James and Carmine began by entering in our sales projections that we had arrived at earlier in Section 5.7, 5.8 and 5.9 into the modules. Thus we start with our sales projections of $250,000 year 1, $285,000 for year 2, and $3150,000 for year 3 respectively. As referenced earlier from sales forecasting sections there are three possible economic scenarios that we considered when looking at sales forecasting - the slow market, the good or normal market and the great market. We decide to go with the good or normal market condition numbers for the projections in our financial modules since it presented the middle of the road approach towards projections which we felt was appropriate.

Compensation Forecast:

In our compensation forecast, we are projecting that the following salaries will be drawn by the owners:

1. James Kelly and Carmine Russon will draw a salary of $42,000, $45,000 amd $48,000 each, in year 1, 2 and 3 respectively.
2. A production associate who will be hired is projected to be given a salary of $35,000, $38,500 and $41,000 in years 1, 2 and 3 respectively.

All the owners have good personal balance sheets and understand that their business is a pay for performance business - if business is slow, they will have to lower the amount of salaries they give themselves and vice versa. They are are drawing modest salaries with an eye towards building the cash reserves of the business and making sure that it has the capital needed for future growth.

The largest operating expense for a small business like Dependable Roofing is of course compensation. Including the cost of compensation to production personnel the total compensation expense for the firm is expected to be $119,000, $128,000 and $137,000 in 2015, 2016 and 2017 respectively.

Capital Contributions:

The initial capital contribution from the owners will be a total of $75,000. James and Carmine being equal shareholders will each be contributing $37,500 from their personal savings. In the event the loan from the community lender does not come through or only part of the loan is approved, the owners recognize that they will need to contribute additional capital to the business. They are ready, willing and able to do so if the need were to arise.

Loan & Interest Expense Summary:

We will be taking out a fully amortizing term loan from a local community lender where we will be paying back both principal and interest on the loan every month. We have anticipated that a loan in the amount of $33,100 at 8.25% interest for 4 years should do the job for us and we are projecting that we will be putting in for this loan at the outset.

As we keep paying this loan down, we anticipate that the at the end of each year we will have the following projected principal balance outstanding - $25,816, $17,908 and $9,322 for 2015, 2016 and 2017 respectively.

Fixed Asset & Depreciation Summary:

The fixed assets of $94,300 that we have entered in for 2015 includes the upfront capital investments in vans customized for the trade along with tools and equipment, assets like furniture & fixtures, computer hardware & software, printers, security systems, deposit etc that we will need to run the business for the next three years. We don't anticipate adding any more to our existing fixed asset infrastructure unless one of the pieces of equipment goes bad - even in that instant, our product warranties and additional insurance riders should be enough to cover the contingencies.

The fixed assets of $94,300 that we have entered in for 2015 includes the upfront capital investments to the location, furniture and fixtures, tools & cleaning equipment that will be needed to perform the work, computers and office equipment and security deposit. All these investments in fixed assets will be used to run the business in the coming years. We don't anticipate any other significant investments in fixed assets. In the event of the pieces of cleaning equipment like high air compressors or automatic weldergoes breaks down, we will be ensuring that the repair is covered under the extended warranties that we will be purchasing when we buy the equipment.

Purchases, Inventory & Cost of Goods Sold:

In this section we simply enter in the cost of goods sold for each year along with the changes in inventory if any. The projectedcost of goods sold in our case will be $0 since there no intrinsic cost of production for any of our services. This is fairly common for service oriented businesses like Dependable Roofing. Also very common in the service business is no inventory. Typically service businesses don't have any tangible physical inventory besides the purchases of initial tools they need and hence the inventory numbers for all three years of operations are projected to be at $0.

Accounts Receivable Summary:

In the roofing contractor business the management of accounts receivables tends to be a major issue especially with large contracts. However since Dependable Roofing is a small sized house cleaning service, they will be instituting and following a policy of payment upon completion of service. In those instances that they do give their clients the ability to pay them after the completion of the job, their payment terms will be Net 7 - bottom line customers are going to have to pay up within 7 days of the completion of the services. Further if the jobs are larger than $300, we will be asking their customers to provide them with a deposit. Based on all these elements, James and Carmine are estimating that their accounts receivables for each of the three years in the business plan will be no more than 0.25% of sales.

Accounts Payable Summary:

James and Carmine will be following a policy of payment upon delivery - paying promptly for the purchases made is one of the hallmarks of excellent cash flow management and fiscal discipline - a common reason why many house cleaning small businesses fail. With all this in mind, we are projecting a very modest accounts payable of 0.30% of all purchases made for their first three years of operations.

Security Deposit:

A security Deposit in the amount of $2,600 is what we anticipate paying our landlord and that security deposit will of course remain with the landlord for the duration of the three years that are being projected here. This security deposit represents two months rent.

Quick Links:

1. Go to the Corresponding Template section for this industry.
2. Go to the Corresponding Questionnaire section for this industry.