Septic Tank Contractor Business Plan

William's Environmental

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Financial Plan

The following is the financial plan for William's Environmental.

7.1 Break-even Analysis

The monthly break-even point is calcualted below, based upon estimated average monthly costs and costs of sales variable percentage.

Break-even Analysis
Monthly Revenue Break-even $40,613
Assumptions:
Average Percent Variable Cost 44%
Estimated Monthly Fixed Cost $22,723

7.2 Projected Profit and Loss

The following is the projected profit and loss for three years.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $416,000 $536,000 $639,000
Direct Cost of Sales $183,250 $221,000 $257,250
Other Production Expenses $0 $0 $0
Total Cost of Sales $183,250 $221,000 $257,250
Gross Margin $232,750 $315,000 $381,750
Gross Margin % 55.95% 58.77% 59.74%
Expenses
Payroll $178,800 $191,800 $204,000
Sales and Marketing and Other Expenses $12,000 $13,500 $16,500
Depreciation $8,856 $8,856 $8,856
Leased Equipment $30,000 $30,000 $30,000
Utilities $1,800 $0 $0
Insurance $2,400 $2,700 $3,000
Rent $12,000 $11,000 $11,000
Payroll Taxes $26,820 $28,770 $30,600
Other $0 $0 $0
Total Operating Expenses $272,676 $286,626 $303,956
Profit Before Interest and Taxes ($39,926) $28,374 $77,794
EBITDA ($31,070) $37,230 $86,650
Interest Expense $9,459 $8,501 $7,501
Taxes Incurred $0 $5,962 $21,088
Net Profit ($49,385) $13,911 $49,205
Net Profit/Sales -11.87% 2.60% 7.70%

7.3 Projected Cash Flow

The following is the projected cash flow for three years.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $208,000 $268,000 $319,500
Cash from Receivables $183,667 $260,981 $313,475
Subtotal Cash from Operations $391,667 $528,981 $632,975
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 $391,667 $528,981 $632,975
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $178,800 $191,800 $204,000
Bill Payments $260,746 $333,251 $375,925
Subtotal Spent on Operations $439,546 $525,051 $579,925
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 $9,996 $9,996 $9,996
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $449,542 $535,047 $589,921
Net Cash Flow ($57,875) ($6,066) $43,054
Cash Balance $22,925 $16,859 $59,913

7.4 Projected Balance Sheet

The following is the projected balance sheet for three years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $22,925 $16,859 $59,913
Accounts Receivable $24,333 $31,353 $37,377
Inventory $17,875 $21,557 $25,093
Other Current Assets $0 $0 $0
Total Current Assets $65,133 $69,769 $122,384
Long-term Assets
Long-term Assets $30,000 $30,000 $30,000
Accumulated Depreciation $8,856 $17,712 $26,568
Total Long-term Assets $21,144 $12,288 $3,432
Total Assets $86,277 $82,057 $125,816
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $34,858 $26,722 $31,272
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $34,858 $26,722 $31,272
Long-term Liabilities $90,004 $80,008 $70,012
Total Liabilities $124,862 $106,730 $101,284
Paid-in Capital $110,000 $110,000 $110,000
Retained Earnings ($99,200) ($148,585) ($134,673)
Earnings ($49,385) $13,911 $49,205
Total Capital ($38,585) ($24,673) $24,532
Total Liabilities and Capital $86,277 $82,057 $125,816
Net Worth ($38,585) ($24,673) $24,532

