Looking for an integrated communications business plan? You're in the right place.
A hosted-communications company has questions to answer before anyone lends to it. How many customers leave each month, and what does that do to the fifth year? How many support technicians does each thousand seats need? How much cash does it take to carry the platform bill until the seats arrive? A feature list answers none of them.
In this article we'll walk through a complete sample plan for a managed unified-communications provider in Nashville, Tennessee, section by section. We'll cover the executive summary, the SWOT and, above all, the financials.
Here's what you'll take away:
- The executive summary: put the whole company, the raise and the three-year numbers on one page
- The competitor table and SWOT: see how to place a small provider against national vendors and local carriers without naming prices you cannot source
- The account roll-forward: track gross adds, monthly churn and seats per technician so the revenue line has a count behind it
- The start-up budget: find out how large a reserve a subscription business needs while seats build up
- The staffing plan: tie each support and implementation hire to the seat count it carries
- The five-year profit, cash flow and balance sheet: follow how pricing, churn and payroll feed each statement
- The downside case: have an answer ready for the "what if bookings are 20% short?" question
Anyone planning a communications or other subscription-service company can start here. The company is fictional, so keep what fits and change the rest.
In this plan
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Creek Park in Brief
Creek Park is a managed unified-communications provider in Nashville, Tennessee. It sells hosted voice, messaging and contact-center bundles to health-care practices and to offices of 20 to 150 people, bills them per user each month, and installs and trains each account itself. Founder Dana Whitfield owns the company together with two angel investors.
Opening takes $720,000: $130,000 of Dana's savings, $360,000 from two angel investors who run Nashville health-care practices, and a $230,000 bank term loan. The largest use is a $590,500 cash reserve. Equipment, a support floor and a training room take $68,000, and legal work, licenses and the launch campaign take the remaining $61,500.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $564,204 | $1,358,000 | $2,222,000 |
| Net income after start-up costs | ($376,523) | ($88,233) | $165,616 |
| Closing cash | $258,987 | $112,710 | $213,745 |
The firm opens with 3 signed accounts and ends 2027 with 39 accounts and about 1,400 seats. Customers leave at 1.0% a month, so the model adds 41 accounts in Year 1 to reach that figure, and 56 accounts are lost over five years. Year 1 and Year 2 are losses because payroll, the platform bill and the support floor arrive before the seats do. Year 3 is the first profit.
A second run takes 20% off revenue in every year. Later hiring, a smaller marketing budget, a pay cut for Dana, no larger office and no distributions keep cash above zero in each of the five years, though in that run equity goes negative in Year 2.
The offer is narrow on purpose. Creek Park does not sell phone-system hardware or run customers' networks. It runs the phones, messaging and call queues, and the support desk answers in Nashville.
What Creek Park Sells
Legal name: Creek Park Communications, LLC, a Tennessee limited liability company. Owners: Dana Whitfield (55%) and two angel investors (45% together). The LLC elects C corporation tax treatment. Premises: a leased 1,800-square-foot suite in the Nashville area. Start date: 1 January 2027. Stage: pre-launch. Three customer contracts are signed; the platform and carrier agreements are in review.
Purpose
Give practices and mid-size offices phones, messaging and call queues that work, billed at one price per user, with a local team that picks up when something breaks.
Goals for the first two years
- Reach 39 live accounts by December 2027 and 74 by December 2028.
- Keep customer losses at or below 1.0% of accounts a month.
- Keep seats per support technician at or under about 900 through 2028.
- Reach a full-year profit in 2029, the third year, and begin repaying the bank on schedule in 2028.
Five product lines
| Line | How it is priced | Year 1 share of revenue |
|---|---|---|
| Hosted voice and collaboration seats | $33 per seat a month | 44% |
| Contact-center bundles | $79 per agent a month, on top of the seat | 6% |
| Messaging and health-care add-ons | $5 per seat a month | 4% |
| Usage, numbers and text traffic | $3.50 per seat a month | 5% |
| Install, porting and training | $3,800 plus $55 per seat, once | 42% |
Regulation and what gets confirmed
Voice service delivered over the internet can fall under federal and state telecom rules, and a provider selling to health-care customers also meets privacy obligations. Creek Park expects to follow the FCC's 911 and caller-ID rules for the lines it sells, to register where registration is required, and to sign a business associate agreement with each covered health-care customer. Which registrations, which state and local fees and which exact contract terms apply is a question for telecom and health-care counsel before the first sale, and the $26,000 legal budget is sized for that review. The rules and fee rates change, so the figures here carry no rates. Creek Park does not describe itself as HIPAA-certified.
