Looking for an accounting services business plan? You're in the right place.
Starting a CPA firm means having answers ready for the questions a bank, a landlord or a partner will ask. How much money do you need? When does the firm start making a profit? What happens if clients arrive more slowly than you hoped? A blank template won't show you what a sensible answer looks like.
In this article we'll walk through a complete sample business plan for a CPA firm in Denver, Colorado, section by section, so you can see what good looks like and write your own with confidence. We'll cover the executive summary, the SWOT analysis and, in particular, all of the financials.
Here's what you'll take away:
- The executive summary: see how to put the whole business on one page, so a reader knows what you're asking for and why within a minute
- The SWOT analysis: learn how to name your weaknesses honestly without putting a reader off
- The start-up budget: find out how much cash a new practice needs before its first tax season pays, so you don't run short in month three
- The first year, month by month: spot the months that lose money before you get there, and plan your cash around them
- The marketing plan: see what a new firm might spend to win its first 30 or so clients, and which channels carry the load
- The five-year profit, cash flow and balance sheet: understand how each hiring, pay and pricing decision shows up in the numbers
- The downside case: have an answer ready for the "what if revenue is 20% short?" question, along with the steps the owner takes in response
If you're setting up a CPA firm, read this before you write your own. The firm is fictional, so take what fits your practice and change the rest.
In this plan
To turn this example into your own accounting services business plan, use the accounting services business plan template.
Executive Summary
Ledger & Leaf is a Colorado accounting firm that opens in Denver's RiNo district on 1 January 2027. It serves owner-run businesses with 3 to 20 employees: monthly bookkeeping and reporting, business and owner tax returns, and, from the fifth month, fractional CFO advisory. Founder Melissa Grant, CPA, owns 100% of the firm.
The firm needs $150,000: $85,000 of Melissa's savings and a $65,000 bank term loan. Of that, $108,700 is held as a cash reserve, $20,000 buys equipment and fit-out, and $21,300 pays for legal work, licensing and the launch campaign.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $304,800 | $600,000 | $825,000 |
| Net income after start-up costs | ($72,319) | $46,561 | $76,865 |
| Closing cash | $45,891 | $76,858 | $109,966 |
The firm starts with 6 clients who have signed engagement letters before launch and reaches 34 monthly subscription clients by December 2027. Year 1 is a loss, because the firm carries a bookkeeper from month 3 and a seasonal tax preparer before the client base can pay for them. Operating profit is positive in March and April and in each month from September to December. Year 2 is the first profitable year.
The plan also stress-tests itself. If revenue runs 20% below plan and Melissa slows hiring, cuts marketing and her own pay, stays in the first office and pays no distributions, the firm stays cash-positive in every year of the model.
The firm's pitch is deliberately narrow. Bookkeeping is a flat monthly fee, a client's business return and the owner's personal return are prepared by the same firm, and a licensed CPA reviews and signs every return.
The Company
Legal name: Ledger & Leaf, LLC, a Colorado limited liability company. Owner: Melissa Grant, CPA, 100%. Premises: 900 square feet of leased office space in the RiNo district, Denver. Start date: 1 January 2027, ahead of the March business-return deadline. Stage: pre-launch. The lease and website are in draft, and the engagement letters for the first six clients are signed.
What Ledger & Leaf is for
Give owner-run businesses in the Denver metro area books they can read and tax returns filed on time, for a flat monthly fee.
Targets for the first two years
- 34 monthly subscription clients by December 2027, up from 6 at launch.
- $600,000 revenue in 2028, the second year, with a profit after tax.
- Repay the bank loan on schedule from mid-2027 and begin owner distributions in 2029.
- A team of four full-time people, Melissa included, by the end of 2028.
The three services
| Service | How it is priced | Year 1 share of revenue |
|---|---|---|
| Monthly bookkeeping, close and reporting | $690 a month on average | 59% |
| Business and owner tax returns, planning and filings | Fixed fee per return | 33% |
| Fractional CFO advisory | $225 an hour | 8% |
Colorado oversight
Colorado regulates CPA firms through the State Board of Accountancy, and the firm registers with the Board before it practises. Ledger & Leaf will not issue attest or compilation reports during this plan period, and it checks the Board's ownership, registration and peer-review requirements before opening and at each renewal.
