february 2000 - mt. sac · pager $40 cellular phone $150 web site hosting setup $25 chamber of...

February 2000

This sample business plan has been made available to users of Business Plan Pro™, business planning software published by Palo Alto Software. Our sample plans were developed by existing companies or new business start-ups as research instruments to determine market viability, or funding availability. Names, locations and numbers may have been changed, and substantial portions of text may have been omitted to preserve confidentiality and proprietary information.

You are welcome to use this plan as a starting point to create your own, but you do not have permission to reproduce, publish, distribute or even copy this plan as it exists here.

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Copyright Palo Alto Software, Inc., 1995-2002

Confidentiality Agreement

The undersigned reader acknowledges that the information provided by _______________ in this business plan is confidential; therefore, reader agrees not to disclose it without the express written permission of _______________.

It is acknowledged by reader that information to be furnished in this business plan is in all respects confidential in nature, other than information which is in the public domain through other means and that any disclosure or use of same by reader, may cause serious harm or damage to _______________.

Upon request, this document is to be immediately returned to _______________.

___________________ Signature

___________________Name (typed or printed)

___________________Date

This is a business plan. It does not imply an offering of securities.

1.0 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.3 Keys to Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.0 Company Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1 Company Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.2 Start-up Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.3 Company Locations and Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

3.0 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.1 Service Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.2 Competitive Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53.3 Sales Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.4 Fulfillment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.5 Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.6 Future Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

4.0 Market Analysis Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64.1 Market Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74.2 Target Market Segment Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

4.2.1 Market Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84.2.2 Market Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84.2.3 Market Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

4.3 Service Business Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84.3.1 Competition and Buying Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94.3.2 Business Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

5.0 Strategy and Implementation Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95.1 Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95.2 Pricing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.3 Promotion Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.4 Sales Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

5.4.1 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

6.0 Management Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116.1 Personnel Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126.2 Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126.3 Management Team Gaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

7.0 Financial Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137.1 Important Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137.2 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147.3 Key Financial Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157.4 Projected Profit and Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167.5 Projected Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177.6 Projected Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197.7 Business Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Table of Contents

1.0 Executive Summary

Business Cashflow Solutions, Inc. offers small- and medium-sized businesses services that reduce invoicing expenses, speed receipt of monies, and allow authorization and recovery of paper drafts.

1.1 Objectives

1. Total receivables of $38,000 in 2000.2. Monthly receivables of $3,000 by the sixth month of operation.3. Minimum of 10% increase in receivables per month.4. Receivables of $10,000 per month by the eighteenth month of operation.

1.2 Mission

Business Cashflow Solutions, Inc., offers small- and medium-sized businesses access to services that increase available operating funds by automating accounts receivable for more timely payment, and allowing merchants to accept paper checks with confidence.

As a service company, we pledge to our customers:

1. Exceptional value for all services rendered.2. Timely response to questions and concerns.3. Total honesty and integrity.

1.3 Keys to Success

1. Direct, person-to-person marketing. 2. Participation in professional business organizations. 3. Frequent follow-up and reselling the value of our services.

2.0 Company Summary

Business Cashflow Solutions, Inc. is a new company that provides "instant cash flow for small- and medium-sized businesses" and reduces expenses associated with invoicing with the following services:

1. Pre-Authorized Checking: Insures that monthly payments are received on time and therefore reduces invoicing costs.

2. Electronic Payments: Offers timely funds settlements and a built-in recovery for NSF items, thereby keeping invoicing costs reduced.

3. Electronic Check Conversion: Converts paper check into an electronic item at point-of-sale, saving time and money while reducing the risks of NSF checks.

4. Electronic Check Recovery: NSF checks are submitted electronically via the ACH

Business Cashflow Solutions, Inc.

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network, allowing fast and convenient collection of funds.

5. Telephone Checks: Allows merchants to accept checks by telephone or fax.

2.1 Company Ownership

Business Cashflow Solutions is a Virginia corporation, subchapter S, based in Chesterfield County.

2.2 Start-up Summary

Our start-up costs come to $33,634. Start-up assets required include $5,885 in short-term assets (office furniture, office equipment, specialized printer, etc.) and $5,500 in initial cash to handle the first 6 months of expenses. The details are included in the following chart and table.

By studying the Start-up costs, you will find that we have $23,364 left to finance. The purpose of this plan is to secure financing for that amount.

