,152 $54,897 $57,786 $60,828
Equipment Buy/Rental $3,880 $3,082 $3,244 $3,415 $3,595
Interest/Bank Charges ($204) ($215) ($226) ($238) ($250)
Tool Repair/Replacement $2,760 $2,905 $3,058 $3,219 $3,389
Computer/Hardware/Software Consultants $8,602 $6,836 $7,196 $7,574 $7,973
Dues/Sub/Licenses/Royalties/Trade Assoc $2,840 $2,990 $3,147 $3,313 $3,487
Corp & Business Taxes $2,104 $2,214 $2,331 $2,454 $2,583
Legal Expenses $1,309 $1,378 $1,451 $1,527 $1,608
Accounting Expenses $2,331 $2,453 $2,582 $2,718 $2,861
Rent of Office/Warehouse Space $14,520 $15,284 $16,089 $16,935 $17,827
Repairs/Maintenance $1,137 $1,197 $1,260 $1,326 $1,396
Communications $9,357 $9,850 $10,368 $10,914 $11,488
Utilities $930 $979 $1,030 $1,084 $1,142
Office Expenses $8,416 $8,859 $9,325 $9,816 $10,332
Miscellaneous/Other $4,589 $4,831 $5,085 $5,353 $5,634
Liability Insurance $7,512 $7,907 $8,324 $8,762 $9,223
Vehicle Expenses & Insurance $10,392 $10,939 $11,515 $12,121 $12,759
Liability Insurance for employees $504 $531 $558 $588 $619
Vehicle Expenses & Insurance $4,044 $4,257 $4,481 $4,717 $4,965
Insurance - General (#43) $1,020 $1,074 $1,130 $1,190 $1,252
Payroll Taxes $65,659 $75,476 $79,448 $83,630 $88,031
Total Operating Expenses $625,452 $668,161 $703,328 $740,345 $779,309
Profit Before Interest and Taxes ($12,935) $23,607 $68,129 $103,658 $139,566
EBITDA ($4,079) $32,929 $77,942 $113,988 $150,439
Interest Expense $0 $0 $0 $0 $0
Taxes Incurred $0 $5,902 $17,032 $25,915 $34,892
Net Profit ($12,935) $17,705 $51,097 $77,744 $104,675
Net Profit/Sales -0.97% 1.18% 3.07% 4.27% 5.28%
Pro Forma Cash Flow
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Cash Received
Cash from Operations
Cash Sales $332,101 $374,226 $416,749 $455,524 $495,551
Cash from Receivables $1,500,397 $1,093,388 $1,220,682 $1,339,614 $1,458,822
Subtotal Cash from Operations $1,832,498 $1,467,614 $1,637,432 $1,795,138 $1,954,373
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 $1,832,498 $1,467,614 $1,637,432 $1,795,138 $1,954,373
Expenditures FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Expenditures from Operations
Cash Spending $366,810 $421,654 $443,846 $467,206 $491,796
Bill Payments $948,152 $1,049,306 $1,152,871 $1,258,223 $1,365,979
Subtotal Spent on Operations $1,314,962 $1,470,960 $1,596,716 $1,725,429 $1,857,775
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 $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0
Subtotal Cash Spent $1,314,962 $1,470,960 $1,596,716 $1,725,429 $1,857,775
Net Cash Flow $517,536 ($3,346) $40,715 $69,709 $96,598
Cash Balance $700,964 $697,618 $738,333 $808,042 $904,640
Pro Forma Balance Sheet
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Assets
Current Assets
Cash $700,964 $697,618 $738,333 $808,042 $904,640
Accounts Receivable $230,904 $260,193 $289,760 $316,719 $344,549
Other Current Assets $31,380 $31,380 $31,380 $31,380 $31,380
Total Current Assets $963,249 $989,191 $1,059,473 $1,156,141 $1,280,569
Long-term Assets
Long-term Assets $145,879 $145,879 $145,879 $145,879 $145,879