Nashville's Practices and Offices
The buyers on the list
Creek Park's market is practices and offices that have outgrown consumer-grade phones and are too small for an in-house telecom team. Physician groups, dental and physical-therapy practices, behavioral-health clinics, law and accounting offices, property managers and nonprofits all fit. The plan uses no count of local firms. The Year 1 account list comes from referral partners, and the model sizes demand by sales effort, not by market share.
What this pays for
Hosted-voice pricing varies widely by vendor, seat count, term and features. Creek Park's $33 seat price is the plan's own figure for voice, messaging and video together, with contact-center agents and secure messaging priced above it. Its quotes list the per-seat price, number-porting charges, handset costs, taxes and fees, and the exit terms on separate lines.
Where else an office could buy
| Alternative | What it offers | Why a buyer picks it | How Creek Park differs by design |
|---|---|---|---|
| National hosted-communications vendors, sold direct | Broad feature sets and large brands | Single vendor, self-service sign-up | Local implementation, training and a Nashville support desk |
| Business plans from the local phone or cable carrier | Voice bundled with internet | One bill, familiar supplier | Messaging, call queues and health-care add-ons included in the seat |
| Interconnect and managed-IT firms | Phones sold alongside IT support | Existing relationship | Voice is the only product, so the support desk knows it deeply |
| Do-it-yourself business VoIP | Lowest list price | No setup fee | Fixed-fee install and training; the firm handles number porting |
| Keeping the old on-premises phone system | No new contract | Already paid for | Hosted pricing replaces maintenance contracts and hardware refresh |
Each row describes an offer and where Creek Park sits against it. It is not a ranking, and no provider is named because prices and plans change often.
SWOT
| Strengths | Weaknesses |
|---|---|
| Founder with years inside regional telecom and health-system IT | One senior leader: if Dana is away, sales and escalations stall |
| Per-seat pricing buyers can compare | No brand yet, and the platform is licensed rather than owned |
| Three signed accounts before opening | Years 1 and 2 are losses funded from the reserve |
| Opportunities | Threats |
|---|---|
| Practices replacing end-of-life phone systems | National vendors cutting prices to win small accounts |
| Referral channels from practice consultants and IT firms | Carriers changing wholesale terms or retiring a feature |
| Add-ons such as secure messaging and call analytics | A platform outage that costs customers' trust |
Who Buys Hosted Communications
The practice manager and the office manager
The buyer is usually the practice manager or office manager, with a physician-owner or managing partner signing. Offices have 20 to 150 people, one to five locations, and an IT contractor who prefers not to handle phones.
How they cope today
Many run an aging on-premises phone system under a maintenance contract, or a patchwork of cloud lines that nobody owns. Front-desk staff juggle scheduling lines, a fax number and a separate answering service.
What starts a search
A system reaching end of service, a move or a new location, a missed-call problem at the front desk, a renewal letter from the carrier, or an outage that stopped a clinic's schedule.
What the buyer wants from the supplier
Calls that connect, a phone that rings at the right desk, clear handling of patient information, an answer within minutes when something breaks, and one monthly bill.
Contact-center bundles
About 22% of accounts, with 9 agents each, take queues for scheduling lines, billing offices or referral intake. Each agent holds one of the account's seats and pays $79 a month on top of the $33 seat price for queues, call recording, reporting and wallboards.
From First Demo to Go-Live
How a sale moves
A prospect gets a 30-minute demo on Creek Park's own lab system, a site and call-flow review, and a fixed-price proposal within three working days. After signature, number porting starts, phones are staged in the lab, and the implementation engineer runs a go-live weekend with training on the Monday. Dana runs every demo in Year 1. The account executive takes over smaller accounts from month 7.
