Furniture Manufacturer Business Plan

Trestle Creek Cabinets is a cabinet company specializing in custom cabinets for the residential, resort, and commercial market. Its founders have extensive experience in the construction and cabinet industry. Trestle Creek Cabinets operates under the umbrella of Trestle Creek, Inc., a construction company sharing staff, office space, and administration costs. However, for business planning purposes, we treat Trestle Creek Cabinets as a separate company.

Over years of involvement in luxury home construction, the company owners have seen a need for a cabinet line with a broad selection of design choices, high-end finishes, organization, customer service, and quality. Trestle Creek Cabinets meets those needs. Building market position in residential, resort, and commercial development segments, the company projects substantial revenue growth between FY1 and FY3. By maintaining an average gross margin of over 25%, the company estimates handsome net profits by FY3.

The company owners have provided the capital to cover start-up expenses. The company seeks a 3-year commercial loan to cover operating expenses.

1.1 Objectives

The company objectives are:

• To be a top cabinet supplier to luxury homes in the regional market.
• Revenues to more than double Year1 levels by the end of Year2.
• Aim to have 70% of sales in high-end residential customer segment.
• 20% of sales in mid-range residential customer segment.
• 10% of sales in commercial development segment.
• To have a showroom within 3 months in a prominent retail space.

1.2 Mission

To deliver a high-quality product, on time and within budget while providing a fast, error-free ordering system.

Company Summary

Trestle Creek Cabinets is a new company that specializes in providing expertise and quality in the cabinet supplier market. We aim to meet the demanding organizational, scheduling, and quality needs of architects, owners, and construction professionals.

2.1 Start-up Summary

Our total start-up expenses, including tools, software, stationery, and related expenses, are shown below. Co-owners Martin Kribs and Brent Palmer will provide the majority of the start-up financing. Additionally, the company plans to secure a 3-year commercial loan facility to meet cash flow requirements.

Start-up: Requirements

Start-up Expenses:

– Business Cards: $100

– Drill Press: $1,916

– Cabinet Jacks: $713

– Kitchen Builder Software: $2,495

– Lateral File: $236

– Sign: $1,154

– Seat Cushions: $338

– Phone Transfer: $64

– First/Last/Deposit: $2,400

– Marketing: $4,430

– Level Package: $1,005

– Sure Trak Software: $499

– Estimating Data Base: $2,200

– Software Lease Buyout: $7,092

– Total Start-up Expenses: $24,642

Start-up Assets:

– Cash Required: $89,299

– Other Current Assets: $14,478

– Long-term Assets: $0

– Total Assets: $103,777

Total Requirements: $128,419

Start-up Funding:

Start-up Expenses to Fund: $24,642

Start-up Assets to Fund: $103,777

Total Funding Required: $128,419

Assets:

Non-cash Assets from Start-up: $14,478

Cash Requirements from Start-up: $89,299

Additional Cash Raised: $0

Cash Balance on Starting Date: $89,299

Total Assets: $103,777

Liabilities and Capital:

Liabilities:

– Current Borrowing: $0

– Long-term Liabilities: $40,000

– Accounts Payable (Outstanding Bills): $0

– Other Current Liabilities (interest-free): $0

– Total Liabilities: $40,000

Capital:

Planned Investment:

– Martin Kribs: $75,265

– Brent Palmer: $13,154

– Other: $0

– Additional Investment Requirement: $0

– Total Planned Investment: $88,419

Loss at Start-up (Start-up Expenses): ($24,642)

Total Capital: $63,777

Total Capital and Liabilities: $103,777

Total Funding: $128,419

Products

Our product consists of two main components:

1. The boxes and shelves will be ordered from two different suppliers (Cab Parts, Scheers) in kitset form. They can be finished with custom veneers.

2. The doors, panels, and drawer fronts will come from four different suppliers: Bergmeyer Manufacturing, Homestead Woods, Decore, and Southwest Door Company. We will have 4-6 custom designs available from Bergmeyer Manufacturing, with unlimited different custom finishes. The other suppliers will provide their stock products.

