Good Earth Resources
Financial Plan
The purchase of Barton landfill at the onset is essential. Since Barton is currently operating, it allows GER the opportunity to augment the current waste stream by hauling from St. Louis and St. Charles, Missouri. The present owners of Barton have been ready to retire for several years and have lost interest in increasing this business. This affords GER the opportunity to build both businesses using Barton’s cash flow and customer base. GER can solicit additional business in anticipation of Martin Creek’s opening day. Prior to opening, waste would be transported to Barton. Thus, at Martin Creek’s opening, there will be excellent revenue sources on the first day of business.
8.1 Important Assumptions
The financial plan depends on important assumptions, most of which are shown in the tables. GER expects a 30 to 45 day lag between services rendered and payment receipt because of the nature of the business. Interest rates, tax rates, and personnel burden are based on conservative assumptions.
Some of the more important underlying assumptions are:
- GER assumes to be able to obtain the final Missouri Department of Natural Resources permit for operation of the landfill.
- GER assumes, of course, that there are no unforeseen changes in technology to make landfills obsolete.
- A recessionary economy would not have an major negative effect on the cash flow, however there may be adjustments in both income and expenses should the recession be extensive and long-term. Even during a recession municipalities generate trash and it must be removed to a landfill. This is a recession-proof business that flourishes in good times and bad.
General Assumptions | |||
Year 1 | Year 2 | Year 3 | |
Plan Month | 1 | 2 | 3 |
Current Interest Rate | 8.00% | 8.00% | 8.00% |
Long-term Interest Rate | 8.00% | 8.00% | 8.00% |
Tax Rate | 2.50% | 0.00% | 2.50% |
Other | 0 | 0 | 0 |
8.2 Break-even Analysis
This chart and table summarize the break-even analysis. GER expects to break even shortly after commencing operations as a result of GER personnel going to the hauler’s transfer stations and using GER road tractors and divert the waste stream. Each trailer holds 80 yards. The monthly units refers to the number of trailer loads with approximately 27 tons (80 yards). Total truckloads for 690 tons daily is 673 loads per month, six days per week easily provided by seven road tractors.

Break-even Analysis | |
Monthly Units Break-even | 11,417 |
Monthly Revenue Break-even | $257,928 |
Assumptions: | |
Average Per-Unit Revenue | $22.59 |
Average Per-Unit Variable Cost | $0.30 |
Estimated Monthly Fixed Cost | $254,477 |
8.3 Projected Profit and Loss
GER projected profit and loss is shown on the following table, with sales at $6,354,720 the first year and increasing each year thereafter. Due to expenditures in the first year, initial profits are lower in comparison to the second year. Once Martin Creek landfill is fully constructed, profits rise dramatically. This chart reflects 940 tons per day to Barton. GER has verbal commitments to bring in this amount starting with the first day of ownership. The Martin Creek Profit & Loss Statement in the Appendix shows 600 tons per day diverted to Barton in the first year and in the 13th month delivered to Martin Creek. By hauling to Barton during Martin Creek’s construction phase, GER will both increase profits and secure this business for Martin Creek at the time it is ready to accept its own waste stream. The additional 600 tons per day provides an additional sales potential of between $4,492,800 on the low side and $5,241,600 on the high side, depending on the length of contract with this transfer station agreed upon.
Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $6,354,720 | $6,990,000 | $7,604,400 |
Direct Cost of Sales | $85,022 | $37,771 | $40,754 |
Geothermal Mat | $0 | $0 | $0 |
Total Cost of Sales | $85,022 | $37,771 | $40,754 |
Gross Margin | $6,269,698 | $6,952,229 | $7,563,646 |
Gross Margin % | 98.66% | 99.46% | 99.46% |
Expenses | |||
Payroll | $541,824 | $569,002 | $597,545 |
Sales and Marketing and Other Expenses | $1,901,908 | $2,019,908 | $2,029,908 |
Depreciation | $0 | $0 | $0 |
Truck Rental | $280,800 | $280,800 | $280,800 |
Utilities | $14,400 | $14,400 | $14,400 |
Insurance | $64,392 | $64,392 | $64,392 |
Telephone | $12,000 | $12,000 | $12,000 |
Payroll Taxes | $238,403 | $250,361 | $262,920 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $3,053,727 | $3,210,863 | $3,261,965 |
Profit Before Interest and Taxes | $3,215,971 | $3,741,366 | $4,301,681 |
EBITDA | $3,215,971 | $3,741,366 | $4,301,681 |
Interest Expense | $43,287 | $89,530 | $101,582 |
Taxes Incurred | $67,731 | $0 | $105,002 |
Net Profit | $3,104,953 | $3,651,836 | $4,095,097 |
Net Profit/Sales | 48.86% | 52.24% | 53.85% |
8.4 Projected Cash Flow
Cash flow projections are shown in the table below.
Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $1,588,680 | $1,747,500 | $1,901,100 |
Cash from Receivables | $3,984,939 | $5,164,414 | $5,627,780 |
Subtotal Cash from Operations | $5,573,619 | $6,911,914 | $7,528,880 |
Additional Cash Received | |||
Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
New Current Borrowing | $596,090 | $0 | $0 |
New Other Liabilities (interest-free) | $0 | $0 | $0 |
New Long-term Liabilities | $448,692 | $448,692 | $448,692 |
Sales of Other Current Assets | $0 | $0 | $0 |
Sales of Long-term Assets | $0 | $0 | $0 |
New Investment Received | $7,548,000 | $0 | $0 |
Subtotal Cash Received | $14,166,401 | $7,360,606 | $7,977,572 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $541,824 | $569,002 | $597,545 |
Bill Payments | $2,486,914 | $2,762,588 | $2,900,038 |
Subtotal Spent on Operations | $3,028,738 | $3,331,590 | $3,497,583 |
Additional Cash Spent | |||
Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
Principal Repayment of Current Borrowing | $3,500,000 | $300,000 | $296,090 |
Other Liabilities Principal Repayment | $0 | $0 | $0 |
Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $5,002,281 | $0 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $11,531,019 | $3,631,590 | $3,793,673 |
Net Cash Flow | $2,635,382 | $3,729,015 | $4,183,899 |
Cash Balance | $2,764,710 | $6,493,725 | $10,677,624 |
8.5 Projected Balance Sheet
The following table shows the projected balance sheet for Good Earth Resources.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $2,764,710 | $6,493,725 | $10,677,624 |
Accounts Receivable | $781,101 | $859,188 | $934,708 |
Other Current Assets | $350,000 | $350,000 | $350,000 |
Total Current Assets | $3,895,811 | $7,702,912 | $11,962,331 |
Long-term Assets | |||
Long-term Assets | $12,002,281 | $12,002,281 | $12,002,281 |
Accumulated Depreciation | $0 | $0 | $0 |
Total Long-term Assets | $12,002,281 | $12,002,281 | $12,002,281 |
Total Assets | $15,898,092 | $19,705,193 | $23,964,612 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $221,029 | $227,602 | $239,323 |
Current Borrowing | $596,090 | $296,090 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $817,119 | $523,692 | $239,323 |
Long-term Liabilities | $448,692 | $897,384 | $1,346,076 |
Total Liabilities | $1,265,811 | $1,421,076 | $1,585,399 |
Paid-in Capital | $11,548,000 | $11,548,000 | $11,548,000 |
Retained Earnings | ($20,672) | $3,084,281 | $6,736,117 |
Earnings | $3,104,953 | $3,651,836 | $4,095,097 |
Total Capital | $14,632,281 | $18,284,117 | $22,379,214 |
Total Liabilities and Capital | $15,898,092 | $19,705,193 | $23,964,612 |
Net Worth | $14,632,281 | $18,284,117 | $22,379,214 |
8.6 Business Ratios
The following table compares the estimated ratios to the Standard Industry Code #4953, Solid Waste Landfill.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 10.00% | 8.79% | 7.24% |
Percent of Total Assets | ||||
Accounts Receivable | 4.91% | 4.36% | 3.90% | 7.22% |
Other Current Assets | 2.20% | 1.78% | 1.46% | 25.93% |
Total Current Assets | 24.50% | 39.09% | 49.92% | 33.95% |
Long-term Assets | 75.50% | 60.91% | 50.08% | 66.05% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 5.14% | 2.66% | 1.00% | 17.37% |
Long-term Liabilities | 2.82% | 4.55% | 5.62% | 23.19% |
Total Liabilities | 7.96% | 7.21% | 6.62% | 40.56% |
Net Worth | 92.04% | 92.79% | 93.38% | 59.44% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 98.66% | 99.46% | 99.46% | 31.67% |
Selling, General & Administrative Expenses | 48.74% | 47.76% | 45.73% | 14.70% |
Advertising Expenses | 2.05% | 2.00% | 1.97% | 0.29% |
Profit Before Interest and Taxes | 50.61% | 53.52% | 56.57% | 2.51% |
Main Ratios | ||||
Current | 4.77 | 14.71 | 49.98 | 1.24 |
Quick | 4.77 | 14.71 | 49.98 | 0.84 |
Total Debt to Total Assets | 7.96% | 7.21% | 6.62% | 62.44% |
Pre-tax Return on Net Worth | 21.68% | 19.97% | 18.77% | 2.35% |
Pre-tax Return on Assets | 19.96% | 18.53% | 17.53% | 6.25% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 48.86% | 52.24% | 53.85% | n.a |
Return on Equity | 21.22% | 19.97% | 18.30% | n.a |
Activity Ratios | ||||
Accounts Receivable Turnover | 6.10 | 6.10 | 6.10 | n.a |
Collection Days | 57 | 57 | 57 | n.a |
Accounts Payable Turnover | 12.25 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 30 | 29 | n.a |
Total Asset Turnover | 0.40 | 0.35 | 0.32 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.09 | 0.08 | 0.07 | n.a |
Current Liab. to Liab. | 0.65 | 0.37 | 0.15 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $3,078,692 | $7,179,220 | $11,723,009 | n.a |
Interest Coverage | 74.29 | 41.79 | 42.35 | n.a |
Additional Ratios | ||||
Assets to Sales | 2.50 | 2.82 | 3.15 | n.a |
Current Debt/Total Assets | 5% | 3% | 1% | n.a |
Acid Test | 3.81 | 13.07 | 46.08 | n.a |
Sales/Net Worth | 0.43 | 0.38 | 0.34 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |