Clean Office Pros
Financial Plan
Clean Office Pros will grow significantly, even over the first three years of operation, by taking advantage of the opportunity presented by its first target market, small offices, and leveraging its success there with medium and large offices. Growth of about $300,000 is expected in sales from the first year to second and over $400,000 from the second year to third.
Financing for this growth will come from the free cash flows generated by the healthy margins in this business once break-even volume has been achieved in the first year.
By the fifth year of operation, the business will be well positioned for a strategic sale to a commercial cleaning franchise (one of the competitors discussed earlier) interested in expanding its expertise with small businesses. At this point an exit will be possible for investors and the original owners.
Start-up Funding
Start-up funding will come in part from the financing of the initial purchases (delivery van, computer and cleaning equipment), and from credit card debt.
Beyond this debt financing, most start-up funding will be provided by the two founders and ;from additional angel investors. Once the additional investment has been contributed, the angel investors will own 49% of the business, Paul Vinci will own 26% and Reid Werbitt will own 25%.
Start-up Funding | |
Start-up Expenses to Fund | $33,500 |
Start-up Assets to Fund | $105,000 |
Total Funding Required | $138,500 |
Assets | |
Non-cash Assets from Start-up | $45,000 |
Cash Requirements from Start-up | $60,000 |
Additional Cash Raised | $0 |
Cash Balance on Starting Date | $60,000 |
Total Assets | $105,000 |
Liabilities and Capital | |
Liabilities | |
Current Borrowing | $5,000 |
Long-term Liabilities | $20,000 |
Accounts Payable (Outstanding Bills) | $2,000 |
Other Current Liabilities (interest-free) | $0 |
Total Liabilities | $27,000 |
Capital | |
Planned Investment | |
Reid Werbitt | $25,000 |
Paul Vinci | $25,000 |
Additional Investors | $61,500 |
Additional Investment Requirement | $0 |
Total Planned Investment | $111,500 |
Loss at Start-up (Start-up Expenses) | ($33,500) |
Total Capital | $78,000 |
Total Capital and Liabilities | $105,000 |
Total Funding | $138,500 |
Break-even Analysis
Each cleaning service offered has a healthy margin and a break even will occur around 552 units sold per month. This represents 512,000 square feet of offices or around 600 small business clients (or 400 small business and 100 medium business clients). At this point, work will be both over night and on weekends, with an average of 16 clients cleaned per day by shift workers. Six crews will be needed to provide this amount of service.

Break-even Analysis | |
Monthly Units Break-even | 552 |
Monthly Revenue Break-even | $45,012 |
Assumptions: | |
Average Per-Unit Revenue | $81.58 |
Average Per-Unit Variable Cost | $29.73 |
Estimated Monthly Fixed Cost | $28,608 |
Projected Profit and Loss
Gross margins will remain relatively stable and grow slightly as better margin business (medium and large offices) is sought out and better prices are established with vendors for volume discounts. The first year will represent a net profit of $71,000 which will continue to grow.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $705,053 | $1,001,500 | $1,452,500 |
Direct Cost of Sales | $256,951 | $360,600 | $521,000 |
Other Costs of Sales | $0 | $0 | $0 |
Total Cost of Sales | $256,951 | $360,600 | $521,000 |
Gross Margin | $448,102 | $640,900 | $931,500 |
Gross Margin % | 63.56% | 63.99% | 64.13% |
Expenses | |||
Payroll | $156,000 | $180,000 | $229,000 |
Marketing/Promotion | $79,000 | $90,000 | $110,000 |
Depreciation | $18,400 | $30,000 | $35,000 |
Rent | $30,000 | $35,000 | $50,000 |
Utilities | $1,800 | $2,400 | $3,000 |
Insurance | $3,000 | $4,000 | $5,000 |
Payroll Taxes | $49,095 | $63,060 | $86,450 |
Other | $6,000 | $10,000 | $15,000 |
Total Operating Expenses | $343,295 | $414,460 | $533,450 |
Profit Before Interest and Taxes | $104,807 | $226,440 | $398,050 |
EBITDA | $123,207 | $256,440 | $433,050 |
Interest Expense | $2,766 | $4,809 | $6,159 |
Taxes Incurred | $30,612 | $66,489 | $117,567 |
Net Profit | $71,429 | $155,142 | $274,324 |
Net Profit/Sales | 10.13% | 15.49% | 18.89% |
Projected Cash Flow
Cash flow before dividends will be positive in the first year. Five months of negative cash flow are required for marketing activities to take hold before they show a greater effect on sales. Dividends can be paid out beginning in month nine to investors.
Accounts receivable will be collected in 30 days, but 45 days average has been given to be conservative.
