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December 1, 2014
Contact Information:
Group 4 – Garrison Gillespie
(817) 705-9203
Table of Contents:
Executive Summary 3
Company Overview
Products and Services Description
Industry and Market Analysis
Marketing Strategy
Development
Operations Plan
Management
Summary of Financials
Offering
Appendices
Executive Summary
Skyline Aeroparts produces cost efficient, high quality detail
parts for the growing aerospace industry. Our customers include
aerospace companies that are in the market for the detail parts that
we produce, such as Boeing and Spirit Aerosystems. Skyline Aeroparts
will offer a variety of different detail parts, expanding our product
stream as the company experiences more growth in demand.
The company’s operation is located in the Dallas-Fort Worth
metroplex. Our location allows our company to be exposed to high air-
traffic, due to the Love Field and DFW International Airports, and
therefore fulfills a need for replacement and new detail parts for the
respective companies that we are targeting. Major aerospace
manufacturing companies that are located in the Dallas-Fort Worth
area include Boeing, EADS, and Lockheed Martin. We will target our
product toward these near-by companies and then look to expand to
different regions within the United States.
The competition for the target market includes Janeway Machine
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and Cox Machine Incorporated. These companies are already
established and own the average share of the market that is present in
detail parts manufacturing. Market share for the detail parts is
generally low, as the industry is not very large. We will gain
competitive advantage over these companies by negotiating contracts
with our raw material suppliers and distributors therefore allowing us
to offer our product at a lower price than our competitors.. This
competitive strategy will allow us to compete on cost while also
producing products with quality that our target market requires.
Skyline Aeroparts management team includes CEO and President
Garrison Gillespie, Chief Financial Officer Trevor Rathbun, Vice
President and Chief Intelligence Officer Michael Slater, Director of
Marketing Jakeb Stunz, and Director of Operations Steve McAdoo. The
company also has a board of directors consisting of Greg Burger, Kelly
Vaughn, and Monty Gillespie, whom all have over a combined 60 years
of aerospace industry experience.
Based upon the size of our market and our defined market share
that is established in our total addressable market, our first year
revenues will be roughly $7 million. These revenues are based on the
company operating at 35% capacity, due to start-up time, we will
begin production and sales in September. By year five gross revenues
are expected to be roughly $25 million, based upon expanding our
revenue stream to include five different detail parts that we produce.
The company currently has $1.5 million in equity from various
investors as well as investments from members of the board and the
management team. We are seeking a $1.5 million investment in order
to have capital in order to meet expected growth in demand for our
high quality, cost efficient product.
Company Overview
Skyline Aeroparts is an up-and-coming business, specializing in
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the manufacturing of aerospace parts. We are currently in the forming
process, and will be based in the Dallas-Fort Worth metroplex. Upon
ramping up, we aim to expand to various markets nationwide, and
grow our company into a well-recognized corporation within our
industry.
Skyline Aeroparts’ mission is to produce the highest quality
aerospace parts, in the most efficient and time-effective manner. As a
newly forming company, we have yet to develop a history. Our goal is
to establish relationships with other aerospace companies (Boeing,
Spirit Aerosystems, etc.) and build our identity through reliable product
delivery to those companies.
Entering an already competitive market, we will need to
establish ourselves as a dependable supplier to our buyers.
Punctuality, efficiency and quality are key in our industry, and we look
to develop those as core building blocks for our company. We also
hope to incorporate new, innovative ideas into our business that will
allow us to stand out in our market.
Our Target Market will include Boeing, Spirit Aerosystems,
Airbus, and other large aerospace companies. For now we will be
targeting the Boeing 737 segment.
Our target customers depend on quality parts for their planes, so
we must perform to provide this. However, we can set ourselves apart
by showing them that not only can we manufacture these parts well,
but also sell at a competitive price and assure their parts get to their
destination (e.g. at the Boeing manufacturing plant in Seattle) on time
and in one piece. We believe that by starting with a few parts and
establishing ourselves in areas such as Supplier of the Year, our growth
potential will be endless and allow our company to progressively
earning new contracts.
We trust we can enter this market and compete from the
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beginning due to the experience we have within our organization
already from executives who have been employed in the aerospace
manufacturing industry. Therefore, we know we can position our
product through connections and sustain growth with inbound
marketing strategies (content creation, B2B networks, and lead
generation).
Our current boundaries include a maximum production number
of 42 parts per month. But upon expansion, we hope to progress past
this boundary and produce a larger amount of parts.