The Year 1 pipeline
The model adds 41 accounts in Year 1. Three are signed before opening, and the other 38 come from about 120 demos at a 32% close rate. Sales cycles are planned at six to ten weeks.
| Source | Gross new accounts | Share |
|---|---|---|
| Referral partners (IT contractors, practice consultants, EHR trainers) | 14 | 34% |
| Direct outreach by Dana and the account executive | 10 | 24% |
| Resellers: managed-IT firms that sell Creek Park under their own contract | 9 | 22% |
| Webinars and association events | 8 | 20% |
Price list
A 24-seat practice with no queue pays about $950 a month for seats and add-ons at launch prices. A 60-seat office with a 9-agent queue pays about $3,100. The 36-seat average with the plan's usual mix works out to $1,569 a month, about $18,800 a year. Terms are 36 months for health-care accounts and 12 months for offices, with a 30-day cure period for service failures; prices rise 3% a year from Year 2.
Account roll-forward
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Accounts at start of year | 0 | 39 | 74 | 115 | 153 |
| Gross new accounts | 41 | 42 | 52 | 54 | 56 |
| Accounts lost (1.0% a month) | 2 | 7 | 11 | 16 | 20 |
| Accounts at year end | 39 | 74 | 115 | 153 | 189 |
| Seats at year end (about 36 per account) | 1,408 | 2,680 | 4,148 | 5,517 | 6,799 |
| Support technicians at year end | 2 | 3 | 4 | 5 | 6 |
| Seats per technician | 704 | 893 | 1,037 | 1,103 | 1,133 |
Account growth slows from 90% in Year 2 to 23% in Year 5 because the lost-account line grows with the base. Each hire follows the seat count, so a bad sales year slows hiring.
Why accounts stay and leave
The plan expects a health-care practice with queues, a number it has advertised for years and trained staff to change supplier rarely; that is the founder's experience and the plan does not quantify it. Accounts leave through practice sales and closures, relocations, non-renewal at term end and negotiated early exits. Most 36-month contracts signed in 2027 reach term end in 2030, so the 1.0% monthly figure is the plan's own estimate and not an industry statistic. A rise to 1.5% would cut Year 5 net margin to 8.2% and revenue to $3,618,000 with hiring unchanged.
Where the Marketing Dollars Go
Year 1 marketing is $88,000: $28,000 of launch spend charged to start-up capital and $60,000 of running cost. That is 15.6% of Year 1 revenue, falling to 3.2% in Year 3 and 2.1% in Year 5 as referrals do more of the work. Each of the 41 new accounts costs about $2,150 in marketing, which compares with about $10,300 a year of recurring gross profit per account at Year 1 prices. Salaries and commissions are on top.
| Channel | Year 1 spend | Purpose |
|---|---|---|
| Website and demo lab (launch) | $14,000 | A site with a booking link and pages for physician groups, dental practices, clinics and offices |
| Practice-manager events and referral kit (launch) | $14,000 | The first 30 introductions to practice consultants and IT firms |
| Search and directory listings | $12,000 | Searches such as "hosted phone system Nashville" and "medical office phone system" |
| Webinars and association events | $16,000 | Regional practice-management meetings; about 8 accounts |
| Referral and partner program | $14,000 | A fee for each account an IT firm or consultant introduces; about 23 accounts from referral and partner sources |
| Case studies and content | $8,000 | One customer story a quarter, with the customer's written approval |
| Outbound tools and mailers | $6,000 | Sequences for the account executive from month 7 |
| Customer newsletters and review requests | $4,000 | Reminders that keep accounts and prompt introductions |
Milestones
- January 2027: 3 accounts live.
- June 2027: 17 accounts live, with the account executive starting in month 7.
- December 2027: 39 accounts, 1,408 seats and about $61,000 of monthly recurring revenue at the December exit rate.
Running the Support Floor
The Nashville suite
Creek Park leases 1,800 square feet at about $33 a square foot a year, or $59,400 in Year 1. It holds a test lab, a support floor for up to eight people and a training room. Year 5 brings a move to about 2,400 square feet at $89,000.
What Creek Park runs and what it buys
Creek Park licenses a hosted voice platform and buys carrier service wholesale. It does not build a network. Its own equipment is a lab, session border controllers and monitoring probes, at a cost of $44,000. Direct costs are 33.7% of revenue and are the platform license and carrier bill. Handsets are bought for each go-live and held as small stock.
How a go-live runs
Each go-live takes about 40 engineer hours across number porting, phone staging, call-flow design, cutover and two training sessions. Forty-one go-lives need about 1,640 hours in Year 1. Dana and the implementation engineer cover them, with contract cabling bought where an office needs it. In November and December 2027 five go-lives a month need about 200 hours, so Dana takes the senior cutovers.
