Westbury Storage, Inc.

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Self-Storage Business Plan

Financial Plan

A commercial loan needs to be negotiated to finance approximately 70% of the total project costs. A 15-year mortgage will be applied for with an 8.5% interest rate. First drawdown upon agreement of the seller and buyer concerning the terms of sale of the building. Last drawdown around the end of the year when all conversion to self-storage units should be completed. First repayment of principle is planned in April of 1999 with monthly installments of interest and principle to continue until the loan is fully repaid in 2013.

Important Assumptions

Interest rates for commercial loans as of this writing are 8.5% fixed for three years or 8.75% fixed for a five year period. Beyond this time frame, rates are quoted at 1% over the Fleet Bank floating rate.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 8.50% 8.50% 8.50%
Long-term Interest Rate 8.50% 8.50% 8.50%
Tax Rate 37.33% 38.00% 37.33%
Other 0 0 0

Key Financial Indicators

The following chart shows the benchmarks for Westbury.

Break-even Analysis

The following table and chart show our Break-even Analysis.

Break-even Analysis
Monthly Revenue Break-even $14,477
Assumptions:
Average Percent Variable Cost 0%
Estimated Monthly Fixed Cost $14,477

Projected Profit and Loss

Advertising and promotion will rely heavily ads in the Yellow Pages, as well as initial local newspaper ads at the time of opening. We are assuming three directories for Yellow Pages ads with 1/8th page ads costing $165/month each. The ads in the local papers (Springfield News and community newspapers) are estimated to cost $300 monthly for the first year only. They will be reduced in the second year to half this amount and eliminated in the third year.

Property taxes ($11,946) are projected at the actual rate of the tax year 7/1/96-6/30/97. Significant increases are not expected.

Building maintenance is normally a very substantial item on a building of this size built in 1910. However, the roof has been completely redone fairly recently and the basic structure of the building is very robust. The start-up costs reflect adequate amounts to ready the building for opening in good order. Also, it should be noted that expenditures for building maintenance would need to be larger if the building were being used for offices rather than storage. We assume an annual amount for maintenance equal to 5% of the purchase price which works out to $27,500.

Utilities:

  • Water and sewer assumed at historical levels of $262 per year.
  • Westbury Municipal Light's bills totalled $13,714 last year when the present tenant was operating production with full staffing. As a self-storage facility electricity is needed only to power the rows of low-draw tube lighting. We estimate electricity to run about $250/month.
  • Fuel oil for heating ran $13,881 last year. Since as a self-storage facility the level of heating does not need to be nearly as high, we estimate an annual bill of half this amount, or $7,000.
  • Trash removal is projected at historical levels of $536 per year.
  • The total for utilities is estimated to be $900 monthly.

Insurance:
Property and Liability Insurance amounted to $15,000 annually for the present tenant. We'll assume the same annual cost.

Telephone:
Most of the telephone bill will be the charges for the Yellow Pages ads. These costs are already included in advertising and promotion. We assume the telephone bill to amount to $150/month.

Bookkeeping/auditors/legal:
Bookkeeping and billing will be handled by the same system used at Plainview Storage and charged at a rate of $300 per month. Auditor charges will run about $4,000 annually.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $320,625 $605,625 $684,000
Direct Cost of Sales $0 $0 $0
Other $0 $0 $0
Total Cost of Sales $0 $0 $0
Gross Margin $320,625 $605,625 $684,000
Gross Margin % 100.00% 100.00% 100.00%
Expenses
Payroll $83,000 $83,000 $83,000
Sales and Marketing and Other Expenses $54,422 $52,622 $50,822
Depreciation $15,000 $15,000 $15,000
Rent $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $10,800 $10,800 $10,800
Payroll Taxes $10,500 $10,500 $10,500
Other $0 $0 $0
Total Operating Expenses $173,722 $171,922 $170,122
Profit Before Interest and Taxes $146,904 $433,704 $513,879
EBITDA $161,904 $448,704 $528,879
Interest Expense $58,776 $58,776 $58,776
Taxes Incurred $34,658 $142,472 $169,905
Net Profit $53,469 $232,455 $285,197
Net Profit/Sales 16.68% 38.38% 41.70%

