Investment Company

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Investment Company Business Plan

Financial Plan

Content has been omitted from this sample plan topic, and following sub-topics.  This sample plan has an abbreviated plan outline.  With the exception of the Executive Summary, only those topics linked to key tables have been used.

The focus of this sample plan is to show the financials for this type of company.  Brief descriptions can be found in the topics associated with key tables.

8.1 Projected Profit and Loss

Please note that in the third year one investment is written off as a failure, producing a $5 million cost which ends up showing a loss for the year of nearly $5 million.  The sale of equity at the end of the period enters the sales forecast and the profit and loss statement as a $45 million gain. 

You will also note that there may be gains or losses in the value of the assets held as equity investments, but these gains or losses don't enter the accounting until there is a transaction.  The accounting treatment is identical to what an individual investor does with stocks: changes in the market price of a share of stock are irrelevant until that share is actually sold to somebody else, or, if the company ceases to exist, that stock is written off as having no value. 

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $400,000 $400,000 $400,000 $400,000 $45,400,000
Direct Cost of Sales $0 $0 $0 $0 $0
Investment write-off $0 $0 $5,000,000 $0 $0
Total Cost of Sales $0 $0 $5,000,000 $0 $0
Gross Margin $400,000 $400,000 ($4,600,000) $400,000 $45,400,000
Gross Margin % 100.00% 100.00% -1150.00% 100.00% 100.00%
Expenses
Payroll $300,000 $315,000 $331,000 $347,000 $364,000
Sales and Marketing and Other Expenses $13,200 $13,900 $14,600 $15,300 $16,000
Depreciation $0 $0 $0 $0 $0
Leased Equipment $2,400 $2,500 $2,600 $2,700 $2,800
Utilities $1,200 $1,300 $1,400 $1,500 $1,600
Insurance $2,400 $2,500 $2,600 $2,700 $2,800
Rent $36,000 $37,800 $39,700 $41,700 $43,800
Payroll Taxes $45,000 $47,250 $49,650 $52,050 $54,600
Other $0 $0 $0 $0 $0
Total Operating Expenses $400,200 $420,250 $441,550 $462,950 $485,600
Profit Before Interest and Taxes ($200) ($20,250) ($5,041,550) ($62,950) $44,914,400
EBITDA ($200) ($20,250) ($5,041,550) ($62,950) $44,914,400
Interest Expense $0 $0 $0 $0 $0
Taxes Incurred $0 $0 $0 $0 $8,982,880
Net Profit ($200) ($20,250) ($5,041,550) ($62,950) $35,931,520
Net Profit/Sales -0.05% -5.06% -1260.39% -15.74% 79.14%

8.2 Projected Cash Flow

The Cash Flow shows four $5 million investments made in the first few months of the plan. 

In the third year, one of the target companies fails, so $5 million is written off as failure.  You'll see that shows as a $5 million sale of long-term assets in the cash flow, and a balancing entry of $5 million in costs of sales in the profit and loss, making for a loss and write-off that year.  The result is a tax loss, and the balance of investments goes to $15 Million.

In the fifth year, another investment is transacted at $50 million.  This shows up as a $5 million equity appreciation in the Sales Forecast, plus a $5 million sale of long-term assets in the Cash Flow.  At that point there's been a $45 million profit and the balance of long-term assets goes down to $10 million. 

The partners invest an additional $100,000 in the fourth year as additional working capital to balance the cash flow of the company. 

Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $400,000 $400,000 $400,000 $400,000 $45,400,000
Subtotal Cash from Operations $400,000 $400,000 $400,000 $400,000 $45,400,000
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 $5,000,000 $0 $5,000,000
New Investment Received $0 $0 $0 $100,000 $0
Subtotal Cash Received $400,000 $400,000 $5,400,000 $500,000 $50,400,000
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $300,000 $315,000 $331,000 $347,000 $364,000
Bill Payments $92,128 $104,671 $4,699,155 $526,465 $8,365,697
Subtotal Spent on Operations $392,128 $419,671 $5,030,155 $873,465 $8,729,697
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 $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $20,000,000 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0
Subtotal Cash Spent $20,392,128 $419,671 $5,030,155 $873,465 $8,729,697
Net Cash Flow ($19,992,128) ($19,671) $369,845 ($373,465) $41,670,303
Cash Balance $107,872 $88,201 $458,045 $84,580 $41,754,883

