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Mojo Music

Executive Summary

Mojo Music will be a CD store that specializes in used CDs and DVD rentals as well as blank CD/DVD recording media.  Our target customers are the 23,000 students of State University and 40,000 non-student residents of the university area.

Mojo Music will be located one half block from the university campus on Taylor Street which is the major retail/commercial section of the university area.  The student foot traffic on Taylor is heavy.  The university bookstore is on Taylor Street, as well as numerous coffee houses, restaurants, and shops that cater to the student population.

Though the location is perfect for our target customers, it is more important to understand what our customers want from a CD store.

Twenty five years ago, it was popular among young adults to create mix cassette tapes of their favorite music for personal use and as gifts for friends. Today, with the wide distribution of CD recording equipment, Internet technology, and new recording formats like MP3, young adults now have the ability to create personalized presentations of their favorite music.  The market for used CDs has exploded as a consequence of young listeners’ ability to create quality duplication from CDs. With the average price for a new CD at $16-$18, young adults would rather buy a used CD for a little over half that price ($8-$11).  It is even more attractive if they can get in-store purchasing credit by selling their own CDs to the store.

Mojo Music will offer popular new releases and used CDs.  We will have a attractive CD buying program that will reward customers for spending money in the store. In addition to new CDs in the store, a customer will be able to order any CD that is currently issued.  We will have that CD in the store within three days.

Affordable blank CD/DVD recording media is another important key in bringing our target customers into the store. Young adults between 17-25 years of age are the largest group purchasing CD and DVD recorders.  There is no store that sells recording media within a 10 mile radius of the university.

Similarly, there is no video/DVD rental store next to campus.  The closest rental store is four miles off campus. Due to the drop in price for DVD players, many students own DVD/CD players, so the preferred format for movies is DVD.  This is not true for the larger community with still prefers video cassette. 

Mojo Music will sell blank recording media and rent movies in DVD format.

Music retail business plan, executive summary chart image

1.1 Objectives

  • To become the first place our target customers will go to sell and buy CDs.
  • To create a strong DVD rental business.
  • To increase blank media sales by 20% each year.

1.2 Mission

Mojo Music’s mission is to offer our target customers:

  • The best quality popular used CDs at affordable prices.
  • The most popular new CDs at the lowest prices.
  • The best recording media at affordable prices.
  • A large selection of DVD rentals.

1.3 Keys to Success

The Keys to Success for Mojo Music are the following:

  • Keep the money paid for used CDs in the store.
  • Offer a quality selection of used CDs.
  • Offer popular new CDs at a discounted price.
  • Offer popular DVDs for rental.
  • Offer recording media at a discounted price.
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Company Summary

Mojo Music offers popular new CDs, used CDs, DVD rentals, and CD/DVD recording media.  The target customers for the store are the 23,000 students of the State University.  The store is located one half block from the major entrance to the university.  The student group represents a unique music buying and DVD rental group that is not being served by the area’s existing CD stores or video rental outlets.

2.1 Start-up Summary

The start-up cost of Mojo Music will consist primarily of inventory and display equipment. Karl Payne will invest $50,000.  In addition to securing a $100,000 SBA loan, Karl has also obtained an investment of $100,000 from a silent partner.

Music retail business plan, company summary chart image

Start-up
Requirements
Start-up Expenses
Legal $1,000
Stationery etc. $0
Brochures $0
Consultants $0
Insurance $0
Rent $4,000
Inventory $120,000
Expensed Equipment $20,000
Display Equipment $6,000
Other $0
Total Start-up Expenses $151,000
Start-up Assets
Cash Required $49,000
Start-up Inventory $0
Other Current Assets $0
Long-term Assets $50,000
Total Assets $99,000
Total Requirements $250,000
Start-up Funding
Start-up Expenses to Fund $151,000
Start-up Assets to Fund $99,000
Total Funding Required $250,000
Assets
Non-cash Assets from Start-up $50,000
Cash Requirements from Start-up $49,000
Additional Cash Raised $0
Cash Balance on Starting Date $49,000
Total Assets $99,000
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $100,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $100,000
Capital
Planned Investment
Karl Payne $50,000
Investor 2 $100,000
Other $0
Additional Investment Requirement $0
Total Planned Investment $150,000
Loss at Start-up (Start-up Expenses) ($151,000)
Total Capital ($1,000)
Total Capital and Liabilities $99,000
Total Funding $250,000

2.2 Company Ownership

The store owner is Karl Payne who has worked in CD stores for over ten years.  Most recently, he was the store manager for CD Warehouse for seven years supervising a staff 10.

