Internet Service Provider Business Plan

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.

Internet service provider business plan, financial plan chart image

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