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Media & Music icon Used Book Store Business Plan

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Flyleaf Books

Executive Summary

Introduction
Flyleaf Books is a start-up used bookstore in the Cleveland, Ohio area. It is the goal of the company management to acquire local market share in the used bookstore industry through low price, a dominant selection of products, a competitive variety of services including a buyback/trade program and hard to find book search, plus a relaxing, friendly environment that encourages browsing and reading.

Company
Flyleaf will be a limited liability corporation registered in the state of Ohio. The company will be jointly owned by Mr. James Vinck, a former head librarian of the Philadelphia City Library, and his wife Aracela.

Mr. Vinck is establishing this firm as a growth-oriented endeavor in order to supplement his retirement, continue meeting people with similar interests, and to leave a viable business to his children. Flyleaf Books will be establishing its store in one of the busiest section of Brecksville, an outlying suburb of Cleveland. This area is well know for its upscale residents and high-quality establishments. Our facility is a former 8,000 square ft. furniture store which allows the company to stock a large amount of inventory.

Products/Services
Flyleaf Books will offer a wide range of book, magazine, and music selections. This includes just about every conceivable category including fiction, non-fiction, business, science, children’s, hobbies, collecting, and other types of books. Our music selection will concentrate on CD’s as these are the most popular and take up the least amount of floor space. In addition, we will be offering a competitive buy and trade service to assist in lowering our inventory acquisition costs and making our store more attractive to our customers. In addition, we offer a search and order service for customer seeking to find hard to get items. Flyleaf Books will have a relaxed “reading room” type atmosphere that we will encourage through the placement of chairs, couches, etc.

Market
Our market is facing a decline in growth over the past two years. This is attributed to the overall weak economy. Book store industry sales rose only 3.6% for last year whereas overall U.S. retail sales grew by 4.3%. However, management believes that this may be an advantage to the used bookstore industry. As customers cut back on purchasing, used bookstores will look more attractive to customers who still wish to purchase books. Therefore, management believes this may be a good time to get into the industry and gain market share.

The bookstore industry as a whole is going through a large consolidation. Previously, the market was dominated by local, small stores and regional chains. With the advent of the “superstore” as created by Barnes & Noble, the largest players in the market have been able to gather significant market share and drive many independent booksellers out of the market.

Where independent booksellers can still create a viable position for themselves within the market is in the used books segment. This segment generally does not attract big companies since the “superstore” concept is much more difficult to replicate in a market with such low profit margins. This tends to favor the local independent bookseller in the used book market segment as long as they can acquire a sufficiently large enough facility to house an attractive inventory and compete with the national chains.

Financial Considerations
Our start-up expenses come to $178,000, which are single time fees associated with opening the store. These costs are financed by both private investors and SBA loans. Please note that we expect to be operating at a loss for the first couple of months before advertising begins to take effect and draw in customers. Flyleaf Books will be receiving periodic influxes of cash to cover operating expenses during the first two years as it strives toward sustainable profitability. Funding has been arranged through lending institutions and private investors already. We do not anticipate any cash flow problems during the next three years.

Used book store business plan, executive summary chart image

1.1 Objectives

These are the goals for the next three years for Flyleaf Books:

  • Achieve profitability by July Year 2.
  • Earn approximately $200,000 in sales by Year 3.
  • Pay owners a reasonable salary while running at a profit.

1.2 Keys to Success

In order to survive and expand, Flyleaf Books must keep the following issues in mind:

  • We must attain a high level of visibility through the media, billboards, and other advertising.
  • We must establish rigid procedures for cost control and incentives for maintaining tight control in order to become THE low-cost leader in used books.
  • In order to continually attract customers, we must be able to keep the maximum amount of inventory available and achieve a high level of customer service.

1.3 Mission

Flyleaf Book’s mission is to provide used quality literature of all types at the lowest possible prices in the Cleveland, OH area. The company additionally seeks to provide a comfortable atmosphere for its clients that promotes browsing, relaxation, and an enjoyable environment to spend extend time in. Flyleaf’s attraction to its customers will be our large selection of books, magazines, used CD’s and our purchasing/buyback option, which lower our book acquisition costs and allows our customers to discard unwanted books/CD’s in exchange for cash.

Company Summary

Flyleaf will be a limited liability corporation registered in the state of Ohio. The company will be jointly owned by Mr. James Vinck, a former head librarian of the Philadelphia City Library, and his wife Aracela.

