Investment Company Business Plan:
This sample plan is for a hypothetical investment company that buys other companies. The initial investment fund is $20 million. In the first few months, $5 million is invested in four companies. The management fee is two percent of the fund value, paid quarterly. Salaries and office expenses are covered by the management fee.
The investments are recorded as the purchase of long-term assets, which also appear on the balance sheet.
In the third year, one of the target companies fails, resulting in a $5 million loss. This is reflected in the cash flow and profit and loss statements. The balance of investments decreases to $15 million.
In the fifth year, one of the target companies is sold for $50 million, resulting in a $45 million profit. The balance of long-term assets decreases to $10 million.
This example showcases a business model that holds and appreciates long-term assets. Sales and cost of sales are the appreciation and write-down of assets, along with the management fees.
The explanation above is broken down into key topics that are linked to corresponding tables. These topics are: Start-up Summary, Sales Forecast, Personnel, Projected Profit and Loss, Projected Cash Flow, and Projected Balance Sheet.
Company Summary
This sample plan topic and following sub-topics omit content. The plan outline is abbreviated, with only key tables linked to.
The focus of this sample plan is to show the financials for this company type. Brief descriptions are found in topics associated with key tables.
2.1 Start-up Summary
This hypothetical Venture Capital firm begins with a $20 million initial investment fund. The venture capital partners invest $100,000 as working capital to balance cash flow each quarter.
Start-up
Requirements
Start-up Expenses
Legal
$0
Stationery etc.
$0
Brochures
$0
Consultants
$0
Insurance
$0
Rent
$0
Research and Development
$0
Expensed Equipment
$0
Other
$0
Total Start-up Expenses
$0
Start-up Assets
Cash Required
$20,100,000
Other Current Assets
$0
Long-term Assets
$0
Total Assets
$20,100,000
Total Requirements
$20,100,000
Start-up Funding
Start-up Expenses to Fund
$0
Start-up Assets to Fund
$20,100,000
Total Funding Required
$20,100,000
Assets
Non-cash Assets from Start-up
$0
Cash Requirements from Start-up
$20,100,000
Additional Cash Raised
$0
Cash Balance on Starting Date
$20,100,000
Total Assets
$20,100,000
Liabilities and Capital
Liabilities
Current Borrowing
$0
Long-term Liabilities
$0
Accounts Payable (Outstanding Bills)
$0
Other Current Liabilities (interest-free)
$0
Total Liabilities
$0
Capital
Planned Investment
Investor 1
$20,000,000
Investor 2
$100,000
Other
$0
Additional Investment Requirement
$0
Total Planned Investment
$20,100,000
Loss at Start-up (Start-up Expenses)
$0
Total Capital
$20,100,000
Total Capital and Liabilities
$20,100,000
Total Funding
$20,100,000
Services
Content has been omitted from this sample plan topic, and following sub-topics. This sample plan has an abbreviated plan outline. With the exception of the Executive Summary, only those topics linked to key tables have been used.
The focus of this sample plan is to show the financials for this type of company. Brief descriptions can be found in the topics associated with key tables.
Market Analysis Summary
Content has been omitted from this sample plan topic, and following sub-topics. This sample plan has an abbreviated plan outline. With the exception of the Executive Summary, only those topics linked to key tables have been used.
The focus of this sample plan is to show the financials for this type of company. Brief descriptions can be found in the topics associated with key tables.
Strategy and Implementation Summary
Content has been omitted from this sample plan topic, and following sub-topics. This sample plan has an abbreviated plan outline. With the exception of the Executive Summary, only those topics linked to key tables have been used.
The focus of this sample plan is to show the financials for this type of company. Brief descriptions can be found in the topics associated with key tables.
Sales Forecast
The company invests $5 million each in four companies. A two percent (2%) management fee is paid quarterly. One of the $5 million investments is sold for $50 million in the last year. That sale enters the accounting as a sale of $5 million worth of stock plus a gain of $45 million. The sales forecast shows the gain of $45 million.
Sales Forecast
| Sales Forecast | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Sales | |||||
| Management Fees | $400,000 | $400,000 | $400,000 | $400,000 | $400,000 |
| Equity appreciation | $0 | $0 | $0 | $0 | $45,000,000 |
| Total Sales | $400,000 | $400,000 | $400,000 | $400,000 | $45,400,000 |
| Direct Cost of Sales | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Management Fees | $0 | $0 | $0 | $0 | $0 |
| Equity appreciation | $0 | $0 | $0 | $0 | $0 |
| Subtotal Direct Cost of Sales | $0 | $0 | $0 | $0 | $0 |
Management Summary
Content has been omitted from this sample plan topic and following sub-topics. This sample plan has an abbreviated plan outline. Only those topics linked to key tables have been used.
