Looking for a custom printed t-shirts business plan? You're in the right place.
A print shop spends tens of thousands of dollars on machines before it prints a shirt for a customer. So a lender or a family investor will ask how much the equipment and the first inventory cost, what a shirt costs to make and what it sells for, and how many months the shop loses money while orders catch up with the payroll. A blank template won't show you what a believable answer looks like.
In this article we'll walk through a complete sample business plan for a custom t-shirt printer in Cincinnati, Ohio, section by section. We'll cover the executive summary, the SWOT analysis and, in particular, all of the financials.
Here's what you'll take away:
- The executive summary: see how to put a print shop on one page, with the raise, the first-year loss and the year it turns a profit
- The unit economics by channel: work out what a team order, a business order, an online order and a private-label run each leave after blanks and ink, so your prices rest on a number
- The SWOT analysis: learn how to name a thin brand and a seasonal calendar without losing the reader
- The equipment and funding table: find out how a shop pays for a printer, a press and a reserve, and how the owner and the lenders split the risk
- The capacity check: test whether the press hours on payroll can handle the shirts you forecast, including the busiest weeks
- The five-year profit, cash flow and balance sheet: see how each hire, price rise and loan payment shows up in the numbers
- The downside case: have an answer ready for the "what if orders are 20% short?" question, along with the steps the owner takes first
If you're planning a t-shirt printing business, read this before you write your own. The shop is fictional, so take what fits and change the rest.
In this plan
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Cedar Mead at a Glance
Cedar Mead is an Ohio custom t-shirt printer that opens on January 1, 2027 in a 3,000-square-foot flex unit in Camp Washington, Cincinnati. It prints in two ways: screen printing for runs from 24 to several hundred shirts, and direct-to-garment printing for one-offs and small online orders. Customers are youth leagues, schools and clubs, local businesses and breweries, shoppers on the shop's online design tool and, from May, small clothing labels that need short runs. Founder Owen Hale owns about 65% of the shop and a family investor owns the rest.
The shop raises $260,000: $85,000 of Owen's savings, $45,000 of minority equity from a family investor, a $100,000 bank term loan and a $30,000 equipment loan. Of that, $75,000 buys the printers, press and build-out, $14,000 buys opening inventory, $28,700 covers legal, registrations, pre-opening costs and the launch, and $142,300 is held as cash reserve.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $350,319 | $623,315 | $841,485 |
| Net income after start-up costs | ($124,113) | $7,791 | $53,434 |
| Closing cash | $41,875 | $39,444 | $82,006 |
Year 1 is a loss because the shop carries a press operator, an assistant and the full rent from January, while orders build from a low winter base. Operating profit turns positive in September and stays positive through December of that year. Year 2 is the first profitable year, at a 1% net margin, and margins reach 6% to 7% by Years 3 to 5. Those are modest margins for a shop that makes a physical product for many small customers.
The plan tests itself. If orders run 20% below forecast and Owen holds back hires, trims marketing and pay, and pays no distributions, the shop still ends every year with cash in the bank, though profit nearly disappears and equity turns negative for three years.
The shop's pitch is narrow: proofs the same day, a fixed turnaround of seven business days, no minimum order online and a local owner who answers the phone.
The Shop
Legal name: Cedar Mead, Inc., an Ohio corporation taxed as a C corporation. Owners: Owen Hale, about 65%; a family investor with no operating role, about 35%. Premises: 3,000 square feet of flex space in Camp Washington, Cincinnati. Start date: January 1, 2027, ahead of the spring league season. Stage: pre-opening. The lease is in review, the equipment quotes are in hand and two leagues have agreed to place their first orders.
Why the shop exists
Print custom shirts for Cincinnati teams, businesses and shoppers at small-run prices, with a proof the same day and shirts on the shelf in a week.
Milestones through 2031
- Online design tool live in March 2027, label printing under way by May 2027.
- Positive monthly operating profit in the September to December peak of 2027.
- $623,315 of revenue in 2028 and a first full-year profit.
- Five full-time people on payroll, Owen included, plus a half-time assistant, by the end of 2030, with the bank and equipment loans paid down from $119,563 at the end of 2027 to $38,260 at the end of 2031.
