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Austin Kinetic

Executive Summary

Austin Kinetic is an information technology consulting firm serving the Austin Metro area with top quality engineers who have a keen interest in customer satisfaction.  The time is right for consulting companies to flourish.  With the recent gains in the stock market, capital is again becoming available for IT infrastructure improvements.  Austin Kinetic will position itself to win a good deal of that emerging business.  The company has been incorporated in Nevada and has acquired an operating permit for Texas.  Austin Kinetic anticipates an enviable cumulative net profit by the end of year three.

The Market
Austin is known as “little Silicon valley” due to its high percentage of technology companies.  With its relatively low cost of living and ample space for expansion, Austin promises to be a strong market into the foreseeable future. There are currently over 7,000 companies that fit the aim of Austin Kinetic in the Austin Metro area, with only four major competitors.  This combination provides a rich opportunity, bolstered by the current up-turn in the area and national economy.

The Business Model
Austin Kinetic will leverage the industry knowledge of its founding members to provide outstanding service to its customers.  The company will initially have as little overhead as possible with its founders working out of their own homes, using their own transportation means to reach clients.  The company will be developed with a “customer service and satisfaction first” mentality in an effort to build acceptance and a positive reputation in the local industry.

The Management Team
In order for the company to be successful, Austin Kinetic must fully leverage the experience and insight of its management team, which includes Adam Authortisement, Bob Borgware, Cary Curry, Dean Dri, and Edgar Extension. The team has over forty-eight cumulative years of experience in service operations management and information technology support.  They currently hold multiple technology industry vendor certifications crossing several disciplines including both logical and physical network structure and management. Over the course of their careers, the team has served in various technical roles with Fortune 500 companies and has been successful in both large and small environments.

Outsourced computer support business plan, executive summary chart image

1.1 Objectives

Austin Kinetic’s objectives for the first five years:

  1. Establish and maintain at least twenty-four full time service contract customers.
  2. Establish an office in Austin, TX.
  3. Break the Big M revenue mark.

1.2 Mission

Austin Kinetic is an innovative business technology company that was founded on the belief that one company can make more than a difference, it can change the whole face of business as we know it.

1.3 Keys to Success

  • Depth of knowledge.
  • Breadth of ability.
  • Development of a strong business relationship with customers to gain an understanding of their business and business needs.
  • Ability to network in the industry.
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Company Summary

Austin Kinetic is incorporated in Nevada with an operating office in Austin, Texas. Initial staff will consist of a small group of experienced computer engineers who’s skills and experience collectively cover a very broad segment of the open systems’ distributed client/server field. The company’s initial focus will be installation and configuration projects which will be developed into ongoing support contracts.

2.1 Company Ownership

Austin Kinetic is incorporated. The major share holders are Adam Authortisement, Bob Borgware, Cary Curry, Dean Dri, and Edgar Extension.

2.2 Start-up Summary

The start-up costs for the company are detailed in the table below, and will be funded by the founder’s personal funds. There will be only small initial equipment cost as the company will be greatly dependent upon its founders’ resources. It is expected that each employee will initially cover the cost of transportation, cell phone, and incidentals that arise in the course of due business. The company will begin covering those costs as revenue streams are generated. Specific guidelines and policies will be developed prior to the sixth operating month.

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Start-up Funding
Start-up Expenses to Fund $7,550
Start-up Assets to Fund $4,550
Total Funding Required $12,100
Assets
Non-cash Assets from Start-up $0
Cash Requirements from Start-up $4,550
Additional Cash Raised $0
Cash Balance on Starting Date $4,550
Total Assets $4,550
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $0
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $0
Capital
Planned Investment
John Butler $2,500
Eddie Hodges $2,400
Sidney Johnson $2,400
Darren Galatas $2,400
Johnathan & Grace Panepinto $2,400
Additional Investment Requirement $0
Total Planned Investment $12,100
Loss at Start-up (Start-up Expenses) ($7,550)
Total Capital $4,550
Total Capital and Liabilities $4,550
Total Funding $12,100
Start-up
Requirements
Start-up Expenses
Legal $800
Stationery etc. $100
Voice Mail Service $150
Website development $1,000
Computers $5,000
Cell Phones $500
Total Start-up Expenses $7,550
Start-up Assets
Cash Required $4,550
Other Current Assets $0
Long-term Assets $0
Total Assets $4,550
Total Requirements $12,100

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Services

Austin Kinetic will offer several support options, including hourly support services, with the option to buy in blocks of 40 hours at a discounted rate.  Blocks purchased will be valid for 180 days from date of purchase.  Additionally, semi-annual service contracts will be available.  Contract pricing will be negotiated on a per-contract basis.

