Tricky Widgets Manufacturing (TWM) is a heavy equipment machinery manufacturer located in Spokane, Washington. TWM is a start-up firm with plans to secure start-up financing to begin operations.

TWM aims to meet the growing demand for heavy equipment machinery products at its location. Initially, the company will offer three products: the “Widget Basic,” “Widget Deluxe,” and “Widget Premium.” These products are highly versatile and offer precise control capabilities, making them popular among commercial construction companies. The company anticipates a swift market entry due to established contact relationships and referral networks with commercial construction company owners.

Heavy Equipment Maker Business Plan Example

1.1 Mission

TWM aims to offer high-quality heavy equipment machinery for the commercial construction industry at a competitive price compared to other premium commercial machinery manufacturers. TWM believes there is an untapped market opportunity because existing providers of construction machinery are too diversified to meet the specialized needs of the commercial construction segment. Furthermore, incorporating greater precision controls within their machinery will better serve this segment of the industry.

1.2 Keys to Success

TWM’s keys to success will include:

– Providing a high level of quality in its product line.

Company Summary

TWM is a start-up manufacturing firm managed by four executives in administration, marketing, sales, and finance. These executives bring extensive experience in the equipment manufacturing industry. They see an opportunity to gain market share by focusing on the specific needs of the commercial construction industry and offering greater precision controls in their products compared to competitors. The company will be organized as a closely-held corporation with the majority of shares held by the four principle executives.

The company aims to raise approximately $4.5 million in loans and another $500,000 from private investors for start-up purposes. TWM will have one manufacturing facility in Spokane, Washington.

2.1 Company Ownership

The company will be a closely-held corporation with six principle shareholders forming the Board of Directors. Within the next five years, the company plans to conduct a public offering to expand its financing capabilities. The principle owners intend to retain the majority of the company’s stock for the foreseeable future. The company is incorporated in Delaware for the most favorable tax conditions.

2.2 Start-up Summary

The following table and chart illustrate projected initial start-up costs for the firm.

Heavy Equipment Maker Business Plan Example

Start-up Requirements

Start-up Expenses

Legal $4,000

Rent $24,000

Advertising $15,000

Insurance $12,000

Research and Development $250,000

Office setup $10,000

Other $3,000

Total Start-up Expenses $318,000

Start-up Assets

Cash Required $2,000,000

Start-up Inventory $100,000

Other Current Assets $100,000

Long-term Assets $2,500,000

Total Assets $4,700,000

Total Requirements $5,018,000

Start-up Funding

Start-up Expenses to Fund $318,000

Start-up Assets to Fund $4,700,000

Total Funding Required $5,018,000

Assets

Non-cash Assets from Start-up $2,700,000

Cash Requirements from Start-up $2,000,000

Additional Cash Raised $0

Cash Balance on Starting Date $2,000,000

Total Assets $4,700,000

Liabilities and Capital

Liabilities

Current Borrowing $0

Long-term Liabilities $4,500,000

Accounts Payable (Outstanding Bills) $10,000

Other Current Liabilities (interest-free) $0

Total Liabilities $4,510,000

Capital

Planned Investment

Investor 1 $55,000

Investor 2 $43,000

Investor 3 $160,000

Investor 4 $60,000

Investor 5 $120,000

Investor 6 $70,000

Total Planned Investment $508,000

Loss at Start-up (Start-up Expenses) ($318,000)

Total Capital $190,000

Total Capital and Liabilities $4,700,000

Total Funding $5,018,000

Products

TWM will manufacture heavy equipment machinery for all phases of commercial construction needs. Primary focus will be product engineering and manufacturing processes to ensure the highest quality, product features, and efficient manufacturing process.

TWM will manufacture heavy equipment machinery products called the “Widget Basic,” “Widget Deluxe,” and “Widget Premium.” All Widget products will lift 50 tons and are designed for precise control of movement.

The Widget Basic includes a large “grabber” arm for girder installation and placement, and a back-hoe lifter for land clearance.

The Widget Deluxe includes a large “grabber” arm for girder installation and placement, a back-hoe lifter for land clearance, and a wrecker ball attachment for building demolition.

The Widget Premium includes a large “grabber” arm for girder installation and placement, a back-hoe lifter for land clearance, a wrecker ball attachment for building demolition, and an elevating device for lifting up to ten crewpersons up to 10 stories.

