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Legal Page
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Table of Contents

1.0 Executive Summary....................................................................................................................................1

Chart: Highlights.......................................................................................................................................1
1.1 Mission....................................................................................................................................................1
1.2 Keys to Success.......................................................................................................................................2
2.0 Company Summary.....................................................................................................................................2
2.1 Start-up Summary...................................................................................................................................2
Table: Start-up...........................................................................................................................................2
Table: Start-up Funding............................................................................................................................3
2.2 Company Ownership..........................................................................................................................3
3.0 Products.......................................................................................................................................................4
4.0 Market Analysis Summary.........................................................................................................................4
4.1 Market Segmentation..............................................................................................................................4
Table: Market Analysis.............................................................................................................................5
Chart: Market Analysis (Pie)....................................................................................................................5
5.0 Strategy and Implementation Summary.....................................................................................................6
5.1 Competitive Edge....................................................................................................................................6
5.2 Marketing Strategy..................................................................................................................................6
5.2.1 Pricing Strategy................................................................................................................................6
5.3 Sales Strategy..........................................................................................................................................7
5.3.1 Sales Forecast...................................................................................................................................7
Table: Sales Forecast............................................................................................................................7
Chart: Sales Monthly............................................................................................................................8
Chart: Sales by Year.............................................................................................................................8
6.0 Management Summary...............................................................................................................................9
6.1 Personnel Plan.........................................................................................................................................9
Table: Personnel........................................................................................................................................9
...........................................................................................................................................................................9
7.0 Financial Plan............................................................................................................................................10
7.1 Break-even Analysis.............................................................................................................................10
Table: Break-even Analysis....................................................................................................................10
Chart: Break-even Analysis....................................................................................................................10
7.2 Projected Profit and Loss......................................................................................................................11
Chart: Profit Monthly..............................................................................................................................11
Chart: Profit Yearly.................................................................................................................................12
Chart: Gross Margin Monthly................................................................................................................12
Chart: Gross Margin Yearly...................................................................................................................13
Table: Profit and Loss.............................................................................................................................14
.....................................................................................................................................................................14
7.3 Projected Cash Flow.............................................................................................................................15
Table: Cash Flow....................................................................................................................................15
Chart: Cash..............................................................................................................................................16
7.4 Projected Balance Sheet........................................................................................................................17
Table: Balance Sheet...............................................................................................................................17
Page 1

Table of Contents

.....................................................................................................................................................................17
7.5 Business Ratios.....................................................................................................................................18
Table: Ratios...........................................................................................................................................18
Table: Sales Forecast.........................................................................................................................................1
...........................................................................................................................................................................1
Table: Personnel................................................................................................................................................2
...........................................................................................................................................................................2
Table: General Assumptions.............................................................................................................................3
...........................................................................................................................................................................3
Table: Profit and Loss.......................................................................................................................................4
...........................................................................................................................................................................4
Table: Cash Flow..............................................................................................................................................5
Table: Balance Sheet.........................................................................................................................................6

Page 2

Liquid Culture

1.0 Executive Summary

The Year 1 season will be a great one for women looking for distinctive outdoor clothing online.
Liquid Culture will eliminate the middle man and offer creative outdoor clothing that is both
functional and beautiful. The savings are passed on to our customers who will be paying a
fraction of what they normally do for current retreated fashion in stores.
Liquid Culture's Year 1 line consists of the best fabric, designs and styling on the market. Larry
Wilson and Maggie Granger, co-owners of Liquid Culture, have fifteen years of experience
between them in the outdoor garment industry. Maggie has been a senior clothing designer for
Manic Woman Clothing for the past seven years. Larry has been the website administrator for
South Face the past eight years.
Another strength of Liquid Culture is that it will not maintain any clothing inventory. Liquid
Culture has contracted with Magic Clothing Company, located in Los Angeles, California,
to produce and ship all Liquid Culture clothing. Our design team will work closely with the
Magic's Indonesian-based manufacturing facilities. The Magic Clothing Company will maintain
the inventory and will produce sufficient product to meet the planned demand.

Chart: Highlights

Highlights
$4,000,000
$3,600,000
$3,200,000
$2,800,000

Sales

$2,400,000

Gross Margin

$2,000,000

Net Profit

$1,600,000
$1,200,000
$800,000
$400,000
$0
Year 1

Year 2

Year 3

1.1 Mission
Liquid Culture's mission is to present consumers with designs, styling and clothes that
energizes any outdoor activity. Whether it be snowboarding, running along the beach, or
drifting down a river, Liquid Culture has comfortable, durable clothing that will look and feel
wonderful.

