Commercial Contractor Business Plan

Executive Summary

Twin Brothers Construction (TBC) plans to become a leading provider of construction and
renovation services in the local area. The company's overall strategy will be based on a
continuing improvement process of setting objectives, measuring results, and providing feedback
to facilitate further growth and progress.

TBC is a company, with principal offices located in the local area. The company's management
is highly experienced and qualified: the brothers who will lead the management team have each
accumulated over twenty five years of experience in the construction industry.

Products/Services
Through their years of experience, TBC's owners have developed sophisticated bidding,
scheduling and materials solutions for some of the most complex construction projects being
done today. The company will use versatile and completely adaptable methods for a variety of
building configurations.

Owners, developers, construction managers, general contractors, and sub-contractors are

expected to realize substantial savings in labor and material costs by using the
company's construction methods and systems. Applications include commercial and residential
structures.

The Market
The housing industry has been growing at a fast pace for several years. An all-time record was
set in 1998, when 886,000 new-site single family homes were sold. That represented a 10% gain
from the robust total of 804,000 homes sold in 1997. Although there was a slight drop in the
number from 2003, this makes for an excellent opportunity for future expansion of the industry.

Twin Brothers Construction plans to rapidly develop marketing alliances with industry leaders
and pursue new sales of its services to residential and commercial builders. The marketing
strategy will focus on securing city, county, and state and federal government contracts.

TBC plans to use a direct sales force, relationship selling, and sub-contractors to reach its target
markets. These channels are most appropriate because of time to market, reduced capital
requirements, and fast access to established distribution channels.

Financial Considerations
We expect to pass the break-even point in the second half of the first year. Despite initial large
outlays in cash to promote sales, the company's cash account is expected to remain healthy. The
company expects approximately $772,000 in sales revenue and reasonable net profits by Year 3.
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1.1 Mission

Our mission is to be the best partner for our customers, suppliers and employees. To realize our
vision, we will strive for profitable growth, operational excellence, customer satisfaction and
strong brand positioning.

1.2 Objectives
1. To have up to three construction projects established within the first year.
2. To have two building renovation projects in progress by the end of the first year.

3. To locate and purchase our first rental building by the end of the first year.

4. To achieve at least 7% profit by the second year.

1.3 Keys to Success

We believe our keys to success will be:

 Using the most updated materials and equipment to assure quality construction projects for
ourselves and our customers.
 Educating the customers and providing valuable advice during the construction planning stages.

 Helping to confirm customer's research about targeting markets and specific sectors.
  Overseeing the logistics associated with a project, which can include arranging local
transportation, booking meetings etc.

 Assigning the actual work to an experienced and qualified third-party contractors and sub-
contractors.

Company Summary

The brothers will invest a total of $90,000 combined ($55,000 and $35,000) in the start-up of the
company. Initial cash requirements will total $50,000. Start-up assets total $55,000.

2.1 Start-up Summary

The following table describes our start-up requirements. One of our biggest start-up expenses
involves the creation of a website. Ongoing maintenance expenses for the website are included in
our Profit and Loss expenses section.

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Start-up Funding
Start-up Expenses to Fund $35,000

Start-up Assets to Fund $55,000

Total Funding Required $90,000

Assets

Non-cash Assets from Start-up $25,000

Cash Requirements from Start-up $50,000

Additional Cash Raised $0

Cash Balance on Starting Date $50,000

Total Assets $75,000

Liabilities and Capital

Liabilities

Current Borrowing $0

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $0

Other Current Liabilities (interest-free) $0

Total Liabilities $0

Capital

Planned Investment

Owner 1 $55,000

Owner 2 $35,000

Other $0

Additional Investment Requirement $0

Total Planned Investment $90,000

Loss at Start-up (Start-up Expenses) ($35,000)

Total Capital $55,000

Total Capital and Liabilities $55,000

Total Funding $90,000

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Start-up

Requirements

Start-up Expenses

Legal $2,000

Stationery etc. $100

Brochures $500

Consultants $2,000

Insurance $10,000

Rent (Deposit and 1st Month) $3,000

Work Equipment $6,000

Website Development $10,000

Other $1,400

Total Start-up Expenses $35,000

Start-up Assets
Cash Required $50,000

Other Current Assets $5,000

Long-term Assets $0

Total Assets $55,000

Total Requirements $90,000

2.2 Company Ownership

The company ownership will be shared by the Chairman and Chief Executive Officer in the
following percentage amounts:

Chairman = 60%

Chief Executive Officer = 40%

Both owners are veterans in the building industry, each with over 25 years experience.

Products and Services

TBC will sell its services to clients in the area of commercial construction and renovation. The
company's staff will design specialized construction drawings that outline the schedule, work
sequence and the materials needed for building and renovation construction projects. Owners,
developers and general contractors will realize substantial savings in labor and material costs by
using TBC's customized performance methods. TBC's methods will offer complete
adaptability at cost-effective prices. The drawings that the company will furnish to the contractor
will specify the order of assembly and erection, including the location of the strongbacks and
joists, the location and actual loading of the ties, location of accessories and advise clients of the
maximum allowable rate of concrete placement.

A longer-term service will be commercial building rental management. This will include the
purchase of commercial building sites or existing buildings that need renovation, coordinating
the construction/renovation, then managing the rental of the property. The company will also be
looking for existing property owners whose properties need renovation to update and increase its
income potential, with TBC eventually taking over the management of these properties on behalf
of the owner.

