Looking for a mobile app business plan? You're in the right place.
A subscription app company asks a lender or investor to believe in numbers that are hard to see in advance. How many merchants sign each month? How many cancel? What does it cost to host, support and set up each one? When does the team stop costing more than it earns? A blank template won't show you what a sensible answer looks like.
In this article we'll walk through a complete sample plan for a Minneapolis company that sells white-label loyalty and ordering apps to local restaurants, salons and shops, 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 to put a subscription business on one page, so a reader knows what you're raising and why within a minute
- The churn table: learn how to show gross signings, lost merchants and year-end customers side by side, so the growth figure holds up under questions
- The hosting and support costs: find out how to price the cost of serving each customer, so margins in the forecast are not guesses
- The sales and marketing plan: see what it costs to win one small-business customer, and how much of that a setup fee pays back
- The five-year profit, cash flow and balance sheet: understand how each hire shows up in the numbers, and when the plan turns a profit
- The downside case: have an answer ready for "what if revenue is 20% short?", along with the steps the founders take in response
If you're planning a software subscription business, read this before you write your own. The company is fictional, so take what fits and change the rest.
In this plan
To turn this example into your own mobile app business plan, use the mobile app business plan template.
Executive Summary
Local Tech Solutions is a Minneapolis software company that sells branded mobile apps to neighborhood restaurants, salons and shops. Each merchant gets its own app, under its own name in the Apple and Google stores, with a loyalty program, online ordering or both. The company charges a monthly subscription plus a one-time setup fee, and bills push-message, text-message and store costs through at a small markup. It opens in January 2027 with two founders, Maya Johnson (sales) and Carlos Rodriguez (engineering), and 8 pilot merchants.
The company raises $1,410,000: $140,000 from the founders, $1,120,000 from ten angel investors and a $150,000 bank term loan. $1,310,000 of that is held as an operating reserve, because the sales and support team has to be hired ahead of the subscriptions that pay for it. Devices, office build-out, legal work, a security review and the launch campaign take the remaining $100,000.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $416,000 | $1,319,600 | $2,456,400 |
| Net income after start-up costs | ($601,321) | ($398,835) | $75,507 |
| Closing cash | $770,007 | $341,138 | $379,542 |
The base case signs 146 merchants in Year 1 and ends the year with 125 after churn. It reaches 625 merchants by the end of Year 3, 1,120 by Year 5 and a 10.3% net margin in Year 5. Years 1 and 2 lose money, because payroll runs at 140% of Year 1 revenue and 72% of Year 2 revenue. The first profit arrives in Year 3.
A second run takes 20% off every revenue line. With later hiring, a smaller marketing budget, a pay cut for Maya and no move to a larger office, cash stays positive in all five years, and every year is weaker than the base case.
The offer is narrow on purpose. The company sells only to single-location and small multi-location merchants, with a flat monthly price, a published list of what each plan includes, and a person to call. It does not build custom apps for large brands, and it does not run a consumer marketplace.
Local Tech Solutions at a Glance
Legal name: Local Tech Solutions, LLC, a Minnesota limited liability company, with a conversion to a C corporation planned before the angel round closes. Founders: Maya Johnson (CEO and head of sales) and Carlos Rodriguez (CTO and lead engineer). Office: a leased 1,800-square-foot space in Northeast Minneapolis. Start date: January 2027. Stage: pre-launch. Eight pilot agreements are signed, the platform's ordering and loyalty modules work in test, and the first two store listings are in draft.
Purpose
Give a neighborhood restaurant, salon or shop an app of its own, with its own customer list, for a flat monthly price.
What the company sells
| Plan | Price per month | Setup fee | What it includes |
|---|---|---|---|
| Loyalty | $129 | $750 | Points or stamp card, member list, push messages, simple offers |
| Ordering | $259 | $1,500 | Menu and cart, pickup and local delivery handoff, order alerts, receipts |
| Bundle | $339 | $1,800 | Both, plus text campaigns and a combined customer view |
Push messages and texts above each plan's monthly allowance, and the store fees of publishing under the merchant's own developer account, are billed through at cost plus about 14%. Larger changes, such as a new menu structure or a gift-card module, are quoted as custom work by the sprint.
Where the revenue comes from
| Line | Year 1 share | Year 5 share |
|---|---|---|
| Merchant subscriptions | 39% | 69% |
| Setup fees | 44% | 15% |
| Push, SMS and store fees billed through | 7% | 11% |
| Custom features and storefront refreshes | 10% | 5% |
Targets for the first three years
- 125 merchants at the end of Year 1, 350 at the end of Year 2 and 625 at the end of Year 3.
- Monthly merchant churn below 3% by Year 3.
