JTB Integrated Technologies

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Database Software Business Plan

Financial Plan

JTB's financial plan is based on raising $225,000 by way of private equity to develop the Integrated Technologies Division of the corporation. To maintain Gross Margins of 36% or better, the Integrated Technologies division will develop, market and support  P.C.-based industrial sales applications and marketing portals.These products will be developed  in conjunction with input from our Industrial Sales, and Products and Services divisions, using our other divisions as a model and test bed. Our unique customer applications will help to speed the quotation and purchasing process of our 300,000 industrial products offered in our industrial divisions catalogs.

In just over one year, the Integrated Technologies Division will fully implement a large-scale Internet and catalog-based marketing program to develop its client base both locally and nationally.

We expect this division to show a net loss in the first two years, which will help to offset taxes on profits made by the other two divisions at the JTB Technologies level. The infrastructure built by this division will serve as a critical part of the daily operations of JTB Industrial Sales and JTB Products and Services beginning in month six. Given these benefits to the overall corporation, the long lead-time necessary for full software development is a worthwhile investment.

Important elements that will impact the financial plan include:

  1. How quickly the Industrial Sales division can pull its operations together, as this division will be situated within the same location as the other divisions. Management will have to develop and cross-train its sales teams as quickly as possible.
  2. While management is putting a lot of emphasis on the Internet based sales and marketing, we will initially implement a solid direct marketing plan with ads in many industrial magazines and websites.
  3. Although the business is a start-up company, the financial plan is solidly based on other software and application developers' business profiles and cost structures. We have eliminated some corporate overhead expenses, such as warehouse and administrative costs, inventory penalties, and corporate nominal interest, as this division will carry only 1/3 of many of the normal operating expenses once established.

With all these factors considered, this division is capable of developing $443,000 in sales by year 5 of the plan. With tough financial planning, these financial goals will be fully realized when all aspects of the business divisions are in place, functioning as a complete corporation.

8.1 Important Assumptions

This plan is one part of a multi-division business plan providing details of each business segment for more accurate projections. For full forecasts, see the main plan (JTB Technologies, Inc.), which shows the overall development of the business in its entirety. Key assumptions around which we have developed this plan are as follows:

  1. Current business, banking, and economic trends continue to be stable.
  2. Customer buying trends and orders remain strong.
  3. Overhead and other external operating costs grow as projected.
  4. External outsourced costs grow as anticipated.
  5. Internet buying trends continue to grow in the industrial sector.

Note 8.1.1 Management has selected a quality networked accounting system with capabilities of having multiple businesses running while still offering full consolidation of the business for accounting purposes. This system is complete with project management capabilities and budgeting. As such, management will implement a budgeted approach for the projects while adjusting costs in JTB's favor wherever possible.

All Profit and Loss forecasts in this plan include only the projections for the Industrial Products and Services Division . We suggest that each plan is reviewed, as each is quite different.

General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 0.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0

8.2 Break-even Analysis

As a start-up software firm, JTB Integrated Technologies will not reach break-even until year 3, although we will control costs to maintain a positive cash balance with the initial funding throughout the first two years.

The initial goal is to bring the subscription based products and services to market within 10 months, and to fully develop the linked websites for affiliate development in the first year. We will also offer numerous well accepted industrial software products for resale.  What will set JTB apart from the other industrial entities is its ability for flexibility, expansion, and its individual divisions with key individuals all under one roof targeting each market segment JTB will pursue.

With this in mind, the goal is to build a solid base for the corporation with our primary products and services while continuing the development phase of our distribution software.

Break-even Analysis
Monthly Revenue Break-even $5,518
Assumptions:
Average Percent Variable Cost 36%
Estimated Monthly Fixed Cost $3,509

8.3 Projected Profit and Loss

Please be sure to read note 8.1.1 in the Important Assumptions, section 8.1 regarding our Accounting system and methodology.

The Projected Profit and Loss table takes into consideration all of the basic operating expenses for the Integrated Technologies Division only. When management produced the table, we would have preferred to project a softer startup with more of a gradual expense growth as we added equipment and services. However, in software and Web development, up-front research and development expenses are significant. The plan does show a full depreciation schedule of relevant long-term assets.

One consideration not included in the Profit and Loss statement is the burden of management, and management's output. Please remember when you do review the P&L, that the 3 JTB divisions will actually be operating under one roof; as such, management's role will be to fill in, in all areas of production wherever needed to complete orders. Jeremy Mitchell will have primary management oversight ni the Integrated Technologies Division.

The Profit and Loss statement, below, includes an additional direct cost of sales in the fees paid to a contracted Graphic Designer, who will work with our developers to create the "look" of the software application UI and the JTB websites. We will keep this graphic artist on retainer to provide updates as we develop new and more customized versions of the software, and as we update the look and functionality of the website over the next five years.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $23,204 $199,948 $268,330 $331,797 $443,411
Direct Cost of Sales $8,448 $35,795 $55,219 $66,051 $90,527
Developers Payroll $94,800 $74,800 $74,800 $74,800 $74,800
Contracted Graphics Dvlpmnt for Software $4,500 $4,500 $4,500 $4,500 $4,500
Total Cost of Sales $107,748 $115,095 $134,519 $145,351 $169,827
Gross Margin ($84,544) $84,853 $133,811 $186,446 $273,584
Gross Margin % -364.35% 42.44% 49.87% 56.19% 61.70%
Operating Expenses
Sales and Marketing Expenses
Sales and Marketing Payroll $13,100 $50,000 $53,000 $55,000 $57,000
Advertising/Promotion $5,850 $7,200 $12,000 $12,000 $12,000
Other Sales and Marketing Expenses $0 $0 $0 $0 $0
Total Sales and Marketing Expenses $18,950 $57,200 $65,000 $67,000 $69,000
Sales and Marketing % 81.67% 28.61% 24.22% 20.19% 15.56%
General and Administrative Expenses
General and Administrative Payroll $0 $0 $0 $0 $0
Sales and Marketing and Other Expenses $3,000 $5,000 $12,000 $12,000 $16,000
Depreciation $996 $1,000 $1,000 $1,000 $1,000
Rent $9,000 $9,000 $9,000 $9,000 $9,000
Utilities $3,000 $3,000 $3,000 $3,000 $3,000
Insurance $4,200 $6,000 $6,000 $6,000 $6,000
Payroll Taxes $0 $0 $0 $0 $0
CPA: Accounting and Payroll $600 $600 $600 $600 $600
Off-site secure backup storage $360 $400 $400 $400 $400
Computer maintenance and software upgrades $2,000 $3,000 $4,000 $5,000 $6,000
Total General and Administrative Expenses $23,156 $28,000 $36,000 $37,000 $42,000
General and Administrative % 99.79% 14.00% 13.42% 11.15% 9.47%
Other Expenses:
Other Payroll $0 $0 $0 $0 $0
Consultants $0 $0 $0 $0 $0
Other Expenses $0 $0 $0 $0 $0
Total Other Expenses $0 $0 $0 $0 $0
Other % 0.00% 0.00% 0.00% 0.00% 0.00%
Total Operating Expenses $42,106 $85,200 $101,000 $104,000 $111,000
Profit Before Interest and Taxes ($126,650) ($347) $32,811 $82,446 $162,584
EBITDA ($125,654) $653 $33,811 $83,446 $163,584
Interest Expense $2,592 $2,374 $2,144 $1,914 $1,684
Taxes Incurred $0 $0 $9,200 $24,160 $48,270
Net Profit ($129,243) ($2,721) $21,467 $56,372 $112,630
Net Profit/Sales -556.99% -1.36% 8.00% 16.99% 25.40%

8.4 Projected Cash Flow

JTB's projected cash flow reflects the business' position to repay the initial investors and the long-term loan. Please remember when you review this table, it is for the Integrated Technologies Division only. This division will operate at a loss for the first two years in order to build a solid, integrated software package to support the other divisions and to serve as the basis for future customized software and hosting for outside clients.

