Looking for a software sales business plan? You're in the right place.
A business that resells other companies' software keeps a small slice of each license, so the plan has to answer questions a product company never faces. Where does the profit come from if the margin on a license is about fifteen cents on the dollar? How much cash do customer invoices tie up while vendors still want paying? What does a lender see if sales slip? A blank template won't show what a sound answer looks like.
In this article we'll walk through a complete sample plan for a business-software reseller in Omaha, Nebraska, section by section. We'll cover the executive summary, the SWOT analysis and, in particular, all of the financials, including receivables, vendor credit and the line of credit.
Here's what you'll take away:
- The executive summary: see how to explain a low-margin resale business on one page, so a reader sees the volume, the margin and the risk in the first minute
- The revenue mix: learn how license resale, monthly seats, implementation, training and managed services each earn, and which of them pays the payroll
- The funding structure: find out why a reseller that doubles its sales needs a cash reserve larger than its equipment budget
- The receivables and vendor-credit balances: see how net-30 invoices and 28-day supplier terms turn into the cash a lender will test
- The five-year profit, cash flow and balance sheet: understand how each hire, price and payment term shows up in the numbers
- The downside case: have an answer ready for "what if sales run 20% short?", along with the steps the owner takes in response
If you're setting up a software reseller, read this before you write your own. The business is fictional, so take what fits your market and change the rest.
In this plan
To turn this example into your own software sales business plan, use the software sales business plan template.
Westwood Fell at a Glance
Westwood Fell is a software reseller based in Omaha, launching January 1, 2027. Its catalog is accounting, CRM and endpoint-security licenses plus cloud productivity-suite seats, sold to companies with 10 to 250 employees. The firm then sets up and trains on what it sold and, from the fourth month, manages it. It owns no software of its own and sells no hardware. Founder Marcus Hale holds 67% and a private investor holds 33%.
The business raises $600,000: $480,000 of equity and a $120,000 bank line of credit. Of that, $504,000 is a reserve for the receivables that build as sales grow and for the first-year loss, $60,000 buys laptops, a demonstration lab and the office fit-out, and $36,000 pays for legal work, partner enrollment and the launch.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $1,684,830 | $3,263,216 | $4,753,222 |
| Net income after start-up costs | ($194,019) | $39,937 | $235,563 |
| Closing cash | $261,069 | $222,123 | $383,808 |
Year 1 loses money because four salaries and an office are in place before resale margins of 13% to 15% can pay for them. Operating profit turns positive in September 2027, Year 2 is the first profitable year, and net margin reaches 8.1% in Year 5. The model holds gross margin flat at 38.1%, so it gives no credit for the shift toward retainers, and the later years are cautious as a result.
License resale brings most of the revenue and little of the profit. In Year 1 it accounts for 68% of revenue and about 26% of gross profit at the stated line margins. Implementation, training and monthly retainers earn the difference, and the plan is built to grow the retainers from 9% of revenue to 26%.
The plan also tests itself against a bad year. Take 20% off sales, push back later hires, drop the last one, trim marketing and Marcus's own pay, and pay no distributions: year-end cash still never falls below $145,137, and profit arrives in Year 2.
The Company and What It Sells
Legal name: Westwood Fell, LLC, a Nebraska limited liability company. Owners: Marcus Hale, 67%, and one private investor, 33%. Location: about 2,600 square feet of office, demonstration lab and training room in west Omaha. Opens: January 1, 2027. Where things stand: pre-launch, with a lease still in draft, two distributor credit applications filed and 35 of Marcus's contacts waiting for a first quote.
Purpose
Give owner-run companies in the Omaha area one supplier for the business software they pay for each year, the people who set it up and the training that makes staff use it, at a quoted price and with a named consultant.
Five lines of revenue
| Line | How it is priced | Year 1 share of revenue |
|---|---|---|
| Annual licenses: accounting, CRM and endpoint security | Quoted per order, average $3,200 | 51% |
| Monthly seats on a cloud productivity suite | About $27 a seat a month | 17% |
| Implementation, migration and configuration | $165 an hour, blended | 19% |
| Training and adoption sessions | $1,800 a day | 4% |
| Managed services retainers: user and license administration, renewals, first-line help | About $1,675 a month for about 28 users | 9% |
Vendors and distributors
The business buys through national software distributors, which extend trade credit after an application, and enrolls in the partner programs of the vendors whose products it sells. Each vendor and distributor sets its own tiers, rebates and credit terms, and they shift often, so no program is named here and no tier is promised. Plan figures stand in for them: suppliers are paid in 28 days on average, and margins blend to 15% on licenses and 13% on seats, any incentive included.
