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Granite Industries, Inc.

Executive Summary

Granite Industries, Inc. (Granite) is a specialty chemical formulator, lab analysis agency, and toll manufacturer, selling products to companies from cosmetics manufacturers to food supplement marketers. We manufacture and distribute Creatine Monohydrate, an approved food supplement used to improve strength, endurance, and muscle mass. Granite also produces five other speciality chemicals that will be detailed later in this document. A strong knowledge-based management team, with a combined thirty-years of experience in this industry, incorporated Granite.

Granite is a niche player in the speciality- and industrial-chemicals business, focusing on value-added products which are not widely or readily available in the United States. We have perfected unique manufacturing processes resulting in lower manufacturing costs and high profitability. We have established a network of strategic alliances with distribution companies who lack our capability to ascend from laboratory to commercial scale and manufacture products in accordance with quality specifications.

Our distributors and our customers have given us an opportunity to provide products beyond our present capability. We need to add equipment, increase our inventory, and establish marketing and support activities.

Sales and Projections

We have had sales increase steadily over the last three years. These numbers give us a strong reference point on which we have based our sales projection for the upcoming three fiscal years. Our projected sales for the three years of this plan are shown in the Sales Forecast table.

Funding Requirements

We are seeking adequate capital to enable us to expand our operation and become a major factor in the production of chemicals in the industrial, consumer, and textile markets Our signature product is Creatine Monohydrate; we manufacture both the powdered and liquid forms. We are the only company in the world capable of manufacturing this product in liquid form. Our market research shows that the demand for this product alone justifies the expansion of our facilities.

Note: Customer and Distributor company names and financial information have been removed from this sample plan to protect proprietary and confidential information.

1.1 Objectives

The objectives of this business plan are outlined below:

  1. Sales increasing by leaps and bounds through Year 3.
  2. Gross Margin the envy of the industry.
  3. Net Profits increases commensurate with sales growth.

Chemical laboratory business plan, executive summary chart image

1.2 Mission

We have the management team and the chemical formulations to become a major player in the specialized niche we serve. We have developed new technology and processes that are in demand by other chemical manufacturers as well as by major distributors who do not have the ability to produce our speciality products. We see our mission as not only that of toll and custom manufacturer, but as a trade supplier where we can reach the end-user market with products we consider to be proprietary. We seek a fair and responsible profit, enough to keep the company financially healthy for the long term and to satisfactorily compensate owners and investors for their money and risk.

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Company Summary

Granite began operations as a custom and toll chemical manufacturer. The management team consists of a president and CEO, a vice president of operations and marketing and a physician.

Note: Names have been removed for confidentiality.

2.1 Company History

Beginning in June, we spent the remainder of our first year outfitting our manufacturing facility, which included equipment installation and build-out. We became fully operational the first quarter of our second year. Our concentration was on small lot toll manufacturing and custom orders. In that same quarter we were approached by Customer A, LLC to become a subcontractor for a $23 million order they had from Manufacturer A. They offered us a mirror contract to produce Creatine Monohydrate. It was necessary for us to expand facilities to meet the requirements and we were successful in obtaining an SBA loan through Wachovia Bank. The loan process took 12 months and we were only able to accommodate a small part of the Customer A order during that period through financial support from the principals. Customer A had to have a back-up producer during this period. Unfortunately that producer failed to meet Manufacturer A’s quality standards and Customer A defaulted on the contract. This also ended our contract.

We returned to our original plan which has continued to the present time. Our experience with Customer A brought us to realize that the market for Creatine Monohydrate exceeds $300 million. Creatine is an FDA approved food supplement which is used by athletes and weekend sports enthusiasts alike. More importantly, we realized that we would be the only domestic source of this product. Proceeding from that point, and with no marketing program other than word-of-mouth, we achieved increasing sales in the succeeding years. Our financials in this document provide the details as well as our projections. We are convinced that this is a lucrative market and that, with adequate equipment and marketing, we can capture a significant part of it.

Note: Customer and Distributor company names and financial information have been removed from this sample plan to protect proprietary and confidential information.