To enter the market with minimum overhead costs, TBC plans to utilize in the first year of
operation mainly sub-contractors and independent experts for its building and renovation
projects.
Accident prevention will be the cornerstone of TBC's safety commitment. The company will
strive to eliminate foreseeable hazards which could result in personal injury or illness; at TBC,
health and safety will not be compromised.

Market Analysis Summary

There were about 792,000 construction companies in the United States in 2002: 237,000 were
building construction contractors; 60,000 were heavy and civil engineering construction or
highway contractors; and 496,000 were specialty trade contractors. Most of these establishments
tend to be small, the majority employing fewer than 10 workers. About 4 out of 5 workers are
employed by small contractors.

Construction offers more opportunities than most other industries for individuals who want to
own and run their own business. The 1.6 million self-employed and unpaid family workers in
2002 performed work directly for property owners or acted as contractors on small jobs, such as
additions, remodeling, and maintenance projects. The rate of self-employment varies greatly by
individual occupation in the construction trades.

The local area is booming at this time, with many development projects running both by public
and by private sources. Overall business growth over the past seven years has averaged
approximately 9.5% and is expected to continue for at least the next several years. This
constitutes an attractive market for TBC. The company will be concentrating on office building
construction. This is the fastest growing segment of all the commercial clients requiring our
services. The other categories to serve will include building renovation along with a segment it
calls the general category, to serve other potential commercial clients.

One longer-term field of operation for the company will be the selling of building material and
components to contractors. By slowly establishing itself as a first-rate material provider, the
company expects to broaden and strengthen its stance in the local building industry. Initially it
will focus on purchasing supplies for its own construction and renovation projects, then use those
completed projects as marketing examples to showcase the quality of materials used and the
customized approach used to design and construct them.

The company plans to develop marketing alliances with industry leaders and pursue new sales of
its services to commercial builders. The market strategy is to capitalize on the company's
future alliances by securing city, county, and state government contracts.

TBC also plans to use a direct sales force, relationship selling, and sub-contractors to reach its
markets. These channels are most appropriate because of time to market, reduced capital
requirements, and fast access to established distribution channels.

4.1 Market Segmentation

The overall Construction Industry was segmented in 2002 as follows (employment in thousands):
Industry Employment Percent

Total, all industries 6,731.7 100.0

Construction of Buildings 1,583.8 23.5

Residential building 807.4 12.0

Nonresidential building construction 776.4 11.5

Special trade contractors 4,217.9 62.7

Building equipment contractors 1,842.5 27.4

Foundation, structure, & building exterior

915.4 13.6
contractors

Building finishing contractors 879.5 13.1

Other specialty trade contractors 580.5 8.6

Highway, street, and bridge construction 344.4 5.1

Land subdivision 86.1 1.3

Other heavy and civil engineering construction 119.0 1.8

Special trade contractors 4,217.9 62.7

Building equipment contractors 1,842.5 27.4

 Foundation, structure, & building exterior
915.4 13.6
contractors

Building finishing contractors 879.5 13.1

Other specialty trade contractors 580.5 8.6

Source: U.S. Department of Labor, Bureau of Labor Statistics (March 9, 2004)

For the purpose of this paper we shall segment our initial targeted market as follows:

 Office Building Construction

 Building Facilities Renovation

 General Construction

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Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5

Potential Customers Growth CAGR

Office building
6% 2,517 4,027 4,268 4,524 4,795 17.48%
construction

Building facilities
3% 2,750 2,833 2,917 3,005 3,095 3.00%
renovation

General construction 3% 3,264 3,362 3,462 3,567 3,674 3.00%

Total 7.90% 8,531 10,222 10,647 11,096 11,564 7.90%

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4.2 Service Business Analysis

The construction industry is divided into three major segments. Construction of buildings
contractors, or general contractors, who build residential, industrial, commercial, and other
buildings. Heavy and civil engineering construction contractors who build sewers, roads,
highways, bridges, tunnels, and other projects. Specialty trade contractors who are engaged in
specialized activities such as carpentry, painting, plumbing, and electrical work.

Construction usually is done or coordinated by general contractors, who specialize in one type of
construction, such as residential or commercial building. They take full responsibility for the
complete job, except for specified portions of the work that may be omitted from the general
contract. Although general contractors may do a portion of the work with their own crews, they
often sub-contract most of the work to heavy construction or specialty trade contractors.

Specialty trade contractors usually do the work of only one trade, such as painting, carpentry, or
electrical work, or of two or more closely-related trades, such as plumbing and heating. Beyond
fitting their work to that of the other trades, specialty trade contractors have no responsibility for
the structure as a whole. They obtain orders for their work from general contractors, architects,
or property owners. Repair work is almost always done on direct order from owners, occupants,
architects, or rental agents.

Twin Brothers Construction will concentrate its activity in the following areas:
  Commercial Building Construction
 Commercial Building Renovation

 Buildings Management and Rental

 Building Materials Supplies

Market Analysis Summary

There were about 792,000 construction companies in the United States in 2002: 237,000 were
building construction contractors; 60,000 were heavy and civil engineering construction or
highway contractors; and 496,000 were specialty trade contractors. Most of these establishments
tend to be small, the majority employing fewer than 10 workers. About 4 out of 5 workers are
employed by small contractors.