At Skyline Aeroparts, we have our sights set on growing our
corporation and expanding our production to newer heights. We aim to
one day compete with the most regarded companies in our area, and
make a name for our company that is synonymous with reliability and
efficiency.
Products and Services Description
As far as our parts we will be building:
Upstop Shim 116A7701-1
This is our low cost item that we will make 84 a month of, bad
profit margin except earned us more profitable parts in contract.
Seal Rib 116A5508-11
Seal Rib 116A5508-12
This is a high profit part, has substantially higher margins than
other parts. Build at a rate of 42 per month.
We will be ordering raw material, building parts in house then
sending out for processing (processing completes painting and other
Boeing required finishes), we will then receive the part ensure quality
and send it to our customer.
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116A5508-11 Seal Rib
Above has the part number and the description of what we are
manufacturing.
(Part 3)
Upstop Shim 116A7701-1 (Part 4)
This is our low cost item that we will make 84 a month of, bad
profit margin except earned us more profitable parts in contract.
(Part 5)
Total Addressable Market
Part 1-Per Month Annually Part 2 - Per month Annually Part 3 - Per month Annually Part 4 - Per Month Annually Part 5 Per Month Annually# Units 84$ 1,008$ 84$ 1,008$ 84$ 1,008$ 84$ 1,008$ 84$ 1,008$ Selling Price 513$ 6,156$ 1,150$ 13,800$ 130$ 1,560$ 100$ 1,200$ 120$ 1,440$ Building Costs 120$ 1,440$ 800$ 9,600$ 65$ 780$ 90$ 1,080$ 115$ 1,380$ Revenue 43,092$ 6,205,248$ 96,600$ 13,910,400$ 10,920$ 1,572,480$ 8,400$ 1,209,600$ 10,080$ 1,451,520$ COGS (10,080)$ (1,451,520)$ (67,200)$ (9,676,800)$ (5,460)$ (786,240)$ (7,560)$ (1,088,640)$ (9,660)$ (1,391,040)$ Profit Margin 33,012$ 4,753,728$ 29,400$ 4,233,600$ 5,460$ 786,240$ 840$ 120,960$ 420$ 60,480$
Total Addressable Market
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We will be ordering raw material, building parts in house then
sending out for processing (processing completes painting and other
Boeing required finishes), we will then receive the part ensure quality
and send it to our customer.
At Skyline Aeroparts, we are constantly aiming to deliver the
highest quality parts in the most time efficient manner. We specialize
in three main parts, and therefore set a very high level of standard for
our products. We produce nothing less than exactly what our
customers are requesting. Customers are very important to us, and we
put a heavy emphasis on always providing the best experience for
them. At Skyline, we assure on-time delivery and carefully handled
parts. We our attentive to our customer’s needs and will not hesitate to
go the extra mile to provide the best product.
Skyline Aeroparts produces aerospace parts that are primarily
used for the wing of an airplane. At the start of production, we will
focus on manufacturing two larger items: Seal Rib 116A5508-11 and
Seal Rib 116A5508-12. These items will be manufactured at a volume
of 42 per month, and will yield a high profit margin. The two Seal Ribs
are our start up items that will allow us to gain the trust of companies
and form contracts to sell them additional items. Upon developing a
reputation in the market, we will begin producing than the Upstop
Shim 116A7701-1. It is a low cost item that will require producing a
volume of 84 per month. Though it has a lower profit margin than the
Seal Ribs, it will allow us to continue increasing our yearly revenues
and to keep growing in the aerospace parts industry. All of our parts
will require us to order raw materials, assemble them into parts, send
them to processing (specific processing for each aerospace company),
then re-affirm quality before finally sending them to our customer.
Our target companies are Boeing and Spirit Aerospace. We
believe that our quality and reliability will separate us from other
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manufacturers, and allow us to develop strong relationships with these
companies.
Any additional features to mention?
As far as pricing is concerned, our five parts vary quite a bit. Part
1 will be sold at $513, part 2 at $1150, part 3 at $130, part 4 at $100,
and part 5 at $120. As you can see, our first two parts will result in the
highest gains, which will allow us to generate revenue very quickly
upon starting up our business.
Two of our main competitors will likely be Janeway Machine and
Cox Machine. The two companies produce similar products to those
that we will produce, and with them being located in our region
(Oklahoma and Kansas) will develop into rivals in the industry.