8.3 Projected Balance Sheet

You can see in the balance sheet how the ending balances for long-term assets were not re-valued.  They remain at the original purchase price until they are sold, or written off as a complete loss.  There is a $5 million write-off in the third year, and a sale of $5 million worth of assets in the last year.  That sale of $5 million in assets produces the $5 million sale at book value plus the $45 million gain in the sales forecast and profit and loss table.
Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $107,872 $88,201 $458,045 $84,580 $41,754,883
Other Current Assets $0 $0 $0 $0 $0
Total Current Assets $107,872 $88,201 $458,045 $84,580 $41,754,883
Long-term Assets
Long-term Assets $20,000,000 $20,000,000 $15,000,000 $15,000,000 $10,000,000
Accumulated Depreciation $0 $0 $0 $0 $0
Total Long-term Assets $20,000,000 $20,000,000 $15,000,000 $15,000,000 $10,000,000
Total Assets $20,107,872 $20,088,201 $15,458,045 $15,084,580 $51,754,883
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $8,072 $8,651 $420,045 $9,530 $748,313
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $8,072 $8,651 $420,045 $9,530 $748,313
Long-term Liabilities $0 $0 $0 $0 $0
Total Liabilities $8,072 $8,651 $420,045 $9,530 $748,313
Paid-in Capital $20,100,000 $20,100,000 $20,100,000 $20,200,000 $20,200,000
Retained Earnings $0 ($200) ($20,450) ($5,062,000) ($5,124,950)
Earnings ($200) ($20,250) ($5,041,550) ($62,950) $35,931,520
Total Capital $20,099,800 $20,079,550 $15,038,000 $15,075,050 $51,006,570
Total Liabilities and Capital $20,107,872 $20,088,201 $15,458,045 $15,084,580 $51,754,883
Net Worth $20,099,800 $20,079,550 $15,038,000 $15,075,050 $51,006,570

8.4 Business Ratios

The Standard Industry Code (SIC) for this type of business is 7389, Business Services.  The Industry Data is provided in the final column of the Ratios table. 

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 0.00% 0.00% 0.00% 11250.00% 8.20%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 0.00% 0.00% 44.20%
Total Current Assets 0.54% 0.44% 2.96% 0.56% 80.68% 74.30%
Long-term Assets 99.46% 99.56% 97.04% 99.44% 19.32% 25.70%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 0.04% 0.04% 2.72% 0.06% 1.45% 49.00%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 13.80%
Total Liabilities 0.04% 0.04% 2.72% 0.06% 1.45% 62.80%
Net Worth 99.96% 99.96% 97.28% 99.94% 98.55% 37.20%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 100.00% 100.00% -1150.00% 100.00% 100.00% 0.00%
Selling, General & Administrative Expenses 100.05% 105.06% 110.39% 115.74% 20.86% 81.40%
Advertising Expenses 0.30% 0.33% 0.35% 0.38% 0.00% 1.70%
Profit Before Interest and Taxes -0.05% -5.06% -1260.39% -15.74% 98.93% 2.10%
Main Ratios
Current 13.36 10.20 1.09 8.88 55.80 1.49
Quick 13.36 10.20 1.09 8.88 55.80 1.17
Total Debt to Total Assets 0.04% 0.04% 2.72% 0.06% 1.45% 62.80%
Pre-tax Return on Net Worth 0.00% -0.10% -33.53% -0.42% 88.06% 4.20%
Pre-tax Return on Assets 0.00% -0.10% -32.61% -0.42% 86.78% 11.30%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin -0.05% -5.06% -1260.39% -15.74% 79.14% n.a
Return on Equity 0.00% -0.10% -33.53% -0.42% 70.44% n.a
Activity Ratios
Accounts Payable Turnover 12.41 12.17 12.17 12.17 12.17 n.a
Payment Days 27 29 15 676 15 n.a
Total Asset Turnover 0.02 0.02 0.03 0.03 0.88 n.a
Debt Ratios
Debt to Net Worth 0.00 0.00 0.03 0.00 0.01 n.a
Current Liab. to Liab. 1.00 1.00 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $99,800 $79,550 $38,000 $75,050 $41,006,570 n.a
Interest Coverage 0.00 0.00 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 50.27 50.22 38.65 37.71 1.14 n.a
Current Debt/Total Assets 0% 0% 3% 0% 1% n.a
Acid Test 13.36 10.20 1.09 8.88 55.80 n.a
Sales/Net Worth 0.02 0.02 0.03 0.03 0.89 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a