Computer Hardware Reseller Business Plan

AMT Computers

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Company Summary

AMT is a computer reseller based in the Uptown area. It was founded as a consulting-oriented VAR, became a reseller to fill the market need for personal computers, and is emphasizing service and support to differentiate itself from more price oriented national chains.

2.1 Company History

AMT has been caught in the vise grip of margin squeezes that have affected computer resellers worldwide. Although the chart titled Past Financial Performance shows that we have had healthy growth in sales, it also shows declining gross margin and declining profits.

The more detailed numbers in the Past Performance table include other indicators of some concern:

The gross margin % has been declining steadily, as we see in the chart.

Both collection days and inventory turnover are getting steadily worse.

All of these concerns are part of the general trend affecting computer resellers. The margin squeeze is happening throughout the computer industry worldwide.

Past Performance
1993 1994 1995
Sales $3,773,889 $4,661,902 $5,301,059
Gross Margin $1,189,495 $1,269,261 $1,127,568
Gross Margin % 31.52% 27.23% 21.27%
Operating Expenses $752,083 $902,500 $1,052,917
Collection Period (days) 39 35 39
Inventory Turnover 6.22 6.19 5.96
Balance Sheet
1993 1994 1995
Current Assets
Cash $43,023 $47,650 $55,432
Accounts Receivable $281,282 $347,468 $395,107
Inventory $573,159 $708,026 $805,098
Other Current Assets $15,000 $20,000 $25,000
Total Current Assets $912,464 $1,123,144 $1,280,637
Long-term Assets
Long-term Assets $250,000 $300,000 $350,000
Accumulated Depreciation $5,000 $20,000 $50,000
Total Long-term Assets $245,000 $280,000 $300,000
Total Assets $1,157,464 $1,403,144 $1,580,637
Current Liabilities
Accounts Payable $159,395 $196,901 $223,897
Current Borrowing $64,072 $79,149 $90,000
Other Current Liabilities (interest free) $10,679 $13,191 $15,000
Total Current Liabilities $234,146 $289,241 $328,897
Long-term Liabilities $202,797 $250,516 $284,862
Total Liabilities $436,943 $539,757 $613,759
Paid-in Capital $250,000 $350,000 $500,000
Retained Earnings $186,203 $274,992 $418,355
Earnings $284,318 $238,395 $48,523
Total Capital $720,521 $863,387 $966,878
Total Capital and Liabilities $1,157,464 $1,403,144 $1,580,637
Other Inputs
Payment Days 30 30 30
Sales on Credit $2,641,722 $3,263,331 $3,445,688
Receivables Turnover 9.39 9.39 8.72

2.2 Company Ownership

AMT is a privately-held C corporation owned in majority by its founder and president, Ralph Jones. There are six part owners, including four investors and two past employees. The largest of these (in percent of ownership) are Frank Dudley, our attorney, and Paul Karots, our public relations consultant. Neither owns more than 15%, but both are active participants in management decisions.

2.3 Company Locations and Facilities

We have one location--a 7,000 square foot store in a suburban shopping center located conveniently close to the downtown area. It includes a training area, service department, offices, and showroom area.

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Past Performance
1993 1994 1995
Sales $3,773,889 $4,661,902 $5,301,059
Gross Margin $1,189,495 $1,269,261 $1,127,568
Gross Margin % 31.52% 27.23% 21.27%
Operating Expenses $752,083 $902,500 $1,052,917
Collection Period (days) 39 35 39
Inventory Turnover 6.22 6.19 5.96
Balance Sheet
1993 1994 1995
Current Assets
Cash $43,023 $47,650 $55,432
Accounts Receivable $281,282 $347,468 $395,107
Inventory $573,159 $708,026 $805,098
Other Current Assets $15,000 $20,000 $25,000
Total Current Assets $912,464 $1,123,144 $1,280,637
Long-term Assets
Long-term Assets $250,000 $300,000 $350,000
Accumulated Depreciation $5,000 $20,000 $50,000
Total Long-term Assets $245,000 $280,000 $300,000
Total Assets $1,157,464 $1,403,144 $1,580,637
Current Liabilities
Accounts Payable $159,395 $196,901 $223,897
Current Borrowing $64,072 $79,149 $90,000
Other Current Liabilities (interest free) $10,679 $13,191 $15,000
Total Current Liabilities $234,146 $289,241 $328,897
Long-term Liabilities $202,797 $250,516 $284,862
Total Liabilities $436,943 $539,757 $613,759
Paid-in Capital $250,000 $350,000 $500,000
Retained Earnings $186,203 $274,992 $418,355
Earnings $284,318 $238,395 $48,523
Total Capital $720,521 $863,387 $966,878
Total Capital and Liabilities $1,157,464 $1,403,144 $1,580,637
Other Inputs
Payment Days 30 30 30
Sales on Credit $2,641,722 $3,263,331 $3,445,688
Receivables Turnover 9.39 9.39 8.72