Support, staffed by seats
Weekday coverage runs from 8 a.m. to 6 p.m. Central, with an on-call rotation after hours. The first technician starts in month 3 and the second in month 8. One technician carries about 700 seats in Year 1, and the ratio rises to about 1,100 by Year 5 as tooling matures. Six technicians are on staff by month 50. The second implementation engineer starts in month 18, midway through the 42 go-lives of Year 2. A customer success manager starts in month 38 to run renewals and quarterly reviews.
Systems
A ticketing and phone-monitoring stack, billing software that rates usage and handles surcharges, a customer portal and a secure document system for contracts. Software spend is $30,000 in Year 1 and $78,000 in Year 5.
Insurance and licenses
- Cyber liability, technology errors and omissions, general liability, an umbrella policy and key-person cover on Dana, $22,000 in Year 1. Workers' compensation sits in the payroll load.
- Business and local licenses, platform-partner certifications and any telecom registrations counsel confirms are needed.
- A written security program and annual risk review, with penetration testing on the platform edge, budgeted at $12,000 in Year 1.
Suppliers
A hosted-platform licensor, two wholesale carriers for redundancy, a handset distributor and a contract cabling firm. The platform license carries a 12-month minimum commitment, a deposit of two months' fees and 90 days' notice of price changes. A change of platform would take a full migration, so the plan keeps a second carrier and negotiates term and exit rights up front.
The Founder and the Gaps
Dana Whitfield, founder and managing director
Dana has fourteen years in telecom, the last six running voice and contact-center systems for a Nashville multi-site health system, after eight years at a regional telecom reseller. She holds a bachelor's degree in information systems. The $130,000 she invests is most of her savings.
Where the team is thin
Three gaps stand out. Dana has not run a company's finances, has not managed a sales team, and has no telecom-tax experience. A fractional accountant closes the books monthly, telecom counsel reviews the carrier and tax questions, and the account executive starts in month 7.
If Dana is out
The implementation engineer and the first support technician know every account, and the customer success manager from month 38 holds the relationships. Key-person life and disability cover on Dana is part of the insurance budget.
Advisers
A telecom attorney, a health-care privacy attorney for the customer agreements, and a CPA with experience in subscription billing.
Ownership and the bank
Dana holds 55% and the two investors hold 45% between them. Both investors run health-care practices that fit the target market. None of the three signed accounts is theirs, and any account either one brings is priced at the standard list. The $230,000 loan carries Dana's personal guarantee and asks for quarterly accounts. A net-worth covenant would be tested at year end.
The Numbers Behind Creek Park
The model runs for five years: 2027 month by month, then one column a year. Seats, churn and staffing sit at the front because they drive every other line, and a reader can follow any total back to them.
What it takes to open the doors
| Use of funds | Amount |
|---|---|
| Test lab, session border controllers, monitoring probes, demo handsets, laptops | $44,000 |
| Support floor, wiring and training room | $24,000 |
| Business licenses, platform partner certifications, telecom registrations | $7,500 |
| Legal: entity, customer and business associate templates, carrier contracts, regulatory review | $26,000 |
| Launch: website, practice-manager events, referral kit | $28,000 |
| Cash reserve for the ramp | $590,500 |
| Total uses | $720,000 |
| Source of funds | Amount |
|---|---|
| Dana Whitfield's savings | $130,000 |
| Angel investors (two Nashville health-care operators) | $360,000 |
| Bank term loan | $230,000 |
| Total sources | $720,000 |
Creek Park opens with $720,000: $130,000 of Dana Whitfield's savings, $360,000 from two angel investors who run Nashville health-care practices, and a $230,000 bank term loan. Equity is $490,000, or 68% of the total. The loan runs seven years at 9.5%, with the first twelve months interest only and a personal guarantee from Dana. The rate is a planning figure, not a quote. Creek Park Communications, LLC elects to be taxed as a C corporation, which is why the model uses corporate rates and pays dividends. The cash reserve is the largest use of funds at $590,500, because the firm loses money for most of Year 1 and again, more narrowly, in Year 2: the platform and carrier bills arrive on day one, while each new account pays by the seat and builds over a year. The reserve is larger than the base-case trough on purpose. The downside run reaches its lowest year-end cash of $58,799 in Year 3, and the extra cash is what keeps that case above zero. Closing Year 1 equity is $113,477.
