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A vendor that sells to town halls and water districts has to answer a banker on questions a consumer app never faces. How long can you pay a team while a board takes a year to vote? How much of your income comes back every year without a new sale? What happens to payroll when two contracts slip a quarter? A blank template won't show what a sensible answer looks like.
In this article we'll walk through a complete sample plan for a database software company in Richfield, Louisiana, section by section. We'll cover the executive summary, the SWOT analysis and, in particular, all of the financials.
Here's what you'll take away:
- The summary: see how to state a niche product, a funding ask and a slow sales cycle on one page, so a reader knows what is being asked within a minute
- The market and buyer sections: learn how to describe public-sector customers and the way they buy without inventing market statistics
- The SWOT analysis: name your weaknesses, such as a small team and a long sales cycle, without putting a lender off
- The start-up budget: find out how much reserve a firm needs when income arrives only in the months a board votes
- The revenue mix: see licenses, implementation, support and add-on modules as separate lines, so a reader can tell what repeats
- The hiring table: time each developer and consultant to signed work, and see why margin dips in the middle years
- The five-year profit, cash flow and balance sheet: follow how pricing, hiring and support growth reach the bottom line
- The downside case: have an answer ready for the "what if sales run 20% short?" question, with the steps the founder takes
If you're setting up a software company, read this before you write your own. The firm is fictional, so take what fits your business and change the rest.
In this plan
If you need a database software business plan template for your own plan, start it in the Toolkit.
What JTB Sells and What It Asks For
JTB Integrated Technologies is a Louisiana corporation that opens in Richfield on January 1, 2027. It writes and supports packaged database applications for small local governments and utilities: utility accounts and billing, permits and inspections, assets and work orders, and a public-records request log. A customer buys a perpetual license, pays an annual support fee of 20% of the license price, and pays separately for the implementation that moves its old records into the new system. Founder Thomas Beauchamp owns 100% of the company.
Opening takes $365,000, raised as $185,000 of Thomas's savings and a $180,000 bank term loan. Most of the money, $313,800, is a reserve for a sales cycle that runs 9 to 14 months. Workstations, test servers and the office take $28,000. Legal work, permits and the launch campaign take the last $23,200.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $334,000 | $637,800 | $968,100 |
| Net income after start-up costs | ($128,390) | $48,381 | $67,255 |
| Closing cash | $166,033 | $146,724 | $139,484 |
Four public bodies sign in Year 1 and the installed base reaches 39 by Year 5. Year 1 loses money because the founder, a senior developer and an implementation consultant are on payroll before most of the income arrives. License revenue comes in only in the months a governing board votes, so EBITDA is positive in only four months of the first year. The first full-year profit comes in Year 2, the base case then stays profitable in every later year, and the downside case in the financial plan shows the same company with sales 20% short.
A second run takes 20% off every revenue line. With the first account manager starting four months late, the later hires pushed back six months, one position dropped, a smaller marketing budget, a 20% pay cut for Thomas and no move to a bigger office, year-end cash stays above zero in each of the five years.
The pitch is narrow on purpose. The customer owns the license outright, runs the software on its own server, and pays a support fee it can budget for. JTB does not ask a town clerk to approve a monthly bill that rises every year.
The Company and Its Products
Legal name: JTB Integrated Technologies, Inc., a Louisiana corporation. Owner: Thomas Beauchamp, 100%. Premises: a leased office in Richfield, 1,800 square feet. Start date: January 1, 2027. Stage: pre-launch. A pilot with one parish water district is agreed in principle, and three other officials have asked for a demonstration.
The four applications
| Application | What it keeps | Typical buyer |
|---|---|---|
| Accounts and billing | Customers, meters, readings, bills, late notices | Water, sewer and gas districts, small town utilities |
| Permits and inspections | Applications, fees, inspection results, code complaints | Towns, villages and parish permit offices |
| Assets and work orders | Lines, hydrants, vehicles, repair history | Utilities and public works departments |
| Public-records log | Requests, deadlines, responses, retention schedules | Clerks and parish administrators |
All four sit on one open-source relational database engine, and a commercial report-writing component is licensed for each customer. A customer can run one module or all four. The data model is shared, so a work order can point to an address, a meter and a permit without re-keying any of them.
Where the product came from
Thomas spent 14 years as the information technology manager for a north Louisiana parish government and wrote the first version of the permit tool while he was there. He left on good terms and holds a signed release from his former employer covering that code. The legal line in the start-up budget pays for the release to be checked, for the license agreement and for the company's own intellectual property assignment.
Goals for the first two years
- Sign four public bodies in 2027 and a further six in 2028, reaching 10 customers.
- Bring Year 2 to $637,800 of revenue and a profit after tax.
- Hire the first account manager by month 17 so that Thomas can return to the product.
- Make bank repayments from the thirteenth month, when principal falls due.
Public Buyers in the Gulf South
Who the customers are
Louisiana has 64 parishes, and inside them sit municipalities, water and sewer districts, fire protection districts and other special-purpose bodies. No published statistic sizes this market. The plan works from a target list of about 400 bodies in Louisiana, east Texas, south Arkansas and Mississippi whose size suits the product: roughly 500 to 15,000 customer accounts or a few hundred permits a year. Thomas built the list from public budget documents. Thirty-nine customers by Year 5 would be under 10% of it.
How the rules affect selling
Louisiana public bodies generally have to advertise and bid purchases above set dollar limits under the state's public bid law, and the rules for software and services can differ from those for construction. No threshold is quoted here. For each prospect, JTB's contract counsel confirms whether a competitive bid, a request for proposals or a direct purchase applies. The firm never splits a purchase to stay under a limit. Any local limit on multi-year support terms is another item for counsel.
Much of what the applications hold may be public records under Louisiana's public records law, and local bodies file annual financial reports with the state. Both facts make clean, exportable records a selling point. Both rules may change, and each customer's attorney has the final say.
What buyers can choose instead
| Alternative | What it offers | Why a buyer picks it | Where JTB differs by design |
|---|---|---|---|
| Spreadsheets and desktop databases built in-house | No fee at all | Free, and the clerk already knows it | Support, a shared data model and records that outlast the person who built them |
| Regional integrators reselling large municipal accounting suites | Finance, payroll and billing in one package | One vendor for everything | A smaller price and a focus on records, not general ledger |
| Subscription cloud vendors | Browser access, no server | Low upfront cost | A perpetual license that a board can approve once, plus a support fee fixed in the contract |
| Statewide or association-endorsed software | A familiar name on the bid list | Prior approval by peers | Local implementation staff within a day's drive |
Each row describes an offer and where JTB sits against it. It is not a ranking. Vendors change their prices and terms often, so none is quoted and none is named.
SWOT
| Strengths | Weaknesses |
|---|---|
| A founder with 14 years inside a parish government | A team of three in Year 1, with Thomas both selling and designing |
| Perpetual license plus a support fee fits how boards budget | License income depends on a handful of board votes each year |
| Four applications on one shared data model | No brand outside the founder's own network |
| Opportunities | Threats |
|---|---|
| Aging in-house databases at small bodies | Subscription vendors winning bodies that prefer an operating budget line |
| Referrals between neighboring bodies and their auditors | A larger vendor cutting prices to enter the segment |
| Add-on modules sold to existing customers | A key developer leaving mid-implementation |
How a Small Government Decides to Buy
The people in the room
The user is usually a clerk, a utility billing supervisor or a permit officer. The signer is a mayor, a parish administrator or a board of commissioners, and a parish council or police jury must often vote on the purchase. The person who runs the old system is frequently the one who has to be convinced it should go.
What the old system looks like
A billing program a former employee wrote, a permit log in a spreadsheet, and paper records with a nightly backup on a thumb drive. Nobody has left a manual, and the vendor who supplied the last package may have retired.
What starts a purchase
A failed backup, a lost record in a public-records dispute, an audit comment, a retiring clerk or a storm that disrupted billing. Atlantic hurricane season runs from June 1 to November 30, and a body that spent a week unable to bill a water customer remembers it at the next budget meeting.
What buyers ask for
An upfront price that fits one budget line. References from a body of a similar size. The data stays theirs. Someone answers the phone within a business day. A source-code escrow agreement, so that the product survives if JTB does not.
Winning a Contract
The path from first call to signature
A first meeting and a demonstration on the prospect's own sample records. A written proposal, or a response to a formal request, within two weeks. A site visit by the implementation consultant to size the data migration. Counsel's review of the contract. A board vote, and a purchase order. Thomas handles every demonstration until the first account manager starts in month 17.
The Year 1 pipeline
About 16 formal proposals at a 25% close rate give 4 signings, because the Year 1 prospects are people Thomas already knows. By Year 3 the plan works at a 20% close rate, which means about 40 proposals for 8 signings. By Year 5 it means about 55 proposals for 11 signings.
| Signings | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| New customers | 4 | 6 | 8 | 10 | 11 |
| Installed base at year end | 4 | 10 | 18 | 28 | 39 |
Price list and terms
Licenses run from about $25,000 for one module to about $120,000 for a full suite. Implementation is quoted as a fixed fee from a data review. Support is 20% of the license price a year, with updates included. The first customer receives a $12,000 discount in return for a reference and a case study. Some public bodies pay a license only on acceptance, and many can drop support in a budget year if the governing board does not appropriate the money, so the model books payment 55 days after invoice and counts support as renewing. Before any proposal reaches Thomas's former employer, counsel checks the state's rules on former public employees dealing with their old agency.
Staying and growing
Support is where the relationship continues. About 35% of customers buy another module each year, and each satisfied body is a reference for its neighbors. The model loses no customer in five years, since replacing a billing or permit system is disruptive and few small bodies do it that fast. One lapse would cost its support fee and its share of add-on sales.
Getting in Front of Clerks and Superintendents
What the marketing budget pays for
Year 1 marketing is $44,000. Launch work takes $14,000 of it, paid from start-up capital, and $30,000 is running spend. Spread over four signings, that is $11,000 per customer in the first year, falling to about $4,500 per customer by Year 5 as referrals do more of the work.
| Channel | Year 1 spend | What it is expected to do |
|---|---|---|
| Website and demonstration environment | $6,000 | A public demo with fictional records that a clerk can try without a call |
| Association conferences (two exhibitor fees) | $10,000 | Face time with clerks and utility managers at the meetings they already attend |
| Reference visits and case studies | $5,000 | Visits to the first customers and a one-page result for each |
| Webinars and email | $3,000 | Short sessions on subjects such as retention schedules and records requests |
| Trade-publication ads and directory listings | $3,000 | Visibility in the places a retiring clerk's replacement will look |
| Demonstration kits and printed material | $3,000 | Leave-behind material for board packets |
Launch spending of $14,000 covers the website and demo build ($7,000), a product video and collateral ($4,000) and the first conference booth ($3,000).
Marketing milestones
- January 2027: demonstration site live; pilot agreed with one water district.
- April 2027: first license signed.
- September 2027: third signing, and the first reference visit completed.
- December 2027: four customers, two live on paid support.
Delivery and Support
Office and tools
The Richfield office holds eight desks, which is enough because consultants spend most weeks at customer sites, a small test lab with servers that mirror customer set-ups, and a conference table for training. Rent and service charges come to about $14 a square foot a year, or $25,200 in Year 1, with utilities on top. In Year 4 the company moves to roughly 2,500 square feet. Source control, a ticketing system, a customer relationship tool and remote-support software cost $9,000 in Year 1 and $25,000 by Year 5.
From signature to go-live
A data review, then clean-up of the old records, a configuration workshop, a trial migration, staff training and a cut-over weekend. The consultant bills in thirds across about 13 weeks. Support starts the month after go-live.
Support and continuity
Support is by phone and remote session, weekday business hours, with a four-hour response target on utility billing days. Every customer also receives encrypted off-site backups. Public bodies in Louisiana depend on billing and records working after a storm, and the plan treats continuity as part of the product.
Who does the work
Headcount runs from three full-time staff at the end of Year 1 (Thomas, a senior developer and an implementation consultant) to five at the end of Year 2, seven plus a part-time administrator at the end of Year 3, ten at the end of Year 4 and eleven at the end of Year 5. Each hire waits for the signed work to carry it, and the downside case shows which ones slip or are dropped. Revenue per full-time-equivalent employee climbs from $111,333 in Year 1 to $148,739 in Year 5.
Insurance, escrow and licenses
- Insurance for software errors and omissions, cyber liability, general liability and workers' compensation, plus key-person life and disability cover on Thomas.
- A source-code escrow agreement, offered to every customer that asks.
- Louisiana corporate filings and local business permits.
- A written security policy for customer data, reviewed each year by outside counsel.
Management and Advisers
Thomas Beauchamp, founder and president
Thomas has 14 years as the information technology manager for a north Louisiana parish government and a computer science degree. He knows how a council approves a budget line and how a clerk's day goes, and he writes the code himself. His $185,000 investment is his savings. He draws $90,000 a year.
Where the team is thin
Three gaps stand out. Thomas has never run a formal bid response from the vendor side, has not hired a team, and has no experience pricing support contracts for a customer base. The plan answers each in turn: contract counsel reviews every proposal for the first year, hires come through local college and personal contacts, and a retired parish administrator advises on pricing and on how boards read a proposal, for a modest fee inside professional fees.
If Thomas is out
Thomas is the architect of the product, which is why the firm insures him and keeps its code in escrow. From month 1 the senior developer can build and release a new version without him, and the escrow agreement covers the case where neither is available.
Ownership and the bank
JTB Integrated Technologies, Inc. is 100% Thomas's. The bank's term loan rests on his personal guarantee and a lien on company assets, and quarterly accounts go to the bank.
The Numbers: Licenses, Support and Payroll
The forecast starts from one count: how many public bodies sign each year (4, 6, 8, 10 and 11). Every revenue line is priced from that count: a license at signing, implementation over the following quarter, support from go-live, and add-on modules sold to bodies already on the books. The first twelve months appear month by month, and the four years after them as yearly totals.
Funding the first sales cycles
| Use of funds | Amount |
|---|---|
| Developer workstations, test servers and network gear | $21,000 |
| Office furniture and fit-out | $7,000 |
| Louisiana business registration and local permits | $1,200 |
| Legal: entity, license agreement, support terms, IP assignment | $8,000 |
| Launch: website, product demos, first conference booth | $14,000 |
| Cash reserve for the first sales cycles | $313,800 |
| Total uses | $365,000 |
| Source of funds | Amount |
|---|---|
| Thomas Beauchamp's savings | $185,000 |
| Bank term loan | $180,000 |
| Total sources | $365,000 |
Opening takes $365,000. Thomas Beauchamp puts in $185,000 of savings, 51% of the total, and a regional bank lends $180,000 as a six-year term loan at 9.5%, interest only for the first twelve months. The bank is likely to ask for his personal guarantee, a lien on the company's assets and possibly a pledge of personal property, and the 9.5% rate is the plan's own figure, not an offer from any lender. The biggest single use is the $313,800 reserve. A public body buys only when its governing board votes, so the first signature lands in April and four boards supply all of Year 1's license income. Payroll runs every month in between. Year 1 closes with $166,033 in cash on the engine's average-receivables method. License invoices cluster in September and November, so cash actually in the bank at December 31 could be as much as $50,000 lower.
Prices, hours and contract terms behind the forecast
- The price list runs from about $25,000 for a single module at a small water district to about $120,000 for a parish-wide suite. The blended license is $60,000 at Year 1 prices. The first customer gets a $12,000 founding-customer discount and pays $48,000, which makes Year 1 license revenue $228,000 on four signings. Prices rise 3% a year from Year 2.
- Signings are 4, 6, 8, 10 and 11 a year, so the installed base reaches 4, 10, 18, 28 and 39 customers at year end. The model loses no customer in five years, since replacing a billing or permit system is disruptive, and a lapse would cost that body's support fee and its share of add-on sales. Support fees on existing contracts also rise 3% a year. The Year 1 signings fall in April, July, September and November, which are the four months the monthly table shows license revenue. The plan expects a sales cycle of 9 to 14 months from first meeting to signature, so the Year 1 signings come from conversations Thomas has already started: one 60-day unpaid pilot with a parish water district, which converts to the $48,000 license, and three referrals from officials he worked with before. A lender would want letters of intent for these four before closing.
