Financial Services Business Plan

Green Investments (GI) is a financial service company specializing in stocks of environmentally responsible companies. The Washington-based L.L.C. is led by Sarah Lewis and Steve Burke. GI utilizes financial research from Bear Stearns and in-house environmental responsibility analysis to advise clients.

Services:

GI has developed a criteria-based marker system to evaluate companies’ environmental impact effectively. Only financially prudent companies are evaluated, ensuring that recommendations are financially and environmentally sound.

Competitive Edge:

GI will leverage the proprietory evaluation system to rapidly gain market share. The system is convenient and based on extensive research, providing a streamlined overview of companies’ environmental performance.

Market:

GI will focus on the unserved niche of environmental investing within the financial services market. GI faces indirect competition from environmentally responsible mutual funds, which assess a company’s environmental performance but do not allow for individual equity investment.

Management Team:

GI is led by two experienced managers, Sarah Lewis and Steve Burke. Sarah holds a masters degree in environmental studies and has worked for the Environmental Protection Agency, where she prepared environmental impact statements. Steve has an MBA and has developed an extensive network of contacts while working for Salomon Smith Barney.

GI addresses a previously ignored niche in the financial services market. GI projects sales of $230,000 and $261,000 in years two and three, respectively.

Financial Services Business Plan Example

1.1 Objectives

  • To become the premier environmental investment firm.
  • Attract more people to invest in environmentally responsible companies.
  • Continue to reduce costs associated with environmental investment research.

1.2 Mission

Green Investments’ mission is to be the premier financial service organization for investing in environmentally responsible companies. Through comprehensive research and verifiable criteria, Green Investments identifies sound environmental investments. By offering high-level services, Green Investments will succeed as a company and have a positive impact on the environment.

1.3 Keys to Success

  • Develop accurate environmental markers for assessing a company’s environmental impacts.
  • Purchase high-quality investment research from recognized firms.
  • Price the service competitively with a good profit margin.

Company Summary

Green Investments is a Washington-based financial service company specializing in environmentally responsible companies. It is owned by Steve Burke and Sarah Lewis and is registered as a L.L.C.

2.1 Start-up Summary

The following equipment is needed for start-up:

  • Phone system (5 line).
  • Workstation computers (4), back-end server, DSL Internet connection, and laser printer.
  • Office furniture, meeting room and waiting room furniture.
  • Monthly service charge for Bear Stearns software.
  • Fax machine, copier, lighting, and assorted office supplies.

2.2 Company Ownership

Steve Burke and Sarah Lewis equally own Green Investments. They initially planned to form a S Corporation, but decided on a L.L.C. to avoid double taxation while still enjoying the benefits of personal liability avoidance.

Services

Green Investments offers investment advice for stocks. It purchases financial performance research from Bear Stearns, a highly respected firm. In addition to financial performance criteria, Green Investments has developed environmental markers to evaluate a company’s environmental impact. The markers include energy usage, water usage, recycling programs, paper consumption, chemical cleaning usage, ground maintenance impact, formal environmental policies, and recycling rates. Green Investments applies these markers to recommended investments from Bear Stearns to create a list of recommended stocks with strong financial and environmental performance.

Green Investments charges a service fee similar to standard brokerage firms, but slightly higher due to the additional research required. However, the price difference is not significant, especially for customers who want to invest in environmentally sound companies.

Recent studies have shown that "green" stocks perform well. Companies that prioritize environmental considerations tend to perform better.

Market Analysis Summary

Green Investments targets two customer segments: households with less than $1 million, and households with more than $1 million in wealth. Both groups are concerned with the environment and make investment decisions based on companies with strong economic and environmental performance records.

The financial services industry has various niches, and Green Investments specifically focuses on environmentally responsible companies.

4.1 Market Segmentation

Green Investments has segmented the target market into two groups based on household wealth: less than $1 million and more than $1 million.

