SummitPentagon Premier Roofing Business Plan — Working Capital
Why a growing roofing company runs short of cash, the receivable and material cycle, and how the facilities are sized against it.
Working Capital
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- Overview & contents
- i. Important Notice
- 1. Executive Summary
- 2. Why Most Roofing Companies Fail to Make Money
- 3. Insurance Is the Defining Cost
- 4. The Economics of One Roof
- 5. SWOT and Competitive Position
- 6. Customer Acquisition
- 7. Service Mix and the Commercial Question
- 8. Crews, Subcontractors and the Certificate Trap
- 9. Funding: SBA and What Beats It
- 10. Working Capital
- 11. The Five-Year Build and Its Gates
- 12. Licensing, Bonding and Compliance
- 13. People and Production
- 14. Financial Projections
- 15. Break-Even
- 16. Sensitivity and Scenarios
- 17. Risk Management
- 18. Implementation Timeline
- 19. Returns
- 20. Key Performance Indicators
- 21. Key Assumptions
- 22. Conclusion
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Capital Schedules
- C. Appendix C: Funding and Debt Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
|---|---|---|---|---|---|
|
Share of jobs consumer-financed |
28.0% |
36.0% |
44.0% |
50.0% |
55.0% |
|
Blended days sales outstanding |
19.8 |
16.8 |
13.6 |
12.0 |
10.7 |
|
Receivables, $’000 |
29 |
75 |
111 |
149 |
187 |
|
Work in progress, $’000 |
11 |
33 |
59 |
89 |
124 |
|
Supplier days |
30 |
38 |
45 |
48 |
52 |
|
Supplier credit, $’000 |
(18) |
(67) |
(141) |
(228) |
(346) |
|
Net working capital, $’000 |
22 |
41 |
29 |
10 |
(35) |
|
Movement in the year, $’000 |
(22) |
(19) |
12 |
19 |
45 |
By Year 5 supplier credit of $346,000 exceeds receivables of $187,000, which means the business runs on negative working capital — suppliers fund the job before the customer pays for it. That position is the single most valuable financial characteristic of a well-run roofing company, and it is achieved through two ordinary disciplines: paying distributors exactly to terms so that credit lines grow, and financing customers so that collection is measured in days rather than weeks.
10.1 Seasonality
Roofing is one of the most seasonal trades. Revenue can swing 40 to 60 per cent between peak and off-season months depending on the market, and companies that spend like it is July year-round end up borrowing during winter to cover overhead — with the interest cost eating directly into a margin that is thin to begin with.
The practical responses are structural rather than clever: build a cash reserve during the peak explicitly earmarked for the off-season rather than treating a strong summer bank balance as available profit; size the line of credit against the off-season overhead run rate and arrange it before it is needed; use the trough for repairs, which are less weather-dependent, and for the training that peak season never allows; never reduce marketing in the off-season, because the pipeline it fills produces the spring revenue; and hold distributor payments to terms through the trough even when it is uncomfortable, because that line is what funds the recovery.