Our product is currently in an early part of its lifecycle. We
understand the product and what it requires to produce it, but we just
simply are in the beginning stages of actually producing. We have a
solid foundation of knowledge of our product, and it will be ready to hit
the market as soon as we have formed ties with aerospace companies
that require our services. The main obstacles hindering us from start-
up are solidifying contracts with buyers, and funding to help us get on
our way. But once we tackle these challenges, we believe we will hit
the ground running in the industry.
Industry and Marketplace Analysis
The aerospace industry consists of the production, sale, and
service of different types of aircrafts. Our NAIC code is 334511. The
industry is segmented into 3 main segments which are commercial,
private, and defense. The industry goes through cycles where years at
a time order will be surging then a sharp decline in following years.
Servicing different segments of the industry would enable us to
manage these fluctuations in demand in a more effective and less
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financially devastating way. Some of the major power houses in the
industry include Boeing, General Dynamics, and Lockhead Martin.
International companies such as Airbus Group, BAE Systems, and
Bombarider lay a major role as well. Remaining relevant as an industry
is crucial at a time when advancement in travels that are constantly
trying to pull customers away from air travel. We must always be
seeking a better faster way to serve in order to maintain any space in
the industry. Things such as the national debt, the U.S. export controls,
and lack of support and funding for our programs hinders our industry
growth. It makes it harder to do business with our own government as
well as international customers. According to Boeing’s current market
outlook, the industry’s average growth rate of the industry is around
5% per year.
Most of planes in use are for commercial airlines. Our main
market will be companies such as Boeing to produce parts for the
airplanes the produce for commercial use. In 2012, there were 20,310
airplanes in use and in the next 18 years the demand for new planes is
predicted to be 35,260 increasing the total. Some of the planes will go
to replacing older planes and the remaining will be used as fleet
growth for many airline companies. The market is separated by types
of planes we would be making parts for such as: large widebody,
medium widebody, small widebody, single aisle, and regional jets.
Being able to produce part for different types of planes would allow us
to take up a bigger market share. Companies that currently provide for
these markets include COX Machine and Janeway Machine. In this
market, staying up-to-date with advancements in the technologies
used to produce and assemble parts and used to create new parts will
allow us to maintain a solid hold on the market shares we happen to
acquire.
The main buyers in our market are Boeing, Airbus, and
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Bombardier. Being able to produce products quicker and more efficient
than our competitors would allow us to build trust and gain respect
with the major players in our markets. We would use a direct sale
approach to gain the business of these buyers. Currently, the price at
which the parts are costing is a factor of the dissatisfaction for
customers. Dealing directly with the companies and placing bids that
are more economical than others is always a good way to build
traction. We believe our customers want to be able to trust that their
supplier will meet deadlines, preferably at decreasing prices. They
want to be able to decrease their prices to increase their customer
base as well.
Marketing Strategy
The purpose of our marketing strategy is to retain and sustain a
relationship with Boeing and other large aerospace customers in order
to sell them aerospace parts. We will achieve this through existing
connections and maintain these clients through exceptional customer
service and on-time shipments. Our target market is relatively small in
that it is only a few companies, but the potential is great within these
companies. We will focus on straight B2B marketing efforts such as
direct connections, RFP responses, existing connections in the
aerospace industry, and a quality inbound marketing campaign. Which
will show the industry we not only have the know-how, but also the
means to get the job done well. Our niche exists in our ability to be
low-cost and specialized; meaning that as we grow and begin
producing more parts, we will grow innovativeness and quality
standards that exceed our clients requirements. Our identity will be
founded in four words: Quality, Efficiency, Responsibility, and Care.
15% of our sales will be allocated to these marketing efforts.
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Target Market Strategy
We will be entering an already competitive market that targets
large aerospace manufacturing companies, however we will be
competing in innovating ways that differentiation ourselves from the
market.
Target Market – Boeing, Spirit Aerospace, Airbus, and other large
aerospace companies. For now we will be targeting the Boeing 737
segment.
Our target customers depend on quality parts for their planes, so
we must perform to provide this. However, we can set ourselves apart
by showing them that not only can we manufacture these parts well,
but also sell at a competitive price and assure their parts get to their
destination (e.g. at the Boeing manufacturing plant in Seattle) on time
and in one piece. We believe that by starting with a few parts and
establishing ourselves in areas such as Supplier of the Year, our growth
potential will be endless and allow our company to progressively earn
new contracts.
