Looking for an electronic filing storage business plan? You're in the right place.
A scanning bureau pays for scanners, space and operators before the first box arrives, and its income comes in two kinds: one-off page fees and monthly storage fees. Before a lender or investor commits, a few questions need answers. How many pages must be scanned each month to keep the floor busy? How long until the storage fees carry the payroll? What happens to the loan if clients arrive a fifth slower?
This article walks through a complete sample plan for a document scanning and secure electronic storage business in Salt Lake City, Utah, section by section. It covers the executive summary, the SWOT analysis and, above all, the financials.
Here's what you'll take away:
- The executive summary: see how to put a raise, an equipment budget and a first-year loss on one page, so a lender sees what is being asked for
- The service lines and pricing: learn how a per-page project fee and a monthly storage fee are priced against the production hours behind them
- The records rules section: find out how to state retention and HIPAA questions without overclaiming what the business can promise
- The capacity table: check that scanner hours and staff cover every year of revenue before a reader asks
- The five-year profit and loss, cash flow and balance sheet: understand how the equipment loan, depreciation and the move to a larger building show up in the numbers
- The downside case: have an answer ready for "what if a fifth of the work never arrives?", with the cuts the founder makes in response
If you are planning a scanning or records business, read this before writing your own. The company is fictional, so keep what fits and replace the rest.
In this plan
Looking for a electronic filing storage business plan template? The Toolkit builds yours with your own numbers.
Stone Brook at a Glance
Stone Brook, Inc. is a Utah document-imaging bureau that opens on January 1, 2027 in a leased light-industrial unit in Salt Lake City. It scans paper files for law firms, medical and dental practices and small government offices, indexes the images so a single record can be found in seconds, and then hosts them in an encrypted, access-controlled archive for a monthly fee. Owen Tarrant, who ran production at a regional imaging bureau for twelve years, owns 70%. One private investor holds the other 30%.
The raise is $505,000: $395,000 of equity ($225,000 from Owen, $170,000 from the investor) and a $110,000 equipment loan. Equipment takes $148,000, start-up costs take $34,500, and a $322,500 reserve covers the payroll gap while the storage base builds.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $448,320 | $792,000 | $1,102,000 |
| Net income after start-up costs | ($194,776) | ($8,578) | $98,350 |
| Closing cash | $133,197 | $99,174 | $173,240 |
Three accounts are open at the end of the first month and 40 by December 2027. Revenue comes from three places: per-page scanning projects, a monthly fee for each hosted account, and ongoing scanning and retrievals for accounts already open. The first year loses money because six people and a full production floor are paid before the storage fees can cover them. Monthly operating profit first turns positive in October 2027, the first full-year operating profit arrives in Year 2, and the first net profit in Year 3. By Year 5 revenue is $1,546,000 and net income $164,928, a 10.7% margin.
A second run of the model removes 20% of every revenue line. Hires slip, marketing and the founder's pay are cut, and the move to a larger building is skipped. Cash stays above zero in all five years, though it is thinnest in Year 4.
The pitch is narrow. Stone Brook does not sell software, court filing or data recovery. It sells clean images of a client's own paper, a searchable index, and a documented chain of custody from the moment a box leaves the client's door.
The Scanning Bureau
Legal name: Stone Brook, Inc., a Utah corporation. Owners: Owen Tarrant, 70%; one private investor, 30%. Premises: 3,400 square feet of leased light-industrial space with a loading door, in the Salt Lake City valley. Start date: January 1, 2027. Stage: pre-launch. Three accounts have signed engagement letters; the lease is in draft.
The three revenue lines
| Line | How it is priced | Year 1 share of revenue |
|---|---|---|
| Backfile scanning and indexing projects | About $0.18 a page, quoted by project | 66% |
| Monthly storage and access accounts | $340 a month on average | 21% |
| Ongoing scanning, retrievals and rush requests | About $0.20 a page for new files, plus per-request fees | 13% |
Where the work stops
Stone Brook scans, indexes and hosts. It does not file documents with courts, recover failed drives, host email or sell case-management software. Clients who need those services are referred out, which keeps the production floor and the insurance policy simple.
Retention, HIPAA and who decides what is destroyed
Retention periods belong to the client. Law firms follow their state bar's rules and their own engagement letters. Government offices follow the retention schedules that apply to their records, and the state archives division is the usual starting point for public bodies. Medical and dental practices follow their own retention policies and state law. Each client confirms its periods with its own counsel.