  • Customers with less than $1 million are middle-class individuals who invest in moderately risky stocks and allocate 35%-45% of their portfolio to stocks.
  • Customers with more than $1 million are upper-middle class to upper class individuals who prioritize return on investments and have environmental concerns.

Both segments share characteristics such as choosing environmentally friendly vehicles, actively recycling, and making retail purchases with environmental considerations in mind. They are also more likely to engage in human-powered outdoor activities.

Financial Services Business Plan Example

Market Analysis:

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Year 1 Year 2 Year 3 Year 4 Year 5 CAGR

Potential Customers Growth 8% 1,232,000 1,330,560 1,437,005 1,551,965 1,676,122 8.00%

>$1 million worth customers 7% 223,090 238,706 255,415 273,294 292,425 7.00%

Total 7.85% 1,455,090 1,569,266 1,692,420 1,825,259 1,968,547 7.85%

4.2 Target Market Segment Strategy:

Green Investments has chosen these target market segments because of their ideological beliefs and the corresponding need for services that Green Investments can provide. While people can buy shares of an environmentally responsible mutual fund to act on their beliefs, mutual funds are just one type of investment. The downside of investments is their relatively low rate of return compared to good stocks, limited personalized service, and the inability to make custom choices beyond the type of mutual fund.

Therefore, Green Investments has chosen these customer segments because they have unmet needs. These groups have the financial means and desire for environmental investments, but their only current option is a mutual fund. Green Investments has differentiated these market segments based on household worth, as this characteristic provides useful behavioral information.

4.3 Service Business Analysis:

Green Investments operates in the financial service industry, a multi-billion dollar industry providing a range of financial services such as investments. This industry offers various investment options, including but not limited to bonds, treasury bills, stocks, mutual funds, insurance policies, annuities, and IRAs.

Within the industry, customers are served by large national firms like Merrill Lynch or Charles Schwab, franchises, individual firms, and online brokers. Buying decisions are often influenced by personal familiarity with a specific company. Most service providers offer a similar menu of investment options.

Fee structures vary, with some firms charging a percentage based on the client’s investment amount and others using hourly rates or quarterly management fees. Some service providers offer flexibility to work with customers in creating special arrangements.

4.3.1 Competition and Buying Patterns:

Green Investments faces no direct competitors offering environmentally sound stock investment services. The current environmental investment options are all mutual fund-based, such as Janus, Citizen Funds, Sierra Club Environmental Fund, and Portfolio 21.

Green Investments also competes with a range of financial advisors who provide various investment options. However, these competitors do not independently research the environmentalism of different companies.

Strategy and Implementation Summary:

Green Investments differentiates itself through independent environmental research based on custom criteria for objectively measuring a company’s dedication to environmentalism. This competitive edge is marketed using the slogan "think globally, act locally," inspiring people to contribute to the environment through responsible investing. The sales campaign emphasizes the superior performance of environmental investments compared to the S&P 500 Index.

5.1 Competitive Edge:

Green Investments’ competitive edge lies in its environmental marker criteria that identify economically performing companies with solid environmental commitments. These markers are valuable because they are based on extensive research, provide comparability with similar businesses, and are easier to use than large-scale internal audits. The objective and accurate measurement system offered by Green Investments is unique and serves as an information source for stock investment decision-making.

5.2 Marketing Strategy:

Green Investments’ marketing effort revolves around the mantra "think globally, act locally" to encourage people to make investments based on their conscience. The company promotes the idea that responsible investing has no real cost compared to other options and offers better returns than the S&P 500 Index. Magazine advertisements and community-based marketing activities, such as networking, sponsorship, and participation in seminars, increase awareness of Green Investments and its services.

5.3 Sales Strategy:

The sales strategy focuses on providing quantitative evidence that Green Investments’ recommended companies outperform the S&P 500 Index. Green Investments’ chosen companies outperformed the index by 2.4% in 1999-2001. A sales packet is distributed to prospective customers, highlighting the historic returns of recommended companies.

5.3.1 Sales Forecast:

The sales forecast is conservative to avoid inflated expectations. The initial months will be slow, but Green Investments projects steady, incremental growth in sales. This growth is attributed to increased sales proficiency and awareness among the target customers.

Please refer to the table and chart below for numerical and graphical representations of the future year’s sales forecasts.

Financial Services Business Plan Example

Sales Forecast

Year 1 Year 2 Year 3

Sales $54,746 $156,665 $178,225

>$1 million worth customers $22,889 $73,633 $83,766

Total Sales $77,635 $230,298 $261,991

Direct Cost of Sales

Year 1 Year 2 Year 3

$8,212 $23,500 $26,734

>$1 million worth customers $3,433 $11,045 $12,565

Subtotal Direct Cost of Sales $11,645 $34,545 $39,299

5.4 Milestones

Green Investments has identified several milestones that will act as ambitious yet achievable goals for the organization. By establishing these goals, the organization will develop an implicit incentive for all members to work hard.

Business plan completion: The business plan is the roadmap for the organization and forces analysis of a multitude of issues.

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– First account of over $1 million invested: This would be a significant amount for both an individual account and the organization, and they will strive to achieve many of these customers.

– Profitability: An eventual necessity.

– Revenue of $250,000: With the achievement of this milestone and the previous one, it will reaffirm the success of the business model.

Financial Services Business Plan Example

Milestones:

Milestones
Milestone Start Date End Date Budget Manager Department
Business plan completion 1/1/2003 2/1/2003 $0 Sarah & Steve Planning
First $ million account 1/1/2003 4/15/2004 $0 Sarah Sales
Profitability 1/1/2003 6/1/2005 $0 Steve Accounting
Revenue of $250K 1/1/2003 9/15/2004 $0 Sarah Sales
Totals $0

Management Summary:

Green Investments will be led by the founding team of Sarah Lewis and Steve Burke. Sarah has an undergraduate and Masters in environmental studies from the University of Burlington. After obtaining her degrees, she moved to Washington DC where she worked for the Environmental Protection Agency (EPA) for four years, performing environmental impact statements for various industries, companies, and projects. Sarah was also a project manager for Janus in their evaluation department, where they conducted company-wide environmental assessments of potential investments for the fund.

The other member of Green Investments’ management team is Steve Burke. Steve comes from a financial background, with an undergraduate degree in Finance from Seattle University and an MBA from the University of Washington. After completing his education, Steve worked for Salomon Smith Barney in their investment department for eight years.

Personnel Plan:

  • Sarah: Company research, development of markers, sales.
  • Steve: Sales, accounting and finance, account management, marketing.
  • Account manager: Customer support for investment accounts.
  • Administrative assistant: Assorted tasks.
  • Bookkeeper: Handles day-to-day accounts receivables and payable duties.
  • Research assistant: Assists Sarah with research.

The positions will be phased in as needed. Please refer to the following chart for personnel forecasts.

Personnel Plan
Year 1 Year 2 Year 3
Sarah $30,000 $40,000 $40,000
Steve $30,000 $40,000 $40,000
Account Manager $27,000 $36,000 $36,000
Administrative Assistant $15,000 $15,000 $15,000
Bookkeeper $10,000 $12,000 $12,000
Research Assistant $8,250 $9,000 $9,000
Total People 6 6 6
Total Payroll $120,250 $152,000 $152,000

Financial Plan:

The following sections will outline important financial information.

Important Assumptions:

General Assumptions
Year 1 Year 2 Year 3
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 30.00% 30.00% 30.00%
Other 0 0 0

Break-even Analysis:

The Break-even Analysis is shown in the following table and chart.