- Implementation is $30,000 a customer in Year 1, about 200 hours at $150, billed in thirds over the three months after signing. The $60,000 average license is about two modules on the shared data model, so the old records are converted once. A single-module job at a small district would run less, and a full-suite conversion for a parish would run more, probably 300 hours or more. The November signing spills into the next year, so Year 1 books $100,000 of the $120,000 its four signings earn. From Year 2 the model books 85% of a year's implementation work in the signing year and 15% in the next, and the rate rises 3% a year.
- Support is 20% of the license price each year, or $12,000 on a $60,000 license, and covers the help desk, fixes and annual updates. The model bills it monthly from the month after go-live, once implementation ends, and counts a customer as paying only when live; about 35% of each year's signings are still in implementation at year end. Real contracts would bill a year in advance, which would help cash. The model does not claim that benefit.
- About 35% of the installed base at the start of each year buys further modules, at an average of $18,000 at Year 1 prices. No add-on revenue is forecast in Year 1, when no customer has been live for more than a few months.
- Delivery hours are checked against consultants. At $150 an hour rising 3% a year, implementation revenue needs about 670 hours in Year 1, 1,140 in Year 2, 1,540 in Year 3, 1,940 in Year 4 and 2,170 in Year 5. A consultant has about 1,170 billable hours a year (1,800 productive hours at 65%), because bid demonstrations, training material and support escalations take the rest. The first consultant covers 86% of Year 1's hours from month 5 and is at 97% in Year 2, when Thomas and the senior developer take any overflow. The second consultant starts in month 24, which puts utilization at 66% in Year 3 and 83% in Year 4. The third starts in month 52, and Year 5 sits at 67%.
- Direct costs run at about 6.6% of revenue in every year: report-engine runtime fees and other third-party components (6% of license revenue), site-visit travel and lodging (8% of implementation), help-desk tooling (4% of support) and 5% of add-on sales. Developers, consultants and support staff are in payroll, not in direct costs.
- Staff are the largest cost. A 27% load on each salary stands for employer payroll taxes, health coverage and a retirement match, and the part-time administrator's load is 15%. The salaries shown are launch-year rates and 3% raises start in Year 2 on their own line. Payroll takes 86% of revenue in Year 1 and 69% in Year 5, and no salary is cut to reach the Year 5 margin. The $92,000 senior developer and $88,000 developer are planning figures for a small Louisiana town; a developer hired in a large city, or working remotely for a larger employer, may cost more, and recruiting is slower in a small market.
- Receivables average 55 days. A board approves an invoice at a scheduled meeting, so a bill raised just after a meeting waits for the next. Payables average 25 days. The bad-debt allowance is small, $500 in Year 1 rising to $5,000, because public bodies are slow payers rather than risky ones, and the larger exposure is delay.
- The Richfield office is 1,800 square feet at $14 a square foot a year for rent and service charges, $25,200 in Year 1, moving to about 2,500 square feet from Year 4. Utilities come on top. The $9,500 insurance line in Year 1 buys errors-and-omissions cover for the software, cyber liability, general liability and workers' compensation, with life and disability cover on Thomas. Professional fees are $10,000 in Year 1 and cover contract counsel on proposals and contracts, the annual tax return, a pricing adviser and a source-code escrow agreement that public buyers often request.
- Marketing is $44,000 in Year 1, made up of $14,000 for the launch, charged to opening capital, and $30,000 of ordinary running spend. Spread over the four signings that is $11,000 a customer; running spend alone is $7,500. By Year 5 marketing is $50,000 across 11 signings, $4,545 each. Bid preparation and sales travel add $9,000 in Year 1 and $23,000 in Year 5. Thomas's own selling time and the account managers' salaries sit in payroll and are not counted in these figures.
- The model taxes the firm as a C corporation at 21% federal plus a flat 5.5% Louisiana planning rate, after the Year 1 loss is carried forward. The state rate and the treatment of loss carryforwards have changed in recent years and need confirming with a Louisiana tax adviser. Federal rules limit how much taxable income an old loss can offset, so a small Year 2 tax charge may apply that the model does not show. An S corporation election would shift the tax to Thomas's personal return.
- No distributions are paid in any year, and the loan runs its full term. Cash builds to $205,593 by the end of Year 5, so the first distribution, or early repayment, would be a Year 6 decision.
