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Dry Cleaning & Laundromat icon Dry Cleaning - UK Only - Business Plan

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Guildford Dry Cleaning Service

Executive Summary

Guildford Dry Cleaning Service is a sole trader, start-up enterprise, to be established in Guildford, Surrey. The company will provide dry cleaning, laundry, and garment alterations, offered with regular home pick-up and delivery services.

The company will have a production facility, but will not need a retail shop front because of our pick-up and delivery service. However, we will need delivery vans, and customer service trained drivers.

Customers can choose payment either at the time of each delivery, or by monthly credit card billing. The Service will send statements to each contract customer, itemising service fees and the charge for the service to their credit cards for payment, at the end of each month.

The business provides a new door-to-door dry cleaning, laundry, and alteration service in Guildford that surely will attract customer attention. Working customers may find this service is convenient for them and want to try it. If they are satisfied with the service quality they are likely to become repeat customers. When the patronage happens continuously, they become loyal customers of the service. These customers will recommend Guildford Dry Cleaning Service to their friends and coworkers. As more and more customers use this service, Guildford Dry Cleaning Service’s image is enhanced and we will gain more and more market share.

Sales forecast gradually increase over Years 1-3 and comprise total sales of £324,700. We project solid Net profits in the first year.  Third year Sales and Net Profits increase significantly.

Dry cleaning - uk only - business plan, executive summary chart image

1.1 Mission

We will offer dry cleaning, laundry, and clothing alteration services with free home pickup and delivery. Our high quality and convenience will save time for working customers.

1.2 Keys to Success

  1. The business is entering the first year of operation therefore a comprehensive marketing strategy will be the key to success of the business.
  2. It is important to remember that the target customers have money and want to be provided with a high quality service; therefore they will only use this service if they are entirely satisfied.
  3. Furthermore, the hours of operation must be convenient and service completion must be timely in order that customers are not harried after a long day working.

1.3 Objectives

In providing laundry and garment alteration services for customers in Guildford area, Guildford Dry Cleaning Service aims to:

  • Attain a 30% market share by the end of the first year
  • Have first year total sales in excess of £324,000
  • Producing net profits of over £75,000.
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Company Summary

Guildford Dry Cleaning Service is a sole trader, start-up enterprise, to be established in Guildford, Surrey.  The company will provide dry cleaning, laundry, and garment alterations, offered with regular home pick-up and delivery services.

The company will have a production facility, but will not need a retail shop front because of our pick-up and delivery service. However, we will need delivery vans, and customer service trained drivers.

Initially, the production facility will be rented. Cleaning equipment will be leased with accompanying maintenance contracts.

Start-up financing will be through owner investment and bank loans, with a line of credit established for operations eventualities.

2.1 Company Ownership

The proposed legal form of business is sole trader. This is a small business and need not publicly disclose its finances. The business can immediately start without the complicated procedures associated with partnerships, limited liability companies, or co-operatives. The owner/founder will be the director and will initially handle the bookkeeping responsibilities.

2.2 Start-up Summary

Capital resource plan

Loan: Lending plan has to be completed and submitted to the bank six months before starting the business. Loan will be needed two months in advance.

Leasing equipment: Buying new machines costs approximately £30,000 as opposed to leasing which costs £10,000 per year including maintenance. Evaluating the leasing solution shows NPV higher than that of buying machines. Moreover, the business is new and has less experience in maintenance and repair of machine breakdown, therefore the optimal solution is leasing machines. The following machines will be leased:

  • 1 Washer – 17kg capacity, high spin, microprocessor control, electric heat
  • 1 Tumble dryer – 18kg capacity, stainless steel drum and gas heated
  • 1 Dry cleaning machine – 11kg
  • 1 Roller Iron 1000 x 300 mm, variable speed and vacuum exhauster
  • 1 Ironing table with steaming vacuum board, integral 7 litre boiler, iron, water pump and light

Capital plan: The owner will invest £32,000 in the business. Additional capital for the business will be borrowed from a bank.

  • Buying a new van, and office/facilities equipment (computer, printer, fax, telephone instrument, tables, chairs, shelving, work tables, racks, etc…) and initial leasing of laundry machines: £19,500
  • Buying another new van in April: £7,000

Annual interest of 6.48% has to be paid on the long-term loans secured with fixed assets.