Financial Services Business Plan Example

Break-even Analysis:

Monthly Revenue Break-even: $15,225

Assumptions:

– Average Percent Variable Cost: 15%

– Estimated Monthly Fixed Cost: $12,941

Projected Profit and Loss:

The table below indicates the projected profit and loss.

Financial Services Business Plan Example

Financial Services Business Plan Example

Financial Services Business Plan Example

Pro Forma Profit and Loss

Year 1 Year 2 Year 3

Sales $77,635 $230,298 $261,991

Direct Cost of Sales $11,645 $34,545 $39,299

Other Costs of Sales $0 $0 $0

Total Cost of Sales $11,645 $34,545 $39,299

Gross Margin $65,990 $195,753 $222,692

Gross Margin % 85.00% 85.00% 85.00%

Expenses

Payroll $120,250 $152,000 $152,000

Sales and Marketing and Other Expenses $0 $0 $0

Depreciation $3,804 $317 $317

Rent $7,800 $7,800 $7,800

Utilities $1,800 $1,800 $1,800

Insurance $1,800 $1,800 $1,800

Payroll Taxes $18,038 $22,800 $22,800

Other $1,800 $1,800 $1,800

Total Operating Expenses $155,292 $188,317 $188,317

Profit Before Interest and Taxes ($89,301) $7,436 $34,375

EBITDA ($85,497) $7,753 $34,692

Interest Expense $73 $220 $120

Taxes Incurred $0 $2,165 $10,277

Net Profit ($89,374) $5,051 $23,979

Net Profit/Sales -115.12% 2.19% 9.15%

8.4 Projected Cash Flow

The following table and chart will indicate Projected Cash Flow.

Financial Services Business Plan Example

Pro Forma Cash Flow

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $77,635 $230,298 $261,991
Subtotal Cash from Operations $77,635 $230,298 $261,991
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $3,000 $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 $80,635 $230,298 $261,991
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $120,250 $152,000 $152,000
Bill Payments $38,394 $71,497 $84,646
Subtotal Spent on Operations $158,644 $223,497 $236,646
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $300 $1,000 $1,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $158,944 $224,497 $237,646
Net Cash Flow ($78,308) $5,801 $24,345
Cash Balance $692 $6,492 $30,837

Projected Balance Sheet

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $692 $6,492 $30,837
Other Current Assets $7,000 $7,000 $7,000
Total Current Assets $7,692 $13,492 $37,837
Long-term Assets
Long-term Assets $19,000 $19,000 $19,000
Accumulated Depreciation $3,804 $4,121 $4,438
Total Long-term Assets $15,196 $14,879 $14,562
Total Assets $22,888 $28,371 $52,399
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $4,561 $5,994 $7,043
Current Borrowing $2,700 $1,700 $700
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $7,261 $7,694 $7,743
Long-term Liabilities $0 $0 $0
Total Liabilities $7,261 $7,694 $7,743
Paid-in Capital $125,000 $125,000 $125,000
Retained Earnings ($20,000) ($109,374) ($104,323)
Earnings ($89,374) $5,051 $23,979
Total Capital $15,626 $20,677 $44,656
Total Liabilities and Capital $22,888 $28,371 $52,399
Net Worth $15,626 $20,677 $44,656
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Business Ratios

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 196.64% 13.76% 8.79%
Percent of Total Assets
Other Current Assets 30.58% 24.67% 13.36% 44.18%
Total Current Assets 33.61% 47.56% 72.21% 76.27%
Long-term Assets
Long-term Assets 66.39%
General Assumptions
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
1 2 3 4 5 6 7 8 9 10 11 12
0 0 0 0 0 0 0 0 0 0 0 0

Pro Forma Profit and Loss:

