Looking for a web design business plan? You're in the right place.
A web studio's plan gets read by a lender or a partner who asks the same questions every time. How much cash does the studio need before the first projects pay? When do the monthly care fees start covering payroll? What happens if projects arrive a fifth more slowly than hoped? A blank template gives no sense of what a believable answer looks like.
This article walks through a complete sample plan for a web design, build and care studio in Charlotte, North Carolina, section by section. It covers the executive summary, the SWOT analysis and every financial table, down to the month-by-month first year.
What you get from each part:
- The executive summary: see how three revenue lines and one funding request fit on a single page
- The SWOT and competitor table: learn how to describe template builders and freelancers fairly while showing where a studio sits among them
- The funnel and marketing budget: work out how many sales calls produce 22 fixed-price projects, and what each one costs to win
- The capacity table: check delivery hours against staff hours in each year, so hiring follows work and not hope
- The first year, month by month: spot the ten months that lose money before they arrive, and size the cash reserve to match
- The five-year profit and loss, cash flow and balance sheet: follow how each hire, price rise and care-plan client moves the numbers
- The downside case: have a worked answer for revenue running 20% short, with the owner's cuts laid out
If you are setting up a web studio, read this before writing your own. The company is fictional, so keep what fits and change the rest.
In this plan
Looking for a online services business plan template? The Toolkit builds yours with your own numbers.
Executive Summary
Web Applications is a web design, build and care studio that opens in Charlotte, North Carolina on 1 January 2027. It sells three things to owner-run local businesses: fixed-price website builds ($5,500 for a brochure site up to $24,000 for an online store, $11,500 on average), monthly care plans that cover hosting, security updates, backups and a bank of small changes (about $300 a month on average), and a few paid-ad management retainers at a flat fee averaging $1,800 a month. Founder Jordan Ellison owns 100% of the company.
Opening takes $425,000: $350,000 of Jordan's savings plus a $75,000 bank line of credit drawn at opening. Equipment and office build-out take $24,000, legal work, registrations and the launch campaign take $25,500, and the remaining $375,500 stays in the account to carry two loss-making years and the downside case.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $323,800 | $635,201 | $956,083 |
| Net income after start-up costs | ($124,259) | ($35,279) | $15,035 |
| Closing cash | $256,483 | $185,862 | $163,138 |
The studio delivers 22 site builds in Year 1, starts with 4 care-plan clients carried over from Jordan's freelance book and ends the year with 21 care plans and 3 ad retainers. Payroll arrives before the work does: a developer starts in month 3, then a designer in month 15 and an account and care manager in month 18, so Years 1 and 2 both lose money. Year 3 is the first profit, and a thin one. By Year 5 revenue is $1,462,937 and net income is $145,014, a 9.9% margin on a payroll of seven full-time people.
A second run of the model cuts every revenue line by 20%. With two late hires, one role never filled, a smaller marketing budget, a pay cut for Jordan, no office move and no distributions, the studio loses money through Year 4 and still ends every year with cash in the bank.
The offer is deliberately plain. The price is fixed before work starts, the same team that builds the site keeps it running afterward, and each build is reviewed against the WCAG 2.2 AA success criteria as part of the fixed price, without any promise about legal outcomes.
The Studio
- Legal name: Web Applications, LLC, a North Carolina limited liability company. The financial model taxes it as a C corporation, a simplification.
- Owner: Jordan Ellison, 100%.
- Premises: a leased 1,400-square-foot office in Charlotte.
- Start date: 1 January 2027.
- Stage: pre-launch. Four care-plan clients and two build deposits are signed, the lease is in draft and the portfolio site is half written.
What the studio is for
Give small and mid-sized Charlotte businesses a website that is built to a quoted price, loads quickly, is reviewed against WCAG 2.2 AA before launch and has a named team behind it after launch.
Where the studio should stand by the end of Year 2
- 44 care-plan clients and 6 ad retainers by December 2028.
