Sample business plan financial projections and pro forma

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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)

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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