Market Analysis Summary

Trestle Creek Cabinets will focus on architects, owners, and contractors in the regional area involved in high-end residential, resort, and commercial development segments.

In 2000, a total of 219 new residential homes worth $168 million were constructed in Teton County, WY. If we assume an average of $40,000 per kitchen (likely conservative) and multiply that by the 219 homes, the total value of kitchens installed for the year is $8,760,000. We plan to acquire 4-5% of the market share in this residential segment in our first year, which we believe is attainable in a growing market.

Teton County, Idaho has great potential due to three new resort developments: Teton Springs Golf & Fishing Club, Grand Targhee Resort Expansion, and Teton Country Club.

The following table outlines the total market potential of the three major customer segments in Teton County.

Target Market Segment Strategy

Trestle Creek Cabinets will focus on contacting contractors and architects specializing in the luxury home market. Establishing relationships with these entities will generate strong leads and personal recommendations to home owners.

There are plans to upgrade office space to a showroom in a high visibility location to expose our products to new home builders.

Market Analysis

4.2 Industry Analysis

There are two main types of cabinet suppliers in the industry.

1. Resellers of complete cabinet sets using stock items where the cabinets turn up completely built. Usually have no shop facilities but do have show rooms.
2. Custom shops with full, in-house fabrication facilities. They are usually very product oriented and under-perform with customer support.

Trestle Creek Cabinets can provide high volume work, superior project management, and excellent quality while maintaining a low overhead.

4.2.1 Competition and Buying Patterns

The high-end cabinet market understands the concept of service and support and is more likely to pay for it when the offering is clearly stated.

There are many competitors in the local market. Although each of them delivers a quality product, we feel they fail to deliver a full turnkey package. There are four factors that govern the cost of all kitchen projects: Scope, Product, Design, and Services. Most people mistakenly think that the size of the project and the choice of brand name products will lead to the best results. But it is the design and a company’s services that will have the greatest impact on the quality and value of the customer’s investment.

Strategy and Implementation Summary

Teton County, Wyoming and Idaho are experiencing steady growth in the high-end residential markets, and there is a general consensus of continued growth in the area. Taking part in this growth, while providing attention to the design development, ordering process, project management, and installation, will put us on the road to success.

5.1 Competitive Edge

Our competitive edge is our ability to provide high volumes and flexibility in style, while maintaining a quality product backed by excellent service.

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5.2 Sales Strategy

Our sales strategy is to make ourselves known through mailings, print advertising, and personal contact to architects and contractors primarily involved with the design/construction of commercial development and luxury homes.

Having a showroom will be a sales tool in itself. A showroom will give us exposure to the general public, new arrivals to the area, and construction professionals.

5.2.1 Sales Forecast

The table below shows projected cabinet sales. As the company gets established in the market, we anticipate strong sales growth over the next three years.

Sales Forecast

Milestones

The table below lists program milestones, dates, managers, and budgets.

Management Summary

Martin Kribs, President, has 20 years of construction experience. Brent Palmer, V. President, has three years of construction experience and six years in management within the hospitality industry. As the company grows, we will hire an administration/showroom assistant.

Personnel Plan

Financial Plan

The initial financial goals for the company are:

• Obtain an operating line of credit from a financial institution.
• Finance growth through retained earnings.
• Operate on a 25-30% gross margin.

Important Assumptions

The financial plan depends on certain assumptions, most of which are shown in the table below as annual assumptions.

Break-even Analysis

As the business settles and start-up/showroom costs are met, average monthly operating costs will increase and stabilize. The average per unit price is for a 24″ base unit. This table shows we need to sell 16 units or 32 lineal feet of cabinets per month to break even.

Break-even Analysis:

Monthly Revenue Break-even: $38,806.

Assumptions:

– Average Percent Variable Cost: 68%

– Estimated Monthly Fixed Cost: $12,327.

