Operations Plan


Method of Service Delivery


Solar panels will be delivered to SI Co from Advanced Energy Solutions via UPS.  They have a minimum order of $200 on most items.  Most items are in stock, ready to be shipped within three days.  They prefer to ship by UPS, but can ship by Parcel Post if it is more convenient.  Unless otherwise specified, shipping, handling, and insurance charges in the continental U.S. are estimated to be around 5% of the order but are based on where it’s being shipped to and the weight of what is being shipped (http://www.advancedenergysolutions.com).

SI Co will deliver the solar panels to its client’s locations through the use of two company trucks, which have already been purchased. SI Co will perform installations every day but Sunday from 7:00am- 5:00pm.

 

Availability of Qualified Labor Pool


SI Co has a vast amount of experience in the electric field. Brendon Tee has 14 years in the business and his father has 25 years in the business. Through their familiarity with the local IBEW, they will have access to union electricians.  These electricians can be utilized for jobs that require additional labor above and beyond the father /son team. The licensed electricians acquired from the IBEW can be called out on a temporary basis, which will eliminate the need for permanent employees on the SI Co payroll. SI Co’s owner Susan Trip brings years of experience in the electrical industry.  She will perform multiple administrative duties at the Dorsey office including the company’s bookkeeping, purchasing, and marketing.

 

Quality Control


Each job will be personally inspected by one of the qualified team members of SI Co.  By hand selecting the supplemental labor, the owners can assure quality in their workers.  As a built in system for quality control, the owners will perform callbacks after the service is complete.  A questionnaire will be designed to pin point any potential problems that may need to be addressed as the company moves forward.

 

Customer Support


SI Co will offer a 24 hour hot line from their Dorsey location as well as email service from their website.  Customers will be able to email with questions about their new products and installation.  All emails will be answered within one business day.

 

Financials


In 2010, SI Co is projected to do 5 jobs, which includes putting up solar panels.  The process includes everything an individual would need in order to obtain the use of solar power.  This includes the battery, converters, and solar panels. SI Co estimated a cost of $45,000 for a 4,000-watt solar system.  It costs an average of $9 per watt to have a company put up solar panels; where as it would cost an individual $7 per watt to put it up independently (solar-electric.com Nov. 3, 2008). 

 

The net sales for the first year will be $225,000.  This includes the $9 per watt, which is what SI Co will charge per watt to put up solar panels. On average, the size of the solar systems will be about 4,000 watts per job. Then SI Co will be taking $9 times 4,000 watts, which equals $36,000.  Another fee that will be added to the total cost of the job will be $9,000, which is $36,000 times 25 percent (solar-electric.com Nov. 3, 2008).  This added fee includes the battery pack system for a total of $45,000 per job on average. The costs of sales for the fist year will be $175,000.  This includes the 5 solar panels jobs, which is $7 per watt, which is what SI Co will pay for the solar panel system.  Taking $7 multiplied by 4,000; which equals $28,000.  SI Co then takes 25% multiplied by $28,000, which is $7,000.  The 25 % comes from the charge of having the battery-based system (solar-electric.com Nov. 3, 2008).  The total cost of sales for SI Co will be $35,000 times 5 jobs, which is $175,000. 


 

The operating expense of the first year of operation is $51,600.  This includes a labor expense of $30,000 for the 5 solar panel jobs.  This is at a rate of $50 per hour at an average rate of 120 labor hours per job. SI Co will also have a gas expense of $5,000 and an insurance expense of $6,000. SI Co will have to hire a lawyer, which will cost an average of $1,000 per year. SI Co will have to hire a part time accountant to do their books.  A CPA will charge about $100 per hour and work on the business about 10 hour per month.  This will be $9,600 in accountant fees for SI Co (Brad Reed Nov. 11, 2008). SI Co will also have to pay a $10,000 bond to the union hall to be able to hire workers out of the union hall. 

 

SI Co will have a 5 year straight-line depreciation expense of $18,000 in the first year.  This comes from the $100,000 worth of assets, like vehicles, a shed, and equipment.   There will be an interest expense of $5,000 for a 20 year $100,000 loan at 5%.  This will bring the income before taxes at a loss of $24,600.  Since there is a loss, SI Co will receive a tax credit of $9,594.  This is at a tax rate of 39% times $24,600.  The $9,594 will carry over into the next year or, until SI Co becomes profitable (Brad Reed Nov. 11, 2008). 

 

In 2011, SI Co plans to complete 8 solar panel jobs.  This will increase the net sales up to $360,000, and have a cost of sales of $280,000.  The cost of the solar panels will remain the same for this year. The operating expense will increase to $70,100; this is because the increase in the labor costs of doing 3 more jobs in 2011.  Depreciation will also stay the same because of the straight-line method, which is $18,000.  SI Co will only have a net loss of $8,100 of operating income.  The interest expense will decrease to $4,500.  There will be a tax credit again for this year, which is $4,914.  Si Co will have a net loss of $12,600 after the taxes.

 

In 2012, SI Co will finally have a profit of $1,900. SI Co will increase the net sales to $540,000, by doing 12 solar panel jobs.  The costs of sales will be $420,000.  Again this is using the rate of $9 per watt to have a company put up solar panels; where as it would cost an individual $7 per watt to put it up independently (solar-electric.com Nov. 3, 2008). 

 

SI Co will have a gross profit $120,000. The operating expense will be $96,100, which again is the increase in labor.  There will also be a slight increase in gas to $6,500, and an increase in insurance to $7,000.   The operating income is $5,900, and the interest expense will be $4,000 this year.  The income before taxes is $1,900. SI Co will not have to pay taxes in the third year because of their tax credit. SI Co will have a net income of $1,900.  (See appendix 7 for the pro forma income statement)

 

The pro forma balance sheet for SI Co will have a $100,000 in total assets to start with and it will be decreasing each year by $18,000.  By the year 2012 SI Co will have $46,000 in total assets.  The total liabilities will decrease by $5,000 each year. SI Co will start out with $100,000 and end up with $85,000 in 2012.  The owners’ equity in 2010 will be only $6,400, but by the year 2012 SI Co will have $58,900 in owners’ equity.  (See appendix 8 for the pro forma balance sheet)

 

The projected cash flow for the first year of operating is $87,400.  In the year 2011 the ending cash flow for SI Co is $97,300.  By the time 2012 come around the ending cash flow for SI Co is $121,200.  The total amount of cash sales for the first three years of operation is about $1.125 million.  The total amount of expenses for the first three years of operation is about $1.092 million.  (See appendix 9 for the pro forma projected cash flow statements)

 



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