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Shipping, Freight & Trucking icon General Motor Freight Trucking Business Plan

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Timely Trucking

Executive Summary

Timely Trucking is a new medium- and long-haul dry van trucking business based on Portland, Oregon and founded by veteran entrepreneur Jim Kerrigan. Timely Trucking will serve businesses in the Pacific Northwest (eventually expanding to include Washington, Oregon, Idaho, Montana, and Wyoming) with freight hauling and logistics management services. The business will develop a reputation for its on-time and accurate service as well as sophisticated Web and software functionality, allowing clients to align their business with Timely Trucking’s services and scheduling automatically. The business will be managed by Jim Kerrigan, CEO, and a Chief Operating Officer.

Timely Trucking can be launched for about $700,000, largely with the investment of Jim Kerrigan, and with some investment by investing partners. The business will be launched with three 18-wheeler trucks and will expand its operations to utilize eight 18-wheelers by the end of its third year, using auto loans to finance this expansion. Gross margins will be around 60%, allowing for significant profit by the end of the third year as the business scales up.

Beyond three years, the business will seek to expand to additional bases of operation in the Northwest and to add trucks with refrigerated and temperature-controlled trailers. The business will be positioned for sale to a national freight-hauling service seeking to expand to, or add operations in, the Northwest.

General motor freight trucking business plan, executive summary chart image

Objectives

Timely Trucking intends to serve businesses in the Northwest United States (Washington, Oregon, Idaho, Montana, and Wyoming) with truck-based distribution services.

Over the first three years of operations, Timely Trucking will seek to meet the following objectives:

  • Establish bases in Seattle, Spokane, Portland, Cheyenne, Boise, and Billings
  • Purchase 8 18-wheeler trucks with dry van trailers
  • Hire 10 full-time truck drivers
  • Achieve strong annual revenue  based on 1.2 million miles of hauling in the third year

Mission

Timely Trucking will simplify distribution of goods for Northwestern businesses, becoming their partner in operating efficiently and reliably. Timely Trucking will use management of logistics, on-time, accurate deliveries from destination to destination in the Northwest, and partnerships with distribution centers and warehousing businesses to achieve its goals.

Keys to Success

The keys to success in the trucking business are:

  1. Robust communication systems between drivers, bases, and clients
  2. Setting delivery schedules that can be met (i.e. setting the right expectations)
  3. Hiring and retaining reliable, safe drivers
  4. Understanding what clients are trying to achieve, and helping them find the right distribution solution to create long-term relationships
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Company Summary

Timely Trucking, a startup truck company headquartered in Portland, Oregon, will provide trucking and logistics management solutions for business clients in the Northwestern states of Oregon, Washington, Idaho, Montana, and Wyoming. Beginning with operations in Washington and Oregon, the business will haul freight from suppliers to manufacturers to distributors and retailers, operating in partnership with distribution centers, warehouses, and wholesalers.

Company Ownership

Timely Trucking was founded by Jim Kerrigan, a previous owner of a warehousing business which he successfully exited from after fifteen years of management. Timely Trucking has been established as a sole proprietorship during its pre-launch phase, but will be reclassified as a limited liability company to take on partners. Kerrigan will share ownership with outside investors, giving 20% of shares to investors.

Start-up Summary

The start-up expenses include some of the basic set-up costs for the Timely Trucking office – stationery (business cards and letterhead), rent for the office and a large adjacent parking lot for two month’s rent and one month’s security at $4,000 per month, and computer equipment. Marketing expenses include brochures and website development (see website plan for more details). Other expenses include legal consultation fees to ensure that all precautions are taken to limit the risk of the business and to establish templates for client and partner agreements, insurance premiums for the first year of operation to cover liability associated with the service, the office, and the trucks, and licenses and permits for the business. These include Fuel Tax Reporting, USDOT numbers, 2290’s, IRP tags, MC numbers, and IFTA decals.

Cash required will be used to fund the months of operation before cash flow break even is achieved and to allow for adequate cash reserves to reduce the risk of running low on cash if targets are not met. Other current assets include office supplies, software for accounting, scheduling, and resource management and light equipment. Long-term assets include three new 18-wheelers, estimated at $150,000 each (approximately $120,000 for the cab and $30,000 for the trailer). The business will purchase new in order to better ensure that deliveries are made on time and that the usual risks of aging equipment are avoided.  $75,000 is budgeted for three fork lifts estimated at $25,000 each, one per truck. An additional $25,000 is budgeted for long-term assets including repair equipment and tools which it is cost-effective to own in-house, satellite-tracking equipment for each truck, and office furniture.

While some trucking businesses hire owner-operators of trucks, Timely Trucking will maintain greater control over the service it offers by owning the trucks, ensuring that it always lives up to its name.

