SummitPentagon Premier Roofing Business Plan — Returns
What the owner earns across the horizon, the return on capital deployed and the exit assumptions behind it.
Returns
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
- 19.1 Free cash flow
- 19.2 What the owner holds at Year 5
|
Measure |
Value |
Basis |
|---|---|---|
|
Owner equity |
$165k |
At inception |
|
Year 5 EBITDA |
$532k |
At an 8.3% margin |
|
Exit multiple applied |
5.0x |
Equivalent to 0.41x revenue |
|
Terminal enterprise value |
$2.66m |
|
|
Net debt at Year 5 |
$205k |
Loans of $725k less cash of $520k |
|
Terminal equity value |
$2.46m |
|
|
Money multiple on owner equity |
14.88x |
|
|
Return on owner equity |
71.6% |
Over five years |
|
Project IRR |
63.0% |
On free cash flow with the terminal enterprise value |
|
Return on capital expenditure |
72.3% |
Year 5 EBITDA on $736k |
|
Exit multiple at which owner equity is returned |
0.70x |
|
Exit multiple |
Enterprise value |
Terminal equity |
Project IRR |
Return on owner equity |
Money multiple |
|---|---|---|---|---|---|
|
3.0x |
$1.60m |
$1.39m |
45.3% |
53.2% |
8.43x |
|
3.5x |
$1.86m |
$1.66m |
50.3% |
58.6% |
10.04x |
|
4.0x |
$2.13m |
$1.92m |
54.8% |
63.4% |
11.65x |
|
4.5x |
$2.39m |
$2.19m |
59.0% |
67.7% |
13.27x |
|
5.0x |
$2.66m |
$2.46m |
63.0% |
71.6% |
14.88x |
|
5.5x |
$2.93m |
$2.72m |
66.7% |
75.2% |
16.49x |
|
6.0x |
$3.19m |
$2.99m |
70.1% |
78.5% |
18.10x |
19.1 Free cash flow
|
$’000 |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|---|---|---|---|---|---|
|
EBITDA |
(110) |
(63) |
40 |
237 |
532 |
|
Movement in working capital |
(22) |
(19) |
12 |
19 |
45 |
|
Federal income tax |
— |
— |
— |
(3) |
(15) |
|
Capital expenditure |
(170) |
(108) |
(168) |
(132) |
(158) |
|
Free cash flow to the firm |
(302) |
(190) |
(116) |
121 |
404 |
Free cash flow to the firm is negative in Years 1 to 3 and turns positive in Year 4, reaching $404,000 in Year 5 and $124,000 cumulatively across the five years. Unusually for a start-up, the business is cumulatively free cash flow positive by the end of the window — a direct consequence of the low capital intensity and the negative working capital position. That is the strongest financial characteristic in this plan and it is what makes the exit multiple less critical than it would be in a capital-hungry trade.
19.2 What the owner holds at Year 5
What the owner holds is five crews and a management layer against $442k of equipment, a referral base completing 290 replacements a year, distributor relationships worth $346k of free credit that scales automatically with volume, commercial capability at 37.2 per cent gross margin, three years of workers’ compensation claims history, and $30k of net operating loss carryforward.
Year 5 is the first year of full five-crew operation and the last year of the build. Year 6 runs the same five crews through an overhead base already sized for them, with no crew capital, a referral base that is compounding and a workers’ compensation rate that has three years of history behind it. The five-year window captures the whole cost of building the business and one year of running it.