Goals for the first two years
- 150 active accounts at the end of 2027, 35 of them from existing relationships.
- 18 managed services contracts and 1,480 resold seats by December 2027.
- $3,263,216 of revenue in 2028 and a first full-year profit.
- A team of ten full-time people and one part-time coordinator by the end of 2028.
Software Buying in Omaha
What the data supports
The plan quotes no Omaha market size. The forecast rests on account counts, order values and renewal rates, each stated as the plan's own figure.
How companies of this size buy
A company with 40 or 80 staff usually has an office manager or owner who decides on software and no one whose job is software. Accounting and CRM licenses renew each year, security subscriptions renew with them, and productivity-suite seats bill monthly. Renewals cluster around fiscal-year end and a second bump in June, which is why the plan builds a heavy fourth quarter. That seasonal shape is an estimate made for this plan.
Where else a buyer could go
| Alternative | What it offers | Why a customer picks it | Where Westwood Fell positions itself |
|---|---|---|---|
| Buying direct from the vendor's website | Instant purchase, standard terms | Speed on a single license | Quote across several vendors, plus setup |
| National resellers and distributors' own channels | Wide catalog, volume pricing | Scale on large or complex orders | A named consultant for a 40-seat office |
| Local managed service providers | Monthly support, often software included | One bill for IT | Software, implementation and training priced separately |
| Independent consultants | Hands-on setup | Personal service | A team that covers holidays and leaves |
| The customer's own part-time IT person | Knows the office | Already on staff | Takes over renewals, license counts and vendor calls |
Each row lists what that category sells and where Westwood Fell sits against it. Rows are not ranked, and no competitor prices are quoted.
SWOT
| Strengths | Weaknesses |
|---|---|
| An owner with 35 warm contacts and a track record at a regional reseller | Resale margin of 13% to 15% leaves little room for a lost renewal |
| Software, setup, training and support from one team | Year 1 loses money and draws on the reserve |
| Monthly seats and retainers that repeat without a new sale | Three people hold most of the implementation knowledge in Year 1 |
| Opportunities | Threats |
|---|---|
| Moving annual license customers onto retainers | Vendors selling direct and changing program terms with little notice |
| Renewals that repeat at about 85% a year | Customers moving to larger resellers or managed providers |
| Referrals from accountants and managed service providers | Slow-paying customers and a lender that tightens the line |
Who Buys and What Moves Them
The company with 10 to 250 employees
Examples are a trucking broker, a dental group, an engineering firm, a regional distributor, an insurance agency and a nonprofit. One person owns software decisions and has other work too. Typical orders cover 15 to 40 seats.
What they do today
Some buy each license on the vendor's site with a company card and miss renewals. Some let a managed provider mark software up inside a monthly bill that no one can break down. A few depend on one person who knows how the books and the CRM are set up.
What moves them
A renewal notice that doubles the price, a failed migration, an audit request from a bank or insurer, a new hire who cannot find the right login, or a vendor changing its license terms.
What they ask of a supplier
A quote in writing they can set beside others, a start date that holds, someone who picks up the phone, and an invoice on net-30 terms.
How buyers pay
Orders under $2,000 are paid by card or ACH on delivery. Larger orders carry net-30 terms after a credit check, and projects bill 30% on signing and the balance on completion. The average customer pays in 38 days.
From First Call to Signed Order
Who answers a quote request
The quoting and renewals coordinator receives each request and sends back a written quote in four business hours. Orders above $10,000 are reviewed by the senior solutions consultant before the quote leaves the building.
The Year 1 pipeline
About 115 new accounts are won in the year from roughly 460 qualified quotes, a 25% win rate, on top of the 35 existing contacts.
| Lead source | New accounts | Share |
|---|---|---|
| Referrals from accountants and managed service providers | 32 | 28% |
| Outbound calls and email from the account executive and coordinator | 28 | 24% |
| Vendor-hosted webinars and co-marketing | 20 | 17% |
| Local search and the website | 18 | 16% |
| Chamber, association and industry events | 17 | 15% |
How prices are set
Distributor cost plus a markup sets each license quote, and the markup moves with the product and the competition. The plan averages 15% of price on licenses and 13% on seats. Implementation is quoted as a fixed fee for standard setups and at $165 an hour for the rest. Training is $1,800 a day. Retainers cover user and license administration, renewals management, security-policy upkeep and first-line help desk, with no device management or on-site work. They are priced per user on a 12-month term that renews automatically, and average $1,675 a month for about 28 users, or roughly $60 a user; scope and response times go in the written agreement.