Industry Analysis

The industry is dominated by a few large companies, such as Caterpillar, Komatsu, Ingersoll Rand, and Linde AG. Caterpillar has approximately 40% market share. These companies market products through local distributors and provide financing, servicing, and replacement of equipment.

Customers require reliable, versatile equipment and are influenced by reputation and cost. Equipment purchases are significant long-term assets for customers.

Market Analysis Summary

The construction machinery industry had sales of approximately $15.4 billion last year. Commercial construction companies, equipment rental and leasing companies, and general construction firms are the main customers. Small construction companies are a rapidly growing sub-segment.

The market is influenced by the economy. Recent downturns have affected sales for companies like Caterpillar and Komatsu. TWM aims to be the industry leader in specialized equipment and innovative designs.

Market Analysis

Potential Customers Growth Year 1 Year 2 Year 3 Year 4 Year 5 CAGR

Major Commercial Construction Companies 15% 25,000 28,750 33,063 38,022 43,725 15.00%

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Mid-Sized Commercial Construction Companies 10% 5,000 5,500 6,050 6,655 7,321 10.00%

Small Commercial Construction Companies 3% 5,000 5,150 5,305 5,464 5,628 3.00%

Total 12.81% 35,000 39,400 44,418 50,141 56,674 12.81%

Market Segmentation

TWM will focus on large commercial construction companies with over $2 billion in annual revenue. These companies are looking for heavy equipment machinery with durability, efficiency, ease of operation, precise control, and safety features.

Mid-size commercial construction companies are a secondary market for TWM. These companies prioritize cost savings and typically choose the Widget Basic and Widget Deluxe products.

Heavy Equipment Maker Business Plan Example

TWM primarily focuses on its target market, the large commercial construction company, through direct selling via its various relationship and referral networks. Additionally, investment will be made in advertising to promote product awareness. Direct selling is more effective in closing sales and reducing sales and marketing costs.

TWM uses product demonstrations at its site to close sales. Potential clients’ travel costs for product demonstrations are covered by TWM. Product demonstrations are a critical step in the sales process, allowing the opportunity to prove product capabilities, educate potential clients, and establish a relationship.

The volume of commercial construction activity has been steadily increasing since the mid-1980s. Demand for heavy machinery equipment has also been steadily increasing as new entrants come into the market and current participants grow their operations.

Modern complex designs and other factors have increased demand for higher precision and accuracy in controls of heavy machinery equipment in commercial construction operations.

TWM faces approximately 55 major competitors nationally. The top player is Caterpillar, a trusted name with a 40-year presence in the market.

Large commercial construction companies typically look for widely used equipment with an established name and reputation for quality, durability, and versatility. Product demonstrations are critical in the buying process, especially when working with a smaller, less known company.

Similar competitors offer power equipment that plays a niche role in commercial construction and material movement. This segment’s products include skid-steer loaders, compact hydraulic excavators, industrial vehicles, pavers, compactors, drilling equipment, and rough-terrain material handlers.

TWM will succeed by manufacturing high-quality, durable heavy equipment machinery with numerous precise control options. It will focus on a narrow segment of the market and aim to establish the best reputation in that segment.

TWM’s competitive edge lies in its quality, product features and options, and relationships with major commercial construction companies nationwide.

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TWM plans to deliver sales of approximately $54 million in the current year, $62 million in the second year, and $75 million in the third year following this plan.

The company will leverage its extensive contacts with major construction companies to secure contracts through direct sales methods and onsite demonstrations. Many of these companies have shown interest in purchasing TWM’s proposed products. The advertising campaign will create product awareness through trade journals, direct mail advertising, and other means. In the future, TWM will seek partnerships with major equipment distributors. The establishment of a post-sales servicing and parts division will provide additional sales and marketing opportunities for new products.

