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January 1998

This sample business plan has been made available to users of Business Plan Pro", business planning software published by Palo Alto Software. Names, loc ations and numbers may have been c hanged, and substantial portions of text may have been omitted from the original plan to preserve confidentiality and proprietary information. You are welcome to use this plan as a starting point to create your own, but you do not have permission to reproduce, publish, distribute or even copy this plan as it exists here. Requests for reprints, ac ademic use, and other dissemination of this sample plan should be emailed to the marketing department of Palo Alto Software at marketing@paloalto.com. For product information visit our Website: www.paloalto.com or call: 1-800-229-7526. Copyright Palo Alto Software, Inc., 1995-2008

Confidentiality Agreement The undersigned reader ac knowledges that the information provided by _________________________ in this business plan is confidential; therefore, reader agrees not to disc lose it without the express written permission of _________________________. It is ac knowledged by reader that information to be furnished in this business plan is in all respec ts confidential in nature, other than information which is in the public domain through other means and that any disc losure or use of same by reader, may cause serious harm or damage to _________________________. Upon request, this document is to be immediately returned to _________________________. ___________________ Signature ___________________ Name (typed or printed) ___________________ Date This is a business plan. It does not imply an offering of securities.

Table of Contents
1.0 Executive Summary.............................................................................................................................1 1.1 Objectives ...................................................................................................................................1 1.2 Mission........................................................................................................................................2 1.3 Keys to Success ........................................................................................................................2 2.0 Company Summary.............................................................................................................................2 2.1 Company Ownership .................................................................................................................2 2.2 Company History........................................................................................................................3 2.3 Company Locations and Facilities ..........................................................................................4 3.0 Products ...............................................................................................................................................5 3.1 Product Description...................................................................................................................5 3.2 Competitive Comparison..........................................................................................................5 3.3 Sales Literature ..........................................................................................................................5 3.4 Sourcing ......................................................................................................................................6 3.5 Technology..................................................................................................................................6 3.6 Future Products ..........................................................................................................................6 4.0 Market Analysis Summary..................................................................................................................6 4.1 Market Segmentation ................................................................................................................7 4.2 Industry Analysis .........................................................................................................................8 4.2.1 Distribution Patterns ...............................................................................................................8 4.2.2 Competition and Buying Patterns .........................................................................................8 4.2.3 Main Competitors ...................................................................................................................9 4.2.4 Industry Participants ...............................................................................................................9 4.3 Target Market Segment Strategy...........................................................................................10 4.3.1 Market Needs .......................................................................................................................10 4.3.2 Market Trends .......................................................................................................................10 4.3.3 Market Growth.......................................................................................................................10 5.0 Strategy and Implementation Summary..........................................................................................11 5.1 Strategy Pyramid .....................................................................................................................11 5.2 Value Proposition ....................................................................................................................11 5.3 Competitive Edge....................................................................................................................11 5.4 Marketing Strategy ..................................................................................................................12 5.4.1 Pricing Strategy ....................................................................................................................12 5.4.2 Promotion Strategy ..............................................................................................................12 5.4.3 Distribution Strategy.............................................................................................................12 5.4.4 Positioning Statement..........................................................................................................12 5.5 Sales Strategy..........................................................................................................................13 5.5.1 Sales Programs....................................................................................................................13 5.5.2 Sales Forecast .....................................................................................................................14 5.6 Milestones ................................................................................................................................16 6.0 Management Summary ....................................................................................................................17 6.1 Organizational Structure..........................................................................................................17 6.2 Management Team .................................................................................................................18 6.3 Management Team Gaps .......................................................................................................18 6.4 Personnel Plan.........................................................................................................................18 7.0 Financial Plan ....................................................................................................................................20 7.1 Important Assumptions............................................................................................................20 7.2 Key Financial Indicators ..........................................................................................................21
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7.3 Break-even Analysis................................................................................................................22 7.4 Projected Profit and Loss .......................................................................................................23 7.5 Projected Cash Flow ...............................................................................................................27 7.6 Projected Balance Sheet ........................................................................................................29 7.7 Business Ratios .......................................................................................................................30

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1.0 Executive Summary
Willamette Furniture Mfr. has been riding a growth spurt, having disc overed the high-end direc t mail channel that gave us a push to new potential volumes through channels. Bolstered by appearances in spec ialty catalogs, we were able to develop another additional channel through distributors of office equipment that sell direc tly to corporations. This annual business plan calls for another three years of ac celerated growth. Bec ause our sales growth has brought some working capital implications, we are carefully planning to manage growth and provide for steady cash flow. We also expec t to be profitable as never before. In all, this plan is a healthy company with good growth prospec ts, looking to manage its orderly growth in the near future.

1.1 Objectives
1. Foc us on the new channels to increase sales beyond the $1 million mark by 2000. 2. Maintain a gross margin c lose to 60%, despite the sales increase. 3. Increase the net profit significantly by 2000.

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1.2 Mission
Willamette Furniture Mfr. helps create pleasant, productive office environments with welldesigned furniture that incorporates new tec hnology into the classic office mode, in which real people can work happily. We are sensitive to the look and feel of good wood and fine furniture as well as to high-powered personal computing. We always provide the best possible value to our customers who care about quality office environments, and we want every dollar spent with us to be well spent. We also create and nurture a healthy, creative, respec tful, and fun office and workshop environment, in which our employees are fairly compensated and encouraged to respec t the customer and the quality of the product we produce. We seek fair and responsible profit, enough to keep the company financially healthy for the long term and to fairly compensate owners and investors for their money and risk.

1.3 Keys to Success


Uncompromising commitment to the quality of the end product: quality wood, quality workmanship, quality design, quality of end result. Successful niche marketing: we need to find the quality-consc ious customer in the right channels, and we need to make sure that customer can find us. Almost-automatic assembly: we can't afford to ship fully-assembled desks, but assembly must be so easy and automatic that it makes the customer feel better about the quality, not worse.

2.0 Company Summary


Willamette Furniture Mfr. is a privately-owned specialty manufac turer of high-end office furniture for computer users who care about elegant office space. Our customers are in all levels of business that can afford very high quality office furniture, plus a growing portion of high-end home offices.

2.1 Company Ownership


Willamette Furniture Mfr. is an Oregon corporation, subchapter S, owned entirely by Jim and Susan Graham. It was created in 1992. At that time the product line and industrial property rights (including trademarks) were purchased from the heirs to the Willamette Association, which was a 1970s commune in rural Oregon.

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2.2 Company History
Willamette Furniture Mfr. had ac tually existed since the 1970s as a "hippy commune," but its present existence began in 1992 when the furniture line was purchased by Jim and Susan Graham. The Grahams moved to Oregon from California and purchased the business as part of the move. Sales took a big jump in 1997, when we reached more effec tive channels of distribution. The key was winning a plac e in the Premier Exec utive office furniture catalog, which led to winning the interest of the Needham furniture distributors, and display space in several hundred stores. Profitability and working capital were problems during our rec ent growth, but we believe we now have costs and cash flow under control.

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Table: Past Performance
Past Performance Sales Gross Margin Gross Margin % Operating Expenses Collection Period (days) Inventory Turnover Balance Sheet 1995 Current Assets Cash Accounts Receivable Inventory Other Current Assets Total Current Assets Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities (interest free) Total Current Liabilities Long-term Liabilities Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital Total Capital and Liabilities Other Inputs Payment Days Sales on Credit Receivables Turnover 1996 1997 1995 $127,809 $58,381 45.68% $54,602 0 4.00 1996 $130,568 $72,374 55.43% $69,801 0 4.70 1997 $225,790 $105,245 46.61% $90,125 36 6.00

$0 $0 $0 $0 $0

$0 $0 $0 $0 $0

$1,438 $27,605 $10,141 $2,375 $41,559

$0 $0 $0 $0

$0 $0 $0 $0

$3,210 $1,720 $1,490 $43,049

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

$11,191 $0 $1,803 $12,994 $0 $12,994 $4,500 $13,100 $12,455 $30,055 $43,049

0 $0 0.00

0 $0 0.00

35 $140,434 5.09

2.3 Company Locations and Facilities


Willamette Furniture Mfr. is loc ated in a single fac ility in the West Eleventh industrial district in Eugene, OR. The fac ility includes office and workshop space, ac cess to the loc al bus route, and good parking.

