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).
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:
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:
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