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Products

Mojo Music offers popular new CDs, used CDs, DVD rentals, and CD/DVD recording media.  The primary focus will be to satisfy the music/DVD needs of the target customers.

  • New CDs: CDs that are popular with our target group.
  • Used CDs: CDs that are in good condition and that have a reasonable chance of being purchased.
  • DVD rentals: Movies that are popular with our target customers.
  • CD/DVD recording media: Provide the best quality for the best price.
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Market Analysis Summary

It is estimated that the university student community spends over $75 million with local businesses each year.  Approximately 50% of these sales are for entertainment including music and movies.   The university’s commercial/retail area borders the east side of the campus and it is the main entrance onto campus.  Each day, thousands of students shop and eat on Taylor Street before, after, and between classes.

Currently, if a student wanted to purchase a used CD, he/she would have to take a ten minute drive to reach the only used CD store in town.  Similarly, he/she would also have to drive to reach the closest video rental store to the campus community.

Mojo Music offers the student the ability to buy a CD or rent a DVD during the day while on campus.

4.1 Market Segmentation

Mojo Music will focus on three significant customer groups:

  • Used CD buyer/seller:  The shelf life for music is very short with young adults.  What was popular three months ago can quickly become boring.  The music industry is aware of this trend and is constantly releasing the next great hit to satisfy this hunger for the new.  But what does the buyer do with old CDs that are no longer being rotating into the CD player? Mojo Music will be uniquely designed to attract and retain this important customer group.
  • CD/DVD recording media buyer: This customer group is very significant. They have already embraced the technology that gives them the freedom to create their own CDs and DVDs.  The purchase/sell turnaround on a CD/DVD is very quick with this group. They will be a great source for used popular CDs and DVDs.  Mojo Music will set up an in-house credit system that will bring this customer group into the store.
  • DVD renters: As stated before, the student population represents a unique group of DVD users.  Many manufacturers now make cheap CD/DVD players that are targeted at young adults.  So DVD rentals are much higher with this customer group than the population as a whole.  Mojo Music’s location is perfect to capture the walk-in business for DVD rentals.
Music retail business plan, market analysis summary chart image

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Used CD Buyer/Seller 15% 10,000 11,500 13,225 15,209 17,490 15.00%
CD/DVD Recording Media Buyer 10% 4,000 4,400 4,840 5,324 5,856 10.00%
DVD Renters 15% 10,000 11,500 13,225 15,209 17,490 15.00%
Other 0% 0 0 0 0 0 0.00%
Total 14.21% 24,000 27,400 31,290 35,742 40,836 14.21%

4.2 Target Market Segment Strategy

The advancement of CD recording equipment, Internet technology, and new recording formats like MP3, has turned young adults into a new type of music and movie consumer.  This trend has already depressed CD sales nationwide and many CD stores have gone out of business in last five years.

To be successful, a store must respond to the market opportunity the target consumer is providing. Though the game has changed, there is still tremendous opportunity if a CD store can read the market needs and trends correctly.

The student population that Mojo Music is targeting is very comfortable with the newest technology and has easy access to CD/DVD recording equipment. This creates a new expectation in the consumer’s mind concerning what is an affordable price for music.  Most college-aged adults have reported in numerous industry polls that the price of new CDs should be lower.  This search for a lower price led to the explosion of MP3 on the Internet. Consequently, CD recording media has increased in sales.

Quality used CDs fill the niche that this concern creates by offering a lower price for popular music.

Another area where the college-age consumers is leading the market is in the use of DVDs.  At most video rental shops, DVDs are small subsection of available rentals. Currently, these shops primarily serve consumers who prefer video cassettes. Though this trend is changing, DVD owners find the selection limited.

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Strategy and Implementation Summary

Mojo Music will be heavily promoting the store.  We will use the student daily paper to advertise a $2 off per CD coupon.  In addition, we will have a drawing for five CD/DVD players each week.  We will continue the drawings for the first eight weeks of the store’s operation.

5.1 Competitive Edge

Mojo Music’s competitive edge is:

  • Location: Mojo Music is on Taylor Street, one half block from the entrance to the university.  The student foot traffic on Taylor Street is very strong. The closest used CD store to the university area is a ten minute drive.
  • Quality used CDs: With the average price for a new CD at $16-$18, young adults would rather buy a used CD for a little over half that price ($8-$11).  It is even more attractive if they can get in-store purchasing credit by selling their own CDs to the store.
  • CD/DVD recording media: Young adults between 17-25 years of age are the largest group purchasing CD and DVD recorders.  There is no store that sells recording media within a 10 mile radius of the university.  
  • DVD rentals: The closest rental store is four miles off campus. Due to the drop in price for DVD players, many students own DVD/CD players, so their reasonable format for movies are DVD. 

5.2 Sales Strategy

The key to Mojo Music’s sales strategy is to get the sellers of used CDs to spend their money in the store. To accomplish this goal, we will offer the seller two options for their CDs: cash and in-store credit. In-store credit will be 20% more than cash.  This can be used to buy CDs or CD/DVD recording media.  In-store credit can also be used to rent DVDs.

5.2.1 Sales Forecast

The following is the sales forecast for three years.

Music retail business plan, strategy and implementation summary chart image

Music retail business plan, strategy and implementation summary chart image

Sales Forecast
Year 1 Year 2 Year 3
Unit Sales
New CDs 18,400 20,000 23,000
Used CDs 33,500 38,000 41,000
CD/DVD Recording Media 15,100 18,000 21,000
DVD Rentals 28,100 30,000 33,000
Other 0 0 0
Total Unit Sales 95,100 106,000 118,000
Unit Prices Year 1 Year 2 Year 3
New CDs $16.00 $16.00 $16.00
Used CDs $10.00 $10.00 $10.00
CD/DVD Recording Media $10.00 $10.00 $10.00
DVD Rentals $3.00 $3.00 $3.00
Other $0.00 $0.00 $0.00
Sales
New CDs $294,400 $320,000 $368,000
Used CDs $335,000 $380,000 $410,000
CD/DVD Recording Media $151,000 $180,000 $210,000
DVD Rentals $84,300 $90,000 $99,000
Other $0 $0 $0
Total Sales $864,700 $970,000 $1,087,000
Direct Unit Costs Year 1 Year 2 Year 3
New CDs $11.00 $11.00 $11.00
Used CDs $5.00 $5.00 $5.00
CD/DVD Recording Media $4.00 $4.00 $4.00
DVD Rentals $1.00 $1.00 $1.00
Other $0.00 $0.00 $0.00
Direct Cost of Sales
New CDs $202,400 $220,000 $253,000
Used CDs $167,500 $190,000 $205,000
CD/DVD Recording Media $60,400 $72,000 $84,000
DVD Rentals $28,100 $30,000 $33,000
Other $0 $0 $0
Subtotal Direct Cost of Sales $458,400 $512,000 $575,000

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Management Summary

Karl Payne is the owner/manager of Mojo Music.  Karl has worked for over 15 years in record/CD stores. As a student at State University, Karl worked at The Record Factory, a successful downtown record store, in the late 80’s. After graduating in 1989 with a BA in english, Karl went on to managed two record/CD stores; the Palace (89-93) and the CD Warehouse.  Karl is a excellent staff supervisor and will do very well in managing the staff of Mojo Music.

6.1 Personnel Plan

Mojo Music will have the following staff members:

  • Manager.
  • Assistant manager.
  • Four customer assistants.
Personnel Plan
Year 1 Year 2 Year 3
Manager $36,000 $40,000 $45,000
Assistant Manager $30,000 $33,000 $37,000
Customer Assistants $72,000 $75,000 $80,000
Other $0 $0 $0
Total People 6 6 6
Total Payroll $138,000 $148,000 $162,000

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Financial Plan

The following is the financial plan for Mojo Music.