Four ways the shop earns
| Channel | What it is | Year 1 share of revenue |
|---|---|---|
| Team, club and school orders | Screen-printed runs of 24 to 400 shirts, often with names and numbers | 35.9% |
| Business, brewery and event merchandise | Screen and direct-to-garment runs of 48 to 500 | 32.5% |
| Online design-tool orders | One to 24 shirts printed direct to garment and shipped | 22.0% |
| Printing for local labels and shops | Runs of 100 to 1,000 shirts for brands that sell elsewhere | 9.6% |
Rules the shop writes into its terms
Artwork that carries a team, brand or character logo the customer does not own is declined unless the customer shows permission. Orders for children's sizes may fall under federal children's product rules, which the shop reviews with counsel before it quotes. Ohio sales tax is collected on retail sales, and blanks are bought under a resale certificate. Both points are subject to Ohio Department of Taxation rules, which may change.
Printing for Greater Cincinnati
What the area buys in shirts
Cincinnati and northern Kentucky have a steady spring and fall calendar of youth baseball, soccer and football, school systems that often order spirit wear in late summer and spring, a craft-brewery scene, and a summer of neighborhood festivals and charity runs. Many of those groups order printed shirts on a regular schedule, usually with a deadline attached. The plan does not rely on a published market-size figure. It sizes the shop from what it can print: about 20,650 shirts in Year 1.
Who else prints in the area
| Competitor type | Strengths | Weaknesses |
|---|---|---|
| National web-to-print sites | Large catalogs, instant online pricing | Often a week or more in shipping, no local pickup, limited help with artwork |
| Established local screen printers | Low prices on large runs, long customer lists | Many set minimums of 48 shirts or more, quote by email and decline one-off orders |
| Promotional-products resellers | One vendor for pens, bags and shirts | Add a margin on top of an outside printer, slower proofs |
| Print-on-demand marketplaces | No inventory, wide choice of designs | Print quality can vary, little local service, limited blank choices |
SWOT
| Positive | Negative | |
|---|---|---|
| Internal | Strengths: a founder with nine years in commercial screen printing; two print methods under one roof; a proof within a day; no order minimum online | Weaknesses: no brand yet; a large equipment bill before the first order; revenue concentrated in a few busy weeks; modest net margin |
| External | Opportunities: reorders from leagues and breweries; private-label work for local clothing brands; seasonal team stores for schools; embroidery or hats later | Threats: national sites that undercut single-shirt prices; blank-garment price rises; a larger local printer dropping its minimums; a bad season for youth sports sign-ups |
Who Orders, and What They Ask For
The league or school volunteer
A parent or coach who must order 60 shirts by a game date, with colors, a logo and a list of sizes collected by text message. They want a price they can quote to the board, a proof they can forward and a delivery date they can trust. Price matters less than a missed opening day.
The business owner with an event
A brewery, a charity run or a restaurant ordering 100 shirts for staff or a festival booth. They want artwork help, a clear unit price and a repeat order the following year without redoing the setup.
The online buyer
Someone designing one to six shirts for a family reunion, a bachelorette weekend or a gift. They want to see the design on a shirt before paying, and delivery before a date. Orders spike in November and December.
The local label
A clothing brand or shop that sells in a few stores and cannot meet a big printer's minimum. It wants consistent quality across reruns, fair pricing at 100 to 1,000 pieces and a printer that holds screens between runs.
Quotes, Orders and Pricing
From artwork to proof
A customer uploads artwork or builds a design online. A same-day proof shows the placement, colors and shirt style. Team and business orders over $500 pay 50% when the proof is approved and the balance before pickup or within 15 days. Online orders are paid at checkout.
What a shirt earns
| Channel | Average price | Direct cost | Gross profit |
|---|---|---|---|
| Team shirt | $14.80 | $5.33 (36%) | $9.47 (64%) |
| Business shirt | $17.80 | $6.59 (37%) | $11.21 (63%) |
| Online order, 2.5 shirts | $70.00 | $23.10 (33%) | $46.90 (67%) |
| Private-label shirt | $11.20 | $5.38 (48%) | $5.82 (52%) |
Direct cost covers blank garments, ink and print supplies. Labor, rent, card fees, shipping and reprints sit below gross profit. After $6.80 of shipping, $1.54 of card fees and $1.05 of reprints, an average online order contributes about $37.50. Private-label work earns the least per shirt because the customer shops on price, and it earns its place by filling the press between seasonal peaks.
Turnaround and reorders
Standard turnaround is seven business days from proof approval, with a three-day rush at a higher price. Screens for a customer's design are kept for 12 months, so a reorder skips most of the setup time. Reorders are tracked by customer in the order system, and every team receives a reminder message six weeks before the next season.
Getting Found
Where marketing money goes in Year 1
Marketing is $34,000 in Year 1 on top of the $15,000 launch budget funded from start-up capital.
| Channel | Year 1 spend | What it is meant to produce |
|---|---|---|
| Paid search and social ads | $20,000 | About 960 first-time online buyers |
| Email, content and review tools | $6,000 | Repeat orders and search visibility for the design tool |
| League and school sponsorships | $3,000 | Team accounts through coaches and boards |
| Sample kits and mailers | $2,500 | Business and brewery accounts |
| Chamber events and festival booths | $2,500 | Event orders and private-label contacts |
Online spend of $26,000 divided by 960 first-time buyers is about $27 per new customer, against about $37.50 contributed by an average online order. Repeat orders are only 140 of the 1,100 in Year 1. The $8,000 of local and business spend divided by about 105 team and business accounts is about $76 per account.
The $15,000 launch
$8,000 builds the online design tool and store, $4,000 pays for sample shirts and product photography, and $3,000 covers a launch open house and local ads. All of it is expensed at opening.
Marketing as the shop grows
Marketing reaches $41,000 in Year 3, which is 4.9% of revenue against 9.7% in Year 1. The drop follows reorders: by Year 3 most team and business revenue comes from customers the shop already has.
On the Shop Floor
The unit
3,000 square feet in Camp Washington at about $11 a square foot a year, all-in, or $33,000 in Year 1, on a five-year lease with a personal guarantee and 3% annual increases. The landlord contributes nothing to the build-out. The unit has an art and proofing desk, a screen room with an exposure unit and washout booth, a press floor, a direct-to-garment area, and a packing and shipping bench. The shop pays $14,000 for a build-out that adds 240-volt power, ventilation, a washout drain and air lines.
Equipment
A direct-to-garment printer with a pretreatment unit and curing oven ($31,000); a six-color manual screen press, flash dryer, conveyor dryer, exposure unit and washout booth ($19,000); heat presses, a vinyl cutter and an air compressor ($5,500); and design computers with color-management software ($5,500). Printheads on the direct-to-garment machine wear out and are budgeted as a service cost, starting at $1,800 in Year 1.
How capacity lines up with sales
Year 3 needs about 3,400 production hours against about 4,950 on payroll, 69% use. The shop does not hire for the average month. September and November run near 1.5 times average, so a seasonal helper joins each August and leaves after November. The direct-to-garment operator arrives in month 16 because Year 2 peak weeks would otherwise run near 90% of capacity. One manual press is enough, with about 625 run hours a year even in Year 5; the second senior press operator, in month 42, adds hands for screen preparation, finishing and a second shift in the peak.
Quality, waste and safety
Reprints and spoiled garments are budgeted at 1.5% of sales. Screen-reclaim wastewater runs through a filter and a licensed hazardous-waste pickup, budgeted at $1,800 in Year 1. Inks and chemicals are stored in flammable cabinets, and the unit passes a fire inspection before opening.
Suppliers and software
Blank garments come from two national apparel distributors, with a third supplier in reserve. A written non-solicit review with Owen's former employer is part of the legal work before opening. Software covers the web store and design tool, a color-management system, artwork tools, accounting and shipping, at $9,000 in Year 1 and $14,000 by Year 5.
Insurance
General and products liability, property and contents, equipment breakdown and cyber cover total $6,800 in Year 1. Workers' compensation sits in the payroll costs.
