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FoodFun Lifeskills Instructional Software

Executive Summary

FoodFun Lifeskills Instructional Software (FoodFun LIS) is a start-up organization whose vision is to create the finest education/entertainment software for non-reading individuals with developmental disabilities. The software product has been designed and created by a Ph.D. veteran of the special education industry, to meet the needs of this special customer segment. The software will be constructive by teaching certain lifeskills and will be fun to use, encouraging the student to use it as often as possible. FoodFun LIS was formed as an Illinois L.L.C. by founder and owner is Sue Altamirankow, Ph.D. and will be based in Chicago.

The Market
FoodFun has identified four distinct market segments that will be interested in the software product. These segments are the most likely consumers of the software. The segments are as follows:

  • Centers for Independent Living– These centers exist to help train individuals with developmental disabilities to live on their own. The curriculum is often based around four primary lifeskills that are necessary for the individuals to have in order to successfully live independently.
  • School Districts– All states are required to provide education for students of special needs until they reach the age of 21. The school districts are often the educational providers until the students are 18 and will be interested in FoodFun’s software as they help the students obtain fundamental lifeskills.
  • Proactive Parents– Parents who are taking an active role in the education of their children will be looking for aids that they can use at home to help with their child’s learning progress.
  • Agencies– Many states have formed agencies that act as brokers to connect service providers with individuals. The agencies have generally been formed as a result of a settlement or payout from a lawsuit (including class action).

Parents are expected to purchase only one copy of the program, while the other segments will generally purchase multiple copies/site licenses and are likely to purchase upgrades to subsequent versions.

The Product
Grocery shopping and socialization/leisure are two of the main lifeskills which individuals with developmental disabilities are taught. FoodFun has developed a unique software product that is an effective teaching aid for these important skills. The first component of the software is grocery shopping. This takes the form of a digital cookbook of recipes. Each recipe is represented by a picture. When the student chooses the picture they desire, they then see a list of pictures which are the ingredients and utensils needed to make the dish. The student is then able to print out the pictures and take the pictures to the grocery store, allowing them to shop independently.

The second component is the socialization/leisure time module that provides the user with a choice of many different social events/parties for which they can prepare food. This module allows students to plan for a party (and we know EVERYONE loves to plan for parties) and incorporates music linked to each type of social event to provide entertainment for the user. Many/most individuals with developmental disabilities will receive shear joy when they click on a social even and hear the music.

Competitive Edge
There are several companies on the market selling educational products for this target segment. FoodFun LIS will leverage their competitive edge by incorporating entertainment into their software product, a means of creating interest and joy while using the software. This interest and joy will increase the amount of time that the students use the software, thereby increasing the effectiveness of the program. FoodFun is convinced that when students enjoy what they are doing they are likely to use the product instead of having to be forced to use it.

Management
FoodFun has been founded and will be led by Dr. Sue Altamirankow. Sue has a Masters and Ph.D. in special education and has been teaching in the university setting for eight years. Her published thesis “Implications in Lifeskill Training for Individuals with Autism” was a ground-breaking paper that carefully studied all aspects of lifeskills. This was the foundation of her idea to start a software company. She realized that she could develop a study aid that would be fun and effective. It would be fun because the students would enjoy using it, it would be effective because it taught important necessary lifeskills to individuals with developmental disabilities who begin to live more independently. FoodFun has forecasted revenues of $400,397 and $490,000 for years two and three.

Computer software business plan, executive summary chart image

1.1 Mission

To develop fun-to-use educational software for non-readers with developmental disabilities. Our software will provide lifeskills training that empowers the individuals and make them more independent. We exist to make products that the market demands and have a positive impact on society.

1.2 Keys to Success

  • Develop educational software that is constructive and fun. If it is not fun, it likely will not be used.
  • Implement a strong marketing campaign to develop awareness of the software and its benefits within all of the training centers, school districts, brokerages, and among parents.
  • Design strict financial controls for the organization.

1.3 Objectives

  • Increase sales by triple for the first two years.
  • Achieve 20% market penetration by year four.
  • Assist more than 10,000 different individuals with development disabilities.
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Company Summary

FoodFun Lifeskills Instructional Software is a start-up organization, founded as an Illinois based L.L.C. The company is owned by its founder Sue Altamirankow.

2.1 Company Ownership

The company was founded and is owned by Sue Altamirankow. Sue is a respected, published, former educator of special education with an emphasis on autism. Sue will leverage her extensive knowledge and industry contacts to make FoodFun LIS a success.

2.2 Start-up Summary

FoodFun LIS is a start-up organization. The following assets and professional services will be needed for the formation and start of operations.