Later in this plan, when you view the Balance Sheet, Cash Flow, and the Profit and Loss, you will notice that we have included debt and interest expenses based on an assumed $23,364 loan, financed at 9.5% for a 3 year term.


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Table: Start-up

Start-up

Requirements

Start-up ExpensesLicense/Business Package $19,990Stationery etc. $350Apparel $400Insurance $207Computer (Internet, File Transfer) $0Color Inkjet Printer $0MICR Toner $325Copier Toner $89Software (Microsoft Office, Graphics, Internet Publishing, etc.)

$0

Miscellaneous Office Supplies $200Telephone Connections $128Setup Answering Service $20Pager $40Cellular Phone $150Web Site Hosting Setup $25Chamber of Commerce Membership $325Other $0Total Start-up Expense $22,249

Start-up Assets NeededCash Balance on Starting Date $5,500Other Short-term Assets $5,885Total Short-term Assets $11,385

Long-term Assets $0Total Assets $11,385Total Requirements $33,634

Funding

InvestmentXYXY $10,000Other $0Total Investment $10,000

Short-term LiabilitiesAccounts Payable $0Current Borrowing $23,634Other Short-term Liabilities $0Subtotal Short-term Liabilities $23,634

Long-term Liabilities $0Total Liabilities $23,634

Loss at Start-up ($22,249)Total Capital ($12,249)Total Capital and Liabilities $11,385


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$0

$5,000

$10,000

$15,000

$20,000

$25,000

Expenses Assets Investment Loans

Start-up

2.3 Company Locations and Facilities

The office will be located in the residence of XYXY. There is a 200 square foot office area which will house the computer systems and laser printers that are utilized in providing our services.

3.0 Services

Business Cashflow Solutions, Inc. offers small- and medium-sized businesses services that reduce invoicing expenses, speed receipt of monies, allow for more payment options, and allow acceptance of paper checks.

3.1 Service Description

1. Pre-authorized Checking: This service automatically drafts a customer's monthly payments. This service is useful to businesses that provide monthly services, such as pest control companies, health clubs, child care facilities, apartment complexes, etc. Business owners save on expenses associated with billing and avoid delays in receivables, and their customers save time because their paper drafts are automatically generated and delivered to the merchant.

2. Electronic Payments: This service allows business owners to process electronic

payments through the Automated Clearing House (ACH) system. This benefits the customer with timely funds settlement, built-in recovery of NSF items, no cost for NSF items, and reliable cash flow. It also saves money versus mailing invoices, and allows for check acceptance via telephone.


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3. Electronic Check Conversion: This service converts a traditional paper check into

an electronic item at point-of-sale and processes through the ACH. This saves time and money while reducing the risks of NSF checks. Checks are electronically deposited to the business owner’s account, and check verification is available at no additional cost.

4. Electronic Check Recovery: This service enters NSF items into a database and re-

submits them electronically via the ACH network. The business owner receives 100% face value of the check paid the week following collection and release of the funds. There is no cost to the business owner for this service.

5. Telephone Checks: This service allows business owners to accept checks over the

telephone. This allows credit card convenience to checking account customers, and saves the business owner versus accepting credit cards. Funds are deposited into the business owner’s account within 24 hours.

6. Professional Billing Services: This service can save the business owner money,

time, and the aggravation of trying to "do-it- yourself." This service also gives an improved professional image and better control over slow payments. Promotional mailing pieces can be produced and enclosed with your bill.

7. e-commerce: This service features ZZZZ, which allows online merchants to easily

accept and process electronic check payments directly from their website. We can help plan, design, and implement a reliable, secure, and affordable e-commerce solution for the business owner.

3.2 Competitive Comparison

In the greater Richmond area there are approximately 6 licensees of ZZZZ. These range from inactive owners to established companies, with most being home-based. We believe that superior marketing and customer service will give us an edge on these competitors.

Nationwide, ZZZZ currently has approximately #### licensees. Of these, approximately 16 maintain a comprehensive website to market their services nationwide. Our website will be of the highest quality, and certainly competitive.

In addition, there are several large companies which offer similar services. TeleCheck® and Equifax® are two examples. Mostly, these companies offer check guarantee services, and are not as economical a solution for check acceptance to the small- and medium-sized businesses.


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3.3 Sales Literature

Professional brochures are designed by and available from ZZZZ. As a licensee of ZZZZ, a complete set of copyrighted marketing materials and business forms are provided.

Examples of the sales literature are included with this business plan.