The Denver Market
Colorado's small-business base
The SBA's Office of Advocacy counts 730,887 small businesses in Colorado, 99.5% of the state's businesses (2025 state profile). The count includes businesses with no employees, which are not this firm's market. The target is the narrower group that has outgrown a spreadsheet: businesses with employees, regular payroll and a tax return that is more than one form.
What accountants and bookkeepers earn
The Bureau of Labor Statistics put the median accountant's pay at $81,680 in May 2024 and projects 5% employment growth for accountants and auditors from 2024 to 2034. For bookkeeping, accounting and auditing clerks it reports a median of $49,210 and projects a 6% fall in employment over the same decade, as software absorbs routine entry. The plan follows that split: software handles data entry, and people are paid for review and judgement.
Fees in the market
Published pricing guides put small-business bookkeeping at about $300 to $1,000 a month, full retainers at $500 to $2,000 and an annual business return at $500 to $2,500. These are secondary sources and vary widely. Ledger & Leaf's $690 monthly average sits inside the bookkeeping range. Its $1,800 average business return sits above the guides' range, reflecting Denver rates and a CPA's signature. The AICPA's MAP survey, reported in the Journal of Accountancy in 2022, put the average owner billing rate at $227.50 an hour across firms. The firm's $225 advisory rate sits just below that average from the start, and advisory is still the smallest revenue line in Year 1 because it takes time to earn.
Who a client could hire instead
| Alternative | What it offers | Why a client picks it | How Ledger & Leaf differs by design |
|---|---|---|---|
| Xendoo | Online bookkeeping and tax | Fully remote, with plans published on its site | Local and in person, with one firm for books and returns |
| Pilot | Remote bookkeeping, with tax and CFO services available | Software-led process, with plans published on its site | A single named CPA reviewing and signing |
| QuickBooks Live | Bookkeeping inside QuickBooks Online | Convenient for existing QuickBooks users | Books, tax planning and filing handled by one local team |
| Independent Denver CPA firms | Tax, bookkeeping and advisory | Established referrals and long client histories | Flat monthly pricing and a fixed onboarding schedule |
| Part-time bookkeepers and enrolled agents | Bookkeeping or tax only | Lowest price | A CPA's review of the books |
The table describes what each alternative offers and how this firm positions itself, not a ranking. Plans and prices change often and are not quoted here; each provider publishes its own. Independent Denver firms are not named because most do not publish fees.
SWOT
| Strengths | Weaknesses |
|---|---|
| Licensed CPA with a decade of small-business clients | One senior person: when Melissa is away, review stalls |
| Flat monthly fee that is easy to buy and to budget | No brand yet; every client starts from zero |
| Six signed clients before opening | Year 1 loses money and draws on the reserve |
| Opportunities | Threats |
|---|---|
| Clients moving from remote services to a local accountant | Software automating routine work and pressing prices |
| Referrals from lawyers, bankers and insurance agents | Larger firms discounting to win small clients |
| Advisory work as clients grow | A hire leaving in the middle of tax season |
Who the Clients Are
The owner-managed business with 3 to 20 employees
Examples are a restaurant group, a landscape contractor, a design studio, a dental practice or an online retailer. The owner is 35 to 60, is good at the work and poor at the paperwork, and finds out the books are behind when the bank asks for statements or a tax bill arrives.
How they cope now
Some keep a spreadsheet, some pay a part-time bookkeeper and a separate preparer, and some use an online service. The commonest failure is a gap between the person who keeps the books and the person who files the return, so the return is built on numbers nobody checked.
The trigger for change
A late or messy return, an unexpected tax bill, a lender asking for reconciled accounts, or a bookkeeper who left.
The owner's personal return
A business client usually needs a personal return that matches the business. That is where the 40 owner returns in Year 1 come from.
What clients ask of the firm
The books are right. The return is filed on time. They can reach a person. The fee is the same every month.
Winning Clients
From first call to engagement letter
A 30-minute discovery call, a fixed-fee proposal within two working days, an engagement letter, and an onboarding call in the first week. Melissa takes every discovery call in Year 1.
The Year 1 pipeline
About 31 gross new subscription clients from about 78 discovery calls at a 40% close rate. Another 18 tax-only business clients come mostly from referral partners and Melissa's network.
| Lead source | Gross new subscription clients | Share |
|---|---|---|
| Referral partners (lawyers, bankers, insurance agents) | 13 | 42% |
| Google Ads and local search | 8 | 26% |
| Website and content | 5 | 16% |
| Networking and chamber events | 5 | 16% |
How fees are set
Subscriptions are priced by transaction volume and payroll complexity, from about $400 a month for a small business with few transactions to about $1,200 for one with payroll and several accounts. The $690 average reflects most clients falling in the middle. Prices stay flat in Year 1 and rise 3% a year from Year 2.
Staying and growing
The plan expects 15% of subscription clients to leave each year. Clients who also use the firm for tax and advisory stay longest, so every proposal prices the three services together.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Subscription clients at year end | 34 | 51 | 58 | 68 | 70 |
Growth slows after Year 2 because delivery capacity, not demand, becomes the limit. Hires follow revenue, so the firm turns work away before it overloads the team.
Six clients before opening
Six clients signed engagement letters before opening. They came through personal and professional introductions, not from Melissa's former firm, whose non-solicitation terms she has reviewed with a lawyer.
Marketing Plan
Marketing spend and what it buys
The first-year budget is $44,000: $14,000 of launch spend paid from start-up capital plus $30,000 of running costs. That is 14% of Year 1 revenue; the share falls to 5% by Year 3 and 4% by Year 5 as referrals take over. Spread over 31 gross new subscription clients, Year 1 costs about $1,420 per client, roughly two months of fees.
| Channel | Year 1 spend | What it is expected to do |
|---|---|---|
| Website, brand and photography (launch) | $11,500 | A clear site with a booking link and pages for restaurants, trades, health practices and online retailers |
| Launch event and local print (launch) | $2,500 | Introductions to the first 25 referral partners |
| Google Ads | $9,000 | Searches such as "bookkeeping Denver" and "small business CPA Denver"; about 8 clients |
| Referral partner programme | $4,500 | Coffee meetings, a short referral guide and a thank-you for each introduction; about 13 clients |
| Website content and local search | $6,000 | One practical guide a month, aimed at the questions owners ask in January and September |
| Networking and chamber memberships | $3,000 | A Denver chamber membership and small business workshops; about 5 clients |
| Tax-season mail and email | $5,000 | Reminders to website leads and referral partners' contacts from January |
| Newsletter and client communication | $2,500 | Monthly deadline reminders that keep clients and prompt referrals |
Marketing milestones
- January 2027: website live, first 6 clients onboarded.
- April 2027: 16 clients, and the first referral partner sends a second introduction.
- September 2027: 28 clients, extension-season workload tested.
- December 2027: 34 clients and about $23,500 of monthly subscription revenue.
Running the Firm
The RiNo office
900 square feet in RiNo, set at about $38 a square foot a year, covering rent, service charges and property taxes ($34,200 in Year 1), with six desks, on a five-year lease with a personal guarantee. The part-time administrator and the seasonal preparer share desks. The firm moves to about 1,200 square feet in Year 4.
How work moves through the firm
Each client has a monthly close checklist: bank feeds reconciled, payroll checked, a short report to the owner by the 10th of the following month. For tax, a preparer completes the return, Melissa reviews every one and signs. In February to April a contract preparer handles the extra volume.
Software and client data
Cloud accounting (QuickBooks Online and Xero), payroll software, practice management software that tracks every deadline, and a secure client portal for documents and e-signature. Software costs $12,000 in Year 1 and $27,000 by Year 5.
Who does the work
Two on payroll at the end of Year 1 (Melissa and a bookkeeper from month 3), a contract preparer each tax season, then four full-time people at the end of Year 2 and six by Year 4, plus a part-time administrator from month 36. Each hire follows revenue; the downside case shows what is delayed or dropped if revenue falls short. Melissa bills about 55% of her time, because the rest goes to sales, onboarding and review.
Licences and safeguards
- Colorado State Board of Accountancy firm registration.
