eDocFile
Financial Plan
eDocFile will require a $700,000 investment. Growth will be slow at first, but once the infrastructure is created through branding, positioning and a competent employee base, growth will be explosive. eDocFile should not need additional funding according to projections, because once sales are generated, a captive market of lawyers will generate a revenue stream that will pay for future acquisition of sales. At some juncture (we have calculated 2%, or approx. 1,780,000 transactions) critical mass will be reached and there will be explosive growth. The challenge at that point will not be sales or marketing, but HR. Growth will be limited by the number of qualified people we can hire to support our customers.
7.1 Important Assumptions
Since the company will not be financed by debt, interest rates will not be of great importance to us. Further, eDocFile will not have a significant Accounts Receivable burden as we will, in essence, have cash transactions. Services will be paid for at the time of performance. We also assume an economy without major recession, however, since our service is transaction based and in a sector of the economy that is generally recession proof this is not a major concern for us.
These factors make this venture extremely attractive, and once a self-sustaining revenue stream is achieved, the company could conceivably function as a cash machine.
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 | 9.00% | 9.00% | 9.00% |
Tax Rate | 30.00% | 30.00% | 30.00% |
Other | 0 | 0 | 0 |
7.2 Exit Strategy
One strategy, with the market’s current love affair with .com companies, is to take the company public. With public money comes public scrutiny and influence, the potential eDocFile has to generate large sums of cash may raise questions about the benefits of going public. However, this is an option that can never be excluded.
The other obvious strategy is to be acquired. Unless we are not having fun doing this or have competing outside interests this would not be a first option. However, in today’s climate there are some merger and acquisition deals that should not be overlooked, therefore while this is not a favored strategy it certainly deserves consideration.
We would like to build a company for the long term and think that within three to five years we could generate enough cash to buy out our investors if they need to cash out their investment, thereby keeping the company private. This kind of control will allow us to build a legal portal and give us the leverage to move beyond the legal market to other professional markets.
7.3 Break-even Analysis
The Break-even Analysis is based on the per transaction costs and fees of e-filing, as well as operating expenses.

Break-even Analysis | |
Monthly Revenue Break-even | $49,795 |
Assumptions: | |
Average Percent Variable Cost | 20% |
Estimated Monthly Fixed Cost | $39,956 |
7.4 Projected Profit and Loss
Current projection shows that eDocFile will become profitable in the fourth quarter of its first year. However, this does not mean that eDocFile will have recovered any of its investment. While these projections are far from perfect, they do highlight financial trends; for instance, gross margins will increase as direct sales costs fall over time. The captive market of lawyers is a windfall and helps the company reach profitability sooner that most other Internet start-ups.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $453,826 | $5,445,899 | $79,711,568 |
Direct Cost of Sales | $89,673 | $701,196 | $9,035,258 |
Other Costs of Sales | $0 | $0 | $0 |
Total Cost of Sales | $89,673 | $701,196 | $9,035,258 |
Gross Margin | $364,153 | $4,744,703 | $70,676,310 |
Gross Margin % | 80.24% | 87.12% | 88.67% |
Expenses | |||
Payroll | $312,000 | $1,980,000 | $2,916,000 |
Sales and Marketing and Other Expenses | $50,988 | $544,590 | $7,971,157 |
Depreciation | $0 | $0 | $0 |
Rent | $18,000 | $36,000 | $36,000 |
Utilities | $14,016 | $53,914 | $116,219 |
Insurance | $31,392 | $198,000 | $291,600 |
Payroll Taxes | $46,800 | $297,000 | $437,400 |
Leased equipment | $6,276 | $11,880 | $17,496 |
Total Operating Expenses | $479,472 | $3,121,384 | $11,785,872 |
Profit Before Interest and Taxes | ($115,319) | $1,623,319 | $58,890,438 |
EBITDA | ($115,319) | $1,623,319 | $58,890,438 |
Interest Expense | $0 | $0 | $0 |
Taxes Incurred | $0 | $486,996 | $17,667,131 |
Net Profit | ($115,319) | $1,136,323 | $41,223,307 |
Net Profit/Sales | -25.41% | 20.87% | 51.72% |
7.5 Projected Cash Flow