  • Project work will be billed and estimated on a per-project basis.
  • Web and ASP hosting will be billed on a per-system basis.

Operating systems supported (limited to current and three previous revisions): 

  • Windows
  • Novell NetWare
  • Solaris
  • Red Hat Linux

Hardware supported (hardware configurations must be validated by OEM):

  • All open desktop, server, storage, and network systems.
  • Dell, ADIC, Storagetech, and HP tape drives and libraries.
  • Additional hardware will have to be reviewed on a per-case basis.

Software packages supported (Restricted to implementation and initial configuration):

  • Microsoft Exchange
  • Lotus Notes/Domino
  • SUS Messaging Center
  • Microsoft SQL server
  • Oracle DBS
  • Veritas Backup Exec / Net Backup
  • Legato Networker
  • Arcserve
  • Site Scope
  • SMS
  • Additional packages will have to be reviewed on a per-cases basis.

Service offerings: 

Austin Kinetic has several pre-set packages available for general monitoring of a customer’s network equipment and applications.  The packages are categorized by the type and use of equipment to be monitored. An initial one-time setup fee of $500 will be required per physical site at the onset of any service agreement. This amount is not affected by the number of systems to be monitored at the designated physical site. The customer will be required to provide Internet access to the monitoring server. Out-of-band notification can be added for an additional $50 per month plus a one-time, per-physical-site, $150 initial setup fee.

Basic Server Management*  $350 per month
Austin Kinetic provides professional management of operating systems, including Windows, NetWare, Red Hat Linux, and Solaris. This service is perfect for companies that want to manage their own applications, but not deal with the ongoing hassle of tuning, securing, and maintaining the operating system. We will take the burden of ensuring you get the proper services for your specific server and operating system.

  • A system audit to document your architecture and suggest improvements
  • 24/7 technical support of the server and operating system from experienced engineers
  • Security and bug patch notification for the operating system, and when approved, a service call will be scheduled for installation.*
  • Monitoring the network availability of one IP.
  • Monitoring the server’s disk usage, processor usage and load average
  • Visibility into Austin Kinetic’s trouble ticket system via a secure portal

* Except for the initial system audit, service time to repair or otherwise service the monitored system is not included in this monitoring agreement.

Application Server Management Services*  $450 per month.
Ensuring your applications are available and running at peak efficiency is a 24/7 responsibility. Austin Kinetic offers comprehensive application monitoring and management so your customers and employees will be able to use your applications without significant unscheduled interruption. We offer a complete range of management services tailored to remove the burden of ensuring your applications are up and getting the proper maintenance. 

  • A system audit to document your architecture and suggest improvements 
  • 24/7 technical support of the server, operating system and applications from experienced engineers 
  • Security and bug patch notification for the operating system and applications, and when approved, installation
  • Monitoring application and network availability
  • Monitoring application response time
  • Monitoring the server’s disk usage, processor usage, and load average
  • Visibility into Austin Kinetic’s trouble ticket system via a secure portal 
  • Periodic activity reports

* Except for the initial system audit, service time to repair or otherwise service the monitored system is not included in this monitoring agreement.

Database Server Management Services*  $500 per month.
Ensuring your Oracle, MySQL, and MS SQL 2000 databases are configured and maintained properly is a time-consuming task for IT departments. Austin Kinetic can augment your internal skill set with comprehensive database server management. We offer a broad range of management services and will take the burden of ensuring you get the proper services for your specific server and databases. Typical database services offered by Austin Kinetic include:

  • A system audit to document your architecture and suggest improvements 
  • 24/7 technical support of the server, operating system and database from experienced engineers 
  • Security and bug patch notification for the operating system and database, and when approved, installation 
  • Monitoring database and network availability 
  • Monitoring database response time 
  • Monitoring the server’s disk usage, processor usage and load average 
  • Visibility into Austin Kinetic’s trouble ticket system via a secure portal 
  • Periodic activity reports

* Except for the initial system audit, service time to repair or otherwise service the monitored system is not included in this monitoring agreement.

Network Device Management Services*  $450 per month.
Network devices – firewalls, load balancer, routers, switches and hubs – must be properly configured and maintained to ensure network security and reliable operation. Austin Kinetic offers a broad range of network management services and will take the burden of ensuring you get the proper services for your specific network.

