Looking for a mining software business plan? You're in the right place.
A software company that sells to quarries and mines has questions of its own to answer. How many sites must it sign before the licenses cover the payroll? What happens to cash when construction slows and operators put off buying? How much of the revenue repeats each year without a new sale? A generic software template leaves those blank.
This article walks through a complete sample plan for Hearth Vale, an Atlanta company that sells production tracking, equipment maintenance logs and safety reporting to small and mid-size quarry and aggregate operators. It runs from the executive summary and SWOT through to every financial table, including a downside case.
What you'll take away:
- The plan in brief: see how to put a license-plus-maintenance business on one page, so a lender sees the ask and the shape of the revenue in a minute
- The market table and SWOT: learn to describe your alternatives by category and keep a safety-record product from sounding like a compliance promise
- The sales path and site table: find out how a six-to-nine-month sales cycle and an 8% yearly loss of sites turn into a revenue line
- The marketing budget: see what a niche vendor spends per signed site, and which channels carry the load
- The funding and Year 1 months: understand why a reserve of $1,362,500 is needed when revenue arrives in lumps
- The five-year profit and loss, cash flow and balance sheet: watch license income give way to maintenance and hosting as the base of sites grows
- The downside case: have an answer ready for the question of what happens if construction slows and revenue falls by a fifth
If you are planning a niche software company, read this before you build your own. Hearth Vale is fictional, so take what fits and change the rest.
In this plan
Looking for a mining software business plan template? The Toolkit builds yours with your own numbers.
The Plan in Brief
Hearth Vale, Inc. is an Atlanta, Georgia software company that opens on January 1, 2027. Its product runs the daily paperwork of small and mid-size quarries, aggregate plants and surface mines: tons produced and shipped, service records for loaders, crushers and haul trucks, and the inspection and training records a safety manager keeps. Founders Dana Whitaker and Tomas Reyes own the company with a group of angel investors.
The company asks for $1,500,000: $160,000 from the founders, $1,040,000 of seed equity and a $300,000 bank term loan. Most of it, $1,362,500, is a reserve that carries the company through two loss-making years. Laptops, test hardware and the office build-out take $70,000. Legal work, licenses and the launch campaign take $67,500.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $483,600 | $1,237,000 | $2,060,800 |
| Net income after start-up costs | ($584,837) | ($308,158) | $60,347 |
| Closing cash | $802,673 | $382,337 | $318,033 |
Year 1 revenue is seven site licenses at an average of $56,000, plus training and a few custom builds. Two operators have signed letters of intent before opening; neither is named here. Net income turns positive in Year 3 and reaches $441,834 on $3,466,600 of revenue in Year 5, a net margin of 12.7%. The reason profit arrives late is the revenue mix. Licenses make up 81% of Year 1 revenue, while maintenance and hosting, which repeat every year, make up 33% of Year 5.
The downside run takes 20% off every revenue line to stand in for a construction slowdown. With later hiring, four planned roles never filled, a smaller marketing budget and lower travel, net income stays below the base case every year, year-end cash stays positive, and the company loses money through Year 3.
Large mine-planning suites are built for big miners, and fleet systems come from equipment makers. Hearth Vale builds for the operator with two to five sites and no software team.
Hearth Vale at a Glance
Legal name: Hearth Vale, Inc., a Georgia corporation. Founders: Dana Whitaker, chief executive, and Tomas Reyes, chief engineer. Premises: a leased office of about 2,200 square feet in Atlanta. Start date: January 1, 2027. Stage: pre-launch. The product is built to demo standard, and the engineers' payroll carries the remaining development to general release. Two non-binding letters of intent are signed, with no price fixed, and the lease is in draft.