Heavy Equipment Maker Business Plan Example

Heavy Equipment Maker Business Plan Example

Sales Forecast
Year 1 Year 2 Year 3
Unit Sales
Widget Basic 295 310 341
Widget Deluxe 335 352 387
Widget Premium 362 380 418
Other 0 0 0
Total Unit Sales 992 1,042 1,146
Unit Prices Year 1 Year 2 Year 3
Widget Basic $35,000.00 $38,500.00 $42,350.00
Widget Deluxe $50,000.00 $55,000.00 $60,500.00
Widget Premium $75,000.00 $82,500.00 $90,750.00
Other $0.00 $0.00 $0.00
Sales
Widget Basic $10,327,309 $11,928,042 $14,432,931
Widget Deluxe $16,765,112 $19,363,705 $23,430,082
Widget Premium $27,159,482 $31,369,201 $37,956,734
Other $0 $0 $0
Total Sales $54,251,903 $62,660,948 $75,819,747
Direct Unit Costs Year 1 Year 2 Year 3
Widget Basic $28,000.00 $30,240.00 $32,659.20
Widget Deluxe $40,000.00 $43,200.00 $46,656.00
Widget Premium $60,000.00 $64,800.00 $69,984.00
Other $0.00 $0.00 $0.00
Direct Cost of Sales
Widget Basic $8,261,847 $9,368,935 $11,130,295
Widget Deluxe $13,412,090 $15,209,310 $18,068,660
Widget Premium $21,727,585 $24,639,082 $29,271,229
Other $0 $0 $0
Subtotal Direct Cost of Sales $43,401,522 $49,217,326 $58,470,184

Management Summary

Jim Mitchell, Chief Executive Officer: Extensive experience in sales and marketing in the manufacturing industry.

Ike Smith, Chief Financial Officer: Brings heavy focus in finance.

Pat Hyder, VP of Sales: Strong background in manufacturing sales, business development, and strategic partnership development.

Pamela Jules, VP of Marketing: Strong background in marketing within the heavy equipment manufacturing industry. Extensive experience in business development and strategic partnership development.

6.1 Personnel Plan

The personnel plan shows TWM’s significant investments in research and development.

Personnel Plan
Year 1 Year 2 Year 3
Executives $480,000 $504,000 $529,200
Managers $960,000 $1,008,000 $1,058,400
Manufacturing Process Workers $720,000 $756,000 $793,800
Engineering $3,000,000 $3,150,000 $3,307,500
Total People 115 127 175
Total Payroll $5,160,000 $5,418,000 $5,688,900

Financial Plan

TWM expects to raise $4.5 million in loans along with $.5 million in private investment for start-up costs in the first three years. An additional $50 million in financing is expected to be raised in an initial public offering scheduled between years three-five, providing most of the required funding for growth.

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7.1 Important Assumptions

Important assumptions for this plan are found in the following table.

General Assumptions
Year 1 Year 2 Year 3
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 Break-even Analysis

TWM’s break-even analysis is based on the first-year average figures for total sales and operating expenses. These are presented as per-unit revenue, per-unit cost, and fixed costs. These conservative assumptions provide a more accurate estimate of real risk.

Heavy Equipment Maker Business Plan Example

As the profit and loss table shows, TWM expects to continue its steady growth in profitability over the next three years.

Heavy Equipment Maker Business Plan Example

Heavy Equipment Maker Business Plan Example

Heavy Equipment Maker Business Plan Example

Pro Forma Profit and Loss:

Sales: $54,251,903 (Year 1) | $62,660,948 (Year 2) | $75,819,747 (Year 3)

Direct Cost of Sales: $43,401,522 (Year 1) | $49,217,326 (Year 2) | $58,470,184 (Year 3)

Other: $0 (Year 1) | $0 (Year 2) | $0 (Year 3)

Total Cost of Sales: $43,401,522 (Year 1) | $49,217,326 (Year 2) | $58,470,184 (Year 3)

Gross Margin: $10,850,381 (Year 1) | $13,443,622 (Year 2) | $17,349,563 (Year 3)

Gross Margin %: 20.00% (Year 1) | 21.45% (Year 2) | 22.88% (Year 3)

Expenses:

Payroll: $5,160,000 (Year 1) | $5,418,000 (Year 2) | $5,688,900 (Year 3)

Sales and Marketing and Other Expenses: $242,400 (Year 1) | $540,800 (Year 2) | $829,200 (Year 3)

Depreciation: $300,000 (Year 1) | $300,000 (Year 2) | $300,000 (Year 3)

Utilities: $12,000 (Year 1) | $14,000 (Year 2) | $15,000 (Year 3)

Payroll Taxes: $0 (Year 1) | $0 (Year 2) | $0 (Year 3)

Other: $0 (Year 1) | $0 (Year 2) | $0 (Year 3)

Total Operating Expenses: $5,714,400 (Year 1) | $6,272,800 (Year 2) | $6,833,100 (Year 3)

Profit Before Interest and Taxes: $5,135,981 (Year 1) | $7,170,822 (Year 2) | $10,516,463 (Year 3)

EBITDA: $5,435,981 (Year 1) | $7,470,822 (Year 2) | $10,816,463 (Year 3)