- A PTIN for every preparer and an IRS e-file registration for the firm.
- A written information security plan covering client data. The IRS points tax professionals to Publication 4557 on safeguarding taxpayer data and Publication 5709 on writing the plan, and the FTC rules require one.
- Professional liability, general liability, cyber and workers' compensation insurance, budgeted at $7,500 in Year 1, plus key-person life and disability cover on Melissa.
- Written engagement letters for every client, with scope, fee and deadlines.
Vendors and advisers on call
Software vendors, an employment lawyer on call for hiring, and an outside practice-management consultant for the first quarter. None is hard to replace.
The People
Melissa Grant, CPA, founder and managing partner
Melissa has eleven years in public accounting, all at one mid-size Denver firm, where she became a senior manager in her sixth year and ran a book of about 40 owner-managed clients. She holds a Colorado CPA licence and a degree in accounting. Her $85,000 investment is eleven years of savings. She is leaving to run a smaller practice where she does the work herself.
Where the team is thin
Melissa has not built a sales pipeline from nothing, has not hired for her own firm and has no experience in tax controversy work. The plan covers these with a referral programme run on a fixed weekly schedule, a lawyer on call for hiring, and a standing referral of any audit representation to a specialist.
If Melissa is out
Melissa is the only CPA at launch, so the firm carries life and disability cover on her. The senior accountant hired in month 27 is a CPA, so the firm can sign returns if Melissa is out. Until then a CPA on a retainer covers sign-off.
Outside help
An accountant who runs a 12-person practice in Boulder reviews the first-year numbers every quarter. Melissa uses the Colorado Small Business Development Center network for pricing and marketing questions.
Ownership and the bank
Melissa owns 100% of Ledger & Leaf, LLC and gives the bank a personal guarantee. The loan carries a covenant to deliver quarterly accounts.
Financial Plan
The tables that follow come from a single five-year model, monthly for the first year and yearly after that. The inputs come first so every number can be traced to its reason.
Funding the launch
| Use of funds | Amount |
|---|---|
| Laptops, dual monitors, scanner, printer, phones | $11,000 |
| Office furniture and fit-out | $9,000 |
| CPA firm registration and business licences | $1,800 |
| Legal: entity set-up, engagement letters, lease review | $5,500 |
| Launch: website, branding, local campaign | $14,000 |
| Cash reserve for the first tax-season dip | $108,700 |
| Total uses | $150,000 |
| Source of funds | Amount |
|---|---|
| Melissa Grant's savings | $85,000 |
| Bank term loan | $65,000 |
| Total sources | $150,000 |
Melissa invests $85,000 of her own savings, 57% of the total, and borrows $65,000 from a bank on a seven-year term at 10.5%, interest-only for the first six months. The bank takes a personal guarantee and a lien on the equipment. The rate is an illustration for this example, not a quoted lending rate. The $108,700 reserve is large on purpose. A new practice earns little before its first tax season and carries a bookkeeper and a seasonal preparer from the start.
What the numbers rest on
- Subscriptions bill at an average of $690 a month per client for bookkeeping, monthly close and reporting. The firm starts with 6 clients and ends Year 1 with 34. Those figures are net of 15% annual attrition, so gross new clients in Year 1 are about 31.
- Tax work is seasonal. Year 1 holds about 30 business returns at $1,800, 40 owner returns at $900, and $12,000 of extensions, amendments, estimated-tax planning and state filings. About 12 of the business returns come from subscription clients. The rest are tax-only clients who are not counted in the 34.
- Advisory work bills at $225 an hour from month 5, growing from 6 to 20 hours a month. That is 104 hours in Year 1. The rate sits just below the $227.50 owner rate reported in the AICPA survey.
- Prices rise 3% a year from Year 2. Year-end subscription clients are 34, 51, 58, 68 and 70 over the five years, which with the price rises reproduces the subscription revenue line.
- Delivery capacity in Year 1 is about 2,800 hours: Melissa at 55% billable after sales, onboarding and review time, the bookkeeper from month 3 at 75%, and a contract preparer for February to April. Year 1 revenue works out to about $109 per delivery hour, and about $105 to $120 in later years.