  • Legal services for company formation.
  • Accounting services to set up the accounting shell of the company QuickBooks Pro software.
  • Computer programmers (3) to rapidly develop the software. An individual programmer could complete the coding of this product however, FoodFun is interested in launching the product fast therefore they will employ multiple programmers to speed the process up.
  • Eight computer workstations, including one server. Seven of the stations will have Microsoft Office, one of them will have QuickBooks Pro. Three networked laser printers.
  • A broadband Internet connection.
  • Office cubicle furniture for seven employees.
  • Seven extension telephone system.
  • Copier and fax machine.
  • Lunch room furniture and appliances including a refrigerator and microwave.
  • Shipping materials including boxes, scales, etc.
  • Promotional materials.
Computer software business plan, company summary chart image

Start-up Funding
Start-up Expenses to Fund $22,500
Start-up Assets to Fund $222,500
Total Funding Required $245,000
Assets
Non-cash Assets from Start-up $9,000
Cash Requirements from Start-up $213,500
Additional Cash Raised $0
Cash Balance on Starting Date $213,500
Total Assets $222,500
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $100,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $100,000
Capital
Planned Investment
Investor 1 $60,000
Investor 2 $50,000
Other $35,000
Additional Investment Requirement $0
Total Planned Investment $145,000
Loss at Start-up (Start-up Expenses) ($22,500)
Total Capital $122,500
Total Capital and Liabilities $222,500
Total Funding $245,000
Start-up
Requirements
Start-up Expenses
Legal $3,000
Accounting $2,000
Brochures $2,500
Consultants $0
Insurance $0
Rent $0
Research and Development $0
Expensed Equipment $15,000
Other $0
Total Start-up Expenses $22,500
Start-up Assets
Cash Required $213,500
Start-up Inventory $0
Other Current Assets $0
Long-term Assets $9,000
Total Assets $222,500
Total Requirements $245,000

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Products

FoodFun LIS’ flagship product is a software package designed for non-readers, generally individuals with autism and developmental disabilities, and other people with developmental disabilities. Most transition/lifeskills training programs focus on four key areas of life:  food/cooking/nutrition, money management, health/safety, and social interaction/leisure. FoodFun’s product focuses on food/cooking as well as social interaction, two of the primary lifeskills needed for independent living.

Non-readers rely on visual images as a form of communication, a replacement for the more typical text that readers are able to understand. The first component of the software is a digital cookbook of recipes. The software displays pictures of the different ingredients needed for the recipe. The pictures are then printed allowing the individual to take the picture to the grocery store facilitating the purchasing of the groceries. On each picture is also text explaining what the item is. Within each recipe is the ability to print the different utensils and pots needed to complete the item. While the recipes are meant to be cooked with support, the main goal is to allow the individual to have independent shopping.

The user first sees a bunch of different pictures of food dishes with names below the pictures. The user then chooses a dish and is brought to a screen where the ingredients are listed by picture and also the different utensils/pots/pans needed are listed. Once the user chooses what they want to prepare they can then print up a list of the different ingredients. The list is picture based (with text) and they are able to take the picture list to the grocery to assist them in purchasing the ingredients independently.

The second component of the software is the social occasion/party planning module. This is the fun part (in addition to the fun food pictures). Everyone likes to plan for party. The screen opens with pictures showing different occassions such as a picnic in the park, friends and movie night, birthday party, holiday event, pool party, etc. When the user clicks on the chosen image they hear 30 seconds of background music in a theme matched to the event that they have chosen. Once they have chosen the event the software takes them through the different steps of food preparation for the event. These food preparation steps are the previously explained food component that is now organized not by dish but by event. If a picnic in a park is chosen there will be several dishes to be made, all of them cold as there is no way of heating the dishes while you are in the park. All users of this module will be entertained by the background sounds as well as the excitement of planning for a party.

This component is especially important in the individual’s development. Planning activities are especially important for a population that is so isolated. Without socialization skills such as parties, the clients end up learning the skills and then sit in their apartment alone.

Ultimately, FoodFun’s software product combines two of the most important lifeskills/transition training areas, food preparation and social leisure. The food component allows the non-reading individuals with developmental disabilities to become more independent in their daily activities. The social planning module leverages the existing food module and assists the users in panning for social occassions centered around food. This module is designed to be entertaining to capture the interest and imagination of the user, drawing them into the software, creating the desire to use the product. 

The software product will be developed by three contract programmers. The software will be upgraded yearly.

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Market Analysis Summary

The market for lifeskills training software can be segmented into four groups. The first is centers for independent living, the second is school districts, the third is proactive parents, and the last is agencies charged with special education administration. Each of the four segments is distinct and will be communicated with in different ways. These four segments have been chosen because they are the main purchasers of products for individuals with developmental disabilities.