Interest Expense: $673,381 (Year 1) | $538,595 (Year 2) | $380,991 (Year 3)

Taxes Incurred: $1,338,780 (Year 1) | $1,989,668 (Year 2) | $3,040,642 (Year 3)

Net Profit: $3,123,819 (Year 1) | $4,642,559 (Year 2) | $7,094,831 (Year 3)

Net Profit/Sales: 5.76% (Year 1) | 7.41% (Year 2) | 9.36% (Year 3)

7.4 Projected Cash Flow:

The cash flow projection shows that provisions for ongoing expenses are adequate to meet TWM’s needs as the business generates sufficient cash flow to support operations. The second and third month decrease in cash flow reflects the payment of initial cost of goods sold prior to a large number of receipts being paid. TWM has anticipated this decrease and has arranged a line of credit to cover cash shortages.

Heavy Equipment Maker Business Plan Example

Pro Forma Cash Flow

Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $27,125,951 $31,330,474 $37,909,873
Cash from Receivables $22,227,991 $30,571,290 $36,721,873
Subtotal Cash from Operations $49,353,943 $61,901,764 $74,631,747
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $2,600,000 $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 $51,953,943 $61,901,764 $74,631,747
Expenditures
Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $5,160,000 $5,418,000 $5,688,900
Bill Payments $45,818,085 $52,731,967 $62,793,055
Subtotal Spent on Operations $50,978,085 $58,149,967 $68,481,955
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $2,600,000 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $276,036 $276,038 $276,038
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $51,254,121 $61,026,005 $68,757,993
Net Cash Flow $699,822 $875,759 $5,873,754
Cash Balance $2,699,822 $3,575,580 $9,449,334

7.5 Projected Balance Sheet

TWM’s projected company balance sheet:

Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $2,699,822 $3,575,580 $9,449,334
Accounts Receivable $4,897,960 $5,657,144 $6,845,144
Inventory $4,425,915 $5,018,988 $5,962,558
Other Current Assets $100,000 $100,000 $100,000
Total Current Assets $12,123,697 $14,351,712 $22,357,036
Long-term Assets
Long-term Assets $2,500,000 $2,500,000 $2,500,000
Accumulated Depreciation $300,000 $600,000 $900,000
Total Long-term Assets $2,200,000 $1,900,000 $1,600,000
Total Assets $14,323,697 $16,251,712 $23,957,036
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $4,185,913 $4,347,408 $5,233,939
Current Borrowing $2,600,000 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $6,785,913 $4,347,408 $5,233,939
Long-term Liabilities
$4,223,964 $3,947,926 $3,671,888
Total Liabilities $11,009,877 $8,295,334 $8,905,827
Paid-in Capital $508,000 $508,000 $508,000
Retained Earnings ($318,000) $2,805,819 $7,448,378
Earnings $3,123,819 $4,642,559 $7,094,831
Total Capital $3,313,819 $7,956,378 $15,051,209
Total Liabilities and Capital $14,323,697 $16,251,712 $23,957,036
Net Worth $3,313,819 $7,956,378 $15,051,209

7.6 Business Ratios

Business ratios for the years of this plan:

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Sales Forecast

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 15.50% 21.00% 0.10%
Percent of Total Assets
Accounts Receivable 34.19% 34.81% 28.57% 31.10%
Inventory 30.90% 30.88% 24.89% 29.10%
Other Current Assets 0.70% 0.62% 0.42% 20.00%
Total Current Assets 84.64% 88.31% 93.32% 80.20%
Long-term Assets 15.36% 11.69% 6.68% 19.80%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities
Accounts Payable 47.38% 26.75% 21.85% 38.00%
Long-term Liabilities 29.49% 24.29% 15.33% 16.80%
Total Liabilities 76.86% 51.04% 37.17% 54.80%
Net Worth 23.14% 48.96% 62.83% 45.20%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 20.00% 21.45% 22.88% 28.00%
Selling, General & Administrative Expenses 14.59% 14.37% 13.73% 15.20%
Advertising Expenses 0.11% 0.13% 0.15% 0.50%
Profit Before Interest and Taxes 9.47% 11.44% 13.87% 3.30%
Main Ratios
Current 1.79 3.30 4.27 2.11
Quick 1.13 2.15 3.13 1.14
Total Debt to Total Assets 76.86% 51.04% 37.17% 54.80%
Pre-tax Return on Net Worth 134.67% 83.36% 67.34% 7.30%
Pre-tax Return on Assets 31.16% 40.81% 42.31% 16.20%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 5.76% 7.41% 9.36% n.a
Return on Equity 94.27% 58.35% 47.14% n.a
Activity Ratios
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Sales Forecast
Month 1 2 3 4 5 6 7 8 9 10 11 12
Unit Sales 22 23 24 25 26 27 28 29 30 31 32 34
Total Unit Sales 74 75 77 79 80 82 83 85 87 88 90 92