We trust we can enter this market and compete from the
beginning due to the experience we have within our organization
already from executives who have been employed in the aerospace
manufacturing industry. Therefore, we know we can position our
product through connections and sustain growth with inbound
marketing strategies (content creation, B2B networks, and lead
generation).
Product/Service Strategy
Our products must be manufactured under strict tolerances;
therefore there is little room for innovation. However, we will
continually innovate and improve our service. This includes efficiency
of supply chain to lower costs and quicken shipments, be more
professional and easier to work with than anyone else in the industry,
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and strive to reduce (or completely illuminate) all flaws in the product
during the manufacturing process. This is how we can differentiate
ourselves from our competitors. Our weaknesses lie in our inability to
make many products, but that will change quickly once we get our feet
off the ground. Almost immediately, we trust that we will be a
company that will win over our target market and convince them to
switch from our competitors because of the ways we create value for
them.
Pricing Strategy
Our pricing strategy will be a small piece of how we compete as
an infant company in a money-dense industry. In order to lower costs
and hence the selling price, we will perfect our supply chain and
distribution processes (explained below). Our competitors who
specialize in making specific parts are the price setters in the industry,
which means that we have the open opportunity to compete on a lower
price.
Distribution Strategy
This is where we will excel, next to the actual quality design of
the parts. We will locate ourselves in strategic areas (e.g. Seattle) in
order to successfully deliver parts quickly and on time. We may need
to outsource our delivery methods until we grow enough to begin a
highly efficient way of distributing the parts, without the intermediary.
However, this may not be possible in the beginning stages.
Advertising and Promotion Strategy
Much of marketing these days (whether a B2B or B2C company)
is heading towards simple inbound networking strategies. This requires
the development of content and an innovative website showing we
know what we are doing. In order for this to be effective, we will need
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to put time and effort into managing social sites (e.g. LinkedIn, and
even Twitter and Facebook), which can both target our company
specifically to the areas/companies we desire to work with, but also to
set ourselves apart in the business world as a company that shows
they care more about manufacturing aerospace parts and making
profits. We believe this will be effective because it gives clients (and
anyone else who cares) free, unbiased knowledge that keeps us
accountable for our work and makes us a company clients want to
keep around.
Sales Strategy
Once a lead is generated, they will immediately be handed from
our business development executives to our project managers, who
will then learn about their needs and how we can begin doing work
with them. The project managers will be the point of contact from then
on with that new client. Since our clients will be large and few,
maintaining them will be of utmost importance, therefore rewarding
our sales force and project managers will be of utmost importance as
well. Customer service and genuinely caring for our clients must be a
part of our foundation, or else we will lose clients consistently. This will
require training, intrinsic rewards, as well as, extrinsic rewards to
compensate for their efforts.
Development
In order to begin operations at Skyline Aeroparts we need to
focus primarily on receiving our ISO 9001 certification. This is a time
consuming process that can take up to a year in order to receive,
however with the help of outside firms Skyline Aeroparts can earn this
certification as quickly as four months. Skyline Aeroparts also needs to
complete the installation process of our HAAS CNC machines used to
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manufacture detail parts. Our engineering and programming teams
have begun the programming required to machine parts within Boeing
approved tolerances. Programming these tooling machines is a critical
factor, and is on a very tight timeline. Our management team is
working diligently to ensure these programs are done quickly and
correctly, as any delays in this process will affect the length of time it
will take to receive our ISO 9001 certification. To ensure our firm meets
these tight timelines we carry daily management meetings, which
provide status on development, as well as, any issues to work through
that arise.
Development Timeline
Prior to operations there will be extensive development in our
facilities. New workstations will be added, pneumatic tools, as well as
production supervisor to manage the production floor. Provided in the
appendices is, Figure 1 – Development Timeline, a Gantt chart
providing a complete timeline for completion of each task.
As operations begin we expect to ramp up to full production for
all three contracted parts by September 1, 2015. Boeing manufactures
at a production rate of 42 units per month and have allowed us this
time to ramp-up production. While building up to the required number
of units the previous supplier will remain supplying the additional
inventory needed until their current purchase order ends in order to
continue production. Provided in the appendices, is Figure 2 – Ramp-
Up Plan, a Ramp-Up Plan showing when Skyline Aeroparts will produce
at full production rate.