Chemical laboratory business plan, company summary chart image

Past Performance
FY 1998 FY 1999 FY 2000
Sales $241,782 $269,507 $210,102
Gross Margin $82,812 $112,178 $94,234
Gross Margin % 34.25% 41.62% 44.85%
Operating Expenses $388,109 $332,338 $247,060
Collection Period (days) 0 0 73
Inventory Turnover 6.00 6.00 0.00
Balance Sheet
FY 1998 FY 1999 FY 2000
Current Assets
Cash $481 $7,644 $12,000
Accounts Receivable $16,452 $52,499 $15,500
Inventory $27,888 $17,526 $18,873
Other Current Assets $0 $0 $0
Total Current Assets $44,821 $77,669 $46,373
Long-term Assets
Long-term Assets $258,795 $157,530 $149,118
Accumulated Depreciation $31,013 $39,731 $23,605
Total Long-term Assets $227,782 $117,799 $125,513
Total Assets $272,603 $195,468 $171,886
Current Liabilities
Accounts Payable $120,509 $76,789 $26,513
Current Borrowing $0 $40,785 $7,291
Other Current Liabilities (interest free) $0 $0 $43,503
Total Current Liabilities $120,509 $117,574 $77,307
Long-term Liabilities $262,368 $280,000 $324,550
Total Liabilities $382,877 $397,574 $401,857
Paid-in Capital $386,759 $535,007 $814,820
Retained Earnings ($224,683) ($507,974) ($877,599)
Earnings ($272,350) ($229,139) ($167,192)
Total Capital ($110,274) ($202,106) ($229,971)
Total Capital and Liabilities $272,603 $195,468 $171,886
Other Inputs
Payment Days 0 0 30
Sales on Credit $0 $0 $170,102
Receivables Turnover 0.00 0.00 10.97

2.2 Company Ownership

Granite incorporated in Delaware as a C Corporation. The company is owned in equal shares by the three members of the management team.

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Products

Creatine Monohydrate. This is a dietary supplement commonly used by athletes to improve strength, endurance, and muscle mass. Creatine has become the most popular body building supplement in use today. It is sold in many forms through health food stores, drug stores, and discount chains. The leading producers of Creatine are in Europe, and only a few recently in the United States. The distribution system is complex, with manufacturers selling through a layered system. We have developed a Creatine-based drink which is one-of-a-kind. We hope to begin marketing the product in 2001. Sales potential is well over $1 million per year.

Kelate Cu. This is a specialty product used in cosmetics. It is distributed through Distributor A by special arrangement. Their largest customers are Estee Lauder and Revlon. We project sales of this product to be between $140,000 and $175,000 per year.

Melasyn 100. This is a synthetic form of natural melanin. It is used as a pigment for vitiligo preparation and as a self tanning agent. It is water soluble, which makes it easy to formulate in cosmetic preparations. We are working with Customer A to supply this product to Distributor A. We project sales of $250,000 in 2001.

G-REZ DB. This is a specialty coating material used on industrial buffing pads. We developed the product at the request of the Customer C and sales can reach $300,000 in 2001.

Becrosan 2128A. This is a corrosion inhibitor with a bright future. Similar chemistry has been very successful in Europe for several years. We have manufactured this product on a toll arrangement for Customer B at a level of $65,000 per year. With marketing, we estimate the potential to be $260,000.

Ion Exchange Resins. We provide a toll drying service for Customer D at a level of $35,000 per year. We feel this can increase substantially with additional equipment.

Recrystallized Flavoring Product A. This is a crude Flavor A extract. We purify the extract into an edible grade flavoring using our proprietary recrystallization process. It is then used in both food and tobacco industries. We teamed with Distributor B, the world’s largest distributor of Flavor A, to develop the process. Broker A is the broker. Estimated sales based on current demand levels are $75,000 in 2001.

Note: Customer and Distributor company names and financial information have been removed from this sample plan to protect proprietary and confidential information.

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Market Analysis Summary

We are a highly technical niche player with a specialized product line that is in great demand. Our target markets are the distributors who have established relationships with speciality products firms, textile chemical companies, and consumer products outlets. We are essentially the manufacturing arm for these distributors and can provide development services, as well as products for them.

4.1 Market Segmentation

Our market is divided into three segments:

  • Industrial Products: In this segment our customers include Customer B, Customer D and Distributor A.
  • Consumer Products: Handled primarily through distributors.
  • Textile Products: Customers are: Customer E, Customer C, Customer F and Customer G.

Customer Profiles:

  • Customer E. This family of  companies are manufacturers and distributors of textile speciality chemicals. Our sales to them in 1999 were $59,000, and were $72,000 in 2000. Our sales to them are estimated to grow to $250,000.
  • Customer A. A marketing and chemical broker company. We provide product and process development and manufacturing services. They are the agent for Creatine Monohydrate, Kelate CU, and Melasyn 100. The potential here is over $2 million in sales.
  • Broker A. A marketing company and chemical broker. We process ion exchange resins and purified Flavoring Product A for them. We can anticipate $200 to $300,000 in sales to them per year.
  • Distributor A. A marketing company. They specialize in cosmetic and personal care products. They are the distributors of Kelate Cu, Melasyn 100, and Provitamin B-5, all of which we produce for them.
  • Customer B. We produce corrosion inhibitors for them.
  • Customer C. The world’s largest supplier of industrial buffing pads. We have developed special coatings for them which have been approved and recommended to their worldwide subsidiaries.
  • Customer D. Manufacturers and distributors of ion exchange resins. We provide both custom and toll manufacturing processes for them. Custom and toll manufacturers are two types of distributors that Granite serves. A custom manufacturer may provide the materials for Granite to use the formula and processes on. A toll manufacturer provides their own materials and formulation for Granite to mix the product.