Flyleaf Books will be establishing its store in one of the busiest section of Brecksville, an outlying suburb of Cleveland. This area is well know for its upscale residents and high-quality establishments. Our facility is a former 8,000 square ft. furniture store which allows the company to stock a large amount of inventory.

2.1 Company Ownership

Flyleaf will be a limited liability corporation registered in the state of Ohio. The company will be jointly owned by Mr. James Vinck, a former head librarian of the Philadelphia City Library, and his wife Aracela. Due to high start-up costs, the income and dividends to the principals will be limited for at least the first three years of operation.

The company plans to be leveraged through private investment and a limited number of loans. Mr. Vinck is establishing this firm as a growth-oriented endeavor in order to supplement his retirement, continue meeting people with similar interests, and to leave a viable business to his children. Flyleaf Books will be establishing its store at 14539 Greenhouse Ave NW, one of the busiest section of Brecksville, an outlying suburb of Cleveland. This area is well know for its upscale residents and high-quality establishments. Our facility is a former 8,000 square ft. furniture store which allows the company to stock a large amount of inventory. This facility is located in the front of the Loeman’s Square strip mall. This is an excellent location since it is across the street from the Twin Towers shopping mall. Other establishments within this strip mall include Fry’s Food and Drug, Subway Sandwiches, Boaters World, Michael’s Arts and Crafts, Office Depot, and Jared Jewelry. The company expects to begin offering its services in July.

2.2 Start-up Summary

Our start-up expenses come to $178,000, which are largely single time fees associated with opening the store. These costs are financed by both private investment and short- and long-term SBA guaranteed loans.

Used book store business plan, company summary chart image

Start-up
Requirements
Start-up Expenses
Legal $2,400
Pre-sale advertising/marketing $4,000
Land location and finders fee $20,000
Insurance $1,780
Rent $6,000
Expensed Equipment $25,000
Initial store facilities $50,000
Other $3,000
Total Start-up Expenses $112,180
Start-up Assets
Cash Required $33,820
Start-up Inventory $16,000
Other Current Assets $8,000
Long-term Assets $8,000
Total Assets $65,820
Total Requirements $178,000
Start-up Funding
Start-up Expenses to Fund $112,180
Start-up Assets to Fund $65,820
Total Funding Required $178,000
Assets
Non-cash Assets from Start-up $32,000
Cash Requirements from Start-up $33,820
Additional Cash Raised $0
Cash Balance on Starting Date $33,820
Total Assets $65,820
Liabilities and Capital
Liabilities
Current Borrowing $15,000
Long-term Liabilities $75,000
Accounts Payable (Outstanding Bills) $8,000
Other Current Liabilities (interest-free) $10,000
Total Liabilities $108,000
Capital
Planned Investment
Mr. James Vinck $50,000
Mrs. Aracela Vinck $20,000
Additional Investment Requirement $0
Total Planned Investment $70,000
Loss at Start-up (Start-up Expenses) ($112,180)
Total Capital ($42,180)
Total Capital and Liabilities $65,820
Total Funding $178,000

Products

Flyleaf Books will offer a wide range of book, magazine, and music selections. This includes just about every conceivable category including fiction, non-fiction, business, science, children’s, hobbies, collecting, and other types of books.

Our music selection will concentrate on CDs as these are the most popular and take up the least amount of floor space. In addition, we will be offering a competitive buy and trade service to assist in lowering our inventory acquisition costs and making our store more attractive to our customers. We also offer a search and order service for customer seeking hard to find items. Another less obvious service to our customers will be the relaxed “reading room” type atmosphere that we will encourage through the placement of chairs, couches, and etc. We strongly encourage our customers to spend as long as they like reading through our book selection and enjoying a quiet, relaxing environment. Our store hours will be 8:30 a.m. to 8:00 p.m. Monday-Friday and 10:00 a.m. to 6:00 p.m. Saturday. Once profitability becomes stable, we will extend these hours.

Market Analysis Summary

Our market is facing a decline in growth over the past two years. This is attributed to the overall weak economy. Book store industry sales rose only 3.6% for 2002 whereas overall U.S. retail sales grew by 4.3%. Management believes that the economic slump may be an advantage to the used bookstore industry. As customers cut back on purchasing, used bookstores will look more attractive to customers who still wish to purchase books. Therefore, management believes this may be a good time to get into the industry and gain market share.

Used bookstores serve the entire purchasing population of its geographical area but focuses on the customer who desire to purchase books/music at a discount price and, with regards to books, often do not see a long-term attachment to the product.