What the software does
Three modules share one site database.
| Module | What it records | Who uses it |
|---|---|---|
| Production tracking | Tons loaded and shipped by product size, crusher hours, stockpile levels, scale tickets | Plant manager, dispatcher |
| Equipment maintenance logs | Hours-based service schedules, work orders, downtime reasons, parts used | Maintenance lead |
| Safety and compliance reporting | Inspection checklists, incident logs, training records, exportable reports | Safety manager, owner |
A rugged tablet app works offline, because a pit floor often has no mobile signal, and syncs to a hosted database when it reconnects.
Where the company stands in two years
- Seven licensed sites by December 2027 and 21 by December 2028, after the sites that close or change hands.
- A first profitable year in 2029, with maintenance and hosting at about one-fifth of revenue.
- Loan repayments from 2028, with the first twelve months interest only.
- A team of seven and a half full-time equivalents by the end of 2028.
Safety rules and what the software does not do
The Mine Safety and Health Administration (MSHA) is the federal agency that oversees mine safety and health, and the plan takes its remit to include surface quarries and sand and gravel operations, which the founders would confirm with the agency. Which records, reports and training logs apply to a given operation differs, and the rules change. Hearth Vale software stores the records a customer chooses to keep and produces reports in formats the customer sets up. It does not certify compliance with any rule, and each contract says so. Customers confirm their obligations with MSHA, their state mining regulator or counsel. Hearth Vale does not offer legal advice or inspection services.
The Quarry and Aggregates Software Market
Who already sells to this industry
| Alternative | What it offers | Why an operator picks it | Where Hearth Vale differs by design |
|---|---|---|---|
| Large mine-planning and geology suites | Modeling, design and scheduling for big mines | Deep engineering tools and a long track record | Daily plant records and small-site pricing, not mine design |
| Fleet and dispatch systems from equipment makers | Telemetry and truck tracking | Already on the machines | Works across mixed fleets and records maintenance and safety as well |
| General maintenance software | Work orders and parts for any industry | Cheap and familiar | Built around tons, product sizes and quarry equipment |
| Spreadsheets, paper tickets and whiteboards | Whatever the operator builds | No cost, no training | One database for production, maintenance and safety |
The table describes categories and where Hearth Vale sits against them. It is not a ranking. Vendors change products and prices often, so none are named and none are priced.
A buyer base that follows construction
Demand for crushed stone, sand and gravel generally follows road building, housing and other construction, so an operator's budget can swing with the cycle. The plan expects this to show up in three ways: licenses take longer to sign in a slow year, an operator with several sites licenses one first, and the occasional site closes. The model carries an 8% yearly loss of sites and runs a downside with revenue 20% lower. No market-size statistic is quoted. The plan does not rely on any.
What the plan sets for price
The average license is $56,000 per site, maintenance is 20% of it each year and training is $12,000. These are the plan's own figures. Quarry owners buy plant and equipment as capital items and often prefer a one-time purchase to a monthly subscription, so the plan sells a perpetual license with escrow. Some buyers may ask to pay in installments, which would slow cash and is not modeled.
SWOT
| Strengths | Weaknesses |
|---|---|
| Founders with quarry operations and industrial software backgrounds | Two senior people carry sales, engineering and installs in Year 1 |
| Offline tablet app built for pit conditions | No reference customers yet beyond two letters of intent |
| Recurring maintenance and hosting income that grows each year | Year 1 and Year 2 lose money |
| Opportunities | Threats |
|---|---|
| Multi-site operators who license one site and add more | A construction slowdown that stalls signatures |
| Equipment dealers who can introduce the software | Equipment makers extending their own platforms |
| Connectors to machine data, sold as custom builds | A customer reading a report as proof of compliance |
Who Buys: Plant Managers and Owners
The operator with two to five sites
Typical buyers run a family-owned or regional aggregates business with a few pits and a plant. A general manager signs the purchase, a plant manager lives in the software, and a safety manager or owner reads the reports. There is no IT department. The operator wants something installed by a person and working by the next shipping season.
How the work is done now
Scale tickets go into a spreadsheet at the end of the day. Service intervals sit on a whiteboard or in the maintenance lead's head. Safety checklists live on paper in a binder and reach the owner when someone types them up. Each of those steps loses information.
What sets off a purchase
A breakdown no one saw coming, an inspection where records took an afternoon to find, a new owner or general manager who wants figures, or a second site that makes the spreadsheet unmanageable.
What the buyer weighs
Price against a day of lost output. Whether the app works with no signal. Whether a person comes on site. Whether the data stays theirs if the vendor disappears, which is why the contract includes source-code escrow and a data export.
Selling to Operators with Long Budget Cycles
The sales path
A sales cycle takes six to nine months. It starts with a conversation at a trade show or an association meeting, then a demo on the operator's own scale-ticket export, then a site visit, a written quote and an order form. A license is invoiced half at signing and half at go-live. Dana leads every deal in Year 1, and the first sales executive joins in month 6. The founders start conversations in the second half of 2026, so the first closes that do not come from a letter of intent, in August, fall inside a cycle of that length.
The Year 1 pipeline
The plan counts about 90 first conversations, 40 qualified demos and 7 signed sites, which is an 18% close rate on demos. Two sites come from letters of intent signed before opening.
| Lead source | Sites signed in Year 1 |
|---|---|
| Trade shows and association meetings | 3 |
| Equipment dealer introductions | 2 |
| Letters of intent signed before opening | 2 |
Sites per year
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| New sites | 7 | 15 | 22 | 25 | 28 |
| Sites lost | 0 | 1 | 2 | 3 | 5 |
| Live sites at year end | 7 | 21 | 41 | 63 | 86 |
Why signed sites stay
Once a plant's service history and safety records sit in the system, moving them costs weeks. The plan still expects 8% of sites to leave each year, mainly through closures and quarry sales, and counts on annual maintenance renewals as the main income after the license.
Reaching Quarry Operators
Year 1 spend
Year 1 marketing is $100,000. The launch accounts for $40,000, paid from start-up capital, and the other $60,000 is running cost. Divided by seven signed sites that is about $14,300 per site, a quarter of the license fee, before the sales executive's salary. In Year 2 spend rises to $85,000 for 15 sites, about $5,700 each.
| Channel | Year 1 spend | What it is meant to do |
|---|---|---|
| Website and demo environment (launch) | $18,000 | A sample quarry dataset that runs without a sales call |
| First two trade-show booths (launch) | $22,000 | Introductions to plant managers and owners |
| Trade shows and regional association meetings | $24,000 | Most of the Year 1 conversations |
| Equipment dealer partnerships | $10,000 | Joint demos and a referral fee on signed sites |
| Trade-press advertising and sponsored articles | $9,000 | Name recognition in the magazines operators read |
| Webinars and safety-session sponsorships | $6,000 | Reach safety managers in a short training format |
| Email and technical notes | $6,000 | Follow-up for every demo and a monthly note to the list |
| Customer site-visit program | $5,000 | Flights and meals for prospects visiting a live site |
Milestones
- March 2027: demo environment live, 20 operators in the pipeline.
- May 2027: first license goes live.
- September 2027: 15 qualified demos in the quarter, three licenses closed in the previous four months.
- December 2027: 7 licensed sites and the first custom connector builds invoiced.
How Hearth Vale Runs
The Atlanta office
The company leases about 2,200 square feet near the airport corridor at about $30 per square foot, which makes $66,000 for the year. The team works from the office on most days, with the implementation staff on the road. In Year 4 the company moves to about 2,900 square feet, costing $92,000.
Installing a site
Each new site follows the same sequence. Configure the site database from the operator's scale tickets and equipment list, load the tablets, spend a week on site, return after thirty days to retrain and fix reports. Two trips per site, about $1,900 each in Year 1. The implementation lead handles seven installs in Year 1 and 15 in Year 2, which is close to full time, and a faster year would pull the second hire earlier; a second implementer joins in month 28 and a third in month 54.