Note: Customer and Distributor company names and financial information have been removed from this sample plan to protect proprietary and confidential information.

Chemical laboratory business plan, market analysis summary chart image

Market Analysis
2000 2001 2002 2003 2004
Potential Customers Growth CAGR
Commercial 10% 75,000 52,500 57,750 63,525 69,878 -1.75%
Consumer 22% 125,000 152,500 186,050 226,981 276,917 22.00%
Textile 4% 35,000 36,400 37,856 39,370 40,945 4.00%
Total 13.34% 235,000 241,400 281,656 329,876 387,740 13.34%

4.2 Target Market Segment Strategy

Consumer Market: This is potentially our biggest market for Creatine Monohydrate; it is limited only by our ability to produce. We have distributors who are begging for the product and we have back orders now, so it is only logical that we will devote most of our time meeting this demand. We look at the potential in this market as the basis for our growth.

Industrial Products: Here, we are selling both through distributors as well as direct to manufacturers. This is an untapped market and has been sustained by our reputation and ability to meet formulation criteria. We know that a marketing effort in this segment will produce sales that could quite possibly bring this segment to an equal level with the consumer market.

Textile Products: We have enough experience within this segment to know that once our manufacturing capability is up and running we could actually devote an entire marketing effort to this segment alone. Both our toll and custom manufacturing capability is strategically attractive to all textile manufacturers, including growing markets outside the U.S.

4.3 Industry Analysis

The chemical industry is characterized by a wide variety of companies ranging in size from the large companies such as DuPont and Monsanto to smaller specialty firms such as ours. The companies are generally organized by either end-use markets or product technology. In the past decade there has been a general trend in the industry to change emphasis from chemicals to biotechnology and pharmaceuticals. The cost of product development and the need to operate factories at high levels of capacity have caused chemical companies of every size to outsource parts of the chemical and manufacturing processes. This has created opportunities for smaller companies to create and occupy niches in development and contract manufacturing. The outsource industry providers occupy a market segment commonly identified as custom and toll manufacturers.

4.3.1 Competition and Buying Patterns

In the mainstream business, channels are critical to volume. Manufacturers and distributors with impact in the international chemical market desperately need speciality and toll manufacturers like us to meet the demand. There are many specialty manufacturers, all of whom seem to have carved out a specific niche of expertise, and upon whom these major manufacturers depend for products. In competition, it seems that the line is drawn at the level of quality performance. We have achieved that level and are recognized for a high standard of quality performance. Companies who would seem to be our competition have subcontracted production to us because they do not have the ability to supply that level of quality.

We have achieved another milestone in the industry by developing certain formulations which we estimate would cost another firm $450,000 to duplicate. The Creatine Monohydrate formulation and process is one of them. We have the only process in the world that can produce this supplement in liquid form. It is extremely important that we seize this opportunity and begin to exclusively market this product.

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Strategy and Implementation Summary

We address the market through three business segments: speciality products, textile chemicals, and consumer products. We are a highly technical niche player who has developed strong alliances with distributors who have powerful channel relationships but lack manufacturing or product development capabilities.

Our marketing strategy assumes that we will serve these distributors in three ways:

  • Toll Manufacturers, where our customer provides the raw materials and the formulation and we mix to his/her specifications.
  • Custom Manufacturers, where our customer may provide materials but we provide the formulation and the processes.
  • Trade Supplier, where we develop and sell our own lines of products based on industry and customer needs.

5.1 Competitive Edge

Our competitive edge is in the formulations and manufacturing processes we have developed for the production of the seven products in which we specialize. As detailed above, we are in an excellent position to capture a significant part of the $300 million Creatine Monohydrate market. We simply need to establish a marketing program and begin to promote our capability.

5.2 Sales Strategy

Our sales strategy is outlined below in three phases.

  • Phase One is to accommodate our existing customers and to make sure that current orders and subsequent orders are maintained.
  • Phase Two will commence when our facilities are expanded. We will then be able to accept new clients and contact companies who have shown interest in our products and be able to accommodate their orders.We plan to hire a high-quality sales person to assist in defining our marketing program.

Both phase one and two will primarily be toll and custom manufacturing.

  • Phase Three will begin with the hiring of two additional sales representatives who will develop our end-user program wherein we will begin to sell our own product lines.

5.2.1 Sales Forecast

Our sales forecast assumes no significant change in costs or prices, which is a reasonable assumption for the past two years.