  • A network audit to document your topology and addressing scheme 
  • 24/7 technical support of the network devices from experienced engineers
  • Security and bug patch notification, and when approved, installation 
  • Maintaining the security of firewalls 
  • Monitoring bandwidth usage 
  • Monitoring network device availability and performance 
  • Visibility into Austin Kinetic’s trouble ticket system via a secure portal  

* Except for the initial system audit, service time to repair or otherwise service the monitored system is not included in this monitoring agreement.

Benefits of Security Management Services (Priced determined on a per-site basis.)
Maintaining the security of your Internet-based systems is more important and more time consuming that ever. Austin Kinetic removes the burden of protecting your systems by offering 24/7 security management that combines intrusion detection and vulnerability scanning. We also will not burden your existing hardware as a pre-configured 1U server is installed in your network to handle the intrusion detection and vulnerability task.

  • Identify misconfigured firewalls
  • Catch attacks that firewalls legitimately allow through (such as attacks against Web servers) 
  • Document hacker attempts that fail 
  • Watch for insider hacking 
  • Identify users installing unsecured software on their machines 
  • Recognize unauthorized machines using the network
  • See incorrect IP space utilization

Austin Kinetic will ensure your intrusion detection and vulnerability scanning system is properly installed and maintained. This includes configuring the system, testing the pattern matching, updating scanning profiles, monitoring 24/7, reporting suspicious activities or vulnerability, and providing a monthly report.

Data Backup*  $50 plus a one-time setup fee of $150 per backup server. There will be an additional $100 per-site, per-month charge if tapes are required to be kept off-site.

Protecting your organization’s data is critical. Austin Kinetic will manage your data protection system to ensure that your data is protected by tape backup. While Austin Kinetic cannot be held responsible for lost data, we will ensure that validated and tested backups occur on a regularly scheduled basis. The customer will be responsible for procuring and installing the necessary hardware. Austin Kinetic will configure and monitor the backup software, monitor and test backup jobs, and perform needed file restoration.

* This service does not require the $500 site setup fee.

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Market Analysis Summary

The Information and Technology Service industry is expected to grow at 8.58% per year through 2010.
    –U.S. Department of Labor (2003) http://www.bls.gov/iag/iag.services.htm

We will be primarily focusing on mid-sized companies with 500 or fewer employers.  These companies typically do not have large internal IT departments and could benefit the greatest from our offerings.

4.1 Market Segmentation

The information in the market analysis table gained from the U.S. Census Bureau, http://factfinder.census.gov/servlet/GQRGeoSearchByListServlet?ds_name=E9700A1.  Though the data is based upon 1997 data, it is representative of the local market’s potential.

Outsourced computer support business plan, market analysis summary chart image

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Retail trade 8% 2,925 3,159 3,412 3,685 3,980 8.00%
Professional, scientific, & technical services 8% 3,128 3,378 3,648 3,940 4,255 8.00%
Health care & social assistance 8% 1,705 1,841 1,988 2,147 2,319 7.99%
Total 8.00% 7,758 8,378 9,048 9,772 10,554 8.00%

4.2 Target Market Segment Strategy

Austin Kinetic is interested in servicing companies that are large enough to show direct P&L benefit from information technology investment, but not large enough to maintain their own permanent IT staff.  The business groups targeted in the market analysis table represent the largest groups in our target area that fit our interests.

4.3 Service Business Analysis

Austin Kinetic is in the business of satisfying companies’ information technology infrastructure needs.  We will provide service at various levels from consulting to installation. Services will be sold on a per-customer/case basis with heavy personal interaction between Austin Kinetic sales representatives and prospective customers.

4.3.1 Competition and Buying Patterns

In this industry that Austin Kinetic, word of mouth and reputation are king. While a limited amount of highly focused marketing will be effective, most contracts are gleaned from social contacts and networking.

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Strategy and Implementation Summary

Austin Kinetic’s initial funding will be from its founders’ personal funds. Word-of-mouth and industry networking will be Austin Kinetic’s key source of clients. The company’s success will be based upon the service and satisfaction of customers to the point that they willingly refer new business.

5.1 Competitive Edge

From the onset, Austin Kinetic will have over 20 years of cumulative experience in the information technology field with a very broad range of hands-on experience. This, combined with a keen sense of customer service and satisfaction, will differentiate Austin Kinetic from its competitors.

5.2 Marketing Strategy

Austin Kinetic’s initial marketing strategy will be largely word-of-mouth and industry group networking.  Our biggest initial challenge will be to get our name known in the local market. We will become involved in several industry specific organizations in the local community which will give us direct access to potential customers.

5.3 Sales Strategy

Sales will focus a bit less on building relationships and more on solidifying confidence in Austin Kinetic’s competencies and skills. Our primary focus will be to answer the question, “how can Austin Kinetic best meet a customer’s information technology needs?” Delivering this answer in a clear, concise proposal allied with competitive pricing will be the key to closing deals.