Dry cleaning - uk only - business plan, company summary chart image

Start-up
Requirements
Start-up Expenses
Legal £150
Stationery etc. £1,200
Brochures £2,250
Recruitment and Training £400
Insurance £570
Rent £600
Utilities £500
Leased Equipment £834
Research and Development £0
Expensed Equipment £5,000
Other £2,790
Total Start-up Expenses £14,294
Start-up Assets
Cash Required £10,000
Start-up Inventory £500
Other Current Assets £0
Long-term Assets £14,000
Total Assets £24,500
Total Requirements £38,794
Start-up Funding
Start-up Expenses to Fund £14,294
Start-up Assets to Fund £24,500
Total Funding Required £38,794
Assets
Non-cash Assets from Start-up £14,500
Cash Requirements from Start-up £10,000
Additional Cash Raised £12,706
Cash Balance on Starting Date £22,706
Total Assets £37,206
Liabilities and Capital
Liabilities
Current Borrowing £0
Long-term Liabilities £19,500
Accounts Payable (Outstanding Bills) £0
Other Current Liabilities (interest-free) £0
Total Liabilities £19,500
Capital
Planned Investment
Investor 1 £32,000
Investor 2 £0
Other £0
Additional Investment Requirement £0
Total Planned Investment £32,000
Loss at Start-up (Start-up Expenses) (£14,294)
Total Capital £17,706
Total Capital and Liabilities £37,206
Total Funding £51,500

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Services

Guildford Dry Cleaning Service is going to provide the following services for customers with free home pick-up and delivery in the Guildford area:

  • Dry cleaning
  • Laundry for personal clothes and large items such as blankets, duvets, curtains, etc.
  • Alteration service

Operations plan

There are two ways for customers to take part in the service. Customers can sign contracts with Guildford Dry Cleaning Service to get regularly scheduled service, or they can also order over the telephone or e-mail to Guildford Dry Cleaning Service.

Customers can choose payment either at the time of each delivery, or by monthly credit card billing. The Service will send statements to each contract customer, itemising service fees and the charge for the service to their credit cards for payment, at the end of each month.

No retail shop will be rented in order to reduce the operation cost.  An operations facility for installing machines and equipment, washing and cleaning activities, and storing not yet cleaned and cleaned products is needed. The operations facility will require about 200 square metres divided into four main sections as follows:

  1. Machine installation and cleaning activities
  2. Sorting and storage of dirty garments received
  3. Storing cleaned garments after finishing prior to delivery
  4. Garment alteration workroom

The whole operation process will be controlled and monitored by a laundry expert employee, and generally managed by the business owner.

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Market Analysis Summary

There are a number of reasons for choosing the dry cleaning, laundry, and alteration service industry:

  • Payment for the service is by cash, cheque, or credit card.
  • No capital stagnancy, receive payment every month, easy to get instant profit.
  • Capital requirement for purchasing commercial laundry equipment is minimal, therefore the risk of this business is low.
  • This service only requires a few staff.
  • Supplies needed service for customers’ frequent demand (laundry – clean clothes).
  • Customers use this service as there are few or no alternatives (dry cleaning, carpet cleaning…).
  • The demand for using service is increasing due to changing life styles, incomes, and the increase in clothing expenditure.

Source: “10 Reasons Why The Dry Cleaning Business Continues To Grow”, http://www.mindspring.com/~jimgirone/cleanpage/howto.html

4.1 Market Segmentation

Table 1: Labour market

Labour market

Percentage (%)

Proportion of males employed full-time 2001/2002

92.8

Proportion of males employed part-time 2001/2002

7.2

Proportion of females employed full-time 2001/2002

61.3

Proportion of females employed part-time 2001/2002

38.7

Table 2: Guildford economic change

Economic change

Percentage (%)

Change in GDP per head (1995 – 1998)

39.6

Change in average gross weekly earning (1999 – 2002)

21.2

Change in total employment (1991 – 2001)

36.9

Sources: Local knowledge, Local futures
http://www.guildford.gov.uk/NR/rdonlyres/1F571647-185A-4470-9D3F-06B31BB5D10A/0/GuildfordAuditReportfinal.PDF

Dry cleaning - uk only - business plan, market analysis summary chart image

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Full-time employees 5% 49,400 51,870 54,464 57,187 60,046 5.00%
Part-time employees 10% 14,625 16,088 17,697 19,467 21,414 10.00%
Other 2% 1,500 1,530 1,561 1,592 1,624 2.01%
Total 6.12% 65,525 69,488 73,722 78,246 83,084 6.12%

4.2 Target Market Segment Strategy

Table 1 in the previous topic shows the percentages of males and females working full time from the period 2001 – 2002 which are a lot higher than that of those working part time. Employment, income, and GDP trends show an increase over the past several years.

These tables show that more and more people have money (standard of living increased) but have less time to do their housework (laundry) in Guildford. They are often tired after working all day and tend to spend money to hire someone else to do the housework for them. Moreover, the demand on clothes of these working people (particularly professionals) usually increases proportionately with their income. Buying more clothes, especially expensive clothes, makes them pay more attention to the care and cleaning of those clothes. With careful research, this business focuses on working and professional class customers as a target segment market.

4.3 Service Business Analysis

There are two competitors in dry cleaning, laundry and alteration services in Guildford: Trend Cleaners and Woodbridge Hill Cleaners and Launderers. They are both small-scale services but have quite a lot of customers (this information is collected by self research and observation). However, these shops do not provide door-to-door service free of charge for customers. Hereunder are the strengths, weaknesses, opportunities and threats pertaining to this business:

4.3.1 Competition and Buying Patterns

Strengths:

  • We offer a new service for dry cleaning, and laundry, providing another choice for customers.
  • We provide quick and convenient service in order to save customer’s time.

