Looking for an inventory control software business plan? You're in the right place.
A company that sells warehouse software to distributors has to answer questions a plain app plan never faces. What does a customer pay on day one, and what recurs? How long does a sale take before anything can be invoiced? How many customers fail to renew, and how much support does each live site need? A blank template won't show what a believable answer looks like.
In this article we'll walk through a complete sample plan for a Memphis, Tennessee company that licenses inventory software, resells barcode scanners and installs both on site, 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 executive summary: see how a license, a scanner order and a maintenance contract fit on one page, so a reader sees the raise and the plan in a minute
- The sales plan: learn how a seven-month sale and a ten-week rollout set when the first invoice goes out, and how many consultants a year's go-lives need
- The maintenance and support figures: see how renewals, non-renewals and support analysts add up, so a lender can see what keeps each site paying
- The hiring table: find out how consultants, analysts and account executives are added as installed sites and bookings grow
- The five-year profit, cash flow and balance sheet: understand why a license-and-services company loses money for two years, then earns as maintenance builds
- The bank line and the downside case: see how a plan shows revenue 20% short, what management does about it, and the cash that is left
If you're planning a software company that sells to trade customers, read this before you write your own. The company is fictional, so take what fits your product and change the rest.
In this plan
Looking for a inventory control software business plan template? The Toolkit builds yours with your own numbers.
Royal’s Software at a Glance
Royal’s Software is a Memphis, Tennessee company that sells warehouse and inventory-control software to regional distributors and third-party logistics (3PL) warehouses. It opens on January 1, 2027. Calvin Royal, who spent sixteen years in warehouse operations and system rollouts at a regional 3PL and an ERP reseller, is chief executive. Hannah Okafor, an engineer who has written handheld-scanner applications for eleven years, is chief technology officer. Both draw a salary from day one.
The company sells in five pieces. A warehouse pays a perpetual license of $58,000 for the software, buys about $16,000 of barcode scanners and label printers through Royal’s, pays $36,000 for an on-site rollout and $9,500 for a connection to its accounting system. From go-live it also pays 20% of the license price each year, $11,600 at launch prices, for maintenance and support. The first-year invoice for a site is $119,500 before maintenance.
The raise is $1,500,000: $120,000 from the founders, $980,000 from regional angel investors and a $400,000 bank line of credit. Of that, $1,378,500 stays in the bank as a reserve, because a distributor takes about seven months to sign, the payroll starts in January and the first invoice goes out in May.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $738,267 | $1,758,400 | $2,915,200 |
| Net income after start-up costs | ($560,492) | ($300,406) | $113,364 |
| Closing cash | $802,822 | $375,861 | $344,308 |
Six warehouses are live by December 2027 and 84 by December 2031, after 6% a year of maintenance non-renewals. By Year 5 the company keeps $508,376, or 10.6% of revenue, and every wage in the personnel table is still paid in full. The company loses money for two years. A license-and-services business hires its rollout and support teams before the invoices that pay for them.
The downside case cuts every revenue line by a fifth. Calvin answers with late hires, four posts left empty, a leaner marketing budget and a cut to his own pay; cash holds in all five years and profit begins in Year 4.
How Royal’s Is Set Up
Legal name: Royal’s Software, Inc., a Tennessee corporation that files as a C corporation since angel investors take shares. Founders: Calvin Royal (chief executive) and Hannah Okafor (chief technology officer). Premises: a leased office of about 2,400 square feet in Memphis, with a bench area where a small mock warehouse of racks, scanners and printers is set up for demonstrations. Stage: a working release runs in two design-partner warehouses. Both have signed letters of intent at standard prices, and neither is named here. Their purchase orders count among the nine signatures below.
What a site pays
| Line | How it is priced | Year 1 share of revenue |
|---|---|---|
| Software licenses | $58,000 per site, once, at go-live | 47% |
| On-site implementation and training | $36,000 per site | 29% |
| Barcode scanner and printer resale | about $16,000 per site, 24% margin | 13% |
| Accounting-system integration | $9,500 per site, fixed fee | 8% |
| Annual maintenance and support | 20% of the license price, yearly | 3% |
Maintenance is the smallest line in Year 1 and 20% of revenue by Year 5. That shift is the story of the plan.
Not a hosted service
Royal’s is not a hosted subscription service. The software runs on a server or cloud account the customer controls, which keeps hosting costs low and sets the plan apart from a software-as-a-service company. Royal’s does not operate warehouses or sell freight.
Position at the end of 2028
- 19 installed sites, up from 6.