Pro Forma Profit and Loss
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
$0 $0 $0 $2,500 $3,545 $6,681 $8,641 $9,312 $10,987 $11,110 $12,135 $12,724
$0 $0 $0 $375 $532 $1,002 $1,296 $1,397 $1,648 $1,667 $1,820 $1,909
$0 $0 $0 $375 $532 $1,002 $1,296 $1,397 $1,648 $1,667 $1,820 $1,909
$0 $0 $0 $2,125 $3,013 $5,679 $7,345 $7,916 $9,339 $9,444 $10,315 $10,816
0.00% 0.00% 0.00% 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% 85.00%
$7,167 $8,030 $12,630 $13,205 $13,780 $14,355 $14,355 $14,355 $14,355 $14,355 $14,355 $14,355
($7,167) ($8,030) ($12,630) ($11,080) ($10,766) ($8,676) ($7,010) ($6,439) ($5,016) ($4,911) ($4,040) ($3,539)
($6,850) ($7,713) ($12,313) ($10,763) ($10,449) ($8,359) ($6,693) ($6,122) ($4,699) ($4,594) ($3,723) ($3,222)
$0 $0 $0 $0 $0 $0 $0 $0 $0 $25 $25 $23
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Pro Forma Cash Flow:

Pro Forma Cash Flow
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
$0 $0 $0 $2,500 $3,545 $6,681 $8,641 $9,312 $10,987 $11,110 $12,135 $12,724
$0 $0 $0 $2,500 $3,545 $6,681 $8,641 $9,312 $10,987 $14,110 $12,135 $12,724
$0 $0 $0
Pro Forma Balance Sheet
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Assets Starting Balances
Current Assets
Cash $79,000 $73,938 $66,335 $54,602 $44,275 $34,049 $26,218 $19,809 $13,785 $9,329 $7,752 $4,153 $692
Other Current Assets $7,000
Total Current Assets $86,000 $80,938 $73,335 $61,602 $51,275 $41,049 $33,218 $26,809 $20,785 $16,329 $14,752 $11,153 $7,692
Long-term Assets
Long-term Assets $19,000
Accumulated Depreciation $0 $317 $634 $951 $1,268 $1,585 $1,902 $2,219 $2,536 $2,853 $3,170 $3,487 $3,804
Total Long-term Assets $19,000 $18,683 $18,366 $18,049 $17,732 $17,415 $17,098 $16,781 $16,464 $16,147 $15,830 $15,513 $15,196
Total Assets $105,000 $99,621 $91,701 $79,651 $69,007 $58,464 $50,316 $43,590 $37,249 $32,476 $30,582 $26,666 $22,888
Liabilities and Capital
Current Liabilities
Accounts Payable $0 $1,788 $1,897 $2,477 $2,912 $3,136 $3,663 $3,947 $4,045 $4,288 $4,330 $4,478 $4,561
Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $3,000 $3,000 $2,700
Other Current Liabilities $0
Subtotal Current Liabilities $0 $1,788 $1,897 $2,477 $2,912 $3,136 $3,663 $3,947 $4,045 $4,288 $7,330 $7,478 $7,261
Long-term Liabilities $0
Total Liabilities $0 $1,788 $1,897 $2,477 $2,912 $3,136 $3,663 $3,947 $4,045 $4,288 $7,330 $7,478 $7,261
Paid-in Capital $125,000
Retained Earnings ($20,000)
Earnings $0 ($7,167) ($15,197) ($27,826) ($38,906) ($49,672) ($58,347) ($65,357) ($71,796) ($76,812) ($81,748) ($85,813) ($89,374)
Total Capital $105,000 $97,833 $89,804 $77,174 $66,095 $55,328 $46,653 $39,643 $33,204 $28,188 $23,252 $19,187 $15,626
Total Liabilities and Capital $105,000 $99,621 $91,701 $79,651 $69,007 $58,464 $50,316 $43,590 $37,249 $32,476 $30,582 $26,666 $22,888
Net Worth $105,000 $97,833 $89,804 $77,174 $66,095 $55,328 $46,653 $39,643 $33,204 $28,188 $23,252 $19,187 $15,626

Financial Services Business Plan Example

Business Plan Outline

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