Stone Brook destroys nothing on its own initiative. Originals are held in a locked cage inside the intake room for 90 days after delivery of the images, covered by bailee insurance, then returned or shredded only on a signed instruction from the client. Whether a scanned image may replace a paper original for a given record is a legal question for the client's counsel, and the contract says so in plain terms.
When a clinic sends patient charts, Stone Brook is generally treated as a business associate under HIPAA and signs a business associate agreement first. The overflow scanning partner signs one too. The plan understands that no government body certifies a scanning vendor as HIPAA compliant, so it makes no certification claim. It budgets a security risk assessment at start-up ($12,000 of legal and assessment fees) and an annual review afterward, and relies on counsel to confirm which rules apply to each client.
Targets for the first two years
- 40 storage accounts by December 2027, up from three in January.
- About 1.6 million pages of backfile scanned in 2027, and a first positive operating month in October 2027.
- 85 accounts and $792,000 of revenue in 2028.
- Seven people on payroll by the end of 2028, with a written security policy and a client audit-log report in use from the first month.
Paper Records in the Wasatch Front
Why one floor can serve the metro
Salt Lake City is Utah's capital and the seat of Salt Lake County, and the bulk of the state's population is generally described as living along the Wasatch Front, from Provo to Ogden. A van leaving a Salt Lake City unit can collect boxes from most of that corridor within a morning. Law firms, medical groups, title companies and public offices cluster along it, so pickup routes stay short. The plan does not size the market with a count of firms. Its demand figure is the 40 accounts it must win in Year 1, which is a small number in a metro of this size.
What a client can do instead
| Alternative | What it offers | Why a client picks it | Where Stone Brook differs |
|---|---|---|---|
| Copier-scanner and in-house staff | Scanning when someone has time | No new vendor, no extra bill | Images are indexed and quality-checked, and staff time goes back to billable work |
| National records-management firms | Storage, shredding and scanning at large scale | One vendor for boxes and images | Local pickup, a named contact, and project pricing for small archives |
| Regional imaging bureaus | Backfile scanning, often with a software partner | Established, with long client lists | Scanning, indexing and hosting come from one contract, with a monthly fee in place of a software resale |
| Practice-management and records software vendors | The hosted system, with scanning left to the client | A tool built for the profession | Stone Brook fills the archive for the client before the software is switched on |
| Managed IT providers with cloud storage | Generic file storage | Already on site | Records are indexed, access is logged, and retention is set by record type |
Each row describes an offer and where Stone Brook sits against it. It is not a ranking. Prices and packages change often, so none are quoted here.
SWOT
| Strengths | Weaknesses |
|---|---|
| Twelve years of production experience in the founder | Owen is the only person who sells and runs the floor in the first months |
| Per-page and monthly pricing that a firm can budget | No brand yet; every account starts from zero |
| Three signed accounts before opening | Year 1 loses money and draws on a large reserve |
| Opportunities | Threats |
|---|---|
| Clients clearing archive rooms as leases end or staff retire | Scanners and software that make in-house scanning easy |
| Referrals from accountants, IT providers and practice consultants | A security incident, at Stone Brook or at a competitor, that unsettles clients |
| Accounts that add new files every month | Larger vendors discounting to win small archives |
The Records Custodians We Serve
The buyer is the person who is responsible for a room of paper and would like it gone. That is an office manager at a law firm, a practice manager at a clinic, or a clerk or records officer at a city or county office. They are rarely IT specialists. They keep files because the law or the engagement letter tells them to, and they need to find one when asked.
| Segment | What sets off the search | What they buy | Accounts at end of Year 1 |
|---|---|---|---|
| Law firms | A lease ending, a retirement, or a closed-file room that is full | Backfile scanning of closed matters, then monthly hosting | 18 |
| Medical and dental practices | A records request they cannot answer quickly, or a move to new software | Chart scanning under a business associate agreement, hosted access | 12 |
| Small government offices | A retention schedule that is due, or a budget that must be spent | Project scanning of permits, minutes or case files | 4 |
| Title companies, engineers, accountants | Client audits and storage cost | Backfile and hosting for closed jobs | 6 |
Government projects follow each body's own purchasing rules, which differ by body and by value, and quotes or bids can take months to clear. The plan therefore counts only four public accounts in Year 1, one of them a city records office signed before opening, and puts none under a single large contract.