Our sales increased from 1997 to 1999. We anticipate a slight drop in 2000 due to financial constraints. All of these sales were without the benefit of a marketing program. We feel that with a good marketing program and adequate manufacturing facilities we can achieve substantially increased sales goals in 2001 and 2002. While this seems ambitious, we rely on our distributors’ projections and based on that, we know we will be able to literally sell to the production capacity of our manufacturing facilities.

Chemical laboratory business plan, strategy and implementation summary chart image

Chemical laboratory business plan, strategy and implementation summary chart image

Sales Forecast
FY 2001 FY 2002 FY 2003
Sales
Row 1 $2,217,375 $2,653,800 $3,450,000
Other $0 $0 $0
Total Sales $2,217,375 $2,653,800 $3,450,000
Direct Cost of Sales FY 2001 FY 2002 FY 2003
Row 1 $975,445 $928,830 $1,207,500
Other $0 $0 $0
Subtotal Direct Cost of Sales $975,445 $928,830 $1,207,500

5.3 Milestones

The following table shows specific milestones, with responsibilities assigned, dates, and budgets. We are focusing, in this plan, on a few key milestones that can be accomplished. In addition, shortly following funding we will hire a vice president of marketing and two office personnel. Plant personnel will be added as equipment and facilities are operational.

Chemical laboratory business plan, strategy and implementation summary chart image

Milestones
Milestone Start Date End Date Budget Manager Department
Business Plan 10/16/2000 12/1/2000 $2,000 Pres Total
Presentation to Funding Source 12/5/2000 2/15/2001 $0 Team Total
Stage One New Funding 2/15/2001 2/30/2001 $523,500 Team Total
Location move and up-fit 3/15/2001 3/30/2001 $15,000 VP Manufacturing
Equipment Acquisition 4/10/2001 4/20/2000 $350,000 VP Manufacturing
Raw Materials 4/20/2001 4/30/2001 $90,000 VP Manufacturing
Marketing and Promotion 4/20/2001 12/1/2001 $400,000 Pres Marketing
Totals $1,380,500

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Management Summary

We have a strong management team that can boast of over 30 years experience in technical and management expertise. Each member has a specific contribution. The president and CEO has spent 20 years working in the chemical industry, and is adept at expanding companies that are well-grounded, but lacking in funding. The vice president of Granite is a specialist in consulting for small business on strategic planning and growth programs. And the final member of the team contributes expertise in start-ups among the pharmaceutical industry. Together, this team has a proven background of expertise and is more than capable of transforming Granite into a leading specialty chemical manufacturer.

Note: Names and resume information have been removed from this sample plan to protect proprietary and confidential information.

6.1 Personnel Plan

Our present plan is to immediately bring two people into the manufacturing operation, followed by an additional two or three throughout the next year. We need to begin looking for a capable marketing professional who has a background in chemical sales. We would like to bring that person on board mid 2001. Followed by one or two sales representatives with both interpersonal and telephone marketing skills. We will also employ support personnel as required.

Personnel Plan
FY 2001 FY 2002 FY 2003
Manufacturing $214,026 $220,000 $230,000
Sales $15,000 $30,000 $80,000
Total People 11 11 14
Total Payroll $229,026 $250,000 $310,000

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Financial Plan

We plan to support our growth and debt obligations through increased sales and cash flow. Our major debt with Wachovia Bank is secured by personal and company collateral. Our financials do not include our estimate of the value of proprietary chemical formulations, nor the value of assignable customer contracts.

7.1 Important Assumptions

Positive
The assumptions that support our projections in these tables are: The move to larger facilities and the additional equipment will result in increased production; and the back orders and new orders will be shipped. We have excellent agreements with our primary sources of supply and assume there will be no change in these relationships.We also assume that the demand for Creatine and our other products will continue to increase as evidenced in our market research.

Negative
Another company could develop some of the formulations we have, in which case we would lose some of the technical and market advantage we now have. This will also decrease our valuation. If we cannot find a capable marketing person, who is both sales and technically savvy, in time to get into this market, we would be at a disadvantage. Our hope is that whomever takes an equity position in this project will add marketing expertise. Technology changes, as do buying habits and social structure. A major change in any one of these areas can have a detrimental effect on our business.

General Assumptions
FY 2001 FY 2002 FY 2003
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 25.00% 25.00% 25.00%
Other 0 0 0

7.2 Break-even Analysis

Our Break-even Analysis is based on running costs, the “burn rate” costs we incur to keep the business running, not on theoretical fixed costs that would be relevant only if we were closing. Between payroll, rent, utilities, and other basic day to day costs, we think the monthly figure shown below is a good estimate of fixed costs. Our average variable costs are shown as well. Our COS will be approximately 44% of sales, and we anticipate a healthy profit margin before taxes and debt service in 2001, increasing in 2002.

Our assumptions in average unit sales and average cost per kilogram depend on averaging. We do not really need to calculate an exact average because this is sufficiently close to help us to understand what the real break-even point will be.