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3.0 Products
Willamette Furniture Mfr. offers very high quality office furniture designed to effectively incorporate computer mac hinery into the exec utive office or home office. The key to the line is an ergonomically effective desk that still looks like an exec utive desk, looks very good in a highend home office, but is intended to ac commodate the personal computer.

3.1 Product Description


1. Our main line is the Willamette computer desk in several versions. This is an elegant piec e of office furniture designed to look good in exec utive office or home office, and at the same time be ideal for real use of the computer. The two critical elements of ergonomics -keyboard height and angle and monitor height and angle -- are completely adjustable. Cable runs and shelving add to the utility of the exec utive computer, without sacrificing elegance. 2. We also make complementary piec es to fill out the office suite, including file cabinets, printer stands, and bookcases. 3. We also make custom designs to fit exac t measurements.

3.2 Competitive Comparison


Within our niche we have two significant competitors, Ac me Computer Furniture and ABC Manufacturing. Ac me is a bigger company but like us, operating mainly in our same niche, whose marketing is better than its product quality. ABC is a subsidiary of Haines Furniture, a major furniture manufac turer, which has rec ently targeted our niche. In general, however, our competition is not in our niche. We compete against generalized furniture manufac turers, cheaper computer-related furniture, and the mainstream merchandise in the major furniture channels and office supply stores. It isn't that people choose our competitors instead of our product, it is that they choose lesser quality, mainstream materials instead of the higher quality furniture we offer.

3.3 Sales Literature


Sales literature is attac hed as an appendix to the plan. For 1998 we plan to develop a company catalog, which would include some other products for the same target customers. The foc us will be the exec utive office catalog, with furniture, lamps, other ac cessories.

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3.4 Sourcing
Our Oregon loc ation is a distinct advantage for loc al wood. We can buy higher quality oak and cherry than either of our competitors (one in California, one in New York). Since our sales increased over the last two years, we have been able to buy at better prices, bec ause of higher volumes. We work with three wood suppliers, all loc al. Bambridge supplies most of our oak, and a bit of cherry and some other specialty woods. Bambridge has been in business for as long as we have, and has given us good service and good prices. This is a good, stable supplier. Duffin Wood Products is a good second source, particularly for cherry and specialty woods. We've used Merlin supplies as well, frequently, for filling in when either of our main two suppliers were short. We also work with a number of specialty manufac turers for furniture fittings, drawer ac cessories, glass, shelving ac cessories, and related purchases. Although we aren't a major player compared to the major furniture manufac turers, we are one of the biggest buyers of the custom materials we need. Most of our suppliers are selling through channels to hobbyists and carpenters, so they treat us as a major ac count.

3.5 Technology
We depend on our dominance of the latest in technology of ergonomics, combined with c lassic design elements of fine furniture. We must remain on top of new tec hnologies in display, input and output, and communications. For example, our latest models are already assuming the desktop digital sc anner as a frequent ac cessory, and audio for use in c reating presentations, email attac hments, etc. Our assembly patents are an important competitive edge. No competitor can match the way we turn a drawbac k -- having to assemble the product -- into a feature. Our customer surveys confirm that customers take the interloc king assembly system as an enhancement to the sense of quality.

3.6 Future Products


In 1998 we will introduce the new line based on the exec utive laptop computer, with doc king station to connec t to a network. The new furniture has a different configuration to assume easy ac cess to the docking station, and better use of the space that doesn't have to be dedicated the the CPU case. We are also going to ac commodate larger monitors, the 17" and 21" sizes that are bec oming much more common, particularly in our high-end market. As we do, we will also be watching for the new technology providing wall-mounted flat sc reens, the liquid plasma and similar technologies.

4.0 Market Analysis Summary


Our target market is a person who wants to have very fine furniture with the latest in technology, combined with an old fashioned sense of fine woods and fine woodworking. This person c an be in the corporate towers, small or medium business, or in a home office. The common bond is the apprec iation of quality, and the lac k of price constraints.

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4.1 Market Segmentation
Corporate executives: our market research indicates about 2.5 million potential customers who are managers in c orporations of more than 100 employees. The target customer is going to be at a high exec utive level, in most cases, bec ause the purchase price is relatively steep compared to standard office furniture. Small business owners: our customer surveys indicate a strong market among the owners of businesses with fewer than 100 employees. There are 11 million such businesses in this country, most of them with c oncentrated ownership that makes the owners potential customers. Home offices: the home office business has proliferated during the 1990s, and we also have home offices for people employed outside the home. This is a big market, some 36 million home offices, growing faster than other markets.

Table: Market Analysis


Market Analysis 1998 Potential Customers Corporate Executives Small business owners Home offices Other Total Growth 1% 4% 10% 3% 8.23% 2,500,000 11,000,000 36,000,000 1,000,000 50,500,000 1999 2,525,000 11,440,000 39,600,000 1,030,000 54,595,000 2000 2,550,250 11,897,600 43,560,000 1,060,900 59,068,750 2001 2,575,753 12,373,504 47,916,000 1,092,727 63,957,984 2002 2,601,511 12,868,444 52,707,600 1,125,509 69,303,064 CAGR 1.00% 4.00% 10.00% 3.00% 8.23%

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4.2 Industry Analysis
The office furniture industry has undergone a great deal of change in this dec ade. The growth of the office superstores made a few large brands dominant. They produce relatively inexpensive furniture that makes compromises in order to stay at the low price level. Makers of higher quality furniture are in general shuffling for niches to hide in. Although Willamette Furniture Mfr. was essentially developed around a niche, many of the more traditional furniture makers are looking for niches, trying to deal with declining sales as the main volume goes elsewhere.

4.2.1 Distribution Patterns


The four main manufac turers are selling direc t to the office superstores and buying disc ount clubs. This ac counts for the main volume of distribution. The office furniture customer seems to be growing steadily more comfortable with the retail buy in the chain store. The major corporate purchases are still made direc tly with manufac turers. Although this is still a major channel for some of the more traditional manufac turers, it is essentially closed to new competition. The direc t channel is dominated by two manufac turers and two distributors. The distributors will oc casionally take on a new line -- happily, this has helped Willamette Furniture Mfr. -- but the main growth is in retail. Published research indicates that 51% of the total sales volume in the market goes through the retail channel, most of that major national chains. Another 23% goes through the direc t sales channel, although in this case direc t sales includes sales by distributors who are buying from multiple manufac turers. Most of the remainder, 18%, is sold direc tly to buyers by catalogs.

4.2.2 Competition and Buying Patterns


In the mainstream business, channels are critical to volume. The manufac turers with impact in the national sales are going to win display space in the store, and most buyers seem content to pick their product off the store floor. Price is critical, bec ause the channels take significant margins. Buyers are willing to settle for laminated quality and serviceable design. In direc t sales to corporations, price and volume is critical. The corporate buyer wants troublefree buying in volume, at a great price. Reliable delivery is as important as reliable quality. In the high-end specialty market, particularly in our niche, features are very important. Our target customer is not making selec tions based on price. The ergonomics, design, ac commodation of the computer features within the high-quality feel of good wood, is much more important than mere price. We are also seeing that assembly is critical to shipping and pac king, but our customer doesn't ac cept any assembly problems. We need to make sure that the piec e comes together almost like magic, and as it does, it presents a greater feel of quality than if it hadn't required assembly at all.

