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Painting Contractors Business Plan

Barnum Painters

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Financial Plan

The following sections will outline the Financial Plan of Barnum Painters.

7.1 Important Assumptions

The following table shows the General Assumptions for Barnum Painters.

General Assumptions
2002 2003 2004
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

7.2 Key Financial Indicators

The chart below shows the Benchmarks for Barnum Painters.

7.3 Break-even Analysis

The Break-even Analysis gives the reader an idea of how many projects Barnum Painters must bid for, prep, paint and complete each month to cover costs. Because Barnum Painters is providing a customized service with many projects having unique requirements, the estimates of revenue and cost are somewhat arbitrary. Furthermore, the company experiences a high degree of seasonality in its contracts which may result in a number of unprofitable months during the late fall, winter and early spring periods.

Fixed costs are based on running costs estimated by the officers of the company and  include payroll for all employees. Variable costs are based on a 26% estimate of the average sales per unit. The average revenue estimate is based on the consensus of the principal officers who have had many years of experience in the industry and on the realistic assumption of the types of contracts the company will get in the beginning and the requirements needed to complete such projects.

Break-even Analysis
Monthly Revenue Break-even £17,755
Assumptions:
Average Percent Variable Cost 26%
Estimated Monthly Fixed Cost £13,126

7.4 Projected Profit and Loss

The following table and chart shows the projected Profit and Loss for Barnum Painters.

Pro Forma Profit and Loss
2002 2003 2004
Sales £336,500 £480,505 £629,048
Direct Cost of Sales £87,730 £131,703 £155,755
Production Payroll £84,075 £111,000 £172,000
Other Production Expenses £0 £0 £0
Total Cost of Sales £171,805 £242,703 £327,755
Gross Margin £164,695 £237,803 £301,293
Gross Margin % 48.94% 49.49% 47.90%
Operating Expenses
Sales and Marketing Expenses
Sales and Marketing Payroll £30,000 £30,000 £30,000
Advertising/Promotion £3,600 £5,000 £10,000
Travel £2,400 £3,500 £4,000
Miscellaneous £2,400 £3,000 £3,000
Total Sales and Marketing Expenses £38,400 £41,500 £47,000
Sales and Marketing % 11.41% 8.64% 7.47%
General and Administrative Expenses
General and Administrative Payroll £60,000 £78,000 £96,000
Sales and Marketing and Other Expenses £0 £0 £0
Depreciation £1,200 £1,200 £1,200
Leased Equipment £0 £0 £0
Utilities £1,800 £1,800 £1,800
Insurance £3,600 £3,600 £3,600
Rent £24,000 £24,000 £24,000
Payroll Taxes £26,111 £32,850 £44,700
Other General and Administrative Expenses £0 £0 £0
Total General and Administrative Expenses £116,711 £141,450 £171,300
General and Administrative % 34.68% 29.44% 27.23%
Other Expenses:
Other Payroll £0 £0 £0
Consultants £0 £0 £0
Bookkeeper and acountant £2,400 £2,500 £2,750
Total Other Expenses £2,400 £2,500 £2,750
Other % 0.71% 0.52% 0.44%
Total Operating Expenses £157,511 £185,450 £221,050
Profit Before Interest and Taxes £7,184 £52,353 £80,243
EBITDA £8,384 £53,553 £81,443
Interest Expense £700 £700 £700
Taxes Incurred £1,945 £15,496 £23,863
Net Profit £4,539 £36,157 £55,680
Net Profit/Sales 1.35% 7.52% 8.85%

7.5 Projected Cash Flow

The following table and chart is the Cash Flow for Barnum Painters.

Pro Forma Cash Flow
2002 2003 2004
Cash Received
Cash from Operations
Cash Sales £168,250 £240,253 £314,524
Cash from Receivables £163,833 £238,362 £312,574
Subtotal Cash from Operations £332,083 £478,615 £627,098
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 £332,083 £478,615 £627,098
Expenditures 2002 2003 2004
Expenditures from Operations
Cash Spending £174,075 £219,000 £298,000
Bill Payments £165,033 £210,992 £272,957
Subtotal Spent on Operations £339,108 £429,992 £570,957
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 £0 £0 £0
Purchase Other Current Assets £0 £0 £0
Purchase Long-term Assets £0 £0 £0
Dividends £0 £0 £0
Subtotal Cash Spent £339,108 £429,992 £570,957
Net Cash Flow (£7,025) £48,623 £56,141
Cash Balance £33,125 £81,749 £137,889

7.6 Projected Balance Sheet

The following table presents the Balance Sheet for Barnum Painters.

