Looking for an auditing and consulting business plan? You're in the right place.
A practice that sells hours has to answer questions that a product business never faces. What share of the team's time can be billed? What does professional liability insurance cost once the practice has staff? How many months can the firm run on retainers alone before project work arrives? A blank template won't show you what a believable answer looks like.
In this article we'll walk through a complete sample business plan for an internal-audit and controls consulting firm in Pittsburgh, Pennsylvania, section by section, ending on the financials. We'll cover the executive summary, the SWOT analysis and, in particular, the five-year numbers.
Here's what the plan gives you to work from:
- The executive summary: see how to put an hours-based practice on one page, so a lender or partner knows what the firm sells and what it needs
- The SWOT analysis: learn how to state a single-founder dependency plainly and show how the firm covers it
- The start-up budget: find out how large a cash reserve a new practice needs before retainers and projects cover the payroll
- The utilisation table: see how billable hours, rates and headcount turn into the revenue line, so you can build the same logic for your own team
- The insurance and compliance costs: check what to budget for professional liability, cyber cover and licensing questions before they surprise you
- The five-year profit, cash flow and balance sheet: understand how each hire and each pay rise 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 an audit, controls or compliance consulting practice, read this before you write your own. The firm is fictional, so take what fits and change the rest.
In this plan
To turn this example into your own auditing and consulting business plan, use the auditing and consulting business plan template.
Executive Summary
Artemide Auditing & Consulting is a Pittsburgh practice that opens on 1 January 2027. It sells outsourced internal audit to privately held mid-size companies, controls and compliance consulting projects, and special reviews ahead of clients' external audits. Founder Sandor Artemide, CPA and Certified Internal Auditor, owns 100% of the firm. It does not issue audit opinions on financial statements.
Opening takes $220,000, split between $140,000 of Sandor's savings and an $80,000 bank term loan. The largest piece, $186,500, stays in the bank as a reserve; $17,000 goes on equipment and fit-out and $16,500 on legal work, registrations and the launch.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $346,950 | $598,000 | $840,000 |
| Net income after start-up costs | ($66,242) | $21,995 | $63,509 |
| Closing cash | $101,679 | $88,788 | $117,350 |
Revenue is billable hours times rate, so utilisation drives the plan. The firm starts with two retainers signed before launch and ends Year 1 with six, billing $23,100 a month. Year 1 loses money: the principal draws pay from the first month, and a senior consultant arrives in month 4 before billings can cover both salaries. Operating profit is positive in August and from October to December. Year 2 is the first profitable year.
Professional liability is the largest part of an $18,500 insurance line in Year 1, at $10,500. The line grows with revenue and headcount to $43,500 by Year 5.
The plan also tests a bad outcome. If revenue runs 20% below plan and Sandor delays hiring, cuts marketing and his own pay and pays no distributions, the firm stays cash-positive at every year end of the model. The tightest point is the end of Year 4, at $21,203, and the plan includes a $40,000 standby line of credit, undrawn in every case modelled, for any trough inside a year. About $80,000 of the cash reserve is borrowed, and in a bad year that reserve services the loan.
The Firm at a Glance
Legal name: Artemide Auditing & Consulting, LLC, a Pennsylvania limited liability company. Owner: Sandor Artemide, CPA, CIA, 100%. Premises: 1,200 square feet of leased office space in downtown Pittsburgh. Start date: 1 January 2027. Stage: pre-launch. The lease is in draft, and engagement letters for the first two retainer clients are signed.
Purpose
Give the finance leaders of privately held mid-size companies an independent view of their controls, on a fixed monthly fee, without hiring a full internal audit department.
Goals through 2030
- Six retainer clients by December 2027, up from two at launch.
- $598,000 revenue in 2028, the second year, with a profit after tax.
- Team-wide utilisation of at least 67% of available hours from 2028.
- Four people delivering client work by the end of 2028, Sandor included.
- Repay the bank loan on schedule and begin owner distributions in 2030.
Three lines of work
| Service | How it is priced | Year 1 share of revenue |
|---|---|---|
| Outsourced internal-audit retainers: an annual audit plan, fieldwork, reports to management and the board | About $3,850 a month, sized by hours | 52% |
| Controls and compliance consulting projects: process documentation, control design and testing, readiness work | Fixed fee from an hours estimate | 36% |
| Special reviews and audit-readiness support: targeted reviews ahead of a client's external audit, a sale or a lender request | Fixed fee, usually $5,000 to $15,000 | 12% |
Licensing and peer review in Pennsylvania
Pennsylvania regulates CPAs and CPA firms through the State Board of Accountancy. The Board's peer review rule, 49 Pa. Code § 11.82, makes peer review a condition of licence renewal for a firm that is subject to it. The Board's own pages could not be retrieved when this plan was checked, so the plan relies on the regulation's text alone. Artemide will not issue audit, review or compilation reports during this plan period, so no peer review cost is modelled. Before opening, Sandor confirms with the Board whether the firm needs a firm licence and how the rule applies to it, and he repeats the check at each renewal. If the firm ever took attest work, the plan would need a peer review budget first.
Questions a lender asks
Is the revenue contracted? Only partly. Retainers run on 12-month terms with 60 days' written notice, and the two signed engagement letters commit both clients to that term and an agreed annual plan. Together they are $92,400 a year, 27% of Year 1 revenue. Everything else in Year 1 has to be won.
What is the collateral? The $17,000 of equipment cannot secure $80,000. The bank relies on a personal guarantee and a lien on receivables and other business assets, and Sandor expects to be asked for further security.
Why borrow while holding cash? The reserve is sized to the downside case, and the loan funds a smaller share of it than Sandor's savings do. A cheaper structure for the same protection is a smaller term loan plus a standby line of credit, which is what the plan requests alongside the $80,000 loan. The loan is kept rather than repaid early so that the cash is there in a bad year.
Why "Auditing" in the name? The name describes internal audit, which tests a client's controls for its own management and board. The firm does not audit financial statements or issue opinions, and its website and engagement letters say so.
Who runs the office? Sandor's non-billable time is 45% of his available hours in Year 1, about 850 hours, and it covers selling, proposals, scoping, review and invoicing. No administrator is hired until month 30, because invoicing and scheduling run from practice-management software. If proposal volume outruns that, the part-time administrator can start earlier at about $30,000 a year including on-costs.
Demand for Outsourced Audit Work
Who buys
Privately held companies above a certain size tend to have a controller, a CFO and an external auditor, but no one whose job is to test whether the controls work. The buyers are those with enough revenue and enough outside scrutiny, from a lender, a private-equity owner, an insurer or a board, to need an independent check, and not enough work to justify a full-time internal audit team. The plan targets companies in manufacturing, healthcare services, logistics, technology and financial services around Pittsburgh with roughly 100 to 1,000 employees.
What the labour market shows
The Bureau of Labor Statistics put the median accountant or auditor's pay at $83,680 in May 2025 and projects 5% employment growth for the occupation from 2025 to 2035. For management analysts, the closest category for controls and process consulting, it reports a median of $101,860 and projects 10% growth over the same decade. The plan's wages sit just above those medians for the senior consultant ($88,000) and the manager ($108,000). It does not treat Pittsburgh pay as equal to the national medians, and the wage lines are the first place to adjust for a local survey.
Where the hourly rates come from
Rate surveys for advisory work vary widely by firm size and engagement type, and the plan does not quote one. It builds rates from cost instead. A senior consultant costs about $76 for each billable hour in wages and on-costs, at 78% utilisation, and bills $150. A staff consultant costs about $54 and bills $115. The principal costs about $154 in Year 1, at 55% utilisation, and bills $215. A client is quoted hours at those rates, which is why the retainer works out at about 25 hours a month at a blended $155.
Who else the client could call
| Alternative | What it offers | Why a client picks it | How Artemide differs by design |
|---|---|---|---|
| National accounting firms' risk advisory practices | Internal audit, controls and compliance for larger organisations | Brand, depth of specialists, global reach | A named principal who does the work, and fees sized for a mid-size company |
| Regional CPA firms with internal-audit groups | Audit, tax and advisory under one roof | The existing relationship with the client's external auditor | Independence from the client's external auditor, and no attest work to conflict with |
| Independent internal-audit contractors | Hourly cover from one person | Lowest price, flexible | A team and a methodology, so a retainer survives one person being unavailable |
| Staffing agencies supplying contract auditors | Temporary headcount | Fast to start | A risk-based audit plan and reports, not a body in a chair |
| An in-house internal audit hire | A full-time employee | Full control and availability | Specialist cover for IT, fraud and data analytics without a second hire |
| Governance, risk and compliance software | Workflow and dashboards | Cheap to start | The judgement and fieldwork, which software does not do; the firm uses such tools itself |
The categories are listed for comparison and carry no ranking. No firms are named, because fees and service lines change and most mid-market providers keep them private.
SWOT
| Strengths | Weaknesses |
|---|---|
| Thirteen years of internal-audit and risk work, with a CPA and CIA | One senior person: when Sandor is away, review stalls |
| Two retainers signed before opening | No brand yet; every client starts from zero |
| Fixed monthly fee that is easy to budget | Year 1 loses money and draws on the reserve |
| Opportunities | Threats |
|---|---|
| Lenders, owners and insurers asking mid-size companies for independent assurance | Larger firms discounting to win mid-size accounts |
| Retainer clients buying projects and special reviews | A claim on professional liability cover, or a premium rise |
| Moving the two project lines toward retainers over time | Clients bringing the work in-house when budgets tighten |
Who Hires an Outside Auditor
The buyer: a CFO or controller with no audit team
The buyer runs finance for a company with no internal audit function. They answer to an owner, a board or a lender, and they know where the process weaknesses are but have no independent view to point to.
What triggers a purchase
A request from a lender or investor for evidence that controls work, a finding from the external auditor, a fraud loss or near miss, a new accounting system, or preparation for a sale. Each trigger leads to a different line: a finding leads to a controls project, a sale leads to a special review, and an ongoing owner or board expectation leads to a retainer.
Secondary customer: the audit committee or board chair
In companies with a board, the chair or an audit committee member often approves the engagement and reads the report. Reports are written for that reader as well as for the CFO.
How the buyer ranks a proposal
The reviewer understands the business. The report states what is wrong and what to do about it. The fee is fixed. The work does not interrupt the finance team's close.
Sales and Client Pipeline
How an engagement is won
A first meeting to understand the trigger, a scoping call, a risk-based proposal with an hours estimate within five working days, an engagement letter, and a kick-off meeting. Sandor takes every first meeting and writes every proposal in Year 1.
From first meeting to signed letter
About 85 first meetings lead to about 40 proposals, at a win rate of 28%, which gives 11 new clients. Four of the 11 start as retainers, and the other seven are project clients, some of whom later move to a retainer. Two retainer clients signed before launch are not counted.
| Lead source | New clients in Year 1 | Share |
|---|---|---|
| Referral partners (lawyers, bankers, external audit firms, private-equity sponsors) | 5 | 45% |
| Direct outreach and LinkedIn | 3 | 27% |
| Association events and speaking | 2 | 18% |
| Website and published guides | 1 | 9% |
Pricing
Retainers are priced from an annual audit plan, usually 250 to 350 hours, at a blended $155 an hour, so the average comes to $3,850 a month. Projects are fixed fees built from an hours estimate at the rates in the operating plan, plus a 10% contingency. Special reviews are quoted the same way and billed on milestones. Prices rise 3% a year from Year 2.
Retainers and backlog
The plan expects 12% of retainer clients to leave each year. The six retainers in place in December 2027 bill $277,200 a year, which is 78% of the Year 2 retainer line and 46% of Year 2 revenue.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Retainer clients at year end | 6 | 9 | 11 | 12 | 15 |
Growth slows after Year 2 because delivery capacity, not demand, becomes the limit. Hires follow revenue, so the firm declines work before it overloads the team.
The starting two
Two retainer clients signed engagement letters before opening. Both came from Sandor's earlier work as an in-house audit director, not from the national firm where he began his career, whose non-solicitation terms he has reviewed with a lawyer.
Getting Introduced
Where the $33,000 goes
Marketing in Year 1 comes to $33,000, made up of $9,000 spent at launch out of the start-up funds and $24,000 of running costs. That is 9.5% of Year 1 revenue; the share falls to 3.6% by Year 3 and 2.7% by Year 5 as referrals and renewals take over. Spread over 11 new clients, Year 1 costs about $3,000 per client, which is less than one month of a typical retainer fee.
| Channel | Year 1 spend | What it is expected to do |
|---|---|---|
| Website, brand and sample report (launch) | $6,500 | A clear site with service pages for retainers, controls projects and special reviews, and an anonymised sample report |
| Introductions to referral partners (launch) | $2,500 | First meetings with about 25 lawyers, bankers and external audit contacts |
| Referral partner programme | $5,500 | Quarterly coffees, a one-page guide on when to bring in an internal auditor; about 5 clients |
| LinkedIn and direct outreach | $6,000 | Targeted outreach to CFOs and controllers in the target sectors; about 3 clients |
| Association memberships and events | $5,500 | Finance and audit associations in the region; about 2 clients |
| Speaking and webinars | $3,000 | Two talks a year on controls topics, recorded and reused |
| Published guides and case notes | $2,000 | Short guides drawn from anonymised work; about 1 client |
| Proposal and follow-up materials | $2,000 | Templates for proposals, scoping questionnaires and kick-off packs |
Milestones
- January 2027: website live, two retainer clients onboarded.
- April 2027: three retainers in service, and the senior consultant starts in month 4.
- August 2027: five retainers, and the first month of positive operating profit.
- December 2027: six retainers and about $23,100 of monthly retainer revenue.
Delivery and Operations
The office
1,200 square feet in downtown Pittsburgh, at $27 a square foot a year on a full-service basis ($32,400 in Year 1), with six desks and a meeting room, on a five-year lease with a personal guarantee. Consultants work mostly at client sites, so desks are shared and the same office holds the team through Year 5.
Capacity and utilisation
Utilisation is billable hours as a share of available hours, and each person has 1,880 available hours a year. The table shows the figure for each role in Year 3 and the team in every year.
| Role | Billing rate at launch | Year 3 utilisation | Year 3 billable hours |
|---|---|---|---|
| Principal | $215 | 45% | 846 |
| Senior consultant | $150 | 78% | 1,466 |
| Staff consultant | $115 | 78% | 1,466 |
| Audit and controls manager | $170 | 74% | 1,391 |
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Available hours | 3,290 | 5,797 | 7,520 | 9,400 | 11,280 |
| Billable hours | 2,092 | 3,942 | 5,170 | 6,359 | 7,934 |
| Team utilisation | 64% | 68% | 69% | 68% | 70% |
| Revenue as a share of capacity at those rates | 91% | 96% | 98% | 97% | 96% |
| Revenue per billable hour | $166 | $152 | $162 | $159 | $159 |
The principal's utilisation falls from 55% in Year 1 to 40% in Year 5 as selling, review and quality control take more of his time. Revenue per billable hour is highest in Year 1 because the principal, the highest-rate person, does most of the billable work. The totals use unrounded hours, so they differ by a few hours from the sum of the rounded figures.
How an engagement runs
Every engagement follows the same steps: a risk assessment, a scope and an hours estimate, fieldwork, a review by a more senior person, a written report with management's responses, and a follow-up of agreed actions. For retainers the annual audit plan sets the order of the work. Workpapers are kept in audit management software, and every report is reviewed by a principal or the manager before it leaves the firm. The firm follows the professional standards of the Institute of Internal Auditors, including those on objectivity, and applies the separation rule below.
Audit software and data tools
Audit management software, a data analytics tool for testing full populations of transactions, a secure client portal and Microsoft 365. Software costs $14,000 in Year 1 and $38,000 by Year 5.
Who delivers the work
Two people delivering client work at the end of Year 1 (Sandor and a senior consultant from month 4), four at the end of Year 2, and six from Year 4, plus a part-time administrator from month 30. Specialist contractors cover IT general controls testing and data analytics on engagements that need them. Their cost is carried in direct costs, not payroll. Each hire follows revenue; the downside case shows what is delayed or dropped if revenue falls short.
Insurance and risk
- Professional liability, cyber, general liability and property, and workers' compensation insurance, plus key-person life and disability cover on Sandor, budgeted together at $18,500 in Year 1. Professional liability is the largest part, at $10,500.
- Written engagement letters for every client, with scope, fee, deliverables, confidentiality and a limitation-of-liability clause reviewed by a lawyer.
- A separation rule for objectivity. The firm sells both internal audit and controls design, and it does not let the same people mark their own work. A client that buys controls design or implementation does not receive internal-audit testing of those controls from the same engagement team. Testing is done by a different team with a different reviewer, or after a cooling-off period of at least 12 months, and the engagement letter discloses the arrangement. Annual audit plans exclude areas the firm designed in the previous 12 months.
- Encrypted storage and a written information security policy for client data.
Who the firm depends on
Software vendors, specialist contractors, a broker for insurance and an employment lawyer on call for hiring. None is hard to replace, except the insurer for professional liability, which needs a quote every year.
Leadership and Advisers
Sandor Artemide, CPA, CIA, founder and managing principal
Sandor has thirteen years in internal audit and risk. He spent seven at a national accounting firm, rising to senior manager in its risk advisory practice, and six as internal audit director at a Pittsburgh manufacturer. He holds a Pennsylvania CPA licence and the Certified Internal Auditor credential. His $140,000 investment is the savings of those years.
What Sandor has not done before
Sandor has not built a sales pipeline from nothing, has not hired for his own firm and has no deep IT-audit background. The plan covers these with a referral programme run on a fixed schedule, a lawyer on call for hiring and contractors for IT controls testing.
If Sandor is out
Sandor is the only principal at launch and carries the client relationships, so the firm carries life and disability cover on him. The manager hired in month 24 can lead engagements and sign reports when he is out. Until then an outside reviewer holding the CIA credential, retained for about $2,000 a year under a confidentiality agreement that the engagement letters disclose, covers report sign-off.
Outside advice
A retired audit partner reviews the firm's own first-year financial numbers every quarter, without access to client files. Sandor also uses the regional Small Business Development Center for pricing and marketing questions.
Ownership and the bank's position
Sandor owns 100% of Artemide Auditing & Consulting, LLC and gives the bank a personal guarantee. The loan carries a covenant to deliver quarterly accounts.
Five-Year Financials
The financials run on a single five-year model, with Year 1 broken out by month and Years 2 to 5 shown as annual totals. Revenue starts from billable hours and rates, which lets a reader follow utilisation from the staffing table to the sales line. Consultants' pay is booked in payroll and operating costs rather than direct costs, so the gross profit line sits near 96% and says little about what the work earns. The operating figures come first.
Funding the first year
| Use of funds | Amount |
|---|---|
| Laptops, monitors, encrypted storage, phones | $9,000 |
| Office furniture and fit-out | $8,000 |
| Entity registration, local registrations and first-year professional memberships | $1,500 |
| Legal: entity set-up, engagement and confidentiality terms, lease review | $6,000 |
| Launch: website, brand, introductions to referral partners | $9,000 |
| Cash reserve for the first year | $186,500 |
| Total uses | $220,000 |
| Source of funds | Amount |
|---|---|
| Sandor Artemide's savings | $140,000 |
| Bank term loan | $80,000 |
| Total sources | $220,000 |
Sandor puts in $140,000 of his own savings, 64% of the $220,000 raised, and the bank lends $80,000 over seven years at 9.75%, with interest only for the first 12 months. The bank asks for a personal guarantee and a lien on business assets, and the rate is a planning figure, not a quote. The $186,500 reserve is sized for the downside case, not the base case. In the base case Year 1 operations use $101,321 of cash, including the $16,500 of start-up costs. About $80,000 of the reserve is borrowed, and in a bad year it is the reserve that pays the loan: in the 20%-lower case below, debt service cover drops under 1x in Years 2 and 4. The model reports year-end balances only, so a low point inside a year could sit below the year-end figure. Sandor therefore asks the bank for a $40,000 standby line of credit. It is undrawn in every case modelled and sits outside the figures.
What the numbers rest on
- Revenue equals billable hours multiplied by rate. Each person has 1,880 available hours a year (2,080 less ten holidays and 15 days of leave). Utilisation targets, meaning billable hours as a share of available hours: senior consultants 75% rising to 78%; staff consultants 70% in their first year, then 78%; the manager 68% to 74%; the principal 55% in Year 1, easing to 40% by Year 5 as selling and review claim more of his week.
- Launch rates are $215 an hour for the principal, $170 for the manager, $150 for a senior consultant and $115 for a staff consultant, with 3% increases from Year 2. Across the whole team, utilisation comes to 64%, 68%, 69%, 68% and 70%. Revenue lands at 91%, 96%, 98%, 97% and 96% of the capacity those hours and rates imply, which allows for a slow first year and for scope that overruns and gets written down. Revenue per billable hour works out at $166, $152, $162, $159 and $159.
- A retainer averages $3,850 a month, roughly 25 hours at a blended $155. Two clients sign before launch and the firm closes Year 1 with 6. Retainer clients at each year end are 6, 9, 11, 12 and 15, after a 12% annual loss of clients. In Year 1 a retainer client is billed $46,200.
- Controls and compliance projects average about $21,000 in Year 1, which is about six projects. Special reviews and audit-readiness jobs average about $8,000, about five in all. Both are quoted as fixed fees from an hours estimate with a contingency, and billed on milestones.
- Clients take 40 days to pay on average. Retainers are invoiced monthly on 30-day terms and projects at milestones. The balance sheet carries receivables at an annual average, so December 2027 receivables at the run rate would be about $62,800 against the $38,022 shown. Direct costs run at 2% of retainer revenue and 6% and 5% of the two project lines, for specialist contractors on IT controls testing and data analytics and for per-engagement tool licences. In Year 1 that is 3.8% of revenue.
- On-costs of 27% sit on top of wages and cover payroll taxes, health cover, state unemployment contributions and a retirement match (15% for the part-time administrator). The senior consultant's launch wage is a little above the BLS median for accountants and auditors ($83,680 in May 2025), and the manager's is just above the median for management analysts ($101,860). Pay raises of 3% a year appear as their own line from Year 2. Sandor draws $125,000 from month one, which means every profit line already carries his pay.
- Insurance is among the larger fixed costs and grows faster with the practice than most. Year 1 comes to $18,500: $10,500 professional liability, $2,500 cyber, $1,500 general liability and property, $2,500 workers' compensation and $1,500 key-person life and disability cover on Sandor. By Year 5 it reaches $43,500, between 3.5% and 5.3% of revenue throughout, as revenue and headcount rise. All of these are planning figures pending broker quotes. Professional liability is typically written on a claims-made basis, so cover has to stay in place after an engagement ends.
- The office is 1,200 square feet at $27 a square foot a year, full-service ($32,400), rising 3% a year. Consultants are mostly at client sites and share desks, so one office holds a team of up to seven through Year 5. Mileage, parking and short trips that are not recharged cost $9,000 in Year 1.
- Recruiter fees run at about 10% of first-year salary for experienced hires ($8,800 for the Year 1 senior consultant), with job-board costs for staff-level hires. Replacement laptops and kit for new starters are an annual cost from Year 2, and bad debt is allowed at about 1% of revenue. Professional fees include around $2,000 a year for an outside reviewer who covers report sign-off when Sandor is away.
- Income tax uses the federal corporate rate of 21% and a Pennsylvania corporate net income rate of 6.99%, the rate the Pennsylvania Department of Revenue lists for tax year 2027. The Department's schedule steps down to 4.99% by 2031, but the model holds 6.99% as a cautious placeholder. The Year 1 loss carries forward in full. Federal rules cap the net operating loss deduction for post-2017 losses at 80% of taxable income and Pennsylvania has its own cap; neither is modelled, so tax in Years 2 and 3 is somewhat understated. A pass-through election would normally be considered, which would move this tax to Sandor's personal return. Local taxes are left out.
- Distributions of $25,000 in Year 4 and $45,000 in Year 5 are paid only when the model shows spare cash. The loan runs its course instead of being repaid early.
Revenue by service line
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Outsourced internal-audit retainers | $180,950 | $357,000 | $490,000 | $590,000 | $702,000 |
| Controls and compliance consulting projects | $126,000 | $190,000 | $260,000 | $300,000 | $395,000 |
| Special reviews and audit-readiness support | $40,000 | $51,000 | $90,000 | $120,000 | $163,000 |
| Total revenue | $346,950 | $598,000 | $840,000 | $1,010,000 | $1,260,000 |
| Growth on prior year | – | 72% | 40% | 20% | 25% |
Retainers carry the revenue: 52% in Year 1 and 56% in Year 5, billed every month. The six in place in December 2027 bill $277,200 a year. That is 78% of the Year 2 retainer line and 46% of all Year 2 revenue, so the second year opens with close to half of its revenue already contracted. Controls projects are the second line and the way new clients first arrive. Special reviews are the smallest line and the hardest to predict, since they follow each client's own audit calendar.
Month by month in 2027
| Month | Outsourced internal-audit retainers | Controls and compliance consulting projects | Special reviews and audit-readiness support | Total revenue | EBITDA |
|---|---|---|---|---|---|
| Jan 2027 | $7,700 | $6,000 | $0 | $13,700 | ($17,885) |
| Feb 2027 | $7,700 | $7,000 | $0 | $14,700 | ($16,923) |
| Mar 2027 | $7,700 | $7,500 | $2,000 | $17,200 | ($14,518) |
| Apr 2027 | $11,550 | $9,000 | $0 | $20,550 | ($11,295) |
| May 2027 | $11,550 | $10,000 | $3,000 | $24,550 | ($7,447) |
| Jun 2027 | $15,400 | $11,000 | $0 | $26,400 | ($5,667) |
| Jul 2027 | $15,400 | $11,000 | $4,000 | $30,400 | ($1,819) |
| Aug 2027 | $19,250 | $12,000 | $5,000 | $36,250 | $3,809 |
| Sep 2027 | $19,250 | $12,000 | $0 | $31,250 | ($1,001) |
| Oct 2027 | $19,250 | $12,000 | $6,000 | $37,250 | $4,771 |
| Nov 2027 | $23,100 | $14,500 | $10,000 | $47,600 | $14,728 |
| Dec 2027 | $23,100 | $14,000 | $10,000 | $47,100 | $14,247 |
January is the thinnest month, with two retainers and a first controls project, and billings stay within what the principal can deliver alone (about 86 hours a month at 55% utilisation) until the senior consultant starts in April. Retainers are added through the year, and special reviews cluster in the second half, ahead of clients' year-end external audits. EBITDA (profit before interest, depreciation and tax) is positive in August and October to December, and negative in the other eight months, with September about $1,000 short. Month-end cash is lowest in Aug, at about $61,000 once the 40-day payment lag is allowed for. That is the real low point of Year 1, and it sits below the $101,679 year-end figure shown further down.