General motor freight trucking business plan, company summary chart image

Start-up
Requirements
Start-up Expenses
Legal $5,000
Stationery $3,000
Insurance $10,000
Rent $12,000
Computer $3,000
Licenses and Permits $5,000
Website Development $20,000
Brochures $5,000
Total Start-up Expenses $63,000
Start-up Assets
Cash Required $90,000
Other Current Assets $20,000
Long-term Assets $550,000
Total Assets $660,000
Total Requirements $723,000

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Services

Timely Trucking will offer the following services for businesses in the Northwest:

  • Pick-up and delivery of goods with a minimum per-delivery weight of 20,000 lbs from and to locations in its geographic range by 18-wheeler trucks hauling dry van trailers
  • Both “less than a truck load” and “truck load” services
  • Online tracking information detailing the location of all GPS-tagged trucks and the status of deliveries, including expected arrival times for pick-up or delivery
  • Phone support for all customer questions, delivery changes, and scheduling
  • Preferred client services including online accounts, regular schedules of shipping, or linking of client order information directly to Timely Trucking’s scheduling software to allow for seamless logistics

To maintain its competitiveness in its core services, Timely Trucking will NOT offer:

  • Storage or warehousing of goods awaiting delivery (goods can remain in storage in trucks for short periods, but at relatively high cost to customers)
  • Packaging and crating
  • Flat bed hauling

In the future, Timely Trucking will add the following services:

  • Temperature-controlled shipping to expand the range of customers Timely can appeal to

Trucks are operated by qualified and well-trained drivers with spotless records. Drivers are safety trained and re-tested for knowledge of laws as they change. A dedicated suite of software and communication systems will allow for the logistical management mentioned above.

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Market Analysis Summary

The American commercial trucking industry serves as a key link between raw material suppliers, manufacturers, wholesalers, distributors, and retailers in most industries. According to the American Trucking Association, the industry includes dry van, flatbed, refrigerated and bulk/tank trucking over short-haul (up to 100 miles), medium-haul (100 to 250 miles), and long-haul (250 miles and up).

Timely Trucking will compete in the market for medium and long haul dry van trucking in the American Northwest. This market serves businesses ranging from the packaged goods/grocery industry to the clothing industry to high-tech equipment, as well as commercial relocations.

Customers which require frequent dry van shipping generally have the appropriate-sized loading dock for the standard 9′ high, 8′ 6″ wide, 53′ length dry van cargo area.

Market Segmentation

The market analysis table covers likely market segments within the five states which Timely Trucking will serve.

Raw Material Suppliers ship large quantities of materials to large manufacturers in the northwestern states. These materials generally do not require refrigeration or temperature control. Manufacturers maintain some on-site storage for these supplies and generally have some leeway as to when deliveries can be received, except when projections are mistaken and supplies drop low. Packaging supplies also must be shipped to manufacturers and are included in this group.

Manufacturers often outsource the distribution of their goods to businesses that specialize in serving one the type of retailer or business. Their packaged goods are often shipped to only one wholesaler/distributor, creating a regular business in shipping between the two locations.

Wholesalers/Distributors that serve large retailers assemble truckloads of goods from the many manufacturers they serve. While they often have their own trucks or distribution means, some of these firms do not either because they are smaller or because they attempt to limit their investment in assets. Others may require additional trucking support when they are operating at capacity but not prepared to expand their shipping capacity.

General motor freight trucking business plan, market analysis summary chart image

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Raw Materials Suppliers 1% 1,500 1,515 1,530 1,545 1,560 0.99%
Manufacturers 1% 2,500 2,525 2,550 2,576 2,602 1.00%
Wholesalers/Distributors 1% 1,000 1,010 1,020 1,030 1,040 0.99%
Total 1.00% 5,000 5,050 5,100 5,151 5,202 1.00%

Target Market Segment Strategy

Timely Trucking will begin by focusing specifically on the segment of manufacturers in Washington and Oregon states, expanding after the first year to the entire intended five state region. By serving manufacturers, Timely Trucking can provide an affordable shipping solution for new and growing manufacturers over purchasing their own trucks.

Raw material suppliers sometimes require flatbed or bulk/tank trucking which will not be an initial service offered by Timely Trucking and wholesalers often have their own trucks. These segments are expected to yield some customers, but by focusing first on the middle of the supply chain with manufacturers, Timely Trucking will be introduced to suppliers and distributors who may require their services without having to engage in full marketing campaigns to these segments.

Service Business Analysis

Hoovers reports that:

  • The U.S. trucking industry includes about 110,000 for-hire carriers and 350,000 independent owner-operators
  • Total industry revenue is nearly $200 billion
  • Major players in the industry include YRC Worldwide, Swift Transportation, JB Hunt, and Con-way
  • The industry is fragmented, with the 50 largest companies accounting for less than 30% of the market

The industry includes carriers that use commercial motor vehicles and doesn’t include couriers like UPS and FedEx or private carriers (companies that transport their own products and raw materials).

Hoover’s writes that “demand is driven by consumer spending and manufacturing output. The profitability of individual companies depends on efficient operations. Large companies have advantages in account relationships, bulk fuel purchasing, fleet size, and access to drivers. Small operations can compete effectively by providing quick turnaround, serving a local market, or transporting unusually sized goods. Average annual revenue per employee is $135,000.”

The industry is broken into “truckload (TL) shipments that dedicate trailers to a single shipper’s cargo” and “less-than-truckload (LTL) shipments, which transport the consolidated cargo of several shippers on one truck, dropping off goods at multiple delivery points”.