Revenue by contract line
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Perpetual licenses | $228,000 | $370,800 | $509,200 | $655,600 | $742,800 |
| Implementation and data migration | $100,000 | $176,100 | $245,100 | $318,000 | $366,400 |
| Annual support and updates | $6,000 | $64,900 | $147,000 | $260,300 | $402,800 |
| Add-on modules and enhancements | $0 | $26,000 | $66,800 | $123,900 | $198,500 |
| Total revenue | $334,000 | $637,800 | $968,100 | $1,357,800 | $1,710,500 |
| Growth on prior year | – | 91% | 52% | 40% | 26% |
Licenses are 68% of Year 1 revenue and 43% of Year 5. Support and add-on modules, the two lines that come from customers already signed, grow from 2% to 35% of revenue. That repeat share is what steadies a business whose license income depends on board votes. Year 2 is 91% above Year 1 mainly because Year 1 has only four signings and almost no paid support.
Month by month in 2027
| Month | Perpetual licenses | Implementation and data migration | Annual support and updates | Add-on modules and enhancements | Total revenue | EBITDA |
|---|---|---|---|---|---|---|
| Jan 2027 | $0 | $0 | $0 | $0 | $0 | ($32,827) |
| Feb 2027 | $0 | $0 | $0 | $0 | $0 | ($32,827) |
| Mar 2027 | $0 | $0 | $0 | $0 | $0 | ($32,827) |
| Apr 2027 | $48,000 | $0 | $0 | $0 | $48,000 | $12,023 |
| May 2027 | $0 | $10,000 | $0 | $0 | $10,000 | ($23,483) |
| Jun 2027 | $0 | $10,000 | $0 | $0 | $10,000 | ($23,483) |
| Jul 2027 | $60,000 | $10,000 | $0 | $0 | $70,000 | $32,579 |
| Aug 2027 | $0 | $10,000 | $800 | $0 | $10,800 | ($22,735) |
| Sep 2027 | $60,000 | $10,000 | $800 | $0 | $70,800 | $33,327 |
| Oct 2027 | $0 | $20,000 | $800 | $0 | $20,800 | ($13,392) |
| Nov 2027 | $60,000 | $10,000 | $1,800 | $0 | $71,800 | $34,261 |
| Dec 2027 | $0 | $20,000 | $1,800 | $0 | $21,800 | ($12,457) |
All of Year 1's license revenue arrives in four months. EBITDA is positive in April, July, September and November, and negative in the other eight, by about $32,000 a month at the start. Month-end cash, after setting aside invoices still unpaid under the 55-day terms, is lowest in Jul at about $75,000, because the July invoices have not been paid. On the same basis year-end cash could sit as much as $50,000 below the table's figure, but still above that July low.
Who is hired, and when
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and president (architect, also sells) | $90,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Senior developer | $92,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Implementation consultant | $66,000 | Month 5 | 1 | 1 | 1 | 1 | 1 |
| Public-sector account manager | $72,000 | Month 17 | – | 1 | 1 | 1 | 1 |
| Implementation consultant (second) | $64,000 | Month 24 | – | 1 | 1 | 1 | 1 |
| Support analyst | $54,000 | Month 27 | – | – | 1 | 1 | 1 |
| Developer | $88,000 | Month 30 | – | – | 1 | 1 | 1 |
| Contracts and office administrator (part time, 24 hours a week) | $28,000 | Month 32 | – | – | 0.5 | 0.5 | 0.5 |
| Account manager (second) | $70,000 | Month 38 | – | – | – | 1 | 1 |
| Second senior developer | $98,000 | Month 42 | – | – | – | 1 | 1 |
| Support analyst (second) | $54,000 | Month 46 | – | – | – | 1 | 1 |
| Implementation consultant (third) | $64,000 | Month 52 | – | – | – | – | 1 |
| Total payroll incl. on-costs | $287,020 | $382,693 | $623,440 | $871,458 | $1,043,120 |
Thomas and the senior developer open the company together. The first implementation consultant arrives in month 5, a month after the first signature. The first account manager starts in month 17 and takes over proposal writing, which frees Thomas to return to the product. A second consultant joins in month 24, a support analyst in month 27 and a developer in month 30. A part-time administrator for contracts, insurance certificates and bid paperwork starts in month 32. A second account manager (month 38), a second senior developer (month 42), a second support analyst (month 46) and a third consultant (month 52) complete the team. Until the first analyst arrives, Thomas and the senior developer share the support desk for up to ten customers. Thomas's $90,000 salary is charged in the payroll line, so profit is what remains once he has been paid.