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4.2.3 Main Competitors
Acme Computer Furniture Ac me has been operating since the middle 1980s, and grew up with c omputer-related furniture. It was one of the first, certainly the first we are aware of, to develop personal computer desks and market through advertising in c omputer magazines. Today they are about twice our size. They have a very nicely done catalog and good relationships with two distributors. Strengths: good marketing, strong advertising budget, relationships with distributors, strong direc t sales. Weaknesses: the product is more standardized, and of lesser quality, with less sense of design and materials and workmanship. ABC Manufacturing ABC Manufacturing is a division of Haines Furniture, the second largest manufac turers of mainstream home furnishings. Haines bought ABC three years ago and is foc using on our niche. We see very good quality product, and an excellent sense of design, but little movement in channels or catalogs. Strengths: financial bac king, product quality. Weaknesses: ABC has not seemed to understand our niche, where to find the buyers, how to market as a specialty niche instead of the more traditional furniture channels.

4.2.4 Industry Participants


The main volume in the industry is now concentrated in four main brands, all of which c ompete for retail sales through major retail chain stores: Office Depot, Office Max, Staples, and others. These same four are also concentrating efforts as well in the major club disc ount stores, the Price Club, Costco, Sams, etc. The growth of the office superstores made a few large brands dominant. Designs are similar and quite competitive, costs and cost control is critical, and channel management and channel marketing are the keys to these business' continued success. In mainstream office furniture, the rise of the office store channel has siphoned a lot of volume from the older and more traditional manufac turers. The channels that sold the more traditional lines are also suffering. What's left are smaller brands, smaller companies, and divisions of more traditional furniture companies. There are also some traditional manufac turers still making desks as part of furniture lines foc used mainly on home furnishings. Some of these have looked at times at our niche, and are competing for the same dollars.

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4.3 Target Market Segment Strategy
Our segment definition is of itself strategic. We are not intending to satisfy all users of office furniture intended for use with personal computers, but, rather, only those who are most demanding. We are definitely out to address the needs of the high-end buyer, who is willing to pay more for quality. In our particular market, we also seek the buyer who apprec iates two attributes: the quality of furniture workmanship and the excellence of design, with an understanding of technology and ergonomics built in.

4.3.1 Market Needs


We understand that our target market needs more than just office furniture. The need grew out of the special needs of personal computing, when c ombined with office furniture -- keyboards at correc t height, monitors at correc t height, proper channels for cables, and other amenities. Our target customer wants to have all of that plus fine furniture. There is a need for quality, reassurance of wood and good workmanship. We don't just sell office furniture, we sell office environment and design, plus workmanship.

4.3.2 Market Trends


Our market has finally grown to rec ognize the disparity between most of the standard office furniture sold through channels, and our own products. The development of the high-end office worker, office owners, and baby-boomer exec utive is an important trend for us. We now have people who are using computers who also apprec iate the old-fashioned workmanship of good furniture.

4.3.3 Market Growth


Ac cording to [source omitted], the market for office furniture is growing at XX percent per year, and is projec ted to increase. The market for PC-related office furniture is growing even faster, at YY percent per year, and is projec ted to top $XX billion by the year 2000. Most important is the growth in home offices with personal computer equipment. As the cost of the computer goes down, steadily, the number of home offices goes up. Ac cording to [omitted], this is about 36 million right now, growing at 15 percent per year. Households spent $XX billion last year to equip home offices, and 15 percent of that was spent on furniture.

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5.0 Strategy and Implementation Summary
We foc us on a special kind of customer, the person who wants very high quality office furniture customized to work beautifully with modern technology including personal computers, sc anners, internet connec tions, and other high-tech items. Our customer might be in larger corporations, small or medium business, or in a home office with or without a home-office business. What is important to the customer is elegance, fine workmanship, ease of use, ergonomics, and prac ticality. Our marketing strategy assumes that we need to go into specialty channels to address our target customer's needs. The tie-in with the high-end quality catalogs like Sharper Image is perfec t, bec ause these catalogs cater to our kind of customers. We position as the highest quality, offering status and prestige levels of purchase. The product strategy is also based on quality, in this case the intersection of tec hnical understanding with very high quality woodworking and professional materials, and workmanship. Our most important competitive edge is our assembly strategy, which is based on interloc king wood piec es of such high quality that assembly is not only a pleasure for our customers, it is ac tually a feature that enhances the sense of quality.

5.1 Strategy Pyramid


Our main strategy at Willamette Furniture Mfr. is to position ourselves at the top of the quality sc ale, featuring our combination of superb tec hnology and fine old-fashioned woodworking, for the buyer who wants the best quality regardless of price. Tac tics underneath that strategy include research and development related to new designs and new tec hnology, choosing the right channels of distribution, and communicating our quality position to the market. Programs are mainly those listed in the milestones table, including new design programs, new equipment to keep up with design, channel development, channel marketing programs, our direc t sales, and our continued presence in high-end catalog channels and new presence in the web.

5.2 Value Proposition


Willamette Furniture Mfr. gives the disc riminating personal computer user, who cares about design and quality furniture and quality of working environment, a combination of highest quality furniture and latest tec hnology, at a relatively high price.

5.3 Competitive Edge


Our competitive edge is our dominance of high-technology ergonomics and traditional highquality furniture workmanship. Although there are many computer furniture manufac turers, and many computer lovers, few have brought the two crafts together as we have.

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5.4 Marketing Strategy
Our product is positioned very carefully: this is high-quality office furniture combining workmanship and ergonomics for the customer who understands quality, is a user of high technology equipment, and is willing to spend money on the best. Unlike the mainstream products, we do not use laminates or cheap manufac turing tec hnology. Our marketing strategy is based mainly on making the right information available to the right target customer. We can't afford to sell people on our expensive products, bec ause most don't have the budget. What we really do is make sure that those who have the budget and apprec iate the product know that it exists, and know where to find it. The marketing has to convey the sense of quality in every picture, every promotion, and every publication. We can't afford to appear in sec ond-rate catalogs with poor illustrations that make the product look less than it is. We also need to leverage our presence using high-quality catalogs and specialty distributors.

5.4.1 Pricing Strategy


We will maintain our pricing position as a premier provider. We are the best product available, for the most disc riminating consumer. We intend to maintain our separation from the price competition at the lower end of the business. Our plan calls for no significant changes in pricing.

5.4.2 Promotion Strategy


Our most important vehicle for sales promotion is the direc t mail catalog published by the specialty retailer such as Sharper Image and its competitors. Our advertising budget of $264 million goes mainly for space in the specialty catalog. We also participate in major industry events, including both the Spring and Fall national computer furniture shows and the fall computer show. Our total budget for events is $40,000, plus about half of the $31,000 travel budget. This year we will also promote our products with an in-house catalog including our own products plus related merchandise of interest to the same target market.

5.4.3 Distribution Strategy


Our most important marketing program is [spec ifics omitted]. Ivy Bells will be responsible, with budget of $XX,XXX and milestone date of the 15th of July. This program is intended to [objec tives omitted]. Ac hievement should be measured by [spec ific concrete measurement]. Another key marketing program is [spec ifics omitted]. [Name] will be responsible, with budget of $XX,XXX and milestone date of [date]. This program is intended to [objec tives omitted]. Ac hievement should be measured by [spec ific concrete measurement].

5.4.4 Positioning Statement


For disc riminating personal computer users who want to integrate their PCs with fine furniture, the Willamette line offers exquisite workmanship and design combined with state-of-the-arts ergonomics and tec hnology. Unlike the Ac me line, Willamette Furniture makes no design compromises for standardization. Page 12

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5.5 Sales Strategy
Our strategy foc uses first on maintaining the identity with the high-end buyer who apprec iates the best available quality, but is also very demanding regarding computer systems and technology. We've been able to find these customers using a combination of direc t mail catalogs and direc t sales to distributors. For the next year we continue to foc us on growing presence in the high-end direc t mail catalog that finds our specialty customer. We will work with Sharper Image and Broadview more than ever, and we expec t to gain position in the major airline catalogs as well. Spec ialty retail is a new channel that could bec ome important for us. Our work with distributors has been promising. We hope to continue the relationship with distributors selling direc tly to larger corporations, even though this takes working capital to support rec eivables.