The software industry for individuals with developmental disabilities has just begun to grow. Only within the last few years has there been a significant increase in the number of computers found in classrooms using specialized software. Competing with the software companies are products that have printed pictures on them, typically laminated cards. While these cards are helpful, they are less interactive. 

4.1 Market Segmentation

FoodFun LIS has identified four distinct market segments for their products:

  • Centers for Independent Living– These are typically not-for-profit entities that assist individuals with developmental disabilities. The centers help clients with transition skills, making them more independent. These centers offer a wide range of lifeskills training for the individuals.
  • School Districts– All students are guaranteed an education therefore the school districts must provide the appropriate education until the individual is 21 years old. School districts are consumers of these products in pursuit of their goal of providing the students with an appropriate education.
  • Proactive Parents– These are parents of individuals with developmental disabilities who are taking an active role in their child’s education/lifeskill training. Reinforcing these skills as much as possible is useful, therefore there are many parents that will purchase the software for home use.
  • Agencies– Many states, often as a reaction to a lawsuits (individual and class actions) have set up agencies or brokerages whose purpose is to dispense money from the state to the service providers assisting the individuals in need.
Computer software business plan, market analysis summary chart image

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Centers for Independent Living 6% 3,245 3,440 3,646 3,865 4,097 6.00%
School Districts 5% 14,856 15,599 16,379 17,198 18,058 5.00%
Proactive Parents 8% 824,555 890,519 961,761 1,038,702 1,121,798 8.00%
Agencies 6% 5,354 5,675 6,016 6,377 6,760 6.00%
Total 7.93% 848,010 915,233 987,802 1,066,142 1,150,713 7.93%

4.2 Target Market Segment Strategy

These four target segments were chosen because they have the greatest likelihood of purchasing FoodFun’s products.

  • Centers for Independent Living– The centers typically buy aids to assist in the teaching of lifeskills and other transition skills to their clients.
  • School Districts– In order to assist the school districts in teaching the students (a federal requirement) the districts will use instructional tools and aids. Instructional tools are particularly useful as the ratio of students to teachers is often high and these aids help the school manage the students better.
  • Proactive Parents– Parents that are interested in helping with their child’s education will seek useful devices that they can use at home.
  • Agencies– The agencies are often given sums of money and must spend it on the students’ education/training. The agencies are always looking for products that will be useful in providing students with necessary skills.

4.3 Industry Analysis

There are several companies making products that specifically address learning needs for individuals with developmental disabilities. While some of the companies’ products are also suitable for traditional students, most companies in this industry specialize on products for developmental disabilities.

Within the industry there are a wide range of products. There are many different product groups that target specific types of disabilities. There are also different products targeted on a specific disability. Some might concentrate on spelling, reading comprehension, counting, sentence construction, etc. Lastly, within each specific category products take different forms, some may be CDs, software, cards, audio tapes, etc.

4.3.1 Competition and Buying Patterns

There are three main companies that are direct competitors to FoodFun Lifeskills Instructional Software, focusing on individuals with developmental disabilities or individuals with autism (75% of individuals with autism are developmentally disabled and non-readers).

  • WordWise– This company makes several products including picture-based language programs, laminated picture cards, and community success CDs. While their software has a grocery shopping module, it is very simple and limited in the choices of grocery items.
  • Edbydesign.com– This company has several products including: sentence maker, match maker, counting programs, and sorting programs. These are all non-interactive CD-based programs.
  • Autismcoach.com– This company makes software that is designed to strengthen core cognitive skills such as short-term memory, mental processing speed, multi-tasking and auditory processing. This is primarily for a younger customer age of 10-17.
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Strategy and Implementation Summary

FoodFun LIS will leverage their competitive edge of combining education and entertainment within their software product to help them quickly gain market share. All of the competitors’ software concentrate on skill development. While this is useful, it does not always motivate students. FoodFun has added entertaining elements into their software, encouraging the students to use the software and have fun while they learn.

FoodFun’s marketing strategy will be to raise visibility of the software product among the decision makers who are in charge of purchasing aids and instructional tools. The campaign will be targeted to reach these people/organizations so that they are aware of the options they have in developing the skills of individuals with developmental disabilities. Lastly, the sales strategy will seek to convince the prospective customers that there can be significant gains in learning through FoodFun’s carefully designed software.

A table with sales forecast information and charts displaying monthly and yearly sales projections follows. 