Page 1

Liquid Culture

1.2 Keys to Success

Accessible website that is entertaining to surf. Like a trip to your favorite store where you
always find something new that you want.
Establishing a strong advertising campaign in a traditional media vehicle; i.e. magazines.
Excellent vendor relationship that will facilitate quality manufacturing of Liquid Culture's
clothing and quick shipment of orders.
Acquiring an excellent design staff.

2.0 Company Summary

Liquid Culture will offer creative women's outdoor clothing, online, that is both functional and
beautiful. Larry Wilson and Maggie Granger, co-owners of Liquid Culture, will create a costeffective operation that will eliminate the cost of inventory by having a third-party, Magic
Clothing Company, handle all manufacturing and shipping of clothing to the customer. Liquid
Culture will process the order and collect the payment online. The order will then be sent to
Magic Clothing Company to be filled and shipped. Liquid Culture will focus on clothing design
and marketing of its products.
2.1 Start-up Summary
Liquid Culture's start-up costs consists mostly of design and marketing. Liquid Culture has
$260,000 in investments and $200,000 in a short-term loan.
Table: Start-up

Start-up
Requirements
Start-up Expenses
Legal
Stationery etc.
Brochures
Consultants
Insurance
Rent
Leased Office Equipment
Computer Equipment/Software
Website
Other
Total Start-up Expenses

$1,000
$500
$0
$5,000
$0
$2,000
$10,000
$30,000
$10,000
$0
$58,500

Start-up Assets
Cash Required
Start-up Inventory
Other Current Assets
Long-term Assets
Total Assets

$401,500
$0
$0
$0
$401,500

Total Requirements

$460,000

Page 2

Liquid Culture

Table: Start-up Funding

Start-up Funding
Start-up Expenses to Fund
Start-up Assets to Fund
Total Funding Required

$58,500
$401,500
$460,000

Assets
Non-cash Assets from Start-up
Cash Requirements from Start-up
Additional Cash Raised
Cash Balance on Starting Date
Total Assets

$0
$401,500
$0
$401,500
$401,500

Liabilities and Capital

Liabilities
Current Borrowing
Long-term Liabilities
Accounts Payable (Outstanding Bills)
Other Current Liabilities (interest-free)
Total Liabilities

$0
$200,000
$0
$0
$200,000

Capital
Planned Investment
Investor 1
Investor 2
Other
Additional Investment Requirement
Total Planned Investment

$130,000
$130,000
$0
$0
$260,000

Loss at Start-up (Start-up Expenses)

Total Capital

($58,500)
$201,500

Total Capital and Liabilities

$401,500

Total Funding

$460,000

2.2 Company Ownership

Liquid Culture is owned by Larry Wilson and Maggie Granger.

Page 3

Liquid Culture

3.0 Products
Liquid Culture will sell women's outdoor clothing online. We will offer outdoor clothing for
almost every type of active use. We will focus on the seasonal clothing demands of our
customers including the following:

Fleece outerwear.
Rain gear, waterproof breathables, as well as coated nylon.
Synthetic clothing for outdoor activities.
Hats.
Shorts.
Pants.
Shirts.

4.0 Market Analysis Summary

In the past 15 years, women's outdoor wear has grown into a billion dollar niche in the clothing
industry. The popularity of the Internet has launched a number of online stores for women's
outdoor wear but no company is exclusively selling their products online. There are a number
of reasons for this but the strongest is that the concept is new and untested. Will customers
buy something that they wear that can only be seen online? We believe they will, if the process
is fun and the products are great and cheap.
The key is marketing our target customers in the traditional advertising medium for fashion, i.e.
women fitness magazines.
The ads will focused on the eliminating the middle man in your clothing budget and stepping up
to the distinctive style of Liquid Culture. The company logo will also be an important marketing
tool in bringing customers to our website.
4.1 Market Segmentation
Liquid Culture will be focusing on two distinct groups of women that purchase outdoor clothing:

Women 17-25 years of age: Youth drives the market so this is the important group to
attract to the website. They have less money than the older group so we must give them
what they want for less. The key is to have inexpensive selections in each clothing group
that have the popular cut. The company's logo attractiveness to this group can not be
stressed strongly enough. The initial small purchases will grow larger over time.

