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Arrow Mail

Executive Summary

Arrow Mail is a creative and high-quality personalized direct mail business for financial services companies that focus on small businesses.

There are numerous traits that separate Arrow Mail from other target marketing companies:

  • Quality: Arrow Mail delivers the highest-quality mail piece. The mailing file is put through rigorous procedures to ensure the cleanest address block in the industry. The company creates a highly personalized piece that does not scream “junk mail.” The personalization is done on high-resolution (600 dpi) laser printers to produce a mailing piece that looks like personal correspondence.
  • Service: Most marketing staffs are limited in size, time, and resources. Arrow Mail becomes an extension of the customer’s staff and provides a superior level of customer service and attention to detail. Our team-oriented environment insures the mailing goes out correctly and on time.
  • Creativity: Direct mail must grab the reader’s attention and get the customer’s message across. Arrow Mail can design a creative custom direct mail plan that fits the customer’s tastes and budget; or the company can modify its “proven programs” to suit a customer’s needs. All of the designs and copy are customized to the customer’s satisfaction because “one size does not fit all.”
  • Knowledge: Arrow Mail is not a printer or lettershop that has recently decided to add personalization. The company is a direct marketing agency that, through 20+ years of experience, has acquired valuable knowledge about prospect selection, database analysis, and creative techniques, as well as expertise in financial industry customer files, products, and services.

The company office and production facility is a 5,000 sq. ft. building in Monroe, Oregon (22 miles northeast of Portland).

Arrow Mail’s owner, Todd Graham, has authored a number of articles on direct mail that have appeared in industry trade publications. He has over 20 years of experience in the field.

Working with Johnson Communication 20 years ago, Todd was a pivotal player in the company’s response to the major deregulation of the banking industry, introducing a variety of new products that lent themselves well to quality target marketing. Since then, Todd has built his expertise as account manager with Reilly Marketing and Triumph Direct Mail.

Direct mail business plan, executive summary chart image

1.1 Mission

Arrow Mail’s mission is to provide successful creative direct mail strategies for financial services companies that will resonate with small businesses.

1.2 Objectives

The objectives of Arrow Mail are the following:

  • Acquire 50 customers by the end of the first year of operation.
  • Achieve sales in excess of $260,000.
  • Increase customer base by 25% by the end of the second year of operation.
  • Increase sales by 15% by the end of the second year of operation.
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Company Summary

Arrow Mail is a creative and high-quality personalized direct mail business for the financial services companies that focus on small businesses. The company office and production facility is a 5,000 sq. ft. building in Monroe, Oregon (22 miles northeast of Portland).

Over the past twenty years, the competition in the financial services industries has intensified. The range of financial services available and the number of companies that are offering these services is extraordinary.

Arrow Mail’s expertise selling to small businesses has facilitated the development of a number of successful strategies in reaching the target market groups. By focusing even further on the growing opportunities in equipment loans and motor vehicle lease programs, Arrow Mail has created an attractive niche for its services.

2.1 Company Ownership

Arrow Mail is owned by Todd Graham and a silent partner. The business will operate as a Limited Partnership.

2.2 Start-up Summary

The start-up expense for Arrow Mail is focused primarily on production and assembly setup. Todd will invest $80,000. A silent partner will invest $125,000. In addition, Todd will secure a $125,000 long-term loan.

The start-up costs will cover the production and assembly equipment and the capital to cover losses the first year. This will include computers, laser printers, scanners, and equipment to prep material for mailing.

Direct mail business plan, company summary chart image

Start-up
Requirements
Start-up Expenses
Legal $1,000
Stationery etc. $400
Brochures $8,000
Insurance $1,000
Rent $3,000
Setup $20,000
Expensed Equipment $140,000
Total Start-up Expenses $173,400
Start-up Assets
Cash Required $152,600
Start-up Inventory $4,000
Other Current Assets $0
Long-term Assets $0
Total Assets $156,600
Total Requirements $330,000
Start-up Funding
Start-up Expenses to Fund $173,400
Start-up Assets to Fund $156,600
Total Funding Required $330,000
Assets
Non-cash Assets from Start-up $4,000
Cash Requirements from Start-up $152,600
Additional Cash Raised $0
Cash Balance on Starting Date $152,600
Total Assets $156,600
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $125,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $125,000
Capital
Planned Investment
Todd Graham $80,000
Silent Partner $125,000
Additional Investment Requirement $0
Total Planned Investment $205,000
Loss at Start-up (Start-up Expenses) ($173,400)
Total Capital $31,600
Total Capital and Liabilities $156,600
Total Funding $330,000

2.3 Company Locations and Facilities

The company office and production facility is a 3,000 sq. ft. building in Monroe, Oregon (22 miles northeast of Portland).