- Revenue of $1,758,400, still short of break-even.
- Twelve full-time employees.
- Interest on the bank line paid on schedule.
Tax and sales tax
Tennessee levies an excise tax on net earnings and a franchise tax based on net worth. The model applies 21% federal tax and a 6.5% state planning rate and leaves the franchise tax out. Federal rules limit how much of a year’s profit a carried-forward loss can offset. Rates and loss limits change, so the company would have an accountant confirm both before it approaches investors. The 21% federal rate is also subject to change. Whether state sales tax applies to software, maintenance and scanner sales differs by state, and counsel should confirm it for each customer’s location.
Warehouses That Have Outgrown Their Spreadsheets
The warehouse that signs
The buyer is a warehouse with one to three buildings that moves stock for itself or for clients: a regional building-supplies distributor, a food-service wholesaler, an industrial parts house or a 3PL with several customer accounts under one roof. It has outgrown a spreadsheet or the stock module in its accounting package, and it is too small for a large enterprise warehouse system with a year-long project behind it. Memphis is commonly described as a distribution hub with air, rail, river and interstate links, and the plan starts there for that reason. No freight volumes or warehouse counts are given, and the market is not sized in dollars.
Life on paper pick lists
Staff pick from paper lists, counts are done by shutting the building for a weekend, and the same stock is typed into the accounting system a second time. The costs show up as mis-picks, stock that exists on the shelf but not in the system, and a month-end close that waits for the physical count. Those costs belong to the warehouse, and the plan uses them as the case for switching without putting a figure on them.
The other options on the table
| Alternative | What it offers | Why a warehouse picks it | How Royal’s differs by design |
|---|---|---|---|
| ERP vendors’ bundled warehouse modules | One system and one vendor | Fewer contracts to manage | Works with the accounting package already in place, with a fixed-fee connection |
| Large standalone warehouse management systems | Deep features for big operations | Room to grow | Priced and scoped for one to three buildings, with a ten-week rollout |
| Barcode apps with a monthly fee | Fast to start | Low upfront cost | License, scanners and on-site training in one contract, with a named support desk |
| Spreadsheets and accounting-package stock | Familiar and cheap | Nothing to change | Handheld picking and cycle counts without a shutdown |
The rows name kinds of product. No vendor is ranked or priced, because suppliers change both often.
SWOT
| Strengths | Weaknesses |
|---|---|
| Founders with warehouse floor and rollout experience | Two founders run the first rollouts and sell at the same time |
| One contract covers software, scanners and training | Revenue starts four months after opening |
| Two design-partner warehouses before opening | A new vendor with a short reference list |
| Opportunities | Threats |
|---|---|
| Distributors pushed by customers to scan and label shipments | ERP vendors bundling warehouse modules at little or no extra cost to keep accounts |
| Accounting-system consultants who need a warehouse partner | A distributor being bought by a group that moves it to its own system |
| Replacement scanners and added users from the installed base | Scanner shortages or price rises that squeeze the hardware margin |
Inside a Regional Distributor
The target is a warehouse with 20 to 150 staff. The operations director, who lives with the mis-picks every day, decides whether the demo is convincing. The owner or chief financial officer signs, and wants to know what the accounting connection does to month-end.
A trigger usually arrives first: a large customer demanding scanned shipping labels, a failed audit of stock, a second building to fit out, or a shift supervisor who held the whole system in his head and is leaving.
The questions are practical. Can existing stock levels and bin locations be loaded without a weekend of re-counting? Does the accounting package receive receipts and shipments without double entry? What happens at 7 a.m. when a scanner will not connect? How much of the first-year price is hardware, and who owns it?
Churn is not zero. Distributors leave when a larger group buys them, when they move to an ERP vendor’s bundled module, or when they close. The plan expects 6% of sites live at the start of a year to fail to renew maintenance. Slow support would push that higher.
A Seven-Month Sale
From first demo to go-live
A prospect sees a 60-minute demo on a mock warehouse, then a site survey of one day. A fixed-fee proposal follows that lists the license, the number of scanners, the rollout days and the connection to the accounting package. After signature comes label design, the accounting connection, scanner set-up, on-site training and a parallel count before cutover. Go-live is where maintenance starts. Calvin leads every sale in Year 1, with the first account executive supporting from month 4.