5.1 Competitive Edge

FoodFun LIS’ competitive edge is their clever incorporation of entertaining fun within the education software. Currently, there are several different vendors that are marketing software for this niche, however, the software is strictly educational. While this is well and good for developing skills, the students are not always that eager to use the software. FoodFun has adopted the philosophy that if they can make the education/training fun, the students will use it far more often, having fun while they are learning valuable skills.

Two different studies (not developmental disability specific studies, but the results are still applicable) have shown that if students are enjoying themselves, they will spend 2.4 times as long using the software that they perceive as fun. What this means is that the student is spending 2.4 times as long developing necessary skills when they are enjoying the software. FoodFun has incorporated entertainment aspects to their software to utilize this phenomenon.

5.2 Marketing Strategy

FoodFun’s marketing strategy reflects their perception of the industry: that most of the companies operating today are operated by educators; that they make nice products; but not many people know about the products, and overall awareness is poor. The reality is that so many prospective customers in the United States are unaware of the different available products. FoodFun will employ an aggressive marketing strategy to raise awareness of their products among customers who are in need of these products, and thereby increasing software purchases. FoodFun will be advertising heavily in various industry journals and magazines as a proven method of reaching the target audience. The ads will generate awareness of FoodFun LIS and will lead the customers to FoodFun’s website where they can demo the software. This strategy is based on the philosophy that you can have a great product, but if no one knows about it you are not going to be successful.

5.3 Sales Strategy

FoodFun will use an aggressive sales campaign that will rely on conference participation as well as target cold calling. There are numerous industry conferences throughout the country that are specifically for educators. The conferences are the places where people get together and share strategies that work with their colleagues in different departments and different states. While the conferences are not typically packed with vendors, FoodFun LIS will be present since the conferences are a captive assortment of the right people – the educators that are in the trenches working with the special students. The conferences will be an excellent networking opportunity and should develop significant sales.

The second prong of the sales strategy will be a campaign aimed at contacting key decision makers and introducing them to FoodFun LIS and their products. Autism consultants for school districts comprise one group that will be targeted. The districts often take the consultants’ recommendations when making purchasing decisions for special education. Research will be done to determine states’ education districts structures to determine if it is the ESD (educational service district) that is providing the services or if the money has been given to agencies to disperse to various service providers. This information will be valuable in determining who is the proper consumer for the special software. These personal contacts will help generate significant sales.

5.3.1 Sales Forecast

The following table and charts present sales forecasts in a monthly format as well as yearly projections. Forecasts have been conservatively estimated to increase the likelihood of attainment. Sales has been broken down by customer group.

A fulfillment house will be contracted to produce, package, and ship the hard copy software product to purchasers. Download of the software from the FoodFun LIS website will be available. This will drastically reduce cost of goods if purchasers use the download only purchase option.

Computer software business plan, strategy and implementation summary chart image

Computer software business plan, strategy and implementation summary chart image

Sales Forecast
Year 1 Year 2 Year 3
Sales
Centers for Independent Living $23,439 $96,957 $118,616
School Districts $43,405 $179,550 $219,660
Proactive Parents $9,983 $41,297 $50,522
Agencies $19,966 $82,593 $101,044
Total Sales $96,793 $400,397 $489,842
Direct Cost of Sales Year 1 Year 2 Year 3
Centers for Independent Living $1,641 $6,787 $8,303
School Districts $3,038 $12,569 $15,376
Proactive Parents $699 $2,891 $3,537
Agencies $1,398 $5,782 $7,073
Subtotal Direct Cost of Sales $6,776 $28,028 $34,289

5.4 Milestones

FoodFun LIS has several milestones, presented in the following table and chart, which will be instrumental in the success of the organization.

Computer software business plan, strategy and implementation summary chart image

Milestones
Milestone Start Date End Date Budget Manager Department
Business plan completion 1/1/2004 2/15/2004 $0 Sue Busines Development
Beta version completed 2/1/2004 4/15/2004 $0 ABC Programming
Organizational hiring complete 3/15/2004 5/1/2004 $0 Sue HR
Public release of software 4/15/2004 5/15/2004 $0 ABC Programming
Profitability 5/15/2004 5/30/2005 $0 Sue Accounting
Totals $0

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Web Plan Summary

FoodFun will develop a website that will be used as both a marketing and sales tool. On the site interested parties can receive more information regarding the company and the current product list. Once the beta version of the software is ready interested customers can download a trial version of the software for their evaluation. The website will also provide people with company contact information to allow them to ask any questions that they may have.

Online sales will be contracted to one of the third party Internet sales businesses, such as Yahoo! Shopping. The site will provide customers with a download only purchase option.

6.1 Website Marketing Strategy

The website will be marketed using simple yet effective means. The first method is inclusion of the URL address in all promotional activities. This will be especially important because it will allow all interested parties to view screen shots of the software and download a trial version of the product. FoodFun LIS recognizes that no ad will be able to communicate everything, therefore FoodFun will rely on the website to provide the additional information. The second marketing tool for the website will be comprehension search engine submission. The submission process will provide FoodFun will many visitors to the website. This will be accomplished when an interested party searches on “autism software” or some other set of keywords. The search engine will then list a number of “hits” that correspond to the search terms.

6.2 Development Requirements

FoodFun will employ one computer science student for the design and development of the website. Development will occur concurrently with the development of the software.

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Management Summary

FoodFun LIS has been founded and will be led by Sue Altamirankow. Sue received her Bachelors in Education from Northwestern University. After graduation she entered Northwestern’s Masters Program in Special Education with her emphasis on Autism. Recognizing that she wanted to teach at some point, Sue finished her Masters and entered the rigorous Ph.D. program. Her thesis, entitled “Implications in Lifeskills Training for Individuals with Autism” won widespread accolade and was published in the prestigious Harvard Special Education Journal. Having gotten to know most of the special education department at Northwestern, she was asked to become a faculty member on completion of her Ph.D.  

Sue spent eight years teaching at Northwestern. While she taught a number of general special education classes, her passion was lifeskills for individuals with developmental disabilities, focusing on life transitions. In addition to teaching, Sue served as a member of the board of several different nonprofit agencies. Her time spent on the different boards was quite pleasing since it provided her with a bit more direct experience with the individuals in need. In the school setting most of her interactions was specifically with graduate and undergraduate students.

Sue began to realize as much as she enjoyed teaching, she felt isolated from the students that she was trying to help. She recognized that her work as an educator would in effect benefit the students, but she was looking for a different connection. Because she had an amazing amount of knowledge about the subject of special education, Sue began to brainstorm some ideas of starting a business that would serve individuals with developmental disabilities. While this intrigued Sue, she did not feel she had the requisite business experience, so she took several business courses to help develop this new skill set. While taking these course (and teaching at the same time) Sue began to realize that while there were many different study aids on the market, they were all strictly educational. Sue believed (and studies would indicate) that if a fun component was added to the aid, students would use it more often and learn more. With this information in hand, Sue began to create an idea for some software that was both educational and entertaining at the same time. This was the beginning of FoodFun Lifeskills Instructional Software. 

7.1 Personnel Plan

FoodFun LIS will require the following employees:

  • Sue- she will be doing a little of everything from HR to business development to product development to finance.
  • Accounting- an accounting clerk will be hired.
  • Software development- two employees will be in charge writing manuals, instructions, and product bug updates, and version upgrades.
  • Marketing Sales- two employees will be hired to generate sales.
  • Customer Service- two employees will be used to field any questions from customers or address any concerns/problems regarding orders as well technical difficulties.
Personnel Plan
Year 1 Year 2 Year 3
Sue $22,000 $26,000 $30,000
Accounting $16,200 $21,600 $21,600
Software Documentation $19,800 $26,400 $26,400
Product Development $15,400 $26,400 $26,400
Customer Service/ Tech Support $19,800 $26,400 $26,400
Customer Service/ Tech Support $19,800 $26,400 $26,400
Marketing/ Sales $27,000 $36,000 $36,000
Marketing/ Sales $27,000 $36,000 $36,000
Total People 8 8 8
Total Payroll $167,000 $225,200 $229,200

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Financial Plan

The following sections outline important financial information.

8.1 Important Assumptions

The following table details important financial assumptions.

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

8.2 Break-even Analysis

The Break-even Analysis is shown below.

Computer software business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even $20,959
Assumptions:
Average Percent Variable Cost 7%
Estimated Monthly Fixed Cost $19,492

8.3 Projected Profit and Loss

The table and charts illustrate the projected profit and loss.

Computer software business plan, financial plan chart image

Computer software business plan, financial plan chart image

Computer software business plan, financial plan chart image

Computer software business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $96,793 $400,397 $489,842
Direct Cost of Sales $6,776 $28,028 $34,289
Other Costs of Goods $0 $0 $0
Total Cost of Sales $6,776 $28,028 $34,289
Gross Margin $90,018 $372,369 $455,553
Gross Margin % 93.00% 93.00% 93.00%
Expenses
Payroll $167,000 $225,200 $229,200
Sales and Marketing and Other Expenses $6,600 $7,200 $7,200
Depreciation $1,800 $1,800 $1,800
Rent $10,450 $11,400 $11,400
Utilities $5,500 $6,000 $6,000
Insurance $5,500 $5,500 $5,500
Payroll Taxes $25,050 $33,780 $34,380
Programming $12,000 $0 $0
Total Operating Expenses $233,900 $290,880 $295,480
Profit Before Interest and Taxes ($143,882) $81,489 $160,073
EBITDA ($142,082) $83,289 $161,873
Interest Expense $9,134 $9,566 $9,943
Taxes Incurred $0 $21,577 $45,039
Net Profit ($153,017) $50,346 $105,091
Net Profit/Sales -158.09% 12.57% 21.45%

8.4 Projected Cash Flow

The following chart and table show projected cash flow.