Pro Forma Balance Sheet
2002 2003 2004
Assets
Current Assets
Cash £33,125 £81,749 £137,889
Accounts Receivable £4,417 £6,307 £8,256
Inventory £9,906 £14,871 £17,587
Other Current Assets £0 £0 £0
Total Current Assets £47,448 £102,927 £163,733
Long-term Assets
Long-term Assets £4,000 £4,000 £4,000
Accumulated Depreciation £1,200 £2,400 £3,600
Total Long-term Assets £2,800 £1,600 £400
Total Assets £50,248 £104,527 £164,133
Liabilities and Capital 2002 2003 2004
Current Liabilities
Accounts Payable £709 £18,831 £22,758
Current Borrowing £7,000 £7,000 £7,000
Other Current Liabilities £0 £0 £0
Subtotal Current Liabilities £7,709 £25,831 £29,758
Long-term Liabilities £0 £0 £0
Total Liabilities £7,709 £25,831 £29,758
Paid-in Capital £44,550 £44,550 £44,550
Retained Earnings (£6,550) (£2,011) £34,145
Earnings £4,539 £36,157 £55,680
Total Capital £42,539 £78,695 £134,375
Total Liabilities and Capital £50,248 £104,527 £164,133
Net Worth £42,539 £78,695 £134,375

7.7 Business Ratios

Business ratios for the years of this plan are shown below.  Industry profile ratios based on the Standard Industrial Classification (SIC) code 1721, Painting and Paper Hanging, are shown for comparison.