Weaknesses:

  • Strong competition from already established competitors in Guildford.
  • Starting at no market share at all.
  • Less experience than competitors.

Opportunities:

  • Expenditure in clothing is increasing, including expensive clothes; therefore the demand of taking care of clothes also increases.
  • There are more and more women – who traditionally do the laundry and cleaning work in the family – going to work outside the home. The target market of this business is working-class and professional-class customers.
  • Average income of Guildford citizens is increasing.
  • People tend to spend more time on leisure activities rather than doing the house work.
  • Participation within a steadily growing service. The forecast of the dry cleaning and laundry service goes steadily up through 2010.
  • There is a high likelihood of repeat business.
  • The ability to decrease the fixed costs as the sales volume increases.

Threats:

  • If the business is successful, there will be new competitors who supply the same kind of service.
  • New technology changes may bring out new family washing machines for dry cleaning.
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Strategy and Implementation Summary

Evaluation

The following areas will be monitored to evaluate the business performance:

  • Monthly and annual sales
  • Monthly and annual profit
  • Repeat business
  • Customer satisfaction

The business success will depend on quality and convenience of the service, customer opinions, and competitor response.

Optimism

The business provides a new door-to-door dry cleaning, laundry, and alteration service in Guildford that surely will attract customer attention. Working customers may find this service is convenient for them and want to try it. If they are satisfied with the service quality they will likely become repeat customers. When the patronage happens continuously, they become loyal customers of the service. These customers will recommend Guildford Dry Cleaning Service to their friends and coworkers. As more and more customers use this service, Guildford Dry Cleaning Service’s image is enhanced and we will gain more and more market share.

If we attain monthly and annual sales at least as forecasted, total costs and expenses, including any unanticipated charges, will not exceed our estimates and therefore the monthly and annual profit will be satisfactorily achieved.

Difficulties and Risks

Guildford Dry Cleaning is a start-up and as such has less experience and begins with no market share at all. Assertive, effective initial marketing efforts will be necessary to gain a customer base. If existing competitors see us as a major threat and they resort to overtly aggressive and debilitating actions it will be very difficult for us to become an established player in the marketplace. Risks caused by competitors are possible, therefore the business has to monitor and evaluate its performance frequently, and collect customer evaluations and suggestions in order to continually improve.

Worst Case Risks

The worst case scenario would be that the business cannot support itself on an ongoing basis. The costs of doing business may be under-estimated, or sales and profit may be less than expected, making the business difficult to finance. Moreover, in case of social economic recession, political changes, or inflation, the business may perform even worse than has been forecasted.

5.1 Competitive Edge

As the UK’s economy grows rapidly and quality of life is increased, people tend to spend more time and money in leisure activities rather than doing their house work. They prefer that someone else does the cleaning work for them. Guildford has a population of 129,701 served by three dry cleaning and laundry shops. These existing shops wait for customers to bring their garments in and pick them up later. Customers have to drive cars to town, find parking places, carry their clothes or large items such as curtains, blankets, etc. to the shop, and to queue for being serviced. Then they must repeat this boring process when they come to collect their items. Moreover, these shops are only open from 9am – 6pm, and closed on Sunday, which are almost the same working hours of offices; most inconvenient for customers especially those with full-time jobs.

By understanding and addressing this need, our new dry cleaning, laundry and alteration service will be established, providing door-to-door service free of delivery charge. We make our customers’ lives simpler by saving them time, and eliminating waiting in queues, parking problems, forgetting to collect clothes, missing meals, and going home late.

5.2 Marketing Strategy

Place: Trading directly with customers, conveniently in the customers’ houses in Guildford. We are choosing to not rent a shop in high street in the town centre, thereby reducing costs. Guildford Dry Cleaning Service will receive clothes from and return them to customers’ houses. Requests for urgent situation pick ups and deliveries will be accommodated, and a nominal fee charged.

Product: Free home pick up and delivery service, coming to customers’ house between 6 – 9 pm twice per week. We provide convenience and high quality dry cleaning, laundry, and alteration services.

Price: Normally, new businesses set their initial prices lower than their competitors. In our situation however, the business has higher costs for our delivery service and promotions to increase customers’ awareness and establish our brand name. We will set our prices to match those of our competitors. The pricing scheme is based on a per-service price. Moreover, the business targets working and professional customers who often pay less attention to price than the quality and convenience of service. Kelvin Clancy (in Kotler, 2003) shows that only between 15 and 35 percent of buyers are price sensitive. People with higher incomes are willing to pay more for features, customer service, quality, and convenience.