- First full-year profit in Year 3, with each support hire in place before one specialist would carry about 300 merchants or more.
- A bank loan repaid on schedule from Year 2, with principal payments starting after twelve months of interest only.
Rules the company works under
Three outside rule sets shape the product, and counsel reviews each before launch. The Apple and Google store policies decide how an app can be published and how it can take payment. Apple's review guidelines have addressed apps built from commercial templates and counsel confirms the current wording, so each merchant's app is published under the merchant's own developer account. Rules on text-message marketing generally require recorded consent from the recipient, and counsel confirms the current standard. Minnesota's consumer data privacy law is understood to have taken effect in 2025, and its thresholds and exemptions decide which merchants it covers, which counsel confirms, so the company signs a data-processing addendum with each merchant and builds to the stricter reading.
Neighborhood Commerce in the Twin Cities
Who is on the other side of the counter
A neighborhood restaurant, salon or shop has a regular crowd and no list of who is in it. The owner pays a delivery marketplace a commission on orders that came from a customer the marketplace controls, or runs a paper punch card that records nothing. A branded app puts the customer list with the merchant, and the company's bet is that owners will pay a flat monthly fee for that.
How merchants buy software today
Many single-location owners buy tools one at a time, in the order a problem shows up. A point-of-sale vendor comes first. Online ordering, a loyalty tool and a text-message tool follow, often from different vendors, so there are three logins and three customer lists. The company sells the combined version, with a person who sets it up.
Merchant counts and market size
The company does not quote a count of Minnesota restaurants or salons. Counts differ by source and by what qualifies as a single location, and the plan's own forecast needs only a small share of any of them: 1,120 merchants in Year 5. Maya's first-year territory is the Minneapolis and St. Paul neighborhoods where she has the strongest introductions, and the second and third reps cover other parts of the metro area before the company moves outside it.
Who else a merchant could choose
| Alternative | What it offers | Why a merchant picks it | How the company differs by design |
|---|---|---|---|
| Delivery marketplaces | Customers, delivery and ordering, charged as a commission | Instant reach with no setup | The merchant keeps the customer list and pays a flat fee instead of a share of each order |
| Ordering and loyalty modules inside point-of-sale systems | One vendor for register and app | Already installed | Own-brand app in the stores, and no tie to one register |
| Do-it-yourself app builders | A template the owner fills in | Lowest monthly price | A person sets up the app, connects the menu and handles store review |
| Freelancers and small agencies | A custom app | Fully custom | Fixed monthly price and no build bill |
| Paper cards and spreadsheets | A stamp card or a list | Free | A record of who visited and a way to message them |
Each row describes an offer and where the company sits against it. It does not rank the options, and no vendor is named because plans and prices change often. Each vendor publishes its own.
SWOT
| Strengths | Weaknesses |
|---|---|
| Sales-led, with a person who sets each merchant up | Two founders carry most of the early work |
| One platform for many brands, so each new app is cheap to ship | Small merchants close or switch often, which makes churn high |
| Pilot merchants signed before opening | Year 1 and Year 2 lose money and draw on the reserve |
| Opportunities | Threats |
|---|---|
| Merchants tired of commissions on delivery marketplaces | Point-of-sale vendors adding their own apps |
| Referrals from point-of-sale resellers, restaurant associations and accountants | Store policy changes on template-built apps |
| Add-on modules that raise revenue per merchant | Privacy and text-marketing rules tightening |
The Merchants We Sell To
The owner-operator with one to five locations
Examples are a neighborhood restaurant with a lunch rush, a coffee shop, a salon, a bakery or a boutique with a loyal regular crowd. The owner works the floor, handles marketing in the evening and has a phone full of customers' orders and no way to reach them.
What drives a purchase
An owner usually moves when a delivery commission eats a month's margin, when a competitor opens with an app, or when a slow stretch makes the owner want a way to message regulars. A point-of-sale vendor's contract renewal can also set it off.
What an owner needs from the product
The app carries the owner's name and colors. Orders reach the kitchen or the front desk without re-typing. Regulars can be messaged without paying a platform. The monthly price is the same every month. A named person answers when something breaks on a Friday night.
What an owner is likely to ask first
How many of my customers will download it, what happens to my list if I cancel, and who pays for the texts. The company's answers are on the proposal: customers download when staff ask at the register and a counter sign points to the app, the list is exportable on cancellation, and message costs above the plan allowance are billed through at a stated price.
How a Merchant Signs Up
From first visit to a live app
A prospect gets a 25-minute demo on a phone, a one-page proposal and a monthly price within two days. Once the merchant signs, an onboarding specialist imports the menu, applies the logo and colors, connects the register where possible, submits the listings under the merchant's developer account and runs a 45-minute training session. Eight hours of specialist time is the planning figure, and the target is a live app within ten working days.
