Frame & Field Studios Business Plan — Financial Plan

Five-year projections with full income statement, cash flow and balance sheet: revenue to R27.96m and EBITDA to R5.34m.

Financial Plan

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7.1 Basis of preparation
7.2 Income statement
7.3 Fixed costs and capital
7.4 Working capital
7.5 Cash flow
7.6 Balance sheet

7.1 Basis of preparation

▪ All figures are in South African Rand and exclude VAT.

▪ Revenue is built from photographers, working days, billable utilisation and the blended day rate. Output is capped by editing capacity where that binds, which is in every year.

▪ Day rates escalate at 5.5% a year before AI-driven erosion. After erosion weighted by each line’s exposure the blended rate rises 2.8% a year — so catalogue and brand rates fall in real terms while events and portraiture hold.

▪ Direct costs escalate at 6.0% and fixed costs at 5.8%, both above the blended rate increase.

▪ Overhead scales with headcount rather than being fully loaded from Year 1, reflecting a founder-led start.

▪ Depreciation is straight-line over four to ten years; camera and computing equipment is depreciated fastest because it is replaced fastest.

▪ Tax is at Small Business Corporation rates while turnover remains below the R20 million threshold, and at 27% thereafter, with the Year 1 assessed loss carried forward subject to the section 20 limitation.

▪ Working capital assumes 58 debtor days, 12 days of work in progress and 28 days to pay suppliers.

7.2 Income statement

R	Year 1	Year 2	Year 3	Year 4	Year 5
Billable days	398	664	929	1 062	1 195
Average day rate	20 946	21 525	22 127	22 754	23 407
Revenue	8 340 055	14 284 070	20 557 258	24 159 695	27 959 254
Direct costs	(2 739 405)	(4 839 616)	(7 181 989)	(8 700 467)	(10 375 307)
Gross profit	5 600 650	9 444 454	13 375 269	15 459 228	17 583 947
Gross margin	67.2%	66.1%	65.1%	64.0%	62.9%
Salaries and wages	(3 719 707)	(5 008 755)	(6 434 819)	(7 528 889)	(8 474 005)
Other fixed costs	(2 483 184)	(2 812 971)	(3 172 660)	(3 481 435)	(3 771 357)
EBITDA	(602 241)	1 622 728	3 767 790	4 448 903	5 338 585
EBITDA margin	-7.2%	11.4%	18.3%	18.4%	19.1%
Pre-opening costs, non-recurring	(1 860 000)	—	—	—	—
Depreciation	(1 205 333)	(1 205 333)	(1 205 333)	(1 205 333)	(1 205 333)
Finance costs	(787 912)	(666 855)	(529 795)	(374 615)	(198 921)
Profit / (loss) before tax	(4 455 486)	(249 460)	2 032 662	2 868 955	3 934 331
Taxation	—	—	(109 764)	(154 924)	(850 683)
Profit / (loss) after tax	(4 455 486)	(249 460)	1 922 898	2 714 031	3 083 648
Cumulative profit / (deficit)	(4 455 486)	(4 704 946)	(2 782 048)	(68 017)	3 015 631
Revenue per photographer	2 780 018	3 174 238	3 426 210	3 451 385	3 727 901

The tax basis changes in Year 3, and it is worth stating why

Small Business Corporation rates are available only while turnover stays below R20 million. Revenue reaches R20 557 258 in Year 3, so the studio pays Small Business Corporation rates in Years 1 and 2 and the standard 27 per cent corporate rate from Year 3 onward. The Year 1 loss of R4 455 486 and the Year 2 loss of R249 460 shelter the Year 3 and Year 4 profits under the section 20 limitation, which caps the set-off at the higher of R1 million or 80 per cent of taxable income. Tax of R109 764 falls in Year 3, R154 924 in Year 4 and R850 683 in Year 5, and the assessed loss is fully utilised by the end of the projection. A plan that assumes Small Business Corporation rates throughout understates the Year 5 charge by roughly a third.

7.3 Fixed costs and capital

Figure 12. The cash fixed cost base at maturity.

Fixed cost at maturity	Annual	Note
Salaries, wages and statutory contributions	6 763 104	16 people; base payroll R6624000 plus 2.1% statutory
Studio lease and municipal services	745 920	420 m² at R148/m² a month
Marketing, portfolio and business development	468 000
Software, cloud and asset management	352 000
Equipment insurance and maintenance	318 000
Artificial intelligence tooling and licences	268 000	Aimed at reducing the editing ratio in Section 4
Vehicle running and logistics	248 000
Administration, connectivity and sundry	224 000
Professional fees, audit and compliance	208 000
Professional indemnity and public liability	178 000
Total cash fixed costs	9 773 024	Plus depreciation of R1 330 333