- Revenue of $635,201 in 2028, with the net loss narrowed from $124,259 to $35,279.
- A product designer, an account and care manager and a paid-ads specialist on staff, so contractors only handle overflow.
- Bank line repayments on schedule once the interest-only year ends.
Three lines of revenue
| Line | How it is priced | Year 1 share of revenue |
|---|---|---|
| Fixed-price site builds and redesigns | $5,500 to $24,000 per project | 78% |
| Care plans | $175, $325 or $525 a month, about $300 blended | 13% |
| Paid-ad management retainers | About $1,800 a month, flat | 9% |
Rules that govern the work
The studio treats web accessibility cautiously. The U.S. Department of Justice states that the Americans with Disabilities Act covers businesses open to the public and points to the Web Content Accessibility Guidelines as helpful technical guidance. Builds target WCAG 2.2 level AA, and the client contract says so in plain terms. It does not guarantee that a site is immune from a demand letter, and it names the client's own content and third-party plug-ins as areas the studio cannot control. Privacy rules for forms, cookies, analytics and ad tracking differ by state and change often, so the studio supplies consent tooling and a privacy-page template, tells clients to have counsel approve the final text, and does not give legal advice.
Charlotte Market and Competitors
Who in Charlotte needs a site
The studio looks for businesses with 5 to 50 employees that depend on their site for leads or orders: contractors and home-service companies, law and accounting offices, dental and veterinary practices, boutique retailers and regional distributors. It does not build patient portals or collect regulated health data, and it declines work that would require it to. The plan expects businesses with no staff and no budget to use do-it-yourself builders and those with a procurement department to hire larger agencies. The market in between is the target.
Price points
The plan's prices are set from the studio's own quoting experience, not a survey, and they will vary with the local market. A brochure site for a five-person firm is $5,500. A 15-page service site with a booking form and a content migration is $11,000 to $13,000. An online store with 100 products and payment integration is $18,000 to $24,000. Care plans have three tiers: $175 for hosting, updates, backups and uptime monitoring; $325 for those plus two hours of changes a month and an accessibility scan; $525 with four hours of changes and a monthly performance review. About 40% of clients choose the first tier, 45% the second and 15% the third.
Alternatives a client has
| Alternative | What it offers | Why a client picks it | How Web Applications differs by design |
|---|---|---|---|
| Do-it-yourself site builders | Templates and a monthly subscription | Lowest cash cost and fast to start | A finished custom build with someone accountable for changes |
| Freelance developers | Project work at an hourly or fixed rate | Low price, often a personal referral | A team, so a vacation or a departure does not stall the site |
| Charlotte web agencies | Custom work, usually with a brand or campaign scope | Large portfolios and in-house strategy | A fixed quote, a lighter process and a care plan as a standard line |
| National maintenance and hosting providers | Hosting and update plans for existing sites | Convenience and published pricing | The people who built the site also maintain it |
| In-house marketing hire | A staff member managing the site | Always available | Delivery capacity beyond one person's skills |
The table describes offers and where the studio sits among them. It does not rank anyone, and no provider is named because plans and prices change often.
SWOT
| Strengths | Weaknesses |
|---|---|
| Founder who has shipped sites for eleven years | One lead developer until month 3, so illness stalls work |
| Quoted fixed prices that are simple to approve | No local brand yet, so every client starts from zero |
| Four care-plan clients before opening | Two loss-making years that draw on the reserve |
| Opportunities | Threats |
|---|---|
| Owners who outgrow a template builder | AI-assisted site tools lowering what clients will pay for a build |
| Care plans that renew without selling again | Accessibility demand letters aimed at clients, and their anger at the studio |
| Referral work from accountants, bankers and brand designers | A developer leaving mid-project |
Who Buys a Website
The owner who has outgrown the template
The typical buyer is the owner or office manager of a business that already has a site, usually a builder template assembled years ago. The site looks dated, loads slowly on a phone, and nobody knows who has the login. The purchase is a project with a deadline, and the owner wants a quote that does not move.
