Investment Consulting Business Plan

The primary goal of the first full quarter of operation (July – September 2001) will be to secure funding from outside sources. Prior to this point, VISTA INVESTORS has a budget of $25,000 to be used for finding investors, forming a legal partnership, and registering the firm and its products with the SEC. The amount sought from investors will be approximately $1 million, which should see the business through to profitability near the completion of the third year. This break-even point equates roughly to an asset under management level of approximately $100 million. One can easily see that even modest points beyond this break-even level can be highly lucrative. Economies of scale are great meaning the same investment team can take on a virtually unlimited amount of assets. More importantly, net profit margins become very attractive.

There are a few items worthy of note as it pertains to our forecasts. Most likely, excess cash will be re-deployed into the business once a level of sustainability in revenue has been achieved. The primary purpose of this type of reinvestment would focus on a “second stage” marketing plan to increase distribution. A word of note is also warranted as it pertains to the cash flow statement. One appealing feature of the investment industry is that collection of fees (i.e. revenues) is highly certain because fees are frequently charged directly to the client’s accounts (or to the mutual fund). For this reason, revenue certainty is very high and is directly related to the amount of assets under management. Common practice in the investment management industry is to bill at each quarter-end. For example, our annual fee of 0.80% would be applied to our clients’ accounts four times per year at 0.20%.

Simply put, the economic motivation is great. Growth rates for the investment management industry are projected to range from 20% to 25% in each of the next three years. The demographic, economic, political and social evidence supporting these projections make this one of the most attractive industries due to the high degree of certainty in the estimates. We believe the certainty coupled with the above average growth rate distinguishes this opportunity from other venture investments. Additionally, our conservative estimates outline a plan-to-profitability over a period much shorter than typical venture investments that sometimes require up to ten years to harvest profits.

7.1 Exit Strategy

All employee/owners of the firm will be required to sell back their ownership stakes upon retirement/departure. Thus ownership incentives remain aligned with those actively participating in the firm’s activities. This requirement does not apply to venture/angel investors contributing to the up-front financing of our initial operating budget. Exit strategies will be negotiated with venture/angel investors on a case-by-case basis. This will include the term of the investment partnership.

7.2 Financial Risks and Contingencies

The following highlights some, but certainly not all, of the risks associated with this business plan:

Market Risk – A high correlation exists between the growth rate of the investment management industry and the performance of equity markets. While evidence suggests a conducive environment for equities in the future, no forecasts can be made with absolute certainty.

Performance Risk – At the end of the day, our products are measured by their performance. While the goal is to achieve competitive performance over three to five-year time periods, short-term periods may result in underperformance based on the critical measures outlined in this plan. For this reason, it is common for newly-created ventures in the investment management business to seek funding for an operating budget covering three or more years. This is consistent with the VISTA INVESTORS financing plan.

Business/Operating Risk – Beyond the third full year of operations, assets under management must produce revenues that will be sufficient to support operations in their entirety. Otherwise our options will be to acquire additional funding or to reduce costs. Because investors are our highest priority, we will not take action that will jeopardize our investment products. Thus, costs are unlikely to be reduced below the already modest forecasts of our financial statements. As a contingency, we would first consider outside funding, the sale of our firm, the sale of one of our products, or other feasible alternatives that would sustain the production of the highest quality investment products.

7.3 Important Assumptions

The following table provides some assumptions that are key to the success of VISTA INVESTORS.

7.4 Break-even Analysis

The chart and table below give the break-even assumptions for the company.

7.5 Projected Profit and Loss

VISTA INVESTORS’ profit and loss information can be found in the table below.

7.6 Projected Cash Flow

The chart and table below highlight the cash flow statement for the company. It includes the anticipated investment required in the first year.

7.7 Projected Balance Sheet

The Balance Sheet shows a build-up of cash during year 2004 and beyond.

7.8 Business Ratios

The following table outlines some of the more important ratios from the Business Services industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 7389, Business Services, NEC.