Our main competitors are: Barnes & Noble (which holds approximately 22% nationwide market share), Borders (which holds approximately 15%), and other local new and used bookstores.

4.1 Market Segmentation

The company anticipates serving the needs of all the potential customers within a ten to fifteen mile radius in which the approximate population is 150,000 (based on census information). The majority of the residents in this area are Caucasian (78.8%) Black (13.6%) and Hispanic (9%) with occupations classified as professional, homemaker, or retired. The majority of household incomes range from $50,000 – $100,000 (50.3%). The median income in this area is $68,096, compared to the whole Cleveland area which is $34,248. The typical “head of household” age is 25 – 34 (22.4%) or age 34 – 44 (23.1%) with a median age of 44.4 years old and an average age of 32 years old.

Target market segments
Used bookstores serve the entire purchasing population of its geographical area but focuses on customers who desire to purchase books/music at discount prices because they are seen either as near commodity items or, in the case of books, are not considered to be a long-term investment (i.e. they will trade them back). Because of this relatively low value placed upon our merchandise by potential customers, Flyleaf Books can still flourish in an upscale environment like Brecksville. This is especially true with people seeking to cut costs with the bad economy. Even though we service the entire book reading population in Brecksville and the surrounding area, we can divide our customers based on purchasing habits.

  • Casual Shoppers: These are customers who go to the bookstore with no set idea of what they want to purchase. They seek to spend a fair amount of time browsing the store and often are considered impulse buyers. Often they leave the store with small purchases or without buying anything. These customers are attracted to bookstores with low prices and large inventory.
  • “Hard to Find” Shoppers: These are customers with very specific needs. They are looking for a difficult to obtain item, usually a book that is out of print. If we can satisfy this customer, then we are able to build significant customer loyalty. These clients are generally price insensitive and are also drawn to stores that have large inventory.
  • Specific Category Shoppers: These customers are those types that generally buy books or music of one category, such as fiction or romance. These customers generally have a good idea of what they want to purchase and have the greatest buyback/trade potential. These customers represent the highest volume purchaser, often leaving the store having spent $30-$50.

The following table and pie graph show how our market segments are broken up into size and relative percentages. We use the city of Brecksville census information to determine growth figures.

Used book store business plan, market analysis summary chart image

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Casual shoppers 2% 78,000 79,560 81,151 82,774 84,429 2.00%
“Hard to find” shoppers 2% 22,000 22,440 22,889 23,347 23,814 2.00%
Specific category shoppers 2% 50,000 51,000 52,020 53,060 54,121 2.00%
Total 2.00% 150,000 153,000 156,060 159,181 162,364 2.00%

4.2 Industry Analysis

Our market is facing a decline in growth over the past two years. This is attributed to the overall weak economy. Book store industry sales rose only 3.6% for 2002 whereas overall U.S. retail sales grew by 4.3%. However, management believes that this may be an advantage to the used bookstore industry. According to interviews made by Mr. Vinck with bookstore owners and managers, the used book industry has typically done better than other retailers during economic downturns. As customers cut back on purchasing, used bookstores will look more attractive to purchase books. Therefore, management believes this may be a good time to get into the industry and gain market share. As the weak economy continues, we expect growth to be initially quite high but overall volume sales to be low, and then seeing this taper off to industry norms.

The bookstore industry as a whole is going through a large consolidation. Previously, the market was dominated by local, small stores and regional chains. With the advent of the “superstore” as created by Barnes & Noble, the largest players in the market have been able to gather significant market share and drive a lot of independent booksellers out of the market.

Where independent booksellers can still create a viable position for themselves is within the used books segment. This segment generally does not attract big companies since the “superstore” concept is much more difficult to replicate in a market with such low profit margins. Dominant selection, both in used and new books is the key to bringing in new customers and the only way to do that is to operate at a low-price leader. These two factors tend to favor the local independent bookseller in the used book market segment as long as they can acquire a sufficiently large enough facility to house an attractive inventory and LOCALLY compete with the national chains.

4.2.1 Competition and Buying Patterns

Our main competitors are: Barnes & Noble (which holds approximately 22% nationwide market share), Borders (which holds approximately 15%), and other local new and used bookstores. The used bookstore that most closely rivals our own is Greenbaum Books which is located approximately 13 miles away in Ashbury. It is estimated that they hold 9% of the local market share.