Women 26-40 years of age: They are the core group that will drive Liquid Culture's
success. This target group is responsible for the growth of outdoor women's wear. They
will be harder to pull into the website. Once there, the key will be promoting the quality,
attractiveness and savings. In addition, we will have to assure that the purchase will fit the
way the customer wants it to. It will be crucial that the return policy is hassle-free and
speedy.

Page 4

Liquid Culture

Table: Market Analysis

Market Analysis
Potential Customers

Growth

Women Ages 16-25

Women Ages 26-40
Other
Total

20%
15%
0%
17.81%

Year 1

Year 2

Year 3

Year 4

Year 5

6,000,000
5,000,000
0
11,000,000

7,200,000
5,750,000
0
12,950,000

8,640,000
6,612,500
0
15,252,500

10,368,000
7,604,375
0
17,972,375

12,441,600
8,745,031
0
21,186,631

CAGR
20.00%
15.00%
0.00%
17.81%

Chart: Market Analysis (Pie)

Market Analysis (Pie)

Women Ages 16-25

Women Ages 26-40
Other

Page 5

Liquid Culture

5.0 Strategy and Implementation Summary

Liquid Culture will win market share in the women's outdoor clothing niche by aggressively
pursuing visibility with its target customers.
5.1 Competitive Edge
Liquid Culture's competitive edge is its focus on the process than on product. The website is
just the endpoint of an entire marketing program to drive customers' interest in Liquid Culture.
Though we have confidence in the quality and attractiveness of our products, we know that
building the road to the website is our most important job.
Larry Wilson's experience with South Face is pivotal to the success of Liquid Culture's website.
South Face's website averaged five million hits a year and is considered one of the most
accessible and attractive websites in the clothing industry. His experience is invaluable in
assuring customers' satisfaction with the shopping experience online.
Larry will introduce a new clothing measurement feature that is fun to use and will reduce
customers confusion on how the clothing will fit. This will increase customer satisfaction and
reduce returns.
Maggie Granger will be in charge of the clothing design team. As senior clothing designer for
Manic Woman Clothing, she watched the Manic Woman's sales grow by 20% for the past five
years. Her clothing designs have been praised in the industry and have spawned many
imitators. With Liquid Culture, Maggie is ready to change how quality women's outdoor clothing
is sold.
Liquid Culture's agreement with Magic Clothing Company is another strong competitive
advantage. Our design team will work closely with the Magic's Indonesian-based
manufacturing facilities. The Magic Clothing Company will maintain the inventory and will
produce sufficient product to meet the planned demand. This will keep production costs low for
products and put a cap on Liquid Culture's overhead.
5.2 Marketing Strategy
Liquid Culture's marketing strategy is a simple one. In women's fitness magazines like Self,
Shape and Strive, Liquid Culture will introduce customers to their products and website. We will
also advertise in CosmoGirl and Ellegirl magazines.
For the first two months, Liquid Culture will offer 10% off for all purchases under $100 and
15% off all purchases over $100. We will offer the same discount strategy three more times
during the year when new seasonal clothing is introduced.
5.2.1 Pricing Strategy
Liquid Culture's pricing strategy is to pass on most of the store mark-up to the consumer in
reduced price for clothing. This advantage has no negative impact on our sales profit and will
also absorb some of the initial cost of offering discounts during our first three months of
operation.

Page 6

Liquid Culture

5.3 Sales Strategy

Liquid Culture will launch a $245,000 ad campaign targeted at our core customer groups. The
focus of the ads will be to "keep the money you give to the middleman" and use it to get
outdoors and enjoy life. Liquid Culture's attractive logo will be heavily displayed in these ads.
We estimate it will take most of the year to build our sales to the point where we begin to show
a profit.
Liquid Culture will offer discounts at various times of the year to even out seasonality and build
initial awareness of the website.
5.3.1 Sales Forecast
We expect sales to increase at a steady rate for the first year. It will begin slow as we open, but
will quickly pick up as our customer base increases. Liquid Culture will see a sales increase of
38% between the first and second year. We feel that we can accomplish this steady goal and
maintain this amount of sales.
Table: Sales Forecast