7.3 Projected Profit and Loss:

Our projected profit and loss:

Pro Forma Profit and Loss:

Year 1 Year 2 Year 3

Sales $442,000 $1,000,000 $1,500,000

Direct Cost of Sales $301,600 $725,000 $1,087,500

Other $0 $0 $0

Total Cost of Sales $301,600 $725,000 $1,087,500

Gross Margin $140,400 $275,000 $412,500

Gross Margin % 31.76% 27.50% 27.50%

Expenses:

Payroll $78,000 $157,000 $195,000

Sales and Marketing and Other Expenses $45,680 $44,600 $61,000

Depreciation $0 $0 $0

Utilities $3,000 $4,000 $5,000

Insurance $1,140 $1,300 $1,500

Rent $8,400 $9,000 $12,000

Payroll Taxes $11,700 $23,550 $29,250

Other $0 $0 $0

Total Operating Expenses $147,920 $239,450 $303,750

Profit Before Interest and Taxes: ($7,520) $35,550 $108,750

EBITDA: ($7,520) $35,550 $108,750

Interest Expense: $4,000 $3,336 $1,937

Taxes Incurred: $0 $4,832 $17,357

Net Profit: ($11,520) $27,382 $89,456

Net Profit/Sales: -2.61% 2.74% 5.96%

7.4 Projected Cash Flow:

We do not expect major problems with cash flow since most contracts require a 50% deposit upon signing.

Pro Forma Cash Flow:

Year 1 Year 2 Year 3

—————————————

Cash Received

Cash from Operations

Cash Sales $110,500 $250,000 $375,000

Cash from Receivables $281,813 $687,272 $1,068,792

Subtotal Cash from Operations $392,313 $937,272 $1,443,792

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 $392,313 $937,272 $1,443,792

Expenditures

Expenditures from Operations

Cash Spending $78,000 $157,000 $195,000

Bill Payments $349,852 $774,249 $1,182,673

Subtotal Spent on Operations $427,852 $931,249 $1,377,673

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 $13,289 $14,681

Purchase Other Current Assets $0 $0 $0

Purchase Long-term Assets $0 $0 $0

Dividends $0 $0 $0

Subtotal Cash Spent $427,852 $944,538 $1,392,354

Net Cash Flow ($35,539) ($7,266) $51,438

Cash Balance $53,759 $46,494 $97,932

7.5 Projected Balance Sheet:

The balance sheet shows a healthy growth of net worth and a strong financial position.

Pro Forma Balance Sheet:

Year 1 Year 2 Year 3

—————————————

Assets

Current Assets

Cash $53,759 $46,494 $97,932

Accounts Receivable $49,688 $112,415 $168,623

Other Current Assets $14,478 $14,478 $14,478

Total Current Assets $117,925 $173,387 $281,033

Long-term Assets

Long-term Assets $0 $0 $0

Accumulated Depreciation $0 $0 $0

Total Long-term Assets $0 $0 $0

Total Assets $117,925 $173,387 $281,033

Liabilities and Capital

Year 1 Year 2 Year 3

—————————————

Current Liabilities

Accounts Payable $25,668 $67,037 $99,908

Current Borrowing $0 $0 $0

Other Current Liabilities $0 $0 $0

Subtotal Current Liabilities $25,668 $67,037 $99,908

Long-term Liabilities $40,000 $26,711 $12,030

Total Liabilities $65,668 $93,748 $111,938

Paid-in Capital $88,419 $88,419 $88,419

Retained Earnings ($24,642) ($36,162) ($8,780)

Earnings ($11,520) $27,382 $89,456

Total Capital $52,257 $79,639 $169,095

Total Liabilities and Capital $117,925 $173,387 $281,033

Net Worth $52,257 $79,639 $169,095

7.6 Business Ratios:

The following table contains important ratios for the woodworking industry, as determined by the Standard Industry Classification (SIC) Code, #1751.