Chemical laboratory business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even $68,486
Assumptions:
Average Percent Variable Cost 44%
Estimated Monthly Fixed Cost $38,358

7.3 Projected Profit and Loss

Our profit projection before taxes or debt service for 2001 is attainable. In 2002, we anticipate an increase in net profit, and in 2003 as well.

Chemical laboratory business plan, financial plan chart image

Chemical laboratory business plan, financial plan chart image

Chemical laboratory business plan, financial plan chart image

Chemical laboratory business plan, financial plan chart image

Pro Forma Profit and Loss
FY 2001 FY 2002 FY 2003
Sales $2,217,375 $2,653,800 $3,450,000
Direct Cost of Sales $975,445 $928,830 $1,207,500
Other $0 $0 $0
Total Cost of Sales $975,445 $928,830 $1,207,500
Gross Margin $1,241,930 $1,724,970 $2,242,500
Gross Margin % 56.01% 65.00% 65.00%
Expenses
Payroll $229,026 $250,000 $310,000
Sales and Marketing and Other Expenses $104,800 $104,000 $29,000
Depreciation $36,000 $36,000 $36,000
Leased Equipment $11,172 $25,000 $25,000
Utilities $12,000 $15,000 $18,000
Insurance $3,545 $5,000 $0
Rent $29,400 $30,000 $30,000
Payroll Taxes $34,354 $37,500 $46,500
Other $0 $0 $0
Total Operating Expenses $460,297 $502,500 $494,500
Profit Before Interest and Taxes $781,633 $1,222,470 $1,748,000
EBITDA $817,633 $1,258,470 $1,784,000
Interest Expense $34,739 $37,855 $41,455
Taxes Incurred $186,723 $296,154 $426,636
Net Profit $560,170 $888,461 $1,279,909
Net Profit/Sales 25.26% 33.48% 37.10%

7.4 Projected Cash Flow

Our cash position at the present time is negligible due to financial constraints in maintaining production for existing orders and being unable to expand to meet future demand. We expect to manage cash flow over the next three years with a couple infusions of new equity investment. We feel that, with the accompanying increases in accounts receivable and inventory, we can extend our line of short term credit. Because of our toll manufacturing capability, inventory can be maintained at a fairly constant level. Receivables, however, will increase dramatically in 2001, and possibly double by 2003.

Chemical laboratory business plan, financial plan chart image

Pro Forma Cash Flow
FY 2001 FY 2002 FY 2003
Cash Received
Cash from Operations
Cash Sales $221,738 $265,380 $345,000
Cash from Receivables $1,530,100 $2,293,742 $2,932,272
Subtotal Cash from Operations $1,751,837 $2,559,122 $3,277,272
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $7,500 $0 $0
New Long-term Liabilities $60,000 $60,000 $60,000
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $875,000 $425,000 $0
Subtotal Cash Received $2,694,337 $3,044,122 $3,337,272
Expenditures FY 2001 FY 2002 FY 2003
Expenditures from Operations
Cash Spending $229,026 $250,000 $310,000
Bill Payments $1,364,802 $1,515,967 $1,829,035
Subtotal Spent on Operations $1,593,828 $1,765,967 $2,139,035
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $7,291 $0 $0
Other Liabilities Principal Repayment $9,000 $12,000 $12,000
Long-term Liabilities Principal Repayment $24,000 $24,000 $24,000
Purchase Other Current Assets $45,000 $35,000 $35,000
Purchase Long-term Assets $50,000 $25,000 $25,000
Dividends $0 $0 $0
Subtotal Cash Spent $1,729,119 $1,861,967 $2,235,035
Net Cash Flow $965,218 $1,182,155 $1,102,237
Cash Balance $977,218 $2,159,373 $3,261,611

7.5 Projected Balance Sheet

Our projected balance sheet shows an increase in net worth in 2003, at which point we expect to be making enviable profits. Our financial projections show a significant part of our net worth to be from paid-in capital and a positive figure in retained earnings. We are increasing assets in order to meet our equipment and facility requirements, and because we need to increase our receivables and inventory to support our growth in sales. Monthly projections are in the appendices.