Support and releases
A support engineer joins in month 18. Releases go out monthly, with a test site that runs every release before customers see it. Hosted data is backed up daily and a quarterly security test costs part of the $14,000 set aside in Year 1. A formal SOC 2 audit is not budgeted in the first two years.
Contracts and data
Every site signs a license and maintenance agreement. It states the scope, that the software is a record-keeping tool, the maintenance fee and a source-code escrow clause. Whether software licenses and maintenance are taxable differs by state, so the company confirms treatment with a tax advisor for each customer's state before invoicing.
Insurance and equipment
Technology errors-and-omissions, cyber, general liability and workers' compensation cost $22,000 in Year 1. Laptops and tablets turn over every four years.
Who supplies what
A cloud host, a mapping-data provider and two payment processors. Each can be replaced with some rework.
The Founders and the Hires
Dana Whitaker, chief executive
Dana spent fourteen years in aggregates operations in the Southeast, first as a plant supervisor and then as an operations analyst for a regional producer. She has run a crusher shift and written the monthly production report. She puts in $80,000 of savings and leads sales, finance and hiring in the early years.
Tomas Reyes, chief engineer
Tomas has twelve years in industrial software, the last six on maintenance and asset-tracking products for manufacturers. He designed the data model and the offline sync, and he contributes $80,000. He holds the architecture, which is the plan's main key-person exposure.
Where the team is thin
Neither founder has run a company with outside investors, hired a sales team or handled a multi-state tax question. An outside accountant is retained at the start, a part-time administrator joins in month 20, and the second sales executive joins in month 33.
If one founder is out
Source code, build scripts and design notes sit in a repository both founders can reach and in escrow for customers. Key-person life and disability coverage is bought on both founders.
Ownership
The founders hold a majority of the shares after the seed round. The terms of the seed round and the board seats are still to be agreed. The bank term loan carries personal guarantees from both founders and a lien on equipment.
Licenses, Maintenance and Payroll in Figures
The tables that follow come from a single model covering five years, with Year 1 broken out by month. Hearth Vale earns most of its cash when a site signs and when a maintenance invoice comes due, so the inputs are listed before the results.
Funding Hearth Vale
| Use of funds | Amount |
|---|---|
| Laptops, rugged tablets, demo and test hardware | $42,000 |
| Office furniture and build-out | $28,000 |
| Georgia registration and business licenses | $1,500 |
| Legal: entity, license and maintenance contract, source-code escrow, IP assignment | $26,000 |
| Launch: website, demo environment, first trade shows | $40,000 |
| Cash reserve for long sales cycles and a slow construction year | $1,362,500 |
| Total uses | $1,500,000 |
| Source of funds | Amount |
|---|---|
| Founders’ savings (two founders) | $160,000 |
| Seed equity from angel investors | $1,040,000 |
| Bank term loan | $300,000 |
| Total sources | $1,500,000 |
Founders put in $160,000 and angel investors $1,040,000, so equity is $1,200,000 or 80% of the $1,500,000 total. The other $300,000 is a bank term loan at 10.5% over seven years, interest only for the first twelve months, backed by personal guarantees from both founders. The rate and structure are the plan's own and not a quoted offer, since a lender sets its own terms. Operating profit does not cover repayments until Year 3, so the early payments come out of the reserve. A lender may ask for equity first or a loan guarantee program, and the founders would confirm terms with several banks before relying on the loan. The $1,362,500 reserve is the largest line because the company loses money for two full years: the model shows losses of $584,837 in Year 1 and $308,158 in Year 2, and customers pay for software in a few large invoices instead of a steady monthly stream.
Pricing and volume inputs
- A site means one quarry, pit or plant. The average license is $56,000 per site for the full suite of production tracking, equipment maintenance logs and safety and compliance reporting, and list prices rise 3% a year from Year 2. The plan prices on its own logic and does not quote any competitor's price.