This sample plan focuses on showing the financials for this type of company. Brief descriptions can be found in the topics associated with key tables.
Personnel Plan
| Personnel Plan | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Partners | $240,000 | $252,000 | $265,000 | $278,000 | $292,000 |
| Other | $60,000 | $63,000 | $66,000 | $69,000 | $72,000 |
| Total People | 4 | 4 | 4 | 4 | 4 |
| Total Payroll | $300,000 | $315,000 | $331,000 | $347,000 | $364,000 |
Content has been omitted from this sample plan topic and following sub-topics. This sample plan has an abbreviated plan outline. Only those topics linked to key tables have been used.
The focus of this sample plan is to show the financials for this type of company. Brief descriptions can be found in the topics associated with key tables.
Projected Profit and Loss
Please note that in the third year one investment is written off as a failure, resulting in a $5 million loss for the year. The sale of equity at the end of the period enters the sales forecast and the profit and loss statement as a $45 million gain.
You will also note that there may be gains or losses in the value of the assets held as equity investments, but these gains or losses don’t enter the accounting until there is a transaction. The accounting treatment is identical to what an individual investor does with stocks: changes in the market price of a share of stock are irrelevant until that share is sold or written off as having no value.
Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $400,000 $400,000 $400,000 $400,000 $45,400,000
Direct Cost of Sales $0 $0 $0 $0 $0
Investment write-off $0 $0 $5,000,000 $0 $0
Total Cost of Sales $0 $0 $5,000,000 $0 $0
Gross Margin $400,000 $400,000 ($4,600,000) $400,000 $45,400,000
Gross Margin % 100.00% 100.00% -1150.00% 100.00% 100.00%
Expenses
Payroll $300,000 $315,000 $331,000 $347,000 $364,000
Sales and Marketing and Other Expenses $13,200 $13,900 $14,600 $15,300 $16,000
Depreciation $0 $0 $0 $0 $0
Leased Equipment $2,400 $2,500 $2,600 $2,700 $2,800
Utilities $1,200 $1,300 $1,400 $1,500 $1,600
Insurance $2,400 $2,500 $2,600 $2,700 $2,800
Rent $36,000 $37,800 $39,700 $41,700 $43,800
Payroll Taxes $45,000 $47,250 $49,650 $52,050 $54,600
Other $0 $0 $0 $0 $0
Total Operating Expenses $400,200 $420,250 $441,550 $462,950 $485,600
Profit Before Interest and Taxes ($200) ($20,250) ($5,041,550) ($62,950) $44,914,400
EBITDA ($200) ($20,250) ($5,041,550) ($62,950) $44,914,400
Interest Expense $0 $0 $0 $0 $0
Taxes Incurred $0 $0 $0 $0 $8,982,880
Net Profit ($200) ($20,250) ($5,041,550) ($62,950) $35,931,520
Net Profit/Sales -0.05% -5.06% -1260.39% -15.74% 79.14%
8.2 Projected Cash Flow
The Cash Flow shows four $5 million investments made in the first few months of the plan.
In the third year, one of the target companies fails, so $5 million is written off as failure. This shows 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, resulting in 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, another investment is transacted at $50 million. This shows up as a $5 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.
The partners invest an additional $100,000 in the fourth year as additional working capital to balance the cash flow of the company.
Pro Forma Cash Flow
| Pro Forma Cash Flow | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Cash Received | |||||
| Cash from Operations | |||||
| Cash Sales | $400,000 | $400,000 | $400,000 | $400,000 | $45,400,000 |
| Subtotal Cash from Operations | $400,000 | $400,000 | $400,000 | $400,000 | $45,400,000 |
| Additional Cash Received | |||||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $5,000,000 | $0 | $5,000,000 |
| New Investment Received | $0 | $0 | $0 | $100,000 | $0 |
| Subtotal Cash Received | $400,000 | $400,000 | $5,400,000 | $500,000 | $50,400,000 |
8.3 Projected Balance Sheet
In the balance sheet, you can see that the ending balances for long-term assets were not re-valued and remain at the original purchase price until they are sold or written off as a complete loss. There is a $5 million write-off in the third year, and a sale of $5 million worth of assets in the last year. This sale of $5 million in assets includes the $5 million sale at book value plus the $45 million gain in the sales forecast and profit and loss table.
