Web Services Provider
Financial Plan
Funding Requirements and Uses
The company is raising significant new investment for the purpose of growth and operations. This funding will cover operating expenses and product development during this period.
7.1 Important Assumptions
The company operates as a Virginia Corporation. The following financial projection is based on sales volume at the levels described in the revenue section and presents, to the best of management’s knowledge and belief, the company’s expected assets, liabilities, capital, revenues, and expenses. The projections reflect management’s judgement of the expected conditions and its expected course of action given the hypothetical assumptions.
The table below provides significant assumptions that drive the company’s financial projections.
General Assumptions | |||
2000 | 2001 | 2002 | |
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 | 25.42% | 25.00% | 25.42% |
Other | 0 | 0 | 0 |
7.2 Break-even Analysis
The following chart and table provide the Break-even Assumptions for Web Services Provider.

Break-even Analysis | |
Monthly Revenue Break-even | $106,438 |
Assumptions: | |
Average Percent Variable Cost | 7% |
Estimated Monthly Fixed Cost | $99,342 |
7.3 Projected Profit and Loss
Web Services Provider is in the early stage of development, thus initial projections have only been made on accounts that are believed to most drive the income statement.




Pro Forma Profit and Loss | |||
2000 | 2001 | 2002 | |
Sales | $1,500,000 | $4,500,000 | $7,500,000 |
Direct Cost of Sales | $100,000 | $150,000 | $200,000 |
Other | $50,000 | $50,000 | $50,000 |
Total Cost of Sales | $150,000 | $200,000 | $250,000 |
Gross Margin | $1,350,000 | $4,300,000 | $7,250,000 |
Gross Margin % | 90.00% | 95.56% | 96.67% |
Expenses | |||
Payroll | $480,000 | $627,000 | $838,000 |
Sales and Marketing and Other Expenses | $249,500 | $453,000 | $675,000 |
Depreciation | $4,200 | $4,500 | $5,000 |
Repairs and Maintenance | $12,000 | $18,000 | $30,000 |
Bank Charges | $2,000 | $2,000 | $2,000 |
Insurance | $6,000 | $7,000 | $8,000 |
Rent | $40,000 | $45,000 | $48,000 |
Depreciation | $14,400 | $20,000 | $20,000 |
Software | $12,000 | $15,000 | $24,000 |
Product Development | $300,000 | $300,000 | $400,000 |
Payroll Taxes | $72,000 | $94,050 | $125,700 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $1,192,100 | $1,585,550 | $2,175,700 |
Profit Before Interest and Taxes | $157,900 | $2,714,450 | $5,074,300 |
EBITDA | $162,100 | $2,718,950 | $5,079,300 |
Interest Expense | $0 | $0 | $0 |
Taxes Incurred | $39,802 | $678,613 | $1,289,718 |
Net Profit | $118,098 | $2,035,838 | $3,784,582 |
Net Profit/Sales | 7.87% | 45.24% | 50.46% |
7.4 Projected Cash Flow
The chart and table below depict the projected cash flow for the company.