Sales Forecast
Year 1

Year 2

Year 3

Clothing
Other
Total Sales

$2,170,000
$0
$2,170,000

$3,000,000
$0
$3,000,000

$4,300,000
$0
$4,300,000

Direct Cost of Sales

Clothing
Other
Subtotal Direct Cost of Sales

Year 1
$1,249,000
$0
$1,249,000

Year 2
$1,800,000
$0
$1,800,000

Year 3
$2,580,000
$0
$2,580,000

Sales

Page 7

Liquid Culture

Chart: Sales Monthly

Sales Monthly
$400,000
$360,000
$320,000
$280,000
$240,000

Clothing

$200,000

Other

$160,000
$120,000
$80,000
$40,000
$0
Month 1
Month 3
Month 5
Month 7
Month 9
Month 11
Month 2
Month 4
Month 6
Month 8
Month 10
Month 12

Chart: Sales by Year

Sales by Year

$4,000,000
$3,500,000
$3,000,000

Clothing

$2,500,000

Other

$2,000,000
$1,500,000
$1,000,000
$500,000
$0
Year 1

Year 2

Year 3

Page 8

Liquid Culture

6.0 Management Summary

Larry Wilson will manage the marketing team, as well as the development and administration of
Liquid Culture's website. Maggie Granger will be in charge of the clothing design team. She will
also manage the production of the designs by Magic Clothing Company.
6.1 Personnel Plan
Besides Larry and Maggie, Liquid Culture will have a staff of eight:

Three member clothing design team.

Web administrator.
Two member marketing team.
Office manager.
Accountant.

Table: Personnel

Personnel Plan
Year 1

Year 2

Year 3

Marketing/Website Director
Design Director
Designers
Web Administrator
Office Manager
Marketing Staff
Accountant
Other
Total People

$84,000
$84,000
$144,000
$48,000
$36,000
$96,000
$39,600
$0
8

$90,000
$90,000
$156,000
$52,000
$39,000
$104,000
$44,000
$0
8

$95,000
$95,000
$166,000
$56,000
$42,000
$112,000
$48,000
$0
8

Total Payroll

$531,600

$575,000

$614,000

Page 9

Liquid Culture

7.0 Financial Plan

The following is the financial plan for Liquid Culture.
7.1 Break-even Analysis
Our break-even analysis is based on running costs, the costs we incur to keep the business
running, not on theoretical fixed costs that would be relevant only if we were closing. Fixed
costs include payroll, rent, utilities, and marketing costs.
Table: Break-even Analysis

Break-even Analysis
Monthly Revenue Break-even

$177,248

Assumptions:
Average Percent Variable Cost
Estimated Monthly Fixed Cost

58%
$75,228

Chart: Break-even Analysis

Break-even Analysis
$60,000
$40,000
$20,000
$0
($20,000)
($40,000)
($60,000)

$0

$60,000
$120,000
$180,000
$240,000
$300,000
$30,000
$90,000
$150,000
$210,000
$270,000
$330,000

Page 10

Liquid Culture

7.2 Projected Profit and Loss

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

Chart: Profit Monthly

Profit Monthly
$60,000

$40,000

$20,000

$0

($20,000)

($40,000)
Month 1
Month 3
Month 5
Month 7
Month 9
Month 11
Month 2
Month 4
Month 6
Month 8
Month 10
Month 12

Page 11

Liquid Culture

Chart: Profit Yearly

Profit Yearly

$400,000
$360,000
$320,000
$280,000
$240,000
$200,000
$160,000
$120,000
$80,000
$40,000
$0
Year 1

Year 2

Year 3

Chart: Gross Margin Monthly

Gross Margin Monthly

$160,000
$140,000
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$0
Month 1
Month 3
Month 5
Month 7
Month 9
Month 11
Month 2
Month 4
Month 6
Month 8
Month 10
Month 12

Page 12

Liquid Culture

Chart: Gross Margin Yearly

Gross Margin Yearly

$1,800,000
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
Year 1

Year 2

Year 3

Page 13

Liquid Culture

Table: Profit and Loss

Pro Forma Profit and Loss

Year 1

Year 2

Year 3

$2,170,000
$1,249,000
$0
$1,249,000

$3,000,000
$1,800,000
$0
$1,800,000

$4,300,000
$2,580,000
$0
$2,580,000

$921,000
42.44%

$1,200,000
40.00%

$1,720,000
40.00%

Payroll
Sales and Marketing and Other Expenses
Depreciation
Leased Equipment
Utilities
Insurance
Rent
Payroll Taxes
Other