Competition and Buying Patterns

In addition to competing with other trucking companies, including national carriers, Timely Trucking will compete with rail and air cargo transportation. However, for the distances it intends to travel, and due to the few rail lines over the northwestern states, trucking is at an advantage.

Shippers choose between trucking companies based on:

  • Their track record of on-time and accurate deliveries
  • Their price
  • Their ability to partner with the shipper to offer logistics expertise and added services.
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Web Plan Summary

The Timely Trucking website will serve as a source of basic information for those who find it via Internet searches, as well as a sophisticated account management portal for clients. For potential clients, the website will serve as a deeper explanation of the services and background of the company than a brochure or advertisement can provide. Specific calls to action on the website will ask users to call to speak to a salesperson or to fill in a form with their basic information and a good time to speak with them, so that a salesperson can contact them. Even one-time clients will be able to access up-to-date information about the ETA and current location of their deliveries. Clients who subscribe to preferred services will have access to more advanced information and functions.

Website Marketing Strategy

Timely Trucking will utilize the following means to promote its website as a marketing tool:

  • Initial and ongoing search engine optimization by the Web developer and then by an SEO firm
  • Google Adwords campaign which can be reduced or defunded if organic search rankings are high enough
  • Profiles and listings on ten business and trucking company online databases
  • Mention of the website URL in all brochures and advertisements

Development Requirements

The website’s components will have the following requirements:

Front End

  • Homepage – Mirroring a basic brochure about Timely Trucking
  • About Us – Background on the partners, mission, and basics of the business
  • Contact – Form to submit information and phone number to reach a salesperson during business hours
  • Services – Deeper description of the service options along with images of the trucks and a map of the area served>

Delivery Tracking

  • Form – To enter delivery code which was designated for the delivery
  • Map – Shows current location of the delivery on a map
  • Statistics – Gives ETA, minutes late or ahead of schedule, status of pick-up or drop-off, other notes about the order

Account Management

  • Login – Login form for client username and password
  • Account Profile – Basic client information, settings related to interface between client systems and Timely Trucking if direct links have been established
  • Scheduling – Calendar on which pickups and deliveries can be scheduled and rescheduled
  • Alerts – Settings for email or text alerts about deliveries which can be sent to client

Back End

  • Database Entry – Ability to search within and make changes and edits to the client and scheduling information in the database
  • Billing Interface – Website sends billing information for completed jobs directly to accounting software for bill creation

The website will be developed over a three month period and will require $20,000. Many elements can be adapted from off-the-shelf or open source software, but others must be developed from scratch to interface between client software and the Timely Trucking database.

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Strategy and Implementation Summary

Timely Trucking will focus its strategy on the following areas:

  • Establishing a strong software/Web component to its business to drive adoption of its preferred client services
  • Building and maintaining its on-time reputation to command revenue per mile slightly over the industry average
  • Targeting manufacturers in Oregon and Washington in the first wave of marketing as the segment most in need of Timely Trucking’s services

Competitive Edge

Timely Trucking will establish a competitive edge through its dogged focus on on-time deliveries for its specific target market. Software systems, communication systems, operational choices and marketing materials will all be oriented around this goal. By making customers more assured of on-time delivery with Timely Trucking than with competitors, they will be more likely to use the business overall, as they can never be sure when a few hours can make an incredible difference to their potential revenues or expenses.

Marketing Strategy

Timely Trucking will attempt to rapidly achieve awareness in Oregon and Washington states about its business in the first year, followed with awareness in Idaho, Wyoming, and Montana in future years. It will seek to position itself not as the most inexpensive carrier, but as a carrier with the best on-time record coupled with advanced systems to help clients manage their logistics better. Smaller businesses may feel more comfortable working with a smaller carrier as they fear being lost in the shuffle by bigger carriers who also handle huge accounts.

  • Building a website with visibility on search engines and in databases of trucking companies (see Web plan)
  • Creating a compelling brochure of Timely Trucking services which will be distributed through direct mail, and kept in stock for networking events
  • Exhibiting at Northwestern business service conferences, especially for sectors of the manufacturing industry
  • Advertisements in trade publications
  • Public relations efforts including press releases related to the business launch and its unique preferred client account management package

Sales Strategy

Jim Kerrigan will manage sales for the business, making appointments with and traveling to client businesses in the region when necessary to establish relationships based on an understanding of the client’s needs for shipping. Kerrigan will prospect from a list of manufacturer businesses in the region, starting with small and new businesses which may not have established a long-term relationship with a carrier yet.

Sales Forecast

The cost of sales listed here for per-mile shipping is approximately 25% for fuel based on the estimated 10 mpg for loaded trucks, and another 25% for truck driver labor hours that can be assigned to the jobs based on $16/hour rate. Cost of sales for preferred accounts is much smaller as it consists only of set-up and maintenance labor for hourly operators.

Preferred client accounts are paid for once a year and a 90% retention rate is projected.