- Receivables average 14 days. Subscriptions are collected by bank debit in advance, tax work is billed on delivery and advisory is billed on 30-day terms. Direct costs run at about 3.4% of revenue: card and bank fees, per-client software seats and per-return software.
- Payroll adds 27% to wages for payroll taxes, health cover, Colorado paid-leave premiums, workers' compensation and a retirement match (15% for the part-time administrator). Wages in the personnel table are launch rates, and annual pay raises of 3% are charged as a separate line from Year 2.
- Rent is based on 900 square feet in RiNo at about $38 a square foot a year, covering rent, service charges and property taxes, then about 1,200 square feet from Year 4. Utilities are separate. Replacement laptops and new-hire kit are budgeted as an annual expense from Year 2.
- Tax is charged at the federal corporate rate of 21% and the Colorado corporate rate of 4.4%, with the Year 1 loss carried forward. The firm would normally elect S corporation status, which moves this tax to Melissa's personal return and leaves the firm with more cash. Corporate rates are used here as a cautious placeholder.
- Owner distributions of $30,000, $20,000 and $40,000 are paid in Years 3 to 5, only from cash the model shows the firm can spare. The loan stays in place rather than being repaid early, so the firm borrows while holding cash. The reserve protects the firm against a lost tax season.
Revenue by service
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Monthly bookkeeping and accounting subscriptions | $179,400 | $365,000 | $480,000 | $570,000 | $640,000 |
| Tax preparation and compliance | $102,000 | $175,000 | $240,000 | $285,000 | $320,000 |
| Fractional CFO and advisory | $23,400 | $60,000 | $105,000 | $130,000 | $145,000 |
| Total revenue | $304,800 | $600,000 | $825,000 | $985,000 | $1,105,000 |
| Growth on prior year | – | 97% | 38% | 19% | 12% |
Subscriptions are the base: they repeat every month and make up 59% of Year 1 revenue and 58% of Year 5. Tax work earns the most per hour but arrives in two bursts a year. Advisory is the smallest line in Year 1 and the one with room to grow, because it needs the trust that a first year of bookkeeping builds.
The first twelve months
| Month | Monthly bookkeeping and accounting subscriptions | Tax preparation and compliance | Fractional CFO and advisory | Total revenue | EBITDA |
|---|---|---|---|---|---|
| Jan 2027 | $4,140 | $2,300 | $0 | $6,440 | ($21,722) |
| Feb 2027 | $6,900 | $7,000 | $0 | $13,900 | ($14,513) |
| Mar 2027 | $8,970 | $21,000 | $0 | $29,970 | $1,018 |
| Apr 2027 | $11,040 | $25,800 | $0 | $36,840 | $7,657 |
| May 2027 | $13,110 | $4,700 | $1,350 | $19,160 | ($9,429) |
| Jun 2027 | $15,180 | $3,500 | $1,800 | $20,480 | ($8,154) |
| Jul 2027 | $16,560 | $2,300 | $2,250 | $21,110 | ($7,545) |
| Aug 2027 | $17,940 | $2,900 | $2,700 | $23,540 | ($5,196) |
| Sep 2027 | $19,320 | $10,500 | $3,150 | $32,970 | $3,917 |
| Oct 2027 | $20,700 | $13,200 | $3,600 | $37,500 | $8,295 |
| Nov 2027 | $22,080 | $4,700 | $4,050 | $30,830 | $1,849 |
| Dec 2027 | $23,460 | $4,100 | $4,500 | $32,060 | $3,038 |
Revenue is lowest in January and builds through March and April on business returns, dips over the summer, and rises again at the September and October extension deadlines. EBITDA, which is profit before interest, depreciation and tax, is positive in March, April and each month from September to December, and negative in the other six. The lowest month-end cash balance is Sep, at about $32,000 after allowing for the 14 days clients take to pay.