Ratio Analysis
2002 2003 2004 Industry Profile
Sales Growth 0.00% 42.79% 30.91% 5.90%
Percent of Total Assets
Accounts Receivable 8.79% 6.03% 5.03% 34.60%
Inventory 19.71% 14.23% 10.72% 5.40%
Other Current Assets 0.00% 0.00% 0.00% 29.80%
Total Current Assets 94.43% 98.47% 99.76% 69.80%
Long-term Assets 5.57% 1.53% 0.24% 30.20%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 15.34% 24.71% 18.13% 43.40%
Long-term Liabilities 0.00% 0.00% 0.00% 12.40%
Total Liabilities 15.34% 24.71% 18.13% 55.80%
Net Worth 84.66% 75.29% 81.87% 44.20%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 48.94% 49.49% 47.90% 27.20%
Selling, General & Administrative Expenses 47.59% 41.97% 39.05% 15.40%
Advertising Expenses 1.07% 1.04% 1.59% 0.40%
Profit Before Interest and Taxes 2.13% 10.90% 12.76% 2.50%
Main Ratios
Current 6.15 3.98 5.50 1.60
Quick 4.87 3.41 4.91 1.27
Total Debt to Total Assets 15.34% 24.71% 18.13% 55.80%
Pre-tax Return on Net Worth 15.24% 65.64% 59.19% 5.60%
Pre-tax Return on Assets 12.90% 49.42% 48.46% 12.60%
Additional Ratios 2002 2003 2004
Net Profit Margin 1.35% 7.52% 8.85% n.a
Return on Equity 10.67% 45.95% 41.44% n.a
Activity Ratios
Accounts Receivable Turnover 38.09 38.09 38.09 n.a
Collection Days 59 8 8 n.a
Inventory Turnover 9.08 10.63 9.60 n.a
Accounts Payable Turnover 233.61 12.17 12.17 n.a
Payment Days 27 16 27 n.a
Total Asset Turnover 6.70 4.60 3.83 n.a
Debt Ratios
Debt to Net Worth 0.18 0.33 0.22 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital £39,739 £77,095 £133,975 n.a
Interest Coverage 10.26 74.79 114.63 n.a
Additional Ratios
Assets to Sales 0.15 0.22 0.26 n.a
Current Debt/Total Assets 15% 25% 18% n.a
Acid Test 4.30 3.16 4.63 n.a
Sales/Net Worth 7.91 6.11 4.68 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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General Assumptions
2002 2003 2004
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
Break-even Analysis
Monthly Revenue Break-even £17,755
Assumptions:
Average Percent Variable Cost 26%
Estimated Monthly Fixed Cost £13,126
Pro Forma Profit and Loss
2002 2003 2004
Sales £336,500 £480,505 £629,048
Direct Cost of Sales £87,730 £131,703 £155,755
Production Payroll £84,075 £111,000 £172,000
Other Production Expenses £0 £0 £0
Total Cost of Sales £171,805 £242,703 £327,755
Gross Margin £164,695 £237,803 £301,293
Gross Margin % 48.94% 49.49% 47.90%
Operating Expenses
Sales and Marketing Expenses
Sales and Marketing Payroll £30,000 £30,000 £30,000
Advertising/Promotion £3,600 £5,000 £10,000
Travel £2,400 £3,500 £4,000
Miscellaneous £2,400 £3,000 £3,000
Total Sales and Marketing Expenses £38,400 £41,500 £47,000
Sales and Marketing % 11.41% 8.64% 7.47%
General and Administrative Expenses
General and Administrative Payroll £60,000 £78,000 £96,000
Sales and Marketing and Other Expenses £0 £0 £0
Depreciation £1,200 £1,200 £1,200
Leased Equipment £0 £0 £0
Utilities £1,800 £1,800 £1,800
Insurance £3,600 £3,600 £3,600
Rent £24,000 £24,000 £24,000
Payroll Taxes £26,111 £32,850 £44,700
Other General and Administrative Expenses £0 £0 £0
Total General and Administrative Expenses £116,711 £141,450 £171,300
General and Administrative % 34.68% 29.44% 27.23%
Other Expenses:
Other Payroll £0 £0 £0
Consultants £0 £0 £0
Bookkeeper and acountant £2,400 £2,500 £2,750
Total Other Expenses £2,400 £2,500 £2,750
Other % 0.71% 0.52% 0.44%
Total Operating Expenses £157,511 £185,450 £221,050
Profit Before Interest and Taxes £7,184 £52,353 £80,243
EBITDA £8,384 £53,553 £81,443
Interest Expense £700 £700 £700
Taxes Incurred £1,945 £15,496 £23,863
Net Profit £4,539 £36,157 £55,680
Net Profit/Sales 1.35% 7.52% 8.85%
Pro Forma Cash Flow
2002 2003 2004
Cash Received
Cash from Operations
Cash Sales £168,250 £240,253 £314,524
Cash from Receivables £163,833 £238,362 £312,574
Subtotal Cash from Operations £332,083 £478,615 £627,098
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 £332,083 £478,615 £627,098
Expenditures 2002 2003 2004
Expenditures from Operations
Cash Spending £174,075 £219,000 £298,000
Bill Payments £165,033 £210,992 £272,957
Subtotal Spent on Operations £339,108 £429,992 £570,957
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 £0 £0 £0
Purchase Other Current Assets £0 £0 £0
Purchase Long-term Assets £0 £0 £0
Dividends £0 £0 £0
Subtotal Cash Spent £339,108 £429,992 £570,957
Net Cash Flow (£7,025) £48,623 £56,141
Cash Balance £33,125 £81,749 £137,889
Pro Forma Balance Sheet
2002 2003 2004
Assets
Current Assets
Cash £33,125 £81,749 £137,889
Accounts Receivable £4,417 £6,307 £8,256
Inventory £9,906 £14,871 £17,587
Other Current Assets £0 £0 £0
Total Current Assets £47,448 £102,927 £163,733
Long-term Assets
Long-term Assets £4,000 £4,000 £4,000
Accumulated Depreciation £1,200 £2,400 £3,600
Total Long-term Assets £2,800 £1,600 £400
Total Assets £50,248 £104,527 £164,133
Liabilities and Capital 2002 2003 2004
Current Liabilities
Accounts Payable £709 £18,831 £22,758
Current Borrowing £7,000 £7,000 £7,000
Other Current Liabilities £0 £0 £0
Subtotal Current Liabilities £7,709 £25,831 £29,758
Long-term Liabilities £0 £0 £0
Total Liabilities £7,709 £25,831 £29,758
Paid-in Capital £44,550 £44,550 £44,550
Retained Earnings (£6,550) (£2,011) £34,145
Earnings £4,539 £36,157 £55,680
Total Capital £42,539 £78,695 £134,375
Total Liabilities and Capital £50,248 £104,527 £164,133
Net Worth £42,539 £78,695 £134,375
Ratio Analysis
2002 2003 2004 Industry Profile
Sales Growth 0.00% 42.79% 30.91% 5.90%
Percent of Total Assets
Accounts Receivable 8.79% 6.03% 5.03% 34.60%
Inventory 19.71% 14.23% 10.72% 5.40%
Other Current Assets 0.00% 0.00% 0.00% 29.80%
Total Current Assets 94.43% 98.47% 99.76% 69.80%
Long-term Assets 5.57% 1.53% 0.24% 30.20%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 15.34% 24.71% 18.13% 43.40%
Long-term Liabilities 0.00% 0.00% 0.00% 12.40%
Total Liabilities 15.34% 24.71% 18.13% 55.80%
Net Worth 84.66% 75.29% 81.87% 44.20%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 48.94% 49.49% 47.90% 27.20%
Selling, General & Administrative Expenses 47.59% 41.97% 39.05% 15.40%
Advertising Expenses 1.07% 1.04% 1.59% 0.40%
Profit Before Interest and Taxes 2.13%