- Annual maintenance and support is 20% of the license fee, $11,200 per site in Year 1 dollars. It is invoiced on each site's first anniversary, so the line is empty in Year 1, and a site that signs late in a year first pays maintenance in the year after.
- New sites per year are 7, 15, 22, 25 and 28. Sites lost to closures, sales of the quarry or consolidation run at 8% of the opening base, which gives 7, 21, 41, 63 and 86 live sites at each year end.
- On-site implementation and training is a $12,000 fee per new site, billed in the month after the license. It covers a week on site, two trips, and remote configuration around them.
- Hosted data sync and the field app cost $400 a site each month once a site is live. Quarries often have patchy mobile coverage, so tablets work offline and sync when they can. Equipment connectors and custom reports are one-off builds of $6,000 to $10,000.
- Direct costs run at 8% of licenses, 10% of maintenance, 15% of training, 22% of hosting and 25% of custom builds. That comes to 9.9% of Year 1 revenue and the same share by Year 5. Implementation and support staff sit in payroll, not in this line.
- Receivables average 45 days of annual revenue on the balance sheet, so a Year 1 with a heavy December understates receivables and overstates cash; the monthly low quoted under the Year 1 table applies the lag to December sales directly. A license is invoiced half at signing and half at go-live, maintenance is invoiced annually in advance, and hosting is invoiced monthly. Accounts payable average 20 days. License and maintenance invoices are counted as revenue when issued, with no deferred-revenue balance, which flatters the early years slightly. With implementation and support staff, travel and direct costs all counted against revenue, gross margin is roughly 70% in each year, against the 90% the profit and loss shows.
- Payroll carries a 27% load for employer taxes, health coverage, workers' compensation and retirement match, and 15% for the part-time administrator. Pay raises of 3% a year start in Year 2 and appear on their own line. Wages are not cut in the base case.
- Sales commission is 7% of license revenue. Travel for training and support is $26,000 in Year 1, about $1,900 for each of 14 trips, and grows with the installed base.
- The model taxes the company at 21% federal and a 5.39% Georgia planning rate, which may change, so the current figure should be confirmed with a tax advisor. No income tax is charged in any year because $892,995 of losses carried forward outweighs the $784,960 earned across Years 3 to 5. Rules on how much of a loss can offset a given year differ, and the advisor should confirm them.
- No distributions are paid. Cash builds for the same reason the reserve is large: customers' spending follows the construction cycle, and a slow year would arrive without warning.
Revenue by product line
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Software licenses (per site) | $392,000 | $865,200 | $1,307,000 | $1,529,800 | $1,764,800 |
| Annual maintenance and support | $0 | $69,200 | $225,800 | $465,100 | $731,100 |
| On-site implementation and training | $60,000 | $185,400 | $280,100 | $327,800 | $378,200 |
| Hosted data sync and field app | $7,600 | $69,200 | $157,900 | $272,700 | $402,500 |
| Equipment connectors and custom reports | $24,000 | $48,000 | $90,000 | $140,000 | $190,000 |
| Total revenue | $483,600 | $1,237,000 | $2,060,800 | $2,735,400 | $3,466,600 |
| Growth on prior year | – | 156% | 67% | 33% | 27% |
Licenses are 81% of Year 1 revenue and 51% of Year 5 revenue. The shift is the point of the model. Maintenance and hosting together are 2% of Year 1 revenue and 33% of Year 5, and those lines come back each year in the base case. The downside run takes 20% off them too, to allow for slower go-lives and cancellations. Year 2 grows 156% because new sites rise from 7 to 15, the first maintenance invoices arrive and hosting runs for a full year.
