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KnaelHaed ASPware, Inc.

Executive Summary

Despite the prolonged slide in the industry, the housing segment in the US construction market gained a record of $550.14 billion last year. This sector is also showing a steady growth for the next two years. Among the top revenue generating sectors in the segment is new single family housing construction, which comprised 67% of total residential construction in the US.

Over the years, the business model in the industry had shifted toward greater more cost efficiency. Low entry barriers (other than the need to obtain state-based licenses and registration) in the industry had spawned more service providers in the industry. However, competition is largely based on reputation and proven performance as many new competitors find it difficult to quickly establish a foothold in the market.

The existing firms have several advantages relative to new entrants. They:

  • Have access to a pool of skilled subcontractors.
  • Have ongoing arrangements with materials suppliers.
  • Have ongoing arrangements with financial institutions and property developers.
  • Can display completed examples of their work in a local market and leverage off “word-of-mouth” referrals.

KnaelHaed ASPware (KnaelHaed) is a provider of Web-based vertical market software applications. The DigitalSuspenders is an online software solution to be offered by KnaelHaed ASPware in support of the building construction process.

The Problem

The construction industry lags behind other industries in research and development (R&D) investment. R&D investments for mature US companies are typically around 3.5% of sales. For some industries such as aerospace that number can be 7% to 14%. However, the construction industry only reinvests 0.5% of sales. The reasons for the low reinvestment vary, but are generally due to costs and complexity. Most construction firms are small (less than 10 employees) and operate on thin profit margins. So, technology spending is often seen as an unaffordable luxury.

The Solution

The DigitalSuspenders will be an integrated family of Web-based software applications that support the entire building lifecycle from conception, to construction, to facility management. The suite will support the needs of small contractors by offering: online collaboration, digital takeoff, estimating, and project and property management capabilities, all presented in a format that’s easy to understand and use.

The Market Size

The home construction industry is comprised of 163,703 establishments and employed 796,880 persons according to the most recent Economic Census. The industry had grown in the last couple of years to a record 175,000 establishments, while the commercial and institutional building industry is comprised of 34,588 establishments in the US according to the most recent Economic Census. The construction industry accounts for approximately 8% of US GDP.

Start-up Costs

KnaelHaed ASPware anticipates initially requiring $120,000 to complete the beta prototype of the DigitalSuspenders, provide for legal and infrastructure expenses related to start up and to cultivate potential customers. To finance the start up we intend to seek initial capital from angel investors and corporate partners.

Potential Payoff

KnaelHaed ASPware anticipates break-even within two years. In addition to our product sales, we expect royalty revenue from licensing our position sensing and software technology. Within three to five years, KnaelHaed ASPware anticipates an IPO or sale of the company to fuel further growth and to offer liquidity to investors.

Management Team

Paul Peen, the current President & Chief Executive Officer, has over 20 years of experience in commercial software development, including stints at Microsoft and Expedia.com.

Leveraging connectivity, interactivity and speed, KnaelHaed ASPware is the first of its kind offering both efficiency and cost saving strategy to builders and subcontractors. KnaelHaed offers competitive pricing on solutions by outsourcing. KnaelHaed ASPware is committed to the creation of new ideas in the development of its model that is useful in accomplishing clients’ objectives. Together, the owners’ passion and accumulated field work has made KnaelHaed ASPware more than “just-another-outsourcing-hub”, but a catalyst for the next e-commerce re-invention.

Asp software developer business plan, executive summary chart image

1.1 Objectives

The mission of KnaelHaed ASPware is to provide a medium for custom builders, general contractors, design builders, engineer-contractors, joint-venture contractors, and turnkey contractors to outsource their works with greater cost saving efficiency.

This model is positioned to be a “disruptive force” against most of the construction software companies that charge several thousand dollars for each copy of their software. KnaelHaed ASPware’s model is to offer a subset of these capabilities for free. Utilizing the open-source business model, KnaelHaed ASPware’s ideal mission is to provide better solutions for all stakeholders.

1.2 Mission

Our target markets are those builders and subcontractors seeking to benefit from outsourcing. The industry today is supplied independently by software companies whose products are quite costly for small and medium sized users. Considering that the typical home builders construct only about a dozen homes per year, there are only a few companies that may then be considered large enough, with sufficient financial resources to pay for premium licensing of a software package.

We estimate that approximately 60% of the total US market would fall within the criteria of small and medium builders, equating to 118,980 establishments. Our focus will be directed to these establishments that are prioritizing on cost efficiency and precise results.

1.3 Keys to Success

We have targeted the construction market for several reasons. As a $787 billion industry (both residential and commercial), it offers significant growth potential. The annual unit growth of the number of establishments in the housing sector averaged 6.45% and commercial/institutional sector 0.46% last year.

Despite the low growth in the construction industry, it still remains a very fragmented market. Within the US alone there are over 200,000 establishments (both housing and commercial/institutional) on record.

The keys to our success are:

    • Building and maintaining strategic alliances with our software vendors and other industry related business partners
    • Adopting a customer- and market-focused sales and marketing paradigm
    • Managing the business by implementing, and consistently measuring and adjusting the fundamentals of a Balanced Scorecard:

 

    • Employee Learning and Growth Goals Vs. Results
    • Financial Goals Vs. Results
    • Internal Business Process Goals Vs. Results
    • Customer Satisfaction Goals Vs. Results
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Company Summary

KnaelHaed ASPware is a serviced website that supports the creation and dissemination of electronic construction documents, such as plans, estimates, schedules, budgets and proposals. It is a medium for connecting builders, subcontractors, and building owners to manage and collaborate on their projects. The production of these documents will be done using off-the-shelf industry leading software applications, utilized by outsourced workers overseas, with the finished products posted to a secure website. The overall idea is to help builders reduce labor costs and streamline operations.

KnaelHaed ASPware will give away free 3D building models in an effort to increase advantages in attracting builders to the site and encouraging the use of 3D building designs. The building information will allow us to offer other related knowledge services such as estimating, proposals, budgets, and facilities maintenance. The facilities maintenance functionality will be like other CAFM (Computer Aided Facilities Maintenance) software packages, except that it will be online and integrated with KnaelHaed ASPware’s 3D building models. KnaelHaed ASPware’s service will not be restricted to the home builder market but marketed to commercial builders as well.

2.1 Company Ownership

KnaelHaed ASPware is the brainchild of Mr. Paul Peen, incorporated as a limited liability company and is headquartered in Bigburg-by-Bay. The Company shareholders are founder, Paul Peen and selected investors. Mr. Peen has an extensive background in software development with more than 25 years of experience in the software industry.

2.2 Start-up Summary

Total start-up requirements (including legal costs, logo design, stationery and related expenses) comes to $120,710. The start-up costs are to be financed partially by the direct owner investment of $10,000 and financing in the amount of $110,710. The details are included in the following table and chart.

Asp software developer business plan, company summary chart image

Start-up
Requirements
Start-up Expenses
Legal $1,000
Stationery etc. $800
Rent $4,800
Software $21,000
Server and Hardware $23,000
Sales Campaign $5,000
Logo/Brand Development $1,000
Web Design $4,000
Domain/Hosting $110
Total Start-up Expenses $60,710
Start-up Assets
Cash Required $60,000
Other Current Assets $0
Long-term Assets $0
Total Assets $60,000
Total Requirements $120,710

2.3 Company Locations and Facilities

KnaelHaed ASPware will be based in Bigburg-by-Bay. The office lease average is $6 per square foot in our area, and the Company will occupy approximately 800 sq. feet of space for day-to-day operations. There will be four management employees covering Web Maintenance and General Administration.

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Products and Services

KnaelHaed ASPware’s DigitalSuspenders package will offer services to produce construction documents at low cost as well as a medium for its business actors to collaborate on both housing and commercial type of projects. The business will combine aspects of the open source software with a two-tiered site membership. The entry level is free, subsidized by targeted advertisement utilizing Ad Sense by Google and paid members. However, each visitors are required to fill out registration to acquire their user names and passwords to access the site. The purpose of a free access is to “tease” and encourage visitors to eventually pay for the membership.

Paying members will enjoy more benefits in using the services. The concept is lately dubbed as software-on-demands, a chopped version of an open source application for various type of members, thus members do not have to pay for the applications they do not need for their projects. The software will be cheaper and simpler in the deployment, as well as easy support.

The products that KnaelHaed ASPware’s DigitalSuspenders package will deliver include:

  • Rough 3D building model.
  • Conceptual estimate (builder).
  • Actual estimate (subcontractor, builder).
  • Schedule (subcontractor, builder).
  • Budget (subcontractor, builder).
  • Proposal (subcontractor).
  • Tablet PC software for accessing building information (subcontractor, builder).
  • Detailed 3D building model (builder, owner).
  • Facilities maintenance functionality (owner).

3.1 Competitive Comparison

KnaelHaed ASPware will be facing few direct competitors in the industry and since it will be the first to offer the combination of functionality and connectivity, KnaelHaed ASPware’s success will surely be quickly copied by it competitors.

  • DreamHouse.com (www.dreamhouse.com)

Their site allows non-registered users to freely browse the portfolios of architects and builders who offer their building plans for sale. It is a more of a classified ad site, where the revenue generated through listings of vendors and commission on plan purchases by home owners. The site is interactive, where future home owners could browse plans made by vendors. In addition to the core referral service, DreamHouse.com provides answers to future home owners such as where to obtain the financing, and so on. The Company also offers 24/7 customer service available through toll-free phone numbers.

  • Builder Management Technology (www.buildermt.com/vdsee.html)

Builder Management Technology (BuilderMT) only offers 3D models and walkthroughs to large builders who can afford a $5,000 price tag. There is one feature, called ProDatabase, designed to get builders up and running quickly. The database includes General Ledger, Job Cost Accounting, Purchasing, and Scheduling data that can be easily implemented. BuilderMT also operates a Web-based “Virtual Design Center” (VDSee), so that builders can offer anyone access to the site. VDSee offers fully scaled 3D images of whole-houses, house exteriors, or specific rooms that users can “walk through” and fill with selected appliances from catalogs provided by partner vendors. Similar to DreamHouse.com, BuilderMT is geared strictly to the home builder market. No bid capability, the site acts only as a referral to business partners in the area.

  • The BlueBook (www.thebluebook.com)

The site provides easy access to continually updated information for each of The Blue Book’s regional editions (printed). Not yet online, but soon the services will be made available to Internet users, where construction buyers and sellers will also have free access to online bidding and procurement system. Revenue is generated from listings.

3.2 Sales Literature

This business will begin with a general corporate brochure establishing offered services. This brochure will be developed as part of the start-up expenses or sales campaign and distributed to a list of local builders and subcontractors as a direct mailing strategy to “pull” users into the site.

Literature and mailing for the initial market forums will be very important, with the need to establish a high-quality look and feel in order to create a trustworthy sense of professionalism.

3.3 Business Process

The big idea of KnaelHaed ASPware is the next generation construction blueprint that will be implemented in a phased manner:

  1. 3D models for builders (residential initially) at lower price point than competitors’ software (average at $5,000 per model). KnaelHaed ASPware offers at $1,000 per model. This will be used mainly as a PR and marketing tool to attract consumers and a service differentiator for the builders.
  2. Get builders to realize that the 3D building model alleviates the need to distribute 2D plans to subcontractors from which takeoffs will be done to get dimensions and quantities. The 3D building model already has quantities and dimensions. So, what’s needed is a way for the builder to share building model information. To support this collaboration between builders and their subcontractors, KnaelHaed ASPware will create an online plan room with software tools that allow viewing of the 3D model and extraction of quantities and dimensions so that a sub can then estimate and bid on the job. Access to the plan room will be free, but to use it builders and subs will need to be members, and have 3D models rendered and on-file with KnaelHaed’s database.
  3. Get builders and subcontractors to use KnaelHaed ASPware’s estimating services which will offer faster turnaround and cheaper prices. This will be a paid service and offered at a substantial discount to the market rate due to the use of offshore estimators.
  4. Offer additional related knowledge services. For example, once KnaelHaed ASPware has an estimate, then the system can create: budgets, schedules and proposals. This will also be a paid service with the work done by offshore knowledge workers.
  5. Offer a site management solution to builders that supports building project information in the field. This would entail the use of ruggedized tablet PCs loaded with software that KnaelHaed ASPware will develop to: download building project information from the website to the tablet PC and allow on-site access to 3D models, schedules, and vendor data. Differentiating features:
    • 3D views of the building linked to vendor, subcontract and schedule data;
    • GPS-enabled so that the building viewers are standing in front of is the building viewers see on your screen. This will be a paid product/service that will be first offered to large builders. KnaelHaed ASPware will also use their input to help improve the product.

  6. Offer facilities management software capabilities online. When a builder hands over a commercial building to the owner he also gives him a copy of the 3D building model. We will offer to the property manager the service to update the building model to “as built” so that the version of the model they have exactly matches the actual building. We will then offer, on our website, facilities management functionality tied to the 3D model. We will charge to update 3D models. Use of the site will be restricted to property managers who are site members (we need to know exactly who they are). We will offer our services to property managers who only have an existing building but only have 2D plans. We will create a 3D model and put it up on our site and give them access to the model and to the facilities management application.
  7. Offer 3D models of building plans for sale. So, an architect who has plans for sale would post his 2D plan to the site and we would render it in 3D and make it available for consumers/builders to purchase. We would want to have some kind of incentive to:
    • have has many plans available as possible;
    • encourage architects to submit their plans in 3D;
    • encourage builders working from these plans to use our site.

  8. Automate back office manual work (e.g. estimating, scheduling, etc.) to the greatest degree possible to reduce costs further, improve turnaround times and allow the business to scale.

KnaelHaed ASPware offers a tiered pricing structure for the website starting at free. Then it will charge for customization and make those customized features only available to those that have paid for them. There will be different memberships and pricing structures for our various users: builders, subcontractors, property managers and consumers.

3.4 Technology

New technology has changed almost everything about the distribution of software today. The ASP (Application Service Provider) model makes it easier for construction software vendors to sell and get customers up and running, lending itself to a more scalable and profitable business model. KnaelHaed ASPware intends to become the leader and the most creative provider of Web-based software applications in the construction market. The Company will do this by developing an innovative and progressive development and management team. KnaelHaed ASPware will also accomplish the goal by using clients’ input to further develop the products and services.

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Market Analysis Summary

Demand for family housing construction is subject to both short-term and long-term influences. Short-term influences include factors such as movements in interest rates, housing affordability and stimulatory government policy. The long-term influences include trends in population growth and settlement, the aging of existing stock and buyer preferences between single-family and multi-family style housing.

In the commercial sectors, the demand factors are vary according to the type of buildings, for instance schools, hospitals, museums, etc. Current economic conditions and the level of investor confidence play an important role in determining the overall level of activity in this industry.

4.1 Market Segmentation

Housing Construction

Demand for family housing construction is subject to both short-term and long-term influences. Short-term influences include factors such as movements in interest rates, housing affordability and stimulatory government policy. The long-term influences include trends in population growth and settlement, the aging of existing stock and buyer preferences between single-family and multi-family style housing.

Short-term Determinants

The impact of current economic conditions on consumer confidence. Consumers must be confident of job security and future household income to commit to buying a home. Housing affordability is the cost of purchasing a house relative to current household income and is a key factor driving the housing investment cycle. The affordability ratio (as a measure of the average size of the loan over the current level of pre-tax household income) is directly influenced by the level of mortgage interest rates (availability and price of finance), and the price of land, labor and materials.

The prevailing cost of renting residential accommodation relative to the cost of purchasing (i.e., mortgage repayments) impacts on the short-term demand for housing. The impact of medium-term government policy on housing investment include: local government zoning and conveyancing regulations and costs; government grants and subsidies to home buyers, tax relief or mortgage insurance subsidization; and changes in the tax treatment of tax effective investments.

Approximately 6% of the total value of residential building construction in the US is funded by the public sector, and this principally involves the construction of multi-family and single-family housing for defense personnel, public servants and special welfare recipients (e.g., disability accommodation and veterans housing). Fluctuations in public budget allocations towards housing construction mainly result from variations in the fiscal stance (deficit/surplus) and the stage of the economic cycle.

Natural disasters, such as the damage caused by Hurricane Katrina in the gulf states in August 2005, and damage to property from brush fires and earthquakes, can stimulate short-term demand for new housing construction irrespective of the underlying trends in housing demand.

Long-term Underlying Demand

Long-term demographic trends indicate the required minimum stock of housing, but not necessarily the value. Demographic factors influencing single-family housing demand include: population growth rates, trends in net migration, population dispersion, the age composition of the population and the rate of household formation have a profound influence on the long-term demand for housing stock. Trends in household size and long-term preferences in the size of homes influences the demand for single-family housing construction relative to smaller multi-family housing units.

Long-term trends in income growth and distribution and general economic development. The aging and demolition of existing housing stock underpins the long-term demand for replacement stock.

Commercial and Institutional Construction

In the commercial sectors, the demand factors vary according to the type of buildings, for instance schools, hospitals, museums, etc. However, current economic conditions and the level of investor confidence play an important role in determining the overall level of activity in this industry.

Key economic factors influencing investment decisions include:

  • The prevailing level of interest rates and availability of finance.
  • Current and expected rates of general economic growth.
  • Expected yield on investment (both long-term rental yield and speculative capital gains).
  • Taxation treatment of building investment compared with other types of assets.
  • Vacancy rates of existing building stock.
  • The rate of replacement of aging building stock.
  • Federal and State government fiscal positions and capacity to raise debt.
  • Trends in the public/private sector mix in the provision of health and educational services.
  • Changes in the structure, distribution and size of the population.

Demand Determinants in Commercial Building Segment

Office construction is principally determined by: growth in the service sector workforce; growth in foreign investment inflow; and developer speculative activity. The average age of commercial office stock is an important determinant of demand for the addition of new stock or the upgrade of existing stock. The impact of new technologies in the areas of IT and communications has the impact of more rapidly aging building stock and thereby increasing demand for premium stock.

Retail building construction (e.g., retail stores, shopping malls, gas stations, etc.) is principally determined by: shopping preferences/patterns (i.e., choice between boutiques and complexes); population growth rates and catchment areas; and patterns in consumption expenditure.

Hotel construction is determined by: growth in international and domestic tourism; major cultural, sporting entertainment, business events; growth in casino licenses; and existing supply of accommodation.

Other commercial building construction is determined by: population growth and urban spread; tourism growth and growth in leisure time; and major cultural and sporting events (e.g., Salt Lake City 2002 Winter Olympics); popularity of new sports and recreations (e.g., soccer, beach volleyball).

Demand Determinants in the Institutional Building Segment

Governments occasionally adopt anti-cyclical spending measures (e.g., expansionary fiscal policy) in order to stimulate stronger economic growth, however the growing pressure on governments to maintain a balanced budget position limits their capacity to use anti-cyclical spending.

Demand for education facilities construction (e.g., schools and university campuses) is principally influenced by: public sector capital expenditure growth; growth in demand for public and private education and child care services; demographic factors such as the growth in ‘school age’ population, geographic distribution, household formation rates; level of child care subsidies; parent labor force participation rates (determines child care demand); the size of average class/teacher ratio; and the inner urban renewal of existing building stock.

Demand for health facilities construction (e.g., hospitals, community health centers, day clinics, and nursing homes, etc.) is determined by: public fixed capital expenditure growth; health insurance arrangements; population growth, dispersion and age distribution; existing supply of hospital beds per capita; and the situation with hospital waiting lists.

Demand for religious building construction is determined by: population growth and dispersion; social and cultural trends; and trends in the inflow of migrants from less represented religious backgrounds (e.g., Muslim, Hindu, etc.).

Demand for barracks, aircraft hangars and other military buildings is determined by: defense budgets; armed service intake trends; and defense planning.

Demand for specialist public services buildings such as postal distribution centers, currency mints and utility distribution installations is determined by: government budget policies and planning issues; and the growth and distribution of population.

Demand for construction of public access buildings such as law courts, libraries, museums and art galleries is determined by: the aging and capacities of existing stock; budgetary position; private philanthropy such as endowments/bequests to the arts; and the timing of special events (e.g., Salt Lake Winter Olympics).

Demand for correctional buildings and detention centers is determined by: budget policies and planning issues; growth in the privatization of the delivery of services; and growth in the prison population.

Asp software developer business plan, market analysis summary chart image

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
House Builders 6% 163,703 174,262 185,502 197,467 210,204 6.45%
Commercial and Institutional Builders 0% 34,588 34,747 34,907 35,068 35,229 0.46%
Total 5.48% 198,291 209,009 220,409 232,535 245,433 5.48%

4.2 Industry Analysis

The value of construction in place in the total US residential market climbed to a record $550.14 billion in 2004; comprised of new single-family house construction ($370.23 billion), new multi-family house construction ($45.80 billion), plus the value of improvements to existing houses ($134.11 billion). Meanwhile the commercial and institutional construction market reached the value of $237 billion in 2004.

The home construction industry was comprised of 163,703 establishments and employed 796,880 persons according to the 2002 Economic Census. The industry has grown in last couple of years to a record 175,000 establishments, employing approximately 920,000 people in 2004.

The commercial and institutional building industry was comprised of 34,588 establishments in the US according to the 2002 Economic Census, and employed a total of 673,318 people. However, in contrast to its housing counterpart, in a recent estimate conducted by IBISWorld and Euromonitor, the employment for commercial and institutional building industry had decreased marginally over the past years due to weak demand in downstream building markets to 655,000 people in 34,750 establishments in 2004. The major categories for commercial and institutional building industry are divided as follow:

  • Educational facilities (28.6%)
  • Retail stores and commercial warehouses (24.6%)
  • Offices (16.5%)
  • Healthcare facilities (12.3%)
  • Amusement and recreation facilities (7.4%)
  • Hotels (4.4%)
  • Public safety facilities (3.2%)
  • Religious buildings (3%)

4.2.1 Business Participants

The market has expressed the need to have more access to suppliers and buyers in completing each of their projects. To gain this, the industry needs a more interactive and real-time medium serving as a hub connecting both subcontractors and builders.

This has manifested itself in the form of greater visibility and timely event notice so the appropriate corrective or scheduled actions can be implemented, to ensure an efficient project management and supply chain.

4.2.2 Distributing a Service

Small to medium builders are accustomed to cooperating with subcontractors who they have already employed in past projects. The each expect fair price in their project, as it is mainly a trust-based business relationship.

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Strategy and Implementation Summary

KnaelHaed ASPware has clearly defined the target market and differentiated itself by offering a unique solution to the industry today. KnaelHaed ASPware’s sales and marketing strategy will be a combination of targeted mass marketing techniques as well as a focused direct sales team approach. Reasonable sales targets have been established with an implementation plan designed to ensure the goals set forth below are achieved.

5.1 Strategy Pyramid

For placing emphasis on service and support, KnaelHaed ASPware’s main tactics are networking expertise, excellent training, and developing own network administrative system. 

Our second strategy is emphasizing relationships. The tactics are marketing the company (instead of the products and services) — the vision of the company — to subcontractors and builders to use the service.

5.2 Value Proposition

Software delivered as a service improves the customer experience by making a product easier to use for a customer and evolving it as quickly as possible to meet the customer’s needs. Software delivered as a service enables that and packaged software does not.

Customers are tired of buying expensive software products with large up-front licenses; expensive hardware to purchase, manage, and maintain; followed by expensive professional services to get the product up and running. From this backdrop, it is easy to see why reducing complexity and simplifying technology for customers is a big driver to more rapid adoption of products. It is also easy to see why reducing complexity for the customer also helps reduce complexity for the vendor, lowering the friction to sell and deliver its product. This means a more capital efficient business model, one which would hopefully scale much quicker and cost less to build product, sell, and support customers.

For the software vendor, it makes it:

  1. Easier to sell
    • Shorter sales cycle-do not have to test extensively in a customer’s environment.
    • Lends itself to telesales, can demo over phone and Web, do not need a huge sales infrastructure to close deals (just need quote bearing reps without a huge staff of sales engineers and professional services guys to get the job done).
    • Not a capital expense, usually sold as monthly or annual subscription which can many times be taken out of business budget as opposed to IT budget.

  2. Easier to install
    • No messy installation process, long testing process, or even waiting for hardware to be delivered to customer.
    • Can leave a customer and simply point them to a URL, train them over the phone, and get them up and running.
    • All of this means that the business can scale rapidly.

  3. Cheaper to support
    • Browser-based delivery and richer client interfaces like DHTML make it easy to use for the customer=less training=less customer support costs.

  4. Easier to integrate
    • Standard APIs make it easier for software delivered as a service to integrate disparate systems.
    • Once again, reduces costs to deliver product to customers and also removes obstacles to getting customers.

  5. Cheaper to build
    • Versus a few years ago, bandwidth, storage, servers, and software are much cheaper.
    • Think Linux, Intel boxes, cheap bandwidth, commodity software stacks, and smarter entrepreneurs changing the economics of building and delivering software as a service.
    • The economics speak for themselves.

5.3 Marketing Strategy

The first strategic move for KnaelHaed ASPware must be to create its website and identity. An amount of $5,000 has been set aside for this image boosting purpose. The site must have all the features running as planned to maintain the credibility of the business.

It is essential that care be taken to cause the most important search engines to find KnaelHaed ASPware’s website using a variety of keywords. While the above work is being done, KnaelHaed ASPware must immediately take steps to enter the home construction industry. With the largest growth in the segment, home construction market is surely ready to take advantage of the system and services provided by KnaelHaed ASPware. From there, the commercial and institutional segment will follow.

5.3.1 Pricing Strategy

KnaelHaed ASPware’s pricing strategy will be to enter the market with our products and services set much lower than the competitors’ current offerings. Membership fees for subcontractors and builders are $50 per month, and instead of charging $5,000 per 3D model, KnaelHaed ASPware offer $1,000 for a customized 3D model job.

5.3.2 Marketing Programs

KnaelHaed ASPware’s marketing program will position the company as both an ASP and a service hub to the construction industry in general. The service will be marketed to builders and subcontractors that wish to outsource some of their work to be more cost efficient. Visitors to KnaelHaed ASPware’s website will first be “lured” to try the service for free by filling in the main info of who they are, what company they are with, how to get in touch with them, and so on. There will be limitations on KnaelHaed’s free service, and these visitors will, at some point, desire to become members in order to enjoy the benefits of the full service.

5.3.3 Positioning Statement

KnaelHaed ASPware is a “referral plus” service, meaning that the company acts as a hub for builders and subcontractors to interact and collaborate. In the meantime, KnaelHaed ASPware itself is a producing entity, where it offers various products to complement the relationships of the clients.

5.4 Sales Strategy

KnaelHaed ASPware is targeting both home and commercial segments of the construction industry that currently do not have enough resources and networking capabilities to better implement their projects. Sales to these market segments will be conducted through strategic partnership with local subcontractors in all counties of the US.

KnaelHaed will develop a secondary market segment comprised of large corporate users for more premium services following the success of the initial launch.

5.4.1 Sales Forecast

The table below outlines the sales forecast and cost of goods sold. The forecast is based on reasonable sales projections within this very large market.

Asp software developer business plan, strategy and implementation summary chart image

Asp software developer business plan, strategy and implementation summary chart image

Sales Forecast
Year 1 Year 2 Year 3
Unit Sales
Paid Membership 37,400 40,392 43,623
Customized Model 1,129 1,200 1,400
Advertisement 67,300 70,900 72,000
Total Unit Sales 105,829 112,492 117,023
Unit Prices Year 1 Year 2 Year 3
Paid Membership $50.00 $50.00 $50.00
Customized Model $1,000.00 $1,000.00 $1,000.00
Advertisement $1.32 $1.32 $1.32
Sales
Paid Membership $1,870,000 $2,019,600 $2,181,150
Customized Model $1,129,000 $1,200,000 $1,400,000
Advertisement $88,836 $93,588 $95,040
Total Sales $3,087,836 $3,313,188 $3,676,190
Direct Unit Costs Year 1 Year 2 Year 3
Paid Membership $10.00 $10.00 $10.00
Customized Model $200.00 $600.00 $600.00
Advertisement $0.26 $0.26 $0.26
Direct Cost of Sales
Paid Membership $374,000 $403,920 $436,230
Customized Model $225,800 $720,000 $840,000
Advertisement $17,767 $18,718 $19,008
Subtotal Direct Cost of Sales $617,567 $1,142,638 $1,295,238

5.5 Strategic Alliances

KnaelHaed ASPware will establish strategic partnerships with network service and infrastructure providers that can provide high performance access to network facilities. The focus of KnaelHaed ASPware’s strategic alliances is on start-up software houses that are currently targeting the industry, as well as offshore companies specializing in outsourcing call centers and knowledge workers. These offshore companies to be named later.

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Management Summary

KnaelHaed ASPware will have a limited management structure and using the power and flexibility of the World Wide Web, outsource and automate a great deal of the day-to-day work.

7.1 Management Team

Paul Peen – Founder and President

Mr. Peen has an extensive background in software development with more than 25 years of experience in the software industry.

Raef Terre – Vice-president

Mr. Terre has spent many years in the construction industry beginning as a framing carpenter, and working his way up to site foreman and job manager for a major general contractor.

7.2 Management Team Gaps

We believe we have a good team for covering the main points of the business plan. Key members have the experience and knowledge to manage and grow the business, and are highly motivated.

The obvious management gap is a plan to fill the general manager’s position at some point in the future. As the company grows, KnaelHaed ASPware will seek out additional talent in all operational areas.

7.3 Personnel Plan

There will be less than ten employees of KnaelHaed ASPware. The growth of the company will be determined by how accurately and efficiently the company is able to implement the facets of this business plan.

Each member of the KnaelHaed ASPware team is highly valued; everyone is expected to have opinions, as it is a team that will make this company excel. It is the mission of the company to employ people who are committed to a high standard of excellence, who thrive on a team atmosphere, and who have outstanding customer service skills. This idealism is represented by the current staff, and will continue to be the guideline by which new team members are hired.

Personnel Plan
Year 1 Year 2 Year 3
President $65,600 $78,720 $94,464
Vice-President $48,000 $53,000 $58,000
General Administrative Assistant $32,400 $36,250 $39,500
IT Staff 1 $27,600 $30,300 $33,260
IT Staff 2 $27,600 $30,300 $33,260
Total People 5 5 5
Total Payroll $201,200 $228,570 $258,484

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Financial Plan

The following subtopics help present the financial plan for KnaelHaed ASPware.

8.1 Start-up Funding

Our start-up costs of $120,710 are to be financed by direct owner investment and investors’. The details are shown in the Start-up Funding Table below.

Start-up Funding
Start-up Expenses to Fund $60,710
Start-up Assets to Fund $60,000
Total Funding Required $120,710
Assets
Non-cash Assets from Start-up $0
Cash Requirements from Start-up $60,000
Additional Cash Raised $0
Cash Balance on Starting Date $60,000
Total Assets $60,000
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
Owner $10,000
Investor $60,710
Additional Investment Requirement $50,000
Total Planned Investment $120,710
Loss at Start-up (Start-up Expenses) ($60,710)
Total Capital $60,000
Total Capital and Liabilities $60,000
Total Funding $120,710

8.2 The Investment Offering

We plan to raise $120,710 in initial investment (our Seed round) by offering investors 60% of KnaelHaed ASPware. The founder will retain control of the remaining 40% through the first two years of operations. Additional investment may be required to fund expansion plans in the 3rd year of operations. Please review the Start-up Funding section of the Financial Plan for a complete breakdown of KnaelHaed ASPware’s start-up requirements and the start-up funding plan.

Investment Offering
Proposed Year: 2006 2007 2008 2011
Valuation, Investment, Shares
Investment Amount $1,100,710 $0 $0
Equity Share Offering Percentage 60.00% 0.00% 0.00%
Valuation $1,834,517 $0 $0 $860,000
Investor Exit Payout $516,000 $0 $0
Investor Years Until Exit 5 4 3
Investor IRR -14.06% 0.00% 0.00%
Share Ownership Year 2006 Year 2007 Year 2008 Year 2011
Founders’ Shares 10,000 10,000 10,000 10,000
Stock Split Multiple 0 0 0
Stock Options Issued 0 0 0 0
Investor Shares Issued 15,000 0 0
Price per share $73.38 $0.00 $0.00 $34.40
Options Holders’ Shares 0 0 0 0
Year 2006 Investors’ Shares 15,000 15,000 15,000 15,000
Year 2007 Investors’ Shares 0 0 0
Year 2008 Investors’ Shares 0 0
Total Shares Outstanding 25,000 25,000 25,000 25,000
Equity Ownership Percentage Year 2006 Year 2007 Year 2008 Year 2011
Founders’ Equity 40.00% 40.00% 40.00% 40.00%
Option Holders’ Equity 0.00% 0.00% 0.00% 0.00%
Year 2006 Investors’ Equity 60.00% 60.00% 60.00% 60.00%
Year 2007 Investors’ Equity 0.00% 0.00% 0.00%
Year 2008 Investors’ Equity 0.00% 0.00%
Total Equity 100.00% 100.00% 100.00% 100.00%
Investors’ Equity 60.00% 60.00% 60.00% 60.00%
Founders’ & Employees’ Equity 40.00% 40.00% 40.00% 40.00%

8.3 Key Financial Indicators

As shown in the Benchmarks chart below, our key financial indicators are:

  • Projected Sales: Projections are based on actual past performance, and are conservative. We will increase sales at an average rate of 8% per year.
  • Gross Margins: Average gross margins are based on 20% COGS of all FOSS services.
  • Operating Expenses: Operating expenses are based on providing our small team with above average wages and benefits, and providing superior performance.
Asp software developer business plan, financial plan chart image

8.4 Projected Cash Flow

The following chart and table show the project cash flow for KnaelHaed ASPware.

Asp software developer business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $3,087,836 $3,313,188 $3,676,190
Subtotal Cash from Operations $3,087,836 $3,313,188 $3,676,190
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 $0 $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 $3,087,836 $3,313,188 $3,676,190
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $201,200 $228,570 $258,484
Bill Payments $1,188,059 $1,863,445 $1,992,763
Subtotal Spent on Operations $1,389,259 $2,092,015 $2,251,247
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 $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $200,000 $400,000
Subtotal Cash Spent $1,389,259 $2,292,015 $2,651,247
Net Cash Flow $1,698,577 $1,021,173 $1,024,943
Cash Balance $1,758,577 $2,779,750 $3,804,692

8.5 Break-even Analysis

For our break-even analysis, we assume running costs which include our full payroll, rent, and utilities, and an estimation of other running costs. Payroll alone, at our present run rate, is only about $16,767 per month.

The chart shows the average revenue we need each month to break even, according to these assumptions.

Asp software developer business plan, financial plan chart image

Break-even Analysis
Monthly Units Break-even 1,232
Monthly Revenue Break-even $35,952
Assumptions:
Average Per-Unit Revenue $29.18
Average Per-Unit Variable Cost $5.84
Estimated Monthly Fixed Cost $28,762

8.6 Projected Profit and Loss

Month-by-month assumptions for profit and loss are included in the appendix.

Asp software developer business plan, financial plan chart image

Asp software developer business plan, financial plan chart image

Asp software developer business plan, financial plan chart image

Asp software developer business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $3,087,836 $3,313,188 $3,676,190
Direct Cost of Sales $617,567 $1,142,638 $1,295,238
Other Costs of Sales $0 $0 $0
Total Cost of Sales $617,567 $1,142,638 $1,295,238
Gross Margin $2,470,269 $2,170,550 $2,380,952
Gross Margin % 80.00% 65.51% 64.77%
Expenses
Payroll $201,200 $228,570 $258,484
Marketing/Promotion $3,000 $3,000 $3,000
Depreciation $0 $0 $0
Rent $57,600 $57,600 $57,600
Utilities $3,840 $3,840 $3,840
Insurance $600 $600 $600
Payroll Taxes $0 $0 $0
Research and Development $20,400 $20,400 $20,400
Outsourced Offshore Labor $42,000 $4,000 $5,000
Website/Server/Hosting Expenses $10,500 $12,000 $15,000
Contracts/Consultants $6,000 $6,000 $6,000
Total Operating Expenses $345,140 $336,010 $369,924
Profit Before Interest and Taxes $2,125,129 $1,834,540 $2,011,028
EBITDA $2,125,129 $1,834,540 $2,011,028
Interest Expense $0 $0 $0
Taxes Incurred $637,539 $550,362 $603,308
Net Profit $1,487,590 $1,284,178 $1,407,720
Net Profit/Sales 48.18% 38.76% 38.29%

8.7 Projected Balance Sheet

The table below presents the balance sheet for KnaelHaed ASPware. This table reflects a positive cash position through out the period of this financial plan and growth in net worth.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $1,758,577 $2,779,750 $3,804,692
Other Current Assets $0 $0 $0
Total Current Assets $1,758,577 $2,779,750 $3,804,692
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $1,758,577 $2,779,750 $3,804,692
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $210,987 $147,981 $165,204
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $210,987 $147,981 $165,204
Long-term Liabilities $0 $0 $0
Total Liabilities $210,987 $147,981 $165,204
Paid-in Capital $120,710 $120,710 $120,710
Retained Earnings ($60,710) $1,226,880 $2,111,058
Earnings $1,487,590 $1,284,178 $1,407,720
Total Capital $1,547,590 $2,631,768 $3,639,488
Total Liabilities and Capital $1,758,577 $2,779,750 $3,804,692
Net Worth $1,547,590 $2,631,768 $3,639,488

8.8 Business Ratios

The following table outlines some of the more important ratios from the Computer software development and applications industry, SIC 7371.0300. The final column, Industry Profile, details specific ratios based on the Custom computer programming services industry as it is classified by the Standard Industry Classification (SIC) code, 7371.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 7.30% 10.96% 15.89%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 51.94%
Total Current Assets 100.00% 100.00% 100.00% 73.91%
Long-term Assets 0.00% 0.00% 0.00% 26.09%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 12.00% 5.32% 4.34% 32.77%
Long-term Liabilities 0.00% 0.00% 0.00% 16.11%
Total Liabilities 12.00% 5.32% 4.34% 48.88%
Net Worth 88.00% 94.68% 95.66% 51.12%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 80.00% 65.51% 64.77% 100.00%
Selling, General & Administrative Expenses 31.82% 26.75% 26.47% 77.57%
Advertising Expenses 0.00% 0.00% 0.00% 1.68%
Profit Before Interest and Taxes 68.82% 55.37% 54.70% 1.43%
Main Ratios
Current 8.34 18.78 23.03 1.62
Quick 8.34 18.78 23.03 1.26
Total Debt to Total Assets 12.00% 5.32% 4.34% 59.33%
Pre-tax Return on Net Worth 137.32% 69.71% 55.26% 2.02%
Pre-tax Return on Assets 120.84% 66.00% 52.86% 4.98%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 48.18% 38.76% 38.29% n.a
Return on Equity 96.12% 48.80% 38.68% n.a
Activity Ratios
Accounts Payable Turnover 6.63 12.17 12.17 n.a
Payment Days 27 36 28 n.a
Total Asset Turnover 1.76 1.19 0.97 n.a
Debt Ratios
Debt to Net Worth 0.14 0.06 0.05 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $1,547,590 $2,631,768 $3,639,488 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.57 0.84 1.03 n.a
Current Debt/Total Assets 12% 5% 4% n.a
Acid Test 8.34 18.78 23.03 n.a
Sales/Net Worth 2.00 1.26 1.01 n.a
Dividend Payout 0.00 0.16 0.28 n.a

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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
Unit Sales
Paid Membership 0% 800 1,000 1,500 2,200 2,700 3,000 3,500 3,800 4,200 4,700 5,000 5,000
Customized Model 0% 25 35 45 55 65 75 85 95 105 105 214 225
Advertisement 0% 2,000 2,800 3,500 4,200 4,600 5,000 5,500 6,300 7,000 7,800 8,600 10,000
Total Unit Sales 2,825 3,835 5,045 6,455 7,365 8,075 9,085 10,195 11,305 12,605 13,814 15,225
Unit Prices Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Paid Membership $50.00 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00
Customized Model $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Advertisement $1.32 $1.32 $1.32 $1.32 $1.32 $1.32 $1.32 $1.32 $1.32 $1.32 $1.32 $1.32
Sales
Paid Membership $40,000 $50,000 $75,000 $110,000 $135,000 $150,000 $175,000 $190,000 $210,000 $235,000 $250,000 $250,000
Customized Model $25,000 $35,000 $45,000 $55,000 $65,000 $75,000 $85,000 $95,000 $105,000 $105,000 $214,000 $225,000
Advertisement $2,640 $3,696 $4,620 $5,544 $6,072 $6,600 $7,260 $8,316 $9,240 $10,296 $11,352 $13,200
Total Sales $67,640 $88,696 $124,620 $170,544 $206,072 $231,600 $267,260 $293,316 $324,240 $350,296 $475,352 $488,200
Direct Unit Costs Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Paid Membership 20.00% $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
Customized Model 60.00% $200.00 $200.00 $200.00 $200.00 $200.00 $200.00 $200.00 $200.00 $200.00 $200.00 $200.00 $200.00
Advertisement 20.00% $0.26 $0.26 $0.26 $0.26 $0.26 $0.26 $0.26 $0.26 $0.26 $0.26 $0.26 $0.26
Direct Cost of Sales
Paid Membership $8,000 $10,000 $15,000 $22,000 $27,000 $30,000 $35,000 $38,000 $42,000 $47,000 $50,000 $50,000
Customized Model $5,000 $7,000 $9,000 $11,000 $13,000 $15,000 $17,000 $19,000 $21,000 $21,000 $42,800 $45,000
Advertisement $528 $739 $924 $1,109 $1,214 $1,320 $1,452 $1,663 $1,848 $2,059 $2,270 $2,640
Subtotal Direct Cost of Sales $13,528 $17,739 $24,924 $34,109 $41,214 $46,320 $53,452 $58,663 $64,848 $70,059 $95,070 $97,640
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
President 0% $5,467 $5,467 $5,467 $5,467 $5,467 $5,467 $5,467 $5,467 $5,467 $5,467 $5,467 $5,467
Vice-President 0% $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000
General Administrative Assistant 0% $2,700 $2,700 $2,700 $2,700 $2,700 $2,700 $2,700 $2,700 $2,700 $2,700 $2,700 $2,700
IT Staff 1 0% $2,300 $2,300 $2,300 $2,300 $2,300 $2,300 $2,300 $2,300 $2,300 $2,300 $2,300 $2,300
IT Staff 2 0% $2,300 $2,300 $2,300 $2,300 $2,300 $2,300 $2,300 $2,300 $2,300 $2,300 $2,300 $2,300
Total People 5 5 5 5 5 5 5 5 5 5 5 5
Total Payroll $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767

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 $67,640 $88,696 $124,620 $170,544 $206,072 $231,600 $267,260 $293,316 $324,240 $350,296 $475,352 $488,200
Direct Cost of Sales $13,528 $17,739 $24,924 $34,109 $41,214 $46,320 $53,452 $58,663 $64,848 $70,059 $95,070 $97,640
Other Costs of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $13,528 $17,739 $24,924 $34,109 $41,214 $46,320 $53,452 $58,663 $64,848 $70,059 $95,070 $97,640
Gross Margin $54,112 $70,957 $99,696 $136,435 $164,858 $185,280 $213,808 $234,653 $259,392 $280,237 $380,282 $390,560
Gross Margin % 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00%
Expenses
Payroll $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767
Marketing/Promotion $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250
Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Rent $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800
Utilities $320 $320 $320 $320 $320 $320 $320 $320 $320 $320 $320 $320
Insurance $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50
Payroll Taxes 15% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Research and Development $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700
Outsourced Offshore Labor $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500
Website/Server/Hosting Expenses 15% $500 $500 $500 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Contracts/Consultants $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500
Total Operating Expenses $28,387 $28,387 $28,387 $28,887 $28,887 $28,887 $28,887 $28,887 $28,887 $28,887 $28,887 $28,887
Profit Before Interest and Taxes $25,725 $42,570 $71,309 $107,549 $135,971 $156,393 $184,921 $205,766 $230,505 $251,350 $351,395 $361,673
EBITDA $25,725 $42,570 $71,309 $107,549 $135,971 $156,393 $184,921 $205,766 $230,505 $251,350 $351,395 $361,673
Interest Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Taxes Incurred $7,718 $12,771 $21,393 $32,265 $40,791 $46,918 $55,476 $61,730 $69,152 $75,405 $105,418 $108,502
Net Profit $18,008 $29,799 $49,917 $75,284 $95,180 $109,475 $129,445 $144,036 $161,354 $175,945 $245,976 $253,171
Net Profit/Sales 26.62% 33.60% 40.05% 44.14% 46.19% 47.27% 48.43% 49.11% 49.76% 50.23% 51.75% 51.86%

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 $67,640 $88,696 $124,620 $170,544 $206,072 $231,600 $267,260 $293,316 $324,240 $350,296 $475,352 $488,200
Subtotal Cash from Operations $67,640 $88,696 $124,620 $170,544 $206,072 $231,600 $267,260 $293,316 $324,240 $350,296 $475,352 $488,200
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 $67,640 $88,696 $124,620 $170,544 $206,072 $231,600 $267,260 $293,316 $324,240 $350,296 $475,352 $488,200
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 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767 $16,767
Bill Payments $1,096 $33,174 $42,657 $58,622 $79,014 $94,500 $105,881 $121,431 $132,967 $146,502 $159,418 $212,797
Subtotal Spent on Operations $17,862 $49,941 $59,424 $75,389 $95,781 $111,267 $122,648 $138,197 $149,733 $163,268 $176,185 $229,564
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 $17,862 $49,941 $59,424 $75,389 $95,781 $111,267 $122,648 $138,197 $149,733 $163,268 $176,185 $229,564
Net Cash Flow $49,778 $38,755 $65,196 $95,155 $110,291 $120,333 $144,612 $155,119 $174,507 $187,028 $299,167 $258,636
Cash Balance $109,778 $148,533 $213,729 $308,884 $419,175 $539,508 $684,121 $839,240 $1,013,746 $1,200,774 $1,499,941 $1,758,577

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 $60,000 $109,778 $148,533 $213,729 $308,884 $419,175 $539,508 $684,121 $839,240 $1,013,746 $1,200,774 $1,499,941 $1,758,577
Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Current Assets $60,000 $109,778 $148,533 $213,729 $308,884 $419,175 $539,508 $684,121 $839,240 $1,013,746 $1,200,774 $1,499,941 $1,758,577
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 $60,000 $109,778 $148,533 $213,729 $308,884 $419,175 $539,508 $684,121 $839,240 $1,013,746 $1,200,774 $1,499,941 $1,758,577
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 $31,770 $40,726 $56,006 $75,877 $90,988 $101,846 $117,013 $128,096 $141,249 $152,331 $205,522 $210,987
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 $31,770 $40,726 $56,006 $75,877 $90,988 $101,846 $117,013 $128,096 $141,249 $152,331 $205,522 $210,987
Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Liabilities $0 $31,770 $40,726 $56,006 $75,877 $90,988 $101,846 $117,013 $128,096 $141,249 $152,331 $205,522 $210,987
Paid-in Capital $120,710 $120,710 $120,710 $120,710 $120,710 $120,710 $120,710 $120,710 $120,710 $120,710 $120,710 $120,710 $120,710
Retained Earnings ($60,710) ($60,710) ($60,710) ($60,710) ($60,710) ($60,710) ($60,710) ($60,710) ($60,710) ($60,710) ($60,710) ($60,710) ($60,710)
Earnings $0 $18,008 $47,807 $97,723 $173,007 $268,187 $377,662 $507,107 $651,144 $812,497 $988,442 $1,234,419 $1,487,590
Total Capital $60,000 $78,008 $107,807 $157,723 $233,007 $328,187 $437,662 $567,107 $711,144 $872,497 $1,048,442 $1,294,419 $1,547,590
Total Liabilities and Capital $60,000 $109,778 $148,533 $213,729 $308,884 $419,175 $539,508 $684,121 $839,240 $1,013,746 $1,200,774 $1,499,941 $1,758,577
Net Worth $60,000 $78,008 $107,807 $157,723 $233,007 $328,187 $437,662 $567,107 $711,144 $872,497 $1,048,442 $1,294,419 $1,547,590

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