Who Runs the Press
Owen Hale, founder
Owen spent nine years at a commercial screen printer in northern Kentucky, the last four as production manager, where he ran press scheduling, screen making and customer proofs for team and business accounts. He holds a two-year degree in graphic communications. His $85,000 is eleven years of savings. He takes a $52,000 salary, below what a production manager would earn elsewhere.
What the team lacks
Owen has not run online advertising, built a web store or set pricing for a shop that carries its own overhead. The plan fills those gaps with a monthly ad review with a freelance marketer in the first year, a fixed pricing sheet reviewed every quarter, and a CPA who sets up job costing before the first order. The freelance marketing review is budgeted at $3,000 in Year 1 professional fees.
Hiring in order
The lead press operator starts in January and the half-time assistant on the same day. A direct-to-garment and fulfillment operator joins in month 16, a sales and artwork coordinator in month 26 and a second senior press operator in month 42. Each hire follows a rise in revenue, and the downside case shows what waits.
If Owen is out
The lead press operator is cross-trained on proofs and quoting. For an absence longer than a week, a former colleague with press experience is on call at an hourly rate.
The owners and the lenders
Owen gives the bank a personal guarantee and a lien on the business assets other than the printers and press, which the equipment lender holds as sole collateral. Used printing equipment resells at a steep discount, so the lenders look mainly to cash flow. The family investor owns a minority stake with no say in daily decisions and receives distributions in proportion to ownership.
The Numbers Behind Cedar Mead
One five-year model sits behind every table here, with monthly detail for 2027 and yearly totals after that. The working figures come first, then the forecast built on them.
Equipment, inventory and funding
| Use of funds | Amount |
|---|---|
| Direct-to-garment printer, pretreatment unit and curing oven | $31,000 |
| Six-color manual screen press, flash dryer, conveyor dryer, exposure unit, washout booth | $19,000 |
| Heat presses, vinyl cutter, shop air compressor, racks and benches | $5,500 |
| Design computers, RIP software and color-management tools, label printer | $5,500 |
| 240-volt power, ventilation, washout drain and air lines in the leased unit | $14,000 |
| Opening inventory: house-brand blanks in common sizes, inks, emulsion, pretreatment fluid, bags | $14,000 |
| City and state registrations, vendor’s license, fire inspection | $1,200 |
| Legal: incorporation filing, lease review, terms of sale and artwork-rights policy | $3,500 |
| Pre-opening rent, utilities and training on the new equipment | $9,000 |
| Launch: online design tool and store build, sample kits, product photography, launch events | $15,000 |
| Cash reserve for the slow first quarter and the August to November inventory build | $142,300 |
| Total uses | $260,000 |
| Source of funds | Amount |
|---|---|
| Owen Hale's savings | $85,000 |
| Family investor (minority equity) | $45,000 |
| Bank term loan | $100,000 |
| Equipment loan secured on the printers and press | $30,000 |
| Total sources | $260,000 |
Owen puts in $85,000 of his own savings and a family investor adds $45,000 for a minority share, so equity is $130,000 of the $260,000 raised (50%). A seven-year bank term loan of $100,000 at 10.5% is interest-only for six months. A $30,000 equipment loan at 9.5% runs five years and is secured on the printers and press. Both rates are planning figures, not quotes. The $142,300 reserve is 55% of the raise and is sized to Year 1: cash from operations in that year is negative $132,689, because the shop owns its equipment and carries a press operator and an assistant from day one, before the team-order season and the fall and holiday peak arrive.
Working figures behind the forecast
- Team, club and school orders average 55 shirts at $14.80 a shirt. Year 1 is 8,500 shirts across about 155 orders from roughly 60 leagues, schools and clubs that each reorder two or three times a year. Volume rises to 18,800 shirts by Year 5.
- Business, brewery and event orders average 70 shirts at $17.80. Year 1 is 6,400 shirts over about 90 orders from 45 accounts, and about 60% of the shirts are screen printed with the rest printed direct to garment.
- The online design tool opens in March. Year 1 brings 1,100 orders at an average of $70 for 2.5 shirts, $28 a shirt, from about 960 first-time buyers; the other 140 orders are repeats. Orders reach 3,800 a year by Year 5 as repeat buyers build up.
