"Internet service provider" Business Plan:
1.0 Executive Summary
2.0 Company Summary
3.0 Services
4.0 Market Analysis Summary
5.0 Strategy and Implementation Summary
6.0 Management Summary
7.0 Financial Plan
 7.1 Funding Uses and General Assumptions
7.2 Key Financial Indicators
7.3 Break-even Analysis
7.4 Projected Profit and Loss
7.5 Projected Cash Flow
7.6 Projected Balance Sheet
 7.7 Business Ratios
Business Ideas applicable for this business plan:
Starting your business on the Web
Web advertising revenue website needs start up capital
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This business plan was originally published
by Palo Alto Software, Inc. All rights reserved.
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7.0 Financial Plan
This section presents our financial projections for the term of the plan.
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7.1 Funding Uses and General Assumptions
The company is raising $1.5 million for the purpose of growth and
operations. This funding will cover operating expenses and product development
during this period. The following is a breakdown of how the funds will be used.
| Expenses: |
Cost: |
| Advertising: |
$50,000 |
| Legal Fees: |
$10,000 |
| Office: |
$40,000 |
| Working Capital: |
$100,000 |
| Miscellaneous: |
$50,000 |
| Sub-total: |
$250,000 |
| Product Development: |
$1,250,000 |
| Total: |
$1,500,000 |
Significant Assumptions
- Nature and Limitation of Projections. This 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.
- Revenues. The company's revenue is derived primarily
from subscriptions. Revenue projections are based on the 1999 sales in the
comparable market nationwide, based on industry average. The exact numbers can
be found in the Sales Forecast table and chart section.
- Expenses. The company's expenses are primarily those of
salaries, sales commissions, and administrative costs. Other expenses are based
on management's estimates and industry averages.
The table below outlines the general assumptions of Web Solutions.
|
| General Assumptions |
| |
2001 |
2002 |
2003 |
| 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% |
| Sales on Credit |
15.00% |
15.00% |
15.00% |
| Other |
0 |
0 |
0 |
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7.2 Key Financial Indicators
The sales forecast chart and table are presented below. Final sales
forecasts are based on predictions mentioned in the Executive Summary.
Sales Monthly
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7.3 Break-even Analysis
The following table and chart reflect the company's break-even
estimates. These are based on fixed and variable cost estimates derived from
past income statement data. Given that Web Solutions has little in the way of
marginal costs, the break even analysis reflects the industry's high gross
margins. Unless one of the potential future risks seriously impacts
profitability, or the company loses its ability to rapidly adjust to changing
market conditions, the company does not see this as a serious issue.
|
| Break-even Analysis: |
| Monthly Units Break-even |
41,368 |
| Monthly Revenue Break-even |
$41,368 |
| |
| Assumptions: |
| Average Per-Unit Revenue |
$1.00 |
| Average Per-Unit Variable Cost |
$0.05 |
| Estimated Monthly Fixed Cost |
$39,228 |
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7.4 Projected Profit and Loss
Web Solutions 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. The following table provides Web Solution's projected income
statements for 2000-2002.
|
| Pro Forma Profit and Loss |
| |
2001 |
2002 |
2003 |
| Sales |
$1,500,000 |
$4,500,000 |
$7,500,000 |
| Direct Cost of Goods |
$77,596 |
$84,296 |
$88,796 |
| Other |
$0 |
$0 |
$0 |
|
------------ |
------------ |
------------ |
| Total Cost of Sales |
$77,596 |
$84,296 |
$88,796 |
| Gross Margin |
$1,422,404 |
$4,415,704 |
$7,411,204 |
| Gross Margin % |
94.83% |
98.13% |
98.82% |
| Expenses: |
| Payroll |
$307,800 |
$342,400 |
$392,400 |
| Sales and Marketing and Other Expenses |
$41,468 |
$41,468 |
$41,468 |
| Depreciation |
$0 |
$0 |
$0 |
| Legal Fees |
$300 |
$300 |
$300 |
| Utilities |
$3,600 |
$3,600 |
$3,600 |
| Insurance |
$4,200 |
$4,200 |
$4,200 |
| Mortgage |
$67,200 |
$67,200 |
$67,200 |
| Payroll Taxes |
$46,179 |
$51,360 |
$58,860 |
| Other |
$0 |
$0 |
$0 |
| |
------------ |
------------ |
------------ |
| Total Operating Expenses |
$470,738 |
$510,528 |
$568,028 |
| Profit Before Interest and Taxes |
$951,666 |
$3,905,176 |
$6,843,176 |
| Interest Expense |
$65,506 |
$51,131 |
$36,131 |
| Taxes Incurred |
$225,583 |
$963,511 |
$1,730,124 |
| Net Profit |
$660,577 |
$2,890,534 |
$5,076,921 |
| Net Profit/Sales |
44.04% |
64.23% |
67.69% |
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7.5 Projected Cash Flow
This chart and table show our cash flow and cash balance projections.
Cash
|
| Pro Forma Cash Flow |
| |
2001 |
2002 |
2003 |
| |
| Cash from Operations: |
| Cash Sales |
$1,275,000 |
$3,825,000 |
$6,375,000 |
| Cash from Receivables |
$220,905 |
$619,810 |
$1,069,810 |
| Subtotal Cash from Operations |
$1,495,905 |
$4,444,810 |
$7,444,810 |
| |
| Additional Cash Received |
| Sales Tax, VAT |
$0 |
$0 |
$0 |
| HMRC VAT Repayments |
$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 |
$1,495,905 |
$4,444,810 |
$7,444,810 |
| Expenditures |
2001 |
2002 |
2003 |
| Expenditures from Operations: |
| Cash Spending |
$48,141 |
$121,571 |
$194,346 |
| Payment of Accounts Payable |
$829,560 |
$1,438,462 |
$2,179,741 |
| Subtotal Spent on Operations |
$877,701 |
$1,560,033 |
$2,374,086 |
| |
| 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 |
$150,000 |
$150,000 |
$150,000 |
| Purchase Other Current Assets |
$0 |
$0 |
$0 |
| Purchase Long-term Assets |
$0 |
$0 |
$0 |
| Dividends |
$0 |
$0 |
$0 |
| Subtotal Cash Spent |
$1,027,701 |
$1,710,033 |
$2,524,086 |
| |
| Net Cash Flow |
$468,204 |
$2,734,777 |
$4,920,724 |
| Cash Balance |
$580,816 |
$3,315,593 |
$8,236,316 |
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7.6 Projected Balance Sheet
The following table is the Projected Balance Sheet.
|
| Pro Forma Balance Sheet |
| |
| Assets |
| Current Assets |
2001 |
2002 |
2003 |
| Cash |
$580,816 |
$3,315,593 |
$8,236,316 |
| Accounts Receivable |
$27,595 |
$82,785 |
$137,975 |
| Other Current Assets |
$34,650 |
$34,650 |
$34,650 |
| Total Current Assets |
$643,061 |
$3,433,028 |
$8,408,941 |
| Long-term Assets |
| Long-term Assets |
$331,650 |
$331,650 |
$331,650 |
| Accumulated Depreciation |
$0 |
$0 |
$0 |
| Total Long-term Assets |
$331,650 |
$331,650 |
$331,650 |
| Total Assets |
$974,711 |
$3,764,678 |
$8,740,591 |
| |
| Liabilities and Capital |
| Current Liabilities |
2001 |
2002 |
2003 |
| Accounts Payable |
$32,409 |
$81,842 |
$130,835 |
| Current Borrowing |
$90,338 |
$90,338 |
$90,338 |
| Other Current Liabilities |
$90,338 |
$90,338 |
$90,338 |
| Subtotal Current Liabilities |
$213,084 |
$262,517 |
$311,510 |
| |
Long-term Liabilities |
$495,975 |
$345,975 |
$195,975 |
| Total Liabilities |
$709,059 |
$608,492 |
$507,485 |
| |
| Paid-in Capital |
$0 |
$0 |
$0 |
| Retained Earnings |
($394,925) |
$265,652 |
$3,156,186 |
| Earnings |
$660,577 |
$2,890,534 |
$5,076,921 |
| Total Capital |
$265,652 |
$3,156,186 |
$8,233,107 |
| Total Liabilities and Capital |
$974,711 |
$3,764,678 |
$8,740,591 |
| Net Worth |
$265,652 |
$3,156,186 |
$8,233,107 |
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7.7 Business Ratios