Seats, churn and staffing inputs
- The firm counts customers as accounts: a practice or an office that buys a bundle of seats. Three accounts are signed before opening. Gross new accounts run 41, 42, 52, 54 and 56 over the five years, and the model tracks every month's opening count, new go-lives and cancellations.
- Churn is 1.0% of the prior month's accounts every month, about 11% a year. That loses roughly 2, 7, 11, 16 and 20 accounts across the five years, 56 in all. Year-end accounts are 39, 74, 115, 153 and 189. An account that leaves takes its seats, its add-ons and its usage with it; no win-back is counted.
- An average account has 36 seats, from a 24-seat physician practice to a 60-seat office. Seats bill at $33 a month for voice, messaging and video. A contact-center license at $79 per agent is bought by 22% of accounts, with 9 agents each; the agents are counted among the account's seats and pay the license in addition to the $33 seat price. Secure messaging and e-fax at $5 a seat are taken on 55% of seats. Usage, numbers and text traffic add $3.50 a seat. Together that is $1,569 a month per account in Year 1, or about $18,800 a year. Prices rise 3% a year from Year 2.
- Install and training is a one-time fee of $3,800 plus $55 a seat, or $5,780 for a 36-seat account, charged at go-live. It covers number porting, phone provisioning, call-flow design and two training sessions, and it carries direct costs of 18% for port fees, handsets and contract cabling.
- Direct costs are the platform license and carrier wholesale bill. They are 44% of seat and contact-center revenue, 28% of messaging add-ons, 70% of usage and 18% of install fees, 33.7% of all revenue. Recurring lines earn a gross margin of about 55% before any support wage. Taxes and regulatory surcharges collected from customers pass through to the authorities and sit outside revenue; the rates change, so they are not forecast here.
- Support is staffed by seats, with coverage from 8 a.m. to 6 p.m. Central and an on-call rotation after hours. One support technician carries about 700 seats in Year 1 and 1,100 by Year 5, which the hiring plan holds: two technicians at the end of Year 1 for about 1,400 seats, six at the end of Year 5 for about 6,800. A technician starts when the book reaches the seat count the previous one can carry, and the hire months are on the personnel table.
- Implementation is the other bottleneck. A go-live takes about 40 engineer hours, so 41 accounts in Year 1 need roughly 1,640 hours from one engineer and Dana. In November and December 2027 five go-lives a month need about 200 hours, so Dana takes the senior cutovers and contract cabling covers the rest. A second engineer starts in month 18, midway through Year 2, whose 42 go-lives need about 1,680 hours.
- Each salary carries a 27% load for employer payroll tax, health cover, workers' compensation and a retirement match. The wages in the personnel table are launch-year rates; 3% raises start in Year 2 and are charged on their own line.
- Receivables average 25 days. Seats and usage bill monthly by card or bank debit, install fees at go-live, and larger offices pay invoices on 30-day terms. The annual statements apply the 25 days to each year's average revenue, so Year 1 receivables look light against December's run rate. Payables to the platform and carriers average 30 days. Handset and gateway stock is held at 3% of direct costs.
- Rent is $33 a square foot on 1,800 square feet, rising 3% a year, with a move to 2,400 square feet in Year 5 at about $37. The model taxes profit at 21% federal plus 6.5% for the Tennessee excise tax, after the operating losses of Years 1 and 2 are carried forward. Both rates may change, and the franchise tax and the pass-through surcharges need a tax adviser's confirmation.
Revenue by product line
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Hosted voice and collaboration seats | $247,698 | $839,000 | $1,440,000 | $2,097,000 | $2,750,000 |
| Contact-center bundles | $32,613 | $110,000 | $190,000 | $276,000 | $362,000 |
| Messaging and health-care add-ons | $20,641 | $70,000 | $120,000 | $175,000 | $229,000 |
| Usage, numbers and text traffic | $26,272 | $89,000 | $153,000 | $222,000 | $292,000 |
| Install, porting and training fees | $236,980 | $250,000 | $319,000 | $341,000 | $364,000 |
| Total revenue | $564,204 | $1,358,000 | $2,222,000 | $3,111,000 | $3,997,000 |
| Growth on prior year | – | 141% | 64% | 40% | 28% |
Seats are 44% of Year 1 revenue and 69% of Year 5. Install fees are 42% of the first year because the firm is opening a new account about every nine days, then shrink to 9% as the base compounds. Recurring lines, meaning everything except install fees, rise from 58% of revenue in Year 1 to 91% in Year 5. Year 2 revenue is 141% above Year 1 because Year 1 averages 17 live accounts and Year 2 averages 57; the 39 accounts that finish Year 1 are all billing on 1 January 2028.
