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.
Full Answer Section
Five-Year Revenue Projection
The following table shows a five-year revenue projection for my venture company:
I made the following assumptions in generating this projection:
- I will acquire 1,000 subscribers in the first year and grow my subscriber base by 50% per year thereafter.
- Each subscriber will pay a monthly subscription fee of $100.
Five-Year Pro Forma P&L Statement
The following table shows a five-year pro forma P&L statement for my venture company:
I made the following assumptions in generating this P&L statement:
- Cost of goods sold will be 25% of revenue.
- Operating expenses will be 50% of revenue.
Five-Year Pro Forma Cash Flow Statement
The following table shows a five-year pro forma cash flow statement for my venture company:
I made the following assumptions in generating this cash flow statement:
- Cash flow from operations will be equal to net income.
- I will invest $100,000 in the first year to create my content library.
- I will not need to raise any additional financing after the first year.
Conclusion
I believe that my business model is sound and that my financial projections are realistic. I am confident that my venture company can be profitable within five years.
Sample Answer
Business Model
The business model of my venture company is to provide a subscription service for educational content. Subscribers would have access to a library of online courses, tutorials, and other learning resources on a variety of topics. I have selected this business model because it is a scalable and recurring revenue model. Once I have created a library of high-quality content, I can continue to add new content and subscribers over time without incurring significant additional costs.