5.3.1 Sales Forecast

Sales are forecast with an emphasis on project work at the onset. In the first few months, we will be primarily occupied in conducting short-term one-day to one-week projects while building Austin Kinetic’s reputation and brand name. Within the first six months, Austin Kinetic will have signed three annual service contracts, doubling that by the end of the year and each semi-annual period thereafter. Sales contracts will be set period contracts paid by monthly installments.

As a service business, our only direct costs would relate to the time spent by employees in responding to customers’ needs. Our employees are all paid a set salary, and not by hourly billing, so we have no direct costs of sales; these salaries can be found in the Personnel Plan.

Outsourced computer support business plan, strategy and implementation summary chart image

Outsourced computer support business plan, strategy and implementation summary chart image

Sales Forecast
Year 1 Year 2 Year 3 Year 4 Year 5
Sales
Project related $309,600 $705,600 $1,051,200 $1,396,800 $1,742,400
Service contract $30,000 $108,000 $180,000 $252,000 $324,000
Total Sales $339,600 $813,600 $1,231,200 $1,648,800 $2,066,400
Direct Cost of Sales Year 1 Year 2 Year 3 Year 4 Year 5
Technician Salary $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $0 $0 $0 $0 $0

5.4 Milestones

Austin Kinetic will have very simple marketing milestones geared toward industry networking and beginning to build name recognition.

Outsourced computer support business plan, strategy and implementation summary chart image

Milestones
Milestone Start Date End Date Budget Manager Department
Join Austin’s chamber of commerce 2/1/2004 3/1/2004 $0 Adam Marketing
Register with Austin Business Journal 2/1/2004 3/1/2004 $0 Adam Marketing
Obtain first service contract 5/30/2004 6/5/2004 $0 Bob and Dean All
Open Office 2/1/2004 2/1/2005 $3,500 Edgar Operations
Totals $3,500

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Web Plan Summary

Austin Kinetic’s Web presence will not only serve as a medium for the company’s marketing message, but also will serve as an important tool for our customers. Customers will be provided with the ability to manage and monitor their accounts from anywhere that has access to the Internet. Additionally, consultants in the field will be able to track time and work journals through the site as well as develop and print immediate job estimates.

6.1 Website Marketing Strategy

Austin Kinetic’s Web presence will be utilized as a tool to assist the company’s overall marketing strategy. It will serve as a point of reference for information about the company and its services, and in a small part, lend credibility to the marketing message.

6.2 Development Requirements

Austin Kinetic’s site will reside in a two-tier environment. A back-end database will be utilized to manage customer data. The site will be developed with the assistance of a contracted professional developer.

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Management Summary

At the outset, Austin Kinetic will maintain five part-time employees, its founders. These employees will be responsible for all aspects of the business and serve in both managerial as well as technical roles.  As the business grows, additional engineers will be hired. We anticipate that during the fourth year of operation, the original five employees will be free from any technical duties and concentrate solely on their management responsibilities. At this time, Austin Kinetic will look to add a full-time sales and marketing manager as well.

7.1 Personnel Plan

Business permitting, Austin Kinetic will maintain a staff of five engineers through most of FY 2007. A secretary will be hired at the start of FY 2006 to assist with telephone and office management. At the end of FY 2007, an additional engineer will be brought on board as workload dictates. Beginning FY 2008, the original founding members will be transitioned from field work and into management, replaced by additional engineers.  Additionally, a full time marketing/sales representative will be hired. 

Compensation projections were made with annual merit increases of 5% for staff and 15% for the founders. The table also shows a profit sharing plan starting in the second year, based on 5% of the previous year’s net profits. These bonuses will be divided equally among staff members, including owners.

Personnel Plan
Year 1 Year 2 Year 3 Year 4 Year 5
Profit Sharing – 5% net profits $0 $0 $0 $0 $0
Adam Authortisement (CEO) $14,400 $55,000 $63,000 $73,000 $83,600
Edgar Extension (COO) $14,400 $55,000 $63,000 $73,000 $83,600
Cary Curry (CIO) $14,400 $55,000 $63,000 $73,000 $83,600
Dean Dri (CFO) $14,400 $55,000 $63,000 $73,000 $83,600
Bob Borgware (CTO) $14,400 $55,000 $63,000 $73,000 $83,600
Secretary $0 $30,000 $31,500 $33,000 $34,700
Sales/Marketing $0 $0 $0 $70,000 $73,500
Technician-1 $0 $0 $13,750 $55,688 $58,472
Technician-2 $0 $0 $0 $55,000 $57,750
Technician-3 $0 $0 $0 $55,000 $57,750
Technician-4 $0 $0 $0 $55,000 $57,750
Technician-5 $0 $0 $0 $55,000 $57,750
Technician-6 $0 $0 $0 $55,000 $57,750
Technician-7 $0 $0 $0 $45,833 $57,292
Technician-8 $0 $0 $0 $9,167 $55,458
Technician-9 $0 $0 $0 $0 $36,667
Total People 5 6 7 15 16
Total Payroll $72,000 $305,000 $360,250 $853,688 $1,022,839