What they ask of a vendor
A quote with a page count and a price. Proof that boxes were counted in and counted out. An index that lets staff find a file by client, matter, date or name. Access that the firm controls, with a log of who opened what. A clear answer on when the paper may be destroyed.
From Sample Box to Signed Contract
Four steps
- A 30-minute call and a site visit to the records room, where Owen or the representative estimates box count and file condition.
- A pilot of up to 500 pages scanned free, returned with the index so the client can test it.
- A fixed quote per page, an engagement letter and a business associate agreement where one applies.
- Pickup, a barcode for every box, and a status report at each stage.
The Year 1 pipeline
About 120 discovery conversations at a 31% close rate produce 37 accounts won after opening. Three accounts signed before opening make 40.
| Lead source | New accounts won after opening | Share |
|---|---|---|
| Referral partners (accountants, IT providers, practice consultants) | 12 | 32% |
| Bar and medical association events | 8 | 22% |
| Search and local content | 7 | 19% |
| Outbound calls and email by the representative | 6 | 16% |
| Chamber and word of mouth | 4 | 11% |
How accounts are priced
A project quote counts boxes and file condition, then applies the per-page rate. The $340 monthly average is a $90 account fee, seven user seats at $28 and about $54 for stored volume. Small practices pay less and firms with many users pay more. Price rises of 3% a year begin in Year 2.
Keeping accounts
The plan expects 7% of accounts to leave each year. Records archives are slow to move once indexed, so the main risks are a firm closing or a client choosing another vendor after a price dispute. Each account receives a quarterly access-log summary and a yearly review of what the client still needs to keep.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Storage accounts at year end | 40 | 85 | 118 | 144 | 164 |
| Gross new accounts | 37 | 49 | 40 | 35 | 31 |
New-account wins slow after Year 2 as the referral network fills. Further growth comes from existing accounts sending more boxes.
Where the Marketing Money Goes
Year 1 marketing is $56,000, made up of $20,000 of launch spend funded from the start-up capital and $36,000 of running cost. That is 12% of Year 1 revenue and falls to 4.5% by Year 3 and 3.5% by Year 5. The 37 accounts won after opening cost about $1,500 each, against an average first-year backfile project of $7,400.
| Channel | Year 1 spend | What it is expected to do |
|---|---|---|
| Website, case sheets and sample-scan kits (launch) | $8,000 | A site that explains the process, with a pilot-request form |
| Opening events and printed kits (launch) | $7,000 | Introductions at 20 firms and practices |
| First-quarter search test (launch) | $5,000 | Tests which search terms bring calls; about 3 of the 7 search accounts |
| Referral partnerships | $6,000 | Lunches, a one-page guide and a thank-you for each introduction; about 12 accounts |
| Association events and exhibits | $9,000 | Bar and medical association booths and sponsorships; about 8 accounts |
| Search ads and local content | $9,000 | Searches such as "scan law firm files Salt Lake City"; about 4 more accounts |
| Workshops and written guides | $5,000 | Practical talks on file retention and the pilot offer |
| Outbound tools | $4,000 | Lists and email software for the representative; about 6 accounts |
| Chamber memberships | $3,000 | Local introductions and word of mouth; about 4 accounts |
Milestones
- January 2027: floor live, three accounts open.
- April 2027: 14 accounts.
- October 2027: 35 accounts, and the first month of positive operating profit.
- December 2027: 40 accounts and $13,600 of monthly storage revenue.
Inside the Production Floor
Space
The 3,400 square feet, on a five-year lease with Owen's personal guarantee, hold an intake room with a locked door and camera, six prep tables, two production scanners, one overhead scanner for bound volumes and oversize sheets, and the servers. At about $17 per square foot a year, all in, rent is $57,800 in Year 1. A move to about 4,200 square feet in Year 4 raises it to $76,000 and costs a further $45,000 for the secure-room fit-out, the server move and the days of downtime. Utilities of $8,400 cover the scanners, the server room and cooling.
How a box moves
Each box is barcoded at the client's door and logged at the intake room. Staff remove staples and clips, repair torn pages and scan at 300 dpi, then run text recognition. A second person checks a sample of every batch for skew, missing pages and unreadable lines. Index fields are keyed or checked, and the images go to the client's account. The status report shows each box as received, prepped, scanned, checked or released.
