FINANCIAL PLAN
Start-up Funding
For every startup that succeeds, there are hundreds that run out of cash during the first year causing the demise of the project. Magic Hands Cleaning has budgeted $300,000 start-up capital for the business. The founders are providing the first $100,000 to help launch the business. The company is also seeking another $200,000 from investors (Loan) to achieve the sum that is necessary to help Magic Hands Cleaning start its first year. The founders are confident that $300,000 is sufficient capital to start providing clients with the exceptional services that Magic Hands intended while still being able to cover the costs associated with getting the business off the ground. The financials are outlined accordingly within the next several sections based on a conservative approach to estimating the amount of clients that Magic Hands will maintain and acquire. The business plans to scales reasonably in its assumption as to avoid experiencing serious problems.
Start-up Timeline
Magic Hands Cleaning Services will start operating on June 1, 2018. In the meantime, before the official launch of the business, the company owners will be organizing every aspect involved in buying capital assets before obtaining all the necessary corporate requirements including leases, (liability insurance and workers compensation costing around $7,500/month) and commercial licenses $250. The cleaning contractor’s license will be obtained by the company CEO by the 23rd of April after completing all the necessary procedures.
Sales Forecast
In projecting sales, Magic Hands Cleaning would grow progressively at about one to two percent biweekly, according to the service agreements with existing clients and new services with new clients. The consecutive estimates for clients acquisition give a chance for Magic Hands to undersell and outperform, whereas much business plans tend to exaggerate potential earnings. The residential cleaning services are projected to expand to commercial by the fifth year with projected revenue of $1.5 million. Magic Hands services will continue to update their premium services for their clients as the customer satisfaction increases.
There will be bi-weekly or weekly service four-hours of specialized cleaning at $130 offered to client. For the people and organizations interested in one-time cleaning, the company will be offering both three-hours of cleaning (three men hour) at $250 and two-hours of cleaning (two men hour) at $190. Both the three-hour and two-hour cleaning services will be offered for those who are interested in first-time regular cleaning.
Expansion Timeline - 5-Year Sales Projection
First Year Start-up
· Revenue goal: $215,000
· Capital: Vans and carrier trailers; Equipment (portable ladders)
· Operation region: Raleigh, North Carolina as well as other big towns in the North Carolina area.
· Personnel: 16 employees on payroll, including the five owners (4 of them will be Managers and the Sr. Cleaning Supervisor), Team Lead, 2 Salespersons, 6 Cleaners, 2 Van Drivers.
Second Year
· Revenue: $344,000
· Capital: buy equipment inclusive of items that come up as very necessary.
· Location: go on leasing.
Fifth Year
· Revenue: $1.5 million; against the expansion to commercial cleaning for instance Extended Stay of America.
· Capital: buy more needed equipment and a larger truck.
· Location: lease extra unit for the added equipment and truck.
· Renew the lease contract at Raleigh, North Carolina.
· Operation: expand throughout North Carolina.
Cash Flow
The cash flow is an imperative statement for any organization. It gives an idea of how origination to know if they have enough capital to cover the necessary expenses and the payroll that are due. As a new corporation, $300,000 was raised from investors. The cash flow statement will help make it clear that Magic Hands has the proper funds covered by keeping the company functioning at high level. The founders believe that there is an absolute standard to be met to help spur future cash flows; with the ending cash flow of the year 2018 being $215,000. That is a reasonable capital generated by a group of ten associates. Magic Hands Cleaning will do just fine if the company’s operating activities are greater than net income.
Staffing
Payroll timeline for the first year: the first payroll is on Friday June 1, 2018 with last payroll of the year being December 28, 2018 (total of 16 payrolls in 2018). Magic Hands Cleaning will have 16 employees on payroll, including the five owners (4 of them will be Managers and the Sr. Cleaning Supervisor), Team Lead, 2 Salespersons, 6 Cleaners, and 2 Van Drivers; employees’ count is expected to grow as the company grows. Group healthcare insurance will cost the company around $5,200 monthly for the eight eligible employees.
Formal written performance reviews will be completed for all staff twice a year. Increases will be based on performance and are done annually in March. The first increase will be prorated from the anniversary start date. However, a midyear performance appraisal will also be done strictly performed for the company’s sales team completed in August.
In the first financial year, each owner (the managers and the Sr. cleaning supervisor) will earn $35,000 and $38,000 by year three inclusive of benefits. By the third to fourth year of operation, the company intends to start paying owners dividends on their 20% investment provided Magic Hands reach its profit goals. Owners, who are involved in marketing the business and bringing in substantial sales, will receive designated commissions.
Team Lead: They will be expected to have supervisory skills that will enable them facilitate the cleaning process being carried out by the cleaners. They will be paid $10 per hour each inclusive of benefits.
