1.0 Executive Summary
The purpose of this business plan is to secure a $100,000 line of credit for the development of a mechanical engineering firm based in Doylestown, Pennsylvania. Deutsch ME Group LLC (“the Company”) was founded this year by Matthew Deutsch, a professional engineer that has more than ten years of experience in the field of mechanical engineering. A significant focus of the Company’s operations will be on providing services specific for the development of hydraulic systems. Revenue generating operations are expected to commence in the fourth quarter of this year.
Operations
The primary revenue center for the Company will come from the ongoing design and development of hydraulic systems specific for the needs in industrial enterprises. Given the complexities of these systems, many firms that require that hydraulic equipment design is outsourced to third-party companies like Deutsch ME Group. The Company will generate substantial revenues from these engagements. Each design and development engagement is expected to produce $50,000 to $175,000 of revenue.
The Company will also provide ongoing consulting services among entities that have existing hydraulic systems that need to be updated. These services will be rendered on a per hour basis. Generally, the Company will produce $250 per hour for consultation.
The third section of this mechanical engineer business plan will further discuss the operations of the business.
The Financing
The $100,000 of revolving credit will fully support the operations of Deutsch ME Group as it establishes its client base. A significant portion of this funding will be used specifically for working capital purposes. Matthew Deutsch will contribute $50,000.
The Company could easily expand its credit facility as the business onboards additional mechanical engineers that will increase the billings of the business and its capability for providing a greater degree of design development services.
The Future
A major component of the Company’s growth will come from the ongoing hiring of highly qualified mechanical engineers that work in tandem with the Founder to provide hydraulic system development services. The Company will also further expand the scope of its marketing operations in order to onboard new industrial clients that have complex mechanical design needs.
Market Overview
Revenue Forecasts
2.0 The Financing
2.1 Funds Required
The funding discussed in the executive summary will be allocated as follows:
2.2 Management and Investor Equity
Matthew Deutsch retains a 100% ownership interest in the business.
2.3 Exit Strategies
The sale of engineering firms is a complex undertaking given that the owner typically needs to be a highly experienced individual within the field. In all likeliness, the Company will work with its staff engineers to engage in a buyout program so they ultimately become the owners of the firm. This event is not expected to occur for a significant period of time, and prior to this vent a formal valuation will be undertaken to determine the fair market value of the business prior to offering a buyout plan.
3.0 Operations
As noted in the executive summary, the Company will be actively involved with providing a wide range of mechanical engineering services specific for hydraulic systems. As these types of systems are used extensively within the field of manufacturing and other industrial applications, there is an immense demand among these entities to work with highly qualified mechanical engineers to develop the systems. The Company will typically generate $50,000 to $175,000 per design engagement and additional fees may be added based on working with contractors to implement the system systems.
A major and very important part of the Company’s revenue generation will come from the ongoing per hour consulting fees that will be provided to industrial enterprises that have existing hydraulic systems that need to be maintained, upgraded, or replaced. This will produce highly predictable streams of revenue that will fully support the underlying operations the business while it sources highly valuable design engagements.
In regards to employment, the Company will directly hire its staff of mechanical engineers, although independently contracted labor will be used from time to time based on the individual’s expertise for specific projects.
4.0 Overview of the Organization
4.1 Registered Name
Deutsch ME Group LLC. The Company is registered as a limited liability Company in the Commonwealth of Pennsylvania.
4.2 Commencement of Operations
This mechanical engineering firm will establish its operations in the fourth quarter of this year.
4.3 Mission Statement
To provide comprehensive solutions for companies that have complex hydraulic systems.
4.4 Vision Statement
To become a widely noted and respected mechanical engineering firm with a specialty in hydraulics within the United States.
4.5 Organizational Objectives
• Conducting extensive direct outreach with manufacturing enterprises throughout the country that maintain complex hydraulic system systems.
• Adhere to all best practices as relates to the design of implementation of hydraulic systems.
• Leverage the Founder’s existing relationships in order to onboard clients at the onset of operation operations.