Investment will be continually made in additional cleaning equipment and delivery vans to enable more cleaning crew to work. Furthermore, by the end of the first year, the office will expand to allow for additional storage and staff.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $0 | $0 | $0 |
Cash from Receivables | $571,061 | $945,162 | $1,366,790 |
Subtotal Cash from Operations | $571,061 | $945,162 | $1,366,790 |
Additional Cash Received | |||
Sales Tax, VAT, HST/GST Received | $56,404 | $80,120 | $116,200 |
New Current Borrowing | $10,000 | $17,000 | $17,000 |
New Other Liabilities (interest-free) | $0 | $0 | $0 |
New Long-term Liabilities | $20,000 | $20,000 | $20,000 |
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 | $657,465 | $1,062,282 | $1,519,990 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $156,000 | $180,000 | $229,000 |
Bill Payments | $405,528 | $639,751 | $891,342 |
Subtotal Spent on Operations | $561,528 | $819,751 | $1,120,342 |
Additional Cash Spent | |||
Sales Tax, VAT, HST/GST Paid Out | $56,404 | $80,120 | $116,200 |
Principal Repayment of Current Borrowing | $7,913 | $15,000 | $16,000 |
Other Liabilities Principal Repayment | $0 | $0 | $0 |
Long-term Liabilities Principal Repayment | $6,000 | $8,000 | $8,000 |
Purchase Other Current Assets | $2,000 | $15,000 | $15,000 |
Purchase Long-term Assets | $20,000 | $20,000 | $40,000 |
Dividends | $20,000 | $75,000 | $200,000 |
Subtotal Cash Spent | $673,845 | $1,032,871 | $1,515,542 |
Net Cash Flow | ($16,380) | $29,411 | $4,448 |
Cash Balance | $43,620 | $73,031 | $77,479 |
Projected Balance Sheet
The net worth of the business will grow significantly over the first three years of operation as the business will be primarily financed by its own earnings and not need to take on a great deal of new debt. The debt that is taken on will be financing for the purchases of new cleaning equipment and delivery vans, primarily.
Additional capital is not required over the first three years of operation as the free cash flows from the business will support the business.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $43,620 | $73,031 | $77,479 |
Accounts Receivable | $133,992 | $190,330 | $276,041 |
Other Current Assets | $7,000 | $22,000 | $37,000 |
Total Current Assets | $184,612 | $285,361 | $390,519 |
Long-term Assets | |||
Long-term Assets | $60,000 | $80,000 | $120,000 |
Accumulated Depreciation | $18,400 | $48,400 | $83,400 |
Total Long-term Assets | $41,600 | $31,600 | $36,600 |
Total Assets | $226,212 | $316,961 | $427,119 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $55,696 | $52,303 | $75,138 |
Current Borrowing | $7,087 | $9,087 | $10,087 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $62,784 | $61,391 | $85,225 |
Long-term Liabilities | $34,000 | $46,000 | $58,000 |
Total Liabilities | $96,784 | $107,391 | $143,225 |
Paid-in Capital | $111,500 | $111,500 | $111,500 |
Retained Earnings | ($53,500) | ($57,071) | ($101,930) |
Earnings | $71,429 | $155,142 | $274,324 |
Total Capital | $129,429 | $209,570 | $283,894 |
Total Liabilities and Capital | $226,212 | $316,961 | $427,119 |
Net Worth | $129,429 | $209,570 | $283,894 |
Business Ratios
This table shows ratios for the three years of the plan compared to the janitorial services businesses of similar revenues. Clean Office Pros expects to improve on industry profitability, as shown in this table, even with slightly higher spending on S G A and advertising as a percentage of sales. Gross margins will be slightly better than the comparable industry gross margins.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | n.a. | 42.05% | 45.03% | 0.77% |
Percent of Total Assets | ||||
Accounts Receivable | 59.23% | 60.05% | 64.63% | 14.54% |
Other Current Assets | 3.09% | 6.94% | 8.66% | 37.68% |
Total Current Assets | 81.61% | 90.03% | 91.43% | 54.28% |
Long-term Assets | 18.39% | 9.97% | 8.57% | 45.72% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 27.75% | 19.37% | 19.95% | 28.46% |
Long-term Liabilities | 15.03% | 14.51% | 13.58% | 71.54% |
Total Liabilities | 42.78% | 33.88% | 33.53% | 100.00% |
Net Worth | 57.22% | 66.12% | 66.47% | 0.00% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 63.56% | 63.99% | 64.13% | 62.79% |
Selling, General & Administrative Expenses | 53.42% | 48.50% | 45.24% | 17.10% |
Advertising Expenses | 11.20% | 8.99% | 7.57% | 0.21% |
Profit Before Interest and Taxes | 14.87% | 22.61% | 27.40% | 5.93% |
Main Ratios | ||||
Current | 2.94 | 4.65 | 4.58 | 1.35 |
Quick | 2.94 | 4.65 | 4.58 | 1.28 |
Total Debt to Total Assets | 42.78% | 33.88% | 33.53% | 100.00% |
Pre-tax Return on Net Worth | 78.84% | 105.75% | 138.04% | -6101891.37% |
Pre-tax Return on Assets | 45.11% | 69.92% | 91.75% | 31.52% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 10.13% | 15.49% | 18.89% | n.a |
Return on Equity | 55.19% | 74.03% | 96.63% | n.a |
Activity Ratios | ||||
Accounts Receivable Turnover | 5.26 | 5.26 | 5.26 | n.a |
Collection Days | 43 | 59 | 59 | n.a |
Accounts Payable Turnover | 8.25 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 31 | 25 | n.a |
Total Asset Turnover | 3.12 | 3.16 | 3.40 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.75 | 0.51 | 0.50 | n.a |
Current Liab. to Liab. | 0.65 | 0.57 | 0.60 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $121,829 | $223,970 | $305,294 | n.a |
Interest Coverage | 37.90 | 47.09 | 64.63 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.32 | 0.32 | 0.29 | n.a |
Current Debt/Total Assets | 28% | 19% | 20% | n.a |
Acid Test | 0.81 | 1.55 | 1.34 | n.a |
Sales/Net Worth | 5.45 | 4.78 | 5.12 | n.a |
Dividend Payout | 0.28 | 0.48 | 0.73 | n.a |