Earnings year by year
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $334,000 | $637,800 | $968,100 | $1,357,800 | $1,710,500 |
| Direct costs (third-party database and report-engine licenses, customer-site travel, help-desk tools) | ($21,920) | ($41,858) | ($63,535) | ($89,111) | ($112,258) |
| Gross profit | $312,080 | $595,942 | $904,565 | $1,268,689 | $1,598,242 |
| Payroll incl. on-costs | ($287,020) | ($382,693) | ($623,440) | ($871,458) | ($1,043,120) |
| Rent | ($25,200) | ($26,000) | ($26,800) | ($36,000) | ($37,100) |
| Utilities | ($4,200) | ($4,300) | ($4,400) | ($5,600) | ($5,800) |
| Marketing | ($30,000) | ($36,000) | ($41,000) | ($46,000) | ($50,000) |
| Insurance | ($9,500) | ($11,500) | ($14,000) | ($16,500) | ($18,500) |
| Professional fees | ($10,000) | ($9,000) | ($10,000) | ($11,000) | ($12,000) |
| Software subscriptions | ($9,000) | ($13,000) | ($17,000) | ($21,000) | ($25,000) |
| Conferences, association dues and certifications | ($5,000) | ($6,500) | ($8,500) | ($10,500) | ($12,000) |
| Bid preparation and sales travel | ($9,000) | ($13,000) | ($17,000) | ($20,000) | ($23,000) |
| Phones, supplies and payroll service | ($4,500) | ($5,500) | ($7,000) | ($8,500) | ($10,000) |
| Equipment replacement and new-hire kit | $0 | ($5,000) | ($5,000) | ($8,000) | ($8,000) |
| Bad debt allowance | ($500) | ($1,500) | ($2,500) | ($3,500) | ($5,000) |
| Annual pay raises (3% a year) | $0 | ($11,481) | ($37,967) | ($80,808) | ($130,921) |
| EBITDA | ($81,840) | $70,468 | $89,958 | $129,823 | $217,801 |
| Depreciation | ($6,250) | ($6,250) | ($6,250) | ($6,250) | ($1,000) |
| Interest | ($17,100) | ($15,836) | ($12,906) | ($9,684) | ($6,143) |
| Income tax | $0 | $0 | ($3,547) | ($28,865) | ($53,391) |
| Net income before start-up costs | ($105,190) | $48,381 | $67,255 | $85,024 | $157,267 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($23,200) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($128,390) | $48,381 | $67,255 | $85,024 | $157,267 |
Year 1 loses $105,190 before start-up costs and $128,390 after them. Year 2 is the first profitable year, with EBITDA at 11.1% of revenue and a net margin of 7.6%. Year 3 slips to 6.9% because the support analyst, the developer and the part-time administrator arrive ahead of the revenue they will help bring in. Year 4 falls to 6.3% when the second support analyst and the second senior developer start and the office grows. Year 5 reaches 9.2% as support and add-on revenue grow faster than payroll. The Year 1 loss carried forward leaves Year 2 with no income tax, and the tax line first shows in Year 3.