Promotion:

  • Advertise our new service in the Surrey Advertiser, the Internet, public areas such as buses and train stations, shopping centres and supermarkets etc., and drop advertising material into families’ mailboxes.
  • Offer 10% discount as an incentive for customers who sign one-year contracts.
  • Issue coupons with lower price for loyal customers.

5.3 Sales Forecast

Sales forecast gradually increase over the year 2006 and comprise total sales of £324,700. However, in the last three months, October, November and December the sales almost remains the same due to the demand of this service at the end of years doesn’t increase, and even has a minor decrease.

As forecasted, turnover of total market continues to rise and the price of dry cleaning and laundry services also increases from 5-10% http://www.keynote.co.uk/GlobalFrame.htm. However, to avoid being too optimistic, this sale estimation is calculated based on the turnover of competitors in the year 2002.

(Source: http://www.startinbusiness.co.uk/listings/bi9zopps/sale/details/flz201_laundry.htm).

 

Turnover projections of £324,700 for the year were generated in the following areas:

Description Forecast 2006 Percentage
Dry Cleaning

£116,892

36%
Other Laundry £185,079 57%
Alteration Services £22,729 7%
Total £324,700 100%
Dry cleaning - uk only - business plan, strategy and implementation summary chart image

Dry cleaning - uk only - business plan, strategy and implementation summary chart image

Sales Forecast
Year 1 Year 2 Year 3
Sales
Dry Cleaning £116,892 £151,960 £197,548
Laundry £185,079 £240,603 £312,784
Alteration Service £22,729 £29,547 £38,412
Other £0 £0 £0
Total Sales £324,700 £422,110 £548,744
Direct Cost of Sales Year 1 Year 2 Year 3
Dry Cleaning £14,027 £18,235 £23,706
Laundry £14,806 £19,248 £25,023
Alteration Service £6,819 £8,864 £11,524
Other £0 £0 £0
Subtotal Direct Cost of Sales £35,652 £46,348 £60,252

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Management Summary

The owner of the business will be director and accountant working full time.

A laundry expert will be employed and will be in charge of the operation and the quality of garment cleaning. Workers will report to the laundry expert who reports to the owner.

6.1 Personnel Plan

Through the consultation of British Cleaning Council, the term of reference of a laundry expert and workers are prepared. Employment information will be advertised in the newspaper. The laundry expert and two part-time workers who have experience in laundry work will be employed.

The laundry expert will be in charge of the operation and the quality of garment cleaning. Workers will be responsible for cleaning and classifying work and have the duty to report daily work to the laundry expert. The expert has to report their working results and problems to the director.

Two part-time drivers for picking up and delivering clothes work from 17.30 to 21.30, Monday through Saturday.

The staff should be able to carry out working conditions and requirements:

  • Understand and apply dry cleaning and washing processes
  • Meet set standards by following instructions
  • Work in hot, humid surroundings
  • Perform the same work continuously
  • Overtime may be required during peak seasons such as spring and autumn.

Number of staff and salary in the period of January to March 2006:

Description

No of people

Salary per hour (£)

Working hours/week

Owner

Full-time

1

20

48

Laundry expert

Full-time

1

10

48

Workers

Part-time

2

7

48

Drivers

Part-time

2

5

24

Total

6

42

168

From April to December 2004, the business has more customers and becomes busier, thus new staff (a worker and a driver) are employed.

The business prefers to hire extra part-time workers and drivers sharing the total needed working hours. In case one of them becomes sick or busy, other staff can replace them; therefore, the working process will not be effected.

Personnel Plan
Year 1 Year 2 Year 3
Director/Accountant £46,080 £47,462 £48,886
Laundry expert £23,040 £23,731 £24,443
Worker-1 £10,080 £10,382 £10,693
Worker-2 £10,080 £10,382 £10,693
Worker-3 £8,064 £8,306 £8,555
Driver-1 £3,360 £3,461 £3,565
Driver-2 £3,360 £3,461 £3,565
Driver-3 £2,880 £2,966 £3,055
Other £0 £0 £0
Total People 8 8 8
Total Payroll £106,944 £110,151 £113,455

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Financial Plan

The following topics describe the cash flow statement, profit and loss account, and balance sheet have been built using forecasted information which is as accurate and realistic as possible. These financial statements show that the business runs quite well and achieves expected results.

7.1 Important Assumptions

Sales increase gradually over the 12 months showing the positive trend of sales. Guildford Dry Cleaning is steadily gaining market share.

Gross profit and net profit rise proportionately to sales revenue.

Return on capital employed: Pendlebury (2002) indicates this ratio is useful to measure the efficiency which the long term capital has been employed. The business’ return on capital employed (ROCE) increases over the 12 months showing the effect of using capital to grow business, especially in the last months of the year.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 6.48% 6.48% 6.48%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

7.2 Break-even Analysis

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

Dry cleaning - uk only - business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even £16,281
Assumptions:
Average Percent Variable Cost 11%
Estimated Monthly Fixed Cost £14,493

7.3 Projected Profit and Loss

In general, the business might meet some difficulties in the beginning months but after that the business grows as expected and produces a small profit at the end of the year. It is not necessary for the business to gain high profit in the first year, breaking even is acceptable.

