Fescue & Sons Yard Care
Financial Plan
The following sections will outline important financial information.
7.1 Start-up Funding
The owners are contributing a truck worth $3,500 as a long-term asset to the business, plus $1,500 cash toward purchasing the short-term assets needed (mowers, trimmers, safety equipment, etc.). In addition, we are seeking a loan of $11,000 to fund the rest of the start-up requirements. This loan will be backed by the Fescues’ equity in their home.
Start-up Funding | |
Start-up Expenses to Fund | $3,800 |
Start-up Assets to Fund | $12,200 |
Total Funding Required | $16,000 |
Assets | |
Non-cash Assets from Start-up | $6,000 |
Cash Requirements from Start-up | $6,200 |
Additional Cash Raised | $0 |
Cash Balance on Starting Date | $6,200 |
Total Assets | $12,200 |
Liabilities and Capital | |
Liabilities | |
Current Borrowing | $0 |
Long-term Liabilities | $11,000 |
Accounts Payable (Outstanding Bills) | $0 |
Other Current Liabilities (interest-free) | $0 |
Total Liabilities | $11,000 |
Capital | |
Planned Investment | |
Owners | $5,000 |
Other | $0 |
Additional Investment Requirement | $0 |
Total Planned Investment | $5,000 |
Loss at Start-up (Start-up Expenses) | ($3,800) |
Total Capital | $1,200 |
Total Capital and Liabilities | $12,200 |
Total Funding | $16,000 |
7.2 Important Assumptions
The following table highlights some important financial assumptions of Fescue & Sons.
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 | 10.00% | 10.00% | 10.00% |
Tax Rate | 30.00% | 30.00% | 30.00% |
Other | 0 | 0 | 0 |
7.3 Projected Balance Sheet
The following table indicates the projected balance sheet. As we retain earnings and repay the long-term loan, our net worth will increase from $1,200 at start-up to over $21,000 by year three.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $13,048 | $19,632 | $37,538 |
Other Current Assets | $2,500 | $2,500 | $2,500 |
Total Current Assets | $15,548 | $22,132 | $40,038 |
Long-term Assets | |||
Long-term Assets | $3,500 | $10,500 | $10,500 |
Accumulated Depreciation | $1,152 | $3,704 | $6,256 |
Total Long-term Assets | $2,348 | $6,796 | $4,244 |
Total Assets | $17,896 | $28,928 | $44,282 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $1,925 | $1,244 | $1,455 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $1,925 | $1,244 | $1,455 |
Long-term Liabilities | $9,896 | $8,796 | $7,696 |
Total Liabilities | $11,821 | $10,040 | $9,151 |
Paid-in Capital | $5,000 | $5,000 | $5,000 |
Retained Earnings | ($3,800) | $1,076 | $13,888 |
Earnings | $4,876 | $12,812 | $16,242 |
Total Capital | $6,076 | $18,888 | $35,130 |
Total Liabilities and Capital | $17,896 | $28,928 | $44,282 |
Net Worth | $6,076 | $18,888 | $35,130 |
7.4 Break-even Analysis
The Break-even Analysis indicates $3,830 is needed in monthly revenue to break even.