Operations Plan
Supply Chain
Skyline Aeroparts will aim its efforts into developing a strong
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management team, but just importantly training a supply chain staff
that can efficiently handle multiple tasks at once. Our supply chain will
set our company apart from any of our competitors. This department
will be trained to monitor inventory, as well as, react quickly to any
issues from our vendors. Our supply chain analysts will report daily to
ensure our suppliers always meet our end customers needs. Skyline
Aeroparts will maintain a Min-Max inventory; this system will be
monitored by our supply chain and is a system that maintains a
minimum and maximum inventory Skyline Aeroparts will have in house
to ensure 100% on time deliveries to our customer. This system will
also provide flexibility to our suppliers in time of material shortage or
any other issues.
Manufacturing
Our manufacturing process will be designed to have a smooth
workflow design that allows efficient manufacturing avoiding lost time.
Our product will be built in house and flow through the steps of
production to our quality inspection. Upon acceptance we will process
our parts at other firms that have the certifications to apply the proper
finishes to our products. Upon expansion Skyline Aerospace will earn
some of these certifications to process our own manufactured parts in
house to reduce cost of goods.
Operations Strategy
We will use both our supply chain and manufacturing process to
add value to our customer. By producing in house and cutting out
other vendors, aside from raw material suppliers Skyline Aeroparts will
be able to reduce it cost of goods sold, in a relatively low profit margin
industry. We will win our market share through the high level of
operations we expect out of our company. Skyline Aeroparts plans to
start with a small number of parts and focus heavily on the of our
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quality parts. As we open operations this could effect our overall cost
of goods initially. But, as we continually deliver on time parts that
exceed our customer’s standards we will be in the position to bid on
more contracts leading to unlimited growth. Our competitive
advantage will lie in our supply chain, not only by having a
commitment to our customer, but to our suppliers too. Upon earning
each contract from Boeing, we will be allowed to secure material for
long-term contracts to our suppliers, with negotiated reduced costs.
Scope of Operations
Our scope of operations will cover the manufacturing portion of
overall processes. We will be dependent on our suppliers for raw
materials to machine parts. However, once we have received parts
Skyline Aerospace will manufacture each part completely in house. We
will however have to pay processing fees initially to have parts finished
within specification. But look to expand into earning the certifications
to process our parts in house, allowing for complete in house
manufacturing.
Technology
At Skyline Aeroparts, we are always trying to find ways to
differentiate ourselves from our competitors. One way in which we are
aiming to separate ourselves in particular is technology. We have
made the decision to run our information technology in-house to cut
costs, and personalize the way our IT department operates. From the
start, we will have a small database to keep track of our products,
orders, customers, and the dates in which our products have been
requested and are due to customers (As shown in Figure 3 in
appendices).
This database will help our business run more effectively and
efficiently. It will allow us to keep track of the most important
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components of our business and stay organized. As opposed to
recording everything by hand, a database allows for easy input and
quick delivery of output. And as stated earlier, building and
maintaining IT on our own will save our company thousands of dollars.
In addition, we will aim to add an additional IT feature to Skyline:
a business intelligence system. A BI system will allow us to better
utilize our data. We will be able to produce reports that display
business patterns and market trends, thus helping us to make more
educated business decisions. We will require a few years (3 is the goal)
to gather a large enough volume of data to truly make use of the BI
system. But once we reach the three-year mark, we feel that this
system will make a true impact on our business. IT is constantly
evolving, and across the board, many of the most successful
companies our utilizing business intelligence; we hope to model
ourselves after some of them, and also reach greater heights through
this branch of information technology.
Our end product will resemble something similar to this, but we
cannot yet display our own example since we have yet to gather the
necessary data (will need several years as stated earlier).
Shown in Figure 4 in appendices.
Management
Our company will be structured under a Centralized Structure.
Figure 3 in the appendices is how the organizational chart will look
within the lead
Our Board of Directors will consist of various members of the
leadership team, as well as a few very important advisors who work in
the aerospace industry. Below is a list of directors that will hold
ownership in our company.
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Board of Directors
Greg Burger – Chairman of the Board
- Over 20 years experience at Boeing Aerospace.
- 10 years as CEO of SpeQtrum Aerospace.
Kelly Vaughn – Board Executive
- Over 20 years experience at Boeing Aerospace.
- 13 years experience as President of SpeQtrum Aerospace
Monty Gillespie – Board Executive
- 25 years experience at Alcoa Castings.
- Current President of Fitz Aerospace
Leadership Team Profiles
Garrison Gillespie (CEO and President)
- Duties: Garrison has the most industry experience in the
leadership team, with experience as a supply chain analyst
maintaining incoming raw materials and parts, as well as
monitoring products that are moving through the manufacturing
flow to their end customers. He will hold much of the decision-
making with regards to the entire company. Garrison is 22 and
graduates with a BBA in Management.
Trevor Rathbun (CFO)
- Duties: Trevor is an important team member with his extensive
knowledge and application with regards to finance. He is a
certified trainer at Red Lobster and has performed various
projects, which involved financial forecasting and modeling.
Trevor will be key to our financial performance in the future.
Trevor is 22 and will graduate with a BBA in Finance.
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Michael Slater (CIO and VP)
- Duties: Michael is skilled in the field of IT and MIS, so he will be
important in this duty. Michael will be interning at Texas
Instruments to gain some more experience, and this will
contribute greatly to team. His MIS and IT skills will be important
in all aspects of our business, as well as how efficient we will be
technologically. Michael is 20 years old and graduate with a BBA
in MIS and Management with a concentration on
Entrepreneurship.
Jakeb Stunz (Director of Marketing)
- Duties: Jakeb has worked in Marketing with large multi-million
dollar companies such as Smooth Fusion and Bahama Buck’s
Franchise Corporation. Jakeb is skilled in Marketing and will be
key to the overall growth of the company. With extensive
experience in Business-to-Business marketing campaigns, he will
be key to growth. Jakeb is 21 and graduates December 2014 with
a BBA in Management with a concentration on Entrepreneurship.
Steve McAdoo (Director of Operations)
- Duties: Steve will be important to the overall manufacturing
process and maintaining its efficiency. The overall processes that
lead from an order being made to the order being sent out will
be under Steve’s control. Steve is 22 and will receive his BBA in
Management.
Summary of Financials
Income Statement
Refer to Figure 4.
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Revenues
Skyline Aeroparts revenues occur, during the first five years,
from five different parts that are produced by the company. In the first
two years the company will sell parts that have a high profit margin in
order to Revenues maximize profits as a start-up. Moving forward, in
year three we will introduce a third part and will continue introducing
parts in years four and five. The parts that we will produce in years
three through five will have a lower profit margin than the parts we
produce in years one and two. Based upon our total addressable
market per part the gross revenues we will receive from producing all
five parts will be roughly $24 million, and will occur in year five.
Because the company is a start-up, year one’s revenues are estimated
at 35% of our production at full operation. The 35% is taking into
account the time it takes for the company to begin producing our
product as well as accounting for delays such as setting up the
production facility and the hiring process.
Costs of Goods Sold
Just as revenues were estimated at 35% of full production so are
costs of goods sold in year one. After year one costs of goods sold are
calculated by taking our total addressable market costs to produce
each good. The costs of goods sold increase in the first five years as
we add parts. The parts that are introduced in years three through five
have a higher cost compared to revenue than the parts in the first two
years. This results in a lower profit margin for the parts that are
produced in years three through five.
Expenses
Total expenses in our first year of operation are roughly $3.2 million.
These expenses will grow from year to year as we experience growth
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as a company. In years three though five, we will add staff in order to
account for the addition of new parts to our product line. This will add
to the amount of money we allocate toward Salaries & Wages expense
for the company. Major yearly expenses in terms of money allocated
include Rent Expense of $200,000, Salaries & Wages of roughly $1.9
million, and Purchases from Suppliers of $600,000, all respectively in
year one. Our expenses will also include insurance and employee
benefit packages.
Balance Sheet
Refer to Figure 5.
Assets
Skyline Aeroparts assets are highlighted by Plant, Property, and
Equipment, Accounts Receivable, and Inventory. PP&E for the first year
of operation is $1 million. This includes the machines and equipment
used in production as well as the maintenance required for our
manufacturing plant, equipment, and office. We will increase PP&E in
year three to account for the expansion of our product line. The
company estimates Accounts Receivable to be 20% of gross margin in
year one. In order to forecast the amount in A/R for years two through
five we used the percentage of A/R to gross margin in year 1 and then
used that percentage for the following years, therefore maintaining A/R
at 20% of gross margin. The company determined that inventory would
be 20% of gross revenues every year. This number was determined in
order to ensure that the company maintains an inventory that ensures
we can meet our growing demand.