Management feels it must be clearly stated that we do not intend to directly compete with the Barnes & Noble/Borders superstores. Superstores are large and carry approximately 150,000 titles per location. Over the years, these large companies has successfully leveraged their resources to engineer customer experience to a degree that consistently differentiates otherwise commodity-like products and services. This differentiation provides these companies strategic competitive advantage. Resources such as distribution technology, strategic alliances, process research and development, and brand name combine into value-added services that provide the customer with proximity, dominant selection, discounts, and store ambiance. This is simply beyond our capacity and we will be fulfilling a sufficiently different need for our customers. However, we believe that we can successfully duplicate the differentiated experience for our customer without the overall costs.

Strategy and Implementation Summary

Flyleaf’s competitive edge will be the lower prices we will charge our customers and the dominant selection above what our used bookstore rivals can offer. This is based on management’s industry knowledge, greater capitalization and excellent location. One of the most critical element of Flyleaf’s success will be its marketing and advertising. In order to capture attention and sales our company will use prominent signs at the store locations, billboards, media bites on local news, and radio advertisements to capture customers. We expect an average 4.5% increase in sales during the first three years as we establish ourselves in the community. After that we assume a much higher average growth of between 10%-15% growth over the next five years with growth then tapering off to the industry average of 2.5% from year to year. These figures may seem very high, but considering the level of initial sales and the growth possibilities, management actually considers this to be conservative.

5.1 Competitive Edge

The company’s competitive edge will be the lower prices we will charge our customers and the larger selection we can offer: through our large store, buyback/trade program, and leveraging management excellent supplier contacts. As stated before, in the bookstore industry, low cost and dominate selection are the two success criteria. We plan to create these advantages in a new, comforting environment that will retain customers.

5.2 Marketing Strategy

One of the most critical elements of Flyleaf Book’s success will be its marketing and advertising. In order to capture attention and sales our company will use prominent signs at the store locations, billboards, media bites on local news, and radio advertisements to capture customers.

5.3 Sales Strategy

Since our store will be a stand alone facility, there is little in the way to directly influence how we close the sale other than to have an attractive storefront with our low prices and excellent selection. We believe this in itself is its own seller. One critical procedure we will be establishing is to insure top customer service and reliability and that our store always has enough inventory of all our products. We will be using industry data on inventory for bookstore chains to assist us.

5.3.1 Sales Forecast

Based on a 10% mark-up, our forecasted sales will increase by an average of 4.5% from year to year.

These sales figures are based on a conglomerate of commuter and walk-by traffic established by the Loeman/Twin Towers Mall management and with an average $3.00 purchase amount conforming to industry averages. The target profit margin was defined as an average net profit of all merchandise. As retained earnings increase, a debt retirement fund will be established to encourage early repayment, thus relieving interest expense. Also, a cash basis for purchases will be used to avoid incurring liabilities.

Used book store business plan, strategy and implementation summary chart image

Used book store business plan, strategy and implementation summary chart image

Sales Forecast
Year 1 Year 2 Year 3
Sales
Fiction Books $164,292 $172,507 $182,512
Sci-Fi Books $184,829 $194,070 $205,327
Magazines/newspapers $143,756 $150,944 $159,698
Children’s Books $184,829 $194,070 $205,327
Biography Books $123,219 $129,380 $136,884
Business Books $112,951 $118,599 $125,477
CD’s and Music $184,829 $188,526 $199,460
Other $205,366 $209,473 $214,081
Total Sales $1,304,071 $1,357,569 $1,428,767
Direct Cost of Sales Year 1 Year 2 Year 3
Fiction Books $126,505 $131,105 $136,884
Sci-Fi Books $142,318 $147,494 $153,995
Magazines/newspapers $110,692 $114,717 $119,774
Children’s Books $142,318 $147,494 $153,995
Biography Books $94,879 $98,329 $102,663
Business Books $86,972 $90,135 $94,108
CD’s and Music $142,318 $143,279 $149,595
Other $158,131 $159,199 $160,561
Subtotal Direct Cost of Sales $1,004,135 $1,031,752 $1,071,575

Management Summary

As stated earlier, Flyleaf Books will be an LLC company owned by Mr. James Vinck and his wife, Aracela. Mrs. Vinck is expected to assist Mr. Vinck in various ways and to act as the company’s bookkeeper. The ower’s son, Todd, is currently a business major at OSU and is expected to graduate in 2005. He has expressed an interest in eventually taking over the management of the company and will be working as a part-time manager with this goal in mind. The company also plans to hire various part-time salespeople as needed. Additional personnel will be added if necessary.