Cash in and out
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($170,967) | $10,219 | $25,219 | $34,303 | $106,705 |
| Workstations, test servers and office fit-out | ($28,000) | $0 | $0 | $0 | $0 |
| Funding received | $365,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | ($29,528) | ($32,458) | ($35,680) | ($39,221) |
| Owner distributions | $0 | $0 | $0 | $0 | $0 |
| Net change in cash | $166,033 | ($19,309) | ($7,239) | ($1,376) | $67,485 |
| Closing cash | $166,033 | $146,724 | $139,484 | $138,108 | $205,593 |
Year-end cash stays above $138,000 in every year. Year 2 is the first year principal falls due, $29,528, and cash from operations of $10,219 does not cover it, so the balance falls by $19,309. The slide continues through Year 4, by smaller amounts, before cash rises again in Year 5.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $166,033 | $146,724 | $139,484 | $138,108 | $205,593 |
| Accounts receivable | $50,329 | $96,107 | $145,878 | $204,600 | $257,747 |
| Workstations, test servers and office fit-out (net) | $21,750 | $15,500 | $9,250 | $3,000 | $2,000 |
| Total assets | $238,111 | $258,331 | $294,613 | $345,708 | $465,339 |
| Accounts payable (software, travel and contractor invoices) | $1,501 | $2,867 | $4,352 | $6,103 | $7,689 |
| Bank loan | $180,000 | $150,472 | $118,014 | $82,334 | $43,113 |
| Paid-in capital | $185,000 | $185,000 | $185,000 | $185,000 | $185,000 |
| Retained earnings | ($128,390) | ($80,009) | ($12,753) | $72,270 | $229,537 |
| Total liabilities and equity | $238,111 | $258,331 | $294,613 | $345,708 | $465,339 |
Margins, break-even and loan cover
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -24.5% | 11.1% | 9.3% | 9.6% | 12.7% |
| Net margin (before start-up costs) | -31.5% | 7.6% | 6.9% | 6.3% | 9.2% |
| Payroll incl. pay raises as share of revenue | 86% | 62% | 68% | 70% | 69% |
| Revenue per full-time equivalent at year end | $111,333 | $127,560 | $129,080 | $129,314 | $148,739 |
| Average monthly revenue | $27,833 | $53,150 | $80,675 | $113,150 | $142,542 |
| Monthly revenue needed to cover operating costs | $35,132 | $46,865 | $72,652 | $101,572 | $123,117 |
| Debt service cover (EBITDA / interest + principal) | -4.8x | 1.6x | 2.0x | 2.9x | 4.8x |
Year 1 averages $27,833 of revenue a month against $35,132 needed to cover operating costs. Year 2 clears the bar, $53,150 against $46,865, and each later year stays above it. Loan cover is negative in Year 1, when interest is paid out of a loss, then 1.6x in Year 2 and 2.0x in Year 3.
If every contract line comes in 20% short
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $267,200 | $510,240 | $774,480 | $1,086,240 | $1,368,400 |
| Net income before start-up costs | ($138,746) | ($8,667) | $32,236 | $52,299 | $120,846 |
| Net income after start-up costs | ($161,946) | ($8,667) | $32,236 | $52,299 | $120,846 |
| Closing cash | $142,242 | $74,767 | $42,166 | $19,459 | $60,835 |
Revenue falls 20% on every line in every year. Thomas's response has six parts: the first account manager starts four months late, the other hires made from month 13 onward slip six months, the second senior developer is never hired, marketing falls 20%, Thomas takes a 20% pay cut to $72,000, and the firm stays in its first office. The second consultant keeps its start month, a deliberate choice that protects delivery dates and reference visits on signed public contracts. No distributions are paid in either case. With those steps, year-end cash never falls below $19,459, a low reached in Year 4, and net income is lower than the base case in every year: Year 2 turns into a small loss and profit returns in Year 3. Loan cover falls to 0.3x in Year 2 and 1.1x in Year 3, below the 1.25x some lenders set as a minimum, so Thomas would ask the bank for a covenant waiver or a further six months of interest-only payments before the first test. Equity at the end of Year 1 is $23,054, thin enough that a net-worth covenant would sit close to its trip point, and that conversation would happen at the same meeting. Without the steps, the same shortfall loses money in all five years and takes cash below zero in Year 2.
Sources
No statute, threshold or tax rate is quoted in this plan. These are the places to confirm each point before relying on it:
- Louisiana Legislature, Revised Statutes: the Public Bid Law (Title 38, from R.S. 38:2211), the Public Records Law (R.S. 44:1 and following) and the Local Government Budget Act (R.S. 39:1301 and following).
- Louisiana Department of Revenue, corporate income tax: the state rate. The 5.5% in the model is a planning figure to confirm with a Louisiana tax adviser.
- National Hurricane Center, hurricane climatology: the June 1 to November 30 Atlantic season.
- The 400-body target list, the price list, the close rates and the founder's background are the plan's own figures, not published statistics.
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