7.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 1711, Plumbing, Heating and Air Conditioning (which includes septic tank installation contractors), are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 28.85% 19.22% 6.60%
Percent of Total Assets
Accounts Receivable 28.20% 38.21% 29.71% 46.40%
Inventory 20.72% 26.27% 19.94% 8.70%
Other Current Assets 0.00% 0.00% 0.00% 29.30%
Total Current Assets 75.49% 85.02% 97.27% 84.40%
Long-term Assets 24.51% 14.98% 2.73% 15.60%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 40.40% 32.57% 24.86% 47.20%
Long-term Liabilities 104.32% 97.50% 55.65% 9.10%
Total Liabilities 144.72% 130.07% 80.50% 56.30%
Net Worth -44.72% -30.07% 19.50% 43.70%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 55.95% 58.77% 59.74% 26.50%
Selling, General & Administrative Expenses 67.82% 56.17% 52.04% 14.60%
Advertising Expenses 1.73% 1.49% 1.56% 0.40%
Profit Before Interest and Taxes -9.60% 5.29% 12.17% 2.20%
Main Ratios
Current 1.87 2.61 3.91 1.87
Quick 1.36 1.80 3.11 1.47
Total Debt to Total Assets 144.72% 130.07% 80.50% 56.30%
Pre-tax Return on Net Worth 127.99% -80.55% 286.54% 6.80%
Pre-tax Return on Assets -57.24% 24.22% 55.87% 15.50%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -11.87% 2.60% 7.70% n.a
Return on Equity 0.00% 0.00% 200.58% n.a
Activity Ratios
Accounts Receivable Turnover 8.55 8.55 8.55 n.a
Collection Days 57 38 39 n.a
Inventory Turnover 10.18 11.21 11.03 n.a
Accounts Payable Turnover 8.48 12.17 12.17 n.a
Payment Days 27 35 28 n.a
Total Asset Turnover 4.82 6.53 5.08 n.a
Debt Ratios
Debt to Net Worth 0.00 0.00 4.13 n.a
Current Liab. to Liab. 0.28 0.25 0.31 n.a
Liquidity Ratios
Net Working Capital $30,275 $43,047 $91,112 n.a
Interest Coverage -4.22 3.34 10.37 n.a
Additional Ratios
Assets to Sales 0.21 0.15 0.20 n.a
Current Debt/Total Assets 40% 33% 25% n.a
Acid Test 0.66 0.63 1.92 n.a
Sales/Net Worth 0.00 0.00 26.05 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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Break-even Analysis
Monthly Revenue Break-even $40,613
Assumptions:
Average Percent Variable Cost 44%
Estimated Monthly Fixed Cost $22,723
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $416,000 $536,000 $639,000
Direct Cost of Sales $183,250 $221,000 $257,250
Other Production Expenses $0 $0 $0
Total Cost of Sales $183,250 $221,000 $257,250
Gross Margin $232,750 $315,000 $381,750
Gross Margin % 55.95% 58.77% 59.74%
Expenses
Payroll $178,800 $191,800 $204,000
Sales and Marketing and Other Expenses $12,000 $13,500 $16,500
Depreciation $8,856 $8,856 $8,856
Leased Equipment $30,000 $30,000 $30,000
Utilities $1,800 $0 $0
Insurance $2,400 $2,700 $3,000
Rent $12,000 $11,000 $11,000
Payroll Taxes $26,820 $28,770 $30,600
Other $0 $0 $0
Total Operating Expenses $272,676 $286,626 $303,956
Profit Before Interest and Taxes ($39,926) $28,374 $77,794
EBITDA ($31,070) $37,230 $86,650
Interest Expense $9,459 $8,501 $7,501
Taxes Incurred $0 $5,962 $21,088
Net Profit ($49,385) $13,911 $49,205
Net Profit/Sales -11.87% 2.60% 7.70%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $208,000 $268,000 $319,500
Cash from Receivables $183,667 $260,981 $313,475
Subtotal Cash from Operations $391,667 $528,981 $632,975
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 $391,667 $528,981 $632,975
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $178,800 $191,800 $204,000
Bill Payments $260,746 $333,251 $375,925
Subtotal Spent on Operations $439,546 $525,051 $579,925
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 $9,996 $9,996 $9,996
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $449,542 $535,047 $589,921
Net Cash Flow ($57,875) ($6,066) $43,054
Cash Balance $22,925 $16,859 $59,913
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $22,925 $16,859 $59,913
Accounts Receivable $24,333 $31,353 $37,377
Inventory $17,875 $21,557 $25,093
Other Current Assets $0 $0 $0
Total Current Assets $65,133 $69,769 $122,384
Long-term Assets
Long-term Assets $30,000 $30,000 $30,000
Accumulated Depreciation $8,856 $17,712 $26,568
Total Long-term Assets $21,144 $12,288 $3,432
Total Assets $86,277 $82,057 $125,816
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $34,858 $26,722 $31,272
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $34,858 $26,722 $31,272
Long-term Liabilities $90,004 $80,008 $70,012
Total Liabilities $124,862 $106,730 $101,284
Paid-in Capital $110,000 $110,000 $110,000
Retained Earnings ($99,200) ($148,585) ($134,673)
Earnings ($49,385) $13,911 $49,205
Total Capital ($38,585) ($24,673) $24,532
Total Liabilities and Capital $86,277 $82,057 $125,816
Net Worth ($38,585) ($24,673) $24,532
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 28.85% 19.22% 6.60%
Percent of Total Assets
Accounts Receivable 28.20% 38.21% 29.71% 46.40%
Inventory 20.72% 26.27% 19.94% 8.70%
Other Current Assets 0.00% 0.00% 0.00% 29.30%
Total Current Assets 75.49% 85.02% 97.27% 84.40%
Long-term Assets 24.51% 14.98% 2.73% 15.60%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 40.40% 32.57% 24.86% 47.20%
Long-term Liabilities 104.32% 97.50% 55.65% 9.10%
Total Liabilities 144.72% 130.07% 80.50% 56.30%
Net Worth -44.72% -30.07% 19.50% 43.70%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 55.95% 58.77% 59.74% 26.50%
Selling, General & Administrative Expenses 67.82% 56.17% 52.04% 14.60%
Advertising Expenses 1.73% 1.49% 1.56% 0.40%
Profit Before Interest and Taxes -9.60% 5.29% 12.17% 2.20%
Main Ratios
Current 1.87 2.61 3.91 1.87
Quick 1.36 1.80 3.11 1.47
Total Debt to Total Assets 144.72% 130.07% 80.50% 56.30%
Pre-tax Return on Net Worth 127.99% -80.55% 286.54% 6.80%
Pre-tax Return on Assets -57.24% 24.22% 55.87% 15.50%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -11.87% 2.60% 7.70% n.a
Return on Equity 0.00% 0.00% 200.58% n.a
Activity Ratios
Accounts Receivable Turnover 8.55 8.55 8.55 n.a
Collection Days 57 38 39 n.a
Inventory Turnover 10.18 11.21 11.03 n.a
Accounts Payable Turnover 8.48 12.17 12.17 n.a
Payment Days 27 35 28 n.a
Total Asset Turnover 4.82 6.53 5.08 n.a
Debt Ratios
Debt to Net Worth 0.00 0.00 4.13 n.a
Current Liab. to Liab. 0.28 0.25 0.31 n.a
Liquidity Ratios
Net Working Capital $30,275 $43,047 $91,112 n.a
Interest Coverage -4.22 3.34 10.37 n.a
Additional Ratios
Assets to Sales 0.21 0.15 0.20 n.a
Current Debt/Total Assets 40% 33% 25% n.a
Acid Test 0.66 0.63 1.92 n.a
Sales/Net Worth 0.00 0.00 26.05 n.a
Dividend Payout 0.00 0.00 0.00 n.a