5.5.1 Sales Programs


Spec ific sales programs: 1. Catalog sales: develop plac ement with one additional catalog catering to the high-end office exec utive, paying of course for space and positioning. The budget is $10,000 for this program, due March 15, with Jan responsible. 2. Distributor sales: we need to develop at least new distributor, spending for co-promotion as required, and making direc t sales calls. The specific responsibility is Jan's, and due date is May 15, with a budget of $15,000. 3. Direct sales: we will do a mailing of a new in-house catalog, developed by the marketing department, to add to our direc t telephone sales. Jan will be responsible, without a budget or a deadline bec ause the catalog is a marketing program.

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5.5.2 Sales Forecast
Our sales forec ast assumes no change in c osts or prices, which is a reasonable assumption for the last few years. We are expec ting to increase sales, growing from $225 thousand last year to $450 thousand in the next year, which is about doubling in size. The growth forec ast is in line with our last year, and is relatively high for our industry bec ause we are developing new channels. In 1999 and 2000 we expec t growth c loser to 50% per year, to a projec ted total of more than $1 million in 2000. We are projec ting significant change in the product line, or in the proportion between different lines. The key to our growth is the growth of the new channels, with the main desk. Our seasonality, as shown in the chart, is still a fac tor in the business. We tend to sell much better in Spring and Fall, and sales drop in the summer.

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Table: Sales Forecast
Sales Forecast 1998 Unit Sales Executive desk oak Executive desk cherry Other furniture oak Other furniture cherry Other Total Unit Sales Unit Prices Executive desk oak Executive desk cherry Other furniture oak Other furniture cherry Other Sales Executive desk oak Executive desk cherry Other furniture oak Other furniture cherry Other Total Sales Direct Unit Costs Executive desk oak Executive desk cherry Other furniture oak Other furniture cherry Other Direct Cost of Sales Executive desk oak Executive desk cherry Other furniture oak Other furniture cherry Other Subtotal Direct Cost of Sales 209 31 45 7 6 298 1998 $1,600.00 $1,750.00 $900.00 $1,000.00 $2,500.00 1999 350 30 50 10 10 450 1999 $1,600.00 $1,750.00 $900.00 $1,000.00 $2,500.00 2000 600 30 50 10 10 700 2000 $1,600.00 $1,600.00 $900.00 $1,000.00 $1,600.00

$334,400 $54,250 $40,500 $7,000 $15,000 $451,150 1998 $400.00 $525.00 $180.00 $300.00 $625.00

$560,000 $52,500 $45,000 $10,000 $25,000 $692,500 1999 $400.00 $525.00 $180.00 $300.00 $625.00

$960,000 $48,000 $45,000 $10,000 $16,000 $1,079,000 2000 $400.00 $480.00 $180.00 $300.00 $400.00

$83,600 $16,275 $8,100 $2,100 $3,750 $113,825

$140,000 $15,750 $9,000 $3,000 $6,250 $174,000

$240,000 $14,400 $9,000 $3,000 $4,000 $270,400

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5.6 Milestones
The ac companying table shows specific milestones, with responsibilities assigned, dates, and (in most cases) budgets. We are foc using in this plan on a few key milestones that should be ac complished.

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Table: Milestones
Milestones Milestone Spring trade show Spring trade show Spring trade show Our in-house catalog plan First catalog New distributor New distributor Second catalog In-house catalog design In-house catalog mailing Third catalog placement Fall trade show Fall trade show Fall trade show Laptop product test Laptop product release Totals Start Date 1/1/1998 1/15/1998 1/15/1998 1/31/1998 3/1/1998 3/15/1998 3/15/1998 4/1/1998 4/1/1998 5/1/1998 5/15/1998 5/15/1998 5/15/1998 5/15/1998 6/15/1998 1/1/1998 End Date 5/15/1998 5/15/1998 5/15/1998 2/28/1998 4/15/1998 3/30/1998 4/30/1998 5/15/1998 5/1/1998 6/1/1998 6/15/1998 10/15/1998 10/15/1998 10/15/1998 6/20/1998 10/15/1998 Budget $10,000 $20,000 $6,000 $0 $125,000 $5,000 $3,000 $85,000 $2,000 $5,000 $54,000 $8,000 $20,000 $6,000 $1,000 $15,000 $365,000 Manager Terry Terry Terry Terry Jan Jan Jan Jan Terry Terry Jan Terry Terry Terry Jim Terry Department PR Events Travel Other Ads Travel Sales Ads Other Other Ads PR Events Travel Other PR

6.0 Management Summary


We are a small company owned and operated by Jim and Susan Graham, husband and wife, as a Subchapter S corporation. Jim is the developer and designer of the products, and Susan manages the company as president. Management style reflec ts the participation of the owners. The company respec ts its community of co-workers and treats all workers well. We attempt to develop and nurture the company as community. We are not very hierarchical.

6.1 Organizational Structure


Susan Graham, President, is responsible for overall business management. Our managers of finance, marketing, and sales report direc tly to Susan. Jim Graham, designer, is responsible for product design and development, assembly, and manufac turing. Our workshop manager reports direc tly to Jim. As co-owners, Jim and Susan jointly develop business strategy and long-term plans. Jim is strong on product know-how and tec hnology, and Susan is strong on management and business knowhow.

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Willamette Furniture Mfr.


6.2 Management Team
Susan Graham, 43, president, had a successful career in retail before bec oming half owner of Willamette Furniture Mfr. She was an area manager of Ross Stores, a buyer for Mac y's, and merchandising assistant for Sears and Roebuck. She has a degree in Literature from the University of Notre Dame. Jim Graham, 44, workshop manager, designed furniture for Haines Manufacturing before bec oming half owner of Willamette Furniture Mfr. He was responsible for one of the first exec utive desks designed to include customized fittings for personal computers, and was one of the first to design the monitor inside the desk under glass. He has an B.S. and M.S. in industrial design, from Stanford University and the University of Oregon, respec tively. Terry Hatcher, 34, is marketing manager. Terry joined Willamette Furniture Mfr. from the marketing department of the Thomasville Furniture chain, having been in c harge of national catalog production and catalog advertising. Terry also managed direc t sales at one of the furniture distributors that has since died to industry consolidation. Terry has a B.A. degree in literature from the University of Washington.

6.3 Management Team Gaps


We depend on our professionals, our CPA and our attorney, for some key management help. We don't have a strong background in finance or business management. As we grow we will need to develop more manufac turing tec hnique, more mass production. Leslie grew up with the hand-made and custom furniture business, knows fine woodworking well, but admits a weakness in establishing standardized assembly.

6.4 Personnel Plan


The personnel table assumes slow growth in employees, and 10% per annum pay raises. We already have a strong benefits policy (with fully-paid medical, dental, and life insurance, plus a profit sharing and 401K plan) and very low turnover. Salaries are generally in line with market pay for the Eugene area, although our benefits are above standard market level, so we ultimately pay a bit more for our people than what might be considered standard in our market. Eugene, however, is on average a lower wage loc ation than most of the more developed industry areas. As we grow, we expec t to see steady increases in our personnel to match the increases in sales.

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Willamette Furniture Mfr.


Table: Personnel
Personnel Plan 1998 Production Personnel Workshop manager Assembly Name or Title or Group Subtotal Sales and Marketing Personnel Marketing manager Other Subtotal General and Administrative Personnel President Other Subtotal Other Personnel Design Other Subtotal Total People Total Payroll $30,000 $21,600 $0 $51,600 1999 $50,000 $30,000 $0 $80,000 2000 $75,000 $60,000 $50,000 $185,000

$37,000 $0 $37,000

$65,000 $0 $65,000

$72,000 $0 $72,000

$48,000 $0 $48,000

$75,000 $0 $75,000

$100,000 $0 $100,000

$3,000 $0 $3,000 0 $139,600

$15,000 $0 $15,000 0 $235,000

$25,000 $0 $25,000 0 $382,000

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Willamette Furniture Mfr.