Computer software business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $24,198 $100,099 $122,460
Cash from Receivables $46,108 $217,218 $342,905
Subtotal Cash from Operations $70,306 $317,317 $465,366
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 $40,000 $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 $70,306 $357,317 $465,366
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $167,000 $225,200 $229,200
Bill Payments $75,294 $124,114 $152,785
Subtotal Spent on Operations $242,294 $349,314 $381,985
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 $16,227 $16,227 $16,227
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $258,521 $365,541 $398,212
Net Cash Flow ($188,214) ($8,224) $67,154
Cash Balance $25,286 $17,062 $84,215

8.5 Projected Balance Sheet

The following table presents the projected balance sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $25,286 $17,062 $84,215
Accounts Receivable $26,487 $109,566 $134,042
Inventory $1,408 $5,824 $7,126
Other Current Assets $0 $0 $0
Total Current Assets $53,180 $132,452 $225,383
Long-term Assets
Long-term Assets $9,000 $9,000 $9,000
Accumulated Depreciation $1,800 $3,600 $5,400
Total Long-term Assets $7,200 $5,400 $3,600
Total Assets $60,380 $137,852 $228,983
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $7,124 $10,477 $12,744
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $7,124 $10,477 $12,744
Long-term Liabilities $83,773 $107,546 $91,319
Total Liabilities $90,897 $118,023 $104,063
Paid-in Capital $145,000 $145,000 $145,000
Retained Earnings ($22,500) ($175,517) ($125,171)
Earnings ($153,017) $50,346 $105,091
Total Capital ($30,517) $19,829 $124,920
Total Liabilities and Capital $60,380 $137,852 $228,983
Net Worth ($30,517) $19,829 $124,920

8.6 Business Ratios

The following table outlines some of the more important ratios from the Computer Software industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 5045.9903.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 313.66% 22.34% 1.51%
Percent of Total Assets
Accounts Receivable 43.87% 79.48% 58.54% 29.71%
Inventory 2.33% 4.23% 3.11% 39.18%
Other Current Assets 0.00% 0.00% 0.00% 19.28%
Total Current Assets 88.08% 96.08% 98.43% 88.17%
Long-term Assets 11.92% 3.92% 1.57% 11.83%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 11.80% 7.60% 5.57% 43.83%
Long-term Liabilities 138.74% 78.02% 39.88% 9.87%
Total Liabilities 150.54% 85.62% 45.45% 53.70%
Net Worth -50.54% 14.38% 54.55% 46.30%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 93.00% 93.00% 93.00% 24.10%
Selling, General & Administrative Expenses 251.09% 80.43% 71.55% 15.49%
Advertising Expenses 0.00% 0.00% 0.00% 0.58%
Profit Before Interest and Taxes -148.65% 20.35% 32.68% 2.35%
Main Ratios
Current 7.46 12.64 17.69 1.86
Quick 7.27 12.09 17.13 0.86
Total Debt to Total Assets 150.54% 85.62% 45.45% 5.06%
Pre-tax Return on Net Worth 501.42% 362.71% 120.18% 56.70%
Pre-tax Return on Assets -253.42% 52.17% 65.56% 11.68%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -158.09% 12.57% 21.45% n.a
Return on Equity 0.00% 253.90% 84.13% n.a
Activity Ratios
Accounts Receivable Turnover 2.74 2.74 2.74 n.a
Collection Days 54 83 121 n.a
Inventory Turnover 9.55 7.75 5.30 n.a
Accounts Payable Turnover 11.57 12.17 12.17 n.a
Payment Days 27 25 27 n.a
Total Asset Turnover 1.60 2.90 2.14 n.a
Debt Ratios
Debt to Net Worth 0.00 5.95 0.83 n.a
Current Liab. to Liab. 0.08 0.09 0.12 n.a
Liquidity Ratios
Net Working Capital $46,056 $121,975 $212,639 n.a
Interest Coverage -15.75 8.52 16.10 n.a
Additional Ratios
Assets to Sales 0.62 0.34 0.47 n.a
Current Debt/Total Assets 12% 8% 6% n.a
Acid Test 3.55 1.63 6.61 n.a
Sales/Net Worth 0.00 20.19 3.92 n.a
Dividend Payout 0.00 0.00 0.00 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
Sales
Centers for Independent Living 0% $0 $0 $0 $0 $540 $1,350 $1,944 $2,970 $3,918 $4,023 $4,266 $4,428
School Districts 0% $0 $0 $0 $0 $1,000 $2,500 $3,600 $5,500 $7,255 $7,450 $7,900 $8,200
Proactive Parents 0% $0 $0 $0 $0 $230 $575 $828 $1,265 $1,669 $1,714 $1,817 $1,886
Agencies 0% $0 $0 $0 $0 $460 $1,150 $1,656 $2,530 $3,337 $3,427 $3,634 $3,772
Total Sales $0 $0 $0 $0 $2,230 $5,575 $8,028 $12,265 $16,179 $16,614 $17,617 $18,286
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
Centers for Independent Living $0 $0 $0 $0 $38 $95 $136 $208 $274 $282 $299 $310
School Districts $0 $0 $0 $0 $70 $175 $252 $385 $508 $522 $553 $574
Proactive Parents $0 $0 $0 $0 $16 $40 $58 $89 $117 $120 $127 $132
Agencies $0 $0 $0 $0 $32 $81 $116 $177 $234 $240 $254 $264
Subtotal Direct Cost of Sales $0 $0 $0 $0 $156 $390 $562 $859 $1,133 $1,163 $1,233 $1,280
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
Sue 0% $0 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Accounting 0% $0 $0 $0 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800
Software Documentation 0% $0 $0 $0 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200
Product Development 0% $0 $0 $0 $0 $0 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200
Customer Service/ Tech Support 0% $0 $0 $0 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200
Customer Service/ Tech Support 0% $0 $0 $0 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200
Marketing/ Sales 0% $0 $0 $0 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Marketing/ Sales 0% $0 $0 $0 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Total People 0 1 1 7 7 8 8 8 8 8 8 8
Total Payroll $0 $2,000 $2,000 $16,400 $16,400 $18,600 $18,600 $18,600 $18,600 $18,600 $18,600 $18,600