General motor freight trucking business plan, strategy and implementation summary chart image

General motor freight trucking business plan, strategy and implementation summary chart image

Sales Forecast
Year 1 Year 2 Year 3
Unit Sales
Miles of Shipping 600,139 870,201 1,261,792
Preferred Client Accounts 88 264 528
Total Unit Sales 600,227 870,465 1,262,320
Unit Prices Year 1 Year 2 Year 3
Miles of Shipping $1.30 $1.35 $1.41
Preferred Client Accounts $1,000.00 $1,050.00 $1,100.00
Sales
Miles of Shipping $780,180 $1,176,512 $1,774,180
Preferred Client Accounts $88,000 $277,200 $580,800
Total Sales $868,180 $1,453,712 $2,354,980
Direct Unit Costs Year 1 Year 2 Year 3
Miles of Shipping $0.65 $0.68 $0.70
Preferred Client Accounts $100.00 $105.00 $110.00
Direct Cost of Sales
Miles of Shipping $390,090 $588,256 $887,090
Preferred Client Accounts $8,800 $27,720 $58,080
Subtotal Direct Cost of Sales $398,890 $615,976 $945,170

Milestones

The milestones table covers the early marketing activities described in the marketing strategy summary. The first two milestones (website and brochure) are budgeted under start-up expenses and the remainder are budgeted under the first year marketing budget for operations.

General motor freight trucking business plan, strategy and implementation summary chart image

Milestones
Milestone Start Date End Date Budget Manager Department
Create Brochure 11/1/2009 11/30/2009 $5,000 JK Marketing
Create Website 10/1/2009 12/31/2009 $20,000 JK Marketing
Generate Mailing List 12/1/2009 12/15/2009 $1,000 JK Marketing
Direct Mail Distribution 12/15/2009 12/31/2009 $5,000 JK Marketing
Run First Advertisements 1/1/2010 1/31/2010 $10,000 JK Marketing
Launch Press Release 1/1/2010 1/31/2010 $2,000 JK Marketing
First Trade Show (Pre and Run) 2/15/2010 2/28/2010 $10,000 JK Marketing
Totals $53,000

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Management Summary

Jim Kerrigan, CEO, will manage the strategic direction, sales and marketing of Timely Trucking. He developed experience in all of these areas through work in his previous warehousing business, which he launched and successfully sold after fifteen years of operation.

The Chief Operating Officer position will be filled by a partner who will be granted up to 10% of shares in the business after meeting certain milestones. Additional shares will be granted if the COO contributes capital to the business. The COO will manage operations, finances, human resources, and procurement.

The business will require additional personnel including an administrator/dispatch center operator and a sales/marketing support associate. These individuals will be managed by the COO and the CEO, respectively. Three part-time truck drivers will be hired initially.

Personnel Plan

Truck driver salary listed here covers only wages paid which are not directly attributable to client jobs. This includes training, repair work, returns from deliveries, and other required driving with empty trucks. It is expected that this will be less than 20% of driver wages. Truck drivers will grow from three part-time at launch to four full-time by the end of year 1, eight full-time by the end of year 2, and 10 full-time by the end of year 3. There will be more full-time truck drivers than trucks as the business will attempt to utilize the capacity of the trucks at least 60 hours per week and will limit overtime of drivers.

The sales/marketing associate will be hired in the fourth month after the CEO has directly executed all sales and marketing operations for the first three months.

Personnel Plan
Year 1 Year 2 Year 3
CEO $48,000 $70,000 $75,000
COO $60,000 $70,000 $75,000
Sales/Marketing Associate $27,000 $40,000 $45,000
Administrator $36,000 $40,000 $45,000
Truck Drivers (Non-Job Payroll) $26,961 $40,000 $50,000
Total People 8 12 14
Total Payroll $197,961 $260,000 $290,000

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Financial Plan

Timely Trucking will establish its business with three trucks and a launch financed by the owner and investor’s equity. Starting debt-free will enable the business to take on debt once it has established cash flows to purchase additional trucks over the first three years. Profits will swing positive in the second year after a loss in the first year.

After the first three years, the business can sustain growth of at least three additional trucks per year, and begin to add additional bases of operation throughout the region so that truck drivers who do not live in the Portland area can be hired and trucks do not have to return to this base after all jobs.

Dividends will not be paid out, as cash will be used in the business to prepare for expansion to additional offices and purchase equipment on better terms going forward. After five years of operation, the business will seek a strategic sale to a national freight trucking operator for which Timely Trucking’s geographic and technological focus will be a good match.

Start-up Funding

Jim Kerrigan will provide the majority of start-up funding out of savings from the sale of his previous business. Additional investment will be from investing partners who will be granted 20% of shares in the business for their investment.

Start-up Funding
Start-up Expenses to Fund $63,000
Start-up Assets to Fund $660,000
Total Funding Required $723,000
Assets
Non-cash Assets from Start-up $570,000
Cash Requirements from Start-up $90,000
Additional Cash Raised $0
Cash Balance on Starting Date $90,000
Total Assets $660,000
Liabilities and Capital
Liabilities
Current Borrowing $5,000
Long-term Liabilities $0
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $5,000
Capital
Planned Investment
Jim Kerrigan $500,000
Investors $218,000
Additional Investment Requirement $0
Total Planned Investment $718,000
Loss at Start-up (Start-up Expenses) ($63,000)
Total Capital $655,000
Total Capital and Liabilities $660,000
Total Funding $723,000

Important Assumptions

The business assumes the cost of fuel at an average of the past two years, slightly higher than today’s fuel prices. This is considered a conservative estimate as it is possible that fuel will stay below this number during at least part of the start-up phase. However, if fuel becomes significantly more expensive, the gross margins of the business will drop.