Month by month in Year 1
| Month | Software licenses (per site) | Annual maintenance and support | On-site implementation and training | Hosted data sync and field app | Equipment connectors and custom reports | Total revenue | EBITDA |
|---|---|---|---|---|---|---|---|
| Jan 2027 | $0 | $0 | $0 | $0 | $0 | $0 | ($75,575) |
| Feb 2027 | $0 | $0 | $0 | $0 | $0 | $0 | ($75,575) |
| Mar 2027 | $0 | $0 | $0 | $0 | $0 | $0 | ($75,575) |
| Apr 2027 | $0 | $0 | $0 | $0 | $0 | $0 | ($75,575) |
| May 2027 | $56,000 | $0 | $0 | $0 | $0 | $56,000 | ($25,137) |
| Jun 2027 | $0 | $0 | $12,000 | $400 | $0 | $12,400 | ($64,407) |
| Jul 2027 | $56,000 | $0 | $0 | $400 | $0 | $56,400 | ($24,777) |
| Aug 2027 | $56,000 | $0 | $12,000 | $800 | $6,000 | $74,800 | ($8,205) |
| Sep 2027 | $0 | $0 | $12,000 | $1,200 | $0 | $13,200 | ($63,686) |
| Oct 2027 | $56,000 | $0 | $0 | $1,200 | $8,000 | $65,200 | ($16,851) |
| Nov 2027 | $56,000 | $0 | $12,000 | $1,600 | $0 | $69,600 | ($12,888) |
| Dec 2027 | $112,000 | $0 | $12,000 | $2,000 | $10,000 | $136,000 | $46,917 |
The first four months bring no revenue while payroll runs and the first license negotiations finish. Licenses land in May, July, August, October, November and December, and each one lifts EBITDA by $50,000 or more. December is the only month with a positive EBITDA. Cash is lowest in December of Year 1, at about $656,000 once a 45-day collection lag is applied to that month's sales. The annual statements below carry receivables on average revenue and show a higher year-end balance.
Who is on payroll, and from when
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and chief executive | $125,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Co-founder and chief engineer | $140,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Software engineer | $118,000 | Month 3 | 1 | 1 | 1 | 1 | 1 |
| Implementation and training lead | $86,000 | Month 4 | 1 | 1 | 1 | 1 | 1 |
| Sales executive (aggregates and mining) | $92,000 | Month 6 | 1 | 1 | 1 | 1 | 1 |
| Second software engineer | $118,000 | Month 15 | – | 1 | 1 | 1 | 1 |
| Support and maintenance engineer | $80,000 | Month 18 | – | 1 | 1 | 1 | 1 |
| Office and finance administrator (part time) | $36,000 | Month 20 | – | 0.5 | 0.5 | 0.5 | 0.5 |
| Implementation specialist | $82,000 | Month 28 | – | – | 1 | 1 | 1 |
| Second sales executive | $90,000 | Month 33 | – | – | 1 | 1 | 1 |
| Quality and data engineer | $105,000 | Month 43 | – | – | – | 1 | 1 |
| Customer success manager | $88,000 | Month 46 | – | – | – | 1 | 1 |
| Second senior engineer | $128,000 | Month 48 | – | – | – | 1 | 1 |
| Field implementation specialist | $80,000 | Month 54 | – | – | – | – | 1 |
| Total payroll incl. on-costs | $611,505 | $913,870 | $1,121,535 | $1,331,932 | $1,690,707 |
Both founders are on payroll from January. Hires follow signed work: a software engineer in month 3, the implementation lead in month 4 as the first install nears, and the first sales executive in month 6. Year 2 adds a second software engineer in month 15, a support engineer in month 18 and a part-time administrator in month 20. The second implementer arrives in month 28, a second sales executive in month 33, a quality and data engineer in month 43, a customer success manager in month 46, a second senior engineer in month 48 and a field implementation specialist in month 54, the third person on installs. Full-time equivalents at year end are 5, 7.5, 9.5, 12.5 and 13.5. The administrator's $36,000 is a part-time salary, and the founders' pay sits inside these costs, so profit is what remains after both have been paid.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $483,600 | $1,237,000 | $2,060,800 | $2,735,400 | $3,466,600 |