Capacity
The model counts 500 pages per labor hour for prep, scanning, checks and indexing, and 1,450 productive hours per person per year. Pages in the table are backfile pages at the blended rate, which starts at $0.18 and rises 3% a year.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Backfile pages scanned (millions) | 1.64 | 2.05 | 2.36 | 2.52 | 2.62 |
| Production hours needed | 3,750 | 5,250 | 6,370 | 7,070 | 7,620 |
| Production hours available | 4,350 | 6,400 | 8,340 | 9,430 | 9,430 |
Year 1 runs at 86% of available hours, and October, the busiest month, needs about 410 of roughly 480 hours. Owen helps at peaks and a subcontract partner takes overflow. Later years run between 75% and 82%, which leaves room for rush work and absences. Ongoing work is counted at $130 of revenue per labor hour.
Systems and security
Images are encrypted in transit and at rest and held in a U.S. cloud storage region, with a second copy in another region. Access requires two-factor sign-in, and every view, download and print is logged and reported to the client. Production staff pass a background check before they handle client files. Backups are restored on a test schedule every quarter. A SOC 2 audit is not in the budget, and a client that requires one would be told so before signing.
Insurance and licenses
Insurance covers professional (errors and omissions) liability, cyber liability, general liability, property, bailee cover for client originals, commercial auto for the van, workers' compensation and key-person life and disability cover. It costs $18,000 in Year 1 and rises to $27,500 by Year 5; the quotes are planning figures, and cyber limits are set with the client contracts in view. A Salt Lake City business license and any state registrations are budgeted at $2,500.
Vendors
The cloud and platform vendors, a shredding contractor, the scanner service provider and a subcontract scanning partner. Each can be replaced, though a change of platform would take about a quarter to carry out, which is why the platform contract allows a full export of client data.
Owen Tarrant and the Core Hires
Owen Tarrant, founder and managing director
Owen spent twelve years at a regional imaging bureau, starting on the scanners and finishing as operations manager with about 20 staff. He knows the production side well and has a good sense of how long a box takes. He left when the bureau was sold to a larger company. His $225,000 is the proceeds of a house sale and his savings. He has reviewed the non-solicitation terms in his old contract with a lawyer and will not approach that bureau's clients.
Where the team is thin
Owen has never sold software-style monthly subscriptions, has no formal training in HIPAA or information security, and has never run a security incident response. The plan answers each: the client success and sales representative in month 5, a healthcare attorney and an outside security consultant engaged in the first quarter, and the systems and compliance administrator in month 32.
If Owen is out
He is the only person who prices projects and signs contracts in the first months. A written pricing sheet, a second authorized signer (the investor) and the retrieval coordinator in month 20 reduce the risk. Key-person life and disability cover on Owen sits inside the insurance line and is bought in the first quarter.
Outside advice
A Salt Lake City attorney with a healthcare practice drafts the business associate agreement and reviews the terms of service. A part-time security consultant carries out the first risk assessment. The investor, a retired operations executive, meets Owen monthly and reviews results quarterly.
Ownership and the lender
Owen holds 70% and the investor 30%. The investor's $170,000 buys a 30% stake, which implies a value of about $567,000 for a pre-launch firm; Owen's larger share reflects his twelve years of production experience and the unpaid months before opening. The equipment loan is secured on the scanners and servers, with Owen's personal guarantee. The lender would receive quarterly accounts and a covenant on minimum cash.
Questions a lender will ask
- Customer concentration. The plan sets no single client above about 8% of Year 1 revenue, and no public body under a single large contract.
- Contract terms. Storage accounts sign 12-month terms that renew automatically, with the client's images returned in standard formats within 30 days of termination.
- Collateral. The scanners and servers secure the loan at an advance of 74% of their purchase cost. Used scanners can lose value quickly, so a resale value below cost is expected.
- Security attestation. Without a SOC 2 report, some larger law-firm and healthcare accounts may decline to sign. The plan does not count on them.
- Cover limits. The cyber and errors-and-omissions limits are set after the first client contracts show what they require.
Equipment, Payroll and Cash: The Five-Year Model
The tables below come out of a single five-year model. Year 1 is shown month by month; Years 2 to 5 are annual. Each volume, price and wage is listed first, so a reader can follow any total back to the number that produced it.