Break-even Analysis

The break even point is shown in the table and chart, below.

General motor freight trucking business plan, financial plan chart image

Break-even Analysis
Monthly Units Break-even 52,272
Monthly Revenue Break-even $75,608
Assumptions:
Average Per-Unit Revenue $1.45
Average Per-Unit Variable Cost $0.66
Estimated Monthly Fixed Cost $40,869

Projected Profit and Loss

Major expenses include:

  • Payroll: Covers the management, staff, and truck driver wages (when not directly attributed to jobs)
  • Marketing/Promotion: Projected higher in the first year and then dropping due to extra marketing devoted to the launch and the weaning off of search engine marketing over time
  • Depreciation: Reflects the growing investment in trucks and equipment over the years. Trucks are depreciated on a 10 year straight-line schedule. The depreciation is $1,250 per month per truck or $1,458 per month including the additional equipment purchased with each truck. The business will grow from four trucks at the end of year 1 to six at the end of year 2 to eight at the end of year 3.
  • Truck Maintenance/Repair: Estimated at $200 per month per truck to start and rising to $225 in year 3 due to aging of some of the first trucks purchased.
  • Rent & Utilities: Projected to rise slightly due to inflationary increases
  • Insurance: Will grow with the number of trucks and size of operations
  • Payroll Taxes: Applied to payroll as listed and half of the direct cost of sales (truck driver wages)
  • Licensing and Permitting: Include ongoing renewals of licenses and additional licenses for new trucks as they are purchased

The business expects a net loss in the first year as operations and sales scale up appropriately. Net profits will begin in the second year.

General motor freight trucking business plan, financial plan chart image

General motor freight trucking business plan, financial plan chart image

General motor freight trucking business plan, financial plan chart image

General motor freight trucking business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $868,180 $1,453,712 $2,354,980
Direct Cost of Sales $398,890 $615,976 $945,170
Other Costs of Sales $0 $0 $0
Total Cost of Sales $398,890 $615,976 $945,170
Gross Margin $469,290 $837,736 $1,409,810
Gross Margin % 54.05% 57.63% 59.87%
Expenses
Payroll $197,961 $260,000 $290,000
Marketing/Promotion $102,000 $80,000 $100,000
Depreciation $59,334 $89,952 $124,944
Truck Maintenance/Repair $7,800 $12,000 $18,900
Rent $36,000 $37,800 $39,690
Utilities $3,600 $3,780 $3,969
Insurance $12,000 $18,000 $25,000
Payroll Taxes $59,611 $85,198 $114,388
Licenses and Permitting $8,000 $10,000 $10,000
Web Hosting and Development $4,125 $7,200 $7,560
Total Operating Expenses $490,431 $603,930 $734,451
Profit Before Interest and Taxes ($21,141) $233,806 $675,359
EBITDA $38,193 $323,758 $800,303
Interest Expense $3,889 $21,975 $35,250
Taxes Incurred $0 $63,549 $192,033
Net Profit ($25,030) $148,282 $448,077
Net Profit/Sales -2.88% 10.20% 19.03%

Projected Cash Flow

Purchases of new trucks will be made with 3 year loans for 90% of the purchase price. The remaining $25,000 plus $25,000 in additional equipment (forklift, etc) for each purchase will be made in cash. Payments on these loans will be $3,750 per month, per truck loan for the life of the loans.

One additional truck will be purchased in the first year with a loan, two in the second year, and two in the third year.

General motor freight trucking business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $217,045 $363,428 $588,745
Cash from Receivables $531,566 $1,009,642 $1,642,109
Subtotal Cash from Operations $748,611 $1,373,070 $2,230,854
Additional Cash Received
Sales Tax, VAT, HST/GST Received $69,454 $116,297 $188,398
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $135,000 $270,000 $270,000
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 $953,065 $1,759,367 $2,689,252
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $197,961 $260,000 $290,000
Bill Payments $568,192 $944,669 $1,447,865
Subtotal Spent on Operations $766,154 $1,204,669 $1,737,865
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $69,454 $116,297 $188,398
Principal Repayment of Current Borrowing $2,000 $3,000 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $7,500 $90,000 $180,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $175,000 $350,000 $350,000
Dividends $0 $0 $0
Subtotal Cash Spent $1,020,108 $1,763,966 $2,456,264
Net Cash Flow ($67,043) ($4,599) $232,988
Cash Balance $22,957 $18,358 $251,346

Projected Balance Sheet

The balance sheet illustrates the launch of the business on equity financing and augmented by safe debt over its first three years of operation to purchase additional trucks. This will allow cash and assets, as well as net worth, to continue to grow.