• Maintain a committed program for research and development so that the business remains at the forefront of hydraulic system development.
• Remain within the letter of the law as a relates to rendering all mechanical engineering services.
• Provide gainful employment opportunities to the Company’s staff, which will encourage long-term retention.
5.0 Market and Industry Analysis
5.1 External Environmental Analysis
This section of the mechanical engineer business plan will focus on the current economic climate, the industry, the customer profile, and the ongoing competition that the business will face.
The rate of inflation with the United States is currently higher than expected due to evolving trade policies. This has caused the underlying cost for many businesses to increase moderately over the past twelve months. It should be noted that the United States government is taking appropriate measures to reduce the rate of inflation.
Any issues that pertain the economy will only have a modest impact on Deutsch ME Group’s ability to further acquire mechanical engineering engagements. As hydraulic systems are an interval part of many manufacturing enterprises, there is an immense demand among these entities to have ongoing systems that are cost-effective and have a very long operating life.
5.2 Industry Analysis
As of this year, mechanical engineering firms, generate $350 billion a year of revenue while riding jobs for 900,000 people. There are 100,000 companies that are actively involved in providing these services.
Ultimately, the outlook for the industry is positive. Although artificial intelligence and machine learning will become an integral part of the engineering industry in the coming years, the demand for the services will remain incredibly strong from an outsourced perspective. Deutsch ME Group will be able to capitalize on these new technological developments throughout the life of the business.
5.3 Customer Profile
Any entity that is involved in the field of manufacturing or related industrial activity is a potential client of Deutsch ME Group. Generally, these companies will typically have annual revenue ranging from $10 million to $100 million. In order to ensure economic stability for the business, the Company will have a specialized niche among manufacturers that specifically produce healthcare related products as this will further contribute economic stability.
5.4 Competitive Analysis
The ongoing competition that the business will face as modest as it relates to work entities that specifically focused their operations on hydraulic systems. The principal way that the Company will differentiate itself is by continuing to hire highly qualified engineers that have worked for at least five years within this specific engineering discipline.
6.0 Key Strategic Issues
6.1 Sustainable Operations
Deutsch ME Group will have sustainable operations as a result of the following:
• Limited competition among companies that specifically focus on hydraulic system development and implementation.
• A highly experienced owner, Matthew Deutsch, that has more than ten years of experience as a professional engineer within this field.
• The Company will generate substantial revenues from large scale hydraulic system development engagements.
• Highly predictable reams of revenue from the per hour fees that are charged for consulting services.
6.2 Basis of Growth
The Company will expand via the following methods:
• The Company will be able to provide provided services on a nationwide basis from the onset of operations.
• Continued hiring of highly qualified mechanical engineers that will be able to increase the billable revenue on a year-on-year basis.
• Expansion of operations to include other engineering disciplines, including aerospace development as these also requires hydraulic systems.
• Expansion of operations to include international markets.
7.0 Marketing Plan
7.1 Marketing Objectives
• Conduct extensive direct outreach with industrial enterprises throughout the United States.
• Use multiple forms of online advertising to drive brand visibility on a national level.
• Attend numerous expositions in trade shows specific for industrial companies that have hydraulic systems at their sites.
7.2 Revenue Forecasts
7.3 Revenue Assumptions
Year 1
• Deutsch ME Group will launch its operations.
• Revenue will reach $679,000.
Year 2
• The business will hire an additional mechanical engineer.
• Revenue in Year Two will reach $815,000.
Years 3-5
• By Year Five, the Company will have three engineers on staff.
• Revenue will reach $1.29 million.
7.4 Marketing Strategies
Given that the scope of services offered by Deutsch ME Group are specific for the needs of industrial and manufacturing enterprises, the marketing that will be required is very straightforward. As this is not a consumer facing business, direct outreach will remain as the key for the Company success in the coming years. As noted earlier, Matthew Deutsch will leverage his existing relationships in order to onboard the initial clients that require new hydraulic existing development.