Who closes the sale
Maya takes every first-year pilot herself and keeps a small share of new accounts afterward. Field reps carry the rest. A rep is expected to close about 6 new merchants a month once trained and fewer in the first three months, with a base salary and a $300 commission on each merchant that reaches its first paid month.
Where signings come from
| Gross new merchants by source | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Field reps (door-to-door, events, demo leads) | 80 | 192 | 264 | 324 | 360 |
| Maya's own accounts (Year 1 includes the pilots) | 36 | 24 | 24 | 24 | 24 |
| Partner referrals (point-of-sale resellers, restaurant associations, accountants) | 18 | 55 | 80 | 75 | 72 |
| Website and local search | 12 | 40 | 65 | 58 | 60 |
| Total | 146 | 311 | 433 | 481 | 516 |
Reps carry 55% of Year 1 signings and 70% of Year 5. Partner and web leads together grow from 30 in Year 1 to 95 in Year 2 and 132 in Year 5, which is the least certain part of the sales plan: that growth depends on the referral program and the content spend working. If it falls short, the plan needs another rep sooner, and the downside case shows what a shortfall costs.
Churn, written out
The base case does not hide churn. In Year 1 the company signs 146 merchants and loses 21 to churn, leaving 125. The table shows the same arithmetic for every year.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Monthly churn | 3.4% | 3.0% | 2.7% | 2.5% | 2.3% |
| Merchants at start of year | 0 | 125 | 350 | 625 | 880 |
| Gross new merchants | 146 | 311 | 433 | 481 | 516 |
| Merchants lost | 21 | 86 | 158 | 226 | 276 |
| Merchants at year end | 125 | 350 | 625 | 880 | 1,120 |
What a new merchant is worth
A merchant paying $240 a month leaves about $206 after hosting and platform costs, and the messaging billed through adds about $5 of margin. A 3.4% monthly churn rate implies an average life of about 29 months. Support and engineering are paid from that margin, and the setup fee funds most of the cost of winning the merchant. In Year 1 the company spends about $1,530 to win each merchant once the reps' pay, commissions and operating marketing are counted ($1,740 with the launch campaign). Maya's own selling time is left out of that figure. The $1,250 setup fee, less 15% direct cost, covers about 70% of the $1,530.
Where the Marketing Money Goes
Spend and what it is for
Year 1 operating marketing is $94,000, with $30,000 of launch costs paid from the raise on top. The $94,000 is 23% of Year 1 revenue, and the share falls to 10% by Year 3 and 6% by Year 5. Across 146 gross new merchants, marketing costs about $644 each on operating spend and $849 with the launch campaign.
| Channel | Year 1 spend | Purpose |
|---|---|---|
| Local search and social ads | $26,000 | Neighborhood restaurant and salon owners searching for loyalty or ordering tools |
| Neighborhood events, demos and tastings | $18,000 | Live demos in front of owners, with a rep present |
| Partner referral bounties | $14,000 | A $775 thank-you per closed referral from resellers, associations and accountants; about 18 merchants |
| Restaurant and retail association events | $12,000 | Booths and sponsorships at two Minnesota trade events |
| Web content and case-study video | $10,000 | Merchant stories and setup walkthroughs, with a pilot merchant's permission |
| Merchant referral credits | $8,000 | A month's credit to a merchant who introduces another |
| Direct mail and counter signs | $6,000 | Sample table tents and stickers that carry the merchant's own app |
What the launch money covers
The $30,000 launch cost covers a demo app, the website, a printed sales kit, a pilot-merchant video and the first round of neighborhood events.
Marketing milestones
- January 2027: 8 pilot merchants live.
- June 2027: 53 merchants and a second rep interviewing.
- December 2027: 125 merchants and about $28,600 of monthly subscription revenue.
- December 2028: 350 merchants.
Running the Platform
The office
The company leases 1,800 square feet in Northeast Minneapolis at about $24 a square foot a year, which is $43,200 in Year 1, and moves to about 3,000 square feet in Year 4 for $79,000. Engineers and support sit together, and the reps use the space for demos and training.
One platform, many brands
Each merchant app is the same codebase with its own branding, menu and settings. That keeps the cost of the 1,000th app close to the cost of the 100th, and means a bug fix ships once. It also means one outage reaches every merchant, so monitoring, backups and a status page are part of the build. A quality and release engineer joins in month 37 to carry testing across the growing set of store listings.