Ratio Analysis:

Year 1 Year 2 Year 3 Industry Profile

—————————————

Sales Growth 0.00% 126.24% 50.00% 7.90%

Percent of Total Assets Year 1 Year 2 Year 3 Industry Profile

—————————————

Accounts Receivable 42.13% 64.83% 60.00% 35.00%

Other Current Assets 12.28% 8.35% 5.15% 30.30%

Total Current Assets 100.00% 100.00% 100.00% 71.50%

Long-term Assets 0.00% 0.00% 0.00% 28.50%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities Year 1 Year 2 Year 3 Industry Profile

—————————————

Accounts Payable 21.77% 38.66% 35.55% 42.70%

Long-term Liabilities 33.92% 15.41% 4.28% 14.30%

Total Liabilities 55.69% 54.07% 39.83% 57.00%

Net Worth 44.31% 45.93% 60.17% 43.00%

Percent of Sales Year 1 Year 2 Year 3 Industry Profile

—————————————

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 31.76% 27.50% 27.50% 31.60%

Selling, General & Administrative Expenses 34.37% 24.76% 21.45% 16.70%

Advertising Expenses 1.27% 0.80% 1.00% 0.50%

Profit Before Interest and Taxes -1.70% 3.56% 7.25% 3.40%

Main Ratios Year 1 Year 2 Year 3 Industry Profile

—————————————

Current 4.59 2.59 2.81 1.64

Quick 4.59 2.59 2.81 1.28

Total Debt to Total Assets 55.69% 54.07% 39.83% 57.00%

Pre-tax Return on Net Worth -22.04% 40.45% 63.17% 7.50%

Pre-tax Return on Assets -9.77% 18.58% 38.01% 17.40%

Additional Ratios Year 1 Year 2 Year 3 Industry Profile

—————————————

Net Profit Margin -2.61% 2.74% 5.96% n.a

Return on Equity -22.04% 34.38% 52.90% n.a

Accounts Receivable Turnover 6.67 6.67 6.67 n.a

Collection Days 58 39 46 n.a

Accounts Payable Turnover 14.63 12.17 12.17 n.a

Payment Days 27 21 25 n.a

Total Asset Turnover 3.75 5.77 5.34 n.a

Debt to Net Worth 1.26 1.18 0.66 n.a

Current Liab. to Liab. 0.39 0.72 0.89 n.a

Net Working Capital $92,257 $106,350 $181,125 n.a

Interest Coverage -1.88 10.66 56.14 n.a

Assets to Sales 0.27 0.17 0.19 n.a

Current Debt/Total Assets 22% 39% 36% n.a

Acid Test 2.66 0.91 1.13 n.a

Sales/Net Worth 8.46 12.56 8.87 n.a

Dividend Payout 0.00 0.00 0.00 n.a

Appendix:

Sales Forecast:

Year 1 Year 2 Year 3

—————————————

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

Cabinets 0% $0 $0 $42,000 $12,500 $80,000 $30,000 $50,000 $55,000 $60,000 $45,000 $37,500 $30,000

Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Sales $0 $0 $0 $42,000 $12,500 $80,000 $30,000 $50,000 $55,000 $60,000 $45,000 $37,500 $30,000

Personnel Plan:

Year 1 Year 2 Year 3

—————————————

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

Martin Kribs 0% $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000

Brent Palmer 0% $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000

Carpenters 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

Administration Assistant 0% $0 $0 $0 $0 $0 $0 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000

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

Total Payroll $5,500 $5,500 $5,500 $5,500 $5,500 $5,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500

General Assumptions:

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

Current Interest Rate: 10.00%

Long-term Interest Rate: 10.00%

Tax Rate: 30.00%

Other: 0

Pro Forma Profit and Loss:

Sales: $0, $0, $42,000, $12,500, $80,000, $30,000, $50,000, $55,000, $60,000, $45,000, $37,500, $30,000

Direct Cost of Sales: $0, $0, $0, $9,000, $57,600, $21,000, $36,000, $41,500, $48,000, $36,000, $30,000, $22,500

Other: $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0

Total Cost of Sales: $0, $0, $0, $9,000, $57,600, $21,000, $36,000, $41,500, $48,000, $36,000, $30,000, $22,500