Mr. James Vinck is a graduate of the Dartmouth University, with a degree in library science. He has worked for more than twenty years for the Philadelphia city library system and in 1995 became the head librarian. Over that time Mr. Vinck has established excellent contacts in the book acquisition industry and plans to leverage these contacts in his new business.

6.1 Personnel Plan

Initially the company will have a small staff including upper management and sales personnel. We expect to expand our personnel and extend our hours once we begin to make a profit.

Personnel Plan
Year 1 Year 2 Year 3
Mr. James Vinck $42,000 $48,000 $48,000
Mr. Todd Vinck $18,000 $25,000 $30,000
Salesperson $10,200 $11,000 $11,000
Salesperson $10,200 $11,000 $11,000
Salesperson $10,200 $10,200 $10,200
Salesperson $10,200 $10,200 $10,200
Salesperson $10,200 $10,200 $10,200
Total People 5 5 5
Total Payroll $111,000 $125,600 $130,600

Financial Plan

The following is our financial projects over the next three years. Please note that we expect to be operating at a loss for the first couple of months before advertising begins to take effect and draw in customers.

7.1 Important Assumptions

The company is basing it assumptions on a stable growth market using average interest rates over the past ten years.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

7.2 Break-even Analysis

The following table and chart show our Break-even Analysis. We are deliberately setting these average costs a little low in order to be conservative and give us an idea of the maximum amount of inventory we need to move per month.

Used book store business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even $90,541
Assumptions:
Average Percent Variable Cost 77%
Estimated Monthly Fixed Cost $20,824

7.3 Projected Profit and Loss

The following table explains our itemized costs and determines gross and net margin. Please note that these predictions are weighted toward having higher costs in comparison to revenues in case unexpected hidden costs arise.

Used book store business plan, financial plan chart image

Used book store business plan, financial plan chart image

Used book store business plan, financial plan chart image

Used book store business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $1,304,071 $1,357,569 $1,428,767
Direct Cost of Sales $1,004,135 $1,031,752 $1,071,575
Other Costs of Goods $0 $0 $0
Total Cost of Sales $1,004,135 $1,031,752 $1,071,575
Gross Margin $299,936 $325,817 $357,192
Gross Margin % 23.00% 24.00% 25.00%
Expenses
Payroll $111,000 $125,600 $130,600
Sales and Marketing and Other Expenses $36,000 $15,000 $15,000
Depreciation $0 $0 $0
Leased equipment $0 $0 $0
Rent $60,000 $65,000 $68,000
Utilities $3,600 $4,000 $4,000
Insurance $7,200 $7,200 $7,500
Payroll Taxes $17,093 $18,840 $19,590
Other $15,000 $10,000 $10,000
Total Operating Expenses $249,893 $245,640 $254,690
Profit Before Interest and Taxes $50,044 $80,177 $102,502
EBITDA $50,044 $80,177 $102,502
Interest Expense $13,750 $13,900 $12,050
Taxes Incurred $10,888 $19,883 $27,136
Net Profit $25,406 $46,394 $63,316
Net Profit/Sales 1.95% 3.42% 4.43%

7.4 Projected Cash Flow

Our company will be receiving periodic influxes of cash in order to cover operating expenses during the first two years as it strives toward sustainable profitability. Almost all of this funding has been arranged through lend institutions and private investors already. We do not anticipate any cash flow problems during the next three years.

Used book store business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $1,304,071 $1,357,569 $1,428,767
Subtotal Cash from Operations $1,304,071 $1,357,569 $1,428,767
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $5,000 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $50,000 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $54,000 $0 $0
Subtotal Cash Received $1,413,071 $1,357,569 $1,428,767
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $111,000 $125,600 $130,600
Bill Payments $1,156,323 $1,217,129 $1,235,539
Subtotal Spent on Operations $1,267,323 $1,342,729 $1,366,139
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $7,000 $15,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $5,000 $10,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $1,267,323 $1,354,729 $1,391,139
Net Cash Flow $145,748 $2,840 $37,628
Cash Balance $179,568 $182,408 $220,036