- Printing for local labels and shops begins in May: 3,000 shirts in Year 1 at $11.20, in about 10 runs of 300, for six or so customers. By Year 5 that is 12,200 shirts a year in runs of about 400.
- Direct costs are 36% of team revenue, 37% of business revenue, 33% of online revenue and 48% of label revenue. They cover blank garments, ink, pretreatment, transfers, bags and labels. Blended, that is 36.8% of revenue in Year 1 and a 63.2% gross margin before labor.
- Prices rise 3% a year from Year 2. Total shirts printed grow from 20,650 in Year 1 to 46,750 in Year 3 and 56,500 in Year 5.
- Work rates for the capacity check: about 65 shirts an hour on the screen press once a job is set up, 1.8 hours of screen preparation and setup per job, 18 shirts an hour on the direct-to-garment printer, 45 shirts an hour to count, fold and pack, and 0.12 hours to pack and ship each online order. One full-time worker supplies about 1,750 productive hours a year.
- Production needs about 1,520 hours in Year 1, 2,600 in Year 2 and 3,400 in Year 3, against about 3,200, 4,500 and 4,950 on payroll: 47%, 58% and 69% use. The busiest months, September and November, run near 1.5 times an average month, so Year 2 peaks reach about 86% and Year 3 peaks about 100%. The seasonal helper and overtime cover those weeks. Press run time is about 625 hours even in Year 5, so one press is enough; later hires add hands for screen preparation, finishing and a second peak-season shift, not machines.
- Customers pay online orders at checkout. Team and business orders over $500 pay 50% when the proof is approved and the balance before pickup or within 15 days. Receivables average 10 days of sales. Blank-garment suppliers extend 20-day terms, and the model applies them from the first month.
- Payroll adds 27% to wages for payroll taxes, health contribution, workers' compensation at a print-shop rate and paid leave (15% for part-time roles). Wages in the personnel table are launch rates; annual 3% pay raises are charged as a separate line from Year 2.
- Rent is 3,000 square feet of flex space at about $11 a square foot a year, with taxes and service charges included: $33,000 in Year 1, rising 3% a year. Utilities are $9,600 in Year 1 because the dryers, curing oven, compressor and ventilation run all day.
- Insurance of $6,800 in Year 1 covers general and products liability, property and contents, equipment breakdown and cyber. Workers' compensation sits in the payroll costs.
- Professional fees of $7,500 in Year 1 include the CPA and a $3,000 freelance marketing review; they fall to $5,400 in Year 2.
- Card fees run at 2.2% of sales and reprints and spoiled garments at 1.5%. Shipping and packaging on online orders cost $6.80 an order after what customers pay. These move with sales.
- Cedar Mead, Inc. is modeled as a C corporation: 21% federal plus a planning rate of 1.8% for Cincinnati's city net-profit tax, which may change. The model carries the Year 1 loss forward against 100% of later profit; federal rules limit that deduction to a share of taxable income, so a small tax could appear earlier. Ohio has no corporate net-income tax but levies a commercial activity tax on gross receipts above an exclusion amount. Confirm all of this with an Ohio CPA.
- Owen's $52,000 salary is below what a production manager earns elsewhere, so every profit line is after he is paid a salary under market rate. Owner distributions of $10,000 in Year 4 and $20,000 in Year 5 are paid pro rata to both owners, only from spare cash and only with the bank's consent.
Revenue by print channel
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Team, club and school orders (screen print, runs of 24 to 400) | $125,800 | $198,172 | $255,932 | $287,868 | $313,162 |
| Business, brewery and event merchandise | $113,919 | $190,674 | $254,934 | $291,758 | $320,545 |
| Online design-tool orders (1 to 24 shirts, direct-to-garment) | $77,000 | $151,410 | $215,363 | $260,069 | $299,385 |
| Printing for local labels and shops (runs of 100 to 1,000) | $33,600 | $83,059 | $115,256 | $137,072 | $153,790 |
| Total revenue | $350,319 | $623,315 | $841,485 | $976,767 | $1,086,882 |
| Growth on prior year | – | 78% | 35% | 16% | 11% |
Year 1 revenue splits 35.9% team orders, 32.5% business orders, 22.0% online and 9.6% label work. By Year 5 label work is 14.1% of sales, online 27.5%, team 28.8% and business 29.5%, so no single channel carries the shop. Growth is 78% in Year 2 as the second season of reorders lands, then 35%, 16% and 11%. Team work peaks around the spring and fall sports seasons, business work around summer festivals, and online orders in November and December.
