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Computer Software Business Plan

Financial Plan

The following sections outline important financial information.

8.1 Important Assumptions

The following table details important financial assumptions.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

8.2 Break-even Analysis

The Break-even Analysis is shown below.

Break-even Analysis
Monthly Revenue Break-even $20,959
Assumptions:
Average Percent Variable Cost 7%
Estimated Monthly Fixed Cost $19,492

8.3 Projected Profit and Loss

The table and charts illustrate the projected profit and loss.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $96,793 $400,397 $489,842
Direct Cost of Sales $6,776 $28,028 $34,289
Other Costs of Goods $0 $0 $0
Total Cost of Sales $6,776 $28,028 $34,289
Gross Margin $90,018 $372,369 $455,553
Gross Margin % 93.00% 93.00% 93.00%
Expenses
Payroll $167,000 $225,200 $229,200
Sales and Marketing and Other Expenses $6,600 $7,200 $7,200
Depreciation $1,800 $1,800 $1,800
Rent $10,450 $11,400 $11,400
Utilities $5,500 $6,000 $6,000
Insurance $5,500 $5,500 $5,500
Payroll Taxes $25,050 $33,780 $34,380
Programming $12,000 $0 $0
Total Operating Expenses $233,900 $290,880 $295,480
Profit Before Interest and Taxes ($143,882) $81,489 $160,073
EBITDA ($142,082) $83,289 $161,873
Interest Expense $9,134 $9,566 $9,943
Taxes Incurred $0 $21,577 $45,039
Net Profit ($153,017) $50,346 $105,091
Net Profit/Sales -158.09% 12.57% 21.45%

8.4 Projected Cash Flow

The following chart and table show projected cash flow.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $24,198 $100,099 $122,460
Cash from Receivables $46,108 $217,218 $342,905
Subtotal Cash from Operations $70,306 $317,317 $465,366
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $40,000 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $70,306 $357,317 $465,366
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $167,000 $225,200 $229,200
Bill Payments $75,294 $124,114 $152,785
Subtotal Spent on Operations $242,294 $349,314 $381,985
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $16,227 $16,227 $16,227
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $258,521 $365,541 $398,212
Net Cash Flow ($188,214) ($8,224) $67,154
Cash Balance $25,286 $17,062 $84,215

8.5 Projected Balance Sheet

The following table presents the projected balance sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $25,286 $17,062 $84,215
Accounts Receivable $26,487 $109,566 $134,042
Inventory $1,408 $5,824 $7,126
Other Current Assets $0 $0 $0
Total Current Assets $53,180 $132,452 $225,383
Long-term Assets
Long-term Assets $9,000 $9,000 $9,000
Accumulated Depreciation $1,800 $3,600 $5,400
Total Long-term Assets $7,200 $5,400 $3,600
Total Assets $60,380 $137,852 $228,983
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $7,124 $10,477 $12,744
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $7,124 $10,477 $12,744
Long-term Liabilities $83,773 $107,546 $91,319
Total Liabilities $90,897 $118,023 $104,063
Paid-in Capital $145,000 $145,000 $145,000
Retained Earnings ($22,500) ($175,517) ($125,171)
Earnings ($153,017) $50,346 $105,091
Total Capital ($30,517) $19,829 $124,920
Total Liabilities and Capital $60,380 $137,852 $228,983
Net Worth ($30,517) $19,829 $124,920

8.6 Business Ratios

The following table outlines some of the more important ratios from the Computer Software industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 5045.9903.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 313.66% 22.34% 1.51%
Percent of Total Assets
Accounts Receivable 43.87% 79.48% 58.54% 29.71%
Inventory 2.33% 4.23% 3.11% 39.18%
Other Current Assets 0.00% 0.00% 0.00% 19.28%
Total Current Assets 88.08% 96.08% 98.43% 88.17%
Long-term Assets 11.92% 3.92% 1.57% 11.83%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 11.80% 7.60% 5.57% 43.83%
Long-term Liabilities 138.74% 78.02% 39.88% 9.87%
Total Liabilities 150.54% 85.62% 45.45% 53.70%
Net Worth -50.54% 14.38% 54.55% 46.30%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 93.00% 93.00% 93.00% 24.10%
Selling, General & Administrative Expenses 251.09% 80.43% 71.55% 15.49%
Advertising Expenses 0.00% 0.00% 0.00% 0.58%
Profit Before Interest and Taxes -148.65% 20.35% 32.68% 2.35%
Main Ratios
Current 7.46 12.64 17.69 1.86
Quick 7.27 12.09 17.13 0.86
Total Debt to Total Assets 150.54% 85.62% 45.45% 5.06%
Pre-tax Return on Net Worth 501.42% 362.71% 120.18% 56.70%
Pre-tax Return on Assets -253.42% 52.17% 65.56% 11.68%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -158.09% 12.57% 21.45% n.a
Return on Equity 0.00% 253.90% 84.13% n.a
Activity Ratios
Accounts Receivable Turnover 2.74 2.74 2.74 n.a
Collection Days 54 83 121 n.a
Inventory Turnover 9.55 7.75 5.30 n.a
Accounts Payable Turnover 11.57 12.17 12.17 n.a
Payment Days 27 25 27 n.a
Total Asset Turnover 1.60 2.90 2.14 n.a
Debt Ratios
Debt to Net Worth 0.00 5.95 0.83 n.a
Current Liab. to Liab. 0.08 0.09 0.12 n.a
Liquidity Ratios
Net Working Capital $46,056 $121,975 $212,639 n.a
Interest Coverage -15.75 8.52 16.10 n.a
Additional Ratios
Assets to Sales 0.62 0.34 0.47 n.a
Current Debt/Total Assets 12% 8% 6% n.a
Acid Test 3.55 1.63 6.61 n.a
Sales/Net Worth 0.00 20.19 3.92 n.a
Dividend Payout 0.00 0.00 0.00 n.a