Break-even Analysis | |
Monthly Revenue Break-even | $3,374 |
Assumptions: | |
Average Percent Variable Cost | 8% |
Estimated Monthly Fixed Cost | $3,098 |
7.5 Projected Profit and Loss
The following table and charts show our projected profit and loss. After paying reasonable salaries, we will make a modest profit in the first year, with increasing profits in future years. Our gross margins will remain around 91 or 92%. Our largest expenses as a service business are payroll and payroll taxes.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $49,204 | $75,500 | $89,000 |
Direct Cost of Sales | $4,022 | $6,110 | $7,220 |
Other | $0 | $0 | $0 |
Total Cost of Sales | $4,022 | $6,110 | $7,220 |
Gross Margin | $45,182 | $69,390 | $81,780 |
Gross Margin % | 91.83% | 91.91% | 91.89% |
Expenses | |||
Payroll | $33,500 | $45,000 | $52,500 |
Marketing/Promotion | $125 | $200 | $300 |
Depreciation | $1,152 | $2,552 | $2,552 |
Insurance | $1,200 | $1,200 | $1,200 |
Licenses + bonded fees | $1,200 | $1,200 | $1,200 |
Payroll Taxes | $0 | $0 | $0 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $37,177 | $50,152 | $57,752 |
Profit Before Interest and Taxes | $8,005 | $19,238 | $24,028 |
EBITDA | $9,157 | $21,790 | $26,580 |
Interest Expense | $1,040 | $935 | $825 |
Taxes Incurred | $2,090 | $5,491 | $6,961 |
Net Profit | $4,876 | $12,812 | $16,242 |
Net Profit/Sales | 9.91% | 16.97% | 18.25% |
7.6 Projected Cash Flow
The following chart and table show our projected cash flow. We will repay the loan over ten years (interest payments can be found in the Profit and Loss, above). The table also shows planned purchases of additional equipment as long-term assets in the second fiscal year.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $49,204 | $75,500 | $89,000 |
Subtotal Cash from Operations | $49,204 | $75,500 | $89,000 |
Additional Cash Received | |||
Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
New Current Borrowing | $0 | $0 | $0 |
New Other Liabilities (interest-free) | $0 | $0 | $0 |
New Long-term Liabilities | $0 | $0 | $0 |
Sales of Other Current Assets | $0 | $0 | $0 |
Sales of Long-term Assets | $0 | $0 | $0 |
New Investment Received | $0 | $0 | $0 |
Subtotal Cash Received | $49,204 | $75,500 | $89,000 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $33,500 | $45,000 | $52,500 |
Bill Payments | $7,752 | $15,816 | $17,494 |
Subtotal Spent on Operations | $41,252 | $60,816 | $69,994 |
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 | $1,104 | $1,100 | $1,100 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $0 | $7,000 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $42,356 | $68,916 | $71,094 |
Net Cash Flow | $6,848 | $6,584 | $17,906 |
Cash Balance | $13,048 | $19,632 | $37,538 |
7.7 Business Ratios
The following table outlines some of the more important ratios from the Lawn and Garden Services industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 0782.
The major difference between our ratios and the industry standard is in gross margin. The Lawn and Garden Service industry is labor intensive, and most businesses include manual labor expenses in their direct cost of sales. As a small, family-owned business without a large staff of workers, I am treating these as operating expenses, instead. If personnel costs are included, our gross margin in the first year falls around 23%, and by year three it is up around 32%, roughly the industry average.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 53.44% | 17.88% | 9.12% |
Percent of Total Assets | ||||
Other Current Assets | 13.97% | 8.64% | 5.65% | 32.14% |
Total Current Assets | 86.88% | 76.51% | 90.42% | 51.33% |
Long-term Assets | 13.12% | 23.49% | 9.58% | 48.67% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 10.75% | 4.30% | 3.29% | 25.79% |
Long-term Liabilities | 55.30% | 30.41% | 17.38% | 24.81% |
Total Liabilities | 66.05% | 34.71% | 20.67% | 50.60% |
Net Worth | 33.95% | 65.29% | 79.33% | 49.40% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 91.83% | 91.91% | 91.89% | 32.95% |
Selling, General & Administrative Expenses | 81.92% | 74.94% | 73.64% | 18.41% |
Advertising Expenses | 0.00% | 0.00% | 0.00% | 0.34% |
Profit Before Interest and Taxes | 16.27% | 25.48% | 27.00% | 2.04% |
Main Ratios | ||||
Current | 8.08 | 17.79 | 27.51 | 1.38 |
Quick | 8.08 | 17.79 | 27.51 | 0.88 |
Total Debt to Total Assets | 66.05% | 34.71% | 20.67% | 62.84% |
Pre-tax Return on Net Worth | 114.64% | 96.91% | 66.05% | 4.79% |
Pre-tax Return on Assets | 38.92% | 63.27% | 52.40% | 12.89% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 9.91% | 16.97% | 18.25% | n.a |
Return on Equity | 80.25% | 67.83% | 46.23% | n.a |
Activity Ratios | ||||
Accounts Payable Turnover | 5.03 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 38 | 28 | n.a |
Total Asset Turnover | 2.75 | 2.61 | 2.01 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 1.95 | 0.53 | 0.26 | n.a |
Current Liab. to Liab. | 0.16 | 0.12 | 0.16 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $13,624 | $20,888 | $38,582 | n.a |
Interest Coverage | 7.70 | 20.58 | 29.14 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.36 | 0.38 | 0.50 | n.a |
Current Debt/Total Assets | 11% | 4% | 3% | n.a |
Acid Test | 8.08 | 17.79 | 27.51 | n.a |
Sales/Net Worth | 8.10 | 4.00 | 2.53 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |