KnaelHaed ASPware, Inc.
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.
8.4 Projected Cash Flow
The following chart and table show the project cash flow for KnaelHaed ASPware.
| 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.
| 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.
| 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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