Construction offers more opportunities than most other industries for individuals who want to
own and run their own business. The 1.6 million self-employed and unpaid family workers in
2002 performed work directly for property owners or acted as contractors on small jobs, such as
additions, remodeling, and maintenance projects. The rate of self-employment varies greatly by
individual occupation in the construction trades.

The local area is booming at this time, with many development projects running both by public
and by private sources. Overall business growth over the past seven years has averaged
approximately 9.5% and is expected to continue for at least the next several years. This
constitutes an attractive market for TBC. The company will be concentrating on office building
construction. This is the fastest growing segment of all the commercial clients requiring our
services. The other categories to serve will include building renovation along with a segment it
calls the general category, to serve other potential commercial clients.

One longer-term field of operation for the company will be the selling of building material and
components to contractors. By slowly establishing itself as a first-rate material provider, the
company expects to broaden and strengthen its stance in the local building industry. Initially it
will focus on purchasing supplies for its own construction and renovation projects, then use those
completed projects as marketing examples to showcase the quality of materials used and the
customized approach used to design and construct them.

The company plans to develop marketing alliances with industry leaders and pursue new sales of
its services to commercial builders. The market strategy is to capitalize on the company's
future alliances by securing city, county, and state government contracts.

TBC also plans to use a direct sales force, relationship selling, and sub-contractors to reach its
markets. These channels are most appropriate because of time to market, reduced capital
requirements, and fast access to established distribution channels.

4.1 Market Segmentation

The overall Construction Industry was segmented in 2002 as follows (employment in thousands):
Industry Employment Percent

Total, all industries 6,731.7 100.0

Construction of Buildings 1,583.8 23.5

Residential building 807.4 12.0

Nonresidential building construction 776.4 11.5

Special trade contractors 4,217.9 62.7

Building equipment contractors 1,842.5 27.4

Foundation, structure, & building exterior

915.4 13.6
contractors

Building finishing contractors 879.5 13.1

Other specialty trade contractors 580.5 8.6

Highway, street, and bridge construction 344.4 5.1

Land subdivision 86.1 1.3

Other heavy and civil engineering construction 119.0 1.8

Special trade contractors 4,217.9 62.7

Building equipment contractors 1,842.5 27.4

 Foundation, structure, & building exterior
915.4 13.6
contractors

Building finishing contractors 879.5 13.1

Other specialty trade contractors 580.5 8.6

Source: U.S. Department of Labor, Bureau of Labor Statistics (March 9, 2004)

For the purpose of this paper we shall segment our initial targeted market as follows:

 Office Building Construction

 Building Facilities Renovation

 General Construction

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Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5

Potential Customers Growth CAGR

Office building
6% 2,517 4,027 4,268 4,524 4,795 17.48%
construction

Building facilities
3% 2,750 2,833 2,917 3,005 3,095 3.00%
renovation

General construction 3% 3,264 3,362 3,462 3,567 3,674 3.00%

Total 7.90% 8,531 10,222 10,647 11,096 11,564 7.90%

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business plan.

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4.2 Service Business Analysis

The construction industry is divided into three major segments. Construction of buildings
contractors, or general contractors, who build residential, industrial, commercial, and other
buildings. Heavy and civil engineering construction contractors who build sewers, roads,
highways, bridges, tunnels, and other projects. Specialty trade contractors who are engaged in
specialized activities such as carpentry, painting, plumbing, and electrical work.

Construction usually is done or coordinated by general contractors, who specialize in one type of
construction, such as residential or commercial building. They take full responsibility for the
complete job, except for specified portions of the work that may be omitted from the general
contract. Although general contractors may do a portion of the work with their own crews, they
often sub-contract most of the work to heavy construction or specialty trade contractors.

Specialty trade contractors usually do the work of only one trade, such as painting, carpentry, or
electrical work, or of two or more closely-related trades, such as plumbing and heating. Beyond
fitting their work to that of the other trades, specialty trade contractors have no responsibility for
the structure as a whole. They obtain orders for their work from general contractors, architects,
or property owners. Repair work is almost always done on direct order from owners, occupants,
architects, or rental agents.

Twin Brothers Construction will concentrate its activity in the following areas:
  Commercial Building Construction
 Commercial Building Renovation

 Buildings Management and Rental

 Building Materials Supplies

Strategy and Implementation Summary

TBC plans to use a direct sales force, relationship selling, and sub-contractors to reach its target
markets. These channels are most appropriate because of time to market, reduced capital
requirements, and fast access to established distribution channels. The owners of TBC want to
emphasize to their potential customers that they are more than general contractors, they are
complete construction coordinators.

TBC plans to advertise in magazines, newspapers, and radio. Initially a website with information
on the company owners, their construction background, and contact information will be available
online. References to the website will be mentioned in all other forms of advertising. Channels
used to reach market segments include: sales associates, the Internet and direct mail.

In addition, The table and chart below outline the company's sales forecast for FY2005-2007. In
our sales forecasts, the cost of sales includes only direct labor costs.