Renewals and retention
The plan expects about 85% of annual license orders to renew and about 10% of seats to churn each year. Accounts that buy licenses, setup and a retainer stay longest, so every quote above $5,000 prices all three side by side.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Managed services contracts at year end | 18 | 38 | 56 | 74 | 90 |
| Resold seats at year end | 1,480 | 2,700 | 3,700 | 4,500 | 5,200 |
| Active accounts at year end | 150 | 270 | 360 | 430 | 480 |
A service desk analyst handles 18 to 30 contracts, or about 500 to 840 users, and the next hire follows the contract count. A load of 30, reached in Year 5, is stretched; a lender could press for a lower ceiling.
Paying for Attention
Where the $78,000 goes
Year 1 marketing totals $78,000, made up of $18,000 of launch spend paid from the raise and $60,000 of running cost. Running spend is 3.6% of Year 1 revenue and falls to 1.5% by Year 5. Spread over 115 new accounts that is $522 an account, or $678 once launch costs are added, compared with roughly $11,200 of first-year revenue from each.
| Channel | Year 1 spend | What it is expected to do |
|---|---|---|
| Events: chamber, association and industry | $16,000 | Booths and sponsorships; about 17 accounts |
| Website, search and content | $14,000 | Quote requests from searches such as "business software reseller Omaha"; about 18 accounts |
| Outbound tools and lists | $12,000 | Sequences run by the account executive; about 28 accounts |
| Vendor co-marketing and webinars | $10,000 | Joint events where a vendor's program permits; about 20 accounts |
| Referral program | $8,000 | A thank-you and a first-order credit for accountants and managed providers; about 32 accounts |
Dates to hit
- January 2027: lease signed, website live and quotes out to 35 contacts.
- April 2027: first two managed services contracts signed.
- June 2027: 70 active accounts and 6 managed contracts.
- December 2027: 150 active accounts, 1,480 seats and 18 managed contracts.
Delivery After the Sale
The office
About 2,600 square feet in west Omaha, with all-in rent near $21 a square foot, comes to $55,000 in Year 1: desks for ten, a demonstration lab with test tenants for each product line, and a training room for eight. The business moves to about 3,100 square feet in Year 4 at $72,000, as headcount reaches 13.
How an order moves
The coordinator places the order with the distributor on the day the customer signs. Licenses are provisioned electronically, and a consultant schedules setup within five business days. Setup, data migration and user training follow, and a customer who takes a retainer is handed to the service desk. The part-time billing coordinator, from month 4, matches every distributor invoice to its order before payment and runs invoicing and collection calls. Until then Marcus does both.
Tools the team runs on
A quoting tool linked to distributor catalogs, a ticketing and project system, remote monitoring for managed clients, accounting software and a customer portal for renewals. The tool bill is $30,000 in Year 1 and reaches $64,000 by Year 5.
Staffing as it grows
Six full-time people and a half-time coordinator at the end of Year 1, then ten, twelve and thirteen full-time through Year 4. Each consultant is planned at 1,500 billable hours a year, and the service desk grows with contracts, one analyst for every 18 to 30 of them.
Insurance and safeguards
- General liability, professional liability (errors and omissions), cyber cover and key-person life and disability cover on Marcus, budgeted at $22,000 in Year 1. Workers' compensation is carried inside the payroll load.
- Quote terms in writing that cover renewals, cancellations and a vendor changing its price mid-term.
- A credit check and written limit for every account above $10,000.
- Multi-factor sign-in, a password manager and written access procedures for staff who work inside customers' systems.
Rules and registrations
The business registers with the State of Nebraska and the City of Omaha. Whether licenses, subscriptions, setup and training are subject to Nebraska sales tax depends on how each is delivered and invoiced. The plan states no rule, and the owner would settle the question with the Nebraska Department of Revenue before the first invoice.
Suppliers and advisers
Two national distributors at opening, so no single one controls pricing, and a third once volume supports it. Outside advisers are an accountant, a commercial insurance broker and an employment lawyer who can be called when needed.
Leadership and Gaps
Marcus Hale, founder and president
Marcus has thirteen years in business software sales, the last seven as sales manager at a regional reseller in Omaha, where he led a team of four and managed about 90 accounts. He has vendor sales certifications and a business bachelor's degree. The $320,000 he invests comes from savings and the sale of a home. A lawyer has reviewed his present employment terms, and his non-solicitation period ends on December 31, 2026, so the 35 contacts to be quoted are people he is free to approach.