What the buyer is worried about
Cost overruns, a site that breaks after launch, and being left with no one to call. A fixed price answers the first; a care plan answers the other two.
What sets off the purchase
A rebrand, a move, a new service line, a competitor's new site, a bad review about the site, or an accessibility complaint.
Who signs
For under $15,000 it is usually the owner alone. Above that, a partner or a board member joins the decision, which adds two to four weeks to the sale.
Selling Fixed-Price Projects
From first call to signed scope
Every prospect gets a 30-minute discovery call, then a written scope and fixed price within three working days. A project starts after 50% is paid; the remaining 50% is due at launch. Jordan handles every discovery call in Year 1.
The Year 1 funnel
About 70 qualified discovery calls produce 22 signed builds, a 31% close rate. Four care-plan clients already on Jordan's freelance book move over in month 1, two builds are signed with deposits before opening, and 3 of the 22 builds also buy an ad retainer.
| Lead source | Builds won in Year 1 | Share |
|---|---|---|
| Referral partners (accountants, bankers, brand designers) | 8 | 36% |
| Local search and written guides | 5 | 23% |
| Chamber of commerce and networking events | 4 | 18% |
| Jordan's earlier clients and colleagues | 3 | 14% |
| Outbound email to local business lists | 2 | 9% |
Turning a build into a monthly fee
Every proposal prices the care plan next to the build, and a launch is not scheduled until the client has chosen a tier or declined one in writing. About 70% of builds convert to a care plan, and the studio takes over hosting on two or three existing sites a year. The plan expects 15% of care-plan clients to leave each year, usually when a business closes or is sold.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Site builds delivered | 22 | 35 | 48 | 56 | 62 |
| Care-plan clients at year end | 21 | 44 | 66 | 88 | 106 |
| Ad retainers (average in year) | 1.3 | 4.5 | 7 | 9 | 11 |
Fees rise 3% a year from Year 2. Build volume is capped by hiring: a new developer starts only when booked hours can pay for the role.
Where the Leads Come From
Year 1 spend
Year 1 marketing is $52,000: $16,000 of launch work paid from start-up capital and $36,000 of running cost. That is 16% of Year 1 revenue, or 11% counting running cost alone, falling to 4.8% in Year 3 and 3.7% in Year 5 as referrals and the care base carry more of the load. Spread across 22 new build clients, it is about $2,360 each, roughly a fifth of the $11,500 average build fee.
| Channel | Year 1 spend | What it is expected to do |
|---|---|---|
| Portfolio site and brand (launch) | $11,000 | Six case studies and a page for each type of buyer |
| Launch outreach and local events (launch) | $5,000 | Introductions to the first 20 referral partners |
| Local search and written guides | $10,000 | One guide a month on the questions owners ask before a rebuild; about 5 builds |
| Referral partner thank-you fees and events | $8,000 | A fixed fee for each introduction that signs; about 8 builds |
| Paid search for the studio's own leads | $6,000 | Searches such as "Charlotte web design for contractors"; adds to the search count above |
| Chamber memberships and networking | $5,000 | Two chamber memberships and quarterly workshops; about 4 builds |
| Outbound list work and email tooling | $3,000 | Sequences to lists of businesses with dated sites; about 2 builds |
| Case study video and portfolio upkeep | $4,000 | A short video for each launch |
Milestones
- January 2027: portfolio site live, 4 care-plan clients onboarded.
- April 2027: 2 builds delivered a month, first ad retainer signed.
- October 2027: 3 builds in a month as retailers launch ahead of the holidays.
- December 2027: 21 care plans and 3 ad retainers.
How Work Gets Delivered
The office
The studio leases 1,400 square feet near Charlotte's center city at a planned $33 per square foot per year, common-area charges included, which is $46,200 in Year 1. Rents vary by building and should be confirmed locally. Eight desks fit. In Year 4 the studio moves to about 1,800 square feet at $34, for $61,200.