7.1 Break-even Analysis

The monthly sales break-even point is approximately 6,200 units.

Music retail business plan, financial plan chart image

Break-even Analysis
Monthly Units Break-even 6,215
Monthly Revenue Break-even $56,512
Assumptions:
Average Per-Unit Revenue $9.09
Average Per-Unit Variable Cost $4.82
Estimated Monthly Fixed Cost $26,553

7.2 Projected Profit and Loss

The following table and charts are the projected profit and loss for three years.

Music retail business plan, financial plan chart image

Music retail business plan, financial plan chart image

Music retail business plan, financial plan chart image

Music retail business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $864,700 $970,000 $1,087,000
Direct Cost of Sales $458,400 $512,000 $575,000
Other Production Expenses $0 $0 $0
Total Cost of Sales $458,400 $512,000 $575,000
Gross Margin $406,300 $458,000 $512,000
Gross Margin % 46.99% 47.22% 47.10%
Expenses
Payroll $138,000 $148,000 $162,000
Sales and Marketing and Other Expenses $100,000 $110,000 $130,000
Depreciation $7,140 $7,143 $7,143
Leased Equipment $0 $0 $0
Utilities $4,800 $4,800 $4,800
Insurance $0 $0 $0
Rent $48,000 $48,000 $48,000
Payroll Taxes $20,700 $22,200 $24,300
Other $0 $0 $0
Total Operating Expenses $318,640 $340,143 $376,243
Profit Before Interest and Taxes $87,660 $117,857 $135,757
EBITDA $94,800 $125,000 $142,900
Interest Expense $8,917 $7,001 $5,002
Taxes Incurred $23,623 $33,257 $39,227
Net Profit $55,120 $77,599 $91,529
Net Profit/Sales 6.37% 8.00% 8.42%

7.3 Projected Cash Flow

The following is the projected cash flow for three years.

Music retail business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $216,175 $242,500 $271,750
Cash from Receivables $506,165 $710,164 $795,988
Subtotal Cash from Operations $722,340 $952,664 $1,067,738
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 $68,000 $0 $0
Subtotal Cash Received $790,340 $952,664 $1,067,738
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $138,000 $148,000 $162,000
Bill Payments $644,695 $762,547 $827,116
Subtotal Spent on Operations $782,695 $910,547 $989,116
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 $19,992 $19,992 $19,992
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $802,687 $930,539 $1,009,108
Net Cash Flow ($12,347) $22,125 $58,630
Cash Balance $36,653 $58,778 $117,408

7.4 Projected Balance Sheet

The following is the projected balance sheet for three years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $36,653 $58,778 $117,408
Accounts Receivable $142,360 $159,696 $178,958
Inventory $59,730 $66,714 $74,923
Other Current Assets $0 $0 $0
Total Current Assets $238,743 $285,189 $371,290
Long-term Assets
Long-term Assets $50,000 $50,000 $50,000
Accumulated Depreciation $7,140 $14,283 $21,426
Total Long-term Assets $42,860 $35,717 $28,574
Total Assets $281,603 $320,906 $399,864
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $79,475 $61,171 $68,592
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $79,475 $61,171 $68,592
Long-term Liabilities $80,008 $60,016 $40,024
Total Liabilities $159,483 $121,187 $108,616
Paid-in Capital $218,000 $218,000 $218,000
Retained Earnings ($151,000) ($95,880) ($18,281)
Earnings $55,120 $77,599 $91,529
Total Capital $122,120 $199,719 $291,248
Total Liabilities and Capital $281,603 $320,906 $399,864
Net Worth $122,120 $199,719 $291,248

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 5735, Record and Prerecorded Tape Stores, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 12.18% 12.06% 2.40%
Percent of Total Assets
Accounts Receivable 50.55% 49.76% 44.75% 18.30%
Inventory 21.21% 20.79% 18.74% 38.60%
Other Current Assets 0.00% 0.00% 0.00% 21.70%
Total Current Assets 84.78% 88.87% 92.85% 78.60%
Long-term Assets 15.22% 11.13% 7.15% 21.40%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 28.22% 19.06% 17.15% 40.30%
Long-term Liabilities 28.41% 18.70% 10.01% 14.70%
Total Liabilities 56.63% 37.76% 27.16% 55.00%
Net Worth 43.37% 62.24% 72.84% 45.00%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 46.99% 47.22% 47.10% 33.50%
Selling, General & Administrative Expenses 40.61% 39.22% 38.68% 18.50%
Advertising Expenses 5.78% 5.15% 4.60% 3.60%
Profit Before Interest and Taxes 10.14% 12.15% 12.49% 1.60%
Main Ratios
Current 3.00 4.66 5.41 1.99
Quick 2.25 3.57 4.32 0.78
Total Debt to Total Assets 56.63% 37.76% 27.16% 55.00%
Pre-tax Return on Net Worth 64.48% 55.51% 44.89% 4.10%
Pre-tax Return on Assets 27.96% 34.54% 32.70% 9.00%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 6.37% 8.00% 8.42% n.a
Return on Equity 45.14% 38.85% 31.43% n.a
Activity Ratios
Accounts Receivable Turnover 4.56 4.56 4.56 n.a
Collection Days 56 76 76 n.a
Inventory Turnover 10.91 8.10 8.12 n.a
Accounts Payable Turnover 9.11 12.17 12.17 n.a
Payment Days 27 34 28 n.a
Total Asset Turnover 3.07 3.02 2.72 n.a
Debt Ratios
Debt to Net Worth 1.31 0.61 0.37 n.a
Current Liab. to Liab. 0.50 0.50 0.63 n.a
Liquidity Ratios
Net Working Capital $159,268 $224,018 $302,698 n.a
Interest Coverage 9.83 16.83 27.14 n.a
Additional Ratios
Assets to Sales 0.33 0.33 0.37 n.a
Current Debt/Total Assets 28% 19% 17% n.a
Acid Test 0.46 0.96 1.71 n.a
Sales/Net Worth 7.08 4.86 3.73 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
Unit Sales
New CDs 0% 1,000 1,000 1,300 1,400 1,800 2,000 1,500 1,200 1,600 1,600 1,900 2,100
Used CDs 0% 2,000 2,500 2,500 2,800 3,000 3,200 2,500 2,000 2,800 3,000 3,200 4,000
CD/DVD Recording Media 0% 1,000 1,000 1,000 1,300 1,500 1,300 1,000 1,000 1,000 1,300 1,700 2,000
DVD Rentals 0% 2,000 1,200 1,300 1,800 2,200 2,800 2,000 2,000 2,800 3,400 3,400 3,200
Other 0% 0 0 0 0 0 0 0 0 0 0 0 0
Total Unit Sales 6,000 5,700 6,100 7,300 8,500 9,300 7,000 6,200 8,200 9,300 10,200 11,300
Unit Prices Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
New CDs $16.00 $16.00 $16.00 $16.00 $16.00 $16.00 $16.00 $16.00 $16.00 $16.00 $16.00 $16.00
Used CDs $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
CD/DVD Recording Media $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
DVD Rentals $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00
Other $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sales
New CDs $16,000 $16,000 $20,800 $22,400 $28,800 $32,000 $24,000 $19,200 $25,600 $25,600 $30,400 $33,600
Used CDs $20,000 $25,000 $25,000 $28,000 $30,000 $32,000 $25,000 $20,000 $28,000 $30,000 $32,000 $40,000
CD/DVD Recording Media $10,000 $10,000 $10,000 $13,000 $15,000 $13,000 $10,000 $10,000 $10,000 $13,000 $17,000 $20,000
DVD Rentals $6,000 $3,600 $3,900 $5,400 $6,600 $8,400 $6,000 $6,000 $8,400 $10,200 $10,200 $9,600
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Sales $52,000 $54,600 $59,700 $68,800 $80,400 $85,400 $65,000 $55,200 $72,000 $78,800 $89,600 $103,200
Direct Unit Costs Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
New CDs 0.00% $11.00 $11.00 $11.00 $11.00 $11.00 $11.00 $11.00 $11.00 $11.00 $11.00 $11.00 $11.00
Used CDs 0.00% $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00
CD/DVD Recording Media 0.00% $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00
DVD Rentals 0.00% $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Other 0.00% $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Direct Cost of Sales
New CDs $11,000 $11,000 $14,300 $15,400 $19,800 $22,000 $16,500 $13,200 $17,600 $17,600 $20,900 $23,100
Used CDs $10,000 $12,500 $12,500 $14,000 $15,000 $16,000 $12,500 $10,000 $14,000 $15,000 $16,000 $20,000
CD/DVD Recording Media $4,000 $4,000 $4,000 $5,200 $6,000 $5,200 $4,000 $4,000 $4,000 $5,200 $6,800 $8,000
DVD Rentals $2,000 $1,200 $1,300 $1,800 $2,200 $2,800 $2,000 $2,000 $2,800 $3,400 $3,400 $3,200
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $27,000 $28,700 $32,100 $36,400 $43,000 $46,000 $35,000 $29,200 $38,400 $41,200 $47,100 $54,300
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
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
Assistant Manager 0% $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500
Customer Assistants 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
Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total People 6 6 6 6 6 6 6 6 6 6 6 6
Total Payroll $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500

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 $52,000 $54,600 $59,700 $68,800 $80,400 $85,400 $65,000 $55,200 $72,000 $78,800 $89,600 $103,200
Direct Cost of Sales $27,000 $28,700 $32,100 $36,400 $43,000 $46,000 $35,000 $29,200 $38,400 $41,200 $47,100 $54,300
Other Production Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $27,000 $28,700 $32,100 $36,400 $43,000 $46,000 $35,000 $29,200 $38,400 $41,200 $47,100 $54,300
Gross Margin $25,000 $25,900 $27,600 $32,400 $37,400 $39,400 $30,000 $26,000 $33,600 $37,600 $42,500 $48,900
Gross Margin % 48.08% 47.44% 46.23% 47.09% 46.52% 46.14% 46.15% 47.10% 46.67% 47.72% 47.43% 47.38%
Expenses
Payroll $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500
Sales and Marketing and Other Expenses $20,000 $20,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000
Depreciation $595 $595 $595 $595 $595 $595 $595 $595 $595 $595 $595 $595
Leased Equipment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Utilities $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400
Insurance $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Rent $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000
Payroll Taxes 15% $1,725 $1,725 $1,725 $1,725 $1,725 $1,725 $1,725 $1,725 $1,725 $1,725 $1,725 $1,725
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Operating Expenses $38,220 $38,220 $24,220 $24,220 $24,220 $24,220 $24,220 $24,220 $24,220 $24,220 $24,220 $24,220
Profit Before Interest and Taxes ($13,220) ($12,320) $3,380 $8,180 $13,180 $15,180 $5,780 $1,780 $9,380 $13,380 $18,280 $24,680
EBITDA ($12,625) ($11,725) $3,975 $8,775 $13,775 $15,775 $6,375 $2,375 $9,975 $13,975 $18,875 $25,275
Interest Expense $819 $806 $792 $778 $764 $750 $736 $722 $708 $695 $681 $667
Taxes Incurred ($4,212) ($3,938) $776 $2,221 $3,725 $4,329 $1,513 $317 $2,601 $3,806 $5,280 $7,204
Net Profit ($9,828) ($9,188) $1,812 $5,182 $8,691 $10,101 $3,531 $740 $6,070 $8,880 $12,320 $16,809
Net Profit/Sales -18.90% -16.83% 3.03% 7.53% 10.81% 11.83% 5.43% 1.34% 8.43% 11.27% 13.75% 16.29%