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Financial Plan

Austin Kinetic will initially grow with project work, beginning to build service contracts from the six month point forward. The company will increase its project work to 2,560 man hours per month and increase its service contracts count by six each year. The initial growth will be financed primarily out of the pockets of its founders. The company will fund all growth from the cash flow of the business, remaining debt-free.

8.1 Important Assumptions

At the onset, the founding members of Austin Kinetic will take on much of the financial burden of running the company. There will be no need for dedicated office space until FY 2006 when we expect to open an office in Austin. Until then, Austin Kinetic will compensate travel-related expenses, if any, incurred in the course of business. The only foreseen recurring expenses will be voice mail services, marketing, insurance, Internet access, and Web presence. The lion’s share of funds will be held by Austin Kinetic to develop cash reserves for future expansion and a business climate buffer.

Customers will be billed on an hourly basis of $120. Engineers will be paid a salary, plus $25 per hour for on-call and overtime. Employees who establish the new project/contract will be paid a 5% bonus of the total project / contract price. Business call time of cell phones will be reimbursed.

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 30.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0

8.2 Break-even Analysis

The table and chart below show our break-even analysis. As a service business, we have no direct cost of sales. Our break-even point ni the first year is therefore equal to the amount needed to cover our operating expenses, including payroll. We will reach break even, in the third month.

Outsourced computer support business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even $7,325
Assumptions:
Average Percent Variable Cost 0%
Estimated Monthly Fixed Cost $7,325

8.3 Projected Profit and Loss

In the first year, we will be based out of the founders’ homes. Adam Authortisement has renovated his garage for use as a meeting space and general office, when we need to get together as a group. Utilities in the first year represent the cost of home high-speed Internet access for all five employees ($45 each per month). This access is necessary for communications between personnel and for file transmission for all project and service work. 

After the first year, it will be more cost-effective and attuned to our growth to rent a space in downtown Austin, where we can consolidate equipment, combine utilities, and have a central location for our work and our secretary. Office space rented beginning FY 2006 is forecast to be $2,500 per month.

The Profit and Loss also includes a provision for charity donations, which we have deemed important to our mission, as well as to marketing and outreach in the community. Starting in the second year, 5% of net profits each will be set aside for charity on an annual basis based upon the previous year’s performance.

After the first month, Marketing and Promotion expenses are set at 5% of the previous month’s and year’s sales.

Outsourced computer support business plan, financial plan chart image

Outsourced computer support business plan, financial plan chart image

Outsourced computer support business plan, financial plan chart image

Outsourced computer support business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $339,600 $813,600 $1,231,200 $1,648,800 $2,066,400
Direct Cost of Sales $0 $0 $0 $0 $0
Other Costs of Sales $0 $0 $0 $0 $0
Total Cost of Sales $0 $0 $0 $0 $0
Gross Margin $339,600 $813,600 $1,231,200 $1,648,800 $2,066,400
Gross Margin % 100.00% 100.00% 100.00% 100.00% 100.00%
Expenses
Payroll $72,000 $305,000 $360,250 $853,688 $1,022,839
Marketing/Promotion $200 $0 $0 $0 $0
Depreciation $0 $714 $2,038 $2,464 $3,540
Rent $0 $45,000 $45,000 $50,000 $50,000
Moving Expenses $5,000 $0 $0 $0 $0
Utilities $2,700 $2,000 $2,500 $2,500 $3,000
Insurance $3,000 $10,000 $10,000 $10,000 $10,000
Payroll Taxes $0 $0 $0 $0 $0
Expensed Computer Equipment $5,000 $15,000 $15,000 $15,000 $15,000
Charity (5% of previous year net profit) $0 $0 $0 $0 $0
Total Operating Expenses $87,900 $377,714 $434,788 $933,652 $1,104,379
Profit Before Interest and Taxes $251,700 $435,886 $796,412 $715,148 $962,021
EBITDA $251,700 $436,600 $798,450 $717,612 $965,561
Interest Expense $0 $0 $0 $0 $0
Taxes Incurred $75,510 $130,766 $238,924 $214,544 $288,606
Net Profit $176,190 $305,120 $557,488 $500,604 $673,415
Net Profit/Sales 51.88% 37.50% 45.28% 30.36% 32.59%

8.4 Projected Cash Flow

We have no sales on credit; all service accounts and projects are paid in advance, in installments. We anticipate no problems with our cash flow. By staying debt free and keeping expenses down, we expect a significant positive cash balance by the end of the first year.