Retained earnings will be negative due to the loss sustained in the first year of operation and the start-up phase, but will move closer to positive in the third year after a profitable second year.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $22,957 $18,358 $251,346
Accounts Receivable $119,570 $200,212 $324,339
Other Current Assets $20,000 $20,000 $20,000
Total Current Assets $162,527 $238,570 $595,685
Long-term Assets
Long-term Assets $725,000 $1,075,000 $1,425,000
Accumulated Depreciation $59,334 $149,286 $274,230
Total Long-term Assets $665,666 $925,714 $1,150,770
Total Assets $828,193 $1,164,284 $1,746,455
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $67,723 $78,532 $122,627
Current Borrowing $3,000 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $70,723 $78,532 $122,627
Long-term Liabilities $127,500 $307,500 $397,500
Total Liabilities $198,223 $386,032 $520,127
Paid-in Capital $718,000 $718,000 $718,000
Retained Earnings ($63,000) ($88,030) $60,252
Earnings ($25,030) $148,282 $448,077
Total Capital $629,970 $778,252 $1,226,328
Total Liabilities and Capital $828,193 $1,164,284 $1,746,455
Net Worth $629,970 $778,252 $1,226,328

Business Ratios

The ratios of the business are compared to General Freight/Long-Distance Trucking for businesses of $1 million to $5 million in revenues.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 67.44% 62.00% -0.08%
Percent of Total Assets
Accounts Receivable 14.44% 17.20% 18.57% 28.96%
Other Current Assets 2.41% 1.72% 1.15% 28.54%
Total Current Assets 19.62% 20.49% 34.11% 58.36%
Long-term Assets 80.38% 79.51% 65.89% 41.64%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 8.54% 6.75% 7.02% 34.65%
Long-term Liabilities 15.39% 26.41% 22.76% 34.50%
Total Liabilities 23.93% 33.16% 29.78% 69.15%
Net Worth 76.07% 66.84% 70.22% 30.85%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 54.05% 57.63% 59.87% 59.90%
Selling, General & Administrative Expenses 56.94% 47.43% 40.84% 15.68%
Advertising Expenses 11.75% 5.50% 4.25% 0.24%
Profit Before Interest and Taxes -2.44% 16.08% 28.68% 4.09%
Main Ratios
Current 2.30 3.04 4.86 1.36
Quick 2.30 3.04 4.86 1.34
Total Debt to Total Assets 23.93% 33.16% 29.78% 69.15%
Pre-tax Return on Net Worth -3.97% 27.22% 52.20% 42.38%
Pre-tax Return on Assets -3.02% 18.19% 36.65% 13.08%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -2.88% 10.20% 19.03% n.a
Return on Equity -3.97% 19.05% 36.54% n.a
Activity Ratios
Accounts Receivable Turnover 5.45 5.45 5.45 n.a
Collection Days 43 54 54 n.a
Accounts Payable Turnover 9.39 12.17 12.17 n.a
Payment Days 27 28 25 n.a
Total Asset Turnover 1.05 1.25 1.35 n.a
Debt Ratios
Debt to Net Worth 0.31 0.50 0.42 n.a
Current Liab. to Liab. 0.36 0.20 0.24 n.a
Liquidity Ratios
Net Working Capital $91,804 $160,038 $473,058 n.a
Interest Coverage -5.44 10.64 19.16 n.a
Additional Ratios
Assets to Sales 0.95 0.80 0.74 n.a
Current Debt/Total Assets 9% 7% 7% n.a
Acid Test 0.61 0.49 2.21 n.a
Sales/Net Worth 1.38 1.87 1.92 n.a
Dividend Payout 0.00 0.00 0.00 n.a

Valuation

The valuation of the business after three years is estimated at an average between two methods of valuation, based on an earnings multiple and based on a sales multiple. Both methods yield similar results. The average valuation is $4.53 million.

Investors will be given 20% of shares for their capital contribution. Kerrigan will be given 46% for his capital contribution and 34% for his contribution as founder. Investors will see a 63% internal rate of return based on this valuation.

The market value of the business will be determined after five years, when the business is best poised for sale. The valuation of the business is expected to be between $10 and $15 million for a strategic sale to a national trucking operator at that point.

Investment Analysis
Start Year 1 Year 2 Year 3
Initial Investment
Investment $718,000 $0 $0 $0
Dividends $0 $0 $0 $0
Ending Valuation $0 $0 $0 $3,108,600
Combination as Income Stream ($718,000) $0 $0 $3,108,600
Percent Equity Acquired 66%
Net Present Value (NPV) $1,470,488
Internal Rate of Return (IRR) 63%
Assumptions
Discount Rate 10.00%
Valuation Earnings Multiple 10 10 10
Valuation Sales Multiple 2 2 2
Investment (calculated) $718,000 $0 $0 $0
Dividends $0 $0 $0
Calculated Earnings-based Valuation $0 $1,480,000 $4,480,000
Calculated Sales-based Valuation $1,740,000 $2,910,000 $4,710,000
Calculated Average Valuation $870,000 $2,195,000 $4,595,000