Month by month in 2027
| Month | Team, club and school orders (screen print, runs of 24 to 400) | Business, brewery and event merchandise | Online design-tool orders (1 to 24 shirts, direct-to-garment) | Printing for local labels and shops (runs of 100 to 1,000) | Total revenue | EBITDA |
|---|---|---|---|---|---|---|
| Jan 2027 | $2,146 | $2,456 | $0 | $0 | $4,602 | ($21,311) |
| Feb 2027 | $3,463 | $3,774 | $0 | $0 | $7,237 | ($19,646) |
| Mar 2027 | $7,607 | $6,159 | $1,330 | $0 | $15,096 | ($14,680) |
| Apr 2027 | $10,982 | $8,188 | $2,660 | $0 | $21,830 | ($10,426) |
| May 2027 | $12,669 | $10,502 | $3,710 | $1,568 | $28,449 | ($6,243) |
| Jun 2027 | $9,146 | $11,890 | $4,200 | $2,083 | $27,319 | ($6,957) |
| Jul 2027 | $6,912 | $11,339 | $4,410 | $2,520 | $25,181 | ($8,308) |
| Aug 2027 | $16,058 | $10,644 | $5,460 | $3,315 | $35,477 | ($1,803) |
| Sep 2027 | $19,950 | $13,973 | $7,420 | $4,189 | $45,532 | $4,550 |
| Oct 2027 | $16,902 | $12,602 | $11,550 | $5,242 | $46,296 | $5,033 |
| Nov 2027 | $10,745 | $12,602 | $19,810 | $7,694 | $50,851 | $7,911 |
| Dec 2027 | $9,220 | $9,790 | $16,450 | $6,989 | $42,449 | $2,602 |
January and February bring in $4,602 and $7,237 because teams order from March, the online store opens in March and label work starts in May. Operating profit is negative from January to August and positive from September to December, the stretch when fall teams, festival merchandise and holiday orders overlap. Winter months in later years will be weaker again, which is why the Year 1 cash reserve is sized to the whole year, not the busy season. The lowest month-end cash, after allowing for the 10 days customers take to pay, is Sep at about $26,000.
Press-room payroll and hiring
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Owner: estimating, sales and artwork | $52,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Lead press operator | $42,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Finishing and packing assistant (part time, about 25 hours a week) | $20,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Seasonal production helper (August to November) | $24,000 | Month 8 | – | – | – | – | – |
| Sales and artwork coordinator | $40,000 | Month 26 | – | – | 1 | 1 | 1 |
| Direct-to-garment and fulfillment operator | $36,000 | Month 16 | – | 1 | 1 | 1 | 1 |
| Second senior press operator | $41,000 | Month 42 | – | – | – | 1 | 1 |
| Total payroll incl. on-costs | $151,580 | $185,870 | $243,867 | $278,474 | $300,170 |
Owen and the lead press operator open the shop in January, with a half-time assistant who packs, folds and ships. A seasonal production helper joins each August and leaves after November. The direct-to-garment and fulfillment operator starts in month 16 (April 2028), ahead of that year's team season and the online growth. The sales and artwork coordinator follows in month 26, and a second senior press operator in month 42, in time for the Year 4 fall rush. Full-time staff including Owen number 2, 3, 4, 5 and 5 at the end of Years 1 to 5, plus the half-time assistant throughout. The seasonal helper is shown at an annual-equivalent rate and paid for four months.