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 $0 $0 $0 $0 $2,230 $5,575 $8,028 $12,265 $16,179 $16,614 $17,617 $18,286
Direct Cost of Sales $0 $0 $0 $0 $156 $390 $562 $859 $1,133 $1,163 $1,233 $1,280
Other Costs of Goods $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $0 $0 $0 $0 $156 $390 $562 $859 $1,133 $1,163 $1,233 $1,280
Gross Margin $0 $0 $0 $0 $2,074 $5,185 $7,466 $11,406 $15,046 $15,451 $16,384 $17,006
Gross Margin % 0.00% 0.00% 0.00% 0.00% 93.00% 93.00% 93.00% 93.00% 93.00% 93.00% 93.00% 93.00%
Expenses
Payroll $0 $2,000 $2,000 $16,400 $16,400 $18,600 $18,600 $18,600 $18,600 $18,600 $18,600 $18,600
Sales and Marketing and Other Expenses $0 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600
Depreciation $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150
Rent $0 $950 $950 $950 $950 $950 $950 $950 $950 $950 $950 $950
Utilities $0 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500
Insurance $0 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500
Payroll Taxes 15% $0 $300 $300 $2,460 $2,460 $2,790 $2,790 $2,790 $2,790 $2,790 $2,790 $2,790
Programming $3,000 $3,000 $3,000 $3,000 $0 $0 $0 $0 $0 $0 $0 $0
Total Operating Expenses $3,150 $8,000 $8,000 $24,560 $21,560 $24,090 $24,090 $24,090 $24,090 $24,090 $24,090 $24,090
Profit Before Interest and Taxes ($3,150) ($8,000) ($8,000) ($24,560) ($19,486) ($18,905) ($16,624) ($12,684) ($9,044) ($8,639) ($7,706) ($7,084)
EBITDA ($3,000) ($7,850) ($7,850) ($24,410) ($19,336) ($18,755) ($16,474) ($12,534) ($8,894) ($8,489) ($7,556) ($6,934)
Interest Expense $823 $812 $801 $790 $779 $767 $756 $745 $733 $722 $710 $698
Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Net Profit ($3,973) ($8,812) ($8,801) ($25,350) ($20,265) ($19,673) ($17,380) ($13,428) ($9,777) ($9,361) ($8,416) ($7,782)
Net Profit/Sales 0.00% 0.00% 0.00% 0.00% -908.73% -352.87% -216.49% -109.48% -60.43% -56.35% -47.77% -42.56%

