fincial statement

Mission

AppSuccess provides low-income students who are qualified to go to a four-year college with the means to get there. We eliminate the college application information gap by matching our Applicants with students from top colleges who guide them through the college application and financial aid process via our interactive online platform.

Theory of Change

If we provide low-income students with personalized college application assistance, then they will get into better colleges and have improved life options and opportunities.

Value Proposition

Our product creates value both to the Applicant and to society.

Value for Applicant

AppSuccess’s primary value proposition is to reduce the cost of achieving education to the Applicant. We do this in three ways:

(1) Reducing information costs: By making information that is relevant for college applications free and accessible for all high school students, AppSuccess allows both students and their parents to learn about the details of applying to, attending, and paying for college;

(2) Reducing application support costs: By providing low-income students with free college counseling services, AppSuccess gives them an opportunity to compete with their high-income peers who often have adult support and assistance with their applications; and

(3) Reducing dollar costs: By assisting Applicants to identify and apply for college fee waivers, scholarships, and grants, AppSuccess works to save each Applicant hundreds, if not thousands, of dollars to make college affordable.

In addition, because the end goal of AppSuccess is to get its Applicants into college, we offer our “customers” the added value that comes with a post-secondary education. Studies over the last decade have confirmed that college graduates reap significant benefits over those that stop at high school (College Board). Compared to high school graduates, college graduates:

· Earn nearly $1 million more over a lifetime;

· Have half the unemployment rate;

· Have one-third the incarceration rate;

· Require $800-$2,700 less in social programs each year; and

· Have more educated children.

Value for Society

The financial return to society for a program like AppSuccess is substantial. Not only does it provide intangible benefits to the Applicant in the form of increased exposure to diversity of ideas and cultures, but also to society in the form of economic benefit. A first-pass analysis suggests that the net present return on investment in an AppSuccess Applicant is over $45,000, the bulk of which is derived from the increased income open to college graduates and graduates of higher tier institutions. We expect this sort of return to attract strong foundation investment, especially after proof-of-concept.

FINANCIAL PLAN

Financial Overview

Business Model Description & Financial Targets

Our model projects that we will be cash-flow positive by our third year of operation. Our expenses will be driven mainly by web-development and personnel costs, and will gradually grow from $325,000 in year one to $650,000 in year six, as we double our headcount to accommodate increased web traffic and recruitment efforts. We will be financed mainly by grants and individual donations, and will slowly introduce additional revenue streams including advertising and corporate partnerships.

There are two key financial criteria to our mission: (1) that the application assistance always be provided free of charge to the Applicants, and (2) that we have a financially sustainable organization by year three of operation. Our projections achieve both of these goals (see Appendix).

Key Assumptions

Start-Up & Growth Expectations

AppSuccess will roll out in four Stages:

Stage 1 (estimated time: 1 year). We will launch the program with 90 Applicants and 90 Mentors. We will recruit Campus Leaders from three colleges—Harvard University, Washington University in St. Louis, and the University of California, Berkeley. The Campus Leaders will be in charge of finding 25-35 Mentors in their school. Mentors will be trained using a curriculum designed specifically to assist the Applicants in the application process. We will partner with a handful of high schools to recruit our first 90 Applicants. Applicants and Mentors will interact using the web-based platform, with a back-end that will allow us to monitor the progress of each Applicant. Throughout Stage 1, we will solicit feedback from all 90 Mentors and Applicants on a bi-weekly basis to make continual improvements to the program based on real-time feedback.

Stage 2 (estimated time: 1 year). We will expand the program to 440 Applicants and 430 Mentors from ten universities. This Stage will require us to find new Campus Leaders, who will drive the increased requirement for Mentors. The website and curriculum will be adjusted and improved in response to feedback gathered in Stage 1.

Stage 3 (estimated time: 2-3 years). We will continue to grow, accepting many more Mentors and Applicants. This Stage will require significantly more resources to support nationwide recruiting. We will need to hire staff to manage the Campus Leaders and the Applicant/Mentor pairs, and ensure that each is fulfilling their obligations.

Stage 4 (estimated time: 2-3 years). We will scale further by creating compatible programs for high school juniors, sophomores, and freshmen, focusing more on college preparation (e.g., taking rigorous classes, participating in extracurricular activities, studying for the SAT and ACT). This will require significant curriculum development, with specific benchmarks and a different set of guidelines for each school year program.

Sources of Revenue

Total revenues will grow from a base of approximately $210,000 to over $940,000 by year six of operation. These gains are a direct benefit of the continued support of our donors and partners, as well as advertising related to the growth of our business. Details by line item as follows:

Grants. Foundations provide a large source of funding to education-related nonprofits: four of the top 10 foundations in the US support education. Many other foundations, like the Citi Foundation and the Lumina Foundation, target funds specifically at activities that promote college access among disadvantaged populations. Grants will be a significant source of funding for AppSuccess in our early years, and as we grow we will rely on them increasingly less. In our first year we expect grants to make up 95% of our revenue. By our sixth year of operation we will have reduced our dependence on grants significantly, down to 30% of our revenue. As we continue to build a reputation and a corps of committed financial supporters we expect annual donations to make up an increasingly larger percentage of our revenue stream. Therefore, we plan to apply initially for grants for seed funding from foundations like the Darden Foundation, whose Recipe for Success program offers seed funding to organizations that “impact the educational prospects of underserved youth, ages 14 to 18, by providing them with access to the information and tolls they need to pursue their dreams of higher education.”

Partnership Revenue. AppSuccess will partner with organizations like CollegeBoard, ACT Inc., Princeton Review, Embark, CommonApp, FastWeb, and other organizations geared toward getting students into college. Our goal is to build relationships and eventually point our students toward their websites.

Donations. We will raise donations primarily through our "Sponsor an Applicant" program. The program enables donors to finance all of AppSuccess's costs associated with supporting an Applicant for $100 per Applicant. To get long-term buy-in from donors, we will require Applicants to write letters of appreciation to their sponsors. Similar sponsorship programs have proven extremely effective for other organizations because it puts human faces to the donation.

Advertising Revenue. Different from our partnerships, our advertisers will be consumer product companies and related companies that market to young adults. Revenue calculations are based on a standard ‘click through’ model. We assume our advertisers will pay us an average click through rate of $0.65, and that our Applicants will click an average of 3 times per month.

Costs and Expenses

Our largest expense is personnel, with salaries and benefits estimated to be around $560,000 during the first two years alone. Note that throughout the six-year projection more than 80% of our expenses are related to personnel, as the hardware/storage, real estate, and miscellaneous costs are minimal.

Net Surplus and Break-Even

Despite a minimal loss in years one and two (that could be financed by guaranteed loans), we will be fiscally sound and self-sustaining thereafter (see Below).

Financial Projections

Revenues Expenses Surplus

$1,000

$900

$800

$700

$600

$500

$400

$300

$200

$100

$0

-$100

2012

2013

2014

2015

2016

2017

Dollars (in thousands)

Projected Financials

Statements of Income and Cash Flow

Statement of Income

AppSuccess exhibits seasonality in accordance with the college application process. College application deadlines range from mid-November to early February, thus highest activity levels on our site will be in the first and second fiscal quarters, with web design, advertising and promotion and travel expenses weighted toward the first half of the fiscal year (see Appendix).

Revenues are budgeted to be spread evenly over the fiscal quarters, with the first quarter of 2012 getting a boost from the $25,000 prize related to the HBS Business Plan Competition.

Statement of Cash Flow

Our cash flow statement resembles our projected income statement. This is both due to our nonprofit status (we do not pay any taxes and therefore expense all our software development costs as incurred) and due to the web-based nature of our business, meaning that there are few fixed assets that need to be depreciated. On an annual basis, all our revenues and expenses are received and paid for in cash.

In the first two years of operation we are projected to lose approximately $187,000. This will be financed by debt, raised in advance of incurring the losses and projected to cost approximately 4% on an annual basis (see Appendix).

Note that we will begin to earn a surplus and generate cash in the third year of operation. Any excess cash generated will be used to repay debt.

Sustainability

Sustainability is a serious concern for any enterprise, and especially for those in the not-for-profit realm. Through conservative planning, leveraging our partner relationships and exploiting revenue streams collateral to our core business, we hope to ensure this sustainability for AppSuccess. Our financial projections show that we will be cash flow positive by year three of operation. Yet we recognize that without charging for our services, we are dependent on the funding from individual donors and foundations to be sustainable. We plan to address this challenge in several ways.

Keeping Operating Costs Low

Aside from the handful of staff we need to run the business and develop the website, our operating costs are extremely low, which allows us to focus less of our time on fundraising and more of our time on creating a better product.

Keeping Fundraising Goals Conservative

Our financial projections show that we only need to raise about $200,000 in grants each year to be sustainable. We believe that this is a conservative estimate, since funding for education nonprofits exceed over $5.5 billion annually in the US alone. Importantly, the economic hardships did not affect funding for education.

Developing Other Potential Sources of Revenue

The very nature of our web-based platform lends itself to two potential sources of revenue in the future:

· Data sales: By year six, we will have worked with over 16,500 Applicants and completed tens of thousands of college applications. Using the lessons learned and the data accumulated from these applications, we could compile this information into a workable format to make available to high schools for a fee. Schools, both Title 1 and others, could use this data to help them inform their college counseling, as well as distributing the material to students. Ours would be a classic razor-razor blade model. Due to our technology focus, data accumulation and customization costs would be modest. We could give away the initial data package for free and then charge increasing amounts per school per year for updates. Longer term, we hope to be working with hundreds of Title I high schools (not to mention the thousands of overall high schools in the US), and charging several thousands of dollars annually for updates – this could be a dramatic addition to our revenue model.

· Source code sales: Our operational success will be closely tied to the robustness of our web-based platform. The source code that we will develop, which will allow for complex and multi-faceted interactions to take place remotely, could be sold to other non- competing companies. This could include any multi-person, multi-location operation, including SAT preparation, general tutoring, consulting, medical services, etc.

Key Data

AppSuccess

2012-2017

GROWTH STRATEGY	2012	2013	2014	2015	2016	2017
MENTORS
# Campuses	3	10	25	50	100	100
# Mentors	90	430	1200	2330	4890	6210

APPLICANTS

Avg. applicants per mentor	1	1.02	1.05	1.08	1.08 1.12
# Applicants	90	440	1260	2520	5280 6960

STAFF (FTE)

# Computer designers	1.5	1.5	2	2	2	2
# Other employees	4	4	5	6	8	9
Total headcount	5.5	5.5	7	8	10	11

SALARY EXPENSE

Web designer	60,000
Other employees	40,000

ADVERTISING

price per click through 0.65

# click thru/member/month 3

Statement of Income

AppSuccess

Projected Quarterly Income Statement Fiscal Years 2012-2014

2012-2013

2013-2014

REVENUES	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Grants	68,750	43,750	43,750	43,750	50,000	50,000	50,000	50,000
Partnership	-	-	-	-	-	-	-	-
Donations	2,250	2,250	2,250	2,250	11,000	11,000	11,000	11,000
Advertising	530	700	530	350	2,570	3,430	2,570	1,720
TOTAL REVENUES	71,530	46,700	46,530	46,350	63,570	64,430	63,570	62,720
EXPENSES	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Web Design	30,000	30,000	15,000	15,000	30,000	30,000	15,000	15,000
Salaries	40,000	40,000	40,000	40,000	40,000	40,000	40,000	40,000
Benefits	8,000	8,000	8,000	8,000	8,000	8,000	8,000	8,000
Real Estate	-	-	-	-	-	-	-	-
Travel Expenses	4,500	4,500	1,500	1,500	4,500	4,500	1,500	1,500
Advertising	6,500	6,500	2,000	2,000	6,500	6,500	2,000	2,000
Interest Expense	600	600	1,200	1,200	1,200	1,200	1,200	1,200
Other	3,000	3,000	2,500	2,500	3,000	3,000	2,500	2,500
TOTAL EXPENSES	92,600	92,600	70,200	70,200	93,200	93,200	70,200	70,200
NET SURPLUS	(21,100)	(45,900)	(23,700)	(23,900)	(29,600)	(28,800)	(6,600)	(7,500)

AppSuccess

Projected Annual Income Statement Fiscal Years 2012-2017

REVEUNES	2012	2013	2014	2015	2016	2017
Grants	200,000	200,000	250,000	250,000	250,000	280,000
Partnership	-	-	55,000	75,000	100,000	150,000
Donations	9,000	44,000	113,400	189,000	343,200	348,000
Advertising	2,100	10,300	29,500	59,000	123,600	162,900
TOTAL REVENUES	211,100	254,300	447,900	573,000	816,800	940,900
EXPENSES	2012	2013	2014	2015	2016	2017
Web Design	90,000	90,000	120,000	120,000	120,000	120,000
Salaries	160,000	160,000	200,000	240,000	320,000	360,000
Benefits	32,000	32,000	40,000	48,000	64,000	72,000
Real Estate	-	-	40,000	40,000	40,000	40,000
Travel Expenses	12,000	12,000	12,000	15,000	15,000	15,000
Advertising	17,000	17,000	17,000	20,000	20,000	25,000
Interest Expense (inc)	3,600	4,800	4,800	3,600	2,000	(2,800)
Other	11,000	11,000	11,000	15,000	15,000	20,000
TOTAL EXPENSES	325,600	326,800	444,800	501,600	596,000	649,200
NET SURPLUS	(114,500)	(72,500)	3,100	71,400	220,800	291,700

Statement of Cash Flow

AppSuccess

Fiscal Years 2011-2017

CASH INFLOW	2011	2012	2013	2014	2015	2016	2017
Beginning Cash	-	20,000	25,500	(49,000)	(45,900)	2,500	163,300
HBS Award	25,000	-	-	-	-	-	-
Debt Incurred	-	120,000	-	-	-	-	-
Operating Surplus	-	-	-	3,100	71,400	220,800	291,700
TOTAL INFLOW	25,000	120,000	-	3,100	71,400	220,800	291,700
CASH OUTFLOW	2011	2012	2013	2014	2015	2016	2017
Operating Losses	-	114,500	72,500	-	-	-	-
Investments	5,000	-	2,000	-	3,000	-	-
Debt Repaid	-	-	-	-	20,000	60,000	40,000
TOTAL OUTFLOW	5,000	114,500	74,500	-	23,000	60,000	40,000
NET CASH	20,000	25,500	(49,000)	(45,900)	2,500	163,300	415,000