| Direct costs (hosting, third-party map components and contract trainers) | ($48,032) | ($122,861) | ($204,682) | ($271,685) | ($344,309) |
| Gross profit | $435,568 | $1,114,139 | $1,856,118 | $2,463,715 | $3,122,291 |
| Payroll incl. on-costs | ($611,505) | ($913,870) | ($1,121,535) | ($1,331,932) | ($1,690,707) |
| Rent | ($66,000) | ($68,000) | ($70,000) | ($92,000) | ($95,000) |
| Utilities | ($6,000) | ($6,200) | ($6,400) | ($8,000) | ($8,300) |
| Marketing | ($60,000) | ($85,000) | ($110,000) | ($125,000) | ($135,000) |
| Insurance | ($22,000) | ($26,000) | ($32,000) | ($38,000) | ($44,000) |
| Professional fees | ($24,000) | ($22,000) | ($26,000) | ($28,000) | ($30,000) |
| Software subscriptions | ($36,000) | ($52,000) | ($70,000) | ($88,000) | ($104,000) |
| On-site training and support travel | ($26,000) | ($62,000) | ($92,000) | ($112,000) | ($128,000) |
| Sales commissions (7% of license revenue) | ($27,400) | ($60,600) | ($91,500) | ($107,100) | ($123,500) |
| Security testing, cloud backup and compliance review | ($14,000) | ($22,000) | ($30,000) | ($36,000) | ($42,000) |
| Recruiting, training and conferences | ($12,000) | ($16,000) | ($20,000) | ($22,000) | ($24,000) |
| Equipment replacement and new-hire kit | $0 | ($12,000) | ($10,000) | ($24,000) | ($12,000) |
| Bad debt allowance | ($2,000) | ($5,000) | ($8,000) | ($10,000) | ($12,000) |
| Annual pay raises (3% a year) | $0 | ($27,416) | ($68,301) | ($123,506) | ($212,199) |
| EBITDA | ($471,337) | ($263,947) | $100,382 | $318,178 | $461,586 |
| Depreciation | ($14,500) | ($14,500) | ($14,500) | ($14,500) | ($4,000) |
| Interest | ($31,500) | ($29,711) | ($25,535) | ($20,899) | ($15,751) |
| Income tax | $0 | $0 | $0 | $0 | $0 |
| Net income before start-up costs | ($517,337) | ($308,158) | $60,347 | $282,779 | $441,834 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($67,500) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($584,837) | ($308,158) | $60,347 | $282,779 | $441,834 |
Year 1 EBITDA is a loss of $471,337, and after the $67,500 of start-up costs the net loss is $584,837. Year 2 loses $308,158. The first profit comes in Year 3 at $60,347, a 2.9% net margin before start-up costs, thin because the Year 3 hires arrive before the Year 4 license volume. The margin reaches 10.3% in Year 4 and 12.7% in Year 5, when payroll is 55% of revenue and the pay-raise line has grown to $212,199.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($627,327) | ($382,443) | ($22,234) | $217,781 | $359,666 |
| Laptops, test hardware and build-out | ($70,000) | $0 | $0 | $0 | $0 |
| Funding received | $1,500,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | ($37,893) | ($42,069) | ($46,706) | ($51,853) |
| Owner distributions | $0 | $0 | $0 | $0 | $0 |
| Net change in cash | $802,673 | ($420,336) | ($64,304) | $171,075 | $307,813 |
| Closing cash | $802,673 | $382,337 | $318,033 | $489,108 | $796,921 |
Closing cash stays above zero each year and is lowest at year end in Year 3, at $318,033. The reserve is spent down by the Year 1 and Year 2 losses, then rebuilds from Year 4 as maintenance and hosting renew.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $802,673 | $382,337 | $318,033 | $489,108 | $796,921 |
| Accounts receivable | $59,622 | $152,507 | $254,071 | $337,241 | $427,389 |
| Laptops, test hardware and build-out (net) | $55,500 | $41,000 | $26,500 | $12,000 | $8,000 |
| Total assets | $917,795 | $575,844 | $598,605 | $838,349 | $1,232,310 |