Paying for the scanners and the first year
| Use of funds | Amount |
|---|---|
| Two production document scanners | $46,000 |
| Overhead book and large-format scanner | $17,000 |
| Servers, backup storage and network security | $26,000 |
| Prep stations, shelving and secure intake room | $24,000 |
| Workstations and monitors | $11,000 |
| Used cargo van for box pickup and delivery | $24,000 |
| Business licenses and permits | $2,500 |
| Legal: entity, service and business associate agreements; security risk assessment | $12,000 |
| Launch: website, sample-scan kits, bar and chamber events | $20,000 |
| Cash reserve for the first-year payroll gap | $322,500 |
| Total uses | $505,000 |
| Source of funds | Amount |
|---|---|
| Owen Tarrant's savings | $225,000 |
| One private investor (30% minority stake) | $170,000 |
| Equipment loan (secured on the scanners and servers) | $110,000 |
| Total sources | $505,000 |
Owen puts in $225,000 and one private investor puts in $170,000 for a 30% minority stake, which makes $395,000 of equity, or 78% of the $505,000 raised. Owen's 70% reflects his twelve years in production and the unpaid months before opening. The equipment loan is $110,000 over five years at a planning rate of 9.5%, interest only for the first three months, which is 74% of the $148,000 equipment budget. It is secured on the scanners and servers and backed by Owen's personal guarantee. The rate is a planning figure and not a lender quote. The $322,500 reserve is sized to the downside run: base-case cash never falls below $99,174 at a year end, while a 20% revenue shortfall still leaves $23,151 in the worst year.
Rates, volumes and capacity behind the model
- Backfile projects are priced at about $0.18 a page, blended across stapled and clipped files, mixed paper sizes and the occasional bound volume. The price covers document prep, 300 dpi scanning, text recognition, a quality check and three index fields, and it includes a surcharge on heavily prepped files. Year 1 backfile revenue of $296,000 is therefore about 1.64 million pages, or roughly 40 projects averaging $7,400, which is about 16 boxes of 2,500 pages each. Prices rise 3% a year from Year 2.
- Production runs at about 500 pages per labor hour including staple removal, repair, scanning, a second-person quality check and indexing. Clean loose sheets run faster and stapled medical and legal files slower. Ongoing work is counted at $130 of revenue per labor hour. One full-time operator or specialist offers 1,450 productive hours a year, which is 70% of 2,080. In Year 1 the operators and the first indexer supply about 4,350 hours against roughly 3,750 hours of work, or 86%, and the busiest month, October, needs about 410 hours against about 480 available. Overflow goes to a subcontract scanning partner paid from direct costs. In Years 2 to 5 utilization is 82%, 76%, 75% and 81%.
- A storage and access account bills $340 a month on average in Year 1: a $90 account fee, seven user seats at $28 and about $54 for stored volume. The count climbs from 3 accounts at the end of January to 40 at the end of December, then 85, 118, 144 and 164 at the end of Years 2 to 5. Those year-end counts allow for 7% annual attrition, so gross new accounts run to about 49 in Year 2 and fall to about 31 in Year 5. The monthly fee rises 3% a year.
- Ongoing work is ordinary monthly business: scanning of new files at about $0.20 a page, mailroom batches, certified print copies and rush retrievals. It grows from $59,500 in Year 1 to $310,000 in Year 5 as accounts mature. From Year 4 about half of backfile revenue comes from accounts that send further boxes, which is why backfile keeps growing while new-account wins slow.
- Direct costs are 7% of backfile revenue (shred and disposal, boxes, freight, overflow scanning), 24% of storage revenue (cloud storage, a second backup copy and per-seat platform licenses) and 8% of ongoing work. Together they run at 10.7% of revenue in every year. The gross margin that results is struck before production labor: the operators and indexers sit in the payroll line, so it is not comparable with the gross margin of a firm that books its crew as direct cost.
- Receivables average 38 days. Law firms and government offices pay on 30-day invoices and often a little later, clinics pay monthly, and large projects are billed half on pickup and half on delivery. Payables to cloud and disposal vendors average 30 days.
- Each salary carries a 27% load for employer payroll taxes, a health contribution, workers' compensation and a 401(k) match; the part-time operator's load is 15%. The salaries in the personnel table are launch-year rates, and 3% raises start in Year 2, charged on a separate line. Owen's $100,000 is inside the payroll line, so every profit figure is what remains after he has been paid.
- Rent is priced at about $17 per square foot a year, all in, for 3,400 square feet of light-industrial space with a loading door, which is $57,800 in Year 1. The Year 4 move to roughly 4,200 square feet lifts the figure to $76,000 and carries a one-time cost of $45,000 for the secure-room fit-out, server move and downtime. Insurance is $18,000 in Year 1. Scanner service contracts, a used van and its fuel, and an annual security review are separate lines because they rise with volume.
