INTERNET START-UP: BUSINESS PLAN AND VALUATION USING DISCOUNTED CASH FLOW METHOD
Explanation for a correct understanding and utilization of the model:
1) Blue colour cells must be filled out by the user.
2) Explanations according to the figures which appear in the sheets:
1- Yield which should be achieved by the investor, in the event that no debt would be used in the financing.
2- Proportion of own financing over total permanent financing (debt + net worth), which is considered by
the investor to be reasonable to keep in a company like that. In the case of an internet company, this 
proportion is normally 100% in the initial phase.
3- Assumption of increase in perpetual free cash flow starting in last year, in order to obtain a residual
value of the company.
4- Logically, with a higher level of debt, there is more risk for the company, and a higher yield should
be requested by the investor. A financial formula helps us to calculate the new requested yield.
5- After tax debt cost, in proportion to its percentage over total permanent financing. 
6- Cost of own financing in proportion over total permanent financing. 
7- Interest rate that will be used to discount to present value of the free cash flow that will be generated
by the company.
8- The figures of debt and own financing are left empty because the balance sheet is considered
before including the financing resources.
9- WCN (Working Capital needs) = Cash needed for operations + Receivables - Payables. 
10- This figure will give us an approach to the highest level of financing needs of the company.
Detail of company's income (US$ Thousand)
https://www.financial-simulation.com
Year 1
Year 2 Year 3 Year 4 Year 5 TOTAL
1st Q 2nd Q 3rd Q 4th Q Total Year 1
Assumptions of web site users:
Internet users in our country
Penetration of our web site in our country
Users of our web site in our country
Internet users in the rest of the world
Penetration of our web site in the rest of the world
Users of our web site in the rest of the world
Total users of our web site
Income from subscriptions to payment services:
Inflation
Percentage of users subscribed to payment services
Payment services subscribers
Subscription price - Per month (in US$)
Total from payment services (US$ Thousand)
Income from publicity:
Inflation
Visits per user in each period
Total visits in each period (Thousand)
Pages per visit (average)
Total pages visited in each period (Thousand)
Percentage of publicity occupation
CPT - Income from each thousand pages (in US$)
Total from publicity (US$ Thousand)
Income from electronic sales:
Inflation
Percentage of users who buy
Total buyers
Volume of purchase per buyer in each period (US$)
Profit margin from sales
15%
Total from electronic sales (US$ Thousand)
Income from sponsorship programmes:
Main sponsor (US$ Thousand)
Other sponsors:
Sponsor 1
Sponsor 2
Sponsor 3
Total from sponsors (US$ Thousand)
Income from sale of contents to third parties:
Sale of contents
Total from sale of contents (US$ Thousand)
Total Income (US$ Thousand)
Detail of investments (US$ Thousand)
Year 1
Year 2 Year 3 Year 4 Year 5 TOTAL
1st Q 2nd Q 3rd Q 4th Q Total Year 1
Hardware
Software
Service development
Telecommunications: Internet access
Office and equipment
Other
Launch advertaising campaign
Total investment 
Accumulated investment
Detail of personnel expense (US$ Thousand)
Year 1
Year 2 Year 3 Year 4 Year 5
1st Q 2nd Q 3rd Q 4th Q End Year 1
EVOLUTION OF NUMBER OF EMPLOYEES
General Manager
Finance Manager
Administration Department
Human Resources Manager
Marketing Director
Commercial Director
Commercial Department
Contents Manager
Contents Department
Editorial Manager
Editorial Department
Web masters
Graphic Designers
Systems Manager
Systems Maintainance Department
Database technicians and programmers
Other employees
Total personnel for each period
Year 1
Year 2 Year 3 Year 4 Year 5
1st Q 2nd Q 3rd Q 4th Q Total Year 1
SALARIES
Inflation
ANNUAL GROSS
SALARY (US$ Thousand)
General Manager
Finance Manager
Administration Department
Human Resources Manager
Marketing Director
Commercial Director
Commercial Department
Contents Manager
Contents Department
Editorial Manager
Editorial Department
Web masters
Graphic Designers
Systems Manager
Systems Maintainance Department
Database technicians and programmers
Other employees
Total salaries per period (without inflation)
Total salaries per period (including inflation)
Detail of General and Administrative expense (US$ Thousand)
Year 1
Year 2 Year 3 Year 4 Year 5 TOTALES
1st Q 2nd Q 3rd Q 4th Q Total Year 1
Purchase of contents:
Inflation
Purchase of contents produced by third parties
Purchase of rights for publication of contents
Other costs related to purchase of contents
Total cost related to purchase of contents
Personnel expense (see details in previous page):
Inflation
Personnel (number of employees)
Salaries
Social Security: % of salaries
Social Security
Other social related expense: % of salaries
Other social related expense
Incentives: % of sales
Incentives
Total personnel expense
External Services:
Inflation
3%
Sales and advertising expense: % of sales
Sales and advertising expense
External marketing services
Insurance
Telecommunications
Supplies
Other external services
Total External Services:
Summary of initial assumptions and additional assumptions for the valuation of the company (US$ Thousand).
1) For calculation of Profit and Loss statements:
Year 1
Year 2 Year 3 Year 4 Year 5 TOTAL
1st Q 2nd Q 3rd Q 4th Q Total Year 1
a/ Sales
   Increase in sales
b/ General and administrative expense
   General and administrative expense: % of sales
c/ Depreciation: % of previous period net fixed assets
20%
d/ Income tax rate
2) For calculation of Balance Sheet:
Year 1
Year 2 Year 3 Year 4 Year 5
1st Q 2nd Q 3rd Q 4th Q Total Year 1
a/ Cash needed for operations: % of General and Administrative Expense
    Cash needed for operations
b/ Receivables collection period: (Receivables/sales)*360 (days)
    Receivables
    Receivables: % of sales
c/ Planned investment in fixed assets
d/ Payables payment period: (Payables/G&A Exp.)*360 (days)
    Payables
    Payables: % of General and Administrative Expense
3) For calculation of market value of the company
Year 1 Year 2 Year 3 Year 4 Year 5
a/ Yield requested by the market without debt (Ku) (1)
b/ Cost of debt before tax
c/ Proportion of own financing over total permanent financing (2)
d/ Proportion of debt over total permanent financing
e/ Growth rate of Free Cash Flow (FCF) starting from last year (3)
From these assumptions, we have as a result the following yields requested by the market for the different leverage levels
Yield requested by the market for this leverage (Ke) (4)
Weighted cost of debt after tax (5)
Weighted cost of own financing (6)
Weighted average cost of capital (wacc) (7)
PROJECTIONS OF BALANCE SHEET, PROFIT & LOSS AND FREE CASH FLOW (US$ Thousand)
BALANCE SHEET
Year 1
Year 2 Year 3 Year 4 Year 5
1st Q 2nd Q 3rd Q 4th Q Total Year 1
Cash needed for operations
Receivables
Fixed assets (gross)
 - Accumulated depreciation
Fixed assets (net)
TOTAL ASSETS
Payables
Debt (8)
Net worth (8)
TOTAL LIABILITIES AND NET WORTH
Working capital needs (WCN) (9)
PROFIT AND LOSS
Year 1
Year 2 Year 3 Year 4 Year 5
1st Q 2nd Q 3rd Q 4th Q Total Year 1
Sales
General and administrative expense
Operating gross margin (EBDIT)
Depreciation
EBIT
Income tax
Net Profit
Variation of net profit
 + Depreciation
 - Increase in WCN
 - Investment in fixed assets
Free cash flow (FCF)
Increase in FCF
Accumulated FCF
(10)
VALUATION OF THE COMPANY (US$ Thousand)
Year 1 Year 2 Year 3 Year 4 Year 5
Free cash flow (FCF)
Residual value according to a growth rate of:
with wacc
Total cash flows to be discounted, including residual value
Discounting rate = wacc
Discounting factor
Discounted cash flows
Addition of discounted cash flows (Present value of the company)
SUMMARY OF BUSINESS PLAN ECONOMIC FIGURES: ASSUMPTIONS AND RESULTS (US$ Thousand)
Investments
Year 1
Year 2 Year 3 Year 4 Year 5 TOTAL
1st Q 2nd Q 3rd Q 4th Q Total Year 1
Total investment
Accumulated investment
Income
Year 1
Year 2 Year 3 Year 4 Year 5 TOTAL
1st Q 2nd Q 3rd Q 4th Q Total Year 1
Income from subscriptions to payment services
Income from publicity
Income from electronic sales
Income from sponsorship programmes
Income from sale of contents to third parties
Total income
General and Administrative Expense
Year 1
Year 2 Year 3 Year 4 Year 5 TOTAL
1st Q 2nd Q 3rd Q 4th Q Total Year 1
Total cost related to purchase of contents
Total personnel expense
Total cost of external services:
Total General and Administrative Expense
 
Results
Year 1
Year 2 Year 3 Year 4 Year 5 TOTAL
1st Q 2nd Q 3rd Q 4th Q Total Year 1
Total income
Total general and administrative expense
Gross Operating Margin (EBITDA)
Depreciation
Income Tax
Net Profit
Free Cash Flow (FCF)
Accumulated Free Cash Flow
Discount rate = wacc 
Growth rate of Free Cash Flow (FCF) starting from last year
Present Value of the company (including residual value)