Liabilities
Skyline Aeroparts liabilities include accounts payable as well as a
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line of credit. Accounts payable are estimated at 45% of total expenses
for the respective year. Accounts payable in year one are equal to
$290,000 increasing to $1,123,786 total in year five. The line of credit
we must also use increases from year to year. This increase allows us
to have cash for expansionary growth periods for our company, which
occurs between years one and five. Year one line of credit is equal to
$20,000, increasing to $190,000 total in year five.
Equity
Skyline Aeroparts estimates on selling $3 million worth of equity
in year one as a means to finance the start-up process for the
company. After year one the company does not plan on offering any
more equity in the company, therefore leaving the common stock
balance on the balance sheet as $3 million from years one through
five. Retained earnings include the net income from operations for
respective years one through five. Therefore, the income from the
company is therefore reinvested in order to fuel the growth of the
company.
Cash Flow Statement
Refer to Figure 6.
Cash from Operations
Skyline Aeroparts cash from operations in year one is
$(1,807,369). Although the company experiences a loss in cash from
operations during this period it is mostly due to start-up costs as well
as the company only operating at 35% of full capacity. The total cash
from operations in year two is equal to $182,834 and increases to
$3,270,910 by year five.
22
Cash from Investing
The company’s cash from investing is affected only by purchases
for Plant, Property, and Equipment. Therefore, cash from investing in
year one is $(1,000,000). As we expand in year three we also purchase
PP&E valued at $100,000, resulting in a negative cash flow of $100,000
in year three on the cash flow statement.
Cash from Financing
Line of credit and paid-in-capital are sources of cash from
financing for Skyline Aeroparts. Year ones total cash from financing is
equal to $3,020,000. This number reflects a total of $3,000,000 paid in
capital and $20,000 line of credit. In the following years total cash from
financing reflects only the line of credit, due to the company not selling
stock after year one.
Cash
Ending cash in year one is $212,631. This is a small number and
is a result of the company incurring start-up costs as well as only being
at 35% of full capacity during the first year. This number increases to
$10,593,611 by year five, reflecting the company’s growth through the
first five years.
Offering
Our fifth year financials shows a net income of $4,064,305.
Based upon these financials we are asking for a $1.5 million
investment for a 15% equity stake in Skyline Aeroparts.
Appendices
23
Figure 1 – Development Timeline.
Figure 2 – Ramp-Up Plan
24
Figure 3 – Database
25
Figure 4
Figure 5 – Organizational Chart
Garrison GillespieCEO and President
Michael SlaterVP and CIO
Jakeb StunzDirector of Marketing
Steve McAdooDirector of Operations
Trevor RathbunCFO
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Figure 6 - Income Statement
Year 1 Year 2 Year 3 Year 4 Year 5RevenuesRevenue- Part 1 2,171,837$ 6,205,248$ 6,205,248$ 6,205,248$ 6,205,248$ Revenue -Part 2 4,868,640$ 13,910,400$ 13,910,400$ 13,910,400$ 13,910,400$ Revenue- Part 3 -$ -$ 1,572,480$ 1,572,480$ 1,572,480$ Revenue -Part 4 -$ -$ -$ 1,209,600.00$ 1,209,600.00$ Revenue- Part 5 -$ -$ -$ -$ 1,451,520.00$ Gross Revenue 7,040,477$ 20,115,648$ 21,688,128$ 22,897,728$ 24,349,248$ COGS (3,894,912)$ (11,128,320)$ (11,914,560)$ (13,003,200)$ (14,394,240)$ Gross Margin 3,145,565$ 8,987,328$ 9,773,568$ 9,894,528$ 9,955,008$
