Jack Stauber 1

GBUS 640
10/02/23
Gravyty Financial Plan

1. The revenues are growing through hosting of domains in which nonprofits can benefit
from a more seamless integrated platform to raise funding and organize their crm. From
looking at the income statement the clients that are most important to our business are
midsize companies and large cap companies. Smaller clients have less impact on our
business.
2. The biggest factors when it comes to the cost of goods sold are hosting, storage and
R&D. This is realistic because these are the products and services that we are developing
and offering to our clientele. As revenue increases the resources for our company that are
required will be increased to produce and maintain these services.
3. The largest operating expenses will come from payroll followed by sales and marketing
(SG&A) and payroll taxes.
4. After analyzing the cost assumptions the calculations that were computed are realistic
although we don’t have the full picture because they don’t include payroll and other
operating costs into the analysis. In the variable costs section of the statement, it was
assumed that payroll tax and benefits would take up a big chunk of variable costs
followed by hosting, storage and R&D. This is because most of the R&D costs will be
tied to developer salaries and SG&A percentages will be lower because initial sales and
advertising will be tied to existing infrastructure/networks that’s already in place making
it cheaper to advertise. The total percentage of variable costs adds up to 23% of revenue
per month excluding payroll which would have increased the total percentage if added.

Also variable costs are subject to change at any time depending on internal and external
factors that are at play. The fixed costs only take into account monthly, annual and fixed
one-time payments for their office spaces & legal/accounting fees and not payroll which
is why costs are significantly less. They also included income taxes (35%) and learning
curve adjustments to their cost assumptions and it looks good because as they improve
their processes the cost of learning will go down.

5. In analyzing the companies that were chosen as comparables, they were good decisions
because most of these companies like MicroStrategy, Blackbaud and Paycom Software
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are midsize companies experiencing moderate growth in the nonprofit sector while Intuit
Inc. is a large cap company that is much more established. These companies are a good
starting point for building analysis around/conducting research on and gives a good idea
of where the current market is heading. Many of the companies listed have similar
percentages when it comes to COGS, R&D, SG&A, and cost expenditures. There are no
outliers that I’m aware of except for Blackbaud which has a larger than expected
percentage of COGS (48%) and a lower SG&A (30%) compared to the average. The
OpEx (92%) is also higher than the others.
6. When analyzing the different financial statements some are accurate while others are not
and I’ll explain why. When looking at the cost structures for Gravyty, we can see that the
cost of goods sold makes up a little over 6% of revenue which is correct according to the
measures that will be taken by the company in utilizing existing networks for
advertising/sales and word of mouth advertising. However, it’s lower than the averages
from the comparable companies (17%) which is why it’s a little questionable since this is
a variable cost and not a fixed cost. When looking at the income statement, 23.2% for
SG&A makes much more sense and is in-line with the averages of the other companies.
Total operating expenditures for Gravyty (80.5%) also falls in-line with the averages.

When looking at the fixed costs, the calculations are accurate although limited because it
gives a good overview of monthly and annual payments for their office spaces &
legal/accounting fees but it doesn’t take into account payroll and other fixed operating
costs as a percentage of revenue which is why it’s incomplete when the whole company
has to be considered. Forecasted revenues are also extremely high within the first 3 years
and it's unrealistic to assume they would be making tens of millions so quickly when
they've only achieved hundreds of thousands of dollars. Also considering that salaries are
at $40k or below per employee this may be wishful thinking because developers are
usually paid $75k+ especially if it's in a high cost of living area but under the right
circumstances (internships, overseas labor, part-time developers, remote work, LCOL
areas) it can happen.