This site was chosen for the following reasons:

  • Low production overhead.
  • Facility is located two miles from the FedEx and US Mail regional processing centers.
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Services

Arrow Mail services are as follows:

Marketing Campaign Development

  • Develop exceptional creative themes to compel the recipient to read the copy.
  • Demonstrate the prime consumer benefits and relate them to the creative concepts.
  • Write clear, concise, and interesting lettercopy and response vehicle to achieve desired action.
  • Design and develop collateral material.

Database Analysis & Management

  • Analyze customer base to demonstrate product breakdown.
  • Use modeling techniques to identify customers with a propensity to buy other products.
  • Generate reports to analyze marketing information.

Market Analysis & Prospect List Selection

  • Review the client’s positioning, product offer, and market area.
  • Determine the best audience for the product based on demographics.
  • Produce maps to assist in targeting specific geographic areas.
  • Develop the best marketing approach and mailing package to fit the product and audience.
  • Research and recommend appropriate prospect mailing lists including demographic & geographic selections.
  • Obtain virtually any mailing list available in the country.

Mailing List Hygiene & Preparation

  • Enhance name/address data to achieve the highest quality address block possible.
  • Merge/purge different mailing lists to reduce current customers and/or duplicates.
  • Process mailing file with CASS certified pre-sorting software to increase deliverability and achieve the lowest postage rate (3 & 5 digit sort, BMC, SCF).
  • Develop/modify programs to create complex variables (old/new account, potential borrowing power, etc.).

Offset Printing

  • Typeset, layout and produce mechanicals for custom projects or existing stationery.
  • Manage production of all stationery, postcards and/or collateral material needed for mailing.

Laser Personalization

  • Produce high-quality, personalized letters/envelopes on laser equipment in resolutions up to 600 dpi.
  • Incorporate variable text, data, and signatures as appropriate.
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Market Analysis Summary

Over the past 20 years, the competition in the financial services industries has intensified. Currently, there are numerous financial products/services being offered by the financial community to a wide range of business customers.

Finance companies are an important source of funds for small businesses (less than 500 employees). The area where funds are sought is in leasing of motor vehicles and purchasing equipment. Arrow Mail notes these trends and has created unique strategies in marketing both equipment loans and motor vehicle lease programs to small businesses.

4.1 Market Segmentation

Arrow Mail will focus on two customer groups:

  • Top 20 financial firms;
  • 2nd tier financial firms.
Direct mail business plan, market analysis summary chart image

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Top 20 Financial Firms 0% 15,000 15,015 15,030 15,045 15,060 0.10%
2nd Tier Financial Firms 1% 1,500 1,508 1,516 1,524 1,532 0.53%
Total 0.14% 16,500 16,523 16,546 16,569 16,592 0.14%

4.2 Target Market Segment Strategy

Finance companies provide loans and leases to consumers, as well as short- and intermediate-term loans and leases to business firms.

This segment of the industry sector is quite concentrated, with the 20 largest firms accounting for more than two-thirds of total industry receivables. There was essentially no change in the concentration in the finance industry during from 1996-2001.

Over the five years the total assets of the 20 largest firms grew from $524.9 billion to $770.3 billion. Over the same period, their share of total industry assets fell slightly, from 70.1% to 68.8%. There are an additional 1,200 2nd Tier firms that have captured the remaining 31% of the market.

The total receivables of finance companies grew by almost 50% over the past five years. In mid-2000, about 45% of the industry’s portfolio was comprised of business loans.

4.3 Service Business Analysis

Finance companies are an important source of funds of small businesses, firms with less than 500 employees. Of the loans and leases to business firms in mid-2000, 57% were for business equipment other than motor vehicles.

At mid-2000, 21% of finance companies’ portfolios was invested in motor vehicle loans and leases, down from 26% five years earlier. The past five years marked a major shift by business firms towards the leasing of motor vehicles. Finance companies’ portfolios of business leases of motor vehicles grew at an annual rate of 23.6% over the five years.

Arrow Mail notes these trends and has created unique strategies in marketing both equipment loans and motor vehicle lease programs to small businesses. Arrow Mail will sell services to 2nd Tier Firms.