Pro Forma Balance Sheet
FY 2001 FY 2002 FY 2003
Assets
Current Assets
Cash $977,218 $2,159,373 $3,261,611
Accounts Receivable $481,038 $575,716 $748,444
Inventory $128,852 $122,694 $159,505
Other Current Assets $45,000 $80,000 $115,000
Total Current Assets $1,632,108 $2,937,784 $4,284,560
Long-term Assets
Long-term Assets $199,118 $224,118 $249,118
Accumulated Depreciation $59,605 $95,605 $131,605
Total Long-term Assets $139,513 $128,513 $117,513
Total Assets $1,771,621 $3,066,297 $4,402,073
Liabilities and Capital FY 2001 FY 2002 FY 2003
Current Liabilities
Accounts Payable $163,869 $121,083 $152,951
Current Borrowing $0 $0 $0
Other Current Liabilities $42,003 $30,003 $18,003
Subtotal Current Liabilities $205,872 $151,086 $170,954
Long-term Liabilities $360,550 $396,550 $432,550
Total Liabilities $566,422 $547,636 $603,504
Paid-in Capital $1,689,820 $2,114,820 $2,114,820
Retained Earnings ($1,044,791) ($484,621) $403,840
Earnings $560,170 $888,461 $1,279,909
Total Capital $1,205,199 $2,518,660 $3,798,569
Total Liabilities and Capital $1,771,621 $3,066,297 $4,402,073
Net Worth $1,205,199 $2,518,660 $3,798,569

7.6 Business Ratios

The following table outlines some of the more important ratios from the Chemical Products and Preparations manufacturing industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the NAICS code, 325998.

Ratio Analysis
FY 2001 FY 2002 FY 2003 Industry Profile
Sales Growth 955.38% 19.68% 30.00% 9.54%
Percent of Total Assets
Accounts Receivable 27.15% 18.78% 17.00% 32.42%
Inventory 7.27% 4.00% 3.62% 17.28%
Other Current Assets 2.54% 2.61% 2.61% 38.61%
Total Current Assets 92.13% 95.81% 97.33% 88.31%
Long-term Assets 7.87% 4.19% 2.67% 11.69%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 11.62% 4.93% 3.88% 24.17%
Long-term Liabilities 20.35% 12.93% 9.83% 30.99%
Total Liabilities 31.97% 17.86% 13.71% 55.16%
Net Worth 68.03% 82.14% 86.29% 44.84%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 56.01% 65.00% 65.00% 23.42%
Selling, General & Administrative Expenses 39.81% 40.16% 26.99% 10.99%
Advertising Expenses 3.38% 2.83% 0.00% 0.13%
Profit Before Interest and Taxes 35.25% 46.06% 50.67% 4.87%
Main Ratios
Current 7.93 19.44 25.06 2.71
Quick 7.30 18.63 24.13 1.81
Total Debt to Total Assets 31.97% 17.86% 13.71% 67.53%
Pre-tax Return on Net Worth 61.97% 47.03% 44.93% 4.59%
Pre-tax Return on Assets 42.16% 38.63% 38.77% 14.15%
Additional Ratios FY 2001 FY 2002 FY 2003
Net Profit Margin 25.26% 33.48% 37.10% n.a
Return on Equity 46.48% 35.28% 33.69% n.a
Activity Ratios
Accounts Receivable Turnover 4.15 4.15 4.15 n.a
Collection Days 56 81 78 n.a
Inventory Turnover 10.91 7.38 8.56 n.a
Accounts Payable Turnover 9.17 12.17 12.17 n.a
Payment Days 28 35 27 n.a
Total Asset Turnover 1.25 0.87 0.78 n.a
Debt Ratios
Debt to Net Worth 0.47 0.22 0.16 n.a
Current Liab. to Liab. 0.36 0.28 0.28 n.a
Liquidity Ratios
Net Working Capital $1,426,236 $2,786,697 $4,113,606 n.a
Interest Coverage 22.50 32.29 42.17 n.a
Additional Ratios
Assets to Sales 0.80 1.16 1.28 n.a
Current Debt/Total Assets 12% 5% 4% n.a
Acid Test 4.97 14.82 19.75 n.a
Sales/Net Worth 1.84 1.05 0.91 n.a
Dividend Payout 0.00 0.00 0.00 n.a

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Appendix

Sales Forecast
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Sales
Row 1 0% $69,525 $99,100 $125,175 $146,450 $164,425 $188,600 $201,650 $214,600 $222,150 $242,400 $264,400 $278,900
Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Sales $69,525 $99,100 $125,175 $146,450 $164,425 $188,600 $201,650 $214,600 $222,150 $242,400 $264,400 $278,900
Direct Cost of Sales Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Row 1 $29,200 $44,595 $52,573 $65,902 $75,635 $90,528 $96,792 $92,278 $95,524 $104,232 $111,048 $117,138
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $29,200 $44,595 $52,573 $65,902 $75,635 $90,528 $96,792 $92,278 $95,524 $104,232 $111,048 $117,138
Personnel Plan
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Manufacturing 0% $13,282 $13,282 $13,282 $15,760 $18,920 $18,920 $18,920 $19,500 $19,500 $19,500 $21,580 $21,580
Sales 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $15,000
Total People 6 6 6 6 6 6 6 9 9 9 9 11
Total Payroll $13,282 $13,282 $13,282 $15,760 $18,920 $18,920 $18,920 $19,500 $19,500 $19,500 $21,580 $36,580