The Year 1 pipeline
About 60 qualified opportunities at a 15% close rate give nine signatures. Six go live in 2027 and three, signed in the fourth quarter, go live in 2028 and count toward Year 2.
| Source of signatures | Signatures | Share |
|---|---|---|
| Founders’ network and the two design-partner warehouses | 3 | 33% |
| Logistics trade shows | 2 | 22% |
| Outbound calls to distributors on spreadsheets | 2 | 22% |
| Referrals from accounting consultants and hardware distributors | 2 | 22% |
What caps go-lives in a year
A go-live uses about 28 consultant days, and a consultant delivers about 170 such days a year, so one consultant handles 6 go-lives. Consultants number 2, 3, 4, 5 and 5 at year end, against 6, 13, 20, 24 and 28 go-lives. Year 5 is tight: 28 go-lives against capacity for about 30. The fifth consultant arrives in month 38, ahead of that.
Sales capacity is the other limit. Qualified opportunities have to rise from about 60 in Year 1 to about 190 in Year 5 at the same 15% close rate. License and services bookings per account executive come to about $1.0 million a year in Years 3 and 5, with Calvin selling alongside in the early years; account executives join in months 4, 26 and 36.
What a signed site costs
Year 1 program spend is $156,000, which includes $46,000 of launch costs paid from start-up capital, or about $17,300 for each of nine signatures. In Year 3 spend is $160,000 for 20 go-lives, or $8,000 a site, plus a 4% commission on new contracts of about $3,990 a site. Counting account-executive pay as well, Year 3 selling cost comes to about $24,000 a site. A new site’s first year is worth about $126,000, so the cost is roughly a fifth of first-year contract value.
How the contract is priced
The license is $58,000 a site. Maintenance is 20% of the license, and prices rise 3% a year for new contracts and for maintenance. Hardware is resold at a 24% margin and priced at cost plus, because distributors compare it with the street price of the same scanner. The first-year invoice is shown in full in the proposal so the buyer sees $119,500 and not just the license.
Reaching Operations Directors
The Year 1 marketing budget totals $156,000, made up of $46,000 of launch work from start-up capital and $110,000 in running spend. The running spend is 15% of Year 1 revenue, 5.5% in Year 3 and 4.0% in Year 5. Sales salaries and commissions come on top.
| Channel | Year 1 spend | What it is expected to do |
|---|---|---|
| National logistics trade shows (booth and travel) | $40,000 | Two signatures, and a pipeline of conversations |
| Website, demo videos and case studies | $18,000 | Searches from operations directors comparing options |
| Outbound lists and sequencing tools | $12,000 | Two signatures from distributors on spreadsheets |
| Partner program for accounting consultants and hardware distributors | $12,000 | Two referred signatures |
| Paid search and LinkedIn | $10,000 | Demo requests |
| Webinars and demo environment | $10,000 | Qualified opportunities |
| Memphis-area association events | $8,000 | Local reference visits |
The launch spend is $22,000 for the website and demo videos and $24,000 for the first trade-show booth. No customer is named in marketing material without written consent.
Delivering a Go-Live, Then Keeping It Running
The office and the bench
The Memphis lease is 2,400 square feet at about $21 per foot a year, rent plus common charges, or $50,400 in Year 1. In Year 4 the company takes about 3,200 square feet. A bench area holds racks, scanners and label printers set up as a small warehouse for demos and for testing new scanner models.
Rollout
Each site follows the same sequence: survey, label design, accounting connection, scanner provisioning, on-site training in the customer’s building, a parallel count, then cutover. The founders run the first three rollouts. After that, consultants lead and developers handle anything the connection to the accounting package needs. Overflow goes to contractors.
Support desk
The first analyst starts in month 6 and covers 8 a.m. to 5 p.m. Central. A second joins in month 10, and the desk then runs 6 a.m. to 8 p.m., because warehouses start early. The ratio of live sites to analysts at year end is 3, 9.5, 12.7, 15 and 16.8, and the fifth analyst starts in month 50. Severity-one issues, such as a site that cannot ship, go to a shared on-call rota of developers.
Product and releases
The product is a warehouse application with handheld scanner software, a desktop console and a connector library for accounting packages. The engineering team grows from two people to six by Year 5. Two releases a year, with scanner compatibility testing on the bench before each.
Insurance and contracts
Insurance covers technology errors and omissions, cyber liability, general liability, the Tennessee workers’ compensation premium and key-person cover on both founders: $22,000 in Year 1, rising to $46,000. The license-and-maintenance agreement caps liability and gives the customer a source-code escrow option. Counsel should review both.
Vendors and tools
A support desk, a CRM, source control, cloud test environments and a document-signing service: $26,000 in Year 1 and $80,000 by Year 5. Scanners are bought from two distributors on 30-day terms.