5.1 Competitive Edge

The company plans to become a leading provider of construction services in the local area. To
achieve this, TBC will invest in many ways that will pay off in competitive advantages for its
customers, for example:

 Pre-job conferencing upon request

 Assist in technical or conceptual design

 Assist in supervision when other contractors are employed

 Organize project supervision facilities and staff

 Organize delivery of purchased materials

 Furnishing after-market products

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5.2 Marketing Strategy

Our marketing strategy is the key to our success:

 1. Emphasize our name and unique services through advertising, including a Web page of contact
information. An amount of $10,000 for the design of the website has been included in the Start-
up expenses with ongoing maintenance costs estimated monthly.
2. Focus on commercial building and renovation projects as our initial and primary target markets.

3. Use completed projects to showcase our customized construction project management to

prospective clients.

5.3 Sales Strategy

Sales success requires planning. The company will formulate its sales strategy and tactics to
achieve sales success by following these steps:

Step 1 - Analyzing The Company's Potential: Step through a structured process to help us
develop a sales strategy.

Step 2 - Strategize Around Strengths: The description of sales activity will be analyzed to
produce a report on factors impacting sales potential and ways to strengthen this potential.

Step 3 - Develop Tactics: Receive guidance to develop a comprehensive tactical plan to achieve
success.

Step 4 - Measure Our Past Success: Develop key measurements that mark the progress of
financial estimates that guide our growth.

Final Step - Employ An Action Plan for Success: Provide sales force with a tactical plan that is
aligned with management's strategic objectives.

5.3.1 Sales Forecast

The company will start its operation in the first year by focusing on two areas:

1. Direct construction work

2. Renovation of existing buildings

Starting later in the second year and continuing into the third year the following areas of
operation will be added:

 Renting of Industrial Spaces

 Sale of components and other building materials and components

The following table details the forecasts.

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Sales Forecast

Year 1 Year 2 Year 3

Sales

Direct Construction Projects $135,000 $175,000 $218,750

Building Renovations $123,000 $153,750 $192,188

Building Rentals $0 $75,000 $200,000

Sale of Components and Goods $0 $75,000 $150,000

Other $9,000 $10,000 $12,000

Total Sales $267,000 $488,750 $772,938

Direct Cost of Sales Year 1 Year 2 Year 3

All construction work $54,000 $70,000 $87,500

Renovations $49,200 $61,500 $76,875

Rentals $0 $15,000 $40,000

Sale of Components and Goods $0 $30,000 $60,000

Other $9,000 $1,000 $1,200

Subtotal Direct Cost of Sales $112,200 $177,500 $265,575

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5.4 Milestones

The milestones table describes the steps required for the beginning of operations. Steps might
take longer than estimated, however the owners and the staff will do their utmost to adhere to
this timetable.

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Milestones

Milestone Start Date End Date Budget Manager Department

Establishing Permits 1/1/2005 1/15/2005 $500 Chairman Department

Establishing office 1/15/2005 1/20/2005 $500 CEO Department

Preparing Web Site 1/15/2005 2/15/2005 $1,000 Consultant Department

Purchasing work
1/15/2005 2/25/2005 $6,000 CEO Department
equipment
Hiring staff 2/1/2005 3/1/2005 $0 Chairman@CEO Department

Purcase Initial Inventory 2/15/2005 3/25/2005 $20,000 Chairman&CEO Department

Receive Stock 3/1/2005 4/1/2005 $500 Staff Department

Start Operation 4/1/2005 4/30/2005 $0 Everybody Department

Totals $28,500

Web Plan Summary

Although TBC plans to use traditional advertising methods to reach potential customers, the
owners feel that the Internet has become a valuable resource for customers to find out about the
company and for the company to promote its services to prospective customers. The construction
industry was slower to join the Internet bandwagon compared to other types of businesses. But
now, many local contractors and building suppliers have websites.

The cost to create a website has been included in start-up costs, with website maintenance costs
included in our ongoing expenses. The initial website will have basic contact information and
background about the company owners. Later, it will show information about current projects as
well as completed projects as examples of what the company can do. Once the building materials
portion of the business is well established, the website will expand to include an online store. At
this point in the business plan, there are no estimates for the cost of this expansion and it will
need to be researched and planned for more thoroughly at a later point.

It will take time before the initial cost outlay for the website will pay for itself in potential
customers, but once established, it will provide a cost-effective way to communicate to new and
existing customers.

We will mention our website address as part of our other advertising media.

6.1 Website Marketing Strategy

We hope to be able to secure links to our website from the local city and chamber of commerce
websites as well as local construction-related websites that we can affiliate with.

6.2 Development Requirements

We will contract with a Website developer to initially design the look and information provided
on the website. Our initial cost for this design also includes the first six months of website
maintenance by the website developer. In October, we plan to hire a technician with experience
in website maintenance to troubleshoot and maintain the Website internally.
Once the business has progressed, we will either increase this person's hours from temporary to a
full-time position, or we will hire a second temporary technical position to assist in the re-design
and expansion of the website. Our long-term goal is to have an online store for the sale of
building materials and components.

Management Summary

The company's management philosophy will be based on responsibility and mutual respect. Twin
Brothers Construction will maintain an environment and structure that will encourage
productivity and respect for customers and fellow employees.

TBC will be responsible to its employees and sub-contractors, the men and women who will
work with the company throughout the state. At TBC everyone will be considered as an
individual and the company will respect their dignity and recognize their merit. Employees will
be encouraged to have a sense of security and pride in their jobs. Additionally, employees will be
free to make suggestions and complaints. The company will afford equal opportunity for
employment, development, and advancement for those qualified.

