Financial Projections

Jump to section

• 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

14.1 Basis of preparation

• All amounts are in nominal United States dollars. Revenue is built from replacement jobs completed at the average ticket shown, plus repairs and, from Year 3, commercial work.
• Gross margin is modelled by service line: 34.6 per cent residential replacement, 40.0 per cent repairs and 37.2 per cent commercial by Year 5, blending to 35.4 per cent.
• Crew labor is stated at bare wage cost; workers’ compensation on that labor is shown separately in overhead at 18.5 per cent of payroll falling to 16.0 per cent.
• Marketing is modelled from cost per sold job, falling from $1,576 to $1,303 as referrals and neighbourhood density replace paid media.
• Depreciation is charged on capital expenditure over the useful lives of vehicles, trailers, tools and systems.
• Interest and principal derive from the facility-level schedules in Appendix C across nine instruments; the two line of credit draws revolve rather than amortising.
• Receivables are modelled from blended days sales outstanding, which falls from 19.8 to 10.7 days as the consumer-financed share of jobs rises from 28 to 55 per cent.
• Supplier credit is modelled from distributor terms rising from 30 to 52 days on the materials line.
• Federal corporate income tax is applied at 21 per cent with net operating losses carried forward subject to the 80 per cent limitation. State income tax varies by jurisdiction and is not modelled.
• The balance sheet is derived rather than plugged; owner’s equity rolls forward from the equity contribution and retained earnings, and the closing cash position reconciles exactly to the cash flow statement.

14.2 Projected income statement

EBITDA turns positive in Year 3 at $40,000 and reaches $532,000 in Year 5 at an 8.3 per cent EBITDA margin. Profit after tax arrives in Year 4 at $69,000 and reaches $331,000 in Year 5, a net margin of 5.2 per cent against an NRCA industry average of 2.8 per cent.

Net operating losses of $364,000 accumulate across Years 1 to 3. Under the 80 per cent limitation on post-2017 losses the Year 4 offset is capped at $58,000 against $72,000 of taxable income, producing $3,000 of federal tax; in Year 5 the offset is capped at $277,000 against $346,000, producing $15,000. Tax therefore arises in both profitable years despite $30,000 of loss carryforward remaining, which is a common and frequently missed feature of the post-2017 federal regime. State income tax is additional and varies materially by jurisdiction.

14.3 The cost base as a share of revenue

Overhead falls from 52.5 per cent of revenue to 27.1 per cent, and roughly half of that improvement comes from owner compensation and administration spreading across a revenue base that grows twelvefold while the office grows threefold. Gross margin contributes 3.6 points. The two together are what take the EBITDA margin from minus 20.6 per cent to plus 8.3 per cent.

14.4 Projected cash flow

Operating cash flow is negative in Years 1 and 2 and turns positive in Year 3 at $52,000, reaching $562,000 in Year 5. Closing cash never falls below $45,000, which occurs at the end of Year 1 and is the tightest point in the plan. Working capital releases cash from Year 3 onward as supplier credit grows faster than receivables — by Year 5 it contributes $45,000 rather than absorbing it, which is the negative working capital position described in Section 10.

14.5 Projected balance sheet

Owner’s equity falls from $22,000 at the end of Year 1 to minus $199,000 at the end of Year 3 as accumulated losses exceed the $165,000 contribution, then recovers to $201,000 by Year 5. A negative equity position through the build is the honest picture of a start-up funded largely by debt and supplier credit, and it is the reason the SBA 7(a) is drawn in Year 3 against a forecast rather than a balance sheet: at the end of Year 2 there is no equity for a lender to look at.