7.5 Projected Balance Sheet

The following table is the Projected Balance Sheet for Flyleaf Books.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $179,568 $182,408 $220,036
Inventory $122,562 $125,933 $130,793
Other Current Assets $8,000 $8,000 $8,000
Total Current Assets $310,130 $316,341 $358,830
Long-term Assets
Long-term Assets $8,000 $8,000 $8,000
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $8,000 $8,000 $8,000
Total Assets $318,130 $324,341 $366,830
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $125,904 $97,722 $101,894
Current Borrowing $20,000 $13,000 ($2,000)
Other Current Liabilities $10,000 $10,000 $10,000
Subtotal Current Liabilities $155,904 $120,722 $109,894
Long-term Liabilities $125,000 $120,000 $110,000
Total Liabilities $280,904 $240,722 $219,894
Paid-in Capital $124,000 $124,000 $124,000
Retained Earnings ($112,180) ($86,774) ($40,381)
Earnings $25,406 $46,394 $63,316
Total Capital $37,226 $83,619 $146,935
Total Liabilities and Capital $318,130 $324,341 $366,830
Net Worth $37,226 $83,619 $146,935

7.6 Business Ratios

We are using the industry standard Business Ratios for independent used bookstore chains as a comparison to our own.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 4.10% 5.24% 2.27%
Percent of Total Assets
Inventory 38.53% 38.83% 35.66% 22.18%
Other Current Assets 2.51% 2.47% 2.18% 26.81%
Total Current Assets 97.49% 97.53% 97.82% 56.12%
Long-term Assets 2.51% 2.47% 2.18% 43.88%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 49.01% 37.22% 29.96% 26.39%
Long-term Liabilities 39.29% 37.00% 29.99% 24.87%
Total Liabilities 88.30% 74.22% 59.94% 51.26%
Net Worth 11.70% 25.78% 40.06% 48.74%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 23.00% 24.00% 25.00% 23.55%
Selling, General & Administrative Expenses 21.05% 20.58% 20.57% 16.21%
Advertising Expenses 0.00% 0.00% 0.00% 0.85%
Profit Before Interest and Taxes 3.84% 5.91% 7.17% 1.02%
Main Ratios
Current 1.99 2.62 3.27 1.68
Quick 1.20 1.58 2.08 0.71
Total Debt to Total Assets 88.30% 74.22% 59.94% 4.63%
Pre-tax Return on Net Worth 97.50% 79.26% 61.56% 57.28%
Pre-tax Return on Assets 11.41% 20.43% 24.66% 10.83%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 1.95% 3.42% 4.43% n.a
Return on Equity 68.25% 55.48% 43.09% n.a
Activity Ratios
Inventory Turnover 10.91 8.30 8.35 n.a
Accounts Payable Turnover 10.12 12.17 12.17 n.a
Payment Days 27 34 29 n.a
Total Asset Turnover 4.10 4.19 3.89 n.a
Debt Ratios
Debt to Net Worth 7.55 2.88 1.50 n.a
Current Liab. to Liab. 0.56 0.50 0.50 n.a
Liquidity Ratios
Net Working Capital $154,226 $195,619 $248,935 n.a
Interest Coverage 3.64 5.77 8.51 n.a
Additional Ratios
Assets to Sales 0.24 0.24 0.26 n.a
Current Debt/Total Assets 49% 37% 30% n.a
Acid Test 1.20 1.58 2.08 n.a
Sales/Net Worth 35.03 16.24 9.72 n.a
Dividend Payout 0.00 0.00 0.00 n.a