Here under are the estimated fixed costs and variable costs for the year 2006. These costs have been divided into two periods:

  • Jan – Mar
  • Apr – Dec: One more van (£7,000) will be purchased and new staff recruited; therefore interest, maintenance, petrol, salary and national insurance are increased

Fixed costs Per Month

Jan – Mar

Apr – Dec

Interest rate

1,264

1,604

Machine leasing

834

834

Building renting

600

600

Maintenance

50

100

Petrol

150

300

Salary per month

7,584

9,408

National Insurance

421

620

Total

10,903

13,466

Variable costs Per Month

Jan – Mar

Apr – Dec

Tea/Coffee break

100

100

Office cleaning

100

100

Recruitment cost

45

400

Advertisement

150

200

Telephone

300

500

Electricity

500

500

Miscellaneous

300

300

Total

1,495

2,100

 

 

 

 

 

 

 

 

 

 

 

Dry cleaning - uk only - business plan, financial plan chart image

Dry cleaning - uk only - business plan, financial plan chart image

Dry cleaning - uk only - business plan, financial plan chart image

Dry cleaning - uk only - business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales £324,700 £422,110 £548,744
Direct Cost of Sales £35,652 £46,348 £60,252
Other Costs of Sales £0 £0 £0
Total Cost of Sales £35,652 £46,348 £60,252
Gross Margin £289,048 £375,762 £488,492
Gross Margin % 89.02% 89.02% 89.02%
Expenses
Payroll £106,944 £110,151 £113,455
Sales and Marketing and Other Expenses £2,250 £2,700 £3,000
Depreciation £4,236 £4,700 £4,700
Rent £7,200 £7,200 £7,200
Utilities £11,400 £12,000 £13,000
Inserted Row £0 £0 £0
Petrol £3,150 £3,500 £4,000
Equipment Lease £10,008 £12,000 £15,000
Maintenance £1,050 £1,200 £1,500
Office Cleaning £1,200 £1,500 £1,500
Insurance £6,840 £6,840 £6,840
Payroll Taxes (National Insurance, etc.) £16,042 £16,523 £17,018
Other £3,600 £4,000 £4,000
Total Operating Expenses £173,920 £182,314 £191,213
Profit Before Interest and Taxes £115,128 £193,449 £297,279
EBITDA £119,364 £198,149 £301,979
Interest Expense £1,469 £1,297 £976
Taxes Incurred £34,098 £57,645 £88,891
Net Profit £79,562 £134,506 £207,412
Net Profit/Sales 24.50% 31.87% 37.80%

7.4 Projected Cash Flow

Cash flow increases gradually over the year creating the positive net present value. To exist and develop in the competitive market are getting more and more difficult. Obtaining loyal customers and recruiting new customers in term of long run business are extremely difficult therefore the service aims to achieve low profit create and enhance the service’s image which are the advantage competition in the market.

Dry cleaning - uk only - business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales £324,700 £422,110 £548,744
Subtotal Cash from Operations £324,700 £422,110 £548,744
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 £7,000 £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 £331,700 £422,110 £548,744
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending £106,944 £110,151 £113,455
Bill Payments £123,286 £173,837 £220,566
Subtotal Spent on Operations £230,230 £283,988 £334,021
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 £4,084 £4,792 £5,112
Purchase Other Current Assets £0 £0 £0
Purchase Long-term Assets £7,000 £0 £0
Dividends £0 £0 £0
Subtotal Cash Spent £241,314 £288,780 £339,133
Net Cash Flow £90,386 £133,330 £209,611
Cash Balance £113,092 £246,421 £456,032

7.5 Projected Balance Sheet

The table below shows the balance sheet annual figures for the first three years of operation. First year monthly figures are presented in the appendix.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash £113,092 £246,421 £456,032
Inventory £4,008 £5,210 £6,773
Other Current Assets £0 £0 £0
Total Current Assets £117,099 £251,631 £462,805
Long-term Assets
Long-term Assets £21,000 £21,000 £21,000
Accumulated Depreciation £4,236 £8,936 £13,636
Total Long-term Assets £16,764 £12,064 £7,364
Total Assets £133,863 £263,695 £470,169
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable £14,180 £14,298 £18,472
Current Borrowing £0 £0 £0
Other Current Liabilities £0 £0 £0
Subtotal Current Liabilities £14,180 £14,298 £18,472
Long-term Liabilities £22,416 £17,624 £12,512
Total Liabilities £36,596 £31,922 £30,984
Paid-in Capital £32,000 £32,000 £32,000
Retained Earnings (£14,294) £65,268 £199,774
Earnings £79,562 £134,506 £207,412
Total Capital £97,268 £231,774 £439,185
Total Liabilities and Capital £133,863 £263,695 £470,169
Net Worth £97,268 £231,774 £439,185

7.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios for commercial dry cleaning and laundry establishments are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 30.00% 30.00% 0.41%
Percent of Total Assets
Inventory 2.99% 1.98% 1.44% 3.56%
Other Current Assets 0.00% 0.00% 0.00% 39.13%
Total Current Assets 87.48% 95.43% 98.43% 57.85%
Long-term Assets 12.52% 4.57% 1.57% 42.15%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 10.59% 5.42% 3.93% 26.66%
Long-term Liabilities 16.75% 6.68% 2.66% 20.51%
Total Liabilities 27.34% 12.11% 6.59% 47.17%
Net Worth 72.66% 87.89% 93.41% 52.83%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 89.02% 89.02% 89.02% 100.00%
Selling, General & Administrative Expenses 55.72% 51.42% 46.64% 78.43%
Advertising Expenses 0.00% 0.00% 0.00% 1.78%
Profit Before Interest and Taxes 35.46% 45.83% 54.17% 3.01%
Main Ratios
Current 8.26 17.60 25.05 1.57
Quick 7.98 17.24 24.69 1.30
Total Debt to Total Assets 27.34% 12.11% 6.59% 57.48%
Pre-tax Return on Net Worth 116.85% 82.90% 67.47% 5.38%
Pre-tax Return on Assets 84.91% 72.87% 63.02% 12.65%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 24.50% 31.87% 37.80% n.a
Return on Equity 81.80% 58.03% 47.23% n.a
Activity Ratios
Inventory Turnover 12.00 10.06 10.06 n.a
Accounts Payable Turnover 9.69 12.17 12.17 n.a
Payment Days 27 30 27 n.a
Total Asset Turnover 2.43 1.60 1.17 n.a
Debt Ratios
Debt to Net Worth 0.38 0.14 0.07 n.a
Current Liab. to Liab. 0.39 0.45 0.60 n.a
Liquidity Ratios
Net Working Capital £102,920 £237,334 £444,333 n.a
Interest Coverage 78.38 149.12 304.46 n.a
Additional Ratios
Assets to Sales 0.41 0.62 0.86 n.a
Current Debt/Total Assets 11% 5% 4% n.a
Acid Test 7.98 17.24 24.69 n.a
Sales/Net Worth 3.34 1.82 1.25 n.a
Dividend Payout 0.00 0.00 0.00 n.a

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Appendix

Sales Forecast
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales
Dry Cleaning £4,176 £5,364 £6,156 £8,280 £9,216 £9,720 £10,728 £11,520 £12,456 £12,924 £13,212 £13,140
Laundry £6,612 £8,493 £9,747 £13,110 £14,592 £15,390 £16,986 £18,240 £19,722 £20,463 £20,919 £20,805
Alteration Service £812 £1,043 £1,197 £1,610 £1,792 £1,890 £2,086 £2,240 £2,422 £2,513 £2,569 £2,555
Other £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0
Total Sales £11,600 £14,900 £17,100 £23,000 £25,600 £27,000 £29,800 £32,000 £34,600 £35,900 £36,700 £36,500
Direct Cost of Sales Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Dry Cleaning £501 £644 £739 £994 £1,106 £1,166 £1,287 £1,382 £1,495 £1,551 £1,585 £1,577
Laundry £529 £679 £780 £1,049 £1,167 £1,231 £1,359 £1,459 £1,578 £1,637 £1,674 £1,664
Alteration Service £244 £313 £359 £483 £538 £567 £626 £672 £727 £754 £771 £767
Other £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0
Subtotal Direct Cost of Sales £1,274 £1,636 £1,878 £2,525 £2,811 £2,965 £3,272 £3,514 £3,799 £3,942 £4,030 £4,008
Personnel Plan
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Director/Accountant 0% £3,840 £3,840 £3,840 £3,840 £3,840 £3,840 £3,840 £3,840 £3,840 £3,840 £3,840 £3,840
Laundry expert 0% £1,920 £1,920 £1,920 £1,920 £1,920 £1,920 £1,920 £1,920 £1,920 £1,920 £1,920 £1,920
Worker-1 0% £672 £672 £672 £896 £896 £896 £896 £896 £896 £896 £896 £896
Worker-2 0% £672 £672 £672 £896 £896 £896 £896 £896 £896 £896 £896 £896
Worker-3 0% £0 £0 £0 £896 £896 £896 £896 £896 £896 £896 £896 £896
Driver-1 0% £160 £160 £160 £320 £320 £320 £320 £320 £320 £320 £320 £320
Driver-2 0% £160 £160 £160 £320 £320 £320 £320 £320 £320 £320 £320 £320
Driver-3 0% £0 £0 £0 £320 £320 £320 £320 £320 £320 £320 £320 £320
Other 0% £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0
Total People 6 6 6 8 8 8 8 8 8 8 8 8
Total Payroll £7,424 £7,424 £7,424 £9,408 £9,408 £9,408 £9,408 £9,408 £9,408 £9,408 £9,408 £9,408

