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Expert Application Systems, Inc.
Financial Plan

EASI's financial planning is centered around rapid growth in order to penetrate the untapped market quickly. Twenty-two products will be introduced during the first five years addressing different compliance standards. Projections indicate that EASI will break-even in August, 1993. Detailed financial projections are included in Appendix N. Note that all projections are for fiscal years ending on September 30.

7.1 Sources and Uses of Funds

EASI is seeking investors to provide cash in exchange for equity positions in the corporation. This cash will be used to enable rapid growth in the untapped compliance software market. An initial investment of $59,000 has been made and the management team has agreed to invest $53,000 of additional capital to fund the development of UL Solutions - 1950 and other initial products. Outside investors are sought to contribute $600,000. These funds will be used to market UL Solutions - 1950 and develop subsequent products.

7.2 Income Statement

The revenue projections in the income statement reflect a 35% market penetration by year 5. Expenses are reduced during the first 6 months of development due to low salaries. Salaries are brought to competitive levels in the following months so EASI can attract and retain the quality personnel necessary to provide high levels of customer satisfaction. Following negotiations with investors, a stock option pool will be established to tie management compensation to overall company success.

Pro Forma Income Statement - Fiscal Year Ending September 30
19931994199519961997
Revenues
Software Sales Revenue$374,700$3,166,580$10,226,260$18,998,640$28,197,760
Subscription Revenue$0$50,500$413,000$1,586,500$3,966,500
Interest$8,872$7,086$19,116$56,824$133,739
Total Revenue$383,572$3,224,166$10,658,376$20,641,964$32,297,999
Expenses
Cost of Goods Sold$21,750$164,720$560,770$1,151,060$1,933,660
Sales and Marketing Expenses$425,855$1,060,753$3,191,778$6,175,542$9,649,278
Research and Development$160,845$643,416$2,127,852$4,117,028$6,432,852
General and Administrative$118,162,00$535,302$1,915,067$3,705,325$5,789,567
Total Expenses$726,612$2,404,191$7,795,467$15,148,955$23,805,357
Profit (Loss) Before Income Tax$343,040$81,975$2,862,909$5,493,009$8,492,642
Income Tax$0$162,158$973,389$1,867,623$2,887,498
Net Income$343,040$657,817$1,889,520$3,625,386$5,605,144

7.3 Cash Flow Statement

Strict cash flow management will be critical to the success of the rapid growth plan for EASI. Low levels of inventory and utilization of the Austin Technology Incubator serve to minimize cash outlays during the product introduction. For planning purposes, purchases and operational expenses are assumed to be primarily cash transactions while sales are on accounts receivable. The capital investment of $600,000, in conjunction with steadily increasing revenues, ensure EASI's liquidity.

Pro Forma Cash Flow Statement - Fiscal Year Ending September 30
19931994199519961997
Cash Flow From Operations
Net Income($343,040)$657,817$1,889,520$3,625,386$5,605,144
Depreciation$950$2,450$8,100$9,200$20,800
Increase in Accts Receivable$86,873($487,695)($1,036,593)($1,548,701)($2,119,512)
Increases in Accts Payable$6,833$51,274$87,711$88,488$121,824
Increases in Inventories($5,320)($22,530)($47,900)($57,277)($78,280)
Net Cash from Operations($427,450)$201,315$900,837$2,107,896$3,529,176
Cash Flow From Investing
Purchase of Equipment($6,000)($15,000)($27,000)($48,000)($64,000)
Net Cash from Investing($6,000)($15,000)($27,000)($48,000)($64,000)
Cash Flow From Financing
Equity$600,000$0$0$0$0
Debt$0$0$0$0$0
Net Cash from Financing$600,000$0$0$0$0
Net Cash Flow$166,530$186,315$873,837$2,059,896$3,465,176
Beginning Cash$5,000$171,550$357,865$1,231,702$3,291,598
Ending Cash$171,550$357,865$1,231,702$3,291,598$6,756,775

7.4 Balance Sheet

The balance sheet reflects the low overhead advantages of a software company such as EASI.

Projected Balance Sheet - Fiscal Year Ending September 30
19931994199519961997
Assets
Cash$171,550$357,865$1,231,702$3,291,598$6,756,775
Accounts Receivable$86,873$574,568$1,611,162$3,159,863$5,279,375
Inventory$5,320$27,850$75,750$133,027$211,307
Total Current Assets$263,743$960,284$2,918,614$6,584,488$12,247,456
Equipment at Cost$11,030$26,030$53,030$101,030$165,030
(Accumulated Depreciation)($2,350)($4,800)($12,900)($51,124)($122,354)
Book Value of Equipment$8,680$21,230$40,130$49,906$42,676
Total Assets$272,423$981,514$2,958,744$6,634,394$12,290,132
Liabilities & Equity
Current liabilities$6,833$58,107$145,817$234,305$356,130
Total Liabilities$6,833$58,107$145,817$234,305$356,130
Stock & Paid-in Capital$712,000$712,000$712,000$712,000$712,000
Retained Earnings($446,410)$211,407$2,100,927$5,688,088$11,222,002
Total Equity$265,590$923,407$2,812,927$6,400,088$11,934,002
Total Liabilities and Equity$272,423$981,514$2,958,744$6,634,394$12,290,132

7.5 The Investment Opportunity

The initial investor(s) will receive 25% equity in exchange for their cash infusion of $600,000. The remaining stock will be retained by the management team. After 5 years, the investor(s) will have the option to remain in the company or have EASI repurchase their shares at fair market value. Terms for repurchase will be negotiated with the investor(s). Based on a projected P/E = 15, the investors' share is projected to be worth $21 million, providing a 104% annual return on investment.


Expert Application Systems, Inc.
Table of ContentsAppendices
0. Executive Summary
1. The Company
2. The Market
3. Products
4. Marketing Plan
5. Product Development
6. Organization
7. Financial Plan
Market Survey
Letters of Support
Product Screen Samples
Product Price List
Endorsement from UL
Cost-Benefit Analysis
Resumes
Board of Advisors
Financial Projections
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