This sample plan is for an imaginary investment company that acquires other companies to invest. The hypothetical Venture Capital company starts with $20 million to start its initial investment fund. In its early months of existence, it invests $5 million each in four companies. It receives a management commission of two percent (2%) from the fund’s value each quarter. It pays salaries to its partners and other employees, and office expenses, from the management fee.
The investments show up in the Cash Flow table as the purchase of long-term assets, which also puts them into the balance sheet as long-term assets. You can see them in this sample plan, in the first few months.
In the third year, one of the target companies fails, so $5 million is written off as failure. 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 loss and the remaining investments amount to $15 million.
One of the target companies has a turnover of $50 million in the fifth 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. At that point there’s been a $45 million profit, and the balance of long-term assets goes down to $10 million.
This is just one example. The business model holds long-term assets and waits for them to appreciate. It doesn’t reflect the appreciation of assets, nor does it show write-down until assets are sold. Sales and cost of sales are the appreciation and write-down of assets, plus the management fees.
This explanation has been broken into key topics and copied to be linked to the tables. These topics are:
- 2.2 Start-up Summary
- 5.5.1 Sales Forecast
- 6.4 Personnel
- 7.4 Projectioned Profits and Losses
- 7.5 Projected Cash Flow
- 7.6 Projected balance sheet