TBC employees will be committed to:

 Providing a safe work environment to protect employees, the employees of customers and sub-
contractors, and the public.
 Supplying safe products for customers.

 Continuously improving the company's safety program to reduce the risk of accidents and
occupational illness in a changing work environment.

 Encouraging employees to participate in accident prevention programs and take personal

responsibility for their own and their co-workers' health and safety.

 Regulatory compliance and contribution to high safety standards for our industry.

 Monitoring workplaces, enforcing safe work practices, and communicating the company's safety
performance to employees and other stakeholders.

 Making safety a value-added service that the company provides to its customers.

The company is planning to expand its personnel to add more job superintendents as soon as the
number of projects increases. These superintendents will have the following duties:

Direct supervision of all work at the job sites:

 Quality Control
 Scheduling sub-contractors and material deliveries

 Verifying and insuring that all work is done in accordance with plans

 Insuring that all work is performed in accordance with all OSHA guidelines
7.1 Personnel Plan

The personnel plan is based on the two owners to guide and oversee the operations that will be
managed by themselves. Having been in business for over 25 years, they have agreed to draw
very low salaries for the first two years to offset some of the initial expenses in starting the
business.

For the first year, the company will hire temporary and part-time employees and sub-contract
with consultants and construction professionals to perform the variety of tasks needed. Also, our
contracted construction personnel expenses are reflected in our Sales Forecast as cost of sales,
not part of our personnel table, since they will not be regular employees of the business.

Personnel Plan

Year 1 Year 2 Year 3

Chairman (Principal Owner) $18,000 $25,000 $60,000

CEO (Secondary Owner) $18,000 $25,000 $60,000

Office Clerk (Temporary Hire) $17,250 $32,000 $32,000

Foreman (Temporary Hire) $21,600 $42,000 $42,000

Technical Employee (Part-time) $9,000 $25,000 $25,000

Total People 5 7 8

Total Payroll $83,850 $149,000 $219,000

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7.2 Safety

TBC will be committed to conducting business in a manner that protects the health and safety of
all employees, customers, and persons living in the community where it operates. To accomplish
this, the company will ensure that it complies with current Health Administration and
Occupational Health and Safety laws and will maintain its operations, procedures, technologies,
and policies accordingly.

Each employee will have the responsibility to fully comply with established safety rules and to
perform work in such a manner as to prevent injuries to themselves and others. TBC will be very
concerned about job-site safety and plans to set up a comprehensive safety program.

Financial Plan

The brothers have long-term experience in the local construction industry. They are willing to
invest heavily in this new company and their accumulated experience will insure success for the
new venture. It will be important to watch closely the salaries and regular expenses to assure that
the company will not suffer from lack of sufficient cash to fund its operations.

1. We assume a conservative entrance and steady growth in the market.

2. We assume a slow financial progress based on initially conservative sales against highest
expenses.

3. We assume there will not be an economic crash that would greatly hinder our target market's
access to their personal luxury finds.

The following sections describe the financials for TBC:

8.1 Projected Profit and Loss

Twin Brothers Construction is in the early stage of development, thus initial projections have
only been made based on the sales projections and efficient cost control measures in place. Our
first year monthly net profits will become positive by October, but we will still close the year
with negative profit. This is primarily because of personnel expenses, which include salaries and
the cost of sales for sub-contractors.
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Pro Forma Profit and Loss

Year 1 Year 2 Year 3

Sales $267,000 $488,750 $772,938

Direct Cost of Sales $112,200 $177,500 $265,575

Other $0 $0 $0
Total Cost of Sales $112,200 $177,500 $265,575

Gross Margin $154,800 $311,250 $507,363

Gross Margin % 57.98% 63.68% 65.64%

Expenses

Payroll $83,850 $149,000 $219,000

Sales and Marketing and Other Expenses $7,500 $10,000 $0

Depreciation $0 $0 $0

Gasoline and oil $3,600 $3,750 $4,800

Telephone $1,500 $2,400 $3,500

Utilities $4,800 $11,250 $10,282

Insurance $9,000 $8,226 $24,000

Rent $7,478 $20,000 $25,000

Payroll Taxes $6,522 $0 $0

Website Maintenance & Support $4,200 $6,000 $9,375

Consultants $6,000 $7,500 $9,000

Advertising $6,000 $1,980 $3,500

Misc. Other Expenses $1,800 $2,500 $267,127

Total Operating Expenses $142,250 $222,606 $575,584

Profit Before Interest and Taxes $12,550 $88,644 ($68,222)

EBITDA $12,550 $88,644 ($68,222)

Interest Expense $625 $7,500 $11,250

Taxes Incurred $3,578 $24,343 $0

Net Profit $8,348 $56,801 ($79,472)

Net Profit/Sales 3.13% 11.62% -10.28%

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8.2 Break-even Analysis

During the first year of operations, the break-even monthly sales volume is estimated as shown
below. Our average percent variable reflects our cost of sales which covers contracted
construction payroll costs.

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Break-even Analysis

Monthly Revenue Break-even $20,446

Assumptions:

Average Percent Variable Cost 42%

Estimated Monthly Fixed Cost $11,854

8.3 Projected Cash Flow

We have set our initial Cash at $50,000 so that we have flexibility in handling any unexpected
changes in cash flow in the early months to cover expenses. The following table outlines are cash
flow estimates.