Gross Margin: $0, $0, $42,000, $3,500, $22,400, $9,000, $14,000, $13,500, $12,000, $9,000, $7,500, $7,500

Gross Margin %: 0.00%, 0.00%, 100.00%, 28.00%, 28.00%, 30.00%, 28.00%, 24.55%, 20.00%, 20.00%, 20.00%, 25.00%

Expenses:

Payroll: $5,500, $5,500, $5,500, $5,500, $5,500, $5,500, $7,500, $7,500, $7,500, $7,500, $7,500, $7,500

Sales and Marketing and Other Expenses: $1,150, $1,150, $21,646, $1,800, $5,184, $1,550, $5,150, $2,150, $1,550, $1,400, $1,400, $1,550

Depreciation: $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0

Utilities: $250, $250, $250, $250, $250, $250, $250, $250, $250, $250, $250, $250

Insurance: $95, $95, $95, $95, $95, $95, $95, $95, $95, $95, $95, $95

Rent: $700, $700, $700, $700, $700, $700, $700, $700, $700, $700, $700, $700

Payroll Taxes: 15%, $825, $825, $825, $825, $825, $825, $1,125, $1,125, $1,125, $1,125, $1,125, $1,125

Other: $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0

Total Operating Expenses: $8,520, $8,520, $29,016, $9,170, $12,554, $8,920, $14,820, $11,820, $11,220, $11,070, $11,070, $11,220

Profit Before Interest and Taxes: ($8,520), ($8,520), $12,984, ($5,670), $9,846, $80, ($820), $1,680, $780, ($2,070), ($3,570), ($3,720)

EBITDA: ($8,520), ($8,520), $12,984, ($5,670), $9,846, $80, ($820), $1,680, $780, ($2,070), ($3,570), ($3,720)

Interest Expense: $333, $333, $333, $333, $333, $333, $333, $333, $333, $333, $333, $333

Taxes Incurred: $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0

Net Profit: ($8,853), ($8,853), $12,651, ($6,003), $9,513, ($253), ($1,153), $1,347, $447, ($2,403), ($3,903), ($4,053)

Net Profit/Sales: 0.00%, 0.00%, 30.12%, -48.03%, 11.89%, -0.84%, -2.31%, 2.45%, 0.74%, -5.34%, -10.41%, -13.51%

Pro Forma Cash Flow:

Cash Received

Cash from Operations

Cash Sales: $0, $0, $10,500, $3,125, $20,000, $7,500, $12,500, $13,750, $15,000, $11,250, $9,375, $7,500

Cash from Receivables: $0, $0, $0, $1,050, $30,763, $11,063, $58,750, $23,000, $37,625, $41,375, $44,625, $33,563

Subtotal Cash from Operations: $0, $0, $10,500, $4,175, $50,763, $18,563, $71,250, $36,750, $52,625, $52,625, $54,000, $41,063

Additional Cash Received

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

New Current Borrowing: $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0

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

New Long-term Liabilities: $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0

Sales of Other Current Assets: $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0

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

New Investment Received: $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0

Subtotal Cash Received: $0, $0, $10,500, $4,175, $50,763, $18,563, $71,250, $36,750, $52,625, $52,625, $54,000, $41,063

Expenditures

Expenditures from Operations

Cash Spending: $5,500, $5,500, $5,500, $5,500, $5,500, $5,500, $7,500, $7,500, $7,500, $7,500, $7,500, $7,500

Bill Payments: $112, $3,353, $4,037, $23,488, $14,736, $63,646, $25,383, $43,737, $46,350, $51,648, $39,703, $33,658

Subtotal Spent on Operations: $5,612, $8,853, $9,537, $28,988, $20,236, $69,146, $32,883, $51,237, $53,850, $59,148, $47,203, $41,158

Additional Cash Spent

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

Principal Repayment of Current Borrowing: $0, $0, $0, $0, $0, $0, $0, $0, $0, $

Andrew Brooks

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