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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
Unit Sales
Miles of Shipping 12,000 18,000 27,000 37,800 52,920 55,566 58,344 61,262 64,325 67,541 70,918 74,464
Preferred Client Accounts 0 1 2 4 7 8 9 10 10 11 12 14
Total Unit Sales 12,000 18,001 27,002 37,804 52,927 55,574 58,353 61,272 64,335 67,552 70,930 74,478
Unit Prices Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Miles of Shipping $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30 $1.30
Preferred Client Accounts $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Sales
Miles of Shipping $15,600 $23,400 $35,100 $49,140 $68,796 $72,236 $75,848 $79,640 $83,622 $87,803 $92,193 $96,803
Preferred Client Accounts $0 $1,000 $2,000 $4,000 $7,000 $8,000 $9,000 $10,000 $10,000 $11,000 $12,000 $14,000
Total Sales $15,600 $24,400 $37,100 $53,140 $75,796 $80,236 $84,848 $89,640 $93,622 $98,803 $104,193 $110,803
Direct Unit Costs Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Miles of Shipping 50.00% $0.65 $0.65 $0.65 $0.65 $0.65 $0.65 $0.65 $0.65 $0.65 $0.65 $0.65 $0.65
Preferred Client Accounts 10.00% $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00
Direct Cost of Sales
Miles of Shipping $7,800 $11,700 $17,550 $24,570 $34,398 $36,118 $37,924 $39,820 $41,811 $43,902 $46,097 $48,401
Preferred Client Accounts $0 $100 $200 $400 $700 $800 $900 $1,000 $1,000 $1,100 $1,200 $1,400
Subtotal Direct Cost of Sales $7,800 $11,800 $17,750 $24,970 $35,098 $36,918 $38,824 $40,820 $42,811 $45,002 $47,297 $49,801
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
CEO $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000
COO $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/Marketing Associate $0 $0 $0 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Administrator $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Truck Drivers (Non-Job Payroll) $1,000 $1,200 $1,440 $1,584 $1,901 $2,091 $2,300 $2,530 $2,783 $3,061 $3,367 $3,704
Total People 6 6 6 6 6 6 6 6 7 7 8 8
Total Payroll $13,000 $13,200 $13,440 $16,584 $16,901 $17,091 $17,300 $17,530 $17,783 $18,061 $18,367 $18,704

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 $15,600 $24,400 $37,100 $53,140 $75,796 $80,236 $84,848 $89,640 $93,622 $98,803 $104,193 $110,803
Direct Cost of Sales $7,800 $11,800 $17,750 $24,970 $35,098 $36,918 $38,824 $40,820 $42,811 $45,002 $47,297 $49,801
Other Costs of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $7,800 $11,800 $17,750 $24,970 $35,098 $36,918 $38,824 $40,820 $42,811 $45,002 $47,297 $49,801
Gross Margin $7,800 $12,600 $19,350 $28,170 $40,698 $43,318 $46,024 $48,820 $50,811 $53,802 $56,897 $61,001
Gross Margin % 50.00% 51.64% 52.16% 53.01% 53.69% 53.99% 54.24% 54.46% 54.27% 54.45% 54.61% 55.05%
Expenses
Payroll $13,000 $13,200 $13,440 $16,584 $16,901 $17,091 $17,300 $17,530 $17,783 $18,061 $18,367 $18,704
Marketing/Promotion $6,000 $6,000 $16,000 $6,000 $6,000 $6,000 $16,000 $6,000 $6,000 $16,000 $6,000 $6,000
Depreciation $4,580 $4,580 $4,580 $4,580 $4,580 $4,580 $4,580 $4,580 $4,580 $6,038 $6,038 $6,038
Truck Maintenance/Repair $600 $600 $600 $600 $600 $600 $600 $600 $600 $800 $800 $800
Rent $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Utilities $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300
Insurance $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Payroll Taxes 15% $2,535 $2,865 $3,347 $4,360 $5,167 $5,332 $5,507 $5,691 $5,878 $6,084 $6,302 $6,541
Licenses and Permitting 15% $0 $0 $1,000 $0 $0 $1,000 $0 $0 $5,000 $0 $0 $1,000
Web Hosting and Development $300 $218 $238 $259 $282 $307 $335 $365 $398 $434 $473 $516
Total Operating Expenses $31,315 $31,763 $43,505 $36,683 $37,830 $39,210 $48,622 $39,066 $44,539 $51,718 $42,281 $43,899
Profit Before Interest and Taxes ($23,515) ($19,163) ($24,155) ($8,513) $2,868 $4,108 ($2,598) $9,754 $6,272 $2,084 $14,616 $17,103
EBITDA ($18,935) ($14,583) ($19,575) ($3,933) $7,448 $8,688 $1,982 $14,334 $10,852 $8,122 $20,654 $23,141
Interest Expense $61 $60 $58 $57 $55 $53 $51 $48 $46 $1,168 $1,133 $1,100
Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Net Profit ($23,576) ($19,223) ($24,214) ($8,570) $2,813 $4,055 ($2,649) $9,706 $6,226 $916 $13,483 $16,003
Net Profit/Sales -151.13% -78.78% -65.27% -16.13% 3.71% 5.05% -3.12% 10.83% 6.65% 0.93% 12.94% 14.44%