Who Runs It
Calvin Royal, chief executive
Calvin has sixteen years in warehouse operations and rollouts at a regional 3PL and an ERP reseller, where he ran twelve go-lives. He has never raised outside money. His $115,000 salary is the lowest of the three starting employees.
Hannah Okafor, chief technology officer
Hannah has eleven years of experience writing handheld-scanner and warehouse software. Her salary is $130,000. She wrote the first release and owns the product roadmap.
Gaps on the team
Nobody on the team has led a sales team of more than two, run a support desk with a day-long rota or managed a hardware supply line. An advisory board of two retired distribution executives reviews pricing quarterly, the first support analyst writes the help-desk procedures, and the billing coordinator in month 10 handles reseller invoices.
Key people and cover
Key-person insurance covers both founders. Losing Hannah would hurt more, which is why a senior developer starts in month 1 and a second developer in month 14, so that more than one person understands the code.
Who holds the shares and the debt
The founders hold common stock. The angel investors take preferred shares on terms left to negotiation. A bank line like this would likely carry personal guarantees, a lien on receivables and quarterly reporting. A liquidity covenant is possible: the base case passes it easily, while the downside case ends Year 4 near $47,100 and would fail one set at $250,000.
The Numbers: Sites, Licenses and Payroll
The model starts from a count of warehouses. Each new site brings a license, a hardware order, an on-site rollout and an accounting-system connection; each site already live adds a year of maintenance. Payroll, support staffing and cash are then built on those counts. Month-by-month detail covers 2027, and the later years are annual.
A $1.5 million raise, and what it buys
| Use of funds | Amount |
|---|---|
| Laptops, demo warehouse kit (scanners, printers, racking bench) and office build-out | $48,000 |
| Tennessee registration and business licenses | $1,500 |
| Legal: entity, license and maintenance agreement, reseller agreements, IP assignment | $26,000 |
| Launch: website, demo videos, first logistics trade-show booth | $46,000 |
| Cash reserve for the long sales cycle and first hardware stock | $1,378,500 |
| Total uses | $1,500,000 |
| Source of funds | Amount |
|---|---|
| Founders’ savings (two founders) | $120,000 |
| Equity from regional angel investors | $980,000 |
| Bank line of credit, first draw (term-out 96 months) | $250,000 |
| Bank line of credit, second draw (go-live hardware orders and receivables) | $150,000 |
| Total sources | $1,500,000 |
Opening takes $1,500,000: $120,000 from the two founders, $980,000 from regional angel investors and a $400,000 bank line. The line is drawn in two steps, $250,000 in January and $150,000 in August, at a 10.25% planning rate, interest only for three years and repaid over the following five. The bank would probably ask for personal guarantees and a lien on receivables, and approval is not assured for a company with no trading history; an SBA-backed loan, on whatever program terms apply at the time, is the fallback. Equity is 73% of the total. The line costs about $41,000 a year in interest while the company holds more cash than it borrows, and it earns its place in the downside case, which ends Year 4 with $47,114 even with it. The $1,378,500 reserve is 92% of the raise because the company pays a team for four months before its first invoice and then runs two loss years while installed sites build up.
Site counts, prices and churn behind the forecast
- Each new site pays a perpetual license of $58,000 for one warehouse and up to 25 concurrent users, a hardware order averaging $16,000, an implementation fee of $36,000 and an accounting-system integration fee of $9,500. That is $119,500 in the first year, plus $11,600 of annual maintenance from go-live. License, services and integration prices rise 3% a year; hardware prices rise 2%.
- The hardware order is the plan’s own figure: about 12 lower-cost Android handheld scanners at roughly $1,000, two label printers and the cradles, labels and accessories, resold at a 24% gross margin; rugged devices would raise the order and the dollars passing through. Installed sites also reorder: 30% of the sites live at the start of each year buy $6,000 of replacements and extra devices. The plan quotes no manufacturer’s or distributor’s price.
- Maintenance is 20% of the license price and covers the support desk, software updates and scanner-compatibility fixes. It starts at go-live and renews each year. The model books it evenly by month; in practice it would be invoiced annually in advance, which would improve cash. Royal’s sells licensed software that runs on the customer’s own server or cloud account, not a hosted subscription, so hosting costs are small.
