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Sample Business Plan

Following is a business plan written by The Business Plan Store.
It is posted here with the express permission of the client
(Executive names are fictitious)

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Financial Plan

The following financial projections are based on conservative sales forecasts by month for the next twelve months, and by year for the four years thereafter.  We will continue to sell the DOS-based MDS 2.0 product until January 2002 at which time we expect to have programming completed in the Windows environment for the Enterprise Software Solution.  License fees for the DOS-based product will continue to average $500 with monthly maintenance averaging $125.  Beginning in January 2002 we will sell the Enterprise Software Solution for an average $1,000 license fee and average $500 monthly maintenance fee.  We will convert our DOS-based customers to the Enterprise Software Solution at the average rate of 25 customers per month.  The conversion fee will be $500 and monthly maintenance thereafter will be $500.  We expect to have all of our customers converted by June 2002.  Details of projected sales and conversions are included under the heading Revenue Assumptions.

The cost to upgrade the OBRA e-z DOS-based program to windows is estimated at $120,000 that will be spread over the first twelve months.  Maintenance will require approximately $24,000 per year thereafter.  The cost to upgrade and integrate the MasterLink software is estimated at $204,000 (spread over the first twelve months) with annual maintenance of about $12,000 thereafter.  Details of estimated costs are included under the heading Expense Assumptions.

OBRA e-z will generate negative income from July 2001 until April 2002 while absorbing the expense to upgrade software and jump start its sales and marketing activities.  We expect to be generating profits beginning May 2002 and every month thereafter. 

We will require an initial investment of $750,000, all of which will have been recovered by the end of year two in cash (approximately $700,000) and accounts receivable (approximately $200,000).  By the end of year five, we expect to have cash and accounts receivable aggregating more than $7,000,000.

 

Break-even Analysis

The break-even analysis assumes running costs of approximately $91,700 per month that includes full payroll (compensation and benefits), rent, utilities, supplies, sales and marketing, training, and other miscellaneous costs.

Variable costs include only those directly attributable to packaging and delivering the software product and are estimated to average only about 10% of the license revenue.

The chart shows the break-even revenue is about $94,500 per month.  Conservatively, we estimate that by May 2002 we will be servicing a minimum of 165 customers of $73,125 and license fees of $22,500.  We will have crossed the break-even point in May and project profitability thereafter.

 

Pro forma financial statements follow.

 

 

  

Pro Forma Income Statements – Year 1 by Month

 

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

 

 

 

 

 

 

 

 

 

 

 

 

 

Licenses

$5,000

$5,000

$5,000

$5,000

$5,000

$5,000

$22,500

$22,500

$22,500

$22,500

$22,500

$10,000

Maintenance

8,125

9,375

10,625

11,875

13,125

14,375

15,625

30,000

44,375

58,750

73,125

87,500

Sales

13,125

14,375

15,625

16,875

18,125

19,375

38,125

52,500

66,875

81,250

95,625

97,500

Cost of Goods Sold

500

500

500

500

500

500

2,250

2,250

2,250

2,250

2,250

1,000

Gross Profit

12,625

13,875

15,125

16,375

17,625

18,875

35,875

50,250

64,625

79,000

93,375

96,500

 

 

 

 

 

 

 

 

 

 

 

 

 

Software Development - OBRA e-z

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

Software Development - MasterLink

17,000

17,000

17,000

17,000

17,000

17,000

17,000

17,000

17,000

17,000

17,000

17,000

Salaries

48,500

48,500

48,500

48,500

48,500

48,500

48,500

48,500

48,500

48,500

48,500

48,500

Selling Expense

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

Office Expense

5,200

5,200

5,200

5,200

5,200

5,200

5,200

5,200

5,200

5,200

5,200

5,200

Other

1,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

Total SG & A Expense

91,700

91,700

91,700

91,700

91,700

91,700

91,700

91,700

91,700

91,700

91,700

91,700

Operating Profit

(79,075)

(77,825)

(76,575)