Profit and loss, five years
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $350,319 | $623,315 | $841,485 | $976,767 | $1,086,882 |
| Blank garments, ink and print consumables | ($128,976) | ($229,484) | ($309,807) | ($359,614) | ($400,154) |
| Gross profit | $221,343 | $393,831 | $531,678 | $617,153 | $686,728 |
| Payroll incl. on-costs | ($151,580) | ($185,870) | ($243,867) | ($278,474) | ($300,170) |
| Rent | ($33,000) | ($34,000) | ($35,000) | ($36,100) | ($37,200) |
| Utilities | ($9,600) | ($10,000) | ($10,400) | ($10,800) | ($11,200) |
| Marketing | ($34,000) | ($38,000) | ($41,000) | ($43,000) | ($45,000) |
| Insurance | ($6,800) | ($7,400) | ($8,000) | ($8,600) | ($9,200) |
| Professional fees | ($7,500) | ($5,400) | ($5,700) | ($6,000) | ($6,300) |
| Software subscriptions | ($9,000) | ($10,500) | ($12,000) | ($13,000) | ($14,000) |
| Card and payment-processor fees (2.2% of sales) | ($7,707) | ($13,713) | ($18,513) | ($21,489) | ($23,911) |
| Outbound shipping and packaging on online orders | ($7,480) | ($14,708) | ($20,921) | ($25,264) | ($29,083) |
| Screens, emulsion, reclaim chemicals and press spares | ($7,500) | ($9,500) | ($11,500) | ($12,500) | ($13,500) |
| Direct-to-garment printhead replacements and service plan | ($1,800) | ($3,500) | ($4,500) | ($5,000) | ($5,500) |
| Reprints and spoiled garments (1.5% of sales) | ($5,255) | ($9,350) | ($12,622) | ($14,652) | ($16,303) |
| Delivery and pickup mileage | ($3,000) | ($3,400) | ($3,800) | ($4,000) | ($4,200) |
| Phones, supplies and office costs | ($3,000) | ($3,300) | ($3,600) | ($3,900) | ($4,200) |
| Hazardous-waste pickup, permits and renewals | ($1,800) | ($1,900) | ($2,000) | ($2,100) | ($2,200) |
| Equipment replacement and shop tools | $0 | ($2,500) | ($3,500) | ($6,000) | ($4,000) |
| Bad debt allowance | ($1,600) | ($2,800) | ($3,700) | ($4,100) | ($4,400) |
| Annual pay raises (3% a year) | $0 | ($5,576) | ($14,851) | ($25,822) | ($37,674) |
| EBITDA | ($69,279) | $32,414 | $76,204 | $96,352 | $118,687 |
| Depreciation | ($13,114) | ($13,114) | ($13,114) | ($13,114) | ($13,114) |
| Interest | ($13,020) | ($11,508) | ($9,656) | ($7,606) | ($5,336) |
| Income tax | $0 | $0 | $0 | ($9,292) | ($22,475) |
| Net income before start-up costs | ($95,413) | $7,791 | $53,434 | $66,340 | $77,761 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($28,700) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($124,113) | $7,791 | $53,434 | $66,340 | $77,761 |
Gross profit of $221,343 in Year 1 does not cover the operating costs, so EBITDA is negative $69,279, the net loss is $95,413 after depreciation and interest, and $124,113 after $28,700 of start-up costs. Year 2 is the first profitable year at $7,791, because revenue rises 78% while payroll rises 23%. Net income is $53,434 in Year 3, then $66,340 and $77,761. Net margins of 6% to 7% in Years 3 to 5 are modest for the revenue, and a $55,000 swing in Year 3 gross profit or costs would erase that year's profit. No income tax is due until Year 4 because the Year 1 loss is carried forward.
Where the cash goes
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($132,689) | $14,913 | $61,759 | $76,484 | $88,458 |
| Equipment and build-out | ($75,000) | $0 | $0 | $0 | $0 |
| Funding received | $260,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | ($10,437) | ($17,344) | ($19,196) | ($21,247) | ($23,517) |
| Owner distributions | $0 | $0 | $0 | ($10,000) | ($20,000) |
| Net change in cash | $41,875 | ($2,431) | $42,563 | $45,238 | $44,942 |
| Closing cash | $41,875 | $39,444 | $82,006 | $127,244 | $172,186 |
Year 1 opens with $260,000 and spends $75,000 on equipment and build-out, then loses $132,689 of operating cash and repays $10,437 of principal, leaving $41,875. Year-end cash dips slightly to $39,444 in Year 2 as receivables and inventory grow with sales, then climbs to $172,186 in Year 5 after $30,000 of distributions in Years 4 and 5. Total loan balances fall from $119,563 to $38,260 over the same period.