Month by month in 2027
| Month | Hosted voice and collaboration seats | Contact-center bundles | Messaging and health-care add-ons | Usage, numbers and text traffic | Install, porting and training fees | Total revenue | EBITDA |
|---|---|---|---|---|---|---|---|
| Jan 2027 | $1,782 | $235 | $149 | $189 | $17,340 | $19,695 | ($41,525) |
| Feb 2027 | $4,734 | $623 | $395 | $502 | $11,560 | $17,814 | ($42,772) |
| Mar 2027 | $7,657 | $1,008 | $638 | $812 | $17,340 | $27,455 | ($36,381) |
| Apr 2027 | $11,144 | $1,467 | $929 | $1,182 | $17,340 | $32,062 | ($33,326) |
| May 2027 | $14,597 | $1,922 | $1,216 | $1,548 | $17,340 | $36,623 | ($30,303) |
| Jun 2027 | $18,015 | $2,372 | $1,501 | $1,911 | $17,340 | $41,139 | ($27,309) |
| Jul 2027 | $21,399 | $2,817 | $1,783 | $2,270 | $17,340 | $45,609 | ($24,345) |
| Aug 2027 | $24,749 | $3,259 | $2,062 | $2,625 | $17,340 | $50,035 | ($21,411) |
| Sep 2027 | $28,659 | $3,773 | $2,388 | $3,040 | $23,120 | $60,980 | ($14,155) |
| Oct 2027 | $33,125 | $4,361 | $2,760 | $3,513 | $23,120 | $66,879 | ($10,244) |
| Nov 2027 | $38,139 | $5,022 | $3,178 | $4,045 | $28,900 | $79,284 | ($2,020) |
| Dec 2027 | $43,698 | $5,754 | $3,642 | $4,635 | $28,900 | $86,629 | $2,849 |
Every account that goes live adds recurring revenue the next month, so revenue climbs steadily from $19,695 in January to $86,629 in December rather than following a season. Install fees come in uneven steps with the go-live count, and September through December are the busiest months as the pipeline built earlier in the year comes due. EBITDA stays negative through October, then turns slightly positive in November ($70) and December ($4,939). Month-end cash falls through the year and reaches a Year 1 low of about $216,000 in Dec, once a 25-day collection lag on that month's revenue is counted.
Who is on payroll
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and managing director | $130,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Implementation engineer | $92,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Support technician | $62,000 | Month 3 | 1 | 1 | 1 | 1 | 1 |
| Account executive | $72,000 | Month 7 | 1 | 1 | 1 | 1 | 1 |
| Second support technician | $62,000 | Month 8 | 1 | 1 | 1 | 1 | 1 |
| Third support technician | $64,000 | Month 18 | – | 1 | 1 | 1 | 1 |
| Second implementation engineer | $92,000 | Month 18 | – | 1 | 1 | 1 | 1 |
| Billing and carrier-accounts administrator | $58,000 | Month 26 | – | – | 1 | 1 | 1 |
| Fourth support technician | $64,000 | Month 29 | – | – | 1 | 1 | 1 |
| Second account executive | $74,000 | Month 33 | – | – | 1 | 1 | 1 |
| Customer success manager | $78,000 | Month 38 | – | – | – | 1 | 1 |
| Fifth support technician | $66,000 | Month 42 | – | – | – | 1 | 1 |
| Second senior voice engineer | $118,000 | Month 47 | – | – | – | 1 | 1 |
| Sixth support technician | $66,000 | Month 50 | – | – | – | – | 1 |
| Total payroll incl. on-costs | $426,085 | $646,430 | $882,015 | $1,142,577 | $1,387,475 |
Dana opens with an implementation engineer, so go-lives start in the first month. The first support technician arrives in month 3, the account executive in month 7 and the second technician in month 8. A third technician and the second implementation engineer both start in month 18. Three more technicians follow at months 29, 42 and 50, each matched to the seat count it will carry. The billing and carrier-accounts administrator (month 26), a second account executive (month 33), a customer success manager (month 38) and a second senior voice engineer (month 47) complete the team of 14. Dana's $130,000 starts in month one, so the profit lines are what remains after she is paid.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $564,204 | $1,358,000 | $2,222,000 | $3,111,000 | $3,997,000 |