Unit Prices

Unit Prices
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Widget Basic $35,000.00 $35,000.00 $35,000.00 $35,000.00 $35,000.00 $35,000.00 $35,000.00 $35,000.00 $35,000.00 $35,000.00 $35,000.00
Widget Deluxe $50,000.00 $50,000.00 $50,000.00 $50,000.00 $50,000.00 $50,000.00 $50,000.00 $50,000.00 $50,000.00 $50,000.00 $50,000.00
Widget Premium $75,000.00 $75,000.00 $75,000.00 $75,000.00 $75,000.00 $75,000.00 $75,000.00 $75,000.00 $75,000.00 $75,000.00 $75,000.00

Personnel Plan

Personnel Plan
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Executives 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000
Managers 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000
Manufacturing Process Workers 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000
Engineering 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000
Total People 75 75 75 75 85 85 85 100 100 100 100 115
Total Payroll 430,000 430,000 430,000 430,000 430,000 430,000 430,000 430,000 430,000 430,000 430,000 430,000

Pro Forma Profit and Loss

Pro Forma Profit and Loss
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales $4,045,000 $4,125,900 $4,208,418 $4,292,586 $4,378,438 $4,466,007 $4,555,327 $4,646,434 $4,739,362 $4,834,149 $4,930,832 $5,029,449
Total Cost of Sales $3,236,000 $3,300,720 $3,366,734 $3,434,069 $3,502,750 $3,572,805 $3,644,262 $3,717,147 $3,791,490 $3,867,320 $3,944,666 $4,023,559
Gross Margin $809,000 $825,180 $841,684 $858,517 $875,688 $893,201 $911,065 $929,287 $947,872 $966,830 $986,166Pro Forma Cash Flow

Cash Received

Cash from Operations

Cash Sales

Cash from Receivables

Subtotal Cash from Operations

Additional Cash Received

Sales Tax, VAT, HST/GST Received

New Current Borrowing

New Other Liabilities (interest-free)

New Long-term Liabilities

Sales of Other Current Assets

Sales of Long-term Assets

New Investment Received

Subtotal Cash Received

Expenditures

Expenditures from Operations

Cash Spending

Bill Payments

Subtotal Spent on Operations

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out

Principal Repayment of Current Borrowing

Other Liabilities Principal Repayment

Long-term Liabilities Principal Repayment

Purchase Other Current Assets

Purchase Long-term Assets

Dividends

Subtotal Cash Spent

Net Cash Flow

Cash Balance

Monthly Pro Forma Cash Flow:

Month 1:

Cash Received:

– Cash Sales: $2,022,500

– Cash from Receivables: $0

– Subtotal Cash from Operations: $2,022,500

– Additional Cash Received: $0

– Sales Tax, VAT, HST/GST Received: $0

– New Current Borrowing: $0

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

– New Long-term Liabilities: $0

– Sales of Other Current Assets: $0

– Sales of Long-term Assets: $0

– New Investment Received: $0

– Subtotal Cash Received: $2,022,500

Expenditures:

– Expenditures from Operations: $0

– Cash Spending: $430,000

– Bill Payments: $238,092

– Subtotal Spent on Operations: $668,092

– Additional Cash Spent: $0

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

– Principal Repayment of Current Borrowing: $0

– Other Liabilities Principal Repayment: $0

– Long-term Liabilities Principal Repayment: $23,003

– Purchase Other Current Assets: $0

– Purchase Long-term Assets: $0

– Dividends: $0

– Subtotal Cash Spent: $691,095

Net Cash Flow: $1,331,405

Cash Balance:

– Month 1: $3,331,405

– Month 2: $876,140

– Month 3: $1,009,831

– Month 4: $1,153,781

– Month 5: $1,308,190

– Month 6: $1,473,266

– Month 7: $1,649,220

– Month 8: $1,836,266

– Month 9: $2,034,623

– Month 10: $2,244,515

– Month 11: $2,466,171

– Month 12: $2,699,822

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