General Assumptions
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
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 6.48% 6.48% 6.48% 6.48% 6.48% 6.48% 6.48% 6.48% 6.48% 6.48% 6.48% 6.48%
Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0 0 0 0 0 0 0 0

Pro Forma Profit and Loss
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales £11,600 £14,900 £17,100 £23,000 £25,600 £27,000 £29,800 £32,000 £34,600 £35,900 £36,700 £36,500
Direct Cost of Sales £1,274 £1,636 £1,878 £2,525 £2,811 £2,965 £3,272 £3,514 £3,799 £3,942 £4,030 £4,008
Other Costs of Sales £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0
Total Cost of Sales £1,274 £1,636 £1,878 £2,525 £2,811 £2,965 £3,272 £3,514 £3,799 £3,942 £4,030 £4,008
Gross Margin £10,326 £13,264 £15,222 £20,475 £22,789 £24,035 £26,528 £28,486 £30,801 £31,958 £32,670 £32,492
Gross Margin % 89.02% 89.02% 89.02% 89.02% 89.02% 89.02% 89.02% 89.02% 89.02% 89.02% 89.02% 89.02%
Expenses
Payroll £7,424 £7,424 £7,424 £9,408 £9,408 £9,408 £9,408 £9,408 £9,408 £9,408 £9,408 £9,408
Sales and Marketing and Other Expenses £150 £150 £150 £200 £200 £200 £200 £200 £200 £200 £200 £200
Depreciation £275 £275 £275 £275 £392 £392 £392 £392 £392 £392 £392 £392
Rent £600 £600 £600 £600 £600 £600 £600 £600 £600 £600 £600 £600
Utilities £800 £800 £800 £1,000 £1,000 £1,000 £1,000 £1,000 £1,000 £1,000 £1,000 £1,000
Inserted Row £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0
Petrol £150 £150 £150 £300 £300 £300 £300 £300 £300 £300 £300 £300
Equipment Lease £834 £834 £834 £834 £834 £834 £834 £834 £834 £834 £834 £834
Maintenance £50 £50 £50 £100 £100 £100 £100 £100 £100 £100 £100 £100
Office Cleaning £100 £100 £100 £100 £100 £100 £100 £100 £100 £100 £100 £100
Insurance £570 £570 £570 £570 £570 £570 £570 £570 £570 £570 £570 £570
Payroll Taxes (National Insurance, etc.) 15% £1,114 £1,114 £1,114 £1,411 £1,411 £1,411 £1,411 £1,411 £1,411 £1,411 £1,411 £1,411
Other £300 £300 £300 £300 £300 £300 £300 £300 £300 £300 £300 £300
Total Operating Expenses £12,367 £12,367 £12,367 £15,098 £15,215 £15,215 £15,215 £15,215 £15,215 £15,215 £15,215 £15,215
Profit Before Interest and Taxes (£2,040) £897 £2,856 £5,376 £7,574 £8,820 £11,313 £13,271 £15,586 £16,743 £17,455 £17,277
EBITDA (£1,765) £1,172 £3,131 £5,651 £7,966 £9,212 £11,705 £13,663 £15,978 £17,135 £17,847 £17,669
Interest Expense £104 £102 £101 £137 £135 £133 £131 £129 £127 £125 £123 £121
Taxes Incurred (£643) £239 £827 £1,572 £2,232 £2,606 £3,354 £3,943 £4,638 £4,985 £5,200 £5,147
Net Profit (£1,501) £557 £1,929 £3,668 £5,207 £6,081 £7,827 £9,199 £10,821 £11,633 £12,132 £12,009
Net Profit/Sales -12.94% 3.74% 11.28% 15.95% 20.34% 22.52% 26.27% 28.75% 31.27% 32.40% 33.06% 32.90%