Skills the team lacks
Purchasing, credit control and payroll are new to Marcus. Cover comes from the part-time billing coordinator from month 4, an accountant's monthly review of receivables, and written credit limits on every account from the first order. Technical depth rests on one senior consultant and one consultant until month 16, and on two senior people only from month 46.
If Marcus is out
The senior solutions consultant can run the larger quotes, and the second account executive from month 14 holds a share of the relationships. Key-person life and disability cover on Marcus is in force.
Outside help
The investor, a former controller at a software company, reviews receivables and cash each month. Credit and pricing questions can go to the local Small Business Development Center.
Who owns the firm, and what the bank holds
Marcus holds 67% and the investor 33%, in an LLC that elects corporate tax treatment. As security the bank takes Marcus's personal guarantee and a lien on receivables, and it wants a monthly aging of receivables plus quarterly accounts. Whether the line can be drawn in full at opening depends on how the bank sets its borrowing base, and a lender may set restrictions on distributions.
Financial Plan: Thin Resale Margin, Services on Top
The tables run in the sequence a lender reads: where the $600,000 goes and who supplies it, the order counts and rates under each revenue line, sales by line and month, payroll, earnings, cash, the balance sheet and break-even. A downside case, with the owner's response to it, closes the section.
What $600,000 buys and who supplies it
| Use of funds | Amount |
|---|---|
| Laptops, monitors, phones and the demonstration lab | $34,000 |
| Office furniture, training-room fit-out and cabling | $26,000 |
| Vendor partner enrollment, certifications and distributor credit applications | $9,500 |
| Legal: entity set-up, customer and reseller agreements, lease review | $8,500 |
| Launch: website, quote portal, branding, first campaigns | $18,000 |
| Cash reserve for receivables growth and the first-year loss | $504,000 |
| Total uses | $600,000 |
| Source of funds | Amount |
|---|---|
| Marcus Hale's savings | $320,000 |
| One private investor, a former software-company controller | $160,000 |
| Bank revolving line of credit, guaranteed by the owner and drawn at opening and held (interest only) | $120,000 |
| Total sources | $600,000 |
Marcus Hale puts in $320,000 of his own savings, 53% of the total. A private investor, a former software-company controller, adds $160,000 and takes one third of the company, which brings equity to $480,000, 80% of the raise. The other $120,000, 20%, is a bank revolving line of credit with a personal guarantee from Marcus, drawn in full at opening and held at interest only, which costs $11,100 a year at an example rate of 9.25%. A line of this kind is often capped by a borrowing base tied to receivables, which are close to zero on opening day, so a lender might set it up as a term loan or an undrawn standby line instead; the plan shows it drawn so the interest cost is visible. Distributor trade credit for a new LLC usually needs the same guarantee, and a lender may restrict distributions while the line is outstanding. Of the $600,000, $504,000 is a reserve for the receivables that build as sales grow ($175,407 at the end of Year 1) and for the first-year loss. $60,000 buys laptops, the demonstration lab and the office fit-out, and $36,000 pays for legal work, partner enrollment and the launch.
Order counts, rates and terms behind the forecast
- Annual license sales are the largest Year 1 line: 270 orders at an average of $3,200 of license value, $864,000 in all, for accounting, CRM and endpoint-security subscriptions bought by companies with 10 to 250 employees. Orders reach 400 in Year 2 and 660 in Year 5, and the average order rises 2% a year. About 85% of one year's orders renew the next, so Year 2's 400 orders are roughly 230 renewals and 170 new sales. Resold licenses and seats are booked at gross, with the business as seller of record; whether gross or net presentation applies depends on the contract terms, and the owner's accountant would confirm it. On a net basis revenue would be lower and gross profit unchanged.
- Monthly seats come from a cloud productivity-suite subscription program. The business has 120 seats in January and 1,480 in December, then 2,700, 3,700, 4,500 and 5,200 at the end of Years 2 to 5, net of about 10% annual churn. The resale price is $27 a seat a month in Year 1 and rises 1.5% a year. Vendor program terms, tiers and incentives are set by each vendor and change often, so the model carries its own margin figures and names no program.