Outsourced computer support business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $339,600 $813,600 $1,231,200 $1,648,800 $2,066,400
Subtotal Cash from Operations $339,600 $813,600 $1,231,200 $1,648,800 $2,066,400
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 $0 $0 $0
Subtotal Cash Received $339,600 $813,600 $1,231,200 $1,648,800 $2,066,400
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $72,000 $305,000 $360,250 $853,688 $1,022,839
Bill Payments $76,482 $201,028 $302,493 $293,637 $360,478
Subtotal Spent on Operations $148,482 $506,028 $662,743 $1,147,325 $1,383,317
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 $0 $5,000 $10,000 $5,000 $10,000
Dividends $0 $0 $0 $0 $0
Subtotal Cash Spent $148,482 $511,028 $672,743 $1,152,325 $1,393,317
Net Cash Flow $191,118 $302,572 $558,457 $496,475 $673,083
Cash Balance $195,668 $498,240 $1,056,697 $1,553,172 $2,226,255

8.5 Projected Balance Sheet

Our Balance Sheet is quite solid. We will build our asset base slowly over the first five years, expensing most of our computer and hardware equipment to offset taxes, since they will need replacing every two to three years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $195,668 $498,240 $1,056,697 $1,553,172 $2,226,255
Other Current Assets $0 $0 $0 $0 $0
Total Current Assets $195,668 $498,240 $1,056,697 $1,553,172 $2,226,255
Long-term Assets
Long-term Assets $0 $5,000 $15,000 $20,000 $30,000
Accumulated Depreciation $0 $714 $2,752 $5,216 $8,756
Total Long-term Assets $0 $4,286 $12,248 $14,784 $21,244
Total Assets $195,668 $502,526 $1,068,945 $1,567,956 $2,247,499
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $14,928 $16,666 $25,596 $24,004 $30,132
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $14,928 $16,666 $25,596 $24,004 $30,132
Long-term Liabilities $0 $0 $0 $0 $0
Total Liabilities $14,928 $16,666 $25,596 $24,004 $30,132
Paid-in Capital $12,100 $12,100 $12,100 $12,100 $12,100
Retained Earnings ($7,550) $168,640 $473,760 $1,031,249 $1,531,852
Earnings $176,190 $305,120 $557,488 $500,604 $673,415
Total Capital $180,740 $485,860 $1,043,349 $1,543,952 $2,217,367
Total Liabilities and Capital $195,668 $502,526 $1,068,945 $1,567,956 $2,247,499
Net Worth $180,740 $485,860 $1,043,349 $1,543,952 $2,217,367

8.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7379.02, Computer Related Consulting Services, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 139.58% 51.33% 33.92% 25.33% 16.45%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 0.00% 0.00% 61.43%
Total Current Assets 100.00% 99.15% 98.85% 99.06% 99.05% 87.72%
Long-term Assets 0.00% 0.85% 1.15% 0.94% 0.95% 12.28%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 7.63% 3.32% 2.39% 1.53% 1.34% 34.35%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 20.47%
Total Liabilities 7.63% 3.32% 2.39% 1.53% 1.34% 54.82%
Net Worth 92.37% 96.68% 97.61% 98.47% 98.66% 45.18%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Selling, General & Administrative Expenses 47.42% 59.67% 73.67% 70.43% 69.19% 76.51%
Advertising Expenses 0.21% 0.09% 0.17% 0.15% 0.17% 1.17%
Profit Before Interest and Taxes 74.12% 53.57% 64.69% 43.37% 46.56% 1.40%
Main Ratios
Current 13.11 29.90 41.28 64.71 73.88 1.85
Quick 13.11 29.90 41.28 64.71 73.88 1.53
Total Debt to Total Assets 7.63% 3.32% 2.39% 1.53% 1.34% 61.46%
Pre-tax Return on Net Worth 139.26% 89.71% 76.33% 46.32% 43.39% 2.74%
Pre-tax Return on Assets 128.64% 86.74% 74.50% 45.61% 42.80% 7.10%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin 51.88% 37.50% 45.28% 30.36% 32.59% n.a
Return on Equity 97.48% 62.80% 53.43% 32.42% 30.37% n.a
Activity Ratios
Accounts Payable Turnover 6.12 12.17 12.17 12.17 12.17 n.a
Payment Days 27 28 25 31 27 n.a
Total Asset Turnover 1.74 1.62 1.15 1.05 0.92 n.a
Debt Ratios
Debt to Net Worth 0.08 0.03 0.02 0.02 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 $180,740 $481,574 $1,031,101 $1,529,168 $2,196,123 n.a
Interest Coverage 0.00 0.00 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.58 0.62 0.87 0.95 1.09 n.a
Current Debt/Total Assets 8% 3% 2% 2% 1% n.a
Acid Test 13.11 29.90 41.28 64.71 73.88 n.a
Sales/Net Worth 1.88 1.67 1.18 1.07 0.93 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a