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
Fiction Books 0% $8,000 $9,200 $10,580 $12,167 $12,836 $13,542 $14,287 $15,073 $15,902 $16,776 $17,699 $18,230
Sci-Fi Books 0% $9,000 $10,350 $11,903 $13,688 $14,441 $15,235 $16,073 $16,957 $17,890 $18,873 $19,911 $20,509
Magazines/newspapers 0% $7,000 $8,050 $9,258 $10,646 $11,232 $11,849 $12,501 $13,189 $13,914 $14,679 $15,487 $15,951
Children’s Books 0% $9,000 $10,350 $11,903 $13,688 $14,441 $15,235 $16,073 $16,957 $17,890 $18,873 $19,911 $20,509
Biography Books 0% $6,000 $6,900 $7,935 $9,125 $9,627 $10,157 $10,715 $11,305 $11,926 $12,582 $13,274 $13,673
Business Books 0% $5,500 $6,325 $7,274 $8,365 $8,825 $9,310 $9,822 $10,363 $10,932 $11,534 $12,168 $12,533
CD’s and Music 0% $9,000 $10,350 $11,903 $13,688 $14,441 $15,235 $16,073 $16,957 $17,890 $18,873 $19,911 $20,509
Other 0% $10,000 $11,500 $13,225 $15,209 $16,045 $16,928 $17,859 $18,841 $19,877 $20,970 $22,124 $22,788
Total Sales $63,500 $73,025 $83,979 $96,576 $101,887 $107,491 $113,403 $119,640 $126,220 $133,163 $140,486 $144,701
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
Fiction Books $6,160 $7,084 $8,147 $9,369 $9,884 $10,427 $11,001 $11,606 $12,244 $12,918 $13,628 $14,037
Sci-Fi Books $6,930 $7,970 $9,165 $10,540 $11,119 $11,731 $12,376 $13,057 $13,775 $14,533 $15,332 $15,792
Magazines/newspapers $5,390 $6,199 $7,128 $8,198 $8,648 $9,124 $9,626 $10,155 $10,714 $11,303 $11,925 $12,282
Children’s Books $6,930 $7,970 $9,165 $10,540 $11,119 $11,731 $12,376 $13,057 $13,775 $14,533 $15,332 $15,792
Biography Books $4,620 $5,313 $6,110 $7,026 $7,413 $7,821 $8,251 $8,705 $9,183 $9,688 $10,221 $10,528
Business Books $4,235 $4,870 $5,601 $6,441 $6,795 $7,169 $7,563 $7,979 $8,418 $8,881 $9,369 $9,651
CD’s and Music $6,930 $7,970 $9,165 $10,540 $11,119 $11,731 $12,376 $13,057 $13,775 $14,533 $15,332 $15,792
Other $7,700 $8,855 $10,183 $11,711 $12,355 $13,034 $13,751 $14,508 $15,305 $16,147 $17,035 $17,546
Subtotal Direct Cost of Sales $48,895 $56,229 $64,664 $74,363 $78,453 $82,768 $87,320 $92,123 $97,190 $102,535 $108,175 $111,420
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
Mr. James Vinck 0% $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500
Mr. Todd Vinck 0% $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500
Salesperson 0% $850 $850 $850 $850 $850 $850 $850 $850 $850 $850 $850 $850
Salesperson 0% $850 $850 $850 $850 $850 $850 $850 $850 $850 $850 $850 $850
Salesperson 0% $850 $850 $850 $850 $850 $850 $850 $850 $850 $850 $850 $850
Salesperson 0% $850 $850 $850 $850 $850 $850 $850 $850 $850 $850 $850 $850
Salesperson 0% $850 $850 $850 $850 $850 $850 $850 $850 $850 $850 $850 $850
Total People 7 5 5 5 5 5 5 5 5 5 5 5
Total Payroll $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250

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 $63,500 $73,025 $83,979 $96,576 $101,887 $107,491 $113,403 $119,640 $126,220 $133,163 $140,486 $144,701
Direct Cost of Sales $48,895 $56,229 $64,664 $74,363 $78,453 $82,768 $87,320 $92,123 $97,190 $102,535 $108,175 $111,420
Other Costs of Goods $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $48,895 $56,229 $64,664 $74,363 $78,453 $82,768 $87,320 $92,123 $97,190 $102,535 $108,175 $111,420
Gross Margin $14,605 $16,796 $19,315 $22,212 $23,434 $24,723 $26,083 $27,517 $29,031 $30,627 $32,312 $33,281
Gross Margin % 23.00% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00%
Expenses
Payroll $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250
Sales and Marketing and Other Expenses $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
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
Rent $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000
Utilities $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300
Insurance $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600
Payroll Taxes 15% $1,830 $1,388 $1,388 $1,388 $1,388 $1,388 $1,388 $1,388 $1,388 $1,388 $1,388 $1,388
Other $2,000 $2,000 $2,000 $0 $2,000 $0 $2,000 $0 $3,000 $0 $2,000 $0
Total Operating Expenses $21,980 $21,538 $21,538 $19,538 $21,538 $19,538 $21,538 $19,538 $22,538 $19,538 $21,538 $19,538
Profit Before Interest and Taxes ($7,375) ($4,742) ($2,222) $2,675 $1,897 $5,185 $4,545 $7,980 $6,493 $11,090 $10,774 $13,744
EBITDA ($7,375) ($4,742) ($2,222) $2,675 $1,897 $5,185 $4,545 $7,980 $6,493 $11,090 $10,774 $13,744
Interest Expense $750 $1,167 $1,167 $1,167 $1,167 $1,167 $1,167 $1,167 $1,208 $1,208 $1,208 $1,208
Taxes Incurred ($2,438) ($1,773) ($1,017) $452 $219 $1,206 $1,014 $2,044 $1,585 $2,964 $2,870 $3,761
Net Profit ($5,688) ($4,136) ($2,372) $1,056 $511 $2,813 $2,365 $4,769 $3,699 $6,917 $6,696 $8,775
Net Profit/Sales -8.96% -5.66% -2.82% 1.09% 0.50% 2.62% 2.09% 3.99% 2.93% 5.19% 4.77% 6.06%