General Assumptions
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Plan Month 1 2 3 4 5 6 7 8 9 10 11 12
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00%
Other 0 0 0 0 0 0 0 0 0 0 0 0

Pro Forma Profit and Loss
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Sales $69,525 $99,100 $125,175 $146,450 $164,425 $188,600 $201,650 $214,600 $222,150 $242,400 $264,400 $278,900
Direct Cost of Sales $29,200 $44,595 $52,573 $65,902 $75,635 $90,528 $96,792 $92,278 $95,524 $104,232 $111,048 $117,138
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $29,200 $44,595 $52,573 $65,902 $75,635 $90,528 $96,792 $92,278 $95,524 $104,232 $111,048 $117,138
Gross Margin $40,325 $54,505 $72,602 $80,548 $88,790 $98,072 $104,858 $122,322 $126,626 $138,168 $153,352 $161,762
Gross Margin % 58.00% 55.00% 58.00% 55.00% 54.00% 52.00% 52.00% 57.00% 57.00% 57.00% 58.00% 58.00%
Expenses
Payroll $13,282 $13,282 $13,282 $15,760 $18,920 $18,920 $18,920 $19,500 $19,500 $19,500 $21,580 $36,580
Sales and Marketing and Other Expenses $1,400 $1,400 $2,000 $2,500 $4,000 $1,500 $2,000 $1,500 $27,000 $27,500 $27,000 $7,000
Depreciation $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Leased Equipment $931 $931 $931 $931 $931 $931 $931 $931 $931 $931 $931 $931
Utilities $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Insurance $285 $285 $285 $285 $285 $285 $285 $310 $310 $310 $310 $310
Rent $2,450 $2,450 $2,450 $2,450 $2,450 $2,450 $2,450 $2,450 $2,450 $2,450 $2,450 $2,450
Payroll Taxes 15% $1,992 $1,992 $1,992 $2,364 $2,838 $2,838 $2,838 $2,925 $2,925 $2,925 $3,237 $5,487
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Operating Expenses $24,340 $24,340 $24,940 $28,290 $33,424 $30,924 $31,424 $31,616 $57,116 $57,616 $59,508 $56,758
Profit Before Interest and Taxes $15,985 $30,165 $47,662 $52,258 $55,366 $67,148 $73,434 $90,706 $69,510 $80,552 $93,844 $105,004
EBITDA $18,985 $33,165 $50,662 $55,258 $58,366 $70,148 $76,434 $93,706 $72,510 $83,552 $96,844 $108,004
Interest Expense $2,785 $2,805 $2,825 $2,845 $2,865 $2,885 $2,905 $2,925 $2,945 $2,965 $2,985 $3,005
Taxes Incurred $3,300 $6,840 $11,209 $12,353 $13,125 $16,066 $17,632 $21,945 $16,641 $19,397 $22,715 $25,500
Net Profit $9,900 $20,520 $33,627 $37,060 $39,376 $48,197 $52,897 $65,836 $49,924 $58,190 $68,144 $76,500
Net Profit/Sales 14.24% 20.71% 26.86% 25.31% 23.95% 25.56% 26.23% 30.68% 22.47% 24.01% 25.77% 27.43%