- Sales run long. A qualified distributor takes about seven months from first demo to signature, then about ten weeks from signature to go-live while the site survey, label design, accounting connection and scanner set-up are finished. Year 1 therefore opens with no revenue through April, the first go-live falls in June, and six sites are live by December. Another three, signed in the fourth quarter, go live in 2028 and count in Year 2’s 13.
- Installed sites at year end are 6, 19, 38, 60 and 84. Gross go-lives are 6, 13, 20, 24 and 28. Churn is 6% of the sites live at the start of each year failing to renew maintenance, rounded to whole sites: none in Year 2, then 1, 2 and 4. The usual causes are a distributor being bought by a larger group that moves it to its own system, a move to an ERP vendor’s bundled warehouse module, and closures. Combining 94% site retention with 3% price rises, maintenance on the existing base keeps about 97% of its value each year, so growth depends on new sites. Each lost site takes about $13,000 of annual maintenance with it by Year 5.
- Support is staffed by installed base. One analyst starts in month 6, when the first site goes live, and a second in month 10. The ratio of live sites to analysts at year end is 3, 9.5, 12.7, 15 and 16.8, because early customers need more hand-holding and each analyst can carry more sites as the product settles. Five analysts, hired in months 6, 10, 30, 42 and 50, run the desk: 8 a.m. to 5 p.m. Central until month 10, then 6 a.m. to 8 p.m., with severity-one issues passed to a shared developer on-call rota.
- Implementation capacity is 6 go-lives per consultant per year. A go-live uses about 28 consultant days: 24 billed and four of preparation and travel. A consultant delivers about 170 such days a year after training, leave and pre-sales support. Consultants number 2, 3, 4, 5 and 5 at year end. Year 1 needs about 1.0 consultant-years against 1.25 on payroll, and the founders run the first rollouts themselves. Overflow goes to contractors, which the 10% direct cost on services covers.
- Direct costs average 16% of revenue. Hardware costs 76% of its resale price. The other rates are 4% on licenses and maintenance for third-party database and reporting components, 10% on services for contractors and unbilled travel, and 15% on integration fees for contract developers. Implementation and support salaries sit in payroll, not in direct cost. Counting them as delivery cost brings the gross margin down from 84% to about 57% in Year 1 and 62% in Year 5.
- Payroll costs run 27% above salary, covering employer taxes, health cover, workers’ compensation and a retirement match. Raises of 3% per year start in Year 2 and sit on their own line. The salaries shown are launch-year rates. Engineering roles run from $108,000 to $130,000, below the $134,040 national median for software developers (BLS, May 2025), which reflects a Memphis labor market and is a hiring risk. Account executives are paid a base salary plus a commission of 4% of new license and services contracts, shown as its own line. Sales tax on software, maintenance and hardware varies by state; the model treats customer invoices as exclusive of sales tax, and an adviser should confirm treatment by state.
- Receivables average 48 days because distributors pay on net-30 to net-45 terms and license invoices are large. Payables average 30 days on hardware and contractor invoices. Inventory is 10% of annual direct cost, about five weeks of scanner and printer stock plus demo and spare units. Bad debt allowance is 0.4% of revenue in Year 1 and 0.3% in Year 5.
- Rent is a 2,400 square foot office with a small demonstration area at about $21 a square foot a year, moving to about 3,200 square feet in Year 4. The model taxes the company as a C corporation at a 21% federal rate (which may change) and a 6.5% Tennessee planning rate for the excise tax, after carrying the Year 1 to Year 2 losses forward. Tennessee adds a franchise tax on net worth that the model omits, and federal limits on using old losses would raise cash tax a little in Years 3 to 5. Both need an accountant’s confirmation. Owners take no distributions.
What each line brings in
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Software licenses | $348,000 | $776,600 | $1,230,600 | $1,521,000 | $1,827,800 |
| Annual maintenance and support | $21,267 | $149,400 | $350,700 | $621,100 | $940,000 |
| Barcode scanner and printer resale | $96,000 | $223,200 | $368,500 | $480,100 | $601,800 |
| On-site implementation and training | $216,000 | $482,000 | $763,800 | $944,100 | $1,134,500 |
| Accounting-system integration (fixed fee) | $57,000 | $127,200 | $201,600 | $249,100 | $299,400 |
| Total revenue | $738,267 | $1,758,400 | $2,915,200 | $3,815,400 | $4,803,500 |
| Growth on prior year | – | 138% | 66% | 31% | 26% |
Licenses are 47% of Year 1 revenue and 38% of Year 5. Maintenance goes from 3% to 20% as sites accumulate, and it is the line a lender will look at because it recurs and carries almost no direct cost. Hardware holds at 12% to 13% of revenue throughout. Services (implementation plus integration) are 37% of Year 1 revenue and 30% of Year 5. Year 2 revenue is 138% above Year 1 because the six December sites pay maintenance for a full year and 13 more go live.