Projected Cash Flow

The following chart and table represent the cash flow for Westbury Storage.
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $320,625 $605,625 $684,000
Subtotal Cash from Operations $320,625 $605,625 $684,000
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 $320,625 $605,625 $684,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $83,000 $83,000 $83,000
Bill Payments $149,735 $271,974 $298,696
Subtotal Spent on Operations $232,735 $354,974 $381,696
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 $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $232,735 $354,974 $381,696
Net Cash Flow $87,890 $250,651 $302,304
Cash Balance $105,890 $356,540 $658,845

Projected Balance Sheet

The following table presents the balance sheet for Westbury Storage.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $105,890 $356,540 $658,845
Other Current Assets $0 $0 $0
Total Current Assets $105,890 $356,540 $658,845
Long-term Assets
Long-term Assets $986,748 $986,748 $986,748
Accumulated Depreciation $15,000 $30,000 $45,000
Total Long-term Assets $971,748 $956,748 $941,748
Total Assets $1,077,638 $1,313,288 $1,600,593
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $19,421 $22,617 $24,724
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $19,421 $22,617 $24,724
Long-term Liabilities $691,487 $691,487 $691,487
Total Liabilities $710,908 $714,104 $716,211
Paid-in Capital $363,000 $363,000 $363,000
Retained Earnings ($49,739) $3,730 $236,185
Earnings $53,469 $232,455 $285,197
Total Capital $366,730 $599,185 $884,382
Total Liabilities and Capital $1,077,638 $1,313,288 $1,600,593
Net Worth $366,730 $599,185 $884,382

Business Ratios

Business ratios for Westbury for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 4225, General Warehousing and Storage, are shown for comparison.
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 88.89% 12.94% 4.70%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 24.60%
Total Current Assets 9.83% 27.15% 41.16% 46.00%
Long-term Assets 90.17% 72.85% 58.84% 54.00%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 1.80% 1.72% 1.54% 32.40%
Long-term Liabilities 64.17% 52.65% 43.20% 29.60%
Total Liabilities 65.97% 54.38% 44.75% 62.00%
Net Worth 34.03% 45.62% 55.25% 38.00%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 100.00% 100.00% 100.00% 100.00%
Selling, General & Administrative Expenses 82.72% 61.12% 57.95% 82.90%
Advertising Expenses 1.74% 0.62% 0.29% 0.30%
Profit Before Interest and Taxes 45.82% 71.61% 75.13% 1.80%
Main Ratios
Current 5.45 15.76 26.65 1.35
Quick 5.45 15.76 26.65 1.09
Total Debt to Total Assets 65.97% 54.38% 44.75% 62.00%
Pre-tax Return on Net Worth 24.03% 62.57% 51.46% 3.50%
Pre-tax Return on Assets 8.18% 28.55% 28.43% 9.30%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 16.68% 38.38% 41.70% n.a
Return on Equity 14.58% 38.80% 32.25% n.a
Activity Ratios
Accounts Payable Turnover 8.71 12.17 12.17 n.a
Payment Days 27 28 29 n.a
Total Asset Turnover 0.30 0.46 0.43 n.a
Debt Ratios
Debt to Net Worth 1.94 1.19 0.81 n.a
Current Liab. to Liab. 0.03 0.03 0.03 n.a
Liquidity Ratios
Net Working Capital $86,469 $333,924 $634,121 n.a
Interest Coverage 2.50 7.38 8.74 n.a
Additional Ratios
Assets to Sales 3.36 2.17 2.34 n.a
Current Debt/Total Assets 2% 2% 2% n.a
Acid Test 5.45 15.76 26.65 n.a
Sales/Net Worth 0.87 1.01 0.77 n.a
Dividend Payout 0.00 0.00 0.00 n.a