**Sales literature examples are not available with this sample plan.

3.4 Fulfillment

The key fulfillment and delivery will be provided by the principals of the business. The real core value is the combination of hard work, attention to detail, and strong sense of service.

3.5 Technology

Business Cashflow Solutions, Inc. will maintain several key systems including:

1. Secure computer for maintenance of all customer files and fulfillment of services.2. Secondary computer with complete email facilities on the Internet and all necessary

website development and publishing software for maintenance of our website which will allow customer prospecting, customer support, and contact.

3. High-speed laser printer for creation of pre-authorized checks and marketing and sales literature.

3.6 Future Services

As a licensee of ZZZZ, Business Cashflow Solutions, Inc., will be able to offer all expanded services offered by ZZZZ. In the 5 years that ZZZZ has been in business, they have increased their services from only Pre-Authorized Checking to the current seven services described in section 3.1.

4.0 Market Analysis Summary

Business Cashflow Solutions, Inc. will be focusing on service companies that have regular, ongoing billings. In addition, we will be marketing our complete line of check acceptance products to all retail establishments.

For the purpose of this analysis, we have only included the Richmond-Petersburg MSA potential market. We believe this shows the huge potential market for these services in a quite conservative way, and allows for our success utilizing only this market. However, we will not be limiting our marketing efforts to the Richmond-Petersburg area. Other areas of direct marketing will be all areas of the state of Virginia. In addition, our Internet marketing allows potential customers from any area of the United States.


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4.1 Market Segmentation

1. Retail: our highest revenue producing segment will be large local businesses, such as grocery stores, that use check acceptance services. But all retail segments have a potential need for at least one of our services.

2. Service: the biggest concentration of business will be service companies, such as pest

control, alarm monitoring, lawn care, child care facilities, etc., that can utilize our pre-authorized checking and electronic payments services. All service companies represent potential customers for one or more of our services.

Retail (Richmond-Petersburg MSA)

Services (Richmond-Petersburg MSA)

Other

Market Analysis (Pie)

Table: Market Analysis

Market AnalysisPotential Customers Growth 2000 2001 2002 2003 2004 CAGRRetail (Richmond-Petersburg MSA)

1% 5,126 5,182 5,239 5,297 5,355 1.10%

Services (Richmond-Petersburg MSA)

3% 10,633 10,963 11,303 11,653 12,014 3.10%

Other 0% 0 0 0 0 0 0.00%Total 2.46% 15,759 16,145 16,542 16,950 17,369 2.46%


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4.2 Target Market Segment Strategy

Our target market is comprised of service and retail businesses because of the nature of the services we provide.

We need to focus our marketing efforts at a local level, allowing growth in other areas to be a source of additional revenues that we will not be dependent on for success.

4.2.1 Market Trends

Trends are in our favor. According to an article in Business Week's June 22, 1998 issue, "there was a 100% increase in the number of checks cut since 1992 due to small-biz growth."

The service and retail industries have experienced strong growth historically; and consumer spending and confidence are at all-time highs, and are continuing to grow.

The trend to outsource services is established for businesses, and will see increases as finding employees to staff positions continues to become more difficult.

4.2.2 Market Growth

Limiting ourselves to the Richmond-Petersburg MSA, we see more than 400 retail and service businesses per year, according to information gathered from the Greater Richmond Partnership and the U.S. Census Bureau. These numbers allow for new customer acquisition sufficient to sustain Business Cashflow Solution, Inc.'s ongoing operating objectives.

4.2.3 Market Needs

Since our target is the small- and medium-sized business, one of the underlying needs is for increased cash flow. The key points of our services is that they allow for the expedition of receivables, while saving the business money in invoicing expenses.

4.3 Service Business Analysis

The licensee base of ZZZZ consists of over #### nationwide. While a licensee is not assigned a territory and is free to operate his business anywhere, ZZZZ is committed to establishing only a select number of payment processing centers in any geographic area, to reach their goal of 2.5% of the market.


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4.3.1 Competition and Buying Patterns

In many respects, competition is non-existent for our services. Small- and medium-sized businesses generally cannot utilize pre-authorized checks and electronic payments on their own. These options are mostly reserved for large organizations such as insurance companies and banks.

Pricing for these services is well below what most businesses spend to invoice customers, and these services have met with wide approval throughout the United States.