| Direct costs (platform licenses, carrier wholesale, porting fees) | ($190,163) | ($457,709) | ($748,918) | ($1,048,552) | ($1,347,176) |
| Gross profit | $374,041 | $900,291 | $1,473,082 | $2,062,448 | $2,649,824 |
| Payroll incl. on-costs | ($426,085) | ($646,430) | ($882,015) | ($1,142,577) | ($1,387,475) |
| Rent | ($59,400) | ($61,200) | ($63,000) | ($64,900) | ($89,000) |
| Utilities | ($6,000) | ($6,200) | ($6,400) | ($6,600) | ($8,200) |
| Marketing | ($60,000) | ($66,000) | ($72,000) | ($78,000) | ($84,000) |
| Insurance | ($22,000) | ($26,000) | ($30,000) | ($34,000) | ($38,000) |
| Professional fees | ($10,000) | ($12,000) | ($14,000) | ($15,000) | ($16,000) |
| Software subscriptions | ($30,000) | ($42,000) | ($54,000) | ($66,000) | ($78,000) |
| Sales commissions on first-year contract value | ($9,000) | ($22,000) | ($33,000) | ($38,000) | ($41,000) |
| Platform monitoring, security testing and HIPAA risk review | ($12,000) | ($16,000) | ($20,000) | ($24,000) | ($28,000) |
| Regulatory filings, E911 administration and fee compliance | ($6,000) | ($8,000) | ($10,000) | ($12,000) | ($14,000) |
| Training, certifications and tuition | ($5,000) | ($7,000) | ($9,000) | ($10,000) | ($11,000) |
| Lab refresh, laptops and new-hire kit | $0 | ($8,000) | ($9,000) | ($14,000) | ($11,000) |
| Phones, travel and supplies | ($6,000) | ($8,000) | ($10,000) | ($11,000) | ($12,000) |
| Tennessee franchise tax and business filings | ($1,500) | ($2,500) | ($3,500) | ($4,500) | ($5,500) |
| Bad debt allowance | ($2,000) | ($5,000) | ($8,000) | ($11,000) | ($14,000) |
| Annual pay raises (3% a year) | $0 | ($19,393) | ($53,715) | ($105,948) | ($174,140) |
| EBITDA | ($280,944) | ($55,432) | $195,452 | $424,923 | $638,509 |
| Depreciation | ($12,229) | ($12,229) | ($12,229) | ($12,229) | ($12,229) |
| Interest | ($21,850) | ($20,572) | ($17,608) | ($14,349) | ($10,768) |
| Income tax | $0 | $0 | $0 | ($42,000) | ($160,864) |
| Net income before start-up costs | ($315,023) | ($88,233) | $165,616 | $356,345 | $454,649 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($61,500) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($376,523) | ($88,233) | $165,616 | $356,345 | $454,649 |
The first year loses $315,023 before start-up costs and $376,523 after them. Year 2 loses $88,233, and Year 3 is the first profit, at $165,616 or 7.5% of revenue. Net margin rises to 11.5% in Year 4 and holds at 11.4% in Year 5, a shade lower as the move to a larger office lands, with every wage left in place and 3% raises in every year after the first. Year 3 pays no income tax because the earlier losses carry forward, and tax starts in Year 4. A rerun with churn at 1.5% a month instead of 1.0%, and hiring left unchanged, gives Year 5 revenue of $3,618,000 and a net margin of 8.2%.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($393,013) | ($116,410) | $133,865 | $323,321 | $421,778 |
| Lab, controllers and support floor | ($68,000) | $0 | $0 | $0 | $0 |
| Funding received | $720,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | ($29,866) | ($32,831) | ($36,089) | ($39,671) |
| Owner distributions | $0 | $0 | $0 | ($40,000) | ($70,000) |
| Net change in cash | $258,987 | ($146,276) | $101,035 | $247,232 | $312,107 |
| Closing cash | $258,987 | $112,710 | $213,745 | $460,977 | $773,085 |
Cash stays positive in every year. The lowest year-end balance, $112,710, comes at the end of Year 2, after $29,866 of principal and $20,572 of interest are paid out of the reserve rather than from operations. Distributions of $40,000 and $70,000 start in Year 4, once retained earnings turn positive. The annual statements count receivables on each year's average revenue, so the $258,987 Year 1 closing balance sits above the monthly low in the 2027 table, which counts receivables on December's revenue.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $258,987 | $112,710 | $213,745 | $460,977 | $773,085 |