Balance sheet at year end
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $41,875 | $39,444 | $82,006 | $127,244 | $172,186 |
| Accounts receivable | $9,598 | $17,077 | $23,054 | $26,761 | $29,778 |
| Blank garments and ink | $19,159 | $23,179 | $26,392 | $28,385 | $30,006 |
| Equipment and build-out (net) | $61,886 | $48,771 | $35,657 | $22,543 | $9,429 |
| Total assets | $132,517 | $128,471 | $167,110 | $204,932 | $241,398 |
| Accounts payable | $7,067 | $12,574 | $16,976 | $19,705 | $21,926 |
| Bank and equipment loans | $119,563 | $102,219 | $83,023 | $61,776 | $38,260 |
| Paid-in capital | $130,000 | $130,000 | $130,000 | $130,000 | $130,000 |
| Retained earnings | ($124,113) | ($116,322) | ($62,889) | ($6,549) | $51,212 |
| Total liabilities and equity | $132,517 | $128,471 | $167,110 | $204,932 | $241,398 |
Margins, break-even and loan cover
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -19.8% | 5.2% | 9.1% | 9.9% | 10.9% |
| Net margin (before start-up costs) | -27.2% | 1.2% | 6.3% | 6.8% | 7.2% |
| Payroll incl. pay raises as share of revenue | 43% | 31% | 31% | 31% | 31% |
| Revenue per full-time equivalent at year end | $140,128 | $178,090 | $186,997 | $177,594 | $197,615 |
| Average monthly revenue | $29,193 | $51,943 | $70,124 | $81,397 | $90,574 |
| Monthly revenue needed to cover operating costs | $38,331 | $47,668 | $60,073 | $68,689 | $74,920 |
| Debt service cover (EBITDA / interest + principal) | -3.0x | 1.1x | 2.6x | 3.3x | 4.1x |
Year 1 averages $29,193 of revenue a month against $38,331 needed to cover operating costs, so it loses money. Year 2 averages $51,943 against $47,668, and Year 3 clears the bar by about 17%: $70,124 against $60,073. Debt service cover is negative in Year 1 and 1.1x in Year 2, which a lender will read as thin, then reaches 2.6x in Year 3 and 4.1x in Year 5. Blank and ink inventory covers 54 days of direct cost at the end of Year 1 and 31 days at the end of Year 3, as the opening inventory is spread over more sales.
If orders run 20% short
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $280,255 | $498,652 | $673,188 | $781,414 | $869,506 |
| Net income before start-up costs | ($108,226) | ($10,797) | $15,000 | $29,362 | $68,190 |
| Net income after start-up costs | ($136,926) | ($10,797) | $15,000 | $29,362 | $68,190 |
| Closing cash | $33,400 | $13,579 | $18,666 | $37,520 | $93,374 |
This case cuts every revenue line by 20% in every year. The response: every hire from month 13 starts six months later, the second senior press operator is not hired, marketing falls 20%, Owen takes a 20% pay cut, no distributions are paid, opening inventory is 20% smaller with the saving moved to the reserve, part-time hours fall 20%, and card fees, shipping, reprints, mileage and bad debt follow sales down. On those terms year-end cash never falls below $13,579, but the damage is real: the shop loses $10,797 in Year 2 and earns only $15,000 in Year 3, equity is negative from Year 1 through Year 3 (Year 1 ends at ($6,926)), and debt service cover is 0.5x in Year 2 and 1.3x in Year 3. Owen would ask the bank before the first covenant date for a waiver of any net-worth test and a six-month interest-only extension, and would open a small working-capital line before the August to November inventory build. The year-end figures also hide the build itself: monthly cash inside Years 2 and 3 is not modeled. A 20% shortfall in this trade is survivable only because hiring and marketing give way first.
Sources
- Ohio Department of Taxation: commercial activity tax and sales and use tax guidance. The plan gives no rate from these pages.
- City of Cincinnati, Income Tax Division: net-profit tax rules. The 1.8% rate in the model is a planning figure and may change.
- U.S. Consumer Product Safety Commission: business guidance on children's apparel.
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