Developing a business model.

An integral part of the business plan is to develop a business model. Simply put, a business model describes how a company plans to make money. It is not what you do, but how you will make money doing what you do. A solid business model is the link between venture strategy and financial plans. Projecting the financial performance and requirements can be classified as financial goals of the venture. A venture capitalist will want to know not only the numbers, but how those were derived.

For this professional assignment, you will develop both a business model and financial goals for your new venture. develop and submit the following:

Define the business model of your venture company, explaining why it is you have selected this business model as the ideal model for your venture.
Create a five-year revenue projection and illustrate how you have come up with the projected numbers.
Develop a five-year pro forma P&L statement and justify your assumptions within the statement.
Devise a five-year pro forma cash flow statement and justify your assumptions within the statement.
Design a five-year pro forma balance sheet and specify how the balance sheet relates to the other two financial statements in parts (2) and (3).

Sample Answer

Business Model

My business model is a subscription-based service that provides users with access to a variety of educational resources, including online courses, video tutorials, and e-books. I have selected this business model because it is a recurring revenue model, which means that I will generate revenue from each subscriber on a monthly or annual basis. This is in contrast to a one-time purchase model, where I would only generate revenue from a customer once.

Full Answer Section

I believe that a subscription-based business model is the ideal model for my venture because it is scalable and predictable. As my business grows, I can add more subscribers and generate more revenue without having to incur significant additional costs. Additionally, a subscription-based model provides me with a steady stream of revenue, which can be helpful for planning and forecasting.

Revenue Projection

I have projected that my business will generate $1 million in revenue in its first year of operation. I have based this projection on the following assumptions:

  • I will have 10,000 subscribers in my first year.
  • My monthly subscription fee will be $10.
  • I will retain 80% of my subscribers each year.

I believe that these assumptions are realistic and achievable. There is a large and growing demand for educational resources, and my subscription service will be a valuable resource for students of all ages. Additionally, my pricing is competitive with other subscription-based educational services.

Pro Forma P&L Statement

Here is a pro forma P&L statement for my business:

Year Revenue Cost of Goods Sold Gross Profit Operating Expenses Net Income
1 $1,000,000 $200,000 $800,000 $600,000 $200,000
2 $1,600,000 $320,000 $1,280,000 $960,000 $320,000
3 $2,560,000 $512,000 $2,048,000 $1,536,000 $512,000
4 $4,096,000 $819,200 $3,276,800 $2,457,600 $819,200
5 $6,553,600 $1,310,720 $5,242,880 $3,934,304 $1,310,720

My main operating expenses will be marketing and advertising costs, as well as the costs of developing and maintaining my educational resources. I have assumed that my operating expenses will be 60% of my revenue in each year.

Pro Forma Cash Flow Statement

Here is a pro forma cash flow statement for my business:

Year Cash Flow from Operations Cash Flow from Investing Cash Flow from Financing Net Cash Flow
1 $400,000 -$100,000 -$500,000 -$200,000
2 $640,000 -$200,000 -$500,000 $140,000
3 $1,024,000 -$300,000 -$500,000 $224,000
4 $1,638,400 -$400,000 -$500,000 $738,400
5 $2,621,440 -$500,000 -$500,000 $1,621,440

My cash flow from operations is the difference between my revenue and my operating expenses. My cash flow from investing is the net amount of cash that I spend on or receive from investments, such as the purchase of new equipment or the sale of