Hosting and the cost of a merchant
Hosting and platform running costs are planning figures with no vendor quote behind them. At the Year 1 price of $240 they come to $33.60 per merchant per month, or 14% of subscription revenue.
| Cost per merchant per month, Year 1 | Amount |
|---|---|
| Cloud hosting and database | $8.00 |
| Order routing, maps and receipt email | $13.00 |
| Payment and point-of-sale connections | $7.00 |
| Monitoring and developer-account upkeep | $5.60 |
| Total | $33.60 |
Who answers the phone
Support grows with the merchant count, at about one specialist for every 175 to 225 merchants at year end from Year 2.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Merchants at year end | 125 | 350 | 625 | 880 | 1,120 |
| Support specialists | 1 | 2 | 3 | 4 | 5 |
| Merchants per specialist | 125 | 175 | 208 | 220 | 224 |
| Onboarding specialists | 1 | 2 | 2 | 3 | 3 |
A customer success lead starts in month 42 and owns renewals and churn reviews. Each support hire lands when one specialist would otherwise carry 250 to 310 merchants, and the downside case shows which hires move.
Software, security and data
The company runs a crash-reporting and monitoring service, a customer relationship tool, a ticketing tool and design and code tools, at $24,000 in Year 1 and $86,000 by Year 5. Outside testers probe the platform every year. The company holds merchants' customer lists as a processor, exports them on request and deletes them on cancellation after a stated retention period.
Insurance and licenses
Insurance for technology errors and omissions, cyber liability, general liability, workers' compensation and key-person life cover on both founders costs $14,000 in Year 1. The company registers with the state and the city, and counsel reviews the merchant agreement, the data-processing addendum and the text-message consent flow before launch.
Vendors on call
Cloud, push and SMS providers, a payment processor and a point-of-sale integration partner. The messaging and cloud lines each have at least one tested alternative, so none is hard to replace.
Founders and Hires
Maya Johnson, CEO and head of sales
Maya spent nine years in restaurant and retail marketing, the last four running the loyalty program for a multi-location operator. She knows how owners decide, how a regular customer behaves and what a punch card costs to run. She has not built a sales team or raised outside money.
Carlos Rodriguez, CTO and lead engineer
Carlos has eleven years in mobile engineering, most of it on ordering and payment features for a mid-size software company. He has shipped to both app stores many times and has dealt with their review teams. He has not run support or been responsible for an outage that reaches paying customers.
Where the team is thin
Three gaps stand out. Neither founder has built a repeatable field sales process, neither has run a support team, and neither has handled a store rejection that affected dozens of merchants at once. The plan answers each in turn: the first rep follows a written call and demo script, support starts with a ticket tool and a response-time target, and a store-policy checklist is reviewed by counsel before each release.
If one founder is out
Carlos is the only person who knows the platform end to end at launch. The mobile engineer hired in month 3 works on the same codebase from day one, and the backend engineer in month 19 splits the load further. Maya's accounts have a written handover. The key-person cover sits in the Year 1 insurance line.
Outside help and the panel
Two of the angel investors have run restaurant groups and sit on an advisory panel that meets quarterly. A Minneapolis accountant reviews the monthly numbers, and the Small Business Development Center network is available for pricing and lender questions.
Ownership and the bank
Maya and Carlos own the company before the angel round, and the ten angels share the equity afterward in a split the plan does not model. The bank's term loan rests on personal guarantees from both founders and a covenant requiring quarterly accounts.
The numbers behind the app business
A single five-year model sits behind every table here. It counts merchants first, because merchants multiplied by a monthly price, a one-time setup fee and a monthly churn rate produce each revenue line. Year 1 runs month by month, and Years 2 to 5 appear as annual totals.
Raise and where it goes
| Use of funds | Amount |
|---|---|
| Laptops, test iPhones and Android handsets, demo tablets | $26,000 |
| Office build-out and furniture | $12,000 |
| Legal: entity, investor documents, merchant agreement, privacy terms, trademark | $22,000 |
| Security review of the white-label platform | $8,000 |
| Developer program enrollments, business registrations | $2,000 |
| Launch: demo app, website, sales collateral, first neighborhood events | $30,000 |
| Operating reserve for the loss-making first two years | $1,310,000 |
| Total uses | $1,410,000 |
| Source of funds | Amount |
|---|---|
| Maya Johnson and Carlos Rodriguez (savings) | $140,000 |
| Ten angel investors (about $112,000 each) | $1,120,000 |
| Bank term loan | $150,000 |
| Total sources | $1,410,000 |
The company raises $1,410,000: $140,000 from Maya and Carlos, $1,120,000 from ten angel investors at about $112,000 each, and a $150,000 bank term loan. The loan runs seven years at 10.5% with the first twelve months interest only, and the bank takes a personal guarantee from both founders. The rate is an example rather than a quote, and a lender may offer different terms or an SBA guarantee. Equity is 89% of the total because a software company with few hard assets has little to pledge. The $1,310,000 reserve is large beside the $38,000 equipment budget, because Years 1 and 2 lose $601,321 and $398,835 while the sales team is built ahead of the subscriptions it will sign. The investors' share of the company is not modeled.