In regards to the Company’s website, this platform will showcase the prior portfolio of Matthew Deutsch as well as staff engineers. The website will undergo significant search engine optimization so that when keyword phrases related to hydraulic system development and implementation are completed – the website will be quickly found among individuals. The Company will continue to add additional information regarding hydraulic system development and best practices in order to maintain its standings among major search engine engines.
For social media, the Company will exclusively use LinkedIn with a targeting audience of executives that are employed by industrial entities. Through these operations, the Company will showcase the immense capabilities the business.
The Company will also attend expositions and trade show specific for hydraulic systems, as well as for industrial enterprises in general. At these events, booths will be rented that showcase the design capabilities of Deutsch ME Group.
8.0 Organizational Plan
8.1 Organizational Hierarchy
8.2 Personnel Costs
9.0 Financial Plan
9.1 Underlying Assumptions
• The Company will acquire a $100,000 revolving credit facility to launch operations.
• Matthew Deutsch will contribute $50,000 towards the development of Deutsch ME Group.
• The Company will have a compounded annual growth rate of 17.4%, which will be facilitated by the continued hiring of staff mechanical engineers.
9.2 Financial Highlights
• The Company will achieve contribution margins of 95% on all hydraulic system developments engagements.
• The business will charge $250 per hour for per hour for consulting fees, which will fully support the underlying operations of the business.
9.3 Sensitivity Analysis
The Company’s revenues are only modestly sensitive to economic recession. In a highly challenging economic times, the demand for the development of new hydraulic systems may decline slightly. As noted earlier, the Company intends to develop a specific niche among healthcare product manufacturers in order to reduce these risks. The significant contribution margin generated from full scale engagements, as well as per fees, will fully ensure that the business is able to remain profitable.
9.4 Source of Funds
9.5 Financial Proformas
A) Profit and Loss Statement
B) Common Size Income Statement
C) Cash Flow Analysis
D) Balance Sheet
9.6 Breakeven Analysis
9.7 Business Ratios
SWOT Analysis
Strengths
• The Company will be able to source clients on a nationwide basis who have complex hydraulic system engineering needs.
• The two streams of revenue will fully support the operations of this mechanical engineering firm.
• The Company will be able to onboard mechanical engineers on it as needed basis, including those that have specialized expertise for hydraulic systems.
Weaknesses
• Operational complexities as this is a business that deals with high complex industrial systems.
• Payroll cost will be a significant expense for Deutsch ME Group.
Opportunities
• Expansion of the Company’s marketing operations to collect include a greater degree of direct outreach with industrial firms.
• Hiring of additional mechanical engineers on a year-on-year basis.
• Expansion of mechanical engineering operations to include systems outside of the field of hydraulics.
Threats
• A very severe economic recession could impact demand.
Risk Analysis
Development Risk – Low
The mechanical engineering service architecture that will be used by the business has been developed. The principal matter that needs to be addressed is securing the revolving credit facility discuss this document.
Financing Risk – Low/Moderate
Although a significant portion of the funding sought in this mechanical engineer business plan will be used for working capital purposes, the substantial and highly predictable nature of the Company’s revenue will reduce financing risks.
Marketing Risk – Low
As this is not a consumer facing business, Deutsch ME Group will be able to use a laser targeted marketing campaign to attract the intention of industrial enterprises. This will be complimented by leveraging the CEO’s existing relationships.
Management Risk – Low
Matthew Deutsch is a highly qualified professional engineer. He will be able to effectively launch the operations of this business to profitability.
Valuation Risk – Low
The valuation risk is offset by:
• The Company will operate on a nationwide basis which will reduce its economic risks.
• There is limited competition when mechanical engineering firms that specialize in industrial hydraulic systems.
• The Company will have the ability to rapidly scale of operations in the coming years.
Exit Risk – Low
As noted earlier, there would be a moderate degree of complexity with diverting Deutsch ME Group to a third-party. In all likeliness, the Company will use a buyout plan with its staff, mechanical engineers. This is not expected to occur for a significant period of time.