Who is on payroll
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and managing CPA | $120,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Bookkeeper | $54,000 | Month 3 | 1 | 1 | 1 | 1 | 1 |
| Seasonal tax preparer (contract, February to April) | $100,000 | Month 2 | – | – | – | – | – |
| Staff accountant | $72,000 | Month 13 | – | 1 | 1 | 1 | 1 |
| Second bookkeeper | $54,000 | Month 16 | – | 1 | 1 | 1 | 1 |
| Senior accountant (CPA) | $105,000 | Month 27 | – | – | 1 | 1 | 1 |
| Client administrator (part time, 20 hours a week) | $19,000 | Month 36 | – | – | 0.5 | 0.5 | 0.5 |
| Second senior accountant (CPA) | $108,000 | Month 40 | – | – | – | 1 | 1 |
| Total payroll incl. on-costs | $234,550 | $388,855 | $518,946 | $664,070 | $698,360 |
Melissa is alone in January. A contract preparer covers February to April of every year, and the first bookkeeper joins in month 3, as March returns arrive. The staff accountant follows in month 13, a second bookkeeper in month 16, a senior CPA in month 27, a part-time administrator in month 36 and a second senior CPA in month 40. Each hire is timed to the revenue the last one made possible. The seasonal preparer is shown at an annual-equivalent rate and paid for three months. The administrator's $19,000 is a part-time salary. Her $120,000 salary starts in month one and is already in the costs, so profit here means what remains after she is paid.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $304,800 | $600,000 | $825,000 | $985,000 | $1,105,000 |
| Direct costs (payment fees, per-return software) | ($10,236) | ($20,150) | ($27,706) | ($33,079) | ($37,109) |
| Gross profit | $294,564 | $579,850 | $797,294 | $951,921 | $1,067,891 |
| Payroll incl. on-costs | ($234,550) | ($388,855) | ($518,946) | ($664,070) | ($698,360) |
| Rent | ($34,200) | ($35,200) | ($36,300) | ($46,500) | ($47,900) |
| Utilities | ($3,600) | ($3,700) | ($3,800) | ($3,900) | ($4,000) |
| Marketing | ($30,000) | ($36,000) | ($40,000) | ($42,000) | ($44,000) |
| Insurance | ($7,500) | ($8,300) | ($9,100) | ($9,800) | ($10,300) |
| Professional fees | ($4,000) | ($4,500) | ($5,000) | ($5,000) | ($5,500) |
| Software subscriptions | ($12,000) | ($17,000) | ($22,000) | ($25,000) | ($27,000) |
| CPE, licence renewals and professional dues | ($3,500) | ($5,000) | ($6,500) | ($7,500) | ($8,000) |
| Phones, supplies and postage | ($4,500) | ($5,500) | ($6,500) | ($7,000) | ($7,500) |
| Equipment replacement and new-hire kit | $0 | ($5,000) | ($4,000) | ($9,000) | ($4,000) |
| Bad debt allowance | ($1,500) | ($3,000) | ($4,500) | ($5,500) | ($6,200) |
| Annual pay raises (3% a year) | $0 | ($11,666) | ($31,604) | ($61,577) | ($87,650) |
| EBITDA | ($40,786) | $56,129 | $109,044 | $65,074 | $117,481 |
| Depreciation | ($3,486) | ($3,486) | ($3,486) | ($3,486) | ($3,486) |
| Interest | ($6,747) | ($6,082) | ($5,227) | ($4,278) | ($3,225) |
| Income tax | $0 | $0 | ($23,466) | ($14,027) | ($27,112) |
| Net income before start-up costs | ($51,019) | $46,561 | $76,865 | $43,283 | $83,659 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($21,300) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($72,319) | $46,561 | $76,865 | $43,283 | $83,659 |
Year 1 loses $51,019 before start-up costs and $72,319 after them. Year 2 is the first profitable year. Year 3 shows the widest margin, 13.2% at EBITDA, because the next hire does not arrive until month 40. Year 4 dips to 6.6% as the second senior CPA, the larger office and the accumulating pay raises land together, and Year 5 recovers to 10.6%. Income tax is zero in Year 2 because the Year 1 loss is carried forward.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($80,524) | $38,724 | $71,721 | $40,632 | $82,542 |
| Equipment and fit-out | ($20,000) | $0 | $0 | $0 | $0 |
| Funding received | $150,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | ($3,585) | ($7,757) | ($8,612) | ($9,561) | ($10,615) |
| Owner distributions | $0 | $0 | ($30,000) | ($20,000) | ($40,000) |