7.0 Financial Plan
The financial picture is quite encouraging. We have been slow to take on debt, but with our increase in sales we do expec t to apply for a credit line with the bank, to a limit of $150,000. The credit line is easily supported by assets. We do expec t to be able to take some money out as dividends. The owners don't take overly generous salaries, so some draw is appropriate.

7.1 Important Assumptions


The ac companying table lists our main assumptions for developing our financial projec tions. The most sensitive assumption is the collec tion days. We would like to improve collec tion days to take pressure off of our working capital, but our increasing sales through channels makes the collec tion time a cost of doing business. We also expec t to see a dec line in our inventory turnover ratio, another unfortunate side effec t of increasing sales through channel. We find ourselves having to buy earlier and hold more finished goods in order to deal with sales through the channel.

Table: General Assumptions


General Assumptions 1998 Plan Month Current Interest Rate Long-term Interest Rate Tax Rate Other 1 10.00% 90.00% 25.42% 0 2 10.00% 90.00% 25.00% 0 1999 3 10.00% 90.00% 25.00% 0 2000

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Willamette Furniture Mfr.


7.2 Key Financial Indicators
The following chart shows changes in key financial indicators: sales, gross margin, operating expenses, collec tion days, and inventory turnover. The growth in sales will be very hard to manage. We expec t our gross margin to be a bit lower than before, bec ause our projec tions show a slight dec line as we go into new product areas and fac e new competition. The projec tions for collec tion days and inventory turnover show that we are already expec ting a dec line in these indicators, bec ause of increasing sales through channels.

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Willamette Furniture Mfr.


7.3 Break-even Analysis
Our break-even analysis is based on running costs, the "burn-rate" costs we incur to keep the business running, not on theoretical fixed costs that would be relevant only if we were closing. Our assumptions on average unit sales and average per-unit costs depend on averaging. We don't really need to calculate an exac t average, this is close enough to help us understand what a real break-even point might be. The essential insight here is that our sales level seems to be running comfortably above breakeven.

Table: Break-even Analysis


Break-even Analysis Monthly Units Break-even Monthly Revenue Break-even Assumptions: Average Per-Unit Revenue Average Per-Unit Variable Cost Estimated Monthly Fixed Cost 13 $19,627

$1,513.93 $381.96 $14,675

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Willamette Furniture Mfr.


7.4 Projected Profit and Loss
We do expec t a significant increase in profitability this year, and in the future, bec ause we have learned how to deal with the increasing sales levels of selling through channels. Despite the lower profitability levels of rec ent years, we expec t to see very strong net profits in 1998, and remain at that level through 2000. Our higher sales volume has lowered our cost of goods and increased our gross margin. This increase in gross margin is important to profitability.

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Willamette Furniture Mfr.

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Willamette Furniture Mfr.


Table: Profit and Loss
Pro Forma Profit and Loss Sales Direct Cost of Sales Production Payroll Other Costs of Sales Total Cost of Sales Gross Margin Gross Margin % Operating Expenses Sales and Marketing Expenses Sales and Marketing Payroll Advertising/Promotion Miscellaneous Events Public Relations Travel Total Sales and Marketing Expenses Sales and Marketing % General and Administrative Expenses General and Administrative Payroll Marketing/Promotion Depreciation Leased Equipment Rent Utilities Insurance Payroll Taxes Other General and Administrative Expenses Total General and Administrative Expenses General and Administrative % Other Expenses: Other Payroll Consultants Other Expenses Total Other Expenses Other % Total Operating Expenses Profit Before Interest and Taxes EBITDA Interest Expense Taxes Incurred Net Profit Net Profit/Sales 1998 $451,150 $113,825 $51,600 $3,110 $168,535 $282,615 62.64% 1999 $692,500 $174,000 $80,000 $0 $254,000 $438,500 63.32% 2000 $1,079,000 $270,400 $185,000 $0 $455,400 $623,600 57.79%

$37,000 $64,000 $2,400 $6,250 $750 $4,500 $114,900 25.47%

$65,000 $70,400 $2,600 $6,900 $800 $5,000 $150,700 21.76%

$72,000 $77,400 $2,900 $7,600 $900 $5,500 $166,300 15.41%

$48,000 $0 $1,000 $1,500 $3,600 $2,400 $500 $0 $1,200 $58,200 12.90%

$75,000 $0 $1,100 $1,700 $4,000 $2,600 $600 $0 $1,300 $86,300 12.46%

$100,000 $0 $1,200 $1,900 $4,400 $2,900 $700 $0 $1,400 $112,500 10.43%

$3,000 $0 $0 $3,000 0.66% $176,100 $106,515 $107,515 $6,094 $25,009 $75,412 16.72%

$15,000 $0 $0 $15,000 2.17% $252,000 $186,500 $187,600 $5,875 $45,156 $135,469 19.56%

$25,000 $0 $0 $25,000 2.32% $303,800 $319,800 $321,000 $4,875 $78,731 $236,194 21.89%

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Willamette Furniture Mfr.


7.5 Projected Cash Flow
Although we expec t to be more profitable in 1998, we still have drains on the cash flow. We need to invest $25,000 in new assembly and manufac turing equipment, plus $15,000 in new computer equipment, and another $10,000 in misc ellaneous short-term assets, including office equipment. Bec ause of our increased sales through channels, and necessary increase in inventory levels, we need to increase working capital. We plan to extend our credit line to cover as much as $150,000 in short-term credit, bac ked by rec eivables and inventory.

Table: Cash Flow


Pro Forma Cash Flow 1998 Cash Received Cash from Operations Cash Sales Cash from Receivables Subtotal Cash from Operations Additional Cash Received Sales Tax, VAT, HST/GST Received New Current Borrowing New Other Liabilities (interest-free) New Long-term Liabilities Sales of Other Current Assets Sales of Long-term Assets New Investment Received Subtotal Cash Received Expenditures Expenditures from Operations Cash Spending Bill Payments Subtotal Spent on Operations Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out Principal Repayment of Current Borrowing Other Liabilities Principal Repayment Long-term Liabilities Principal Repayment Purchase Other Current Assets Purchase Long-term Assets Dividends Subtotal Cash Spent Net Cash Flow Cash Balance 1999 2000

$112,788 $288,966 $401,754

$173,125 $478,182 $651,307

$269,750 $743,283 $1,013,033

$0 $125,000 $0 $0 $0 $0 $50,000 $576,754 1998

$0 $50,000 $0 $0 $0 $0 $0 $701,307 1999

$0 $100,000 $0 $0 $0 $0 $0 $1,113,033 2000

$139,600 $231,587 $371,187

$235,000 $317,081 $552,081

$382,000 $458,115 $840,115

$0 $66,250 $0 $0 $0 $50,000 $0 $487,437 $89,317 $90,755

$0 $50,000 $0 $0 $0 $20,000 $0 $622,081 $79,226 $169,981

$0 $120,000 $0 $0 $0 $30,000 $0 $990,115 $122,918 $292,899

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7.6 Projected Balance Sheet
Our projec ted balance sheet shows an increase in net worth to more than $400 thousand in 2000, at which point we expec t to be making compelling profits on sales of $1.1 million. With the present financial projec tions we will be careful in supporting our working capital credit line, and we are growing assets both because we want to -- new equipment -- and bec ause we have to grow rec eivables and inventory to support growth in sales through channels.

