Manufacturing Plant – Operating Model – 10 Year

Specific logic structures and assumptions designed to show the resulting financial performance of acquiring and operating a manufacturing plant.

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This is a general manufacturing model. That means it is not for any specific type of widget but has the ability to work in nearly any scenario no matter how many widget types and no matter what the situation is. As long as it involves owning/renting a production plant and selling things that it produced, this will be helpful.

There are slots to account for up to 10 different widget types (each ‘type’ can be a group of ‘types’ as well) or it could be a factory that just produces a single type of product. Either way, this model has the logic to fit the scenario.

For each widget type, the user can define the following:
1. max units produced per day
2. max production days per year
3. max laborers required
4. max hours per laborer per day
5. max working days for laborers
6. average pay rate for laborers
7. percentage of equipment used (of the depreciation, how much should be allocated to each type of widget category)
8. percentage of max capacity achieved in each of the 10 years

This is a unique business model in that you have depreciation counted as part of the cost of goods sold, which is a non-cash item. When figuring out final cash flows this is added back in. There is also logic surrounding the purchase of raw materials and the actual allocation of those purchases. This allows the model to calculate the actual cash flow that happens each period.

There is also a place to enter fixed expenses directly related to production. This would be things like the plant manager, rent of inventory space, rent of plant (if not purchased), property taxes, insurance, and anything else directly related to production. These costs will all be attributed evenly to the units produced in the same period that the costs happened.

Altogether, the model will calculate the following: total units produced by type, revenue, contribution margin, EBITDA, EBIT, EBT, and EAT (earnings after tax) as well as an available cash flow to distribute, which is calculated by: EBITDA less debt service, less income taxes, less equipment, and raw material purchases, plus raw materials assigned in COGS per period, less fixed asset sales, building sale, and exit value upon exit if an exit was chosen to happen in a given month.

There will be inputs to account for potentially raising startup capital from a traditional p+i loan as well as investors and owners. Based on that, a resulting IRR, ROI, and DCF analysis are displayed for owners/operators as well as investors. The share of profits investors get is configurable.

The cash required is a filler based on the minimum cash position before any equity contributions over the 10-year period (per a monthly basis).

Many visuals are included to provide a quick look at the production performance given the assumptions entered.

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