- Margins are stated per line. License resale keeps 15% of price and seat resale 13%, after what distributors and vendors charge and with any rebates or incentives folded in, since neither can be counted on. Implementation keeps 94% of price after subcontract help, training 88% after materials, and managed services 78% after the monitoring and security tooling they use. A 2-point cut in resale margin would cost about $56,000 of gross profit at Year 3 resale volume. The model holds the blended Year 1 direct-cost rate, 61.9%, in every later year, a gross margin of 38.1%. It gives no credit for the move toward services and retainers, so later-year margins are understated if the mix shifts as forecast.
- Implementation bills a blended $165 an hour, rising 3% a year: 1,900 hours in Year 1, 3,300 in Year 2 and 5,900 in Year 5. Each consultant is planned at 1,500 billable hours a year, 72% of 2,080 paid hours, and Marcus covers about 250 hours in Year 1, falling to 100 later. Capacity is about 2,750 hours in Year 1. Training days delivered by the senior consultant before the trainer arrives (40 in Year 1 and about 35 in Year 2) take 320 and 280 of those hours, so utilization is 78% in Year 1 and 82% in Year 2, then 80% or below.
- Training sells at $1,800 a day, rising 3% a year: 40 days in Year 1, 70 in Year 2 and 128 in Year 5. The trainer hired in month 19 delivers up to about 130 days a year.
- Managed services retainers cover user and license administration, renewals management, security-policy upkeep and first-line help desk for the suite and the applications the business sold. They exclude device management and on-site work. A contract averages about 28 named users at roughly $60 a user, or $1,675 a month, rising 3% a year; market pricing varies widely and this is a planning figure. Contracts begin in April and stand at 18, 38, 56, 74 and 90 at the end of Years 1 to 5, with Marcus and the senior consultant covering them until the first analyst starts in month 8. Each analyst carries between 18 and 30 contracts, or about 500 to 840 users, and the Year 5 load is stretched, so a lender could push for a lower ceiling.
- Active accounts stand at about 150, 270, 360, 430 and 480 at the end of Years 1 to 5, the Year 1 figure including 35 of Marcus's existing relationships. Revenue per account runs from about $11,200 in Year 1 to about $14,900 in Year 5.
- Customers pay in 38 days on average. License orders and projects invoice on net 30 and often run late, while seats and retainers bill monthly by ACH or card. Receivables reach $175,407 by the close of Year 1 and $745,840 by the close of Year 5, computed on each year's average daily billings, so in a fast-growing year they understate the balance at the December run-rate. Suppliers are paid on a 28-day average, leaving payables of $79,980 and $340,080 on those dates; credit limits and terms are set by each supplier after an application. The business holds no inventory, because licenses are delivered electronically.
- Payroll adds 27% to wages for employer payroll taxes, health coverage, workers' compensation and a retirement match, and 15% for the part-time coordinator. The wages in the personnel table are launch-year rates; 3% annual raises start in Year 2 and sit on their own line. Sales staff earn base pay plus commissions, and the commission line is 5.9% of Year 1 gross profit and 5.3% of Year 5 gross profit.
- The office is about 2,600 square feet in west Omaha with a demonstration lab and a training room, at an all-in rent near $21 a square foot, which is $55,000 in Year 1. It moves to about 3,100 square feet in Year 4 at roughly $23 a square foot, which takes rent to $72,000. Insurance is $22,000 in Year 1 and covers general liability, professional liability (errors and omissions), cyber cover and key-person life and disability cover on Marcus; customers often ask to see the first three.
- Marketing in Year 1 comes to $78,000, split into $18,000 of launch spend funded by the raise and $60,000 of running spend. The business wins 115 new accounts in the year, so running spend is $522 an account, or $678 with launch included, while first-year revenue per account is roughly $11,200.
- Tax is 21% federal and 4.55% Nebraska on the profit left after earlier losses carry forward. The state figure is an example rate that may change, and the owner would confirm the current rate with the Nebraska Department of Revenue. The model treats the LLC as electing corporate tax treatment, which a pass-through structure would change.
- Distributions to owners total $120,000 in Year 4 and $200,000 in Year 5, split 67% and 33% and paid only out of cash the model can spare. The line of credit stays fully drawn throughout, so the business borrows while it holds cash; a lender might ask for a repayment schedule instead.
Revenue by line
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Annual license sales (accounting, CRM and security) | $864,000 | $1,305,600 | $1,731,226 | $2,037,519 | $2,286,097 |
| Monthly subscription seats (productivity suite and add-ons) | $284,580 | $687,317 | $1,068,137 | $1,389,079 | $1,667,827 |
| Implementation, migration and configuration | $313,500 | $560,835 | $770,213 | $937,560 | $1,095,683 |
| Training and adoption sessions | $72,000 | $129,780 | $181,414 | $226,194 | $259,317 |
| Managed services retainers | $150,750 | $579,684 | $1,002,232 | $1,427,648 | $1,855,064 |
| Total revenue | $1,684,830 | $3,263,216 | $4,753,222 | $6,018,000 | $7,163,988 |
| Growth on prior year | – | 94% | 46% | 27% | 19% |
Resale lines make up 68% of Year 1 revenue but only about 26% of Year 1 gross profit at the line margins above; implementation, training and retainers supply the rest. License sales fall from 51% of revenue in Year 1 to 32% in Year 5, while managed retainers grow from 9% to 26% and seats from 17% to 23%. The retainers are the line that turns a one-time sale into a monthly one, which is why a service desk analyst joins payroll in month 8.
Year 1 by month, with the budget-season climb
| Month | Annual license sales (accounting, CRM and security) | Monthly subscription seats (productivity suite and add-ons) | Implementation, migration and configuration | Training and adoption sessions | Managed services retainers | Total revenue | EBITDA |
|---|---|---|---|---|---|---|---|
| Jan 2027 | $25,330 | $3,240 | $9,187 | $1,647 | $0 | $39,404 | ($49,866) |
| Feb 2027 | $35,259 | $7,020 | $12,788 | $2,866 | $0 | $57,933 | ($42,803) |
| Mar 2027 | $50,153 | $10,800 | $16,977 | $4,349 | $0 | $82,279 | ($33,523) |
| Apr 2027 | $56,232 | $15,120 | $20,394 | $4,876 | $3,350 | $99,972 | ($26,779) |
| May 2027 | $62,311 | $19,440 | $24,105 | $6,079 | $6,700 | $118,635 | ($19,664) |
| Jun 2027 | $84,703 | $23,760 | $29,103 | $5,799 | $10,050 | $153,415 | ($6,407) |
| Jul 2027 | $65,959 | $27,270 | $27,339 | $4,596 | $13,400 | $138,564 | ($12,068) |
| Aug 2027 | $73,710 | $30,510 | $30,297 | $7,191 | $16,750 | $158,458 | ($4,485) |
| Sep 2027 | $86,121 | $33,480 | $33,072 | $9,061 | $20,100 | $181,834 | $4,426 |
| Oct 2027 | $96,253 | $35,910 | $36,746 | $9,886 | $23,450 | $202,245 | $12,206 |
| Nov 2027 | $111,451 | $38,070 | $36,746 | $8,237 | $26,800 | $221,304 | $19,471 |
| Dec 2027 | $116,518 | $39,960 | $36,746 | $7,413 | $30,150 | $230,787 | $23,086 |
Revenue opens at $39,404 in January, climbs as accounts are onboarded, steps up in June when mid-year renewals fall due, and reaches $230,787 in December as year-end budgets are spent. Operating profit before interest, depreciation and tax is negative from January to August and positive from September. The monthly cash line counts customer invoices as collected. Treating 38 days of billings as unpaid and ignoring vendor credit, month-end cash is lowest in November, at about $54,000; that is a stress figure, and with about 28 days of vendor credit counted the low is roughly $180,000.
Headcount and payroll
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder, president and lead account executive | $115,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Senior solutions consultant (implementation lead) | $92,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Account executive | $62,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Quoting and renewals coordinator | $48,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Implementation consultant | $74,000 | Month 5 | 1 | 1 | 1 | 1 | 1 |
| Service desk analyst | $58,000 | Month 8 | 1 | 1 | 1 | 1 | 1 |
| Billing and vendor-compliance coordinator (part time, about 20 hours a week) | $24,000 | Month 4 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Second account executive | $62,000 | Month 14 | – | 1 | 1 | 1 | 1 |
| Second implementation consultant | $74,000 | Month 16 | – | 1 | 1 | 1 | 1 |
| Trainer and adoption specialist | $64,000 | Month 19 | – | 1 | 1 | 1 | 1 |
| Second service desk analyst | $58,000 | Month 22 | – | 1 | 1 | 1 | 1 |
| Third implementation consultant | $76,000 | Month 30 | – | – | 1 | 1 | 1 |
| Third service desk analyst | $58,000 | Month 31 | – | – | 1 | 1 | 1 |
| Second senior solutions consultant | $100,000 | Month 46 | – | – | – | 1 | 1 |
| Total payroll incl. on-costs | $516,635 | $799,548 | $1,018,623 | $1,127,420 | $1,222,670 |
Marcus, a senior solutions consultant, an account executive and a quoting and renewals coordinator open the business in January. The part-time billing and vendor-compliance coordinator joins in month 4, the first implementation consultant in month 5 and the first service desk analyst in month 8, when managed contracts reach 10. Year 2 adds a second account executive (month 14), a second implementation consultant (16), the trainer (19) and a second analyst (22). The third consultant arrives in month 30, the third analyst in month 31 and a second senior solutions consultant in month 46. That is 6.5 full-time equivalents at the end of Year 1, 10.5 at the end of Year 2, 12.5 at the end of Year 3 and 13.5 from Year 4. Marcus's $115,000 sits inside the costs, so the profit lines are what remains after he is paid, and no full-time role is turned into a part-time one anywhere in the plan.
Earnings, line by line
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $1,684,830 | $3,263,216 | $4,753,222 | $6,018,000 | $7,163,988 |
| Cost of sales (license and seat purchases from distributors and vendors, subcontract help, training materials, managed-service tooling) | ($1,042,600) | ($2,019,330) | ($2,941,369) | ($3,724,034) | ($4,433,190) |
| Gross profit | $642,230 | $1,243,886 | $1,811,853 | $2,293,966 | $2,730,798 |
| Payroll incl. on-costs | ($516,635) | ($799,548) | ($1,018,623) | ($1,127,420) | ($1,222,670) |
| Rent | ($55,000) | ($56,600) | ($58,300) | ($72,000) | ($74,200) |
| Utilities | ($7,000) | ($7,200) | ($7,400) | ($8,800) | ($9,100) |
| Marketing | ($60,000) | ($78,000) | ($92,000) | ($100,000) | ($108,000) |
| Insurance | ($22,000) | ($28,000) | ($33,000) | ($37,000) | ($40,000) |
| Professional fees | ($9,000) | ($10,000) | ($11,000) | ($11,500) | ($12,000) |
| Software subscriptions | ($30,000) | ($42,000) | ($52,000) | ($58,000) | ($64,000) |
| Sales commissions | ($38,000) | ($70,000) | ($100,000) | ($125,000) | ($145,000) |
| Vendor certifications, training and partner-program fees | ($9,000) | ($12,000) | ($14,000) | ($15,500) | ($17,000) |
| Travel and client-site costs | ($14,000) | ($20,000) | ($25,000) | ($28,000) | ($31,000) |
| Card and ACH fees, phones, supplies | ($10,000) | ($15,000) | ($19,000) | ($22,000) | ($25,000) |
| Demonstration lab licenses and equipment replacement | $0 | ($6,000) | ($5,000) | ($10,000) | ($8,000) |
| Bad debt allowance | ($8,000) | ($14,000) | ($19,000) | ($23,000) | ($27,000) |
| Annual pay raises (3% a year) | $0 | ($23,986) | ($62,034) | ($104,542) | ($153,456) |
| EBITDA | ($136,405) | $61,552 | $295,495 | $551,204 | $794,372 |
| Depreciation | ($10,514) | ($10,514) | ($10,514) | ($10,514) | ($10,514) |
| Interest | ($11,100) | ($11,100) | ($11,100) | ($11,100) | ($11,100) |
| Income tax | $0 | $0 | ($38,318) | ($130,250) | ($190,056) |
| Net income before start-up costs | ($158,019) | $39,937 | $235,563 | $399,340 | $582,702 |
| Start-up costs expensed at opening (legal, partner enrollment, launch marketing) | ($36,000) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($194,019) | $39,937 | $235,563 | $399,340 | $582,702 |
The Year 1 loss is $158,019 ahead of start-up costs and $194,019 once they are counted. Operating profit turns positive in September, and Year 2 earns $39,937 with no tax, since the early losses carry forward. Net margin before start-up costs rises from 1.2% in Year 2 to 5.0%, 6.6% and 8.1% in Year 5, which is $582,702. Pay raises grow to $153,456 a year by Year 5, yet payroll falls from 31% of revenue to 19% because revenue per full-time equivalent rises from $259,205 to $530,666. Gross margin is held at 38.1% in every year, so the table gives no credit for the move toward services and retainers.
