This sample plan was created for a hypothetical investment company that buys other companies as investments. This sample shows that the initial investment fund for a hypothetical Venture Capital firm is $20 million. In its early months of existence, it invests $5 million each in four companies. It receives a monthly management fee of two per cent (2%) of the fund’s value. It pays salaries to its associates and other employees. The management fee covers office expenses.
The cash flow table displays investments as longterm assets purchased. These assets are added to the balance sheet. These can be seen in this sample plan in the first few weeks.
Five million dollars is written off for failure if one of the target businesses fails in the third year. It will be clear that this resulted in a $5million sale of long-term cash assets and a balancing input of $5,000,000 in costs in profit and loss. This results in a tax deduction and the investment balance is increased to $15 millions.
One of the target businesses is transacted at $50,000,000 in the fifth fiscal year. You’ll see in the sample how that shows up as a $45 million equity appreciation in the sales forecast, plus a $5 million sale of long-term assets in the cash flow. The $45 million profit is now realized, while the long-term balance drops to $10 million.
This is an example. This business model holds long-term assets, and waits for their appreciation. It doesn’t show asset appreciation until they are sold and it doesn’t show write down of assets until they fail. Sales and cost are the appreciation or write-down of assets.
The explanation above has been broken down and copied into key topics in the outline that are linked to corresponding tables. These topics are:
- 2.2 Summary of the Start-up
- 5.5.1 Sales Forecast
- 6.4 Employees
- 7.4 Projectioned Profits and Losses
- 7.5 Projected Cash Flow
- 7.6 Projected Financial Balance Sheet