Standard business ratios are shown in this table. Industy Profile
ratios are based on Standard Industrial Classification (SIC) Index code 7375
| |
| Ratio Analysis |
| |
2001 |
2002 |
2003 |
Industry Profile |
| Sales Growth |
21.21% |
200.00% |
66.67% |
9.70% |
| |
| Percent of Total Assets |
| Accounts Receivable |
2.83% |
2.20% |
1.58% |
25.00% |
| Inventory |
0.00% |
0.00% |
0.00% |
5.30% |
| Other Current Assets |
3.55% |
0.92% |
0.40% |
46.30% |
| Total Current Assets |
65.97% |
91.19% |
96.21% |
76.60% |
| Long-term Assets |
34.03 |
8.81% |
3.79% |
23.40% |
| Total Assets |
100.00% |
100.00% |
100.00% |
100.00% |
| |
| Current Liabilities |
21.86% |
6.97% |
3.56% |
49.40% |
| Long-term Liabilities |
50.88% |
9.19% |
2.24% |
21.20% |
| Total Liabilities |
72.75% |
16.16% |
5.81% |
70.60% |
| Net Worth |
27.25% |
83.84% |
94.19% |
29.40% |
| |
| Percent of Sales |
| Sales |
100.00% |
100.00% |
100.00% |
100.00% |
| Gross Margin |
94.83% |
98.13% |
98.82% |
0.00% |
| Selling, General & Administrative Expenses |
50.52% |
33.89% |
30.75% |
78.10% |
| Advertising Expenses |
1.67% |
0.56% |
0.33% |
0.90% |
| Profit Before Interest and Taxes |
63.44% |
86.78% |
91.24% |
1.90% |
| |
| Main Ratios |
| Current |
3.02 |
13.08 |
26.99 |
1.57 |
| Quick |
3.02 |
13.08 |
26.99 |
1.19 |
| Total Debt to Total Assets |
72.75% |
16.16% |
5.81% |
70.60% |
| Pre-tax Return on Net Worth |
333.58% |
122.11% |
82.68% |
4.10% |
| Pre-tax Return on Assets |
90.92% |
102.37% |
77.88% |
13.80% |
| |
| Additional Ratios |
2001 |
2002 |
2003 |
|
| Net Profit Margin |
44.04% |
64.23% |
67.69% |
n.a |
| Return on Equity |
248.66% |
91.58% |
61.66% |
n.a |
| |
| Activity Ratios |
| Accounts Receivable Turnover |
8.15 |
8.15 |
8.15 |
n.a |
| Collection Days |
48 |
30 |
36 |
n.a |
| Inventory Turnover |
0.00 |
0.00 |
0.00 |
n.a |
| Accounts Payable Turnover |
24.42 |
18.18 |
17.03 |
n.a |
| Payment Days |
17 |
14 |
17 |
n.a |
| Total Asset Turnover |
1.54 |
1.20 |
0.86 |
n.a |
| |
| Debt Ratios |
| Debt to Net Worth |
2.67 |
0.19 |
0.06 |
n.a |
| Current Liab. to Liab. |
0.30 |
0.43 |
0.61 |
n.a |
| |
| Liquidity Ratios |
| Net Working Capital |
$429,977 |
$3,170,511 |
$8,097,432 |
n.a |
| Interest Coverage |
14.53 |
76.38 |
189.40 |
n.a |
| |
| Additional Ratios |
| Assets to Sales |
0.65 |
0.84 |
1.17 |
n.a |
| Current Debt/Total Assets |
22% |
7% |
4% |
n.a |
| Acid Test |
2.89 |
12.76 |
26.55 |
n.a |
| Sales/Net Worth |
5.65 |
1.43 |
0.91 |
n.a |
| Dividend Payout |
0.00 |
0.00 |
0.00 |
n.a |
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