What moves cash each year
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($278,931) | ($38,946) | $161,685 | $338,218 | $528,309 |
| Laptops, demonstration lab, training room and fit-out | ($60,000) | $0 | $0 | $0 | $0 |
| Funding received | $600,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | $0 | $0 | $0 | $0 |
| Owner distributions | $0 | $0 | $0 | ($120,000) | ($200,000) |
| Net change in cash | $261,069 | ($38,946) | $161,685 | $218,218 | $328,309 |
| Closing cash | $261,069 | $222,123 | $383,808 | $602,026 | $930,335 |
Year 1 operations consume $278,931 of cash. The pieces are the $158,019 operating loss ahead of start-up costs, $36,000 of start-up spend and $175,407 of receivables added, offset by $79,980 of vendor credit and $10,514 of depreciation. Cash never goes negative at a year end; the low point is $222,123 at the close of Year 2, when receivables are still outgrowing profit. Distributions wait until Year 4.
Balance sheet: receivables and vendor credit
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $261,069 | $222,123 | $383,808 | $602,026 | $930,335 |
| Accounts receivable | $175,407 | $339,732 | $494,856 | $626,532 | $745,840 |
| Laptops, demonstration lab, training room and fit-out (net) | $49,486 | $38,971 | $28,457 | $17,943 | $7,429 |
| Total assets | $485,961 | $600,826 | $907,121 | $1,246,500 | $1,683,603 |
| Owed to distributors and vendors (about 28 days) | $79,980 | $154,908 | $225,639 | $285,679 | $340,080 |
| Bank line of credit | $120,000 | $120,000 | $120,000 | $120,000 | $120,000 |
| Paid-in capital | $480,000 | $480,000 | $480,000 | $480,000 | $480,000 |
| Retained earnings | ($194,019) | ($154,081) | $81,481 | $360,821 | $743,523 |
| Total liabilities and equity | $485,961 | $600,826 | $907,121 | $1,246,500 | $1,683,603 |
Margins, break-even and debt cover
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -8.1% | 1.9% | 6.2% | 9.2% | 11.1% |
| Net margin (before start-up costs) | -9.4% | 1.2% | 5.0% | 6.6% | 8.1% |
| Payroll incl. pay raises as share of revenue | 31% | 25% | 23% | 20% | 19% |
| Revenue per full-time equivalent at year end | $259,205 | $310,782 | $380,258 | $445,778 | $530,666 |
| Average monthly revenue | $140,403 | $271,935 | $396,102 | $501,500 | $596,999 |
| Monthly revenue needed to cover operating costs | $170,223 | $258,478 | $331,502 | $380,997 | $423,336 |
| Debt service cover (EBITDA / interest + principal) | -12.3x | 5.5x | 26.6x | 49.7x | 71.6x |
In Year 1, monthly revenue averages $140,403 but operating costs need $170,223, hence the loss. Year 2 clears the line, at $271,935 against $258,478, and Year 5 clears it by $173,663, at $596,999 against $423,336. Debt service cover is negative in Year 1 and 5.5x in Year 2; because the line is interest only, the figure shows how many times operating profit covers the interest.
A 20% sales shortfall, and the response
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $1,347,864 | $2,610,573 | $3,802,578 | $4,814,400 | $5,731,190 |
| Net income before start-up costs | ($235,655) | $3,623 | $94,507 | $183,699 | $354,681 |
| Net income after start-up costs | ($271,655) | $3,623 | $94,507 | $183,699 | $354,681 |
| Closing cash | $202,518 | $145,137 | $182,645 | $319,550 | $632,819 |
Each revenue line is cut by 20% across all five years. Marcus responds in seven steps: hires from month 13 onward slip by six months, the second senior solutions consultant is never hired, marketing falls 20%, his own pay falls 20% to $92,000, commissions and card fees fall with sales, the business stays in its first office instead of moving in Year 4, and no distributions are paid. Bad debt is not cut. With those in place, year-end cash never drops below $145,137 and the business is profitable from Year 2, though only by $3,623 that year. The Year 1 loss grows from $194,019 to $271,655, and Year 5 earns $354,681 against $582,702 in the base case. Equity at the end of Year 1 is $208,345; a bank with a net-worth covenant would watch that closely, and Marcus would raise it before any covenant date. Balances at year end sit above the low point inside a year. Without the steps, the same shortfall would draw down the reserve far faster.
Sources
- Nebraska Department of Revenue: the state corporate income tax rate and the sales tax treatment of licenses, subscriptions, implementation and training. The plan uses 4.55% as an example rate and states no sales tax rule, so both items need confirming with the department.
- Vendor program terms, distributor margins and credit terms, hourly and daily rates, retainer prices, rent, insurance premiums, renewal rates and account counts are the plan's own figures.
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