- The model taxes the firm as a C corporation at 21% federal and 4.45% Utah, a planning rate that may change. Earlier losses are offset against later profit in a simplified way, so a tax adviser could time the first payments differently. Income tax is nil in Years 1 to 3 and about $600 in Year 4, then rises to $53,565 in Year 5.
- A distribution of $40,000 is paid to both owners pro rata in Year 5, after the loan has been fully repaid and only if the lender's terms allow it. The equipment loan runs its full five years.
Revenue by line of work
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Backfile scanning and indexing projects | $296,000 | $380,000 | $450,000 | $495,000 | $530,000 |
| Monthly storage and access accounts | $92,820 | $262,000 | $437,000 | $583,000 | $706,000 |
| Ongoing scanning, retrievals and rush requests | $59,500 | $150,000 | $215,000 | $265,000 | $310,000 |
| Total revenue | $448,320 | $792,000 | $1,102,000 | $1,343,000 | $1,546,000 |
| Growth on prior year | – | 77% | 39% | 22% | 15% |
Backfile projects supply 66% of Year 1 revenue, because the first customers are clearing archive rooms. By Year 5 storage accounts are the largest line at 46%, and backfile has fallen to 34%. That shift is the point of the model: a scanned box earns once, while a stored account bills every month for as long as the client stays.
Month by month through 2027
| Month | Backfile scanning and indexing projects | Monthly storage and access accounts | Ongoing scanning, retrievals and rush requests | Total revenue | EBITDA |
|---|---|---|---|---|---|
| Jan 2027 | $8,000 | $1,020 | $1,500 | $10,520 | ($34,172) |
| Feb 2027 | $16,000 | $2,040 | $2,000 | $20,040 | ($25,666) |
| Mar 2027 | $22,000 | $3,400 | $3,000 | $28,400 | ($18,197) |
| Apr 2027 | $24,000 | $4,760 | $3,500 | $32,260 | ($14,748) |
| May 2027 | $26,000 | $6,120 | $4,000 | $36,120 | ($11,299) |
| Jun 2027 | $28,000 | $7,480 | $5,000 | $40,480 | ($7,403) |
| Jul 2027 | $26,000 | $8,840 | $5,500 | $40,340 | ($7,528) |
| Aug 2027 | $28,000 | $9,860 | $6,000 | $43,860 | ($4,383) |
| Sep 2027 | $30,000 | $10,880 | $6,500 | $47,380 | ($1,238) |
| Oct 2027 | $32,000 | $11,900 | $7,000 | $50,900 | $1,907 |
| Nov 2027 | $30,000 | $12,920 | $7,500 | $50,420 | $1,478 |
| Dec 2027 | $26,000 | $13,600 | $8,000 | $47,600 | ($1,042) |
January revenue is $10,520, with only three accounts open and the crew still learning the first jobs. Work builds through the spring, and the monthly storage line grows every month as accounts are added. EBITDA, which is profit before depreciation, interest and tax, is negative in every month except October and November, and December slips back below zero as clients close for the holidays. The Year 1 low for month-end cash, counted after the 38-day collection lag, is the Nov balance of about $116,000; the lowest year-end balance of the five years comes later, in Year 2.