8.7 Long-term Plan

Austin Kinetic anticipates maintaining a steady profit percentage and plans to build cash reserves to an amount which would cover operating expenses for twelve months should any catastrophic event occur.  This will be a moving target and be recalculated on an annual basis as the business cash flow changes.  There has been no pre-set limit placed upon Austin Kinetic. Its founders see the possibility of expanding the company into a global force ranked equal to today’s top Fortune 500 companies.

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Appendix

Sales Forecast
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales
Project related 0% $2,400 $4,800 $9,600 $19,200 $24,000 $26,400 $31,200 $33,600 $36,000 $38,400 $40,800 $43,200
Service contract 0% $0 $0 $0 $0 $0 $3,000 $3,000 $4,000 $4,000 $5,000 $5,000 $6,000
Total Sales $2,400 $4,800 $9,600 $19,200 $24,000 $29,400 $34,200 $37,600 $40,000 $43,400 $45,800 $49,200
Direct Cost of Sales Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Technician Salary $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Personnel Plan
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Profit Sharing – 5% net profits 5% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Adam Authortisement (CEO) 0% $100 $200 $400 $800 $1,000 $1,250 $1,450 $1,600 $1,700 $1,850 $1,950 $2,100
Edgar Extension (COO) 0% $100 $200 $400 $800 $1,000 $1,250 $1,450 $1,600 $1,700 $1,850 $1,950 $2,100
Cary Curry (CIO) 0% $100 $200 $400 $800 $1,000 $1,250 $1,450 $1,600 $1,700 $1,850 $1,950 $2,100
Dean Dri (CFO) 0% $100 $200 $400 $800 $1,000 $1,250 $1,450 $1,600 $1,700 $1,850 $1,950 $2,100
Bob Borgware (CTO) 0% $100 $200 $400 $800 $1,000 $1,250 $1,450 $1,600 $1,700 $1,850 $1,950 $2,100
Secretary 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales/Marketing 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Technician-1 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Technician-2 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Technician-3 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Technician-4 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Technician-5 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Technician-6 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Technician-7 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Technician-8 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Technician-9 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total People 5 5 5 5 5 5 5 5 5 5 5 5
Total Payroll $500 $1,000 $2,000 $4,000 $5,000 $6,250 $7,250 $8,000 $8,500 $9,250 $9,750 $10,500

General Assumptions
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Plan Month 1 2 3 4 5 6 7 8 9 10 11 12
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0 0 0 0 0 0 0 0

Pro Forma Profit and Loss
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales $2,400 $4,800 $9,600 $19,200 $24,000 $29,400 $34,200 $37,600 $40,000 $43,400 $45,800 $49,200
Direct Cost of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Costs of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Gross Margin $2,400 $4,800 $9,600 $19,200 $24,000 $29,400 $34,200 $37,600 $40,000 $43,400 $45,800 $49,200
Gross Margin % 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Expenses
Payroll $500 $1,000 $2,000 $4,000 $5,000 $6,250 $7,250 $8,000 $8,500 $9,250 $9,750 $10,500
Marketing/Promotion 5% $200 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Rent $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Moving Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $5,000
Utilities $225 $225 $225 $225 $225 $225 $225 $225 $225 $225 $225 $225
Insurance $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250
Payroll Taxes 15% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Expensed Computer Equipment 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $5,000 $0 $0
Charity (5% of previous year net profit) 5% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Operating Expenses $1,175 $1,475 $2,475 $4,475 $5,475 $6,725 $7,725 $8,475 $8,975 $14,725 $10,225 $15,975
Profit Before Interest and Taxes $1,225 $3,325 $7,125 $14,725 $18,525 $22,675 $26,475 $29,125 $31,025 $28,675 $35,575 $33,225
EBITDA $1,225 $3,325 $7,125 $14,725 $18,525 $22,675 $26,475 $29,125 $31,025 $28,675 $35,575 $33,225
Interest Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Taxes Incurred $368 $998 $2,138 $4,418 $5,558 $6,803 $7,943 $8,738 $9,308 $8,603 $10,673 $9,968
Net Profit $858 $2,328 $4,988 $10,308 $12,968 $15,873 $18,533 $20,388 $21,718 $20,073 $24,903 $23,258
Net Profit/Sales 35.73% 48.49% 51.95% 53.68% 54.03% 53.99% 54.19% 54.22% 54.29% 46.25% 54.37% 47.27%