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Pro Forma Cash Flow

Year 1 Year 2 Year 3

Cash Received
Cash from Operations

Cash Sales $267,000 $488,750 $772,938

Subtotal Cash from Operations $267,000 $488,750 $772,938

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 $75,000 $0 $75,000

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 $342,000 $488,750 $847,938

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending $83,850 $149,000 $219,000

Bill Payments $152,974 $281,521 $604,604

Subtotal Spent on Operations $236,824 $430,521 $823,604

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 $100,000 $0 $100,000

Dividends $0 $0 $0

Subtotal Cash Spent $336,824 $430,521 $923,604

Net Cash Flow $5,176 $58,229 ($75,667)

Cash Balance $55,176 $113,405 $37,738

8.4 Projected Balance Sheet

The following table outlines our Balance Sheet.

Pro Forma Balance Sheet

Year 1 Year 2 Year 3

Assets

Current Assets

Cash $55,176 $113,405 $37,738

Other Current Assets $5,000 $5,000 $5,000

Total Current Assets $60,176 $118,405 $42,738

Long-term Assets

Long-term Assets $100,000 $100,000 $200,000

Accumulated Depreciation $0 $0 $0

Total Long-term Assets $100,000 $100,000 $200,000

Total Assets $160,176 $218,405 $242,738

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities

Accounts Payable $21,828 $23,256 $52,061

Current Borrowing $0 $0 $0

Other Current Liabilities $0 $0 $0

Subtotal Current Liabilities $21,828 $23,256 $52,061

Long-term Liabilities $75,000 $75,000 $150,000

Total Liabilities $96,828 $98,256 $202,061

Paid-in Capital $90,000 $90,000 $90,000

Retained Earnings ($35,000) ($26,652) $30,149

Earnings $8,348 $56,801 ($79,472)

Total Capital $63,348 $120,149 $40,677

Total Liabilities and Capital $160,176 $218,405 $242,738

Net Worth $63,348 $120,149 $40,677

8.5 Business Ratios

The following Ratios table includes industry profile comparison ratios for Commercial and
Office Building Contractors (Standard Industry Code #1542).

Ratio Analysis

Year 1 Year 2 Year 3 Industry Profile

Sales Growth 0.00% 83.05% 58.15% -3.57%

Percent of Total Assets

Other Current Assets 3.12% 2.29% 2.06% 39.87%

Total Current Assets 37.57% 54.21% 17.61% 91.45%

Long-term Assets 62.43% 45.79% 82.39% 8.55%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 13.63% 10.65% 21.45% 34.87%

Long-term Liabilities 46.82% 34.34% 61.79% 15.42%

Total Liabilities 60.45% 44.99% 83.24% 50.29%

Net Worth 39.55% 55.01% 16.76% 49.71%

Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 57.98% 63.68% 65.64% 17.83%

Selling, General & Administrative

50.39% 31.80% 27.73% 7.07%
Expenses

Advertising Expenses 4.95% 6.32% 5.54% 0.25%

Profit Before Interest and Taxes 4.70% 18.14% -8.83% 1.85%

Main Ratios

Current 2.76 5.09 0.82 2.34

Quick 2.76 5.09 0.82 1.12

Total Debt to Total Assets 60.45% 44.99% 83.24% 57.63%

Pre-tax Return on Net Worth 18.83% 67.54% -195.37% 4.01%

Pre-tax Return on Assets 7.45% 37.15% -32.74% 9.46%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin 3.13% 11.62% -10.28% n.a

Return on Equity 13.18% 47.28% -195.37% n.a

Activity Ratios

Accounts Payable Turnover 8.01 12.17 12.17 n.a

Payment Days 27 29 22 n.a

Total Asset Turnover 1.67 2.24 3.18 n.a

Debt Ratios

Debt to Net Worth 1.53 0.82 4.97 n.a

Current Liab. to Liab. 0.23 0.24 0.26 n.a

Liquidity Ratios

Net Working Capital $38,348 $95,149 ($9,323) n.a

Interest Coverage 20.08 11.82 -6.06 n.a

Additional Ratios

Assets to Sales 0.60 0.45 0.31 n.a

Current Debt/Total Assets 14% 11% 21% n.a

Acid Test 2.76 5.09 0.82 n.a

Sales/Net Worth 4.21 4.07 19.00 n.a

Dividend Payout 0.00 0.00 0.00 n.a

Appendix

Sales Forecast

Month Month Month Month Month Month Month Month Month Month Month Month
1 2 3 4 5 6 7 8 9 10 11 12

Sales

Direct
$10,00 $10,00 $10,00 $15,00 $15,00 $15,00 $20,00 $20,00
Constructio 0% $0 $0 $0 $20,000
0 0 0 0 0 0 0 0
n Projects

Building 0% $7,500 $7,500 $8,000 $8,000 $9,000 $9,000 $10,00 $10,00 $12,00 $12,00 $15,00 $15,000
Renovations 0 0 0 0 0

Building
0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Rentals

Sale of
Components 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
and Goods

Other 0% $0 $0 $0 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000

$19,00 $20,00 $20,00 $26,00 $26,00 $28,00 $33,00 $36,00

Total Sales $7,500 $7,500 $8,000 $36,000
0 0 0 0 0 0 0 0

Direct Cost Month Month Month Month Month Month Month Month Month Month Month Month
of Sales 1 2 3 4 5 6 7 8 9 10 11 12