Pro Forma Cash Flow
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Cash Received
Cash from Operations
Cash Sales £11,600 £14,900 £17,100 £23,000 £25,600 £27,000 £29,800 £32,000 £34,600 £35,900 £36,700 £36,500
Subtotal Cash from Operations £11,600 £14,900 £17,100 £23,000 £25,600 £27,000 £29,800 £32,000 £34,600 £35,900 £36,700 £36,500
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) £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0
New Long-term Liabilities £0 £0 £0 £7,000 £0 £0 £0 £0 £0 £0 £0 £0
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 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0
Subtotal Cash Received £11,600 £14,900 £17,100 £30,000 £25,600 £27,000 £29,800 £32,000 £34,600 £35,900 £36,700 £36,500
Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Expenditures from Operations
Cash Spending £7,424 £7,424 £7,424 £9,408 £9,408 £9,408 £9,408 £9,408 £9,408 £9,408 £9,408 £9,408
Bill Payments £206 £6,203 £7,030 £7,800 £10,317 £10,891 £11,313 £12,506 £13,276 £14,276 £14,618 £14,849
Subtotal Spent on Operations £7,630 £13,627 £14,454 £17,208 £19,725 £20,299 £20,721 £21,914 £22,684 £23,684 £24,026 £24,257
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 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0
Other Liabilities Principal Repayment £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0
Long-term Liabilities Principal Repayment £276 £278 £280 £282 £364 £366 £368 £370 £372 £374 £376 £378
Purchase Other Current Assets £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0
Purchase Long-term Assets £0 £0 £0 £7,000 £0 £0 £0 £0 £0 £0 £0 £0
Dividends £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0
Subtotal Cash Spent £7,906 £13,905 £14,734 £24,490 £20,089 £20,665 £21,089 £22,284 £23,056 £24,058 £24,402 £24,635
Net Cash Flow £3,694 £995 £2,366 £5,510 £5,511 £6,335 £8,711 £9,716 £11,544 £11,842 £12,298 £11,865
Cash Balance £26,400 £27,395 £29,761 £35,270 £40,782 £47,116 £55,827 £65,544 £77,087 £88,929 £101,227 £113,092
Pro Forma Balance Sheet
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Assets Starting Balances
Current Assets
Cash £22,706 £26,400 £27,395 £29,761 £35,270 £40,782 £47,116 £55,827 £65,544 £77,087 £88,929 £101,227 £113,092
Inventory £500 £1,274 £1,636 £1,878 £2,525 £2,811 £2,965 £3,272 £3,514 £3,799 £3,942 £4,030 £4,008
Other Current Assets £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0
Total Current Assets £23,206 £27,674 £29,031 £31,638 £37,796 £43,593 £50,081 £59,099 £69,057 £80,886 £92,871 £105,257 £117,099
Long-term Assets
Long-term Assets £14,000 £14,000 £14,000 £14,000 £21,000 £21,000 £21,000 £21,000 £21,000 £21,000 £21,000 £21,000 £21,000
Accumulated Depreciation £0 £275 £550 £825 £1,100 £1,492 £1,884 £2,276 £2,668 £3,060 £3,452 £3,844 £4,236
Total Long-term Assets £14,000 £13,725 £13,450 £13,175 £19,900 £19,508 £19,116 £18,724 £18,332 £17,940 £17,548 £17,156 £16,764
Total Assets £37,206 £41,399 £42,481 £44,813 £57,696 £63,101 £69,197 £77,823 £87,389 £98,826 £110,419 £122,413 £133,863
Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Current Liabilities
Accounts Payable £0 £5,970 £6,773 £7,457 £9,954 £10,516 £10,897 £12,064 £12,801 £13,789 £14,123 £14,360 £14,180
Current Borrowing £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0
Other Current Liabilities £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0
Subtotal Current Liabilities £0 £5,970 £6,773 £7,457 £9,954 £10,516 £10,897 £12,064 £12,801 £13,789 £14,123 £14,360 £14,180
Long-term Liabilities £19,500 £19,224 £18,946 £18,666 £25,384 £25,020 £24,654 £24,286 £23,916 £23,544 £23,170 £22,794 £22,416
Total Liabilities £19,500 £25,194 £25,719 £26,123 £35,338 £35,536 £35,551 £36,350 £36,717 £37,333 £37,293 £37,154 £36,596
Paid-in Capital £32,000 £32,000 £32,000 £32,000 £32,000 £32,000 £32,000 £32,000 £32,000 £32,000 £32,000 £32,000 £32,000
Retained Earnings (£14,294) (£14,294) (£14,294) (£14,294) (£14,294) (£14,294) (£14,294) (£14,294) (£14,294) (£14,294) (£14,294) (£14,294) (£14,294)
Earnings £0 (£1,501) (£944) £984 £4,652 £9,859 £15,940 £23,767 £32,966 £43,787 £55,420 £67,552 £79,562
Total Capital £17,706 £16,205 £16,762 £18,690 £22,358 £27,565 £33,646 £41,473 £50,672 £61,493 £73,126 £85,258 £97,268
Total Liabilities and Capital £37,206 £41,399 £42,481 £44,813 £57,696 £63,101 £69,197 £77,823 £87,389 £98,826 £110,419 £122,413 £133,863
Net Worth £17,706 £16,205 £16,762 £18,690 £22,358 £27,565 £33,646 £41,473 £50,672 £61,493 £73,126 £85,258 £97,268

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Full-time employees 5% 49,400 51,870 54,464 57,187 60,046 5.00%
Part-time employees 10% 14,625 16,088 17,697 19,467 21,414 10.00%
Other 2% 1,500 1,530 1,561 1,592 1,624 2.01%
Total 6.12% 65,525 69,488 73,722 78,246 83,084 6.12%

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