Use of funds	Amount	Share	Life
Camera bodies, lenses and capture systems	1 680 000	14.2%	4 years
Studio fit-out: cyclorama, sets and acoustics	1 150 000	9.7%	10 years
Lighting, grip and studio infrastructure	1 050 000	8.9%	7 years
Motion and video equipment	820 000	6.9%	4 years
Post-production workstations and colour-managed suites	680 000	5.7%	4 years
Vehicles for location work	620 000	5.2%	6 years
Network, storage and archive infrastructure	440 000	3.7%	5 years
Furniture, client areas and reception	280 000	2.4%	8 years
Professional fees and set-up	220 000	1.9%	5 years
Capital expenditure subtotal	6 940 000	58.5%
Working capital for the first two quarters	2 600 000	21.9%
Pre-opening salaries, recruitment and training	880 000	7.4%
Portfolio development and speculative shoots	520 000	4.4%
Studio deposit, connections and licences	460 000	3.9%
Launch marketing and client acquisition	460 000	3.9%
Total funding requirement	11 860 000	100.0%

Capital expenditure of R6 940 000 is modest relative to the revenue it supports, which is characteristic of a services business. Note that 41.5 per cent of the requirement is working capital and pre-opening cost rather than equipment. A studio can be equipped for far less than this; what it cannot do cheaply is survive the year it takes to build a client base while sixteen salaries run.

7.4 Working capital

Figure 14. Working capital employed against the facility.

R	Year 1	Year 2	Year 3	Year 4	Year 5
Trade receivables at 58 days	1 325 269	2 269 797	3 266 633	3 839 075	4 442 840
Work in progress at 12 days	274 194	469 613	675 855	794 291	919 208
Less trade payables at 28 days	(210 146)	(371 258)	(550 947)	(667 433)	(795 914)
Working capital employed	1 389 316	2 368 152	3 391 541	3 965 933	4 566 135
As a share of revenue	16.7%	16.6%	16.5%	16.4%	16.3%
Facility drawn at year end	1 895 177	2 954 905	2 823 888	807 921	0

Working capital reaches R4 566 135 — 16.3 per cent of revenue — and exceeds the R3 600 000 facility from Year 4. The facility itself peaks at R2 954 905 drawn in Year 2, when the studio is growing fastest against a still-thin earnings base, and is repaid by Year 5 as retained earnings take over the funding of the debtor book. Agencies in particular pay on their own client’s terms rather than the studio’s, and a growing studio funds that gap out of its own cash. Deposits on event and campaign work, and progress billing on longer briefs, are the practical mitigations.

7.5 Cash flow

R	Year 1	Year 2	Year 3	Year 4	Year 5
Profit / (loss) after tax	(4 455 486)	(249 460)	1 922 898	2 714 031	3 083 648
Add back: depreciation	1 205 333	1 205 333	1 205 333	1 205 333	1 205 333
Add back: pre-opening costs funded at drawdown	1 860 000	—	—	—	—
Movement in working capital	(1 389 316)	(978 836)	(1 023 389)	(574 392)	(600 202)
Cash generated from operations	(2 779 469)	(22 963)	2 104 842	3 344 972	3 688 779
Debt capital repaid	(915 708)	(1 036 765)	(1 173 825)	(1 329 005)	(1 504 697)
Net movement before facility	(3 695 177)	(1 059 728)	931 017	2 015 967	2 184 082
Facility drawn / (repaid)	1 895 177	1 059 728	(131 017)	(2 015 967)	(807 921)
Closing cash	1 259 999	1 260 000	2 060 000	2 060 000	3 436 162

Figure 15. Cash flow — one year of consumption before the studio pays its way.

Opening cash after the capital programme and the non-working-capital pre-opening spend is R2 600 000. Operations consume R2 779 469 in Year 1, turn broadly neutral in Year 2 and reach R3 688 779 by Year 5. Cash is held above R1 259 999 throughout by drawing on the facility, which is what the facility is for.

7.6 Balance sheet

R, at year end	Year 1	Year 2	Year 3	Year 4	Year 5
Equipment, fit-out and vehicles, net of depreciation	5 734 667	4 529 334	3 324 001	2 118 668	913 335
Work in progress	274 194	469 613	675 855	794 291	919 208
Trade receivables	1 325 269	2 269 797	3 266 633	3 839 075	4 442 840
Cash	1 259 999	1 260 000	2 060 000	2 060 000	3 436 162
Total assets	8 594 129	8 528 744	9 326 489	8 812 034	9 711 545
Share capital	5 900 000	5 900 000	5 900 000	5 900 000	5 900 000
Retained earnings / (accumulated loss)	(4 455 486)	(4 704 946)	(2 782 048)	(68 017)	3 015 631
Total equity	1 444 514	1 195 054	3 117 952	5 831 983	8 915 631
Debt and asset finance — non-current	4 007 527	2 833 702	1 504 697	0	0
Debt and asset finance — current	1 036 765	1 173 825	1 329 005	1 504 697	0
Working capital facility drawn	1 895 177	2 954 905	2 823 888	807 921	0
Trade payables	210 146	371 258	550 947	667 433	795 914
Total liabilities	7 149 615	7 333 690	6 208 537	2 980 051	795 914
Total equity and liabilities	8 594 129	8 528 744	9 326 489	8 812 034	9 711 545

Figure 16. Balance sheet — asset composition.

Net book value of equipment, fit-out and vehicles declines from R5 734 667 to R913 335 as depreciation runs against a capital programme completed at launch — a reminder that in a services business the balance sheet understates the enterprise. Total equity falls from R5 900 000 at inception to a low of R1 195 054 at the end of Year 2 and recovers to R8 915 631 by Year 5, as gearing falls from 83.2 per cent to 8.2 per cent.

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