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 $3,900 $6,100 $9,275 $13,285 $18,949 $20,059 $21,212 $22,410 $23,405 $24,701 $26,048 $27,701
Cash from Receivables $0 $6,240 $15,220 $23,380 $34,241 $48,917 $58,623 $62,022 $65,553 $68,823 $72,289 $76,258
Subtotal Cash from Operations $3,900 $12,340 $24,495 $36,665 $53,190 $68,976 $79,835 $84,432 $88,958 $93,524 $98,337 $103,959
Additional Cash Received
Sales Tax, VAT, HST/GST Received 8.00% $1,248 $1,952 $2,968 $4,251 $6,064 $6,419 $6,788 $7,171 $7,490 $7,904 $8,335 $8,864
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 $0 $0 $0 $0 $0 $0 $135,000 $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 $5,148 $14,292 $27,463 $40,916 $59,254 $75,395 $86,623 $91,603 $96,448 $236,428 $106,673 $112,823
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 $13,000 $13,200 $13,440 $16,584 $16,901 $17,091 $17,300 $17,530 $17,783 $18,061 $18,367 $18,704
Bill Payments $720 $21,738 $26,425 $43,202 $40,911 $51,603 $54,880 $65,356 $58,064 $65,325 $73,538 $66,430
Subtotal Spent on Operations $13,720 $34,938 $39,865 $59,786 $57,812 $68,693 $72,180 $82,886 $75,847 $83,386 $91,905 $85,134
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $1,248 $1,952 $2,968 $4,251 $6,064 $6,419 $6,788 $7,171 $7,490 $7,904 $8,335 $8,864
Principal Repayment of Current Borrowing $100 $110 $121 $133 $146 $161 $177 $195 $215 $237 $261 $144
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $3,750 $3,750
Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $175,000 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $15,068 $37,000 $42,954 $64,170 $64,022 $75,273 $79,145 $90,253 $83,552 $266,527 $104,252 $97,892
Net Cash Flow ($9,920) ($22,708) ($15,491) ($23,254) ($4,768) $122 $7,477 $1,350 $12,896 ($30,099) $2,421 $14,931
Cash Balance $80,080 $57,372 $41,882 $18,628 $13,860 $13,982 $21,459 $22,809 $35,705 $5,605 $8,026 $22,957

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 $90,000 $80,080 $57,372 $41,882 $18,628 $13,860 $13,982 $21,459 $22,809 $35,705 $5,605 $8,026 $22,957
Accounts Receivable $0 $11,700 $23,760 $36,365 $52,840 $75,446 $86,705 $91,718 $96,927 $101,590 $106,870 $112,726 $119,570
Other Current Assets $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000
Total Current Assets $110,000 $111,780 $101,132 $98,247 $91,468 $109,306 $120,687 $133,177 $139,736 $157,295 $132,475 $140,752 $162,527
Long-term Assets
Long-term Assets $550,000 $550,000 $550,000 $550,000 $550,000 $550,000 $550,000 $550,000 $550,000 $550,000 $725,000 $725,000 $725,000
Accumulated Depreciation $0 $4,580 $9,160 $13,740 $18,320 $22,900 $27,480 $32,060 $36,640 $41,220 $47,258 $53,296 $59,334
Total Long-term Assets $550,000 $545,420 $540,840 $536,260 $531,680 $527,100 $522,520 $517,940 $513,360 $508,780 $677,742 $671,704 $665,666
Total Assets $660,000 $657,200 $641,972 $634,507 $623,148 $636,406 $643,207 $651,117 $653,096 $666,075 $810,217 $812,456 $828,193
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 $20,876 $24,981 $41,850 $39,195 $49,786 $52,693 $63,429 $55,897 $62,865 $71,328 $64,095 $67,723
Current Borrowing $5,000 $4,900 $4,790 $4,669 $4,536 $4,390 $4,229 $4,052 $3,857 $3,642 $3,405 $3,144 $3,000
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $5,000 $25,776 $29,771 $46,519 $43,731 $54,176 $56,922 $67,481 $59,754 $66,507 $74,733 $67,239 $70,723
Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $135,000 $131,250 $127,500
Total Liabilities $5,000 $25,776 $29,771 $46,519 $43,731 $54,176 $56,922 $67,481 $59,754 $66,507 $209,733 $198,489 $198,223
Paid-in Capital $718,000 $718,000 $718,000 $718,000 $718,000 $718,000 $718,000 $718,000 $718,000 $718,000 $718,000 $718,000 $718,000
Retained Earnings ($63,000) ($63,000) ($63,000) ($63,000) ($63,000) ($63,000) ($63,000) ($63,000) ($63,000) ($63,000) ($63,000) ($63,000) ($63,000)
Earnings $0 ($23,576) ($42,799) ($67,013) ($75,583) ($72,770) ($68,715) ($71,364) ($61,658) ($55,432) ($54,515) ($41,033) ($25,030)
Total Capital $655,000 $631,424 $612,201 $587,987 $579,417 $582,230 $586,285 $583,636 $593,342 $599,568 $600,485 $613,967 $629,970
Total Liabilities and Capital $660,000 $657,200 $641,972 $634,507 $623,148 $636,406 $643,207 $651,117 $653,096 $666,075 $810,217 $812,456 $828,193
Net Worth $655,000 $631,424 $612,201 $587,987 $579,417 $582,230 $586,285 $583,636 $593,342 $599,568 $600,485 $613,967 $629,970

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