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 $63,500 $73,025 $83,979 $96,576 $101,887 $107,491 $113,403 $119,640 $126,220 $133,163 $140,486 $144,701
Subtotal Cash from Operations $63,500 $73,025 $83,979 $96,576 $101,887 $107,491 $113,403 $119,640 $126,220 $133,163 $140,486 $144,701
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 $5,000 $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 $50,000 $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 $50,000 $0 $0 $0 $0 $0 $0 $4,000
Subtotal Cash Received $63,500 $123,025 $83,979 $96,576 $151,887 $107,491 $113,403 $119,640 $131,220 $133,163 $140,486 $148,701
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 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250 $9,250
Bill Payments $11,257 $96,997 $76,325 $86,731 $96,929 $96,744 $100,395 $106,932 $111,169 $118,979 $123,138 $130,727
Subtotal Spent on Operations $20,507 $106,247 $85,575 $95,981 $106,179 $105,994 $109,645 $116,182 $120,419 $128,229 $132,388 $139,977
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 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
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 $20,507 $106,247 $85,575 $95,981 $106,179 $105,994 $109,645 $116,182 $120,419 $128,229 $132,388 $139,977
Net Cash Flow $42,993 $16,778 ($1,596) $595 $45,708 $1,497 $3,758 $3,458 $10,802 $4,934 $8,099 $8,724
Cash Balance $76,813 $93,590 $91,994 $92,589 $138,297 $139,794 $143,552 $147,010 $157,812 $162,746 $170,844 $179,568
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 $33,820 $76,813 $93,590 $91,994 $92,589 $138,297 $139,794 $143,552 $147,010 $157,812 $162,746 $170,844 $179,568
Inventory $16,000 $53,785 $61,852 $71,130 $81,800 $86,298 $91,045 $96,052 $101,335 $106,909 $112,789 $118,992 $122,562
Other Current Assets $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000
Total Current Assets $57,820 $138,597 $163,443 $171,124 $182,388 $232,595 $238,839 $247,605 $256,345 $272,721 $283,534 $297,836 $310,130
Long-term Assets
Long-term Assets $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000
Accumulated Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Long-term Assets $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000
Total Assets $65,820 $146,597 $171,443 $179,124 $190,388 $240,595 $246,839 $255,605 $264,345 $280,721 $291,534 $305,836 $318,130
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 $8,000 $94,465 $73,446 $83,500 $93,708 $93,404 $96,835 $103,236 $107,207 $114,883 $118,780 $126,385 $125,904
Current Borrowing $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $20,000 $20,000 $20,000 $20,000
Other Current Liabilities $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
Subtotal Current Liabilities $33,000 $119,465 $98,446 $108,500 $118,708 $118,404 $121,835 $128,236 $132,207 $144,883 $148,780 $156,385 $155,904
Long-term Liabilities $75,000 $75,000 $125,000 $125,000 $125,000 $125,000 $125,000 $125,000 $125,000 $125,000 $125,000 $125,000 $125,000
Total Liabilities $108,000 $194,465 $223,446 $233,500 $243,708 $243,404 $246,835 $253,236 $257,207 $269,883 $273,780 $281,385 $280,904
Paid-in Capital $70,000 $70,000 $70,000 $70,000 $70,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $124,000
Retained Earnings ($112,180) ($112,180) ($112,180) ($112,180) ($112,180) ($112,180) ($112,180) ($112,180) ($112,180) ($112,180) ($112,180) ($112,180) ($112,180)
Earnings $0 ($5,688) ($9,823) ($12,196) ($11,140) ($10,629) ($7,816) ($5,451) ($682) $3,018 $9,935 $16,631 $25,406
Total Capital ($42,180) ($47,868) ($52,003) ($54,376) ($53,320) ($2,809) $4 $2,369 $7,138 $10,838 $17,755 $24,451 $37,226
Total Liabilities and Capital $65,820 $146,597 $171,443 $179,124 $190,388 $240,595 $246,839 $255,605 $264,345 $280,721 $291,534 $305,836 $318,130
Net Worth ($42,180) ($47,868) ($52,003) ($54,376) ($53,320) ($2,809) $4 $2,369 $7,138 $10,838 $17,755 $24,451 $37,226