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 $13,000 $13,650 $14,925 $17,200 $20,100 $21,350 $16,250 $13,800 $18,000 $19,700 $22,400 $25,800
Cash from Receivables $0 $1,300 $39,065 $41,078 $45,003 $51,890 $60,425 $63,540 $48,505 $41,820 $54,170 $59,370
Subtotal Cash from Operations $13,000 $14,950 $53,990 $58,278 $65,103 $73,240 $76,675 $77,340 $66,505 $61,520 $76,570 $85,170
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 $68,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $13,000 $82,950 $53,990 $58,278 $65,103 $73,240 $76,675 $77,340 $66,505 $61,520 $76,570 $85,170
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 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500 $11,500
Bill Payments $2,648 $78,570 $53,429 $49,757 $56,607 $66,861 $65,530 $37,231 $36,917 $63,853 $61,264 $72,027
Subtotal Spent on Operations $14,148 $90,070 $64,929 $61,257 $68,107 $78,361 $77,030 $48,731 $48,417 $75,353 $72,764 $83,527
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 $1,666 $1,666 $1,666 $1,666 $1,666 $1,666 $1,666 $1,666 $1,666 $1,666 $1,666 $1,666
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 $15,814 $91,736 $66,595 $62,923 $69,773 $80,027 $78,696 $50,397 $50,083 $77,019 $74,430 $85,193
Net Cash Flow ($2,814) ($8,786) ($12,605) ($4,646) ($4,671) ($6,787) ($2,021) $26,943 $16,422 ($15,499) $2,140 ($23)
Cash Balance $46,186 $37,400 $24,795 $20,150 $15,479 $8,691 $6,671 $33,613 $50,035 $34,536 $36,676 $36,653
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 $49,000 $46,186 $37,400 $24,795 $20,150 $15,479 $8,691 $6,671 $33,613 $50,035 $34,536 $36,676 $36,653
Accounts Receivable $0 $39,000 $78,650 $84,360 $94,883 $110,180 $122,340 $110,665 $88,525 $94,020 $111,300 $124,330 $142,360
Inventory $0 $29,700 $31,570 $35,310 $40,040 $47,300 $50,600 $38,500 $32,120 $42,240 $45,320 $51,810 $59,730
Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Current Assets $49,000 $114,886 $147,620 $144,465 $155,072 $172,959 $181,631 $155,836 $154,258 $186,295 $191,156 $212,816 $238,743
Long-term Assets
Long-term Assets $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000
Accumulated Depreciation $0 $595 $1,190 $1,785 $2,380 $2,975 $3,570 $4,165 $4,760 $5,355 $5,950 $6,545 $7,140
Total Long-term Assets $50,000 $49,405 $48,810 $48,215 $47,620 $47,025 $46,430 $45,835 $45,240 $44,645 $44,050 $43,455 $42,860
Total Assets $99,000 $164,291 $196,430 $192,680 $202,692 $219,984 $228,061 $201,671 $199,498 $230,940 $235,206 $256,271 $281,603
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 $76,785 $51,777 $47,882 $54,378 $64,645 $64,287 $36,032 $34,785 $61,823 $58,875 $69,286 $79,475
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 $76,785 $51,777 $47,882 $54,378 $64,645 $64,287 $36,032 $34,785 $61,823 $58,875 $69,286 $79,475
Long-term Liabilities $100,000 $98,334 $96,668 $95,002 $93,336 $91,670 $90,004 $88,338 $86,672 $85,006 $83,340 $81,674 $80,008
Total Liabilities $100,000 $175,119 $148,445 $142,884 $147,714 $156,315 $154,291 $124,370 $121,457 $146,829 $142,215 $150,960 $159,483
Paid-in Capital $150,000 $150,000 $218,000 $218,000 $218,000 $218,000 $218,000 $218,000 $218,000 $218,000 $218,000 $218,000 $218,000
Retained Earnings ($151,000) ($151,000) ($151,000) ($151,000) ($151,000) ($151,000) ($151,000) ($151,000) ($151,000) ($151,000) ($151,000) ($151,000) ($151,000)
Earnings $0 ($9,828) ($19,016) ($17,204) ($12,022) ($3,331) $6,770 $10,301 $11,041 $17,111 $25,991 $38,311 $55,120
Total Capital ($1,000) ($10,828) $47,984 $49,796 $54,978 $63,669 $73,770 $77,301 $78,041 $84,111 $92,991 $105,311 $122,120
Total Liabilities and Capital $99,000 $164,291 $196,430 $192,680 $202,692 $219,984 $228,061 $201,671 $199,498 $230,940 $235,206 $256,271 $281,603
Net Worth ($1,000) ($10,828) $47,984 $49,796 $54,978 $63,669 $73,770 $77,301 $78,041 $84,111 $92,991 $105,311 $122,120

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