| Accounts receivable | $38,644 | $93,014 | $152,192 | $213,082 | $273,767 |
| Handset and gateway stock | $5,705 | $13,731 | $22,468 | $31,457 | $40,415 |
| Lab, controllers and support floor (net) | $55,771 | $43,543 | $31,314 | $19,086 | $6,857 |
| Total assets | $359,107 | $262,998 | $419,718 | $724,602 | $1,094,124 |
| Carrier and platform payables | $15,630 | $37,620 | $61,555 | $86,182 | $110,727 |
| Bank loan | $230,000 | $200,134 | $167,303 | $131,214 | $91,544 |
| Paid-in capital | $490,000 | $490,000 | $490,000 | $490,000 | $490,000 |
| Retained earnings | ($376,523) | ($464,756) | ($299,140) | $17,205 | $401,854 |
| Total liabilities and equity | $359,107 | $262,998 | $419,718 | $724,602 | $1,094,124 |
Margins, break-even and debt cover
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -49.8% | -4.1% | 8.8% | 13.7% | 16.0% |
| Net margin (before start-up costs) | -55.8% | -6.5% | 7.5% | 11.5% | 11.4% |
| Payroll incl. pay raises as share of revenue | 76% | 49% | 42% | 40% | 39% |
| Revenue per full-time equivalent at year end | $112,841 | $194,000 | $222,200 | $239,308 | $285,500 |
| Average monthly revenue | $47,017 | $113,167 | $185,167 | $259,250 | $333,083 |
| Monthly revenue needed to cover operating costs | $82,332 | $120,135 | $160,598 | $205,837 | $252,823 |
| Debt service cover (EBITDA / interest + principal) | -12.9x | -1.1x | 3.9x | 8.4x | 12.7x |
Average monthly revenue is $47,017 against $82,332 needed in Year 1, and $113,167 against $120,135 in Year 2, still short. Year 3 clears the bar with $185,167 against $160,598. Debt service cover turns positive in Year 3 and reaches 3.9x. Payroll takes 76% of revenue in Year 1 and 39% in Year 5.
Bookings 20% short in every year
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $451,363 | $1,086,400 | $1,777,600 | $2,488,800 | $3,197,600 |
| Net income before start-up costs | ($343,011) | ($114,649) | $42,453 | $189,476 | $343,903 |
| Net income after start-up costs | ($404,511) | ($114,649) | $42,453 | $189,476 | $343,903 |
| Closing cash | $236,742 | $72,131 | $58,799 | $188,212 | $468,594 |
The downside takes 20% off every revenue line in every year, which also means fewer new accounts and a thinner support queue. Dana responds with seven moves: every hire from month 13 starts six months later, the second senior voice engineer is never hired, marketing falls 20%, sales commissions fall with bookings, her own pay drops 20%, the office stays at its original size and no distributions are paid. With those in place the firm is worse off than the base case in every year, and year-end cash never drops below $58,799. Net income is a loss in Years 1 and 2 and positive from Year 3. Closing Year 1 equity is $85,489, and equity turns negative at the end of Year 2, by roughly $29,000, before recovering in Year 3. A net-worth covenant would be breached at that point, so Dana would ask the bank to waive it and the angel investors to confirm support before the date. Each of the seven moves is a decision she can make within a month.
Sources
- Federal Communications Commission, 911 requirements for multi-line telephone systems. Starting point for the 911 duties that telecom counsel confirms for hosted service.
- U.S. Department of Health and Human Services, business associate agreements under HIPAA. Starting point for the customer agreements that health-care counsel drafts.
- Tennessee Department of Revenue, franchise and excise tax. The 6.5% excise rate in the model is a planning figure for a tax adviser to confirm, and the franchise tax line is an estimate.
- Prices, churn, seat counts, close rates and account counts are the plan's own figures for a fictional company.
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