ExpensesAdministrative 15,000$ 15,015$ 15,045$ 15,068$ 15,083$ Depreciation 15,000$ 15,000$ 15,000$ 15,000$ 15,000$ Offi ce Supplies 17,500$ 17,502$ 17,504$ 17,505$ 17,507$ Accounting 30,000$ 30,003$ 30,006$ 30,009$ 30,012$ Engineering/Design 60,000$ 60,150$ 60,300$ 60,602$ 60,814$ Legal 70,000$ 70,000$ 70,000$ 70,000$ 70,000$ Salaries & Wages 1,950,000$ 1,950,000$ 2,145,000$ 2,359,500$ 2,595,450$ Employee Benefits 50,000$ 50,000$ 55,000$ 60,500$ 66,550$ Offi ce Expense 25,000$ 25,000$ 25,000$ 25,000$ 25,000$ Insurance 75,000$ 75,000$ 78,750$ 82,688$ 86,822$ Interest 30,000$ 30,003$ 30,006$ 30,009$ 30,012$ Telephone/Internet 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ Advertising 30,000$ 30,002$ 30,003$ 30,005$ 30,007$ Shipping 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ Rent Expense 200,000$ 200,000$ 200,000$ 200,000$ 200,000$ Purchases From Suppliers 600,000$ 600,000$ 600,000$ 600,000$ 600,000$ Technology Expense $10,000 $10,000 $10,000 $10,000 $10,000Business Intelligence System Expense $0 $0 $9,000 $9,000 $9,000Total Expense 3,237,500$ 3,237,674$ 3,450,614$ 3,674,885$ 3,921,256$ Income From Operations (121,935)$ 5,719,651$ 6,292,948$ 6,189,634$ 6,003,740$ EBT (91,935)$ 5,749,654$ 6,322,954$ 6,219,643$ 6,033,752$ Income Tax (36,774)$ 2,299,861$ 2,529,182$ 2,487,857$ 2,413,501$ Net Income (55,161)$ 3,449,792$ 3,793,772$ 3,731,786$ 3,620,251$
Skyline Aeroparts Income Statement
Figure 7 - Balance Sheet
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Year 1 Year 2 Year 3 Year 4 Year 5AssetsCash 212,631$ 415,464$ 3,779,533$ 7,272,701$ 10,593,611$ Offi ce Equipment - Net DepR&D - Net AmortizationPP&E 1,000,000$ 1,000,000$ 1,100,000$ 1,100,000$ 1,100,000$ Depreciation (15,000)$ (30,000)$ (45,000)$ (60,000)$ (75,000)$ Net PP&E 985,000$ 970,000$ 1,055,000$ 1,040,000$ 1,025,000$ Accounts Recievable 629,113$ 1,797,466$ 1,937,977$ 2,046,063$ 2,175,766$ Notes RecievableInventory 1,408,095$ 4,023,130$ 4,337,626$ 4,579,546$ 4,869,850$ Total Assets 3,234,839$ 7,206,060$ 11,110,136$ 14,938,309$ 18,664,226$
LiabilitiesAccounts Payable 270,000$ 771,429$ 831,733$ 878,120$ 933,786$ Customer DepositsLine of Credit 20,000$ 40,000$ 90,000$ 140,000$ 190,000$ Long Term DebtTotal 290,000$ 811,429$ 921,733$ 1,018,120$ 1,123,786$
EquityCommon Stock 3,000,000$ 3,000,000$ 3,000,000$ 3,000,000$ 3,000,000$ Retained Earnings (55,161)$ 3,394,631$ 7,188,403$ 10,920,189$ 14,540,440$ Total 2,944,839$ 6,394,631$ 10,188,403$ 13,920,189$ 17,540,440$
Total Liabilities & S.E. 3,234,839$ 7,206,060$ 11,110,136$ 14,938,309$ 18,664,226$
Balance Check -$ -$ -$ -$ -$
Skyline Aeroparts Balance Sheet
Figure 8 - Cash Flow
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Year 1 Year 2 Year 3 Year 4 Year 5Cash From OperationsNet Income (55,161)$ 3,449,792$ 3,793,772$ 3,731,786$ 3,620,251$ Change in Inventory (1,408,095)$ (2,615,034)$ (314,496)$ (241,920)$ (290,304)$ Change in A/R (629,113)$ (1,168,353)$ (140,511)$ (108,086)$ (129,703)$ Change in A/P 270,000$ 501,429$ 60,304$ 46,388$ 55,665$ Total (1,807,369)$ 182,834$ 3,414,069$ 3,443,168$ 3,270,910$
Cash From InvestingR&DPP&E (1,000,000)$ -$ (100,000)$ -$ -$ Offi ce EquipmentTotal (1,000,000)$ -$ (100,000)$ -$ -$
Cash From FinancingLine of Credit 20,000$ 20,000$ 50,000$ 50,000$ 50,000$ Long Term Debt ProceedsLTD RepaymentPaid In Capital 3,000,000$ -$ -$ -$ -$ Total 3,020,000$ 20,000$ 50,000$ 50,000$ 50,000$
CashChange in Cash 212,631$ 202,834$ 3,364,069$ 3,493,168$ 3,320,910$ Beginning Cash -$ 212,631$ 415,464$ 3,779,533$ 7,272,701$ Ending Cash 212,631$ 415,464$ 3,779,533$ 7,272,701$ 10,593,611$
Skyline Aeroparts Cash Flow Statement
29