4.4 Competition and Buying Patterns

The competition between direct marketing firms is intense yet many of these firms are not focused on marketing financial loan and leasing products to small businesses.

Traditionally, the firms build a track record with specific product to a specific target customer group. Financial services is still an emerging product line for direct marketing firms so there is no clear leader in the field.

The buying pattern for financial firms is similar to the selection process in a marketing campaign.  Direct marketing firms present proposals for a campaign and the company selects the proposal that best fits their budget and overall marketing strategy. The duration of the marketing campaign is one to three years.

Building company loyalty is the most crucial element in winning market share. Companies will stay with a company that has proven to be a valued partner.

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Strategy and Implementation Summary

Arrow Mail’s owner, Todd Graham, has over 20 years of experience in the financial services field and has extensive contacts throughout the country. He will lead the company’s sales campaign. Todd Graham will present the firm’s campaign proposals and follow up with potential customers.

5.1 Marketing Strategy

Arrow Mail will create a direct marketing campaign that fits within a client’s budget range and effectively targets the firm’s potential customers. Arrow Mail employs a matrix of direct marketing strategies that the customer can tailor to fit their desired brand imaging and product positioning as well as focusing on specific customer characteristics.

5.2 Competitive Edge

The competitive advantage of Arrow Mail is experience. We offer our customers time-tested strategies that been successful in the market over the past 20 years. There have been many winners and losers in the growth of financial services. Todd Graham has a superior track record of satisfied customers.

5.3 Sales Forecast

Arrow Mail anticipates that sales will be slow for the first and second month of operation as the focus will be on presentations to firms. After that point, sales will increase.

The following is the sales forecast for three years.

Direct mail business plan, strategy and implementation summary chart image

Sales Forecast
Year 1 Year 2 Year 3
Sales
Marketing Campaigns $209,000 $242,000 $280,000
Market Analysis $130,000 $150,000 $170,000
Database Analysis $106,000 $135,000 $166,000
Mailing Production $93,000 $140,000 $195,000
Other $0 $0 $0
Total Sales $538,000 $667,000 $811,000
Direct Cost of Sales Year 1 Year 2 Year 3
Marketing Campaigns $0 $0 $0
Market Analysis $0 $26,000 $32,000
Database Analysis $0 $0 $0
Mailing Production $20,450 $33,000 $44,000
Other $0 $0 $0
Subtotal Direct Cost of Sales $20,450 $59,000 $76,000

5.4 Milestones

The accompanying table lists important program milestones, with dates and managers in charge, and budgets for each. The milestone schedule indicates our emphasis on planning for implementation.

What the table doesn’t show is the commitment behind it. Our business plan includes complete provisions for plan-vs.-actual analysis, and we will hold monthly follow-up meetings to discuss the variance and course corrections.

Direct mail business plan, strategy and implementation summary chart image

Milestones
Milestone Start Date End Date Budget Manager Department
Office Set-up 4/1/2002 4/27/2002 $20,000 Office Mgr Marketing
Production Set-up 4/1/2002 4/27/2002 $120,000 Production Mgr Department
Marketing Program 2/1/2002 4/1/2002 $20,000 Todd Graham Web
Totals $160,000

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Personnel Plan

Arrow Mail’s owner, Todd Graham, has authored a number of articles on direct mail that have appeared in industry trade publications. He has over 20 years of experience in the field. Working with Johnson Communication 20 years ago, Todd was a pivotal player in the company’s response to the major deregulation of the banking industry, introducing a variety of new products that lent themselves well to quality target marketing. Since then, Todd has built his expertise in the field as an account manager with Reilly Marketing and Triumph Direct Mail.

Arrow Mail personnel will be the following:

  • Todd Graham, creative/sales director;
  • Creative team (2);
  • Production manager;
  • Production team (3);
  • Sales team (2);
  • Office manager.
Personnel Plan
Year 1 Year 2 Year 3
Todd Graham $36,000 $40,000 $44,000
Sales Team (2) $72,000 $78,000 $84,000
Creative Team (2) $96,000 $100,000 $108,000
Production Manager $36,000 $40,000 $44,000
Production Team (3) $64,800 $95,000 $104,000
Office Manager $33,600 $35,000 $37,000
Creative Director $0 $0 $60,000
Other $0 $0 $0
Total People 10 12 12
Total Payroll $338,400 $388,000 $481,000

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Financial Plan

The following is the financial plan for Arrow Mail.

7.1 Break-even Analysis

The monthly break-even point is approximately $38,400.

Direct mail business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even $38,493
Assumptions:
Average Percent Variable Cost 4%
Estimated Monthly Fixed Cost $37,030

7.2 Projected Profit and Loss

The following table and chart highlights the projected profit and loss for three years.

Direct mail business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $538,000 $667,000 $811,000
Direct Cost of Sales $20,450 $59,000 $76,000
Other Production Expenses $0 $0 $0
Total Cost of Sales $20,450 $59,000 $76,000
Gross Margin $517,550 $608,000 $735,000
Gross Margin % 96.20% 91.15% 90.63%
Expenses
Payroll $338,400 $388,000 $481,000
Sales and Marketing and Other Expenses $12,000 $8,000 $10,000
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $7,200 $3,300 $3,300
Insurance $0 $0 $0
Rent $36,000 $18,000 $18,000
Payroll Taxes $50,760 $58,200 $72,150
Other $0 $0 $0
Total Operating Expenses $444,360 $475,500 $584,450
Profit Before Interest and Taxes $73,190 $132,500 $150,550
EBITDA $73,190 $132,500 $150,550
Interest Expense $11,460 $9,620 $7,700
Taxes Incurred $18,519 $36,864 $42,855
Net Profit $43,211 $86,016 $99,995
Net Profit/Sales 8.03% 12.90% 12.33%

7.3 Projected Cash Flow

The following table and chart highlights the projected cash flow for three years.

Direct mail business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $538,000 $667,000 $811,000
Subtotal Cash from Operations $538,000 $667,000 $811,000
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $538,000 $667,000 $811,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $338,400 $388,000 $481,000
Bill Payments $127,662 $210,258 $229,789
Subtotal Spent on Operations $466,062 $598,258 $710,789
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $19,200 $19,200 $19,200
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $485,262 $617,458 $729,989
Net Cash Flow $52,738 $49,542 $81,011
Cash Balance $205,338 $254,880 $335,891

7.4 Projected Balance Sheet

The following table highlights the projected balance sheet for three years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $205,338 $254,880 $335,891
Inventory $3,080 $8,886 $11,446
Other Current Assets $0 $0 $0
Total Current Assets $208,418 $263,766 $347,337
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $208,418 $263,766 $347,337
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $27,807 $16,339 $19,115
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $27,807 $16,339 $19,115
Long-term Liabilities $105,800 $86,600 $67,400
Total Liabilities $133,607 $102,939 $86,515
Paid-in Capital $205,000 $205,000 $205,000
Retained Earnings ($173,400) ($130,189) ($44,173)
Earnings $43,211 $86,016 $99,995
Total Capital $74,811 $160,827 $260,822
Total Liabilities and Capital $208,418 $263,766 $347,337
Net Worth $74,811 $160,827 $260,822

7.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 8748, Business Consulting, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 23.98% 21.59% 12.40%
Percent of Total Assets
Inventory 1.48% 3.37% 3.30% 3.70%
Other Current Assets 0.00% 0.00% 0.00% 44.70%
Total Current Assets 100.00% 100.00% 100.00% 74.50%
Long-term Assets 0.00% 0.00% 0.00% 25.50%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 13.34% 6.19% 5.50% 44.30%
Long-term Liabilities 50.76% 32.83% 19.40% 16.00%
Total Liabilities 64.11% 39.03% 24.91% 60.30%
Net Worth 35.89% 60.97% 75.09% 39.70%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 96.20% 91.15% 90.63% 0.00%
Selling, General & Administrative Expenses 89.10% 78.51% 78.51% 80.80%
Advertising Expenses 2.23% 1.20% 1.23% 1.30%
Profit Before Interest and Taxes 13.60% 19.87% 18.56% 2.20%
Main Ratios
Current 7.50 16.14 18.17 1.75
Quick 7.38 15.60 17.57 1.38
Total Debt to Total Assets 64.11% 39.03% 24.91% 60.30%
Pre-tax Return on Net Worth 82.51% 76.41% 54.77% 3.80%
Pre-tax Return on Assets 29.62% 46.59% 41.13% 9.70%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 8.03% 12.90% 12.33% n.a
Return on Equity 57.76% 53.48% 38.34% n.a
Activity Ratios
Inventory Turnover 7.38 9.86 7.48 n.a
Accounts Payable Turnover 5.59 12.17 12.17 n.a
Payment Days 33 41 28 n.a
Total Asset Turnover 2.58 2.53 2.33 n.a
Debt Ratios
Debt to Net Worth 1.79 0.64 0.33 n.a
Current Liab. to Liab. 0.21 0.16 0.22 n.a
Liquidity Ratios
Net Working Capital $180,611 $247,427 $328,222 n.a
Interest Coverage 6.39 13.77 19.55 n.a
Additional Ratios
Assets to Sales 0.39 0.40 0.43 n.a
Current Debt/Total Assets 13% 6% 6% n.a
Acid Test 7.38 15.60 17.57 n.a
Sales/Net Worth 7.19 4.15 3.11 n.a
Dividend Payout 0.00 0.00 0.00 n.a

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Appendix

Sales Forecast
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales
Marketing Campaigns 0% $0 $0 $10,000 $12,000 $15,000 $18,000 $20,000 $24,000 $24,000 $28,000 $28,000 $30,000
Market Analysis 0% $0 $0 $6,000 $8,000 $10,000 $12,000 $16,000 $16,000 $12,000 $14,000 $16,000 $20,000
Database Analysis 0% $0 $0 $3,000 $5,000 $7,000 $9,000 $10,000 $13,000 $13,000 $14,000 $15,000 $17,000
Mailing Production 0% $0 $0 $4,000 $5,000 $7,000 $7,000 $8,000 $10,000 $10,000 $12,000 $14,000 $16,000
Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Sales $0 $0 $23,000 $30,000 $39,000 $46,000 $54,000 $63,000 $59,000 $68,000 $73,000 $83,000
Direct Cost of Sales Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Marketing Campaigns $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Market Analysis $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Database Analysis $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Mailing Production $0 $0 $1,000 $1,500 $1,750 $2,000 $2,400 $2,400 $2,000 $2,200 $2,400 $2,800
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $0 $0 $1,000 $1,500 $1,750 $2,000 $2,400 $2,400 $2,000 $2,200 $2,400 $2,800
Personnel Plan
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Todd Graham 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Sales Team (2) 0% $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000
Creative Team (2) 0% $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000
Production Manager 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Production Team (3) 0% $5,400 $5,400 $5,400 $5,400 $5,400 $5,400 $5,400 $5,400 $5,400 $5,400 $5,400 $5,400
Office Manager 0% $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800
Creative Director 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total People 10 10 10 10 10 10 10 10 10 10 10 10
Total Payroll $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200

General Assumptions
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Plan Month 1 2 3 4 5 6 7 8 9 10 11 12
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0 0 0 0 0 0 0 0

Pro Forma Profit and Loss
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales $0 $0 $23,000 $30,000 $39,000 $46,000 $54,000 $63,000 $59,000 $68,000 $73,000 $83,000
Direct Cost of Sales $0 $0 $1,000 $1,500 $1,750 $2,000 $2,400 $2,400 $2,000 $2,200 $2,400 $2,800
Other Production Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $0 $0 $1,000 $1,500 $1,750 $2,000 $2,400 $2,400 $2,000 $2,200 $2,400 $2,800
Gross Margin $0 $0 $22,000 $28,500 $37,250 $44,000 $51,600 $60,600 $57,000 $65,800 $70,600 $80,200
Gross Margin % 0.00% 0.00% 95.65% 95.00% 95.51% 95.65% 95.56% 96.19% 96.61% 96.76% 96.71% 96.63%
Expenses
Payroll $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200
Sales and Marketing and Other Expenses $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Leased Equipment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Utilities $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600
Insurance $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Rent $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Payroll Taxes 15% $4,230 $4,230 $4,230 $4,230 $4,230 $4,230 $4,230 $4,230 $4,230 $4,230 $4,230 $4,230
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Operating Expenses $37,030 $37,030 $37,030 $37,030 $37,030 $37,030 $37,030 $37,030 $37,030 $37,030 $37,030 $37,030
Profit Before Interest and Taxes ($37,030) ($37,030) ($15,030) ($8,530) $220 $6,970 $14,570 $23,570 $19,970 $28,770 $33,570 $43,170
EBITDA ($37,030) ($37,030) ($15,030) ($8,530) $220 $6,970 $14,570 $23,570 $19,970 $28,770 $33,570 $43,170
Interest Expense $1,028 $1,015 $1,002 $988 $975 $962 $948 $935 $922 $908 $895 $882
Taxes Incurred ($11,418) ($11,414) ($4,810) ($2,856) ($227) $1,802 $4,086 $6,791 $5,714 $8,359 $9,803 $12,687
Net Profit ($26,641) ($26,632) ($11,222) ($6,663) ($529) $4,206 $9,535 $15,845 $13,334 $19,503 $22,873 $29,602
Net Profit/Sales 0.00% 0.00% -48.79% -22.21% -1.36% 9.14% 17.66% 25.15% 22.60% 28.68% 31.33% 35.66%