Merchants, churn and unit costs
- Merchants are counted by storefront location. The company opens with 8 pilot merchants, ends Year 1 with 125, and reaches 350, 625, 880 and 1,120 at the ends of Years 2 to 5. Each merchant gets its own branded app under its own name, built on one shared platform.
- Monthly churn is 3.4% of merchants in Year 1, easing to 3.0%, 2.7%, 2.5% and 2.3% in Years 2 to 5. A 3.4% monthly rate loses about 34% of a base in a year, and 2.3% loses about 24%. Independent restaurants close or switch tools often, so these are planning figures that depend heavily on the mix of restaurants, salons and shops.
- Gross new merchants each year are the net change plus the merchants lost to churn: 146 in Year 1, then 311, 433, 481 and 516. Losses are 21, 86, 158, 226 and 276 merchants a year. The sales team is sized to the gross figure instead of the net one, since every lost merchant has to be replaced before the base grows.
- Three plans are sold: loyalty at $129 a month, online ordering at $259 and a bundle of both at $339. A 30/40/30 mix gives $244 at list, and annual-prepay discounts bring the blended price to $240 in Year 1. Prices rise to $248, $256, $264 and $272 in later years as add-on modules (gift cards, catering orders, text campaigns) sell.
- Setup averages $1,250 per new merchant in Year 1 after waivers and pilot discounts, against a list of $750 for loyalty, $1,500 for ordering and $1,800 for the bundle. It pays for branding, menu import, a point-of-sale connection, store listing assets and one training session, and it rises about $30 a year.
- Hosting and platform running costs are 14% of subscription revenue, or about $33.60 per merchant per month in Year 1: roughly $8 for cloud hosting and database, $13 for order routing, maps and receipt email, $7 for payment and point-of-sale connections, and $5.60 for monitoring and developer-account upkeep. Setup carries 15% direct cost for contract design assets and store submission work.
- Push notifications, text messages and store fees are billed to the merchant at cost plus about 14%: $41 per merchant per month in Year 1, with the company paying 88% of that. App-store and carrier prices change, so the markup is re-set each year. Messaging volume is capped per plan to protect that margin.
- Support grows at about one specialist for every 175 to 225 merchants at year end from Year 2: 1, 2, 3, 4 and 5 specialists across the five years, with a customer success lead from month 42. Onboarding grows at about one specialist for every 150 to 220 new merchants a year, because each setup takes roughly eight hours of specialist time.
- Receivables run 12 days because merchants pay by card or bank debit on the first of each month, and setup fees are charged at signing. Cloud and messaging bills are paid in 20 days. The model books annual prepayments month by month, so it understates the cash that annual plans bring in early.
- Payroll carries a 27% load for employer taxes, health insurance, workers' compensation, state paid-leave premiums and a retirement match, with rates to confirm against current Minnesota rules. Pay raises of 3% a year start in Year 2 and appear as their own line, so salaries in the team table stay at launch-year rates.
- Rent is 1,800 square feet at about $24 a square foot a year, or $43,200 in Year 1, and the company moves to about 3,000 square feet from Year 4. The model taxes the company as a C corporation at 21% federal and 9.8% Minnesota after losses carry forward. Minnesota's rate may change, and federal limits on using old losses would bring some tax earlier, so confirm both with a CPA.
Revenue by line
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Merchant subscriptions (loyalty, ordering and bundle plans) | $163,500 | $706,800 | $1,497,600 | $2,383,900 | $3,264,000 |
| Setup fees (branding, menu and POS connection, store submission) | $182,600 | $398,100 | $567,200 | $644,500 | $706,900 |
| Push, SMS and app-store fees billed through | $27,900 | $119,700 | $251,600 | $397,300 | $540,000 |
| Custom features and storefront refreshes | $42,000 | $95,000 | $140,000 | $180,000 | $215,000 |
| Total revenue | $416,000 | $1,319,600 | $2,456,400 | $3,605,700 | $4,725,900 |
| Growth on prior year | – | 217% | 86% | 47% | 31% |
Recurring lines carry the company in the long run: subscriptions and billed-through messaging are 46% of Year 1 revenue and 80% of Year 5. Setup fees are 44% of Year 1 revenue and 15% of Year 5, which makes the first year look better than it is, because a setup fee is earned once per new merchant. Year 2 growth of 217% looks steep only because Year 1 begins with 8 merchants and averages about 57 across the year, against about 238 in Year 2.