Cash flow is healthy when compared with most start-ups, yet there is a period in the last quarter of the first year, just before profitability that cash flow becomes tight. The company’s reserves are at its lowest and unforeseen catastrophes, though they may not be fatal, but could cause a serious set back. However, once we establish some semblance of market share, cash flow becomes spectacular even by the most conservative standards because this service is transaction driven.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $453,826 | $5,445,899 | $79,711,568 |
Subtotal Cash from Operations | $453,826 | $5,445,899 | $79,711,568 |
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 | $453,826 | $5,445,899 | $79,711,568 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $312,000 | $1,980,000 | $2,916,000 |
Bill Payments | $186,190 | $2,209,059 | $32,839,986 |
Subtotal Spent on Operations | $498,190 | $4,189,059 | $35,755,986 |
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 | $0 | $0 |
Subtotal Cash Spent | $498,190 | $4,189,059 | $35,755,986 |
Net Cash Flow | ($44,364) | $1,256,840 | $43,955,582 |
Cash Balance | $297,136 | $1,553,976 | $45,509,558 |
7.6 Projected Balance Sheet
The following table shows the projected balance sheet.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $297,136 | $1,553,976 | $45,509,558 |
Other Current Assets | $215,000 | $215,000 | $215,000 |
Total Current Assets | $512,136 | $1,768,976 | $45,724,558 |
Long-term Assets | |||
Long-term Assets | $0 | $0 | $0 |
Accumulated Depreciation | $0 | $0 | $0 |
Total Long-term Assets | $0 | $0 | $0 |
Total Assets | $512,136 | $1,768,976 | $45,724,558 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $70,956 | $191,472 | $2,923,748 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $70,956 | $191,472 | $2,923,748 |
Long-term Liabilities | $0 | $0 | $0 |
Total Liabilities | $70,956 | $191,472 | $2,923,748 |
Paid-in Capital | $700,000 | $700,000 | $700,000 |
Retained Earnings | ($143,500) | ($258,819) | $877,504 |
Earnings | ($115,319) | $1,136,323 | $41,223,307 |
Total Capital | $441,181 | $1,577,504 | $42,800,811 |
Total Liabilities and Capital | $512,136 | $1,768,976 | $45,724,558 |
Net Worth | $441,181 | $1,577,504 | $42,800,811 |
7.7 Business Ratios
The business ratios are impressive because of the built-in captive market. Also, the company has no debt or AR, and together with high margins the projections show high liquidity and large amounts of working capital. This is a healthy and profitable projected forecast. Our SIC industry class is currently Data base information retrieval – 7375.9901.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 1100.00% | 1363.70% | 10.27% |
Percent of Total Assets | ||||
Other Current Assets | 41.98% | 12.15% | 0.47% | 44.32% |
Total Current Assets | 100.00% | 100.00% | 100.00% | 77.85% |
Long-term Assets | 0.00% | 0.00% | 0.00% | 22.15% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 13.85% | 10.82% | 6.39% | 35.88% |
Long-term Liabilities | 0.00% | 0.00% | 0.00% | 21.91% |
Total Liabilities | 13.85% | 10.82% | 6.39% | 57.79% |
Net Worth | 86.15% | 89.18% | 93.61% | 42.21% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 80.24% | 87.12% | 88.67% | 100.00% |
Selling, General & Administrative Expenses | 105.65% | 66.26% | 36.95% | 82.56% |
Advertising Expenses | 0.00% | 0.00% | 0.00% | 1.01% |
Profit Before Interest and Taxes | -25.41% | 29.81% | 73.88% | 1.11% |
Main Ratios | ||||
Current | 7.22 | 9.24 | 15.64 | 1.68 |
Quick | 7.22 | 9.24 | 15.64 | 1.27 |
Total Debt to Total Assets | 13.85% | 10.82% | 6.39% | 2.10% |
Pre-tax Return on Net Worth | -26.14% | 102.90% | 137.59% | 66.78% |
Pre-tax Return on Assets | -22.52% | 91.77% | 128.79% | 6.31% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | -25.41% | 20.87% | 51.72% | n.a |
Return on Equity | -26.14% | 72.03% | 96.31% | n.a |
Activity Ratios | ||||
Accounts Payable Turnover | 3.62 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 21 | 16 | n.a |
Total Asset Turnover | 0.89 | 3.08 | 1.74 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.16 | 0.12 | 0.07 | n.a |
Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $441,181 | $1,577,504 | $42,800,811 | n.a |
Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
Additional Ratios | ||||
Assets to Sales | 1.13 | 0.32 | 0.57 | n.a |
Current Debt/Total Assets | 14% | 11% | 6% | n.a |
Acid Test | 7.22 | 9.24 | 15.64 | n.a |
Sales/Net Worth | 1.03 | 3.45 | 1.86 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |