Looking for an educational software business plan? You're in the right place.
A learning app sold to parents on a monthly subscription raises a set of questions that a generic software template skips. How much does it cost to win one paying family? How many of them leave each month? What do Apple and Google keep? And how much cash does the company need before the subscriptions pay for the team?
In this article we'll walk through a complete sample business plan for a home-learning app in Savannah, Georgia, section by section. We'll cover the executive summary, the SWOT analysis, the funnel from install to paying subscriber, and, in particular, all of the financials.
Here's what you'll take away:
- The executive summary: see how to put an app, a price and a funding request on one page, so a reader knows what the company sells and what it needs in the first minute
- The SWOT analysis: learn how to name the dependence on app-store rules and on paid advertising without weakening the case
- The subscription economics: work out acquisition cost, churn, revenue per account and payback, and see the numbers a seed investor will test first
- The app-store question: see how a 15% commission is built into the forecast, and what moving customers to web billing is worth
- The start-up budget: find out how much a consumer app raises when it will lose money for four years, and what the reserve is for
- The five-year profit, cash flow and balance sheet: understand how each hire and each marketing dollar shows up in the numbers
- The downside case: have an answer ready for the question of what happens if revenue is 20% short, with the steps management takes
If you're planning a subscription app, read this before you write your own. The company is fictional, so take what fits and change the rest.
In this plan
If you need a educational software business plan (consumer learning app) template for your own plan, start it in the Toolkit.
Executive Summary
Cedar Marsh, Inc. is a Savannah, Georgia company that opens on 1 January 2027 to sell a reading and maths practice app to parents. Children aged 5 to 11 work through narrated ten-minute lessons that adjust to how they answer, and a parent dashboard shows what was covered. One family account covers up to four children. Lessons for ages 5 to 8 are ready at launch, and ages 9 to 11 follow between 2028 and 2030. Priya Nair, a former early-reading teacher, is chief executive. Tom Okafor, a mobile engineer, is chief technology officer. Each holds 32% of the company, seed investors hold 30% and an option pool holds 6%.
The company raises $1,300,000: $150,000 from the two founders and $1,150,000 from seed investors. The money is split three ways. $147,000 is spent at opening, mostly on finishing the launch version of the app, $25,000 buys equipment and the office fit-out, and $1,128,000 stays in the bank as the reserve that carries the company to profit.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $377,670 | $747,130 | $1,428,680 |
| Net income after start-up costs | ($460,871) | ($251,379) | $14,098 |
| Closing cash | $782,985 | $501,250 | $455,065 |
The app opens with 500 paying founding families converted from a free beta and ends 2027 with 4,317. Revenue comes from monthly and annual subscriptions, group plans for homeschool co-ops, and printable workbook packs. The company loses money in its first two years, earns a thin profit of $14,098 in Year 3 and grows to $465,399 in Year 5 on revenue of $3,077,620.
The early losses come from a fixed cost base that arrives before the subscribers do. Payroll, lesson production, software, insurance and the office cost about $465,000 in Year 1, before any marketing, against $378,000 of revenue. The team stays at six people through Year 3 while accounts grow from 4,317 to 11,945. Winning a family costs about $30 in Year 1 and $38 by Year 5, and a family repays that in about four months, so the marketing itself pays back. The spend is limited by what the funnel can absorb: the sensitivity tests in the financial section show cash running out quickly if the cost per account is 50% higher.
The model tests itself in two ways. A downside case with higher acquisition costs and more churn, and a management response, keeps cash above $87,000 at every year end. The same shortfall with no response takes cash below zero in Year 4.
The product is deliberately narrow. It is built for one buyer, the parent paying out of pocket, and the price, the data collected and the lesson length can each be explained in a sentence.
Inside Cedar Marsh
Legal name: Cedar Marsh, Inc., a Delaware corporation based in Savannah and registered to do business in Georgia. Owners: Priya Nair 32%, Tom Okafor 32%, seed investors 30%, employee option pool 6%. Premises: about 1,100 square feet of leased office space in Savannah, with a sound-treated corner for recording narration. Launch date: 1 January 2027. Stage: pre-launch. A first version is in beta with 2,600 families on a waiting list, and the $95,000 launch budget finishes it: contract engineers, and illustration and narration for the first 700 lessons.
What the app does
Helps children aged 5 to 11 practise reading and maths for ten minutes a day, and shows the parent what was covered and where the child is stuck.
What families pay
| Product | Price | Notes |
|---|---|---|
| Monthly plan | $12.99 a month | Up to four children per family account |
| Annual plan | $89.99 a year | Equal to $7.50 a month |
| Group seat | $5.50 a month | Annual contract for co-ops and micro-schools, minimum 10 seats |
| Workbook pack | $14 | Printable download, sold inside the app |
From Year 3 the monthly price becomes $14.99 and the annual price $99.99. Introductory offers, refunds, chargebacks and failed renewals take about 5% off list, so revenue per paying account is $10.25 a month in the first two years and $11.10 afterwards.
Targets
- 4,317 paying families by December 2027, up from 500 at launch.
- A first co-op group plan by June 2027, and 300 group seats by December.
- 11,945 paying families, $1.43 million of revenue and a first profit in 2029.
- 21,375 families, $3.08 million of revenue and a team of 10.5 full-time equivalents in 2031.
Children's data and the app stores
The app collects a parent's email, a child's first name and learning progress, and nothing else. It carries no third-party advertising and no tracking in the children's area. The Federal Trade Commission's children's privacy rule applies to online services directed to children under 13, and the FTC amended it in April 2025. The FTC's guidance lists a payment-card transaction that notifies the account holder of each charge as one accepted way to obtain a parent's consent. The company relies on that method, because the parent starts the trial and holds the card, and it adds a parental gate in front of purchases and settings as a separate safeguard. Counsel reviews the design before launch ($24,000 of legal work in the start-up costs) and annually afterwards. Apple and Google each publish additional rules for apps aimed at children, which the same review covers.
The Home-Learning Market
Who learns at home
Homeschooling is the clearest paying audience, though the counts differ by survey. Education Next reports that the Census Bureau's Household Pulse Survey put nearly 6% of school-age children as homeschooled in 2022-23, and that the National Household Education Survey, which defines homeschooling more narrowly, put it at 3.4%. Those are national figures from secondary summaries. They are not Cedar Marsh's market size. The company builds each year's accounts from the funnel described below, and 21,375 paying families in Year 5 is a number of households it would have to find one at a time.
The second audience is larger and harder to count: parents of children in school who pay for extra reading and maths practice. No sourced count of these families is used here.
What the stores keep
Apps sold through Apple's App Store and Google Play pay a commission on each subscription. Apple's Small Business Program lists a 15% commission for developers with up to $1 million in annual proceeds, and Google Play's help page lists 10% plus a 5% billing fee for auto-renewing subscriptions in the US. The forecast uses 15% on store-billed revenue. Apple's $1 million line is measured on Apple proceeds alone. Store-billed proceeds across both stores reach about $1.16 million in Year 5. The split between the stores is not modelled, so if Apple's share passed its line the standard rate would apply to the excess, and web billing is the company's answer to that. Both stores change their terms from time to time.
Where a parent could go instead
| Alternative | What it offers | Why a family picks it | How Cedar Marsh differs |
|---|---|---|---|
| Large-brand children's learning subscriptions | Broad libraries with wide subject coverage | Familiar names and a big catalogue | Two subjects only, with a parent view of what was covered |
| Free nonprofit learning sites | Video lessons and practice at no cost | No cost | Guided daily sessions with narration, for children who do not self-direct |
| Tools assigned by the child's school | Practice set by the teacher | Already in use at school | Usable at home across schools, including homeschool families |
| Private tutors and tutoring centres | One-to-one human attention | Personal feedback | Daily practice at a monthly price, without a person's attention |
| Workbooks and curriculum bundles | Printed or downloadable sequences | Tangible and familiar | Adjusts to answers, and includes workbook packs for offline use |
The table describes categories and how this company positions itself. Prices change often and are not quoted here, and no named product is ranked.
SWOT
| Strengths | Weaknesses |
|---|---|
| A founder who taught early reading and has a 14,000-parent newsletter | Only one engineer for the first 13 months |
| 500 founding families paying on launch day | Growth depends on paid advertising that the company does not control |
| Low cost per new family from referrals and content | Two subjects, so a family who wants more may leave |
| Opportunities | Threats |
|---|---|
| Web billing, which keeps more of each subscription | Changes to app-store commissions or rules |
| Group plans through co-ops and micro-schools | Large brands cutting prices or offering free tiers |
| Summer and back-to-school demand | Rising advertising costs, which raise the cost per family |
Who Subscribes and Why They Leave
Three kinds of paying family
Homeschool parents teach several children at once and want a daily routine for reading and maths that runs without them sitting beside the child. They are the core of the founding families and of the group plans.
Parents supplementing school. A child falls a few months behind in reading, or a parent wants more practice than homework gives. They subscribe in September and January, and many leave in June.
Summer-learning families. They sign up in May and June to keep a child from losing ground over the break, and they leave in September if the child has not kept the habit.
What the beta showed
The 2,600 beta families used the app free for 60 days. 19% (500) chose to pay at the founding-family price when the beta closed. Another 1,200 were still opening the app weekly at day 60 but did not pay, mostly parents with one child who saw the free trial end and judged the price against free alternatives. The forecast counts only the 500 who paid, and the company's first marketing test is whether the other 1,200 convert on an annual offer.
What the buyer asks
The child sticks with it. The parent can see what was covered. The price is plain, with no add-ons in the children's area. Cancelling takes two taps.
Why families leave
The commonest reason is calendar: churn peaks in June, July and December. Next come children who age out of the content, parents who joined on a discount and never formed the habit, and families who were trying several apps at once.
Monthly and annual plans behave differently, so the forecast tracks them apart. In Year 1, 60% of accounts are on monthly plans, which lose about 11.7% of accounts a month. Annual plans (40%) cannot cancel in their first year apart from refunds, and 55% are expected to renew.
| Accounts remaining from 100 new | Monthly plan | Annual plan | Blended, 60% monthly |
|---|---|---|---|
| After 3 months | 69 | 98 | 80 |
| After 6 months | 47 | 97 | 67 |
| After 12 months | 22 | 96 | 52 |
| After 13 months (first renewal) | 20 | 53 | 33 |
The blended Year 1 rate is 7.0% a month of opening accounts. It falls to 5.0% by Year 5 as the annual share rises, monthly churn eases to about 7%, and 70% of annual accounts renew.
From Install to Subscriber
The path
A parent finds the app through an ad, a creator's recommendation, a search or a friend, installs it, and starts a seven-day free trial. The trial converts to a paid plan unless the parent cancels, and the app sends a reminder two days before it does. In Year 1 the funnel is 143,000 installs, 12% of which start a trial (about 17,200), and 35% of trials convert (6,000 paying accounts), or 4.2% of installs. Paid advertising buys about 45,000 of the installs at $1.73 each, and the rest come from creators, search, the newsletter and referrals. Each stage is tracked weekly, and any one can be tested before more is spent on advertising. The funnel rates are the company's forecast, not an industry figure.
What a new family costs and is worth
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| New paying accounts | 6,000 | 6,613 | 11,765 | 14,444 | 15,789 |
| Marketing spend | $182,000 | $205,000 | $400,000 | $520,000 | $600,000 |
| Cost per new account | $30 | $31 | $34 | $36 | $38 |
| Monthly churn | 7.0% | 6.5% | 5.8% | 5.3% | 5.0% |
| Gross profit per account-month | $8.52 | $8.63 | $9.41 | $9.48 | $9.54 |
| Gross profit over an account's life | $121 | $133 | $162 | $179 | $191 |
| Life gross profit divided by cost | 4.0 | 4.3 | 4.8 | 5.0 | 5.0 |
| Months to recover the cost | 3.6 | 3.6 | 3.6 | 3.8 | 4.0 |
The Year 1 spend includes the $22,000 launch campaign. Gross profit per account-month is revenue per account less commissions, payment fees and hosting at the stream rates, which fall as web billing grows. Life gross profit is that figure divided by monthly churn, undiscounted. The table counts programme spend only. Adding the growth marketer, who starts in month 38, raises the cost per new account to about $43 in Year 4 and $45 in Year 5, which brings the ratio to 4.2 in both years. Priya's and Tom's selling time is not counted, and neither is the outside agency, which is paid from the marketing budget. The ratios are high because forecast churn is low, and the sensitivity tests in the financial section show what one extra point of churn does.
Group plans
Co-ops and micro-schools buy seats on an annual contract at $5.50 a seat a month. Priya sells them herself through homeschool-group meetings until a partnerships manager joins in month 40. Seats at year end are 300, 1,200, 3,000, 5,000 and 7,000, about 220 groups of 32 by Year 5, which is 14% of Year 5 revenue.
Where the Next Family Comes From
Year 1 channels
The Year 1 budget is $182,000: $22,000 of launch spend from the start-up capital and $160,000 of running costs. It is 48% of Year 1 revenue, and the share falls to 19% by Year 5. Half of the 6,000 new accounts come from channels that cost under $20 each. Paid advertising carries the largest share of spend and rests on the funnel above, so the first quarter's results decide how much of it continues. Until the growth marketer starts in month 38, Priya runs acquisition with an outside agency, and a seed investor who has managed subscription-app advertising reviews results monthly.
| Channel | Year 1 spend | New accounts | Cost per account |
|---|---|---|---|
| Paid social and search ads | $78,000 | 1,900 | $41 |
| Parent and homeschool creators, group sponsorships | $36,000 | 1,100 | $33 |
| Guides, search content and the newsletter | $20,000 | 1,300 | $15 |
| Referral rewards (a free month for each side) | $12,000 | 850 | $14 |
| Homeschool conferences and local events | $8,000 | 450 | $18 |
| App-store listing tests and tools | $6,000 | 400 | $15 |
| Running total | $160,000 | 6,000 | $27 |
| Launch: website and app-store listings | $9,000 | ||
| Launch: founding-family campaign | $13,000 |
Billing channel
Every account that signs up on the web instead of in the app keeps about 10.5 percentage points more of the subscription for the company. The forecast moves the web share of subscription revenue from 21% in Year 1 to 47% in Year 5, through web sign-up from email and search, and through in-app links to web checkout where the stores allow it. Ten points of subscription revenue shifted from store to web billing is worth about $27,000 a year at Year 5 volumes.
Marketing milestones
- January 2027: 1,142 paying accounts at month end.
- June 2027: first co-op group plan signed.
- September 2027: 3,753 accounts after back-to-school.
- December 2027: 4,317 accounts and $48,170 of monthly revenue.
Building and Running the App
Office
About 1,100 square feet in Savannah, set at roughly $27 a square foot a year including service charges ($30,000 in Year 1), on a three-year lease, with utilities charged separately. The company moves to about 1,600 square feet in Year 4. The recording corner is treated for sound, so lesson narration is recorded in-house.
How lessons are made
A curriculum designer writes each lesson from a template. Freelance illustrators draw new characters and stories from a shared illustration kit, voice artists record the narration in the studio corner, and short feedback phrases ("Nice work, Maya") are generated. Every lesson is tested with a panel of 30 beta families before release. One designer finishes about 12 lessons a week, around 550 a year. The library opens with about 700 lessons: reading for ages 5 to 8 and maths for ages 5 to 7, roughly 100 per age. The second designer, from month 30, extends maths, and ages 9 to 11 are added from 2028 to 2030. Illustration, narration and audio cost $32,000 in Year 1, about $58 a lesson.
How the app is built
One cross-platform codebase serves iPhone, iPad and Android tablets, with a separate web checkout. Releases ship every two weeks. Cloud hosting, content delivery and generated phrases together cost about 4% of revenue. A contract engineer handles operating-system updates and release support. Engineers cost $115,000 and $120,000 a year, about $146,000 and $152,000 with on-costs.
Capacity against accounts
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Paying accounts at year end | 4,317 | 6,652 | 11,945 | 17,140 | 21,375 |
| Support contacts a month (0.1 per account) | 432 | 665 | 1,194 | 1,714 | 2,138 |
| Support capacity a month | 1,500 | 1,500 | 1,500 | 2,250 | 2,250 |
| Curriculum designers | 1 | 1 | 2 | 2 | 2 |
| Engineers on payroll | 1 | 2 | 2 | 3 | 3 |
Safeguards
- A written privacy design that limits data collected from children to first name and progress.
- A parent-only account, with a parental gate in front of purchases and settings.
- No third-party advertising and no tracking tools in the children's area.
- Content tested with real children before it is released.
- Insurance covering cyber liability, technology errors and omissions, general liability and workers' compensation, with key-person life cover on both founders, budgeted at $13,500 in Year 1.
Suppliers
Cloud and app-store accounts, freelance illustrators and voice artists, and a contract engineering firm. Each can be replaced at similar terms.
Founders, Team and Investors
Priya Nair, chief executive
Priya taught early reading in Georgia public schools for eight years, then spent four years as a product manager at an education software company. She writes a weekly newsletter for parents and homeschoolers with 14,000 subscribers, and 2,600 of them joined the beta list. She puts in $75,000 of savings and pays herself $75,000.
Tom Okafor, chief technology officer
Tom has nine years in mobile engineering, the last four on a consumer subscription app, where he led a team of five. He built the first version of the app and runs releases, payments and data security. He puts in $75,000 and pays himself $90,000.
Where the team is thin
Neither founder has run paid advertising at the scale the forecast reaches in Year 3. Until the growth marketer joins in month 38, an outside agency and a seed investor with subscription-app experience support Priya, and the investor reviews the advertising results each month. There is one engineer for the first 13 months, backed by a contract engineer, and the mobile engineer in month 14 ends the dependence on Tom.
If a founder leaves
Each founder's shares vest over four years with a one-year cliff, and the company holds key-person life cover on both founders. The mobile engineer from month 14 and the backend engineer from month 46 are the continuity plan for the code, and Tom documents every release.
What the investors get
Seed investors hold 30% of the company for $1,150,000, which values it at about $3,830,000 after the investment. Their return depends on a later sale of the company or a larger funding round at a higher value, and the forecast pays no dividends. The model turns profitable in Year 3 and holds $979,818 of cash at the end of Year 5, so growth after Year 3 is funded from the company's own cash flow. The company may raise a larger round to grow faster. That is not certain, and the plan does not count on it.
Advisers
A retired curriculum director reviews the reading sequence each term, and a seed investor sits on the board as an observer. A Georgia lawyer reviews the privacy design annually.
Forecast and Subscription Economics
The tables below come from one five-year model, month by month for 2027 and year by year after that. The operating figures come first so each number can be traced to its source. Acquisition cost, churn and revenue per account are worked through in the sales section above.
What the seed round buys
| Use of funds | Amount |
|---|---|
| Laptops and a rack of test phones and tablets | $14,000 |
| Office fit-out and a sound-treated recording corner | $11,000 |
| Finishing the launch version: contract engineers, illustration, narration | $95,000 |
| Legal: entity, IP assignment, children's privacy review, terms | $24,000 |
| Developer accounts, trademark filing and content licences | $6,000 |
| Launch: website, app-store pages, founding-family campaign | $22,000 |
| Cash reserve to carry the plan to its first profitable year | $1,128,000 |
| Total uses | $1,300,000 |
| Source of funds | Amount |
|---|---|
| Priya Nair's savings | $75,000 |
| Tom Okafor's savings | $75,000 |
| Seed investors (30% of the company) | $1,150,000 |
| Total sources | $1,300,000 |
Priya and Tom put in $75,000 each, together 11.5% of the $1,300,000 total, and seed investors put in $1,150,000 for 30% of the company. The founders hold 32% each, and a further 6% is reserved as an employee option pool. There is no debt: a consumer app has little a bank can lend against, and repayments would add a fixed cost to a business that loses money for two years. Of the total, $147,000 is spent at opening (the $95,000 launch build, legal work, licences and the launch campaign), $25,000 buys equipment and the fit-out, and $1,128,000 stays in the bank. The reserve is sized to the two loss years. Year-end cash falls to $455,065 at the end of Year 3, 35% of the money raised, and rises from there. The model shows year-end balances only after Year 1, so a lower point inside Year 2 or Year 3 is possible, and Year 3 marketing is the first spend to cut if sign-ups fall short.