(75,325)

(74,075)

(72,825)

(55,825)

(41,450)

(27,075)

(12,700)

1,675

4,800

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

0

2,361

2,077

1,796

1,515

1,238

965

685

473

314

208

155

Earnings Before Taxes

(79,075)

(75,464)

(74,498)

(73,529)

(72,560)

(71,587)

(54,860)

(40,765)

(26,602)

(12,386)

1,883

4,955

Income Taxes

0

0

0

0

0

0

0

0

0

0

659

1,734

Extraord. Item: Tax Refund

0

0

0

0

0

0

0

0

0

0

659

1,734

Net Income

($79,075)

($75,464)

($74,498)

($73,529)

($72,560)

($71,587)

($54,860)

($40,765)

($26,602)

($12,386)

$1,883

$4,955

 

Pro Forma Income Statements – Years 1 through 5

 

 

Total Y1

Y2

Y3

Y4

Y5

 

 

 

 

 

 

 

Licenses

 

$152,500

$150,000

$200,000

$250,000

$250,000

Maintenance

 

376,875

1,500,000

2,550,000

3,900,000

5,400,000

Sales

 

529,375

1,650,000

2,750,000

4,150,000

5,650,000

Cost of Goods Sold

 

15,250

15,000

20,000

25,000

25,000

Gross Profit

 

514,125

1,635,000

2,730,000

4,125,000

5,625,000

 

 

 

 

 

 

 

Software Development - OBRA e-z

 

120,000

24,000

24,000

24,000

24,000

Software Development - MasterLink

 

204,000

12,000

12,000

12,000

12,000

Salaries

 

582,000

611,100

641,655

673,738

707,425

Selling Expense

 

120,000

120,000

126,000

132,300

138,915

Office Expense

 

62,400

62,400

65,520

68,796

72,236

Other

 

12,000

12,000

12,600

13,230

13,892

Total SG & A Expense

 

1,100,400

841,500

881,775

924,064

968,468

Operating Profit

 

(586,275)

793,500

1,848,225

3,200,936

4,656,532

 

 

 

 

 

 

 

Interest Income

 

11,787

1,981

30,213

79,228

167,624

Earnings Before Taxes

 

(574,488)

795,481

1,878,438

3,280,164

4,824,157

Income Taxes

 

2,393

278,418

657,453

1,148,058

1,688,455

Extraord. Item: Tax Refund

 

2,393

201,071

0

0

0

Net Income

 

($574,488)

$718,133

$1,220,985

$2,132,107

$3,135,702

 

Pro Forma Balance Sheets – Year 1 by Month

 

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

Marketable Securities

629,695

553,911

479,026

404,122

330,188

257,226

182,616

126,038

83,623

55,424

41,270

44,012

Accounts Receivable

16,480

16,800

17,188

18,563

19,938

21,313

41,938

57,750

73,563

89,375

105,188

107,250

Total Current Assets

671,175

595,711

521,214

447,685

375,125

303,539

249,553

208,788

182,186

169,799

171,457

176,262

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

$671,175

$595,711

$521,214

$447,685

$375,125

$303,539

$249,553

$208,788

$182,186

$169,799

$171,457

$176,262

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts Payable

250

250

250

250

250

250

1,125

1,125

1,125

1,125

900

750

Total Current Liabilities

250

250

250

250

250

250

1,125

1,125

1,125

1,125

900

750

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities

250

250

250

250

250

250

1,125

1,125

1,125

1,125

900

750

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained Earnings

(79,075)

(154,539)

(229,036)

(302,565)

(375,125)

(446,711)

(501,572)

(542,337)

(568,939)

(581,326)

(579,443)

(574,488)

Other Equity

750,000

750,000

750,000

750,000

750,000

750,000

750,000

750,000

750,000

750,000

750,000

750,000

Total Liabilities and Equity

$671,175

$595,711

$521,214

$447,685

$375,125

$303,539

$249,553

$208,788

$182,186

$169,799

$171,457

$176,262

 