| Accounts payable (hosting and contractors) | $2,632 | $6,732 | $11,215 | $14,887 | $18,866 |
| Bank loan | $300,000 | $262,107 | $220,037 | $173,331 | $121,478 |
| Paid-in capital | $1,200,000 | $1,200,000 | $1,200,000 | $1,200,000 | $1,200,000 |
| Retained earnings | ($584,837) | ($892,995) | ($832,648) | ($549,869) | ($108,035) |
| Total liabilities and equity | $917,795 | $575,844 | $598,605 | $838,349 | $1,232,310 |
Margins, break-even and debt coverage
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -97.5% | -21.3% | 4.9% | 11.6% | 13.3% |
| Net margin (before start-up costs) | -107.0% | -24.9% | 2.9% | 10.3% | 12.7% |
| Payroll incl. pay raises as share of revenue | 126% | 76% | 58% | 53% | 55% |
| Revenue per full-time equivalent at year end | $96,720 | $164,933 | $216,926 | $218,832 | $256,785 |
| Average monthly revenue | $40,300 | $103,083 | $171,733 | $227,950 | $288,883 |
| Monthly revenue needed to cover operating costs | $83,909 | $127,504 | $162,446 | $198,511 | $246,176 |
| Debt service cover (EBITDA / interest + principal) | -15.0x | -3.9x | 1.5x | 4.7x | 6.8x |
Revenue per month has to reach the level in the second-last row for the company to cover its operating costs. Year 1 averages $40,300 against $83,909 needed, and Year 2 averages $103,083 against $127,504. Year 3 clears the bar, with $171,733 against $162,446. Debt service cover turns positive in Year 3 at 1.5x and reaches 6.8x by Year 5.
If a construction slowdown cuts revenue by a fifth
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $386,880 | $989,600 | $1,648,640 | $2,188,320 | $2,773,280 |
| Net income before start-up costs | ($583,071) | ($345,297) | ($157,456) | $116,246 | $413,114 |
| Net income after start-up costs | ($650,571) | ($345,297) | ($157,456) | $116,246 | $413,114 |
| Closing cash | $748,337 | $308,620 | $45,930 | $66,371 | $362,697 |
Every revenue line comes in 20% below the base case in all five years, which is the shape of a construction slowdown that stretches licenses and shrinks the number of sites. The response has six parts: every hire from month 13 starts six months later, the second sales executive, customer success manager and field specialist are never hired, the second senior engineer is dropped (four planned roles in all), marketing falls 20%, travel falls 15% and commissions follow the lower license revenue. Founder pay is held, because two senior people carrying engineering and sales cannot be thinner, and the office stays as it is. Net income is below the base case in every year, with losses through Year 3 and a first profit in Year 4, and year-end cash bottoms at $45,930 in Year 3, which is about a third of a month of operating costs. Cash inside the year is not modeled and could dip lower in a month with no license. The founders would ask the angel group for a standby commitment of $150,000 to $250,000, which is not counted in the $1,500,000. Equity at the end of Year 1 is $549,429. A second bad year in a row would need a bridge from the investors or deeper cuts, and the plan does not hide that.
Sources
- Mine Safety and Health Administration, msha.gov. The federal agency for mine safety and health. Not quoted. Scope and obligations should be confirmed with MSHA, the state regulator or counsel.
- Georgia Department of Revenue, corporate income tax. Not quoted. The 5.39% state rate in the model is a planning figure; Georgia has been lowering its corporate rate, so the current rate should be confirmed.
- Prices, volumes, wages and rents in this plan are the example company's own figures. No competitor price or market-size statistic is quoted.
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