A project from kickoff to launch
Each build runs about 92 hours across design, development, content migration, testing and launch, in a six to ten week window. A written scope fixes the number of pages, the integrations and two rounds of revision. Extra work is quoted separately. The same checklist covers accessibility, page speed, forms, redirects and backups before any launch.
The care plan in practice
Care plans run on a managed host with automated backups, uptime monitoring and a weekly patch run. Each client averages 1.6 hours a month of human work, mostly small content changes and plug-in conflicts. Hosting, monitoring and licenses cost about 17% of care revenue.
Ad retainers
The studio manages search and social campaigns for a flat monthly fee. The client pays the ad platforms directly, so media spend never appears in the studio's revenue. A retainer takes about 11 hours a month of the specialist's time.
Capacity against revenue
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Delivery hours needed | 2,400 | 4,400 | 6,400 | 7,800 | 9,000 |
| Hours supplied by staff | 2,200 | 4,400 | 6,900 | 8,100 | 8,950 |
Year 1 hours come from Jordan at about 1,000 billable hours and the developer at roughly 1,200 over ten months, with contract designers and copywriters covering the gap. The direct-cost line pays for them. The account and care manager counts for about 700 hours a year; the rest of that role goes to proposals, scheduling and billing. Staff are booked at about 93% in Year 3 and 96% in Year 4, and in Years 2 and 5 contractors cover the small gap. That load is why the second senior developer starts in month 44.
Staff
Headcount is two at the end of Year 1, five at the end of Year 2, six at the end of Year 3 and seven from Year 4, counting Jordan. Each hire waits for the work to cover it, and the downside case shows which hires slip.
Insurance and contracts
Professional liability (errors and omissions), cyber, general liability and workers' compensation and key-person life and disability coverage on Jordan cost $11,000 in Year 1. Every client signs a master agreement and a statement of work. The agreement caps liability at the fees paid and excludes legal compliance guarantees.
Founder and Team
Jordan Ellison, founder and lead developer
Jordan has eleven years in web development: six as lead developer at a Charlotte agency, then five freelancing for local businesses. The $350,000 comes from eleven years of savings. Jordan builds, quotes and sells in Year 1 and takes every discovery call until the account and care manager starts in month 18 and begins screening inbound calls and preparing proposals. Jordan stays the closer.
Where the team is thin
Three gaps stand out. Jordan has never run a sales pipeline at this volume, has not managed more than two people, and has no paid-media background. The plan fills each in turn: a written quoting checklist and weekly pipeline review, an HR adviser retained for the first two hires and paid from professional fees, and a paid-ads specialist hired in month 22.
If Jordan is out
Until the senior developer arrives in month 30, a contract developer on retainer covers urgent fixes. Key-person coverage sits inside the insurance line.
Advisers
An accountant who works with two other agencies reviews the numbers each quarter. A business attorney reviews the client contract once a year and any dispute.
Ownership and the bank
Web Applications, LLC is 100% Jordan's. The line of credit rests on a personal guarantee, a lien on the equipment and quarterly financial statements. The lease runs five years and carries Jordan's personal guarantee.
Numbers and Funding
Everything in this section comes out of a single five-year model. Year 1 runs month by month and Years 2 to 5 run annually. The inputs are listed first with their reasons, so each table can be traced back to a price, an hour count or a hire date.
Funding the launch
| Use of funds | Amount |
|---|---|
| Laptops, monitors, phone and tablet test devices, network | $14,000 |
| Office furniture and build-out | $10,000 |
| State and city registrations | $1,500 |
| Legal: entity, client contract, privacy and terms templates | $8,000 |
| Launch: portfolio site, case studies, outreach | $16,000 |
| Cash reserve for the first two years of losses | $375,500 |
| Total uses | $425,000 |
| Source of funds | Amount |
|---|---|
| Jordan Ellison's savings | $350,000 |
| Bank line of credit, drawn at opening | $75,000 |
| Total sources | $425,000 |
The $75,000 bank line is drawn in full at opening. It carries 10% interest, a figure for the example and not a quoted rate, interest-only for the first twelve months, and then converts to four years of principal and interest. Jordan guarantees it personally and the bank takes a lien on the equipment. The other $350,000, about 82% of the total, is Jordan's savings. The studio borrows while holding cash because the bank relationship and a second source of liquidity are worth the $7,500 of Year 1 interest. The $375,500 reserve is large beside the $24,000 equipment budget. Losses in Years 1 and 2 total $159,538, and the rest of the reserve is sized to the 20% shortfall case in the last section, where year-end cash bottoms at $15,977.