As the cash flow projects only the base products described in the business plan, it's highly probable JTB will be involved with more outsourced products in years 2 thru 5 furthering our potential profitability. After initial decreases due to development lead-time, the cash position shows strong positive growth.

The Cash Flow table reflects one possible exit strategy for initial investors. Early in year three, as the business is becoming profitable with a stabilized software offering, we may seek a second round of outside investment and pay out our initial investors, with a $70,000 increase over the initial investment. We are confident that we can achieve this buy-out rate given the desperate need for software such as ours, the benefit of which will be proven after the first two years.

Please review section 8.1 regarding the Important Assumptions to get a better feel for the explained projected cash flow. 

Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $11,602 $99,974 $134,165 $165,899 $221,706
Cash from Receivables $5,871 $56,324 $117,277 $150,224 $194,140
Subtotal Cash from Operations $17,473 $156,298 $251,442 $316,123 $415,846
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0
New Investment Received $0 $0 $350,000 $0 $0
Subtotal Cash Received $17,473 $156,298 $601,442 $316,123 $415,846
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $107,900 $124,800 $127,800 $129,800 $131,800
Bill Payments $38,265 $82,991 $119,715 $145,872 $198,976
Subtotal Spent on Operations $146,165 $207,791 $247,515 $275,672 $330,776
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $2,262 $2,300 $2,300 $2,300 $2,300
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $0 $300,000 $20,000 $80,000
Subtotal Cash Spent $148,427 $210,091 $549,815 $297,972 $413,076
Net Cash Flow ($130,953) ($53,794) $51,627 $18,150 $2,770
Cash Balance $79,047 $25,253 $76,880 $95,030 $97,800

8.5 Projected Balance Sheet

JTB Integrated Technologies's projected Balance Sheet shows the expected decrease in asset values (including cash reserves) over the two years, as we build, test, and establish our products and services. Once sales begin to pick up, we will make up this loss, reaching a strong net worth in year five.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $79,047 $25,253 $76,880 $95,030 $97,800
Accounts Receivable $5,731 $49,381 $66,269 $81,944 $109,509
Inventory $2,345 $9,935 $15,327 $18,952 $25,328
Other Current Assets $6,500 $6,500 $6,500 $6,500 $6,500
Total Current Assets $93,622 $91,069 $164,976 $202,426 $239,136
Long-term Assets
Long-term Assets $15,000 $15,000 $15,000 $15,000 $15,000
Accumulated Depreciation $996 $1,996 $2,996 $3,996 $4,996
Total Long-term Assets $14,004 $13,004 $12,004 $11,004 $10,004
Total Assets $107,626 $104,073 $176,980 $213,430 $249,140
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $6,631 $8,099 $11,838 $14,216 $19,596
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $6,631 $8,099 $11,838 $14,216 $19,596
Long-term Liabilities $24,888 $22,588 $20,288 $17,988 $15,688
Total Liabilities $31,519 $30,687 $32,126 $32,204 $35,284
Paid-in Capital $225,000 $225,000 $575,000 $575,000 $575,000
Retained Earnings ($19,650) ($148,893) ($451,613) ($450,146) ($473,774)
Earnings ($129,243) ($2,721) $21,467 $56,372 $112,630
Total Capital $76,107 $73,387 $144,854 $181,226 $213,856
Total Liabilities and Capital $107,626 $104,073 $176,980 $213,430 $249,140
Net Worth $76,107 $73,387 $144,854 $181,226 $213,856

8.6 Business Ratios

JTB's business ratios are compared to standard industry ratios for the Business-Oriented Computer Software industry. Our ratios differ in some areas, as the industry profiles most likely reflect a complete business with a full overhead. Our ratios are lighter in overhead and assets, as most of the heavy assets are in our Industrial Products and Services Division, and are not shown in this division's balance sheet.