Operating figures behind the forecast
- Prices in 2027 and 2028 are $12.99 a month or $89.99 a year (equal to $7.50 a month), with 60% of accounts on monthly plans and 40% on annual. The list average is $10.79, and introductory offers, store refunds, chargebacks and failed renewals take about 5% off, which gives revenue per paying account of $10.25 a month. From Year 3 prices are $14.99 and $99.99 ($8.33 a month), the mix is 50% monthly and 50% annual, and the same 5% deduction leaves $11.10. Competitor prices are not quoted.
- Accounts are paying families, one account per household with up to four children. The app opens with 500 founding families and ends each year with 4,317, 6,652, 11,945, 17,140 and 21,375. Gross new accounts are 6,000, 6,613, 11,765, 14,444 and 15,789, which is marketing spend divided by the cost of winning an account. The accounts lost are 2,183, 4,278, 6,472, 9,249 and 11,554.
- Year 1 churn is 7.0% a month of the accounts held at the start of the month (a 6.5% base raised by seasonal factors). That equals about 11.7% a month on monthly plans and almost nothing on annual plans, which cannot cancel inside their first year apart from refunds. Years 2 to 5 use 6.5%, 5.8%, 5.3% and 5.0% of average accounts. The Year 5 figure blends monthly-plan churn of about 7% with 70% of annual accounts renewing. These rates are forecasts, not a published benchmark.
- Year 1 follows the school calendar. Gross adds run 1.35 times the average in January, 1.2 to 1.4 times from August to October and 0.7 times in June and July, and churn peaks in June, July and December. Later years are annual totals only.
- The acquisition funnel in Year 1 is 143,000 installs, 12% of which start a seven-day free trial (about 17,200), and 35% of trials convert to a paid plan (6,000 accounts, or 4.2% of installs). Paid advertising buys about 45,000 of those installs at $1.73 each. The cost of winning an account rises from $30 in Year 1 to $38 in Year 5, because paid channels saturate as spending grows, partly offset by a larger share of referrals.
- App-store billing carries a 15% commission. Apple publishes 15% for developers under $1 million of annual proceeds, and Google Play publishes 10% plus a 5% billing fee on US subscriptions. Terms change. Store-billed revenue is $1.36 million in Year 5, so proceeds are about $1.16 million across both stores. Apple's $1 million line applies to Apple proceeds alone, and the split between the stores is not modelled. If Apple's share passed the line, its standard rate would apply to the excess.
- Web billing costs about 4.5% in payment-processing fees. Hosting, content delivery and generated feedback phrases add about 4% of revenue. Direct costs are therefore 19% of store-billed subscription revenue, 8.5% of web-billed, 6% of group plans and 10% of workbook packs, which are sold inside the app and carry the store commission on most sales. The engine holds the blended Year 1 rate of 16.4% in every year. As web billing grows, a stream-by-stream calculation falls to about 12.8% in Year 5, so the Year 5 direct costs shown are about $110,000 higher than the stream rates imply. The model is cautious on purpose, and the gain from moving customers to web billing is not in the P&L.
- Group plans sell homeschool co-ops and micro-schools a seat for each child at $5.50 a month on an annual contract, rising 9% in Year 3. Seats at year end are 300, 1,200, 3,000, 5,000 and 7,000, which is about 220 groups of 32 by Year 5. Priya sells them until the partnerships manager joins in month 40. Seat holders are not counted in the paying accounts.
- Workbook packs cost $14 and are bought by about 2.5% of paying accounts in an average month, more in August and December. They are downloads, so there is no printing or postage. They are 3% of Year 1 revenue and 3% of Year 5.
- The library opens with about 700 lessons: reading for ages 5 to 8 and maths for ages 5 to 7, about 100 per age. Ages 9 to 11 are added from 2028 to 2030. A curriculum designer finishes about 12 lessons a week, or 550 a year, working from lesson templates and a shared illustration kit. Human narration is recorded in the in-house studio corner and freelance illustration covers new characters and stories. That costs $32,000 in Year 1, about $58 a lesson, and $70,000 by Year 5. A second designer starts in month 30.
- Support capacity: accounts raise about 0.1 contacts a month each, which a help centre and message templates keep down. One support person handles about 1,500 contacts a month. The lead (month 8) covers Years 1 to 3, and a half-time specialist from month 40 covers the rest. Year 5 runs at about 2,140 contacts against 2,250 of capacity.
- Receivables average 35 days, because store payouts arrive after month end on each store's published schedule (confirm current schedules), web payments clear within days and group plans are invoiced. The model has no deferred revenue, so annual plans are recognised month by month. Real annual plans are paid up front, which would put cash in the bank earlier.
- Payroll adds 27% to wages for payroll taxes, health cover, workers' compensation and a retirement match (15% for the half-time specialist). The mobile engineer is paid $115,000 and the backend engineer $120,000, about $146,000 and $152,000 with on-costs. Priya and Tom take less than a salaried job in the same field would pay. Wages are launch rates, and 3% annual pay rises are charged as a separate line from Year 2. The company stays small until Year 4: six people at the end of Year 3, against 14,000 paying accounts.
- Rent covers about 1,100 square feet in Savannah at roughly $27 a square foot a year including service charges, rising to about 1,600 square feet in Year 4, with utilities separate. The rate is not a quoted market rate. Insurance covers cyber, technology errors and omissions, general liability, workers' compensation and key-person life cover on both founders, $13,500 in Year 1. No quotes have been obtained.
- Tax is charged at the 21% federal rate plus a Georgia corporate rate that should be confirmed with the Georgia Department of Revenue. Losses from Years 1 and 2 are carried forward, so the first tax charge falls in Year 5. How software development costs are treated for tax is not modelled, and a tax adviser should confirm it. No dividends are paid.
Revenue by billing channel
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Subscriptions billed through Apple and Google | $283,680 | $472,220 | $792,680 | $1,123,510 | $1,359,500 |
| Subscriptions billed on the web | $73,920 | $202,380 | $445,880 | $813,570 | $1,205,600 |
| Group plans for co-ops and micro-schools | $7,320 | $49,500 | $151,070 | $287,760 | $431,640 |
| Printable workbook packs | $12,750 | $23,030 | $39,050 | $61,080 | $80,880 |
| Total revenue | $377,670 | $747,130 | $1,428,680 | $2,285,920 | $3,077,620 |
| Growth on prior year | – | 98% | 91% | 60% | 35% |
Subscriptions are 95% of Year 1 revenue and 83% of Year 5. Store-billed revenue is the largest line in every year (75% of Year 1, 44% of Year 5), with web billing reaching 39% by Year 5. Group plans grow from 2% of revenue to 14%, and workbook packs are 3%. Growth is 98% in Year 2, then 91%, 60% and 35%, as the base gets larger and each new account costs more to win.
The launch year, month by month
| Month | Subscriptions billed through Apple and Google | Subscriptions billed on the web | Group plans for co-ops and micro-schools | Printable workbook packs | Total revenue | EBITDA |
|---|---|---|---|---|---|---|
| Jan 2027 | $10,070 | $1,640 | $0 | $0 | $11,710 | ($42,257) |
| Feb 2027 | $14,100 | $2,490 | $0 | $0 | $16,590 | ($38,177) |
| Mar 2027 | $17,330 | $3,300 | $0 | $700 | $21,330 | ($34,214) |
| Apr 2027 | $20,050 | $4,110 | $0 | $820 | $24,980 | ($31,162) |
| May 2027 | $21,960 | $4,820 | $0 | $820 | $27,600 | ($28,971) |
| Jun 2027 | $22,620 | $5,310 | $330 | $950 | $29,210 | ($27,625) |
| Jul 2027 | $23,180 | $5,800 | $330 | $990 | $30,300 | ($26,714) |
| Aug 2027 | $26,260 | $6,980 | $770 | $1,590 | $35,600 | ($22,282) |
| Sep 2027 | $30,010 | $8,460 | $1,270 | $1,710 | $41,450 | ($17,391) |
| Oct 2027 | $31,930 | $9,540 | $1,430 | $1,420 | $44,320 | ($14,991) |
| Nov 2027 | $32,980 | $10,410 | $1,540 | $1,480 | $46,410 | ($13,244) |
| Dec 2027 | $33,190 | $11,060 | $1,650 | $2,270 | $48,170 | ($11,772) |
Revenue builds every month through the first half of the year, flattens in June and July when school is out and churn peaks, and climbs again from August to the December gift season. EBITDA, which is operating profit before depreciation and interest, is negative in nearly every month, narrowing from $42,257 below zero in January to $11,772 below zero in December. Cash at the Dec 2027 month end is the Year 1 low, about $763,000. That figure subtracts December receivables at the month's run rate ($56,198). The year-end balance sheet shows $36,215 of receivables because it applies 35 days to the whole year's average revenue.
Hiring schedule
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Co-founder and chief executive | $75,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Co-founder and chief technology officer | $90,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Curriculum designer (reading) | $62,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Member support and community lead | $44,000 | Month 8 | 1 | 1 | 1 | 1 | 1 |
| Mobile engineer | $115,000 | Month 14 | – | 1 | 1 | 1 | 1 |
| Senior curriculum designer (maths) | $72,000 | Month 30 | – | – | 1 | 1 | 1 |
| Growth marketer | $80,000 | Month 38 | – | – | – | 1 | 1 |
| Support specialist (part time, 20 hours a week) | $24,000 | Month 40 | – | – | – | 0.5 | 0.5 |
| Partnerships manager (co-ops and creators) | $76,000 | Month 40 | – | – | – | 1 | 1 |
| Lifecycle and data analyst | $80,000 | Month 44 | – | – | – | 1 | 1 |
| Backend engineer | $120,000 | Month 46 | – | – | – | 1 | 1 |
| Total payroll incl. on-costs | $311,573 | $478,049 | $543,560 | $848,317 | $1,061,380 |
Three people are on payroll from January: Priya, Tom and the reading designer. The support lead starts in month 8 and the mobile engineer in month 14, when the first year has closed with 4,317 accounts. The maths designer follows in month 30, the growth marketer in month 38, and in Year 4 a half-time support specialist (month 40), a partnerships manager (month 40), a data analyst (month 44) and a backend engineer (month 46). Until the growth marketer starts, Priya runs acquisition with an outside agency paid from the marketing budget. The specialist's $24,000 is a half-time salary. Priya's and Tom's pay is already in the costs, so every profit line is struck after both have been paid.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $377,670 | $747,130 | $1,428,680 | $2,285,920 | $3,077,620 |
| Direct costs (app-store commissions, payment fees, hosting) | ($61,897) | ($122,448) | ($234,147) | ($374,641) | ($504,393) |
| Gross profit | $315,773 | $624,682 | $1,194,533 | $1,911,279 | $2,573,227 |
| Payroll incl. on-costs | ($311,573) | ($478,049) | ($543,560) | ($848,317) | ($1,061,380) |
| Rent | ($30,000) | ($31,000) | ($32,000) | ($46,000) | ($47,500) |
| Utilities | ($3,000) | ($3,100) | ($3,200) | ($4,400) | ($4,600) |
| Marketing | ($160,000) | ($205,000) | ($400,000) | ($520,000) | ($600,000) |
| Insurance | ($13,500) | ($14,500) | ($16,000) | ($18,000) | ($19,500) |
| Professional fees | ($22,000) | ($24,000) | ($26,000) | ($28,000) | ($30,000) |
| Software subscriptions | ($24,000) | ($30,000) | ($37,000) | ($46,000) | ($54,000) |
| Illustration, narration and audio production | ($32,000) | ($40,000) | ($50,000) | ($62,000) | ($70,000) |
| Contract engineering for OS updates and release support | ($24,000) | ($18,000) | ($20,000) | ($24,000) | ($26,000) |
| Training, dues, conferences and travel | ($4,000) | ($6,000) | ($8,000) | ($9,000) | ($10,000) |
| Equipment replacement and new-hire kit | $0 | ($6,000) | ($5,000) | ($9,000) | ($6,000) |
| Group-plan invoice bad debt allowance | ($500) | ($1,000) | ($1,500) | ($2,000) | ($2,500) |
| Annual pay raises (3% a year) | $0 | ($14,341) | ($33,103) | ($78,662) | ($133,213) |
| EBITDA | ($308,800) | ($246,308) | $19,170 | $215,900 | $508,534 |
| Depreciation | ($5,071) | ($5,071) | ($5,071) | ($5,071) | ($1,571) |
| Interest | $0 | $0 | $0 | $0 | $0 |
| Income tax | $0 | $0 | $0 | $0 | ($41,563) |
| Net income before start-up costs | ($313,871) | ($251,379) | $14,098 | $210,829 | $465,399 |
| Start-up costs expensed at opening (launch build $95,000, legal, licences, launch marketing) | ($147,000) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($460,871) | ($251,379) | $14,098 | $210,829 | $465,399 |
The company loses $313,871 in Year 1 before start-up costs and $460,871 after them, then $251,379 in Year 2. Year 3 is the first profitable year, at $14,098 on EBITDA of $19,170, a margin of 1.3% that is thin by design. Net income grows to $210,829 in Year 4 and $465,399 in Year 5. Payroll is 82% of revenue in Year 1 and 39% in Year 5. Marketing is $160,000 in the Year 1 P&L plus $22,000 of launch spend expensed at opening, together 48% of Year 1 revenue, and 19% of revenue ($600,000) in Year 5. Direct costs are held at the Year 1 blended 16.4% of revenue in every year, which is cautious: stream by stream they would fall to about 12.8% in Year 5 ($395,000 rather than $504,393). Income tax is zero until Year 5 because the early losses are carried forward.
Cash through the loss years
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($492,015) | ($281,735) | ($46,184) | $133,699 | $391,054 |
| Equipment and fit-out | ($25,000) | $0 | $0 | $0 | $0 |
| Funding received | $1,300,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | $0 | $0 | $0 | $0 |
| Owner distributions | $0 | $0 | $0 | $0 | $0 |
| Net change in cash | $782,985 | ($281,735) | ($46,184) | $133,699 | $391,054 |
| Closing cash | $782,985 | $501,250 | $455,065 | $588,764 | $979,818 |
Cash stays positive in every year. It falls from $782,985 at the end of Year 1 to $455,065 at the end of Year 3, then rises to $588,764 and $979,818 as operations turn positive in Year 4 ($133,699). These are year-end balances, and a lower balance inside Years 2 and 3 is possible. There are no loan repayments and no dividends.
Balance sheet at each year end
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $782,985 | $501,250 | $455,065 | $588,764 | $979,818 |
| Accounts receivable | $36,215 | $71,643 | $136,997 | $219,198 | $295,114 |
| Equipment and fit-out (net) | $19,929 | $14,857 | $9,786 | $4,714 | $3,143 |
| Total assets | $839,129 | $587,749 | $601,848 | $812,676 | $1,278,076 |
| Bank loan | $0 | $0 | $0 | $0 | $0 |
| Paid-in capital | $1,300,000 | $1,300,000 | $1,300,000 | $1,300,000 | $1,300,000 |
| Retained earnings | ($460,871) | ($712,251) | ($698,152) | ($487,324) | ($21,924) |
| Total liabilities and equity | $839,129 | $587,749 | $601,848 | $812,676 | $1,278,076 |
Margins and break-even
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -81.8% | -33.0% | 1.3% | 9.4% | 16.5% |
| Net margin (before start-up costs) | -83.1% | -33.6% | 1.0% | 9.2% | 15.1% |
| Payroll incl. pay raises as share of revenue | 82% | 66% | 40% | 41% | 39% |
| Revenue per full-time equivalent at year end | $94,418 | $149,426 | $238,113 | $217,707 | $293,107 |
| Average monthly revenue | $31,473 | $62,261 | $119,057 | $190,493 | $256,468 |
| Monthly revenue needed to cover operating costs | $62,250 | $86,810 | $117,146 | $168,975 | $205,784 |
| Debt service cover (EBITDA / interest + principal) | – | – | – | – | – |
A year covers its operating costs when average monthly revenue is above the amount needed, shown in the last two rows. Year 1 averages $31,473 a month against $62,250 needed and Year 2 averages $62,261 against $86,810. Year 3 is the first year above the line, at $119,057 against $117,146, and the margin of safety widens to $256,468 against $205,784 by Year 5. There is no debt, so debt service cover is not shown.
If sign-ups run short
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $251,400 | $473,510 | $898,120 | $1,413,930 | $1,849,240 |
| Net income before start-up costs | ($333,724) | ($305,872) | ($237,731) | ($47,974) | $91,831 |
| Net income after start-up costs | ($480,724) | ($305,872) | ($237,731) | ($47,974) | $91,831 |
| Closing cash | $775,240 | $453,142 | $179,766 | $87,402 | $139,063 |
This case does not cut revenue by a flat percentage. Each new account costs 25% more to win and churn is 0.75 points higher every month, so revenue falls to $251,400 in Year 1 (33% below the base case) and $1,849,240 in Year 5 (40% below). Management responds as follows: marketing is cut 20%, illustration and narration spend is cut 25%, software spend 15%, hires from month 13 start six months later, the growth marketer, backend engineer and partnerships manager are not hired (so group-plan seats grow more slowly), Priya and Tom take 20% pay cuts, and the company stays in the first office. On those terms the company loses money through Year 4 and earns $91,831 in Year 5, against $465,399 in the base case. Net income and closing cash are lower than the base case in every year. Cash never falls below $87,402, which it reaches at the end of Year 4. Equity ends Year 1 at $819,276.
The same shortfall without any response, and two single-driver tests with no response, show how much the cuts matter:
| Case (no management response) | Year 3 revenue | Year 5 revenue | Cash, end of Year 3 | Cash, end of Year 4 |
|---|---|---|---|---|
| Base case | $1,428,680 | $3,077,620 | $455,065 | $588,764 |
| Cost per new account +50% | $1,005,900 | $2,196,390 | ($137,637) | ($535,212) |
| Churn +1 point a month | $1,320,860 | $2,786,310 | $321,039 | $304,547 |
| This case: cost +25%, churn +0.75 points | $1,108,710 | $2,369,620 | $16,991 | ($260,358) |
Cash goes negative in two of the three no-response lines, so the company would need either the response above or a bridge round. The plan does not count on a bridge round being available.
Sources
- Apple, App Store Small Business Program.
- Google Play Console Help, Service fees.
- Federal Trade Commission, Complying with COPPA: frequently asked questions, which lists verifiable parental consent methods and notes that the rule was amended on April 22, 2025.
- Education Next, New U.S. Census Bureau data confirm growth in homeschooling amid pandemic (Household Pulse Survey, nearly 6% in 2022-23) and What state policymakers should know about homeschoolers (National Household Education Survey, 3.4%). Both are secondary summaries.
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