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 $0 $0 $0 $0 $558 $1,394 $2,007 $3,066 $4,045 $4,153 $4,404 $4,572
Cash from Receivables $0 $0 $0 $0 $0 $56 $1,756 $4,243 $6,127 $9,297 $12,145 $12,485
Subtotal Cash from Operations $0 $0 $0 $0 $558 $1,450 $3,763 $7,309 $10,172 $13,450 $16,549 $17,057
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 $0 $0 $0 $0 $558 $1,450 $3,763 $7,309 $10,172 $13,450 $16,549 $17,057
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 $0 $2,000 $2,000 $16,400 $16,400 $18,600 $18,600 $18,600 $18,600 $18,600 $18,600 $18,600
Bill Payments $127 $3,917 $6,661 $6,722 $8,733 $6,766 $6,140 $7,096 $7,096 $7,413 $7,261 $7,361
Subtotal Spent on Operations $127 $5,917 $8,661 $23,122 $25,133 $25,366 $24,740 $25,696 $25,696 $26,013 $25,861 $25,961
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 $1,291 $1,302 $1,313 $1,324 $1,335 $1,346 $1,357 $1,369 $1,380 $1,392 $1,403 $1,415
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 $1,419 $7,219 $9,974 $24,446 $26,468 $26,712 $26,098 $27,064 $27,076 $27,404 $27,265 $27,375
Net Cash Flow ($1,419) ($7,219) ($9,974) ($24,446) ($25,910) ($25,262) ($22,335) ($19,755) ($16,904) ($13,955) ($10,715) ($10,319)
Cash Balance $212,081 $204,862 $194,888 $170,441 $144,531 $119,269 $96,934 $77,178 $60,274 $46,320 $35,604 $25,286
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 $213,500 $212,081 $204,862 $194,888 $170,441 $144,531 $119,269 $96,934 $77,178 $60,274 $46,320 $35,604 $25,286
Accounts Receivable $0 $0 $0 $0 $0 $1,673 $5,798 $10,063 $15,019 $21,026 $24,190 $25,258 $26,487
Inventory $0 $0 $0 $0 $0 $844 $454 $892 $1,033 $1,246 $1,279 $1,357 $1,408
Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Current Assets $213,500 $212,081 $204,862 $194,888 $170,441 $147,047 $125,520 $107,889 $93,231 $82,546 $71,789 $62,218 $53,180
Long-term Assets
Long-term Assets $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000
Accumulated Depreciation $0 $150 $300 $450 $600 $750 $900 $1,050 $1,200 $1,350 $1,500 $1,650 $1,800
Total Long-term Assets $9,000 $8,850 $8,700 $8,550 $8,400 $8,250 $8,100 $7,950 $7,800 $7,650 $7,500 $7,350 $7,200
Total Assets $222,500 $220,931 $213,562 $203,438 $178,841 $155,297 $133,620 $115,839 $101,031 $90,196 $79,289 $69,568 $60,380
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 $3,695 $6,440 $6,429 $8,506 $6,562 $5,904 $6,860 $6,849 $7,171 $7,016 $7,115 $7,124
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 $3,695 $6,440 $6,429 $8,506 $6,562 $5,904 $6,860 $6,849 $7,171 $7,016 $7,115 $7,124
Long-term Liabilities $100,000 $98,709 $97,406 $96,094 $94,770 $93,435 $92,089 $90,731 $89,363 $87,983 $86,591 $85,188 $83,773
Total Liabilities $100,000 $102,404 $103,846 $102,523 $103,276 $99,997 $97,992 $97,591 $96,211 $95,154 $93,607 $92,303 $90,897
Paid-in Capital $145,000 $145,000 $145,000 $145,000 $145,000 $145,000 $145,000 $145,000 $145,000 $145,000 $145,000 $145,000 $145,000
Retained Earnings ($22,500) ($22,500) ($22,500) ($22,500) ($22,500) ($22,500) ($22,500) ($22,500) ($22,500) ($22,500) ($22,500) ($22,500) ($22,500)
Earnings $0 ($3,973) ($12,784) ($21,585) ($46,935) ($67,200) ($86,872) ($104,252) ($117,680) ($127,458) ($136,819) ($145,235) ($153,017)
Total Capital $122,500 $118,527 $109,716 $100,915 $75,565 $55,300 $35,628 $18,248 $4,820 ($4,958) ($14,319) ($22,735) ($30,517)
Total Liabilities and Capital $222,500 $220,931 $213,562 $203,438 $178,841 $155,297 $133,620 $115,839 $101,031 $90,196 $79,289 $69,568 $60,380
Net Worth $122,500 $118,527 $109,716 $100,915 $75,565 $55,300 $35,628 $18,248 $4,820 ($4,958) ($14,319) ($22,735) ($30,517)

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