Two (2) Salespersons: They will be required to help with the promotion and marketing of the Magic Hands Cleaning Services in and possibly beyond Raleigh, North Carolina. They will be paid $10 per hour in the first year with commissions (all inclusive of benefits).
Six (6) Cleaners: Will offer top-class cleaning services to various clients and ensure the clients are contented with their work. They will get $9.25 per hour.
Two (2) Van drivers: Are required to have great competency in driving and be in possession of all certifications related to commercial driving. They will help with the transportation of supplies and cleaning team to the client’s site. They will be paid $7.25 per hour.
IT Consultant: Will undertake every technical IT tasks including repair and maintenance of information and communication machines. They will be paid $1,700 per month on a yearly contract.
Facility
Magic Hands Cleaning 1,500 square feet facility will be inclusive of two office spaces for the purposes of facilitating every firm operation including accounting, project management, sales and marketing, and overall management. The facility will be leased at a cost of $8,000 monthly and is leased for a period of between one and six years.
Supplies and Inventory
The estimated cost for supplies for operations is $15,000 for the first year.
Sales and Marketing Budget
The marketing budget will be set at $10,000 (to $15,000 the following years).
Technology Plan
The total cost of buying the office equipment, communication machines, and software and hardware installation will be approximately $65,500 including IT consultant fees to implement the whole IT system.
Computer Software & Hardware
The total yearly cost for computer software will be $12 for the first, second and third fiscal year. The amount will be used for purchasing and updating effective anti-virus software. Other software will cost the company $0 because open source software will be preferred. These include SQL Ledger which will be useful in book-keeping, Skype which will be used to facilitate videoconferencing and OpenPro ERP which will be used in supply chain management as well as customer relations.
The company will need 1 Apple desktop computer made up of an efficient Central Processing Unit (CPU), a monitor (21-inch TFT), a wireless optical mouse, a wireless keyboard and connection cables. The whole set will cost the company $1,200 and will serve for at least 5 years.
Magic Hands Home Cleaning Services will also have to purchase one Apple laptop for each of the five managers, totaling up to 5 laptops bought at $950. This implies that the total cost for buying the laptops will be $4,750.
Utilities
Monthly utilities would be estimated at $1,500 including telephone, internet, gas, electric, water and sewer, and trash.
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CASH FLOW (5-Year Projections)
CASH RECEIPTS
Year 1Year 2Year 3Year 4Year 5
Income from Sales12/31/201812/31/201912/31/202012/31/202112/31/2022
Cash Sales 215,000$ 344,000$ 502,240$ 748,338$ 1,504,159$
Collections10,750 17,200 25,112 37,417 75,208
Total Cash from Sales 225,750 361,200 527,352 785,754 1,579,367
Income from Financing
Loan Proceeds
200,000 - - - -
Equity Capital Investments
100,000 - - - -
Total Cash from Financing
300,000 - - - -
TOTAL CASH RECEIPTS
825,750 361,200 527,352 785,754 1,579,367
CASH DISBURSEMENTS
Inventory
15,000 17,250 19,838 22,813 26,235
Operating Expenses
255,530 420,400 456,200 482,840 514,080
Commissions
6,440 7,480 7,854 8,247 8,659
Capital Purchases
72,412 - - - -
Loan Payments
10,000 10,000 10,000 10,000 10,000
Interest Payments
2,600 2,600 2,600 2,600 2,600
Income Tax Payments
102,000 102,000 102,000 102,000 102,000
Investor Dividend Payments
- - 5,000 7,500 14,600
TOTAL CASH DISBURSEMENTS
463,982 559,730 603,492 636,000 678,174
NET CASH FLOW
361,768 (198,530) (76,140) 149,755 901,192
Opening Cash Balance
859,775
Cash Receipts
1,579,367
Cash Disbursements
678,174
ENDING CASH BALANCE
175,000 297,500 505,750 859,775 1,760,967
ASSETS
Current Assets
Cash1,760,967$
Accounts Receivable22,562
Other Current Assets-
Total Current Assets1,783,530$
Fixed Assets
Equipment65,500
Computer & Telecommunications 6,912
(Less Accumulated Depreciation)(24,135)
Total Fixed Assets48,277$
TOTAL ASSETS1,831,807$
LIABILITIES AND NET WORTH
Current Liabilities
Short-Term Payable20,700$
Income Taxes Due 102,000
Total Current Liabilities122,700$
Long-Term Liabilities
Long-Term Notes Payable 150,000$
Other Long-Term Liabilities -
Total Long-Term Liabilities 150,000$
TOTAL LIABILITIES272,700$
NET WORTH
Paid-In-Capital400,000$
Retained Earnings1,159,107
Total Net Worth1,559,107$
TOTAL LIABILITIES AND NET WORTH 1,831,807$
BALANCE SHEET
Magic Hands Cleaning Services
December 31, 2022
Abasi316
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