Accumulated Depreciation $65,735 $75,057 $84,870 $95,199 $106,072
Total Long-term Assets $80,144 $70,822 $61,009 $50,680 $39,807
Total Assets $1,043,393 $1,060,013 $1,120,482 $1,206,821 $1,320,376
Liabilities and Capital FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Current Liabilities
Accounts Payable $87,239 $86,155 $95,527 $104,122 $113,002
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $87,239 $86,155 $95,527 $104,122 $113,002
Long-term Liabilities $0 $0 $0 $0 $0
Total Liabilities $87,239 $86,155 $95,527 $104,122 $113,002
Paid-in Capital $20,000 $20,000 $20,000 $20,000 $20,000
Retained Earnings $949,088 $936,153 $953,858 $1,004,955 $1,082,699
Earnings ($12,935) $17,705 $51,097 $77,744 $104,675
Total Capital $956,153 $973,858 $1,024,955 $1,102,699 $1,207,374
Total Liabilities and Capital $1,043,393 $1,060,013 $1,120,482 $1,206,821 $1,320,376
Net Worth $956,153 $973,858 $1,024,955 $1,102,699 $1,207,374
Ratio Analysis
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Industry Profile
Sales Growth 77.12% 12.68% 11.36% 9.30% 8.79% -2.88%
Percent of Total Assets
Accounts Receivable 22.13% 24.55% 25.86% 26.24% 26.09% 11.37%
Other Current Assets 3.01% 2.96% 2.80% 2.60% 2.38% 25.23%
Total Current Assets 92.32% 93.32% 94.56% 95.80% 96.99% 76.82%
Long-term Assets 7.68% 6.68% 5.44% 4.20% 3.01% 23.18%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 8.36% 8.13% 8.53% 8.63% 8.56% 44.21%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 12.47%
Total Liabilities 8.36% 8.13% 8.53% 8.63% 8.56% 56.68%
Net Worth 91.64% 91.87% 91.47% 91.37% 91.44% 43.32%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 46.11% 46.21% 46.28% 46.32% 46.36% 16.88%
Selling, General & Administrative Expenses 26.96% 27.77% 28.42% 13.06% 13.02% 5.45%
Advertising Expenses 0.87% 0.87% 0.86% 0.00% 0.00% 0.23%
Profit Before Interest and Taxes -0.97% 1.58% 4.09% 5.69% 7.04% 0.91%
Main Ratios
Current 11.04 11.48 11.09 11.10 11.33 1.59
Quick 11.04 11.48 11.09 11.10 11.33 0.57
Total Debt to Total Assets 8.36% 8.13% 8.53% 8.63% 8.56% 59.20%
Pre-tax Return on Net Worth -1.35% 2.42% 6.65% 9.40% 11.56% 1.93%
Pre-tax Return on Assets -1.24% 2.23% 6.08% 8.59% 10.57% 4.72%
Additional Ratios FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Net Profit Margin -0.97% 1.18% 3.07% 4.27% 5.28% n.a
Return on Equity -1.35% 1.82% 4.99% 7.05% 8.67% n.a
Activity Ratios
Accounts Receivable Turnover 4.31 4.31 4.31 4.31 4.31 n.a
Collection Days 88 80 80 81 81 n.a
Accounts Payable Turnover 11.07 12.17 12.17 12.17 12.17 n.a
Payment Days 29 30 29 29 29 n.a
Total Asset Turnover 1.27 1.41 1.49 1.51 1.50 n.a
Debt Ratios
Debt to Net Worth 0.09 0.09 0.09 0.09 0.09 n.a
Current Liab. to Liab. 1.00 1.00 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $876,009 $903,036 $963,946 $1,052,019 $1,167,566 n.a
Interest Coverage 0.00 0.00 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.79 0.71 0.67 0.66 0.67 n.a
Current Debt/Total Assets 8% 8% 9% 9% 9% n.a
Acid Test 8.39 8.46 8.06 8.06 8.28 n.a
Sales/Net Worth 1.39 1.54 1.63 1.65 1.64 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a