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.

Investment Company Business Plan Example

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.

Investment Company Business Plan Example

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.

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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.

Investment Company Business Plan Example

Investment Company Business Plan Example

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

Financial Plan

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.

Investment Company Business Plan Example

Investment Company Business Plan Example

Investment Company Business Plan Example

Investment Company Business Plan Example

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

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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.

Investment Company Business Plan Example

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

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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.

Sales Forecast

Sales

Management Fees: 2% $0 $0 $100,000 $0 $0 $100,000 $0 $0 $100,000 $0 $0 $100,000

Equity Appreciation: 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Sales $0 $0 $100,000 $0 $0 $100,000 $0 $0 $100,000 $0 $0 $100,000

Direct Cost of Sales

Management Fees: $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Equity Appreciation: $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Direct Cost of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Personnel Plan

Partners: 0% $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000

Other: 0% $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000

Total People 4 4 4 4 4 4 4 4 4 4 4 4 4 4

Total Payroll $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000

General Assumptions

Plan Month 1 2 3 4 5 6 7 8 9 10 11 12

Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Tax Rate 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00%

Other 0 0 0 0 0 0 0 0 0 0 0 0

Pro Forma Profit and Loss

Sales $0 $0 $100,000 $0 $0 $100,000 $0 $0 $100,000 $0 $0 $100,000

Direct Cost of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Investment Write-off $0 $0 $0 $0 $0 $0

Pro Forma Cash Flow:

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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