The most important element of general competition is what it takes to retain customers, as these services are highly price competitive. It is worth making great efforts to maintain personal relationships with our customer base so that we are able to make concessions where necessary to retain customers.

4.3.2 Business Participants

At the highest level are the few well-established names in point-of-sale check authorization. Most of these offer similar but different services, revolving around a high fee to guarantee checks against return.

5.0 Strategy and Implementation Summary

Business Cashflow Solutions, Inc. will focus its marketing and sales on the Richmond-Petersburg area. In addition, we will make sales calls throughout Virginia, and maintain a website for nationwide sales prospecting.

The target customers are retail stores and service industries.

5.1 Marketing Strategy

Our marketing will revolve around direct targeted mailings, Internet marketing to retail and service businesses, and speaking opportunities at the local level.

1. Direct mailing: We will retain the services of a local company that specializes in direct mail promotions. Mailings will be targeted to business types and geographic areas.

2. Internet marketing: A comprehensive website will feature services, pricing, and contact information. We will contract the services of The Omni Group, who specializes in driving targeted traffic to Internet storefronts, to promote our site.

3. Speaking opportunities: We will seek out and solicit opportunities to speak at industry association meetings, business seminars, etc.


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5.2 Pricing Strategy

Our pricing will follow the models set out by ZZZZ. Some services are a set rate which pay a commission to our company (such is the case with Electronic Check Recovery, for example). Example pricing is included as an attachment to this business plan.

**Attachments not available for this sample plan.

5.3 Promotion Strategy

We will be contracting with a local agency to provide direct mailings. Promotional items will be left at sales calls to keep our name in front of the prospect. We will also focus on speaking opportunities at local organizations.

5.4 Sales Strategy

The sales in our business will revolve around the direct efforts of XYXY. Initially, XYXY will be spending 20 hours per week cold-calling businesses to develop customer relationships.

Additional sales efforts will be directed to leads generated by our website and direct mailings. It is important that we respond promptly to these leads, as these customers will be ready to make a buying decision.

5.4.1 Sales Forecast

The following chart and table give a run-down on forecasted sales. We expect a minimum growth of 10% per month for the first 18 months, leveling off at $10,000 per month during the third year.

In our business, the services we provide also have recurring monthly fees included. The sales forecast incorporates in these recurring fee into the new sales for the total sales volume. In the following table, we refer to all sales as one group.


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$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan

Recurring and New

Other

Sales Monthly (Planned)

Table: Sales Forecast (Planned)

Sales ForecastSales 2001 2002 2003Recurring and New $38,000 $109,700 $120,000Other $0 $0 $0Total Sales $38,000 $109,700 $120,000

Direct Cost of Sales 2001 2002 2003Recurring and New $0 $0 $0Other $0 $0 $0Subtotal Direct Cost of Sales $0 $0 $0

6.0 Management Summary

We are a small company, owned and operated by XYXY, as a subchapter S corporation.

XYXY- President

XYXY will be the salesperson. He will also be responsible for marketing and promotion of services. He will develop and maintain the company website. He will be responsible for desktop publishing for the company. He will lecture at speaking engagements. He will assist in bookkeeping and clerical functions.

XXXX- Secretary-Treasurer

XXXX will maintain all the company records and be in direct contact with the accountant. She will be responsible for data entry of all customer files. She will assist in desktop publishing of marketing materials.

The management team consists entirely of the founders themselves.


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6.1 Personnel Plan

Our plan is for the owners to hold unsalaried positions until January 2001. At that point, they will each receive a salary of $28,000 per year, increasing to $40,800 per year in 2002. These figures are reflected in the following table as well as in the Profit and Loss table.

Table: Personnel (Planned)

Personnel Plan2001 2002 2003

XYXY $2,400 $28,800 $40,800XXXX $2,400 $28,800 $40,800Other $0 $0 $0Total Payroll $4,800 $57,600 $81,600

Total Headcount 0 0 0Payroll Burden $60 $8,640 $12,240Total Payroll Expenditures $4,860 $66,240 $93,840

6.2 Organizational Structure

XYXY will be directly responsible for administration and sales. XXXX will be responsible for clerical and bookkeeping.

As soon as a positive cash flow of $3,000 per month is achieved, 2 commissioned salespeople will be hired as independent contractors. Our plan is to recruit these 2 salespeople in major metropolitan areas outside of Virginia.