Pro Forma Cash Flow | |||
2000 | 2001 | 2002 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $0 | $0 | $0 |
Cash from Receivables | $1,268,367 | $4,008,333 | $7,008,333 |
Subtotal Cash from Operations | $1,268,367 | $4,008,333 | $7,008,333 |
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 | $1,250,000 | $0 | $0 |
Subtotal Cash Received | $2,518,367 | $4,008,333 | $7,008,333 |
Expenditures | 2000 | 2001 | 2002 |
Expenditures from Operations | |||
Cash Spending | $480,000 | $627,000 | $838,000 |
Bill Payments | $835,682 | $1,754,052 | $2,786,959 |
Subtotal Spent on Operations | $1,315,682 | $2,381,052 | $3,624,959 |
Additional Cash Spent | |||
Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
Principal Repayment of Current Borrowing | $500 | $0 | $0 |
Other Liabilities Principal Repayment | $10,900 | $0 | $0 |
Long-term Liabilities Principal Repayment | $3,550 | $0 | $0 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $600,000 | $300,000 | $300,000 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $1,930,632 | $2,681,052 | $3,924,959 |
Net Cash Flow | $587,734 | $1,327,281 | $3,083,375 |
Cash Balance | $590,184 | $1,917,466 | $5,000,840 |
7.5 Projected Balance Sheet
Projected Balance Sheets for 2000 – 2002 can be found in the table below, and in the appendices.
Pro Forma Balance Sheet | |||
2000 | 2001 | 2002 | |
Assets | |||
Current Assets | |||
Cash | $590,184 | $1,917,466 | $5,000,840 |
Accounts Receivable | $245,833 | $737,500 | $1,229,167 |
Other Current Assets | $1,050 | $1,050 | $1,050 |
Total Current Assets | $837,068 | $2,656,016 | $6,231,057 |
Long-term Assets | |||
Long-term Assets | $605,250 | $905,250 | $1,205,250 |
Accumulated Depreciation | $5,200 | $9,700 | $14,700 |
Total Long-term Assets | $600,050 | $895,550 | $1,190,550 |
Total Assets | $1,437,118 | $3,551,566 | $7,421,607 |
Liabilities and Capital | 2000 | 2001 | 2002 |
Current Liabilities | |||
Accounts Payable | $72,019 | $150,630 | $236,089 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $72,019 | $150,630 | $236,089 |
Long-term Liabilities | $0 | $0 | $0 |
Total Liabilities | $72,019 | $150,630 | $236,089 |
Paid-in Capital | $1,350,000 | $1,350,000 | $1,350,000 |
Retained Earnings | ($103,000) | $15,098 | $2,050,936 |
Earnings | $118,098 | $2,035,838 | $3,784,582 |
Total Capital | $1,365,098 | $3,400,936 | $7,185,518 |
Total Liabilities and Capital | $1,437,118 | $3,551,566 | $7,421,607 |
Net Worth | $1,365,098 | $3,400,936 | $7,185,518 |
7.6 Business Ratios
The following table outlines some of the more important ratios from the information retrieval industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 7375.
Ratio Analysis | ||||
2000 | 2001 | 2002 | Industry Profile | |
Sales Growth | 66.67% | 200.00% | 66.67% | 9.70% |
Percent of Total Assets | ||||
Accounts Receivable | 17.11% | 20.77% | 16.56% | 25.00% |
Other Current Assets | 0.07% | 0.03% | 0.01% | 46.30% |
Total Current Assets | 58.25% | 74.78% | 83.96% | 76.60% |
Long-term Assets | 41.75% | 25.22% | 16.04% | 23.40% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 5.01% | 4.24% | 3.18% | 49.40% |
Long-term Liabilities | 0.00% | 0.00% | 0.00% | 21.20% |
Total Liabilities | 5.01% | 4.24% | 3.18% | 70.60% |
Net Worth | 94.99% | 95.76% | 96.82% | 29.40% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 90.00% | 95.56% | 96.67% | 0.00% |
Selling, General & Administrative Expenses | 82.10% | 50.31% | 45.92% | 78.10% |
Advertising Expenses | 14.13% | 8.89% | 8.00% | 0.90% |
Profit Before Interest and Taxes | 10.53% | 60.32% | 67.66% | 1.90% |
Main Ratios | ||||
Current | 11.62 | 17.63 | 26.39 | 1.57 |
Quick | 11.62 | 17.63 | 26.39 | 1.19 |
Total Debt to Total Assets | 5.01% | 4.24% | 3.18% | 70.60% |
Pre-tax Return on Net Worth | 11.57% | 79.81% | 70.62% | 4.10% |
Pre-tax Return on Assets | 10.99% | 76.43% | 68.37% | 13.80% |
Additional Ratios | 2000 | 2001 | 2002 | |
Net Profit Margin | 7.87% | 45.24% | 50.46% | n.a |
Return on Equity | 8.65% | 59.86% | 52.67% | n.a |
Activity Ratios | ||||
Accounts Receivable Turnover | 6.10 | 6.10 | 6.10 | n.a |
Collection Days | 58 | 40 | 48 | n.a |
Accounts Payable Turnover | 12.46 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 22 | 25 | n.a |
Total Asset Turnover | 1.04 | 1.27 | 1.01 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.05 | 0.04 | 0.03 | n.a |
Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $765,048 | $2,505,386 | $5,994,968 | n.a |
Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.96 | 0.79 | 0.99 | n.a |
Current Debt/Total Assets | 5% | 4% | 3% | n.a |
Acid Test | 8.21 | 12.74 | 21.19 | n.a |
Sales/Net Worth | 1.10 | 1.32 | 1.04 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |