BMB 655 Module 10 Final Project Example

Financial Plan, 2026-2028

[Student Name]

Southern New Hampshire University

BMB 655: Music Business Finance

Final Project

[Instructor Name]

[Date]

The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.

Financial Plan, 2026-2028

Introduction

This plan is written for the publisher's three founding songwriters and for its lender. It brings together the analysis of the company's performance, the purchase of a 600-song catalog and the funding plan into a single view of 2026 to 2028. It sets goals, projects results and cash, lists investments and their funding, defines the measures that will be watched and states what the company will do if royalty income weakens.

Goals

The founders' goals are growth, steadier income and control. In financial terms, the plan aims to grow the net publisher's share by at least 8 percent a year, to reduce the share of that income produced by the top twenty-five songs from 41 percent to under 30 percent by 2028, and to fund all investments without giving up ownership. These goals pull in different directions at times: buying catalogs increases growth and reduces concentration but adds debt, and the plan's limits are designed to balance them.

Key Assumptions

The company's own catalog grows about 1 percent a year, consistent with its recent history of slow decline in older songs offset by growth in newer ones. The acquired catalog earns about $338,000 a year in net publisher's share, declining 1 percent a year, plus administration savings and new sync income. New writers signed each year add modest income from their second year. Writer royalties stay at about 56 percent of revenue on the existing catalog. Interest on the catalog loan is 7.75 percent. A second catalog of about $2 million is assumed purchased at mid-2028, contributing half a year of income. Damodaran (2012) warns that projections are only as good as their assumptions, and each is drawn from the earlier analysis.

Projections

Projected results, in thousands of dollars

Growth comes mainly from the acquired catalog, whose full-year income begins in 2027. Debt rises in 2026 with the purchase and again in 2028 if the second catalog is bought, staying at or below the policy limit of three times operating cash earnings. The ratio touches the limit in 2026 because the acquired catalog's income has not yet fully arrived; it falls in 2027 as income catches up.

Investments

Writer advances of about $180,000 a year continue, with the expectation from the company's records that about three quarters of advance dollars will be recovered. The $400,000 stake in the licensing startup is paid over 2026 and 2027 and treated as a separate investment, not included in operating projections; its value will be reviewed when the startup reaches 500 paying customers. A second catalog, if found at a price supported by valuation, is the plan's largest discretionary use. Towse (2017) notes that publishers' value lies in owning copyrights that keep earning, which is why catalogs remain the core of the plan.

Funding

The plan follows the pecking order that Myers (1984) described: internal cash first, then catalog-secured debt, with outside equity declined. Internal cash funds advances and the startup stake; the existing $2.4 million catalog loan funds the 2026 purchase; and a second catalog would be financed about 70 percent by an extension of that loan. A $400,000 credit line covers seasonal gaps. Brealey et al. (2020) note that the right amount of debt balances its tax and cost advantages against the risk of financial distress, and the debt limits below are set with that balance in mind.

Measures

The founders and the lender will receive a quarterly report on six measures: growth in the net publisher's share, the top twenty-five songs' share of it, advance recovery for writers signed since 2020, debt relative to operating cash earnings, coverage of debt service and cash on hand. Each has a target or limit: growth of at least 8 percent, concentration falling each year, recovery of at least 70 percent, debt below three times cash earnings, coverage above 1.5 and cash above $600,000.

The Second Catalog Decision

The 2028 purchase is the plan's largest uncertainty, so the projections were also run without it. Without a second catalog, 2028 revenue would be about $5.0 million, operating income about $830,000 and debt about $2.35 million, falling to 1.9 times operating cash earnings. Concentration in the top twenty-five songs would fall to about 33 percent rather than below 30, missing the goal by a few points. The plan therefore treats the second catalog as optional: it should be bought only if a catalog of roughly the right size and age profile can be found at a price supported by valuation, and only if the company is within its debt limits at the time. If no suitable catalog appears, the concentration goal can still be approached through new writer signings, more slowly.

Contingencies

Two triggers are set in advance. If streaming-related income falls 15 percent below plan for two consecutive quarters, new advances are paused and the second catalog search is suspended. If coverage of debt service falls below 1.5, the company will apply surplus cash to the loan and defer discretionary spending until coverage recovers. A downside projection with a 15 percent fall in streaming income from 2027 shows operating income of about $560,000 in 2028 and coverage of about 1.4 without a second catalog, which is manageable once spending is paused.

Conclusion

Over three years the plan grows the company's income by more than 40 percent, mainly through the acquired catalog, reduces dependence on a few songs and keeps ownership with the founders. It is funded by internal cash and catalog-secured debt within clear limits, and it states in advance what the company will do if streaming income weakens. The founders keep full ownership throughout, which was their first condition, and the lender receives the same quarterly measures they do.

References

Brealey, R. A., Myers, S. C., & Allen, F. (2020). Principles of corporate finance (13th ed.). McGraw-Hill Education.

Damodaran, A. (2012). Investment valuation: Tools and techniques for determining the value of any asset (3rd ed.). Wiley.

Myers, S. C. (1984). The capital structure puzzle. The Journal of Finance, 39(3), 574-592. https://doi.org/10.1111/j.1540-6261.1984.tb03646.x

Towse, R. (2017). Economics of music publishing: Copyright and the market. Journal of Cultural Economics, 41(4), 403-420. https://doi.org/10.1007/s10824-016-9268-7