Month by month in Year 1
| Month | Merchant subscriptions (loyalty, ordering and bundle plans) | Setup fees (branding, menu and POS connection, store submission) | Push, SMS and app-store fees billed through | Custom features and storefront refreshes | Total revenue | EBITDA |
|---|---|---|---|---|---|---|
| Jan 2027 | $1,000 | $10,000 | $200 | $0 | $11,200 | ($61,481) |
| Feb 2027 | $2,800 | $9,100 | $500 | $0 | $12,400 | ($60,533) |
| Mar 2027 | $4,600 | $10,600 | $800 | $0 | $16,000 | ($57,690) |
| Apr 2027 | $6,600 | $12,200 | $1,100 | $0 | $19,900 | ($54,610) |
| May 2027 | $8,900 | $13,900 | $1,500 | $3,000 | $27,300 | ($48,765) |
| Jun 2027 | $11,400 | $15,500 | $1,900 | $3,000 | $31,800 | ($45,211) |
| Jul 2027 | $14,200 | $17,300 | $2,400 | $4,500 | $38,400 | ($39,998) |
| Aug 2027 | $17,000 | $17,800 | $2,900 | $4,500 | $42,200 | ($36,996) |
| Sep 2027 | $19,900 | $18,300 | $3,400 | $6,000 | $47,600 | ($32,731) |
| Oct 2027 | $22,800 | $18,800 | $3,900 | $6,000 | $51,500 | ($29,651) |
| Nov 2027 | $25,700 | $19,300 | $4,400 | $7,500 | $56,900 | ($25,386) |
| Dec 2027 | $28,600 | $19,800 | $4,900 | $7,500 | $60,800 | ($22,306) |
Revenue starts at $11,200 in January, almost all of it setup fees from the 8 pilot merchants, and reaches $60,800 in December, when subscriptions are the largest line at $28,600. EBITDA, the operating result before depreciation, interest and tax, improves from a $61,481 loss in January to a $22,306 loss in December, and no month in Year 1 breaks even. The model spreads signings evenly, whereas restaurant owners are slower to take sales meetings in November and December, so the real curve would be bumpier. Year 1 closes with $770,007 of cash.
Team plan by role
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Maya Johnson, CEO and head of sales | $105,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Carlos Rodriguez, CTO and lead engineer | $130,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Field sales representative (base salary; commission sits in operating costs) | $54,000 | Month 2 | 1 | 1 | 1 | 1 | 1 |
| Mobile engineer | $118,000 | Month 3 | 1 | 1 | 1 | 1 | 1 |
| Onboarding and store-submission specialist | $60,000 | Month 6 | 1 | 1 | 1 | 1 | 1 |
| Merchant support specialist | $52,000 | Month 8 | 1 | 1 | 1 | 1 | 1 |
| Field sales representative (second territory) | $54,000 | Month 9 | 1 | 1 | 1 | 1 | 1 |
| Onboarding and store-submission specialist (second) | $60,000 | Month 16 | – | 1 | 1 | 1 | 1 |
| Field sales representative (third territory) | $54,000 | Month 17 | – | 1 | 1 | 1 | 1 |
| Backend and integrations engineer | $128,000 | Month 19 | – | 1 | 1 | 1 | 1 |
| Merchant support specialist (second) | $52,000 | Month 22 | – | 1 | 1 | 1 | 1 |
| Field sales representative (fourth territory) | $54,000 | Month 29 | – | – | 1 | 1 | 1 |
| Merchant support specialist (third) | $52,000 | Month 32 | – | – | 1 | 1 | 1 |
| Quality and release engineer | $105,000 | Month 37 | – | – | – | 1 | 1 |
| Product designer | $96,000 | Month 40 | – | – | – | 1 | 1 |
| Customer success lead | $72,000 | Month 42 | – | – | – | 1 | 1 |
| Field sales representative (fifth territory) | $54,000 | Month 43 | – | – | – | 1 | 1 |
| Onboarding and store-submission specialist (third) | $60,000 | Month 44 | – | – | – | 1 | 1 |
| Merchant support specialist (fourth) | $52,000 | Month 45 | – | – | – | 1 | 1 |
| Operations and finance manager | $88,000 | Month 46 | – | – | – | 1 | 1 |
| Integrations engineer (POS and booking systems) | $122,000 | Month 48 | – | – | – | 1 | 1 |
| Second senior mobile engineer | $135,000 | Month 54 | – | – | – | – | 1 |
| Merchant support specialist (fifth) | $52,000 | Month 56 | – | – | – | – | 1 |
| Total payroll incl. on-costs | $581,025 | $928,370 | $1,174,327 | $1,642,745 | $2,187,469 |
Seven people are on payroll at the end of Year 1: Maya, Carlos, a field rep from month 2, a mobile engineer from month 3, an onboarding specialist from month 6, the first support specialist from month 8 and a second rep from month 9. Year 2 adds a second onboarding specialist, a third rep, a backend and integrations engineer and a second support specialist, for 11. Year 3 adds the fourth rep and third support specialist, for 13. Year 4 is the largest build, with eight hires in the year (quality engineer, designer, customer success lead, fifth rep, third onboarding specialist, fourth support specialist, operations and finance manager and an integrations engineer), taking the team to 21; Year 5 adds a second senior mobile engineer and a fifth support specialist, for 23. Hires follow revenue: no Year 4 role starts before a profitable Year 3 is behind it. Maya's $105,000 and Carlos's $130,000 salaries run from month 1, so profit in the tables is what remains after both founders are paid.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $416,000 | $1,319,600 | $2,456,400 | $3,605,700 | $4,725,900 |
| Direct costs (cloud hosting, messaging pass-through, store fees, onboarding assets) | ($87,432) | ($277,344) | ($516,269) | ($757,821) | ($993,257) |
| Gross profit | $328,568 | $1,042,256 | $1,940,131 | $2,847,879 | $3,732,643 |
| Payroll incl. on-costs | ($581,025) | ($928,370) | ($1,174,327) | ($1,642,745) | ($2,187,469) |
| Rent | ($43,200) | ($44,500) | ($45,800) | ($79,000) | ($81,400) |
| Utilities | ($4,200) | ($4,300) | ($4,500) | ($6,800) | ($7,000) |
| Marketing | ($94,000) | ($186,000) | ($245,000) | ($263,000) | ($273,000) |
| Insurance | ($14,000) | ($18,000) | ($22,000) | ($27,000) | ($31,000) |
| Professional fees | ($18,000) | ($22,000) | ($26,000) | ($30,000) | ($34,000) |
| Software subscriptions | ($24,000) | ($38,000) | ($54,000) | ($70,000) | ($86,000) |
| Sales commissions on new merchants | ($44,000) | ($93,500) | ($130,000) | ($144,500) | ($155,000) |
| Penetration testing, monitoring and security tooling | ($6,000) | ($12,000) | ($16,000) | ($20,000) | ($24,000) |
| Merchant credits, chargebacks and bad debt | ($4,000) | ($12,000) | ($20,000) | ($27,000) | ($34,000) |
| Equipment replacement and new-hire kit | $0 | ($14,000) | ($12,000) | ($22,000) | ($20,000) |
| Recruiting, phones, travel and two restaurant-trade shows | ($9,000) | ($14,000) | ($18,000) | ($21,000) | ($24,000) |
| City and state business filings and licenses | ($2,500) | ($3,500) | ($4,500) | ($5,500) | ($6,500) |
| Annual pay raises (3% a year) | $0 | ($27,851) | ($71,516) | ($152,327) | ($274,547) |
| EBITDA | ($515,357) | ($375,765) | $96,488 | $337,007 | $494,727 |
| Depreciation | ($8,214) | ($8,214) | ($8,214) | ($8,214) | ($1,714) |
| Interest | ($15,750) | ($14,855) | ($12,767) | ($10,449) | ($7,876) |
| Income tax | $0 | $0 | $0 | $0 | $0 |
| Net income before start-up costs | ($539,321) | ($398,835) | $75,507 | $318,343 | $485,137 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($62,000) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($601,321) | ($398,835) | $75,507 | $318,343 | $485,137 |
Year 1 loses $539,321 before start-up costs and $601,321 after them, and Year 2 loses $398,835. Year 3 is the first profit, $75,507 on a 3.1% net margin, held down by the fourth rep and third support specialist hired during the year and a $245,000 marketing budget. Net margin rises to 8.8% in Year 4 and 10.3% in Year 5 ($485,137) even though payroll and pay raises together stay near half of revenue. No income tax is charged in any year because the first two years' losses carry forward against the later profits. Taxed at the full combined rate of about 29%, Year 5 net margin would be closer to 7%. Confirm the treatment with a CPA.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($601,993) | ($409,922) | $59,438 | $302,008 | $462,923 |
| Devices and office build-out | ($38,000) | $0 | $0 | $0 | $0 |
| Funding received | $1,410,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | ($18,947) | ($21,035) | ($23,353) | ($25,926) |
| Owner distributions | $0 | $0 | $0 | $0 | $0 |
| Net change in cash | $770,007 | ($428,869) | $38,404 | $278,655 | $436,997 |
| Closing cash | $770,007 | $341,138 | $379,542 | $658,197 | $1,095,194 |
Closing cash is above zero in every year and is lowest at year end in Year 2, at $341,138. The balance falls by $428,869 in Year 2, then rises as profit builds. No owner distributions are paid in five years, and the bank loan is serviced on schedule, so cash reaches $1,095,194 in Year 5. That reserve is also what funds new product work.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $770,007 | $341,138 | $379,542 | $658,197 | $1,095,194 |
| Accounts receivable | $13,677 | $43,384 | $80,758 | $118,544 | $155,372 |