6.3 Management Team Gaps

The owner has been working in an environment in which decisions about marketing and advertising sources were made by upper management. ZZZZ will be our source for marketing materials, brochures, and advertising materials. They offer a comprehensive support system for their licensees in all aspects of day-to-day business, and we will rely heavily on this support system.

Another task that is not an area of expertise is accounting and tax issues. XYXY's CPA will be contracted to oversee our bookkeeping and cash management.


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7.0 Financial Plan

Business Cashflow Solutions, Inc. is seeking a $23,634 financial package, based on assumptions of a loan financed at 9.5% interest for a 3-year term. The following projections reflect this loan amount.

7.1 Important Assumptions

General assumptions for this plan are on the following table.

Table: General Assumptions

General Assumptions2001 2002 2003

Short-term Interest Rate % 9.50% 9.50% 9.50%Long-term Interest Rate % 9.50% 9.50% 9.50%Tax Rate % 25.00% 25.00% 25.00%Expenses in Cash % 10.00% 10.00% 10.00%Sales on Credit % 0.00% 0.00% 0.00%Personnel Burden % 1.25% 15.00% 15.00%


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7.2 Break-even Analysis

For our Break-even Analysis, we assume total operating expenses of $1,617 per month, which includes a loan amount of $23,634 financed at 9.5% interest for 3 years. In the appendices, you will find a table showing the projected monthly expenses.

($2,000)

($1,500)

($1,000)

($500)

$0

$500

$1,000

$1,500

$2,000

$0 $600 $1,200 $1,800 $2,400 $3,000

Monthly break-even point

Break-even point = where line intersects with 0

Break-even Analysis

Table: Break-even Analysis

Break-even Analysis:Monthly Units Break-even 1,617Monthly Sales Break-even $1,617

Assumptions:Average Per-Unit Revenue $1.00Average Per-Unit Variable Cost $0.00Estimated Monthly Fixed Cost $1,617


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7.3 Key Financial Indicators

The following benchmark chart indicates our key financial indicators for the first three years. We foresee major growth in sales, with only the normal inflation rates affecting our day to day operating expenses. There is a significant increase in operating costs for the Fiscal Years 2001 and 2002, attributed to the start of payroll for the principals.

0

1

2

3

4

5

6

7

8

Sales Gross OpEx AR Est.

2000

2001

2002

Benchmarks (Planned)


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7.4 Projected Profit and Loss

The financial plan depends on carefully researched operating expenses. Actual cost was used in calculating these expenses.

It is important to note that the Projected Profit and loss does not reflect any cost of sales. These costs are included in our actual operating expenses. The main reason this is so is that many of the services we provide have virtually no direct cost, as they are paid to our company as commissions.

Table: Profit and Loss (Planned)

Pro Forma Profit and Loss2001 2002 2003

Sales $38,000 $109,700 $120,000Direct Cost of Sales $0 $0 $0Other $0 $0 $0

------------ ------------ ------------Total Cost of Sales $0 $0 $0Gross Margin $38,000 $109,700 $120,000Gross Margin % 100.00% 100.00% 100.00%Operating Expenses: Advertising/Promotion $4,260 $5,000 $8,000Office Supplies $1,920 $2,050 $2,150Miscellaneous $3,132 $3,300 $3,800Payroll Expense $4,800 $57,600 $81,600Payroll Burden $60 $8,640 $12,240Depreciation $0 $0 $0Leased Equipment $0 $0 $0Utilities $0 $0 $0Insurance $207 $228 $261Rent $0 $0 $0Contract/Consultants $0 $0 $0

------------ ------------ ------------Total Operating Expenses $14,379 $76,818 $108,051Profit Before Interest and Taxes $23,621 $32,882 $11,949Interest Expense Short-term $1,778 $951 $88Interest Expense Long-term $0 $0 $0Taxes Incurred $5,461 $7,983 $2,965Extraordinary Items $0 $0 $0Net Profit $16,382 $23,948 $8,896Net Profit/Sales 43.11% 21.83% 7.41%


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7.5 Projected Cash Flow

The following table shows cash flow for the first three years, and the chart illustrates monthly cash flow in the first year. Monthly cash flow projections are included in the appendix.