| Net change in cash | $45,891 | $30,967 | $33,109 | $11,070 | $31,926 |
| Closing cash | $45,891 | $76,858 | $109,966 | $121,036 | $152,963 |
The balance stays above zero at every year end, and the lowest year-end figure is December 2027. Distributions begin in Year 3, once cash and retained earnings can cover them.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $45,891 | $76,858 | $109,966 | $121,036 | $152,963 |
| Accounts receivable | $11,691 | $23,014 | $31,644 | $37,781 | $42,384 |
| Equipment and fit-out (net) | $16,514 | $13,029 | $9,543 | $6,057 | $2,571 |
| Total assets | $74,096 | $112,900 | $151,153 | $164,874 | $197,918 |
| Bank loan | $61,415 | $53,658 | $45,045 | $35,484 | $24,869 |
| Paid-in capital | $85,000 | $85,000 | $85,000 | $85,000 | $85,000 |
| Retained earnings | ($72,319) | ($25,758) | $21,108 | $44,390 | $88,049 |
| Total liabilities and equity | $74,096 | $112,900 | $151,153 | $164,874 | $197,918 |
Margins and break-even
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -13.4% | 9.3% | 13.2% | 6.6% | 10.6% |
| Net margin (before start-up costs) | -16.7% | 7.8% | 9.3% | 4.4% | 7.6% |
| Payroll incl. pay raises as share of revenue | 77% | 67% | 67% | 74% | 71% |
| Revenue per full-time equivalent at year end | $152,400 | $150,000 | $150,000 | $151,538 | $170,000 |
| Average monthly revenue | $25,400 | $50,000 | $68,750 | $82,083 | $92,083 |
| Monthly revenue needed to cover operating costs | $28,917 | $45,160 | $59,347 | $76,472 | $81,953 |
| Debt service cover (EBITDA / interest + principal) | -3.9x | 4.1x | 7.9x | 4.7x | 8.5x |
Compare the last two rows of the ratios table: operating costs are covered when average monthly revenue sits above the figure the firm needs. Year 1 averages $25,400 a month against $28,917 needed, so it loses money. Year 2 averages $50,000 against $45,160. Debt service cover is negative in Year 1, because the firm is loss-making while paying interest, and stays above 4x from Year 2.
A 20% revenue shortfall
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $243,840 | $480,000 | $660,000 | $788,000 | $884,000 |
| Net income before start-up costs | ($62,022) | $51,596 | $43,241 | $30,285 | $78,591 |
| Net income after start-up costs | ($83,322) | $51,596 | $43,241 | $30,285 | $78,591 |
| Closing cash | $37,226 | $75,492 | $106,703 | $126,003 | $193,783 |
This case cuts every revenue line by 20% in every year. The response: the bookkeeper starts two months later, every hire from month 13 starts six months later, the second senior CPA is dropped, marketing is cut by 20%, Melissa takes a 20% pay cut, the firm stays in its first office and no distributions are paid. On those terms the firm ends every year with cash in the bank, at no less than $37,226, and is profitable from Year 2. Year 2 profit comes out above the base case because the pay cut, delayed hires and lower marketing save more than the lost margin; it is the response working, not a forecast, and the team would be stretched that year. Equity ends Year 1 at $1,678, so thin that a net-worth covenant would be close to tripping, and the firm would raise it with the bank before the covenant date. Closing cash in the later years is higher than in the base case only because no distributions are paid. Without the response, the same shortfall would leave the firm without cash in Year 1 or Year 2.
Sources
- SBA Office of Advocacy, Colorado 2025 state profile.
- Bureau of Labor Statistics, Accountants and auditors and Bookkeeping, accounting and auditing clerks, Occupational Outlook Handbook, May 2024 wage data.
- Small-business accounting fee ranges: Housecall Pro tax preparation guide, a secondary source.
- AICPA MAP survey billing rates, as reported in the Journal of Accountancy, February 2022.
- Colorado State Board of Accountancy, firm applications and forms.
- IRS, Protect your clients, protect yourself (Publications 4557 and 5709; FTC security-plan rule).
- Colorado corporate income tax rate of 4.4%: Tax Foundation, Colorado.
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