Pro Forma Cash Flow
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Cash Received
Cash from Operations
Cash Sales $2,400 $4,800 $9,600 $19,200 $24,000 $29,400 $34,200 $37,600 $40,000 $43,400 $45,800 $49,200
Subtotal Cash from Operations $2,400 $4,800 $9,600 $19,200 $24,000 $29,400 $34,200 $37,600 $40,000 $43,400 $45,800 $49,200
Additional Cash Received
Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $2,400 $4,800 $9,600 $19,200 $24,000 $29,400 $34,200 $37,600 $40,000 $43,400 $45,800 $49,200
Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Expenditures from Operations
Cash Spending $500 $1,000 $2,000 $4,000 $5,000 $6,250 $7,250 $8,000 $8,500 $9,250 $9,750 $10,500
Bill Payments $35 $1,057 $1,511 $2,689 $4,931 $6,074 $7,316 $8,444 $9,232 $9,926 $13,980 $11,291
Subtotal Spent on Operations $535 $2,057 $3,511 $6,689 $9,931 $12,324 $14,566 $16,444 $17,732 $19,176 $23,730 $21,791
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $535 $2,057 $3,511 $6,689 $9,931 $12,324 $14,566 $16,444 $17,732 $19,176 $23,730 $21,791
Net Cash Flow $1,865 $2,743 $6,090 $12,512 $14,070 $17,076 $19,635 $21,156 $22,269 $24,224 $22,070 $27,409
Cash Balance $6,415 $9,158 $15,248 $27,759 $41,829 $58,905 $78,539 $99,695 $121,964 $146,188 $168,258 $195,668
Pro Forma Balance Sheet
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Assets Starting Balances
Current Assets
Cash $4,550 $6,415 $9,158 $15,248 $27,759 $41,829 $58,905 $78,539 $99,695 $121,964 $146,188 $168,258 $195,668
Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Current Assets $4,550 $6,415 $9,158 $15,248 $27,759 $41,829 $58,905 $78,539 $99,695 $121,964 $146,188 $168,258 $195,668
Long-term Assets
Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Accumulated Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Assets $4,550 $6,415 $9,158 $15,248 $27,759 $41,829 $58,905 $78,539 $99,695 $121,964 $146,188 $168,258 $195,668
Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Current Liabilities
Accounts Payable $0 $1,008 $1,423 $2,525 $4,729 $5,831 $7,035 $8,137 $8,905 $9,456 $13,608 $10,776 $14,928
Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $0 $1,008 $1,423 $2,525 $4,729 $5,831 $7,035 $8,137 $8,905 $9,456 $13,608 $10,776 $14,928
Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Liabilities $0 $1,008 $1,423 $2,525 $4,729 $5,831 $7,035 $8,137 $8,905 $9,456 $13,608 $10,776 $14,928
Paid-in Capital $12,100 $12,100 $12,100 $12,100 $12,100 $12,100 $12,100 $12,100 $12,100 $12,100 $12,100 $12,100 $12,100
Retained Earnings ($7,550) ($7,550) ($7,550) ($7,550) ($7,550) ($7,550) ($7,550) ($7,550) ($7,550) ($7,550) ($7,550) ($7,550) ($7,550)
Earnings $0 $858 $3,185 $8,173 $18,480 $31,448 $47,320 $65,853 $86,240 $107,958 $128,030 $152,933 $176,190
Total Capital $4,550 $5,408 $7,735 $12,723 $23,030 $35,998 $51,870 $70,403 $90,790 $112,508 $132,580 $157,483 $180,740
Total Liabilities and Capital $4,550 $6,415 $9,158 $15,248 $27,759 $41,829 $58,905 $78,539 $99,695 $121,964 $146,188 $168,258 $195,668
Net Worth $4,550 $5,408 $7,735 $12,723 $23,030 $35,998 $51,870 $70,403 $90,790 $112,508 $132,580 $157,483 $180,740

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