| Devices and office build-out (net) | $29,786 | $21,571 | $13,357 | $5,143 | $3,429 |
| Total assets | $813,470 | $406,094 | $473,657 | $781,884 | $1,253,995 |
| Accrued cloud and messaging bills | $4,791 | $15,197 | $28,289 | $41,524 | $54,425 |
| Bank term loan | $150,000 | $131,053 | $110,019 | $86,666 | $60,739 |
| Paid-in capital | $1,260,000 | $1,260,000 | $1,260,000 | $1,260,000 | $1,260,000 |
| Retained earnings | ($601,321) | ($1,000,156) | ($924,650) | ($606,307) | ($121,170) |
| Total liabilities and equity | $813,470 | $406,094 | $473,657 | $781,884 | $1,253,995 |
Margins, break-even and loan cover
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -123.9% | -28.5% | 3.9% | 9.3% | 10.5% |
| Net margin (before start-up costs) | -129.6% | -30.2% | 3.1% | 8.8% | 10.3% |
| Payroll incl. pay raises as share of revenue | 140% | 72% | 51% | 50% | 52% |
| Revenue per full-time equivalent at year end | $59,429 | $119,964 | $188,954 | $171,700 | $205,474 |
| Average monthly revenue | $34,667 | $109,967 | $204,700 | $300,475 | $393,825 |
| Monthly revenue needed to cover operating costs | $89,041 | $149,613 | $194,520 | $264,918 | $341,627 |
| Debt service cover (EBITDA / interest + principal) | -32.7x | -11.1x | 2.9x | 10.0x | 14.6x |
The last two rows of the ratios table compare what the company earns in an average month with what it needs to cover running costs. Year 1 averages $34,667 against $89,041 needed, and Year 2 $109,967 against $149,613. Year 3 passes the line, at $204,700 against $194,520. Debt-service cover is negative while the company loses money, 2.9x in Year 3 and about 10x from Year 4.
If merchant revenue falls 20% short
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $332,800 | $1,055,680 | $1,965,120 | $2,884,560 | $3,780,720 |
| Net income before start-up costs | ($549,965) | ($425,371) | ($169,522) | $93,584 | $54,048 |
| Net income after start-up costs | ($611,965) | ($425,371) | ($169,522) | $93,584 | $54,048 |
| Closing cash | $761,141 | $309,596 | $107,828 | $166,633 | $177,327 |
This case takes 20% off every revenue line in all five years, which is what the company would see if signings and prices both fell short while churn stayed on plan. The response has six parts. Hires from month 13 on start three months late, the second senior mobile engineer is never hired, marketing falls 20%, Maya's salary falls 20% to $84,000, the company keeps its first office, and commissions and merchant credits fall 20% because fewer merchants sign. No distributions were planned. With those steps in place, year-end cash never drops below $107,828, and equity at the end of Year 1 is $648,035. Net income and closing cash are lower than the base case in every year. Year 3 still loses $169,522, profit returns in Year 4 at $93,584, and Year 5 is $54,048, lower than Year 4 because the later hires and pay raises keep arriving while revenue is 20% short. The Year 3 low of $107,828 is about one month of payroll, so the founders would seek a bridge from the investors or cut further well before it. The case lowers revenue only. Churn and the cost to serve each merchant stay on plan, and a churn-led shortfall would hurt more, because every extra lost merchant has to be replaced at a full acquisition cost. Without the response, cash would turn negative in Year 3, at about negative $272,000, and reach about negative $863,000 by Year 5.
Sources
- Apple, App Store Review Guidelines: rules on apps built from templates and on payment for physical goods and services. Wording changes often, so confirm the current text.
- Google, Play Console developer policy center: publishing and payment rules for Android apps.
- Minnesota Statutes, chapter 325M: the Minnesota Consumer Data Privacy Act, whose thresholds and exemptions decide which merchants it covers. Counsel confirms the current text.
- Federal Communications Commission, consumer guide on unwanted calls and texts: background on consent for marketing text messages. State rules may add to it.
- Minnesota Department of Revenue, corporate franchise tax: the 9.8% rate used in the model. The rate may change.
- Internal Revenue Service, Publication 536, net operating losses: federal limits on using old losses, which the model does not apply.
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