Production and client staff
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and managing director | $100,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Scanning operator | $40,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Scanning operator (second) | $40,000 | Month 2 | 1 | 1 | 1 | 1 | 1 |
| Indexing and quality-control specialist | $45,000 | Month 4 | 1 | 1 | 1 | 1 | 1 |
| Client success and sales representative | $62,000 | Month 5 | 1 | 1 | 1 | 1 | 1 |
| Scanning operator (third) | $40,000 | Month 9 | 1 | 1 | 1 | 1 | 1 |
| Retrieval and support coordinator | $46,000 | Month 20 | – | 1 | 1 | 1 | 1 |
| Indexing and quality-control specialist (second) | $45,000 | Month 28 | – | – | 1 | 1 | 1 |
| Systems and compliance administrator | $78,000 | Month 32 | – | – | 1 | 1 | 1 |
| Scanning operator (part time, 25 hours a week) | $25,000 | Month 37 | – | – | – | 0.5 | 0.5 |
| Second senior client success representative | $62,000 | Month 44 | – | – | – | 1 | 1 |
| Total payroll incl. on-costs | $336,656 | $439,632 | $557,848 | $691,478 | $737,410 |
Owen starts with one operator in January and a second in February, then adds an indexing specialist in month 4, a client success and sales representative in month 5 and a third operator in month 9. A retrieval and support coordinator joins in month 20, a second indexing specialist in month 28 and the systems and compliance administrator in month 32. A part-time operator starts in month 37 and a second client success representative in month 44. That makes 6 full-time people at the end of Year 1, 7 at the end of Year 2, 9 at the end of Year 3, and 10.5 full-time equivalents from Year 4. The part-time wage is a salary for 25 hours a week.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $448,320 | $792,000 | $1,102,000 | $1,343,000 | $1,546,000 |
| Direct costs (cloud storage, platform licenses, shred and disposal, boxes and freight) | ($47,757) | ($84,367) | ($117,389) | ($143,062) | ($164,686) |
| Gross profit | $400,563 | $707,633 | $984,611 | $1,199,938 | $1,381,314 |
| Payroll incl. on-costs | ($336,656) | ($439,632) | ($557,847) | ($691,478) | ($737,410) |
| Rent | ($57,800) | ($59,500) | ($61,300) | ($76,000) | ($78,300) |
| Utilities | ($8,400) | ($8,700) | ($9,000) | ($10,500) | ($10,900) |
| Marketing | ($36,000) | ($44,000) | ($50,000) | ($52,000) | ($54,000) |
| Insurance | ($18,000) | ($21,000) | ($23,500) | ($25,500) | ($27,500) |
| Professional fees | ($7,000) | ($6,500) | ($7,000) | ($7,500) | ($8,000) |
| Software subscriptions | ($22,000) | ($30,000) | ($37,000) | ($41,000) | ($44,000) |
| Scanner service contracts and spare parts | ($9,000) | ($14,000) | ($16,000) | ($18,000) | ($19,000) |
| Van fuel, courier and box handling | ($12,000) | ($15,000) | ($18,000) | ($20,000) | ($21,000) |
| Annual security assessment and compliance review | ($8,000) | ($10,000) | ($11,000) | ($12,000) | ($12,500) |
| Phones, supplies and postage | ($6,000) | ($7,500) | ($8,500) | ($9,500) | ($10,000) |
| Equipment replacement and new-hire kit | $0 | ($6,000) | ($12,000) | ($14,000) | ($18,000) |
| Building move: fit-out of the secure room, server move and downtime (Year 4) | $0 | $0 | $0 | ($45,000) | $0 |
| Bad debt allowance | ($2,000) | ($5,000) | ($7,000) | ($8,500) | ($9,500) |
| Annual pay raises (3% a year) | $0 | ($13,189) | ($33,973) | ($64,119) | ($92,551) |
| EBITDA | ($122,293) | $27,612 | $132,490 | $104,841 | $238,653 |
| Depreciation | ($27,979) | ($27,979) | ($27,979) | ($27,979) | ($18,729) |
| Interest | ($10,004) | ($8,212) | ($6,162) | ($3,909) | ($1,432) |
| Income tax | $0 | $0 | $0 | ($601) | ($53,565) |
| Net income before start-up costs | ($160,276) | ($8,578) | $98,350 | $72,353 | $164,928 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($34,500) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($194,776) | ($8,578) | $98,350 | $72,353 | $164,928 |
Year 1 shows an operating loss of $122,293 before depreciation, interest and tax, and a net loss of $194,776 after $34,500 of start-up costs. Year 2 turns EBITDA positive at $27,612, but depreciation and interest leave a net loss of $8,578. Year 3 is the first profitable year, with $98,350 of net income (8.9%). Year 4 slips to 5.4% when the larger building, the $45,000 move, two more hires and the first income tax land together, and Year 5 reaches 10.7%. Payroll falls from 75% of revenue in Year 1 to 54% in Year 5 as storage revenue grows faster than headcount.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($209,546) | ($13,371) | $96,768 | $77,351 | $164,300 |
| Scanners, servers and secure intake room | ($148,000) | $0 | $0 | $0 | $0 |
| Funding received | $505,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | ($14,256) | ($20,653) | ($22,703) | ($24,956) | ($27,433) |
