9. Financial Plan

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The start-up financial plan for the Beta Year is very modest and aims for balanced books by the end of the year (excluding start-up investment) based on limited income and expense aimed totally on investing in limited advertising. There is no point to drafting a profit and loss projection, a cash-flow projection, a projected balance sheet, and a break-even calculation when it can be simply stated for the Beta Year:

Income at $16 per subscription:





Total: $10,000

Expenses
Subscription processing fees: $1,000
Advertising and promotion: $9,000

NOTES:

1. Associated Professional Services will subsidize miscellaneous start-up costs up to $5,000 which will allow income from subscriptions (after processing fees) to be used entirely for advertising and promotion. *APS will underwrite or mitigate dissolution costs in the event the magazine fails.

1. Advertising and promotion expenditures will not be made until subscriptions have generated the money. Meanwhile, sales will depend on networking and viral marketing.

1. The budget will be adjusted periodically to reflect revenue above or below projections.

Year 2: 12-Month Profit and Loss Projection

Many business owners think of the 12-month P&L as the centerpiece of their plan. For Year 2 we will put it all together in numbers and get an idea of what it will take to make a profit and be successful.

Our sales projections will come from a sales forecast in which we forecast sales, cost of subscriptions sold, expenses, and profit month-by-month for the second year.

Subscription numbers will multiply as we receive automatic renewals plus new subscribers in the second year. Since we will have no record on retentions during the previous year, we will project retention percentages based on data gleaned from older publications. We will also have a means of projecting new subscriptions based on our record in the Beta Year adjusted to reflect a larger investment in advertising and promotion.

*IMPORTANT NOTE: Accepting a one-year subscription is a contract between the magazine and the subscriber. The magazine is obligated to deliver a full year’s worth of the magazine. Thus, it is not possible to suddenly pull the plug without refunding subscription or advertising money. Once started, the magazine will have to be published until the last subscriber contract is satisfied.

In the Beta Year, this means an abort would still leave the magazine with the obligation of delivering for an additional year or pay off the debt to the subscribers.

Meanwhile, it will be important for the magazine to build a reserve equal to the cost of one full year of production.

Projected Cash Flow

Businesses fail because they cannot pay their bills. Every part of our business plan is important, but none of it means a thing if we run out of cash.

Go slow; think big

Financially, we are undercapitalized. It is somewhat offset by our volunteer intellectual capital, but the lack of cash forces us to think big and go slow until the cash begins to flow. The nature of media, combined with the economics and power of the Web, will enable us to do so.

Before the end of the Beta Year, we need to develop a worksheet to plan how much we will need for capital expenses, operating expenses and reserves in the second year.

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Cover • Table of Contents • Executive Summary • General Company Description • Products and Services • Marketing Plan • Operational Plan • Management and Organization • Personal Financial Statement • Startup Expenses and Capitalization • Financial Plan • Refining the Plan • Appendix A: Competing Publications