All
construction 40% $0 $0 $0 $4,000 $4,000 $4,000 $6,000 $6,000 $6,000 $8,000 $8,000 $8,000
work

Renovations 40% $3,000 $3,000 $3,200 $3,200 $3,600 $3,600 $4,000 $4,000 $4,800 $4,800 $6,000 $6,000

Rentals 20% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Sale of
Components 20% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
and Goods

Other 10% $0 $0 $0 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000

Subtotal
$11,00 $11,00 $11,80 $13,80 $15,00
Direct Cost $3,000 $3,000 $3,200 $8,200 $8,600 $8,600 $15,000
0 0 0 0 0
of Sales

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Personnel Plan
 Month Month Month Month Month Month Month Month Month Month Month Month
1 2 3 4 5 6 7 8 9 10 11 12

Chairman (Principal
0% $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500
Owner)

CEO (Secondary
0% $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500
Owner)

Office Clerk
0% $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $1,500 $1,500 $1,500 $1,750 $1,750 $1,750
(Temporary Hire)

Foreman
0% $0 $0 $0 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400
(Temporary Hire)

Technical Employee
0% $0 $0 $0 $0 $0 $0 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500
(Part-time)

Total People 3 3 3 4 4 4 5 5 5 5 5 5

Total Payroll $4,250 $4,250 $4,250 $6,650 $6,650 $6,650 $8,400 $8,400 $8,400 $8,650 $8,650 $8,650

General Assumptions

Month Month Month Month Month Month Month Month Month Month Month Month
1 2 3 4 5 6 7 8 9 10 11 12

Plan Month 1 2 3 4 5 6 7 8 9 10 11 12

Current
Interest 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Rate

Long-term
Interest 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Rate

Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%

Sales on
0 0 0 0 0 0 0 0 0 0 0 0
Credit

Other 0 0 0 0 0 0 0 0 0 0 0 0
Pro Forma Profit and Loss

Month Month Month Month Month Month Month Month Month Month Month Month
1 2 3 4 5 6 7 8 9 10 11 12

$19,00 $20,00 $20,00 $26,00 $26,00 $28,00 $33,00 $36,00 $36,00

Sales $7,500 $7,500 $8,000
0 0 0 0 0 0 0 0 0

Direct Cost $11,00 $11,00 $11,80 $13,80 $15,00 $15,00

$3,000 $3,000 $3,200 $8,200 $8,600 $8,600
of Sales 0 0 0 0 0 0

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Cost of $11,00 $11,00 $11,80 $13,80 $15,00 $15,00

$3,000 $3,000 $3,200 $8,200 $8,600 $8,600
Sales 0 0 0 0 0 0

Gross $10,80 $11,40 $11,40 $15,00 $15,00 $16,20 $19,20 $21,00 $21,00
$4,500 $4,500 $4,800
Margin 0 0 0 0 0 0 0 0 0

Gross
60.00% 60.00% 60.00% 56.84% 57.00% 57.00% 57.69% 57.69% 57.86% 58.18% 58.33% 58.33%
Margin %

Expenses

Payroll $4,250 $4,250 $4,250 $6,650 $6,650 $6,650 $8,400 $8,400 $8,400 $8,650 $8,650 $8,650

Sales and
Marketing
$500 $500 $500 $500 $500 $500 $750 $750 $750 $750 $750 $750
and Other
Expenses

Depreciatio
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
n

Gasoline
$300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300
and oil

Telephone $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125

Utilities $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400

Insurance $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $750
Rent $1,500 $543 $543 $543 $543 $543 $543 $543 $543 $543 $543 $543

Payroll
15% $543 $543 $543 $543 $543 $543 $543 $543 $543 $543 $543 $544
Taxes

Website
Maintenanc $350 $350 $350 $350 $350 $350 $350 $350 $350 $350 $350 $350
e & Support

Consultants $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500

Advertising 15% $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500

Misc. Other
$150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150
Expenses

Total
$11,31 $11,31 $11,31 $13,31 $13,31 $13,31 $13,56 $13,56 $13,56
Operating $9,868 $8,912 $8,912
2 2 2 2 2 2 2 2 2
Expenses

Profit
Before ($5,368 ($4,412 ($4,112
($512) $88 $88 $1,688 $1,688 $2,888 $5,638 $7,438 $7,438
Interest and ) ) )
Taxes

($5,368 ($4,412 ($4,112

EBITDA ($512) $88 $88 $1,688 $1,688 $2,888 $5,638 $7,438 $7,438
) ) )

Interest
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $625
Expense

Taxes ($1,611 ($1,324 ($1,234

($154) $26 $26 $506 $506 $866 $1,691 $2,231 $2,044
Incurred ) ) )

($3,758 ($3,088 ($2,878

Net Profit ($358) $62 $62 $1,182 $1,182 $2,022 $3,947 $5,207 $4,769
) ) )

Net - - -
-1.89% 0.31% 0.31% 4.54% 4.54% 7.22% 11.96% 14.46% 13.25%
Profit/Sales 50.11% 41.18% 35.98%

Pro Forma Cash Flow

Month Month Month Month Month Month Month Month Month Month Month Month
1 2 3 4 5 6 7 8 9 10 11 12
Cash
Received