Month by month in 2027
| Month | Software licenses | Annual maintenance and support | Barcode scanner and printer resale | On-site implementation and training | Accounting-system integration (fixed fee) | Total revenue | EBITDA |
|---|---|---|---|---|---|---|---|
| Jan 2027 | $0 | $0 | $0 | $0 | $0 | $0 | ($88,737) |
| Feb 2027 | $0 | $0 | $0 | $0 | $0 | $0 | ($88,737) |
| Mar 2027 | $0 | $0 | $0 | $0 | $0 | $0 | ($88,737) |
| Apr 2027 | $0 | $0 | $0 | $0 | $0 | $0 | ($88,737) |
| May 2027 | $0 | $0 | $0 | $18,000 | $0 | $18,000 | ($73,611) |
| Jun 2027 | $58,000 | $967 | $16,000 | $18,000 | $9,500 | $102,467 | ($2,632) |
| Jul 2027 | $0 | $967 | $0 | $18,000 | $0 | $18,967 | ($72,799) |
| Aug 2027 | $58,000 | $1,933 | $16,000 | $36,000 | $9,500 | $121,433 | $13,307 |
| Sep 2027 | $58,000 | $2,900 | $16,000 | $36,000 | $9,500 | $122,400 | $14,119 |
| Oct 2027 | $58,000 | $3,867 | $16,000 | $36,000 | $9,500 | $123,367 | $14,931 |
| Nov 2027 | $58,000 | $4,833 | $16,000 | $36,000 | $9,500 | $124,333 | $15,744 |
| Dec 2027 | $58,000 | $5,800 | $16,000 | $18,000 | $9,500 | $107,300 | $1,430 |
The table spreads each year’s operating costs evenly across the months, so January to April each show a loss of $88,737 with no revenue; real burn would be lighter while the team is still being hired and heavier later. The first services invoices come in May, ahead of the June go-live. June is the first month with license, hardware and integration revenue, and July slips back because no site goes live. EBITDA is positive from August through November, when one site goes live each month, and close to break-even in December. Month-end cash is lowest in Jun, at about $621,000 once the 48-day collection lag is counted (a rough estimate that nets receivables against cash).
Who is hired when
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and chief executive | $115,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Co-founder and chief technology officer | $130,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Senior developer | $118,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Implementation consultant | $84,000 | Month 3 | 1 | 1 | 1 | 1 | 1 |
| Account executive | $90,000 | Month 4 | 1 | 1 | 1 | 1 | 1 |
| Support analyst | $62,000 | Month 6 | 1 | 1 | 1 | 1 | 1 |
| Implementation consultant (second) | $84,000 | Month 8 | 1 | 1 | 1 | 1 | 1 |
| Billing and operations coordinator | $56,000 | Month 10 | 1 | 1 | 1 | 1 | 1 |
| Support analyst (second) | $60,000 | Month 10 | 1 | 1 | 1 | 1 | 1 |
| Developer | $110,000 | Month 14 | – | 1 | 1 | 1 | 1 |
| Implementation consultant (third) | $86,000 | Month 15 | – | 1 | 1 | 1 | 1 |
| Integration developer | $108,000 | Month 22 | – | 1 | 1 | 1 | 1 |
| Account executive (second) | $92,000 | Month 26 | – | – | 1 | 1 | 1 |
| Implementation consultant (fourth) | $86,000 | Month 27 | – | – | 1 | 1 | 1 |
| Support analyst (third) | $64,000 | Month 30 | – | – | 1 | 1 | 1 |
| Account executive (third) | $94,000 | Month 36 | – | – | 1 | 1 | 1 |
| Implementation consultant (fifth) | $88,000 | Month 38 | – | – | – | 1 | 1 |
| Developer (second) | $114,000 | Month 40 | – | – | – | 1 | 1 |
| Support analyst (fourth) | $64,000 | Month 42 | – | – | – | 1 | 1 |
| Finance and contracts manager | $86,000 | Month 44 | – | – | – | 1 | 1 |
| Support analyst (fifth) | $66,000 | Month 50 | – | – | – | – | 1 |
| Second senior developer | $128,000 | Month 52 | – | – | – | – | 1 |
| Total payroll incl. on-costs | $762,847 | $1,268,095 | $1,656,292 | $2,131,483 | $2,473,325 |
Calvin, Hannah and a senior developer start in January. A first consultant joins in month 3 and the first account executive in month 4, since the pipeline has to fill months before anything can be billed. The first support analyst starts in month 6 with the first go-live, a second consultant follows in month 8, a second analyst and the billing coordinator in month 10. Year 2 adds a developer (month 14), a third consultant (15) and an integration developer (22). Year 3 adds the second account executive (26), a fourth consultant (27), a third analyst (30) and a third account executive (36). Year 4 brings a fifth consultant (38), a second developer (40), a fourth analyst (42) and a finance and contracts manager (44). Year 5 adds a fifth analyst (50) and a second senior developer (52). Headcount at year end is 9, 12, 16, 20 and 22. Both founders’ salaries, $115,000 and $130,000, are charged to the cost lines, and profit is stated after them.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $738,267 | $1,758,400 | $2,915,200 | $3,815,400 | $4,803,500 |
| Direct costs (scanner and printer purchases, third-party database and reporting components, contract developers, project travel) | ($117,881) | ($280,768) | ($465,476) | ($609,213) | ($766,985) |
| Gross profit | $620,386 | $1,477,632 | $2,449,724 | $3,206,187 | $4,036,515 |
| Payroll incl. on-costs | ($762,847) | ($1,268,095) | ($1,656,292) | ($2,131,483) | ($2,473,325) |
| Rent | ($50,400) | ($51,900) | ($53,500) | ($68,000) | ($70,000) |
| Utilities | ($6,000) | ($6,200) | ($6,400) | ($8,200) | ($8,500) |
| Marketing | ($110,000) | ($135,000) | ($160,000) | ($175,000) | ($190,000) |
| Insurance | ($22,000) | ($28,000) | ($34,000) | ($40,000) | ($46,000) |
| Professional fees | ($24,000) | ($30,000) | ($36,000) | ($40,000) | ($44,000) |
| Software subscriptions | ($26,000) | ($38,000) | ($52,000) | ($66,000) | ($80,000) |
| Sales commissions (4% of new license and services contracts) | ($22,600) | ($50,300) | ($79,800) | ($98,600) | ($118,500) |
| Sales and customer travel (non-billable) | ($30,000) | ($40,000) | ($50,000) | ($56,000) | ($62,000) |
| Training, certifications and conferences | ($8,000) | ($12,000) | ($16,000) | ($20,000) | ($24,000) |
| Recruiting fees | $0 | ($12,000) | ($16,000) | ($16,000) | ($18,000) |
| Equipment replacement and new-hire kit | $0 | ($10,000) | ($14,000) | ($16,000) | ($18,000) |
| Bad debt allowance | ($3,000) | ($7,000) | ($10,000) | ($13,000) | ($16,000) |
| Annual pay raises (3% a year) | $0 | ($38,043) | ($100,868) | ($197,646) | ($310,424) |
| EBITDA | ($444,461) | ($248,906) | $164,864 | $260,257 | $557,766 |
| Depreciation | ($10,500) | ($10,500) | ($10,500) | ($10,500) | ($2,000) |
| Interest | ($32,031) | ($41,000) | ($41,000) | ($38,023) | ($31,087) |
| Income tax | $0 | $0 | $0 | $0 | ($16,303) |
| Net income before start-up costs | ($486,992) | ($300,406) | $113,364 | $211,734 | $508,376 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($73,500) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($560,492) | ($300,406) | $113,364 | $211,734 | $508,376 |
The Year 1 loss is $486,992 ahead of start-up costs and $560,492 once they are added, and Year 2 loses $300,406. Year 3 earns $113,364, a 3.9% net margin. Year 4 earns $211,734 (5.5%) and Year 5 $508,376 (10.6%) after $16,303 of income tax as the carried-forward loss runs out. Payroll takes 103% of revenue in Year 1 and 58% in Year 5, while headcount climbs from 9 to 22 at full pay. The raise line alone reaches $310,424 in Year 5. Hardware resale adds revenue at a low margin, so it lifts the headline totals more than it lifts profit.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($649,178) | ($426,961) | ($31,553) | $101,292 | $377,625 |
| Laptops, demo warehouse kit and office build-out | ($48,000) | $0 | $0 | $0 | $0 |
| Funding received | $1,500,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | $0 | $0 | ($64,554) | ($71,491) |
| Owner distributions | $0 | $0 | $0 | $0 | $0 |
| Net change in cash | $802,822 | ($426,961) | ($31,553) | $36,738 | $306,134 |
| Closing cash | $802,822 | $375,861 | $344,308 | $381,046 | $687,180 |
Year-end cash never reaches zero. The low point, $344,308, falls in Year 3 after two loss years, and a lender would watch that figure. Interest only runs for three years, so principal repayments of $64,554 and $71,491 fall in Years 4 and 5, and the line stands at $263,955 at the end of Year 5. Receivables grow from $97,087 to $631,693 as sites multiply, which is why cash from operations stays negative until Year 4 even though profit turns in Year 3.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $802,822 | $375,861 | $344,308 | $381,046 | $687,180 |