Prices, hours and rates behind the model
- Site builds average $11,500 in Year 1 at about 92 hours each, which is $125 of revenue per hour. Twenty-two builds are delivered in Year 1, then 35, 48, 56 and 62. Revenue books at launch, when the second 50% falls due. October and November carry three builds a month as retailers launch before the holidays, and December is slow.
- Care plans run at a blended $300 a month: $175, $325 and $525 tiers chosen by roughly 40%, 45% and 15% of clients. Year 1 starts with 4 clients and ends with 21. Year-end counts of 44, 66, 88 and 106 follow, and the revenue line uses the average client count in each year. Churn is 15% a year, about 70% of new builds buy a plan, and the studio takes over hosting on two or three existing sites a year.
- Ad retainers average $1,800 a month, flat, for managing campaigns that spend roughly $4,000 to $10,000 a month of the client's own money. The client pays the ad platforms directly, so that spend is not revenue. There are 16 retainer-months in Year 1, an average of 4.5 retainers in Year 2, then 7, 9 and 11.
- Fees rise 3% a year from Year 2 on every line. Each Years 2 to 5 revenue line is a unit count times the higher price, so a build count or client count can be multiplied back out of each total.
- Delivery effort is 92 hours a build, 1.6 hours a month for each care-plan client and 11 hours a month for each ad retainer. That adds up to about 2,400 hours in Year 1 and 9,000 in Year 5. A full-year developer, designer or specialist supplies about 1,450 billable hours, Jordan about 1,000 and the account and care manager about 700. That works out to 2,200, 4,400, 6,900, 8,100 and 8,950 hours supplied over the five years, with contractors covering peaks.
- Direct costs are 14% of build revenue (contract designers and copywriters, premium plug-ins, stock media, card fees), 17% of care revenue (hosting, monitoring, backups and licenses) and 3% of ad revenue (reporting tools). Together they are 13.4% of revenue in Year 1 and again in Year 5.
- Receivables average 30 days. Builds bill half at signing and half at launch, care plans bill monthly by card or bank debit in advance and ad retainers bill monthly. Payables average 12 days for contractors and software.
- Each salary carries a 27% load for employer payroll taxes, health coverage, paid leave and workers' compensation. The salaries in the personnel table are launch-year rates. Raises of 3% a year are charged on their own line from Year 2.
- Rent is $33 per square foot a year, common-area charges included, on 1,400 square feet, rising to $34 on about 1,800 square feet from Year 4. Software covers design, development, project and ticket tools and grows with headcount. The bad debt allowance is about 1% of revenue.
- The model taxes the company as a C corporation at 21% federal and a 2% North Carolina planning rate. The Year 1 and Year 2 losses carry forward, so the first tax bill is in Year 5. Federal rules cap loss carryforwards at a share of taxable income, which the model ignores, so Years 3 and 4 would carry a small tax bill in practice. The state rate is a planning figure, because North Carolina has legislated reductions to its corporate rate and the current schedule should be confirmed. A small studio would often elect S corporation status, which moves tax to the owner's personal return.
- A single $30,000 distribution in Year 5 follows the first years of retained profit. The line of credit is repaid on schedule.
