South Kelleton Keys and Locksmith will be able to launch based on the savings of its owner and a significant long-term loan, as described in the start-up funding description. After this point, the business will show healthy profits and cash balance to be able to grow with its own cash flow. Steady growth is expected, requiring additional staff, but still using the same basic assets (store, inventory, equipment, etc.) for the most part. As assistant locksmiths work primarily in the field at customer sites, a larger facility is not required to take them on. The owner will keep a healthy cash balance in the business for emergencies and will withdraw additional cash as dividends.
8.1 Start-up Funding
Padraic Lawkse will invest significant startup funding out of his savings and from a credit card line-of-credit to launch the business (current borrowing on the Start-up Funding table). A business loan is sought against the assets of the business to be repaid over the first three years of operation.
8.2 Important Assumptions
This business plan assumes the availability of potential staff due to a favorable job market and the availability of storefronts to launch the business.
8.3 Break-even Analysis
With a monthly break-even shown in the table below the business is expected to reach break-even from a profit perspective in the seventh month of the first year.
8.4 Projected Profit and Loss
The primary operating expenses for the business will be marketing and promotion which will include advertising, producing direct mail pieces and brochures, ongoing website hosting and maintenance and attending events.
Depreciation of long-term assets includes equipment in the store and tools for services, including both the equipment and tools purchased at start-up and allowances for additional purchases (which are shown on the cash flow statement).
Rent is expected to rise and the business will seek a 5+ year lease on an appropriate storefront space of at least 1,000 square feet.
Insurance and bonding includes ongoing insurance payment for general liability for the store and work at client sites and the van, as well as renewals of the surety bond each year.
Payroll taxes includes payments for health insurance for full-time employees.
Store supplies includes all supplies (not inventory) which are expensed immediately for store cleaning, maintenance, and operation.
Van fuel, maintenance, and parking covers the cost of fuel, ongoing maintenance and upkeep of the van, and parking at customer sites when only pay parking is available.
Training and education includes subscriptions and course work for Padraic Lawkse and for the assistant locksmith to seek expertise in locksmith work.
8.5 Projected Cash Flow
Cash flow will become consistently positive by month 6, removing the need for additional funding to get the store and business off the ground. The business will attempt to keep a healthy cash balance in reserve for the potential that equipment or other assets must be repaired or replaced. Steady investments in the assets of the business have been worked in to these projections to account for the gradual replacement of equipment.
The cash flow table shows a budget for the purchase of additional tools and equipment as they become worn out, broken, or lost, and for purchasing tools to install and maintain new types of security devices as they are released to the market so South Kelleton Keys and Locksmith can remain up to date.
The owner will take out dividends from the business when cash flow can support it, while keeping a cash reserve of around $50,000 at any given time in the second and third year in the business.
The borrowing on credit cards will be paid off over the first year.
8.6 Projected Balance Sheet
The business will pay off its current borrowing in its first year of operation and its long-term liabilities over the first three years. Aside from a contingency fund, the business will not retain a great deal of cash in the business, but will pay profits out as dividends for the most part. Net worth will grow steadily, but not radically, over the first three years of operation for this reason.
8.7 Business Ratios
South Kelleton Keys and Locksmith's business ratios are compared here to SIC code 7699 for locksmith businesses with annual sales of $500,000 to $1 million. Due to its ownership of a store, SKelleton Keys' ratios will differ from the average locksmith of a similar volume of sales, as many locksmiths work only from a van. It will carry more inventory and will hold more accounts receivables due to its higher level of business sales. The gross margin is driven higher due to the revenue stream of referral commissions which is almost entirely gross profit.