Cash from
Operations

$19,00 $20,00 $20,00 $26,00 $26,00 $28,00 $33,00 $36,00

Cash Sales $7,500 $7,500 $8,000 $36,000
0 0 0 0 0 0 0 0

Subtotal
$19,00 $20,00 $20,00 $26,00 $26,00 $28,00 $33,00 $36,00
Cash from $7,500 $7,500 $8,000 $36,000
0 0 0 0 0 0 0 0
Operations

Additional
Cash
Received

Sales Tax,
VAT, 0.00
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
HST/GST %
Received

New
Current $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Borrowing

New Other
Liabilities
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
(interest-
free)

New Long-
term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $75,000
Liabilities

Sales of
Other
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Current
Assets

Sales of
Long-term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Assets

New
Investment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Received
Subtotal
$19,00 $20,00 $20,00 $26,00 $26,00 $28,00 $33,00 $36,00 $111,00
Cash $7,500 $7,500 $8,000
0 0 0 0 0 0 0 0 0
Received

Expenditure Month Month Month Month Month Month Month Month Month Month Month Month
s 1 2 3 4 5 6 7 8 9 10 11 12

Expenditure
s from
Operations

Cash
$4,250 $4,250 $4,250 $6,650 $6,650 $6,650 $8,400 $8,400 $8,400 $8,650 $8,650 $8,650
Spending

Bill $12,72 $13,28 $13,39 $16,41 $16,45 $17,67 $20,46

$234 $6,986 $6,348 $6,831 $22,158
Payments 8 8 3 8 7 2 1

Subtotal
$11,23 $10,59 $13,48 $19,37 $19,93 $21,79 $24,81 $24,85 $26,32 $29,11
Spent on $4,484 $30,808
6 8 1 8 8 3 8 7 2 1
Operations

Additional
Cash Spent

Sales Tax,
VAT,
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
HST/GST
Paid Out

Principal
Repayment
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
of Current
Borrowing

Other
Liabilities
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal
Repayment

Long-term
Liabilities
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal
Repayment

Purchase
Other
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Current
Assets
Purchase
$100,00
Long-term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
0
Assets

Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal $11,23 $10,59 $13,48 $19,37 $19,93 $21,79 $24,81 $24,85 $26,32 $29,11 $130,80
$4,484
Cash Spent 6 8 1 8 8 3 8 7 2 1 8

Net Cash ($3,736 ($2,598 ($19,808

$3,016 $5,519 $622 $62 $4,207 $1,182 $3,143 $6,678 $6,889
Flow ) ) )

Cash $53,01 $49,28 $46,68 $52,20 $52,82 $52,88 $57,09 $58,27 $61,41 $68,09 $74,98
$55,176
Balance 6 1 3 2 4 6 3 5 8 5 4

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Pro Forma Balance Sheet

Month Month
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 12
10 11

Starting
Assets
Balances

Current
Assets

Cash $50,000 $53,016 $49,281 $46,683 $52,202 $52,824 $52,886 $57,093 $58,275 $61,418 $68,095 $74,984 $55,176

Other
Current $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000
Assets

Total Current
$55,000 $58,016 $54,281 $51,683 $57,202 $57,824 $57,886 $62,093 $63,275 $66,418 $73,095 $79,984 $60,176
Assets

Long-term
Assets

Long-term
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $100,000
Assets
Accumulated
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Depreciation

Total Long-
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $100,000
term Assets

Total Assets $55,000 $58,016 $54,281 $51,683 $57,202 $57,824 $57,886 $62,093 $63,275 $66,418 $73,095 $79,984 $160,176

Liabilities Month Month

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 12
and Capital 10 11

Current
Liabilities

Accounts
$0 $6,774 $6,127 $6,407 $12,285 $12,845 $12,845 $15,871 $15,871 $16,992 $19,723 $21,405 $21,828
Payable

Current
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Borrowing

Other
Current $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Liabilities

Subtotal
Current $0 $6,774 $6,127 $6,407 $12,285 $12,845 $12,845 $15,871 $15,871 $16,992 $19,723 $21,405 $21,828
Liabilities

Long-term
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $75,000
Liabilities

Total
$0 $6,774 $6,127 $6,407 $12,285 $12,845 $12,845 $15,871 $15,871 $16,992 $19,723 $21,405 $96,828
Liabilities

Paid-in
$90,000 $90,000 $90,000 $90,000 $90,000 $90,000 $90,000 $90,000 $90,000 $90,000 $90,000 $90,000 $90,000
Capital

Retained
($35,000) ($35,000) ($35,000) ($35,000) ($35,000) ($35,000) ($35,000) ($35,000) ($35,000) ($35,000) ($35,000) ($35,000) ($35,000)
Earnings

Earnings $0 ($3,758) ($6,846) ($9,725) ($10,083) ($10,021) ($9,960) ($8,778) ($7,596) ($5,575) ($1,628) $3,579 $8,348

Total Capital $55,000 $51,242 $48,154 $45,275 $44,917 $44,979 $45,040 $46,222 $47,404 $49,425 $53,372 $58,579 $63,348

Total
Liabilities $55,000 $58,016 $54,281 $51,683 $57,202 $57,824 $57,886 $62,093 $63,275 $66,418 $73,095 $79,984 $160,176
and Capital

Net Worth $55,000 $51,242 $48,154 $45,275 $44,917 $44,979 $45,040 $46,222 $47,404 $49,425 $53,372 $58,579 $63,348