Our sales growth is substantially greater as we are adding new products and services each year to the plan, and our average Gross Margins reflect the time and expense invested up-front in the development of many of our products. Overall, we feel our ratios are better than the industry as we have maximized our marketing budgets and marketing avenues while keeping costs in check. Further maximization comes in the form of training the sales staff on maintaining profit-per-order levels when processing orders. Our unique order processing makes for streamlined repeat ordering by customers, further allowing our staff to process orders more efficiently, while reducing the internal costs.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 761.70% 34.20% 23.65% 33.64% 3.84%
Percent of Total Assets
Accounts Receivable 5.32% 47.45% 37.44% 38.39% 43.95% 18.43%
Inventory 2.18% 9.55% 8.66% 8.88% 10.17% 2.30%
Other Current Assets 6.04% 6.25% 3.67% 3.05% 2.61% 46.80%
Total Current Assets 86.99% 87.50% 93.22% 94.84% 95.98% 67.53%
Long-term Assets 13.01% 12.50% 6.78% 5.16% 4.02% 32.47%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 6.16% 7.78% 6.69% 6.66% 7.87% 33.10%
Long-term Liabilities 23.12% 21.70% 11.46% 8.43% 6.30% 15.52%
Total Liabilities 29.29% 29.49% 18.15% 15.09% 14.16% 48.62%
Net Worth 70.71% 70.51% 81.85% 84.91% 85.84% 51.38%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin -364.35% 42.44% 49.87% 56.19% 61.70% 100.00%
Selling, General & Administrative Expenses 26.60% 25.88% 19.21% 15.86% 12.27% 79.13%
Advertising Expenses 19.89% 18.89% 16.37% 14.26% 11.45% 1.27%
Profit Before Interest and Taxes -545.81% -0.17% 12.23% 24.85% 36.67% 1.63%
Main Ratios
Current 14.12 11.24 13.94 14.24 12.20 1.34
Quick 13.77 10.02 12.64 12.91 10.91 1.07
Total Debt to Total Assets 29.29% 29.49% 18.15% 15.09% 14.16% 57.52%
Pre-tax Return on Net Worth -169.82% -3.71% 21.17% 44.44% 75.24% 3.03%
Pre-tax Return on Assets -120.08% -2.61% 17.33% 37.73% 64.58% 7.13%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin -556.99% -1.36% 8.00% 16.99% 25.40% n.a
Return on Equity -169.82% -3.71% 14.82% 31.11% 52.67% n.a
Activity Ratios
Accounts Receivable Turnover 2.02 2.02 2.02 2.02 2.02 n.a
Collection Days 39 101 157 163 158 n.a
Inventory Turnover 7.36 5.83 4.37 3.85 4.09 n.a
Accounts Payable Turnover 6.77 10.43 10.43 10.43 10.43 n.a
Payment Days 31 32 29 32 30 n.a
Total Asset Turnover 0.22 1.92 1.52 1.55 1.78 n.a
Debt Ratios
Debt to Net Worth 0.41 0.42 0.22 0.18 0.16 n.a
Current Liab. to Liab. 0.21 0.26 0.37 0.44 0.56 n.a
Liquidity Ratios
Net Working Capital $86,991 $82,971 $153,138 $188,210 $219,540 n.a
Interest Coverage -48.85 -0.15 15.31 43.08 96.56 n.a
Additional Ratios
Assets to Sales 4.64 0.52 0.66 0.64 0.56 n.a
Current Debt/Total Assets 6% 8% 7% 7% 8% n.a
Acid Test 12.90 3.92 7.04 7.14 5.32 n.a
Sales/Net Worth 0.30 2.72 1.85 1.83 2.07 n.a
Dividend Payout 0.00 0.00 13.97 0.35 0.71 n.a

8.7 Long-term Plan

JTB's Integrated Technologies Divisions long term plan has been projected out to a 10 year review to highlight the businesses long term results, and the added potential of the channel partnerships. Additionally, the fourth and fifth year cash position can be shown for pay-out analysis of the initial investors, this plan also give a much better equity picture.

  1. Gross Sales over $600,000 by year 8 of this plan.
  2. Gross Margins over $270,000 by year 5 of this plan.
  3. Net Income over $100,000 by year 5 of this plan.
  4. Current Assets back up over $200,000 by year 5 of the plan.
  5. Equity of over $260,000 by year 8 of this plan.