Pro Forma Balance Sheets – Years 0 Through 5

 

Y0

 

Y1

 

Y2

Y3

Y4

Y5

 

 

 

 

 

 

 

 

 

Cash

$25,000

 

$25,000

 

$25,000

$25,000

$25,000

$25,000

Marketable Securities

629,695

 

44,012

 

671,395

1,760,630

3,724,986

6,680,688

Accounts Receivable

16,480

 

107,250

 

198,000

330,000

498,000

678,000

Total Current Assets

671,175

 

176,262

 

894,395

2,115,630

4,247,986

7,383,688

 

 

 

 

 

 

 

 

 

Total Assets

$671,175

 

$176,262

 

$894,395

$2,115,630

$4,247,986

$7,383,688

 

 

 

 

 

 

 

 

 

Accounts Payable

250

 

750

 

750

1,000

1,250

1,250

Total Current Liabilities

250

 

750

 

750

1,000

1,250

1,250

 

 

 

 

 

 

 

 

 

Total Liabilities

250

 

750

 

750

1,000

1,250

1,250

 

 

 

 

 

 

 

 

 

Retained Earnings

(79,075)

 

(574,488)

 

143,645

1,364,630

3,496,736

6,632,438

Other Equity

750,000

 

750,000

 

750,000

750,000

750,000

750,000

Total Liabilities and Equity

$671,175

 

$176,262

 

$894,395

$2,115,630

$4,247,986

$7,383,688

 

Pro Forma Cash Flow Statements – Year 1 by Month 

 

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Profit

($79,075)

($77,825)

($76,575)

($75,325)

($74,075)

($72,825)

($55,825)

($41,450)

($27,075)

($12,700)

$1,675

$4,800

Cash Income Taxes

0

0

0

0

0

0

0

0

0

0

0

0

Funds From Opers. After Tax

(79,075)

(77,825)

(76,575)

(75,325)

(74,075)

(72,825)

(55,825)

(41,450)

(27,075)

(12,700)

1,675

4,800

Increm. Working Capital Invest.

41,230

320

388

1,375

1,375

1,375

19,750

15,813

15,813

15,813

16,038

2,213

Cash Flow From Operations

($120,305)

($78,145)

($76,963)

($76,700)

($75,450)

($74,200)

($75,575)

($57,263)

($42,888)

($28,513)

($14,363)

$2,588

 

 

 

 

 

 

 

 

 

 

 

 

 

Non Op Inc. (after tax) -1)

0

2,361

2,077

1,796

1,515

1,238

965

685

473

314

208

155

Investor(s)

750,000

0

0

0

0

0

0

0

0

0

0

0

Net Cash Flow

$629,695

($75,784)

($74,885)

($74,904)

($73,935)

($72,962)

($74,610)

($56,578)

($42,415)

($28,199)

($14,155)

$2,742

 

 

 

 

 

 

 

 

 

 

 

 

 

(1- After-tax interest income

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma Cash Flow Statements – Years 1 through 5

 

Total Y1

Y2

Y3

Y4

Y5

 

 

 

 

 

 

Operating Profit

($586,275)

$793,500

$1,848,225

$3,200,936

$4,656,532

Cash Income Taxes

0

77,155

646,879

1,120,328

1,629,786

Funds From Opers. After Tax

(586,275)

716,345

1,201,346

2,080,608

3,026,746

Increm. Working Capital Invest.

131,500

90,750

131,750

167,750

180,000

Cash Flow From Operations

($717,775)

$625,595

$1,069,596

$1,912,858

$2,846,744

 

 

 

 

 

 

Non Op Inc. (after tax) -1)

11,787

1,788

19,638

51,498

108,956

Investor(s)

750,000

0

0

0

0

Net Cash Flow

$44,012

$627,383

$1,089,235

$1,964,357

$2,955,702

 

 

 

 

 

 

(1- After-tax interest income

 

 

 

 

 


 

 
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