| Pro Forma Balance Sheet | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Assets | |||||
| Current Assets | |||||
| Cash | $107,872 | $88,201 | $458,045 | $84,580 | $41,754,883 |
| Other Current Assets | $0 | $0 | $0 | $0 | $0 |
| Total Current Assets | $107,872 | $88,201 | $458,045 | $84,580 | $41,754,883 |
| Long-term Assets | |||||
| Long-term Assets | $20,000,000 | $20,000,000 | $15,000,000 | $15,000,000 | $10,000,000 |
| Accumulated Depreciation | $0 | $0 | $0 | $0 | $0 |
| Total Long-term Assets | $20,000,000 | $20,000,000 | $15,000,000 | $15,000,000 | $10,000,000 |
| Total Assets | $20,107,872 | $20,088,201 | $15,458,045 | $15,084,580 | $51,754,883 |
| Liabilities and Capital | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Current Liabilities | |||||
| Accounts Payable | $8,072 | $8,651 | $420,045 | $9,530 | $748,313 |
| Current Borrowing | $0 | $0 | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 | $0 | $0 |
| Subtotal Current Liabilities | $8,072 | $8,651 | $420,045 | $9,530 | $748,313 |
| Long-term Liabilities | |||||
| $0 | $0 | $0 | $0 | $0 | |
| Total Liabilities | $8,072 | $8,651 | $420,045 | $9,530 | $748,313 |
| Paid-in Capital | $20,100,000 | $20,100,000 | $20,100,000 | $20,200,000 | $20,200,000 |
| Retained Earnings | $0 | ($200) | ($20,450) | ($5,062,000) | ($5,124,950) |
| Earnings | ($200) | ($20,250) | ($5,041,550) | ($62,950) | $35,931,520 |
| Total Capital | $20,099,800 | $20,079,550 | $15,038,000 | $15,075,050 | $51,006,570 |
| Total Liabilities and Capital | $20,107,872 | $20,088,201 | $15,458,045 | $15,084,580 | $51,754,883 |
| Net Worth | $20,099,800 | $20,079,550 | $15,038,000 | $15,075,050 | $51,006,570 |
8.4 Business Ratios
The Standard Industry Code (SIC) for this type of business is 7389, Business Services. The Industry Data is provided in the final column of the Ratios table.
| Ratio Analysis | ||||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Industry Profile | |
| Sales Growth | 0.00% | 0.00% | 0.00% | 0.00% | 11250.00% | 8.20% |
| Percent of Total Assets | ||||||
| Other Current Assets | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 44.20% |
| Total Current Assets | 0.54% | 0.44% | 2.96% | 0.56% | 80.68% | 74.30% |
| Long-term Assets | 99.46% | 99.56% | 97.04% | 99.44% | 19.32% | 25.70% |
| 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 | $100,000 | $0 | $0 | $100,000 | $0 | $0 | $100,000 | $0 | $0 | $100,000 | ||
| $0 | $0 | $100,000 | $0 | $0 | $100,000 | $0 | $0 | $100,000 | $0 | $0 | $100,000 | ||
| $0 | $0 | $100,000 | $0 | $0 | $100,000 | $0 | $0 | $100,000 | $0 | $0 | $100,000 | ||
Pro Forma Balance Sheet:
| 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 | ||
| $20,100,000 | $15,074,722 | $10,041,372 | $5,108,022 | $74,672 | $41,322 | $107,972 | $74,622 | $41,272 | $107,922 | $74,572 | $41,222 | $107,872 | |
| $0 | $5,000,000 | $10,000,000 | $15,000,000 | $20,000,000 | $20,000,000 | $20,000,000 | $20,000,000 | $20,000,000 | $20,000,000 | $20,000,000 | $20,000,000 | $20,000,000 | |
| $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
| $0 | $5,000,000 | $10,000,000 | $15,000,000 | $20,000,000 | $20,000,000 | $20,000,000 | $20,000,000 | $20,000,000 | $20,000,000 | $20,000,000 | $20,000,000 | $20,000,000 | |
| $20,100,000 | $20,066,650 | $20,033,300 | $20,099,950 | $20,066,600 | $20,033,250 | $20,099,900 | $20,066,550 | $20,033,200 | $20,099,850 | $20,066,500 | $20,033,150 | $20,099,800 | |
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