| Accounts receivable | $97,087 | $231,242 | $383,369 | $501,751 | $631,693 |
| Inventory (scanners, printers and spare units) | $11,788 | $28,077 | $46,548 | $60,921 | $76,699 |
| Laptops, demo warehouse kit and office build-out (net) | $37,500 | $27,000 | $16,500 | $6,000 | $4,000 |
| Total assets | $949,197 | $662,179 | $790,725 | $949,719 | $1,399,572 |
| Accounts payable (hardware distributors and contractors) | $9,689 | $23,077 | $38,258 | $50,072 | $63,040 |
| Bank line of credit | $400,000 | $400,000 | $400,000 | $335,446 | $263,955 |
| Paid-in capital | $1,100,000 | $1,100,000 | $1,100,000 | $1,100,000 | $1,100,000 |
| Retained earnings | ($560,492) | ($860,898) | ($747,534) | ($535,799) | ($27,423) |
| Total liabilities and equity | $949,197 | $662,179 | $790,725 | $949,719 | $1,399,572 |
Margins, break-even and loan cover
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -60.2% | -14.2% | 5.7% | 6.8% | 11.6% |
| Net margin (before start-up costs) | -66.0% | -17.1% | 3.9% | 5.5% | 10.6% |
| Payroll incl. pay raises as share of revenue | 103% | 74% | 60% | 61% | 58% |
| Revenue per full-time equivalent at year end | $82,030 | $146,533 | $182,200 | $190,770 | $218,341 |
| Average monthly revenue | $61,522 | $146,533 | $242,933 | $317,950 | $400,292 |
| Monthly revenue needed to cover operating costs | $105,598 | $171,217 | $226,584 | $292,141 | $344,979 |
| Debt service cover (EBITDA / interest + principal) | -13.9x | -6.1x | 4.0x | 2.5x | 5.4x |
In Year 1 monthly revenue averages $61,522 where $105,598 is needed. Year 2 closes much of the gap ($146,533 against $171,217) without covering it, and Year 3 passes the mark ($242,933 against $226,584). Cover for the loan payments is negative while the company loses money, then 4.0x in Year 3 while payments are interest only, 2.5x in Year 4 once principal starts, and 5.4x in Year 5.
Every revenue line 20% short
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $590,613 | $1,406,720 | $2,332,160 | $3,052,320 | $3,842,800 |
| Net income before start-up costs | ($549,339) | ($357,273) | ($77,671) | $85,532 | $368,853 |
| Net income after start-up costs | ($622,839) | ($357,273) | ($77,671) | $85,532 | $368,853 |
| Closing cash | $760,312 | $303,895 | $112,390 | $47,114 | $240,275 |
Every revenue line runs 20% below the base case in every year. Calvin’s response comes in this order: hires from month 13 on start six months late, the third account executive, the second developer and the fifth support analyst are never hired, the second senior developer is dropped, marketing and sales travel fall 20%, commissions follow the lower bookings, Calvin’s pay falls 20% and the company keeps its first office. Hires made in the first year stay, since signed rollouts need them. After the cuts, profit still trails the base case in each year, the first profit moves from Year 3 to Year 4, and cash bottoms at $47,114 in Year 4, low enough for a bank liquidity covenant to bite. Year 1 equity is $477,161. A flat 20% shortfall does not test slipping go-lives or higher churn. A three-month slip in every go-live would push about a quarter of a year’s new-site revenue, roughly $0.6 million in Year 3, into the following year, and at an 80% gross margin that exceeds Year 3’s cash cushion, so the company would need to defer hires or extend the bank line. Churn of 12% instead of 6% would remove roughly eight more sites over Years 4 and 5.
Sources
- Bureau of Labor Statistics, Software developers, Occupational Outlook Handbook: median pay of $134,040 in May 2025 and 1,905,400 jobs in 2025. The plan’s engineering salaries run below that median and should be compared with local pay surveys.
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