($2,000)

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan

Net Cash Flow

Cash Balance

Cash (Planned)


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Table: Cash Flow (Planned)

Pro Forma Cash Flow 2001 2002 2003

Cash ReceivedCash from Operations: Cash Sales $38,000 $109,700 $120,000From Receivables $0 $0 $0 Subtotal Cash from Operations $38,000 $109,700 $120,000

Additional Cash ReceivedExtraordinary Items $0 $0 $0Sales Tax, VAT, HST/GST Received $0 $0 $0New Current Borrowing $0 $0 $0New Other Liabilities (interest-free) $0 $0 $0New Long-term Liabilities $0 $0 $0Sales of other Short-term Assets $0 $0 $0Sales of Long-term Assets $0 $0 $0Capital Input $0 $0 $0 Subtotal Cash Received $38,000 $109,700 $120,000

Expenditures 2001 2002 2003Expenditures from Operations:Cash Spent on Costs and Expenses $1,676 $1,951 $1,726Wages, Salaries, Payroll Taxes, etc. $4,860 $66,240 $93,840Payment of Accounts Payable $14,252 $17,424 $15,649 Subtotal Spent on Operations $20,788 $85,615 $111,215

Additional Cash SpentSales Tax, VAT, HST/GST Paid Out $0 $0 $0Principal Repayment of Current Borrowing $9,084 $9,084 $9,084Other Liabilities Principal Repayment $0 $0 $0Long-term Liabilities Principal Repayment $0 $0 $0Purchase Other Short-term Assets $0 $0 $0Purchase Long-term Assets $0 $0 $0Dividends $0 $0 $0 Adjustment for Assets Purchased on Credit $0 $0 $0 Subtotal Cash Spent $29,872 $94,699 $120,299

Net Cash Flow $8,128 $15,001 ($299)Cash Balance $13,628 $28,629 $28,329


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7.6 Projected Balance Sheet

The balance sheet in the following table shows a healthy increase in total capital and net worth. The monthly estimates are included in the appendices.

Table: Balance Sheet (Planned)

Pro Forma Balance Sheet

AssetsShort-term Assets 2001 2002 2003Cash $13,628 $28,629 $28,329Accounts Receivable $0 $0 $0Other Short-term Assets $5,885 $5,885 $5,885Total Short-term Assets $19,513 $34,514 $34,214Long-term AssetsLong-term Assets $0 $0 $0Accumulated Depreciation $0 $0 $0Total Long-term Assets $0 $0 $0Total Assets $19,513 $34,514 $34,214

Liabilities and Capital2001 2002 2003

Accounts Payable $829 $966 $855Current Borrowing $14,550 $5,466 ($3,618)Other Short-term Liabilities $0 $0 $0Subtotal Short-term Liabilities $15,379 $6,432 ($2,763)

Long-term Liabilities $0 $0 $0Total Liabilities $15,379 $6,432 ($2,763)

Paid-in Capital $10,000 $10,000 $10,000Retained Earnings ($22,249) ($5,867) $18,082Earnings $16,382 $23,948 $8,896Total Capital $4,133 $28,082 $36,978Total Liabilities and Capital $19,513 $34,514 $34,214Net Worth $4,133 $28,082 $36,978

7.7 Business Ratios

The following table shows the projected businesses ratios. We expect to maintain healthy ratios for profitability, risk, and return. These ratios have been determined by the 7389 industry, as found in the Standard Industry Code (SIC) Index.


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Table: Ratios (Planned)

Ratio Analysis2000 2001 2002 Industry Profile

Sales Growth 0.00% 188.68% 9.39% 8.20%

Percent of Total AssetsAccounts Receivable 0.00% 0.00% 0.00% 26.30%Inventory 0.00% 0.00% 0.00% 3.80%Other Short-term Assets 30.16% 17.05% 17.20% 44.20%Total Short-term Assets 100.00% 100.00% 100.00% 74.30%Long-term Assets 0.00% 0.00% 0.00% 25.70%Total Assets 100.00% 100.00% 100.00% 100.00%

Other Short-term Liabilities 0.00% 0.00% 0.00% 49.00%Subtotal Short-term Liabilities 78.82% 18.64% -8.08% 38.30%Long-term Liabilities 0.00% 0.00% 0.00% 13.80%Total Liabilities 78.82% 18.64% -8.08% 52.10%Net Worth 21.18% 81.36% 108.08% 47.90%

Percent of SalesSales 100.00% 100.00% 100.00% 100.00%Gross Margin 100.00% 100.00% 100.00% 0.00%Selling, General & Administrative Expenses 56.89% 78.17% 92.59% 81.40%Advertising Expenses 11.21% 4.56% 6.67% 1.70%Profit Before Interest and Taxes 62.16% 29.97% 9.96% 2.10%

Main RatiosCurrent 1.27 5.37 -12.38 1.49Quick 1.27 5.37 -12.38 1.17Total Debt to Total Assets 78.82% 18.64% -8.08% 62.80%Pre-tax Return on Net Worth 614.47% 120.48% 32.55% 4.20%Pre-tax Return on Assets 130.16% 98.03% 35.18% 11.30%

Business Vitality Profile 2000 2001 2002 IndustrySales per Employee $0 $0 $0 $0Survival Rate 0.00%

Additional Ratios 2000 2001 2002Net Profit Margin 43.11% 21.83% 7.41% n.aReturn on Equity 396.34% 85.28% 24.06% n.a

Activity RatiosAccounts Receivable Turnover 0.00 0.00 0.00 n.aCollection Days 0 0 0 n.aInventory Turnover 0.00 0.00 0.00 n.aAccounts Payable Turnover 18.18 18.18 18.18 n.aTotal Asset Turnover 1.95 3.18 3.51 n.a

Debt RatiosDebt to Net Worth 3.72 0.23 -0.07 n.aShort-term Liab. to Liab. 1.00 1.00 0.00 n.a

Liquidity RatiosNet Working Capital $4,133 $28,082 $36,978 n.aInterest Coverage 13.29 34.58 136.12 n.a

Additional RatiosAssets to Sales 0.51 0.31 0.29 n.aCurrent Debt/Total Assets 79% 19% -8% n.aAcid Test 1.27 5.37 0.00 n.aSales/Net Worth 9.19 3.91 3.25 n.aDividend Payout $0 0.00 0.00 n.a


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Appendix Table: Sales Forecast (Planned)

Sales ForecastSales Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec JanRecurring and New $0 $500 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 $5,500 $6,000Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Sales $0 $500 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 $5,500 $6,000

Direct Cost of Sales Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec JanRecurring and New $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Subtotal Direct Cost of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Appendix

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Appendix Table: Personnel (Planned)

Personnel PlanFeb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan

XYXY $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $2,400XXXX $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $2,400Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Payroll $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $4,800

Total Headcount 0 0 0 0 0 0 0 0 0 0 0 0Payroll Burden $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $60Total Payroll Expenditures $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $4,860

Appendix

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Appendix Table: General Assumptions

General AssumptionsFeb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan

Short-term Interest Rate % 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50%Long-term Interest Rate % 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50%Tax Rate % 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00%Expenses in Cash % 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%Sales on Credit % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Personnel Burden % 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%

Appendix

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Appendix Table: Profit and Loss (Planned)

Pro Forma Profit and LossFeb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan

Sales $0 $500 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 $5,500 $6,000Direct Cost of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------Total Cost of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Gross Margin $0 $500 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 $5,500 $6,000Gross Margin % 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%Operating Expenses: Advertising/Promotion $355 $355 $355 $355 $355 $355 $355 $355 $355 $355 $355 $355Office Supplies $160 $160 $160 $160 $160 $160 $160 $160 $160 $160 $160 $160Miscellaneous $261 $261 $261 $261 $261 $261 $261 $261 $261 $261 $261 $261Payroll Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $4,800Payroll Burden $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $60Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Leased Equipment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Utilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Insurance $207 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Rent $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Contract/Consultants $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------Total Operating Expenses $983 $776 $776 $776 $776 $776 $776 $776 $776 $776 $776 $5,636Profit Before Interest and Taxes ($983) ($276) $724 $1,224 $1,724 $2,224 $2,724 $3,224 $3,724 $4,224 $4,724 $364Interest Expense Short-term $181 $175 $169 $163 $157 $151 $145 $139 $133 $127 $121 $115Interest Expense Long-term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Taxes Incurred ($291) ($113) $139 $265 $392 $518 $645 $771 $898 $1,024 $1,151 $62Extraordinary Items $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Net Profit ($873) ($338) $416 $796 $1,175 $1,555 $1,934 $2,314 $2,693 $3,073 $3,452 $187Net Profit/Sales 0.00% -67.67% 27.74% 39.78% 47.01% 51.82% 55.26% 57.84% 59.85% 61.45% 62.77% 3.11%

Appendix

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Appendix Table: Cash Flow (Planned)

Pro Forma Cash Flow Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan

Cash ReceivedCash from Operations: Cash Sales $0 $500 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 $5,500 $6,000From Receivables $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Cash from Operations $0 $500 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 $5,500 $6,000

Additional Cash ReceivedExtraordinary Items $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Sales of other Short-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Capital Input $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Cash Received $0 $500 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 $5,500 $6,000

Expenditures Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec JanExpenditures from Operations:Cash Spent on Costs and Expenses $87 $84 $108 $120 $132 $145 $157 $169 $181 $193 $205 $95Wages, Salaries, Payroll Taxes, etc. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $4,860Payment of Accounts Payable $26 $785 $762 $979 $1,088 $1,196 $1,304 $1,413 $1,521 $1,630 $1,738 $1,810 Subtotal Spent on Operations $114 $869 $870 $1,100 $1,220 $1,341 $1,461 $1,582 $1,702 $1,823 $1,943 $6,766

Additional Cash SpentSales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Principal Repayment of Current Borrowing $757 $757 $757 $757 $757 $757 $757 $757 $757 $757 $757 $757Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Purchase Other Short-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Adjustment for Assets Purchased on Credit $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Cash Spent $871 $1,626 $1,627 $1,857 $1,977 $2,098 $2,218 $2,339 $2,459 $2,580 $2,700 $7,523

Net Cash Flow ($871) ($1,126) ($127) $143 $523 $902 $1,282 $1,661 $2,041 $2,420 $2,800 ($1,523)Cash Balance $4,630 $3,504 $3,377 $3,520 $4,043 $4,946 $6,228 $7,889 $9,930 $12,351 $15,151 $13,628

Appendix

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Appendix Table: Balance Sheet (Planned)

Pro Forma Balance Sheet

AssetsShort-term Assets Starting Balances Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec JanCash $5,500 $4,630 $3,504 $3,377 $3,520 $4,043 $4,946 $6,228 $7,889 $9,930 $12,351 $15,151 $13,628Accounts Receivable $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Other Short-term Assets $5,885 $5,885 $5,885 $5,885 $5,885 $5,885 $5,885 $5,885 $5,885 $5,885 $5,885 $5,885 $5,885Total Short-term Assets $11,385 $10,515 $9,389 $9,262 $9,405 $9,928 $10,831 $12,113 $13,774 $15,815 $18,236 $21,036 $19,513Long-term AssetsLong-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Accumulated Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Assets $11,385 $10,515 $9,389 $9,262 $9,405 $9,928 $10,831 $12,113 $13,774 $15,815 $18,236 $21,036 $19,513

Liabilities and CapitalFeb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan

Accounts Payable $0 $760 $729 $943 $1,048 $1,153 $1,257 $1,362 $1,467 $1,572 $1,677 $1,782 $829Current Borrowing $23,634 $22,877 $22,120 $21,363 $20,606 $19,849 $19,092 $18,335 $17,578 $16,821 $16,064 $15,307 $14,550Other Short-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Subtotal Short-term Liabilities $23,634 $23,637 $22,849 $22,306 $21,654 $21,002 $20,349 $19,697 $19,045 $18,393 $17,741 $17,089 $15,379

Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Liabilities $23,634 $23,637 $22,849 $22,306 $21,654 $21,002 $20,349 $19,697 $19,045 $18,393 $17,741 $17,089 $15,379

Paid-in Capital $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000Retained Earnings ($22,249) ($22,249) ($22,249) ($22,249) ($22,249) ($22,249) ($22,249) ($22,249) ($22,249) ($22,249) ($22,249) ($22,249) ($22,249)Earnings $0 ($873) ($1,211) ($795) $0 $1,176 $2,730 $4,664 $6,978 $9,671 $12,744 $16,196 $16,382Total Capital ($12,249) ($13,122) ($13,460) ($13,044) ($12,249) ($11,073) ($9,519) ($7,585) ($5,271) ($2,578) $495 $3,947 $4,133Total Liabilities and Capital $11,385 $10,515 $9,389 $9,262 $9,405 $9,928 $10,831 $12,113 $13,774 $15,815 $18,236 $21,036 $19,513Net Worth ($12,249) ($13,122) ($13,460) ($13,044) ($12,249) ($11,073) ($9,519) ($7,585) ($5,271) ($2,578) $495 $3,947 $4,133

Appendix

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