Who is on payroll, and from when
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and managing principal | $125,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Senior consultant | $88,000 | Month 4 | 1 | 1 | 1 | 1 | 1 |
| Staff consultant | $62,000 | Month 13 | – | 1 | 1 | 1 | 1 |
| Audit and controls manager | $108,000 | Month 24 | – | 1 | 1 | 1 | 1 |
| Practice administrator (part time, 20 hours a week) | $26,000 | Month 30 | – | – | 0.5 | 0.5 | 0.5 |
| Second staff consultant | $64,000 | Month 40 | – | – | – | 1 | 1 |
| Second senior consultant | $95,000 | Month 46 | – | – | – | 1 | 1 |
| Total payroll incl. on-costs | $242,570 | $360,680 | $503,852 | $607,433 | $718,240 |
Sandor is the only person on payroll for the first three months. The senior consultant starts in month 4, once three retainers are running and his own billable time is full. After that: a staff consultant in month 13, the audit and controls manager in month 24, a part-time administrator in month 30 (scheduling, invoicing, workpaper filing), a second staff consultant in month 40 and a second senior consultant in month 46. Each start follows the revenue the previous one made possible. Client delivery is handled by 2 people at the end of Year 1, 4 at the end of Years 2 and 3, and 6 at the end of Years 4 and 5, with the administrator additional from Year 3. The administrator's $26,000 is a part-time salary.
Profit and loss over five years
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $346,950 | $598,000 | $840,000 | $1,010,000 | $1,260,000 |
| Direct costs (specialist contractors, per-engagement tool licences) | ($13,179) | ($22,715) | ($31,908) | ($38,365) | ($47,861) |
| Gross profit | $333,771 | $575,285 | $808,092 | $971,635 | $1,212,139 |
| Payroll incl. on-costs | ($242,570) | ($360,680) | ($503,852) | ($607,432) | ($718,240) |
| Rent | ($32,400) | ($33,400) | ($34,400) | ($35,400) | ($36,500) |
| Utilities | ($3,000) | ($3,100) | ($3,300) | ($3,400) | ($3,500) |
| Marketing | ($24,000) | ($28,000) | ($30,000) | ($32,000) | ($34,000) |
| Insurance | ($18,500) | ($25,500) | ($32,500) | ($37,500) | ($43,500) |
| Professional fees | ($8,000) | ($8,000) | ($9,000) | ($9,500) | ($10,000) |
| Software subscriptions | ($14,000) | ($20,000) | ($27,000) | ($33,000) | ($38,000) |
| CPE, certifications and professional dues | ($5,000) | ($8,000) | ($11,000) | ($13,500) | ($15,500) |
| Client-site travel not recharged | ($9,000) | ($14,000) | ($19,000) | ($22,000) | ($26,000) |
| Phones, supplies and postage | ($4,000) | ($5,500) | ($7,000) | ($8,500) | ($10,000) |
| Recruiting fees and job boards | ($8,800) | ($14,000) | ($1,500) | ($12,500) | $0 |
| Equipment replacement and new-hire kit | $0 | ($6,000) | ($5,000) | ($9,000) | ($7,000) |
| Bad debt allowance | ($3,500) | ($6,000) | ($8,200) | ($10,500) | ($12,600) |
| Annual pay raises (3% a year) | $0 | ($10,820) | ($30,685) | ($56,325) | ($90,145) |
| EBITDA | ($38,999) | $32,285 | $85,656 | $81,077 | $167,154 |
| Depreciation | ($2,943) | ($2,943) | ($2,943) | ($2,943) | ($2,943) |
| Interest | ($7,800) | ($7,347) | ($6,295) | ($5,136) | ($3,858) |
| Income tax | $0 | $0 | ($12,909) | ($19,361) | ($42,529) |
| Net income before start-up costs | ($49,742) | $21,995 | $63,509 | $53,638 | $117,824 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($16,500) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($66,242) | $21,995 | $63,509 | $53,638 | $117,824 |
Year 1 ends $49,742 down before start-up costs and $66,242 down after them. Year 2 makes a profit, but net income is only 3.7% of revenue because the staff consultant and the manager are on payroll before their utilisation reaches target. Year 3 posts a 10.2% EBITDA margin, helped by no new full-time hire until month 40. Year 4 slips to 8.0% when two hires and accumulated pay raises arrive together, and Year 5 reaches 13.3% with the same office and six people delivering. Insurance falls from 5.3% of revenue in Year 1 to 3.5% in Year 5. No income tax is due in Year 2 because the Year 1 loss carries forward; Year 3 pays $12,909.
Where the cash goes
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($101,321) | ($2,575) | $39,932 | $37,951 | $93,369 |
| Equipment and fit-out | ($17,000) | $0 | $0 | $0 | $0 |
| Funding received | $220,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | ($10,317) | ($11,369) | ($12,528) | ($13,806) |
| Owner distributions | $0 | $0 | $0 | ($25,000) | ($45,000) |
| Net change in cash | $101,679 | ($12,892) | $28,563 | $422 | $34,563 |
| Closing cash | $101,679 | $88,788 | $117,350 | $117,772 | $152,336 |
Year-end cash stays above zero throughout, though the Year 1 figure of $101,679 is flattered by the model's averaging of receivables: at the December run rate receivables would be about $24,800 higher and closing cash about $77,000. The true low for the year is the monthly trough above, about $61,000. The lowest year-end balance in the table is Year 2, at $88,788, because receivables grow by $27,512 and $10,317 of principal is repaid while profit is small. Distributions start in Year 4. The loan falls from $80,000 to $31,979 by the end of Year 5.
Balance sheet at each year end
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $101,679 | $88,788 | $117,350 | $117,772 | $152,336 |
| Accounts receivable | $38,022 | $65,534 | $92,055 | $110,685 | $138,082 |
| Equipment and fit-out (net) | $14,057 | $11,114 | $8,171 | $5,229 | $2,286 |
| Total assets | $153,758 | $165,436 | $217,576 | $233,686 | $292,704 |
| Bank loan | $80,000 | $69,683 | $58,314 | $45,786 | $31,979 |
| Paid-in capital | $140,000 | $140,000 | $140,000 | $140,000 | $140,000 |
| Retained earnings | ($66,242) | ($44,247) | $19,262 | $47,900 | $120,724 |
| Total liabilities and equity | $153,758 | $165,436 | $217,576 | $233,686 | $292,704 |
Break-even and margins
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -11.2% | 5.4% | 10.2% | 8.0% | 13.3% |
| Net margin (before start-up costs) | -14.3% | 3.7% | 7.6% | 5.3% | 9.4% |
| Payroll incl. pay raises as share of revenue | 70% | 62% | 64% | 66% | 64% |
| Revenue per full-time equivalent at year end | $173,475 | $149,500 | $186,667 | $155,385 | $193,846 |
| Average monthly revenue | $28,913 | $49,833 | $70,000 | $84,167 | $105,000 |
| Monthly revenue needed to cover operating costs | $32,291 | $47,037 | $62,580 | $77,143 | $90,521 |
| Debt service cover (EBITDA / interest + principal) | -5.0x | 1.8x | 4.8x | 4.6x | 9.5x |
A year breaks even on operating costs when average monthly revenue is above the "needed" row of the ratios table. Year 1 averages $28,913 against $32,291 needed, a loss. Year 2 averages $49,833 against $47,037. Debt service cover is negative in Year 1, with a loss-making firm paying interest, then 1.8x in Year 2 and over 4x from Year 3. Utilisation moves the result most. In Year 3, one percentage point of team utilisation is about 75 billable hours, about $12,200 of revenue and about $11,750 of EBITDA after direct costs, 14% of that year's EBITDA. Five points lost would cut Year 3 EBITDA from $85,656 to about $26,900.
Downside: revenue 20% short
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $277,560 | $478,400 | $672,000 | $808,000 | $1,008,000 |
| Net income before start-up costs | ($79,946) | ($2,436) | $30,974 | ($2,899) | $85,131 |
| Net income after start-up costs | ($96,446) | ($2,436) | $30,974 | ($2,899) | $85,131 |
| Closing cash | $79,079 | $47,259 | $48,591 | $21,203 | $73,553 |
Every revenue line falls 20% in every year. Sandor responds by starting each hire from month 13 six months later, dropping the second senior consultant, cutting marketing by 20%, taking a 20% pay cut and paying no distributions. The first senior consultant is not delayed, since the first retainers cannot be served without him. With those steps the firm closes every year with cash, never below $21,203, reached at the end of Year 4. It is profitable in Years 3 and 5 and loses $2,436 in Year 2 and $2,899 in Year 4. Debt service cover across the five years is -8.9x, 0.4x, 2.3x, 0.3x and 5.8x, so in Years 2 and 4 the reserve pays the loan, not earnings. Equity at the end of Year 1 is $43,554, which is thin, and the bank would hear early if Year 1 tracked this case. All of this is year-end data from a model that spreads Years 2 to 5 evenly, so a trough inside Year 4 could be lower. The standby line of credit covers that and is not drawn here. Without the response, the same shortfall would leave the firm without cash during Year 2.
Sources
- Bureau of Labor Statistics, Accountants and auditors and Management analysts, Occupational Outlook Handbook; median pay for May 2025 and the 2025 to 2035 projection.
- Pennsylvania Department of Revenue, Corporate Net Income Tax: the rate of 6.99% listed for tax year 2027 and the scheduled reductions through 2031.
- Cornell Legal Information Institute, 49 Pa. Code § 11.82, Peer review compliance. The State Board of Accountancy's own pages could not be retrieved when this plan was checked, so the plan states only what the regulation says.
- Federal and Pennsylvania limits on using a prior-year loss against profit are not modelled; check current rules before relying on the tax lines.
- Insurance premiums, rent per square foot, billing rates and recruiting fees are planning figures for this example, not sourced market figures.
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