Revenue by line
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Fixed-price site builds and redesigns | $253,000 | $414,575 | $585,617 | $703,716 | $802,488 |
| Monthly care plans (hosting, updates, small changes) | $42,000 | $120,510 | $210,058 | $302,904 | $393,028 |
| Paid-ad management retainers | $28,800 | $100,116 | $160,408 | $212,426 | $267,421 |
| Total revenue | $323,800 | $635,201 | $956,083 | $1,219,046 | $1,462,937 |
| Growth on prior year | – | 96% | 51% | 28% | 20% |
Site builds supply 78% of Year 1 revenue and 55% of Year 5 revenue. Care plans are 13% in Year 1 and 27% in Year 5, and they are the line that makes the studio less lumpy each year because they bill without a new sale. Ad retainers are the smallest line in Year 1 and 18% of revenue by Year 5.
Year 1, month by month
| Month | Fixed-price site builds and redesigns | Monthly care plans (hosting, updates, small changes) | Paid-ad management retainers | Total revenue | EBITDA |
|---|---|---|---|---|---|
| Jan 2027 | $0 | $1,200 | $0 | $1,200 | ($29,520) |
| Feb 2027 | $11,500 | $1,500 | $0 | $13,000 | ($19,302) |
| Mar 2027 | $11,500 | $1,800 | $0 | $13,300 | ($19,043) |
| Apr 2027 | $23,000 | $2,100 | $1,800 | $26,900 | ($7,266) |
| May 2027 | $23,000 | $2,700 | $1,800 | $27,500 | ($6,747) |
| Jun 2027 | $23,000 | $3,000 | $1,800 | $27,800 | ($6,487) |
| Jul 2027 | $23,000 | $3,600 | $1,800 | $28,400 | ($5,968) |
| Aug 2027 | $23,000 | $4,200 | $3,600 | $30,800 | ($3,889) |
| Sep 2027 | $23,000 | $4,800 | $3,600 | $31,400 | ($3,370) |
| Oct 2027 | $34,500 | $5,100 | $3,600 | $43,200 | $6,848 |
| Nov 2027 | $34,500 | $5,700 | $5,400 | $45,600 | $8,926 |
| Dec 2027 | $23,000 | $6,300 | $5,400 | $34,700 | ($512) |
Builds land in clusters, so revenue climbs unevenly. January has no launches and brings in only $1,200 of care fees, and the first build, signed before opening, ships in February. EBITDA, which is operating profit before interest, depreciation and tax, is negative in every month except October and November, when three builds a month ship, and December slips back to a small loss. Month-end cash, less receivables still outstanding, is lowest in Oct at about $231,000.
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 lead developer | $112,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Web developer | $80,000 | Month 3 | 1 | 1 | 1 | 1 | 1 |
| Product designer | $72,000 | Month 15 | – | 1 | 1 | 1 | 1 |
| Account and care manager | $62,000 | Month 18 | – | 1 | 1 | 1 | 1 |
| Paid-ads specialist | $68,000 | Month 22 | – | 1 | 1 | 1 | 1 |
| Senior developer | $96,000 | Month 30 | – | – | 1 | 1 | 1 |
| Second senior developer | $98,000 | Month 44 | – | – | – | 1 | 1 |
| Total payroll incl. on-costs | $226,907 | $387,562 | $571,500 | $674,158 | $746,760 |
Jordan starts alone in January and uses contract designers and copywriters until the web developer joins in month 3. A product designer follows in month 15, so design stops depending on contractors. The account and care manager starts in month 18, takes over proposal preparation and call screening, and handles care-plan scheduling and billing; about half of that role's time counts toward delivery hours. A paid-ads specialist joins in month 22, a senior developer in month 30 and a second senior developer in month 44. Each start follows a stretch in which booked hours ran close to what the team could supply. Jordan's $112,000 begins in month 1 and sits inside payroll, so every profit line is after the founder has been paid.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $323,800 | $635,201 | $956,083 | $1,219,046 | $1,462,937 |
| Direct costs (contract designers and copywriters, hosting, plug-in licenses, card fees) | ($43,424) | ($85,185) | ($128,218) | ($163,483) | ($196,191) |
| Gross profit | $280,376 | $550,016 | $827,865 | $1,055,563 | $1,266,746 |
| Payroll incl. on-costs | ($226,907) | ($387,562) | ($571,500) | ($674,158) | ($746,760) |
| Rent | ($46,200) | ($47,600) | ($49,000) | ($61,200) | ($63,000) |
| Utilities | ($3,600) | ($3,800) | ($4,000) | ($4,800) | ($5,000) |
| Marketing | ($36,000) | ($42,000) | ($46,000) | ($50,000) | ($54,000) |
| Insurance | ($11,000) | ($14,000) | ($17,000) | ($20,000) | ($22,000) |
| Professional fees | ($9,000) | ($9,000) | ($10,000) | ($11,000) | ($12,000) |
| Software subscriptions | ($24,000) | ($32,000) | ($40,000) | ($46,000) | ($52,000) |
| Training, accessibility audits and certifications | ($3,000) | ($4,500) | ($6,000) | ($7,000) | ($8,000) |
| Phones, supplies and client travel | ($4,000) | ($5,500) | ($7,000) | ($8,000) | ($9,000) |
| Laptop replacement and new-hire kit | $0 | ($6,000) | ($5,000) | ($9,000) | ($6,000) |
| Recruiting fees for developer hires | $0 | ($5,000) | ($5,000) | ($4,000) | ($6,000) |
| Bad debt allowance | ($3,000) | ($5,000) | ($7,500) | ($9,000) | ($10,500) |
| Annual pay raises (3% a year) | $0 | ($11,627) | ($34,804) | ($62,513) | ($93,725) |
| EBITDA | ($86,331) | ($23,573) | $25,061 | $88,891 | $178,761 |
| Depreciation | ($4,929) | ($4,929) | ($4,929) | ($4,929) | ($1,429) |
| Interest | ($7,500) | ($6,778) | ($5,097) | ($3,241) | ($1,190) |
| Income tax | $0 | $0 | $0 | $0 | ($31,129) |
| Net income before start-up costs | ($98,759) | ($35,279) | $15,035 | $80,722 | $145,014 |
| Start-up costs expensed at opening (legal, registrations, launch marketing) | ($25,500) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($124,259) | ($35,279) | $15,035 | $80,722 | $145,014 |
Year 1 loses $98,759 before start-up costs and $124,259 after them. Year 2 loses $35,279 even though revenue nearly doubles, because the designer, the manager and the specialist all join during the year. Payroll takes 70% of revenue in Year 1 and 57% in Year 5. Year 3 is the first profit, at $15,035 (a 1.6% margin). The margin widens to 6.6% in Year 4 and 9.9% in Year 5 as revenue outgrows the cost of each new hire. The Year 1 and Year 2 losses carry forward, and the first income tax bill, $31,129, falls in Year 5.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($144,517) | ($54,572) | ($4,995) | $65,197 | $127,472 |
| Computers, test devices and build-out | ($24,000) | $0 | $0 | $0 | $0 |
| Funding received | $425,000 | $0 | $0 | $0 | $0 |
| Credit line principal repaid | $0 | ($16,049) | ($17,729) | ($19,586) | ($21,637) |
| Owner distributions | $0 | $0 | $0 | $0 | ($30,000) |
| Net change in cash | $256,483 | ($70,621) | ($22,724) | $45,611 | $75,835 |
| Closing cash | $256,483 | $185,862 | $163,138 | $208,749 | $284,584 |
Cash stays positive in every year. It is $256,483 at the end of Year 1, falls to a low of $163,138 at the end of Year 3 and rebuilds to $284,584 by Year 5. The credit line is cleared by the end of Year 5. A single $30,000 owner distribution is paid in Year 5, and a lender would likely require its consent while the line is outstanding.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $256,483 | $185,862 | $163,138 | $208,749 | $284,584 |
| Accounts receivable | $26,614 | $52,208 | $78,582 | $100,196 | $120,241 |
| Computers, test devices and build-out (net) | $19,071 | $14,143 | $9,214 | $4,286 | $2,857 |
| Total assets | $302,168 | $252,214 | $250,935 | $313,231 | $407,683 |
| Accounts payable (contractors and software) | $1,428 | $2,801 | $4,215 | $5,375 | $6,450 |
| Bank line of credit | $75,000 | $58,951 | $41,222 | $21,637 | $0 |
| Paid-in capital | $350,000 | $350,000 | $350,000 | $350,000 | $350,000 |
| Retained earnings | ($124,259) | ($159,538) | ($144,503) | ($63,781) | $51,233 |
| Total liabilities and equity | $302,168 | $252,214 | $250,935 | $313,231 | $407,683 |
Break-even and payroll ratios
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -26.7% | -3.7% | 2.6% | 7.3% | 12.2% |
| Net margin (before start-up costs) | -30.5% | -5.6% | 1.6% | 6.6% | 9.9% |
| Payroll incl. pay raises as share of revenue | 70% | 63% | 63% | 60% | 57% |
| Revenue per full-time equivalent at year end | $161,900 | $127,040 | $159,347 | $174,149 | $208,991 |
| Average monthly revenue | $26,983 | $52,933 | $79,674 | $101,587 | $121,911 |
| Monthly revenue needed to cover operating costs | $35,292 | $55,202 | $77,262 | $93,032 | $104,707 |
| Debt service cover (EBITDA / interest + principal) | -11.5x | -1.0x | 1.1x | 3.9x | 7.8x |
The last rows compare average monthly revenue with the revenue needed to cover all operating costs. Year 1 averages $26,983 a month against $35,292 needed, and Year 2 reaches $52,933 against $55,202. Year 3 is the first year above the bar, at $79,674 against $77,262. Debt service coverage is negative while the studio loses money, then 1.1x in Year 3, 3.9x in Year 4 and 7.8x in Year 5, so Year 3 is thin. Revenue per full-time employee at year end rises from $127,040 in Year 2 to $208,991 in Year 5. Contract designers, copywriters and photographers, paid from the direct-cost line, cover peaks and fill part of that gap.
Revenue 20% below plan, with cuts
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $259,040 | $508,161 | $764,866 | $975,237 | $1,170,350 |
| Net income before start-up costs | ($119,186) | ($85,343) | ($23,581) | ($21,907) | $116,709 |
| Net income after start-up costs | ($144,686) | ($85,343) | ($23,581) | ($21,907) | $116,709 |
| Closing cash | $241,093 | $125,253 | $68,904 | $15,977 | $97,301 |
Every revenue line is 20% below the base case in every year. Jordan responds in six ways: the paid-ads specialist and the senior developer start six months late, the second senior developer is never hired, marketing falls 20%, Jordan takes a 20% pay cut, the studio stays in its first office and distributions stop. The designer and the account manager are kept because the work needs them. Net income is worse than the base case in every year: Year 2 loses $85,343 against $35,279 in the base case. The studio loses money through Year 4 and earns a profit in Year 5. Year-end cash never falls below $15,977, in Year 4, and equity at the end of Year 1 is $205,314. Year 5 earns a similar margin to the base case on lower revenue only because the second senior developer is never hired and the pay cut stays in place. With none of the cuts, the same shortfall would take the bank balance below zero by the end of Year 3.
Sources
- U.S. Department of Justice, Guidance on Web Accessibility and the ADA: the ADA applies to businesses open to the public, and existing technical standards such as WCAG are cited as helpful guidance. The page does not set a legal standard for private sites.
- World Wide Web Consortium, Web Content Accessibility Guidelines (WCAG) 2.2: the success criteria and conformance levels the studio's builds target.
- North Carolina Department of Revenue, Corporate income and franchise tax: the page links to corporate rates by year. The model's 2% state rate is a planning figure and the rate may change.
- Prices, hours, wages, rent and conversion rates in this plan are the example business's own figures. No survey wage or market-size statistic is quoted.
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