| Owner distributions | $0 | $0 | $0 | $0 | ($40,000) |
| Net change in cash | $133,197 | ($34,023) | $74,066 | $52,396 | $96,867 |
| Closing cash | $133,197 | $99,174 | $173,240 | $225,635 | $322,502 |
Closing cash is above zero in every year and is lowest at year end in Year 2, at $99,174, after the first full year of loan principal and a small loss. Cash from operations turns positive in Year 3. The loan is fully repaid by the end of Year 5, and the first distribution waits until then.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $133,197 | $99,174 | $173,240 | $225,635 | $322,502 |
| Accounts receivable | $46,674 | $82,455 | $114,729 | $139,819 | $160,953 |
| Scanners, servers and secure intake room (net) | $120,021 | $92,043 | $64,064 | $36,086 | $17,357 |
| Total assets | $299,893 | $273,671 | $352,033 | $401,540 | $500,813 |
| Accounts payable (cloud, platform and disposal vendors) | $3,925 | $6,934 | $9,648 | $11,758 | $13,536 |
| Bank loan | $95,744 | $75,091 | $52,388 | $27,433 | $0 |
| Paid-in capital | $395,000 | $395,000 | $395,000 | $395,000 | $395,000 |
| Retained earnings | ($194,776) | ($203,354) | ($105,004) | ($32,651) | $92,277 |
| Total liabilities and equity | $299,893 | $273,671 | $352,033 | $401,540 | $500,813 |
Margins, coverage and break-even
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -27.3% | 3.5% | 12.0% | 7.8% | 15.4% |
| Net margin (before start-up costs) | -35.8% | -1.1% | 8.9% | 5.4% | 10.7% |
| Payroll incl. pay raises as share of revenue | 75% | 57% | 54% | 56% | 54% |
| Revenue per full-time equivalent at year end | $74,720 | $113,143 | $122,444 | $127,905 | $147,238 |
| Average monthly revenue | $37,360 | $66,000 | $91,833 | $111,917 | $128,833 |
| Monthly revenue needed to cover operating costs | $48,766 | $63,425 | $79,476 | $102,138 | $106,574 |
| Debt service cover (EBITDA / interest + principal) | -5.0x | 1.0x | 4.6x | 3.6x | 8.3x |
The last two ratio rows compare average monthly revenue with what is needed to cover operating costs. Year 1 falls short, at $37,360 against $48,766. Year 2 clears the bar, at $66,000 against $63,425. Debt service cover is negative in Year 1 and 1.0x in Year 2, which a lender would note; the reserve pays any gap in Year 2. From Year 3 it is 3.6x or better.
If a fifth fewer pages and accounts arrive
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $358,656 | $633,600 | $881,600 | $1,074,400 | $1,236,800 |
| Net income before start-up costs | ($168,101) | ($78,350) | $23,643 | ($3,439) | $92,507 |
| Net income after start-up costs | ($202,601) | ($78,350) | $23,643 | ($3,439) | $92,507 |
| Closing cash | $133,922 | $36,680 | $41,951 | $23,151 | $91,468 |
This run takes 20% off every revenue line in every year. Owen's response has eight parts: the second operator starts two months late, the first indexer three months late and the third operator six months late; every other hire from month 13 slips by six months; the second client success representative is never hired; marketing falls 20%; his own pay falls from $100,000 to $80,000; replacement spending is halved; the firm stays in its first building and skips the move; and no distribution is paid. Even so, Year 1 equity falls to $192,399, the firm earns a profit only in Years 3 and 5, and Year 4 is a small loss of $3,439 as the delayed hires arrive. Year-end cash never falls below $23,151, which would leave little headroom, so Owen would raise a covenant waiver with the lender early. With none of those cuts, the same shortfall leaves the firm out of cash during Year 2.
Sources
- Tax Foundation, Utah tax rates and rankings: the corporate income tax rate in the model is 4.45%, a planning figure. Rates change; confirm with the Utah State Tax Commission.
- Retention periods, HIPAA treatment of a records vendor and the rules for replacing paper originals with images vary by client and record type. Confirm each with counsel before relying on it.
- Page prices, throughput, account fees, wages, rent, insurance and loan terms are the plan's own figures and are not drawn from a published benchmark.
Create a plan as complete as this one
Pick the amount of help you want.
Do it yourself
$197 Toolkit, 12 months
Build your plan with the AI Wizard and every tool you need, at your own pace.
Start my plan →Done with you
$497 Toolkit Plus, 12 months
Our AI builds the plan with you, section by section, from your answers.
Want a person too? Upgrade to a consultation with an MBA graduate.
See Toolkit Plus →Done for you
From $1,997 written for you
We research and write the whole plan, and you review the finished draft.
See the writing service →Need your own electronic filing storage business plan? Click here for the electronic filing storage business plan template.