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Investment Company

Executive Summary

This sample plan was created for a hypothetical investment company that buys other companies as investments.  In this sample, the hypothetical Venture Capital firm starts with $20 million as an initial investment fund.  In its early months of existence, it invests $5 million each in four companies.  It receives a management fee of two percent (2%) of the fund value, paid quarterly.  It pays salaries to its partners and other employees, and office expenses, from the management fee.

The investments show up in the Cash Flow table as the purchase of long-term assets, which also puts them into the balance sheet as long-term assets.  You can see them in this sample plan, in the first few months.

In the third year, one of the target companies fails, so $5 million is written off as failure.  You’ll see how that looks as a $5 million sale of long-term assets in the cash flow, and a balancing entry of $5 million in costs of sales in the profit and loss, making for a loss and write-off that year.  The result is a tax loss, and the balance of investments goes to $15 million.

In the fifth year, one of the target companies is transacted at $50 million.  You’ll see in the sample how that shows up as a $45 million equity appreciation in the sales forecast, plus a $5 million sale of long-term assets in the cash flow.  At that point there’s been a $45 million profit, and the balance of long-term assets goes down to $10 million.

This is a simplified example.  The business model holds long-term assets and waits for them to appreciate.  It doesn’t show appreciation of assets until they are finally sold, and it doesn’t show write-down of assets until they fail.  Sales and cost of sales are the appreciation and write-down of assets, plus the management fees.

The explanation above has been broken down and copied into key topics in the outline that are linked to corresponding tables.  These topics are:

  • 2.2     Start-up Summary
  • 5.5.1  Sales Forecast
  • 6.4     Personnel
  • 7.4     Projected Profit and Loss
  • 7.5     Projected Cash Flow
  • 7.6     Projected Balance Sheet
Investment company business plan, executive summary chart image