Table: Balance Sheet


Pro Forma Balance Sheet 1998 Assets Current Assets Cash Accounts Receivable Inventory Other Current Assets Total Current Assets Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets Liabilities and Capital Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Subtotal Current Liabilities Long-term Liabilities Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital Net Worth 1999 2000

$90,755 $77,001 $12,070 $2,375 $182,201

$169,981 $118,194 $18,451 $2,375 $309,001

$292,899 $184,161 $28,673 $2,375 $508,109

$53,210 $2,720 $50,490 $232,691 1998

$73,210 $3,820 $69,390 $378,391 1999

$103,210 $5,020 $98,190 $606,299 2000

$16,671 $58,750 $1,803 $77,224 $0 $77,224 $54,500 $25,555 $75,412 $155,467 $232,691 $155,467

$26,902 $58,750 $1,803 $87,455 $0 $87,455 $54,500 $100,967 $135,469 $290,936 $378,391 $290,936

$38,616 $38,750 $1,803 $79,169 $0 $79,169 $54,500 $236,436 $236,194 $527,130 $606,299 $527,130

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Willamette Furniture Mfr.


7.7 Business Ratios
Our ratios look healthy and solid. Gross margin is projec ted to dec line slightly, return on assets will run well above industry standards, and return on equity is excellent. Debt and liquidity ratios also look good, with our Quick ratio increasing over the next three years. The standard comparisons are based on SIC code 2521, manufac turers of wood office furniture.

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Willamette Furniture Mfr.


Table: Ratios
Ratio Analysis Sales Growth Percent of Total Assets Accounts Receivable Inventory Other Current Assets Total Current Assets Long-term Assets Total Assets Current Liabilities Long-term Liabilities Total Liabilities Net Worth Percent of Sales Sales Gross Margin Selling, General & Administrative Expenses Advertising Expenses Profit Before Interest and Taxes Main Ratios Current Quick Total Debt to Total Assets Pre-tax Return on Net Worth Pre-tax Return on Assets Additional Ratios Net Profit Margin Return on Equity Activity Ratios Accounts Receivable Turnover Collection Days Inventory Turnover Accounts Payable Turnover Payment Days Total Asset Turnover Debt Ratios Debt to Net Worth Current Liab. to Liab. Liquidity Ratios Net Working Capital Interest Coverage Additional Ratios Assets to Sales Current Debt/Total Assets Acid Test Sales/Net Worth 0.52 33% 1.21 2.90 0.55 23% 1.97 2.38 0.56 13% 3.73 2.05 n.a n.a n.a n.a 1998 99.81% 1999 53.50% 2000 55.81% Industry Profile 4.60%

33.09% 5.19% 1.02% 78.30% 21.70% 100.00% 33.19% 0.00% 33.19% 66.81%

31.24% 4.88% 0.63% 81.66% 18.34% 100.00% 23.11% 0.00% 23.11% 76.89%

30.37% 4.73% 0.39% 83.81% 16.19% 100.00% 13.06% 0.00% 13.06% 86.94%

23.80% 32.10% 19.00% 74.90% 25.10% 100.00% 38.40% 15.90% 54.30% 45.70%

100.00% 62.64% 45.93% 14.19% 23.61%

100.00% 63.32% 43.76% 10.17% 26.93%

100.00% 57.79% 35.90% 7.17% 29.64%

100.00% 32.40% 18.90% 1.40% 1.80%

2.36 2.20 33.19% 64.59% 43.16% 1998 16.72% 48.51%

3.53 3.32 23.11% 62.08% 47.73% 1999 19.56% 46.56%

6.42 6.06 13.06% 59.74% 51.94% 2000 21.89% 44.81%

2.14 1.02 54.30% 5.10% 11.10%

n.a n.a

4.39 58 12.00 14.22 28 1.94

4.39 69 11.40 12.17 24 1.83

4.39 68 11.48 12.17 25 1.78

n.a n.a n.a n.a n.a n.a

0.50 1.00

0.30 1.00

0.15 1.00

n.a n.a

$104,977 17.48

$221,546 31.74

$428,940 65.60

n.a n.a

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Willamette Furniture Mfr.


Dividend Payout 0.00 0.00 0.00 n.a

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Appendix
Table: Sales Forecast
Sales Forecast Jan Unit Sales Executive desk oak Executive desk cherry Other furniture oak Other furniture cherry Other Total Unit Sales Unit Prices Executive desk oak Executive desk cherry Other furniture oak Other furniture cherry Other Sales Executive desk oak Executive desk cherry Other furniture oak Other furniture cherry Other Total Sales Direct Unit Costs Executive desk oak Executive desk cherry Other furniture oak Other furniture cherry Other Direct Cost of Sales Executive desk oak Executive desk cherry Other furniture oak Other furniture cherry Other Subtotal Direct Cost of Sales 15% 5% 5% 5% 20% 14 2 3 0 1 20 Jan $1,600.00 $1,750.00 $900.00 $1,000.00 $2,500.00 Feb 16 3 4 1 0 24 Feb $1,600.00 $1,750.00 $900.00 $1,000.00 $2,500.00 Mar 16 3 4 0 0 23 Mar $1,600.00 $1,750.00 $900.00 $1,000.00 $2,500.00 Apr 16 3 4 0 1 24 Apr $1,600.00 $1,750.00 $900.00 $1,000.00 $2,500.00 May 15 2 3 0 1 21 May $1,600.00 $1,750.00 $900.00 $1,000.00 $2,500.00 Jun 12 2 3 1 0 18 Jun $1,600.00 $1,750.00 $900.00 $1,000.00 $2,500.00 Jul 12 2 3 0 1 18 Jul $1,600.00 $1,750.00 $900.00 $1,000.00 $2,500.00 Aug 15 2 4 1 0 22 Aug $1,600.00 $1,750.00 $900.00 $1,000.00 $2,500.00 Sep 15 3 4 1 0 23 Sep $1,600.00 $1,750.00 $900.00 $1,000.00 $2,500.00 Oct 26 4 4 1 1 36 Oct $1,600.00 $1,750.00 $900.00 $1,000.00 $2,500.00 Nov 27 3 5 1 1 37 Nov $1,600.00 $1,750.00 $900.00 $1,000.00 $2,500.00 Dec 25 2 4 1 0 32 Dec $1,600.00 $1,750.00 $900.00 $1,000.00 $2,500.00

$22,400 $3,500 $2,700 $0 $2,500 $31,100 Jan $400.00 $525.00 $180.00 $300.00 $625.00

$25,600 $5,250 $3,600 $1,000 $0 $35,450 Feb $400.00 $525.00 $180.00 $300.00 $625.00

$25,600 $5,250 $3,600 $0 $0 $34,450 Mar $400.00 $525.00 $180.00 $300.00 $625.00

$25,600 $5,250 $3,600 $0 $2,500 $36,950 Apr $400.00 $525.00 $180.00 $300.00 $625.00

$24,000 $3,500 $2,700 $0 $2,500 $32,700 May $400.00 $525.00 $180.00 $300.00 $625.00

$19,200 $3,500 $2,700 $1,000 $0 $26,400 Jun $400.00 $525.00 $180.00 $300.00 $625.00

$19,200 $3,500 $2,700 $0 $2,500 $27,900 Jul $400.00 $525.00 $180.00 $300.00 $625.00

$24,000 $3,500 $3,600 $1,000 $0 $32,100 Aug $400.00 $525.00 $180.00 $300.00 $625.00

$24,000 $5,250 $3,600 $1,000 $0 $33,850 Sep $400.00 $525.00 $180.00 $300.00 $625.00

$41,600 $7,000 $3,600 $1,000 $2,500 $55,700 Oct $400.00 $525.00 $180.00 $300.00 $625.00

$43,200 $5,250 $4,500 $1,000 $2,500 $56,450 Nov $400.00 $525.00 $180.00 $300.00 $625.00

$40,000 $3,500 $3,600 $1,000 $0 $48,100 Dec $400.00 $525.00 $180.00 $300.00 $625.00

25.00% 30.00% 20.00% 30.00% 25.00%

$5,600 $1,050 $540 $0 $625 $7,815

$6,400 $1,575 $720 $300 $0 $8,995

$6,400 $1,575 $720 $0 $0 $8,695

$6,400 $1,575 $720 $0 $625 $9,320

$6,000 $1,050 $540 $0 $625 $8,215

$4,800 $1,050 $540 $300 $0 $6,690

$4,800 $1,050 $540 $0 $625 $7,015

$6,000 $1,050 $720 $300 $0 $8,070

$6,000 $1,575 $720 $300 $0 $8,595

$10,400 $2,100 $720 $300 $625 $14,145

$10,800 $1,575 $900 $300 $625 $14,200

$10,000 $1,050 $720 $300 $0 $12,070

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Appendix
Table: Personnel
Personnel Plan Jan Production Personnel Workshop manager Assembly Name or Title or Group Subtotal Sales and Marketing Personnel Marketing manager Other Subtotal General and Administrative Personnel President Other Subtotal Other Personnel Design Other Subtotal Total People Total Payroll $250 $0 $250 0 $12,550 $250 $0 $250 0 $11,550 $250 $0 $250 0 $11,550 $250 $0 $250 0 $11,550 $250 $0 $250 0 $11,550 $250 $0 $250 0 $11,550 $250 $0 $250 0 $11,550 $250 $0 $250 0 $11,550 $250 $0 $250 0 $11,550 $250 $0 $250 0 $11,550 $250 $0 $250 0 $11,550 $250 $0 $250 0 $11,550 $2,500 $1,800 $0 $4,300 Feb $2,500 $1,800 $0 $4,300 Mar $2,500 $1,800 $0 $4,300 Apr $2,500 $1,800 $0 $4,300 May $2,500 $1,800 $0 $4,300 Jun $2,500 $1,800 $0 $4,300 Jul $2,500 $1,800 $0 $4,300 Aug $2,500 $1,800 $0 $4,300 Sep $2,500 $1,800 $0 $4,300 Oct $2,500 $1,800 $0 $4,300 Nov $2,500 $1,800 $0 $4,300 Dec $2,500 $1,800 $0 $4,300

$4,000 $0 $4,000

$3,000 $0 $3,000

$3,000 $0 $3,000

$3,000 $0 $3,000

$3,000 $0 $3,000

$3,000 $0 $3,000

$3,000 $0 $3,000

$3,000 $0 $3,000

$3,000 $0 $3,000

$3,000 $0 $3,000

$3,000 $0 $3,000

$3,000 $0 $3,000

$4,000 $0 $4,000

$4,000 $0 $4,000

$4,000 $0 $4,000

$4,000 $0 $4,000

$4,000 $0 $4,000

$4,000 $0 $4,000

$4,000 $0 $4,000

$4,000 $0 $4,000

$4,000 $0 $4,000

$4,000 $0 $4,000

$4,000 $0 $4,000

$4,000 $0 $4,000

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Appendix
Table: Profit and Loss
Pro Forma Profit and Loss Sales Direct Cost of Sales Production Payroll Other Costs of Sales Total Cost of Sales Gross Margin Gross Margin % Operating Expenses Sales and Marketing Expenses Sales and Marketing Payroll Advertising/Promotion Miscellaneous Events Public Relations Travel Total Sales and Marketing Expenses Sales and Marketing % General and Administrative Expenses General and Administrative Payroll Marketing/Promotion Depreciation Leased Equipment Rent Utilities Insurance Payroll Taxes Other General and Administrative Expenses Total General and Administrative Expenses General and Administrative % Other Expenses: 15% Jan $31,100 $7,815 $4,300 $3,110 $15,225 $15,875 51.05% Feb $35,450 $8,995 $4,300 $0 $13,295 $22,155 62.50% Mar $34,450 $8,695 $4,300 $0 $12,995 $21,455 62.28% Apr $36,950 $9,320 $4,300 $0 $13,620 $23,330 63.14% May $32,700 $8,215 $4,300 $0 $12,515 $20,185 61.73% Jun $26,400 $6,690 $4,300 $0 $10,990 $15,410 58.37% Jul $27,900 $7,015 $4,300 $0 $11,315 $16,585 59.44% Aug $32,100 $8,070 $4,300 $0 $12,370 $19,730 61.46% Sep $33,850 $8,595 $4,300 $0 $12,895 $20,955 61.91% Oct $55,700 $14,145 $4,300 $0 $18,445 $37,255 66.89% Nov $56,450 $14,200 $4,300 $0 $18,500 $37,950 67.23% Dec $48,100 $12,070 $4,300 $0 $16,370 $31,730 65.97%

$4,000 $8,000 $200 $0 $0 $0 $12,200 39.23%

$3,000 $8,000 $200 $750 $250 $500 $12,700 35.83%

$3,000 $0 $200 $0 $0 $0 $3,200 9.29%

$3,000 $8,000 $200 $0 $0 $0 $11,200 30.31%

$3,000 $8,000 $200 $3,000 $500 $2,000 $16,700 51.07%

$3,000 $0 $200 $0 $0 $0 $3,200 12.12%

$3,000 $8,000 $200 $0 $0 $500 $11,700 41.94%

$3,000 $8,000 $200 $0 $0 $0 $11,200 34.89%

$3,000 $0 $200 $0 $0 $0 $3,200 9.45%

$3,000 $8,000 $200 $2,500 $0 $0 $13,700 24.60%

$3,000 $8,000 $200 $0 $0 $1,500 $12,700 22.50%

$3,000 $0 $200 $0 $0 $0 $3,200 6.65%

$4,000 $0 $0 $125 $300 $200 $0 $0 $100 $4,725 15.19%

$4,000 $0 $0 $125 $300 $200 $0 $0 $100 $4,725 13.33%

$4,000 $0 $0 $125 $300 $200 $0 $0 $100 $4,725 13.72%

$4,000 $0 $0 $125 $300 $200 $0 $0 $100 $4,725 12.79%

$4,000 $0 $0 $125 $300 $200 $0 $0 $100 $4,725 14.45%

$4,000 $0 $0 $125 $300 $200 $0 $0 $100 $4,725 17.90%

$4,000 $0 $0 $125 $300 $200 $0 $0 $100 $4,725 16.94%

$4,000 $0 $0 $125 $300 $200 $0 $0 $100 $4,725 14.72%

$4,000 $0 $0 $125 $300 $200 $0 $0 $100 $4,725 13.96%

$4,000 $0 $0 $125 $300 $200 $0 $0 $100 $4,725 8.48%

$4,000 $0 $0 $125 $300 $200 $0 $0 $100 $4,725 8.37%

$4,000 $0 $1,000 $125 $300 $200 $500 $0 $100 $6,225 12.94%

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Appendix
Other Payroll Consultants Other Expenses Total Other Expenses Other % Total Operating Expenses Profit Before Interest and Taxes EBITDA Interest Expense Taxes Incurred Net Profit Net Profit/Sales $250 $0 $0 $250 0.80% $17,175 ($1,300) ($1,300) $625 ($578) ($1,348) -4.33% $250 $0 $0 $250 0.71% $17,675 $4,480 $4,480 $615 $966 $2,899 8.18% $250 $0 $0 $250 0.73% $8,175 $13,280 $13,280 $563 $3,179 $9,538 27.69% $250 $0 $0 $250 0.68% $16,175 $7,155 $7,155 $552 $1,651 $4,952 13.40% $250 $0 $0 $250 0.76% $21,675 ($1,490) ($1,490) $510 ($500) ($1,500) -4.59% $250 $0 $0 $250 0.95% $8,175 $7,235 $7,235 $469 $1,692 $5,075 19.22% $250 $0 $0 $250 0.90% $16,675 ($90) ($90) $417 ($127) ($380) -1.36% $250 $0 $0 $250 0.78% $16,175 $3,555 $3,555 $406 $787 $2,362 7.36% $250 $0 $0 $250 0.74% $8,175 $12,780 $12,780 $396 $3,096 $9,288 27.44% $250 $0 $0 $250 0.45% $18,675 $18,580 $18,580 $510 $4,517 $13,552 24.33% $250 $0 $0 $250 0.44% $17,675 $20,275 $20,275 $542 $4,933 $14,800 26.22% $250 $0 $0 $250 0.52% $9,675 $22,055 $23,055 $490 $5,391 $16,174 33.63%

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Appendix
Table: Cash Flow
Pro Forma Cash Flow Jan Cash Received Cash from Operations Cash Sales Cash from Receivables Subtotal Cash from Operations Additional Cash Received Sales Tax, VAT, HST/GST Received New Current Borrowing New Other Liabilities (interest-free) New Long-term Liabilities Sales of Other Current Assets Sales of Long-term Assets New Investment Received Subtotal Cash Received Expenditures Expenditures from Operations Cash Spending Bill Payments Subtotal Spent on Operations Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out Principal Repayment of Current Borrowing Other Liabilities Principal Repayment Long-term Liabilities Principal Repayment Purchase Other Current Assets Purchase Long-term Assets Dividends Subtotal Cash Spent Net Cash Flow Cash Balance $0 $0 $0 $0 $0 $0 $0 $24,327 $72,251 $73,689 $0 $6,250 $0 $0 $0 $25,000 $0 $60,525 ($7,083) $66,606 $0 $6,250 $0 $0 $0 $0 $0 $39,677 ($7,631) $58,975 $0 $6,250 $0 $0 $0 $0 $0 $31,129 $9,671 $68,647 $0 $5,000 $0 $0 $0 $0 $0 $37,639 ($3,564) $65,083 $0 $5,000 $0 $0 $0 $0 $0 $37,652 ($3,446) $61,637 $0 $6,250 $0 $0 $0 $0 $0 $26,344 $4,999 $66,636 $0 $6,250 $0 $0 $0 $0 $0 $34,928 ($2,065) $64,570 $0 $6,250 $0 $0 $0 $25,000 $0 $61,853 ($2,361) $62,210 $0 $6,250 $0 $0 $0 $0 $0 $32,091 $25,953 $88,163 $0 $6,250 $0 $0 $0 $0 $0 $53,748 ($3,702) $84,461 $0 $6,250 $0 $0 $0 $0 $0 $47,525 $6,294 $90,755 $12,550 $11,777 $24,327 $11,550 $17,725 $29,275 $11,550 $21,877 $33,427 $11,550 $13,329 $24,879 $11,550 $21,089 $32,639 $11,550 $21,102 $32,652 $11,550 $8,544 $20,094 $11,550 $17,128 $28,678 $11,550 $19,053 $30,603 $11,550 $14,291 $25,841 $11,550 $35,948 $47,498 $11,550 $29,725 $41,275 0.00% $0 $75,000 $0 $0 $0 $0 $0 $96,578 Jan $0 $5,000 $0 $0 $0 $0 $25,000 $53,443 Feb $0 $0 $0 $0 $0 $0 $0 $32,046 Mar $0 $5,000 $0 $0 $0 $0 $0 $40,800 Apr $0 $0 $0 $0 $0 $0 $0 $34,075 May $0 $0 $0 $0 $0 $0 $0 $34,206 Jun $0 $0 $0 $0 $0 $0 $0 $31,343 Jul $0 $5,000 $0 $0 $0 $0 $0 $32,863 Aug $0 $5,000 $0 $0 $0 $0 $25,000 $59,493 Sep $0 $20,000 $0 $0 $0 $0 $0 $58,044 Oct $0 $10,000 $0 $0 $0 $0 $0 $50,046 Nov $0 $0 $0 $0 $0 $0 $0 $53,819 Dec Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

$7,775 $13,803 $21,578

$8,863 $14,580 $23,443

$8,613 $23,434 $32,046

$9,238 $26,563 $35,800

$8,175 $25,900 $34,075

$6,600 $27,606 $34,206

$6,975 $24,368 $31,343

$8,025 $19,838 $27,863

$8,463 $21,030 $29,493

$13,925 $24,119 $38,044

$14,113 $25,934 $40,046

$12,025 $41,794 $53,819

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Appendix
Table: Balance Sheet
Pro Forma Balance Sheet Jan Assets Current Assets Cash Accounts Receivable Inventory Other Current Assets Total Current Assets Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets Liabilities and Capital Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Subtotal Current Liabilities Long-term Liabilities Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital Net Worth Starting Balances Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

$1,438 $27,605 $10,141 $2,375 $41,559

$73,689 $37,128 $7,815 $2,375 $121,006

$66,606 $49,135 $8,995 $2,375 $127,111

$58,975 $51,539 $8,695 $2,375 $121,584

$68,647 $52,689 $9,320 $2,375 $133,030

$65,083 $51,314 $8,215 $2,375 $126,987

$61,637 $43,508 $6,690 $2,375 $114,210

$66,636 $40,065 $7,015 $2,375 $116,091

$64,570 $44,303 $8,070 $2,375 $119,318

$62,210 $48,660 $8,595 $2,375 $121,840

$88,163 $66,316 $14,145 $2,375 $170,999

$84,461 $82,720 $14,200 $2,375 $183,756

$90,755 $77,001 $12,070 $2,375 $182,201

$3,210 $1,720 $1,490 $43,049

$3,210 $1,720 $1,490 $122,496 Jan

$28,210 $1,720 $26,490 $153,601 Feb

$28,210 $1,720 $26,490 $148,074 Mar

$28,210 $1,720 $26,490 $159,520 Apr

$28,210 $1,720 $26,490 $153,477 May

$28,210 $1,720 $26,490 $140,700 Jun

$28,210 $1,720 $26,490 $142,581 Jul

$28,210 $1,720 $26,490 $145,808 Aug

$53,210 $1,720 $51,490 $173,330 Sep

$53,210 $1,720 $51,490 $222,489 Oct

$53,210 $1,720 $51,490 $235,246 Nov

$53,210 $2,720 $50,490 $232,691 Dec

$11,191 $0 $1,803 $12,994 $0 $12,994 $4,500 $13,100 $12,455 $30,055 $43,049 $30,055

$16,986 $75,000 $1,803 $93,789 $0 $93,789 $4,500 $25,555 ($1,348) $28,708 $122,496 $28,708

$21,442 $73,750 $1,803 $96,995 $0 $96,995 $29,500 $25,555 $1,552 $56,607 $153,601 $56,607

$12,626 $67,500 $1,803 $81,929 $0 $81,929 $29,500 $25,555 $11,090 $66,145 $148,074 $66,145

$20,370 $66,250 $1,803 $88,423 $0 $88,423 $29,500 $25,555 $16,042 $71,097 $159,520 $71,097

$20,827 $61,250 $1,803 $83,880 $0 $83,880 $29,500 $25,555 $14,542 $69,597 $153,477 $69,597

$7,975 $56,250 $1,803 $66,028 $0 $66,028 $29,500 $25,555 $19,616 $74,671 $140,700 $74,671

$16,487 $50,000 $1,803 $68,290 $0 $68,290 $29,500 $25,555 $19,236 $74,291 $142,581 $74,291

$18,602 $48,750 $1,803 $69,155 $0 $69,155 $29,500 $25,555 $21,598 $76,653 $145,808 $76,653

$13,086 $47,500 $1,803 $62,389 $0 $62,389 $54,500 $25,555 $30,886 $110,941 $173,330 $110,941

$34,943 $61,250 $1,803 $97,996 $0 $97,996 $54,500 $25,555 $44,438 $124,493 $222,489 $124,493

$29,150 $65,000 $1,803 $95,953 $0 $95,953 $54,500 $25,555 $59,238 $139,293 $235,246 $139,293

$16,671 $58,750 $1,803 $77,224 $0 $77,224 $54,500 $25,555 $75,412 $155,467 $232,691 $155,467

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