Pro Forma Cash Flow
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Cash Received
Cash from Operations
Cash Sales $0 $0 $23,000 $30,000 $39,000 $46,000 $54,000 $63,000 $59,000 $68,000 $73,000 $83,000
Subtotal Cash from Operations $0 $0 $23,000 $30,000 $39,000 $46,000 $54,000 $63,000 $59,000 $68,000 $73,000 $83,000
Additional Cash Received
Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $0 $0 $23,000 $30,000 $39,000 $46,000 $54,000 $63,000 $59,000 $68,000 $73,000 $83,000
Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Expenditures from Operations
Cash Spending $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200
Bill Payments ($1,559) ($3,076) ($1,349) $5,120 $8,056 $10,857 $13,964 $16,780 $18,891 $17,143 $20,571 $22,264
Subtotal Spent on Operations $26,641 $25,124 $26,851 $33,320 $36,256 $39,057 $42,164 $44,980 $47,091 $45,343 $48,771 $50,464
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600
Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $28,241 $26,724 $28,451 $34,920 $37,856 $40,657 $43,764 $46,580 $48,691 $46,943 $50,371 $52,064
Net Cash Flow ($28,241) ($26,724) ($5,451) ($4,920) $1,144 $5,343 $10,236 $16,420 $10,309 $21,057 $22,629 $30,936
Cash Balance $124,359 $97,635 $92,184 $87,263 $88,408 $93,750 $103,987 $120,407 $130,716 $151,773 $174,402 $205,338
Pro Forma Balance Sheet
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Assets Starting Balances
Current Assets
Cash $152,600 $124,359 $97,635 $92,184 $87,263 $88,408 $93,750 $103,987 $120,407 $130,716 $151,773 $174,402 $205,338
Inventory $4,000 $4,000 $4,000 $3,000 $2,500 $1,925 $2,200 $2,640 $2,640 $2,200 $2,420 $2,640 $3,080
Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Current Assets $156,600 $128,359 $101,635 $95,184 $89,763 $90,333 $95,950 $106,627 $123,047 $132,916 $154,193 $177,042 $208,418
Long-term Assets
Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Accumulated Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Assets $156,600 $128,359 $101,635 $95,184 $89,763 $90,333 $95,950 $106,627 $123,047 $132,916 $154,193 $177,042 $208,418
Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Current Liabilities
Accounts Payable $0 $0 $1,507 $7,878 $10,721 $13,418 $16,430 $19,171 $21,347 $19,482 $22,856 $24,433 $27,807
Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $0 $0 $1,507 $7,878 $10,721 $13,418 $16,430 $19,171 $21,347 $19,482 $22,856 $24,433 $27,807
Long-term Liabilities $125,000 $123,400 $121,800 $120,200 $118,600 $117,000 $115,400 $113,800 $112,200 $110,600 $109,000 $107,400 $105,800
Total Liabilities $125,000 $123,400 $123,307 $128,078 $129,321 $130,418 $131,830 $132,971 $133,547 $130,082 $131,856 $131,833 $133,607
Paid-in Capital $205,000 $205,000 $205,000 $205,000 $205,000 $205,000 $205,000 $205,000 $205,000 $205,000 $205,000 $205,000 $205,000
Retained Earnings ($173,400) ($173,400) ($173,400) ($173,400) ($173,400) ($173,400) ($173,400) ($173,400) ($173,400) ($173,400) ($173,400) ($173,400) ($173,400)
Earnings $0 ($26,641) ($53,272) ($64,495) ($71,157) ($71,686) ($67,480) ($57,945) ($42,100) ($28,767) ($9,263) $13,609 $43,211
Total Capital $31,600 $4,959 ($21,672) ($32,895) ($39,557) ($40,086) ($35,880) ($26,345) ($10,500) $2,833 $22,337 $45,209 $74,811
Total Liabilities and Capital $156,600 $128,359 $101,635 $95,184 $89,763 $90,333 $95,950 $106,627 $123,047 $132,916 $154,193 $177,042 $208,418
Net Worth $31,600 $4,959 ($21,672) ($32,895) ($39,557) ($40,086) ($35,880) ($26,345) ($10,500) $2,833 $22,337 $45,209 $74,811

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