Pro Forma Cash Flow
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Cash Received
Cash from Operations
Cash Sales $6,953 $9,910 $12,518 $14,645 $16,443 $18,860 $20,165 $21,460 $22,215 $24,240 $26,440 $27,890
Cash from Receivables $7,750 $9,836 $63,460 $89,972 $113,296 $132,344 $148,708 $170,132 $181,874 $193,367 $200,543 $218,820
Subtotal Cash from Operations $14,703 $19,746 $75,977 $104,617 $129,738 $151,204 $168,873 $191,592 $204,089 $217,607 $226,983 $246,710
Additional Cash Received
Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $3,000 $2,500 $2,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000
Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $75,000 $0 $0 $300,000 $0 $0 $0 $500,000 $0 $0 $0 $0
Subtotal Cash Received $97,703 $27,246 $82,977 $409,617 $134,738 $156,204 $173,873 $696,592 $209,089 $222,607 $231,983 $251,710
Expenditures Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Expenditures from Operations
Cash Spending $13,282 $13,282 $13,282 $15,760 $18,920 $18,920 $18,920 $19,500 $19,500 $19,500 $21,580 $36,580
Bill Payments $28,399 $57,345 $79,393 $84,750 $105,577 $114,537 $134,827 $133,309 $122,365 $153,896 $171,551 $178,851
Subtotal Spent on Operations $41,681 $70,627 $92,675 $100,510 $124,497 $133,457 $153,747 $152,809 $141,865 $173,396 $193,131 $215,431
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $607 $607 $607 $607 $607 $607 $607 $607 $607 $607 $607 $614
Other Liabilities Principal Repayment $0 $0 $0 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Long-term Liabilities Principal Repayment $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Purchase Other Current Assets $0 $0 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $0
Purchase Long-term Assets $0 $0 $0 $10,000 $10,000 $10,000 $10,000 $10,000 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $44,288 $73,234 $100,282 $119,117 $143,104 $152,064 $172,354 $171,416 $150,472 $182,003 $201,738 $219,045
Net Cash Flow $53,414 ($45,988) ($17,305) $290,500 ($8,366) $4,141 $1,519 $525,175 $58,616 $40,603 $30,244 $32,665
Cash Balance $65,414 $19,426 $2,121 $292,621 $284,256 $288,396 $289,915 $815,090 $873,706 $914,309 $944,554 $977,218
Pro Forma Balance Sheet
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Assets Starting Balances
Current Assets
Cash $12,000 $65,414 $19,426 $2,121 $292,621 $284,256 $288,396 $289,915 $815,090 $873,706 $914,309 $944,554 $977,218
Accounts Receivable $15,500 $70,323 $149,677 $198,875 $240,707 $275,394 $312,790 $345,567 $368,576 $386,637 $411,431 $448,848 $481,038
Inventory $18,873 $32,120 $49,055 $57,830 $72,492 $83,199 $99,581 $106,471 $101,506 $105,076 $114,655 $122,153 $128,852
Other Current Assets $0 $0 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $45,000
Total Current Assets $46,373 $167,857 $218,157 $263,826 $615,821 $657,848 $720,767 $766,953 $1,315,171 $1,400,420 $1,480,395 $1,560,554 $1,632,108
Long-term Assets
Long-term Assets $149,118 $149,118 $149,118 $149,118 $159,118 $169,118 $179,118 $189,118 $199,118 $199,118 $199,118 $199,118 $199,118
Accumulated Depreciation $23,605 $26,605 $29,605 $32,605 $35,605 $38,605 $41,605 $44,605 $47,605 $50,605 $53,605 $56,605 $59,605
Total Long-term Assets $125,513 $122,513 $119,513 $116,513 $123,513 $130,513 $137,513 $144,513 $151,513 $148,513 $145,513 $142,513 $139,513
Total Assets $171,886 $290,370 $337,670 $380,339 $739,334 $788,361 $858,280 $911,466 $1,466,684 $1,548,933 $1,625,908 $1,703,067 $1,771,621
Liabilities and Capital Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Current Liabilities
Accounts Payable $26,513 $54,704 $76,592 $81,240 $101,782 $110,041 $130,370 $129,266 $117,255 $148,187 $165,579 $173,201 $163,869
Current Borrowing $7,291 $6,684 $6,077 $5,470 $4,863 $4,256 $3,649 $3,042 $2,435 $1,828 $1,221 $614 $0
Other Current Liabilities $43,503 $46,503 $49,003 $51,003 $50,003 $49,003 $48,003 $47,003 $46,003 $45,003 $44,003 $43,003 $42,003
Subtotal Current Liabilities $77,307 $107,891 $131,672 $137,713 $156,648 $163,300 $182,022 $179,311 $165,693 $195,018 $210,803 $216,818 $205,872
Long-term Liabilities $324,550 $327,550 $330,550 $333,550 $336,550 $339,550 $342,550 $345,550 $348,550 $351,550 $354,550 $357,550 $360,550
Total Liabilities $401,857 $435,441 $462,222 $471,263 $493,198 $502,850 $524,572 $524,861 $514,243 $546,568 $565,353 $574,368 $566,422
Paid-in Capital $814,820 $889,820 $889,820 $889,820 $1,189,820 $1,189,820 $1,189,820 $1,189,820 $1,689,820 $1,689,820 $1,689,820 $1,689,820 $1,689,820
Retained Earnings ($877,599) ($1,044,791) ($1,044,791) ($1,044,791) ($1,044,791) ($1,044,791) ($1,044,791) ($1,044,791) ($1,044,791) ($1,044,791) ($1,044,791) ($1,044,791) ($1,044,791)
Earnings ($167,192) $9,900 $30,419 $64,047 $101,106 $140,482 $188,679 $241,576 $307,412 $357,336 $415,526 $483,671 $560,170
Total Capital ($229,971) ($145,071) ($124,552) ($90,924) $246,135 $285,511 $333,708 $386,605 $952,441 $1,002,365 $1,060,555 $1,128,700 $1,205,199
Total Liabilities and Capital $171,886 $290,370 $337,670 $380,339 $739,334 $788,361 $858,280 $911,466 $1,466,684 $1,548,933 $1,625,908 $1,703,067 $1,771,621
Net Worth ($229,971) ($145,071) ($124,552) ($90,924) $246,135 $285,511 $333,708 $386,605 $952,441 $1,002,365 $1,060,555 $1,128,700 $1,205,199

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