$531,600
$265,000
$0
$0
$2,400
$0
$24,000
$79,740
$0

$575,000
$340,000
$0
$0
$2,400
$0
$24,000
$86,250
$0

$614,000
$440,000
$0
$0
$2,400
$0
$24,000
$92,100
$0

Total Operating Expenses

$902,740

$1,027,650

$1,172,500

$18,260
$18,260
$17,574
$206

$172,350
$172,350
$13,281
$47,721

$547,500
$547,500
$8,801
$161,610

$481
0.02%

$111,349
3.71%

$377,089
8.77%

Sales
Direct Cost of Sales
Other Production Expenses
Total Cost of Sales
Gross Margin
Gross Margin %

Expenses

Profit Before Interest and Taxes

EBITDA
Interest Expense
Taxes Incurred
Net Profit
Net Profit/Sales

Page 14

Liquid Culture

7.3 Projected Cash Flow

The following table and chart are the projected cash flow for three years.
Table: Cash Flow

Pro Forma Cash Flow

Year 1

Year 2

Year 3

$2,170,000
$2,170,000

$3,000,000
$3,000,000

$4,300,000
$4,300,000

$0
$0
$0
$0
$0
$0
$0
$2,170,000

$0
$0
$0
$0
$0
$0
$0
$3,000,000

$0
$0
$0
$0
$0
$0
$0
$4,300,000

Year 1

Year 2

Year 3

$531,600
$1,590,840
$2,122,440

$575,000
$2,410,513
$2,985,513

$614,000
$3,317,830
$3,931,830

$0
$0
$0
$44,796
$0
$0
$0
$2,167,236

$0
$0
$0
$44,796
$0
$0
$0
$3,030,309

$0
$0
$0
$44,796
$0
$0
$0
$3,976,626

$2,764
$404,264

($30,309)
$373,956

$323,374
$697,330

Cash Received
Cash from Operations
Cash Sales
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

Page 15

Liquid Culture

Chart: Cash

Cash
$400,000
$350,000
$300,000
$250,000
$200,000

Net Cash Flow

$150,000

Cash Balance

$100,000
$50,000
$0

Month 12

Month 11

Month 10

Month 9

Month 8

Month 7

Month 6

Month 5

Month 4

Month 3

Month 2

Month 1

($50,000)

Page 16

Liquid Culture

7.4 Projected Balance Sheet

The following is the projected balance sheet for three years.
Table: Balance Sheet

Pro Forma Balance Sheet

Year 1

Year 2

Year 3

$404,264
$264,000
$0
$668,264

$373,956
$237,790
$0
$611,746

$697,330
$338,983
$0
$1,036,313

$0
$0
$0
$668,264

$0
$0
$0
$611,746

$0
$0
$0
$1,036,313

Year 1

Year 2

Year 3

Accounts Payable
Current Borrowing
Other Current Liabilities
Subtotal Current Liabilities

$311,080
$0
$0
$311,080

$188,009
$0
$0
$188,009

$280,283
$0
$0
$280,283

Long-term Liabilities
Total Liabilities

$155,204
$466,284

$110,408
$298,417

$65,612
$345,895

Paid-in Capital
Retained Earnings
Earnings
Total Capital
Total Liabilities and Capital

$260,000
($58,500)
$481
$201,981
$668,264

$260,000
($58,019)
$111,349
$313,329
$611,746

$260,000
$53,329
$377,089
$690,418
$1,036,313

Net Worth

$201,981

$313,329

$690,418

Assets
Current Assets
Cash
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

Page 17

Liquid Culture

7.5 Business Ratios

The following table shows the projected businesses ratios. We expect to maintain healthy ratios
for profitability, risk, and return. These ratios have been determined by the 5137 industry,
Women's and Children's Clothing, as found in the Standard Industry Code (SIC) Index.
Table: Ratios

Ratio Analysis
Year 1

Year 2

Year 3

Industry Profile

n.a.

38.25%

43.33%

10.40%

Inventory
Other Current Assets
Total Current Assets
Long-term Assets
Total Assets

39.51%
0.00%
100.00%
0.00%
100.00%

38.87%
0.00%
100.00%
0.00%
100.00%

32.71%
0.00%
100.00%
0.00%
100.00%

34.10%
25.70%
89.40%
10.60%
100.00%

Current Liabilities
Long-term Liabilities
Total Liabilities
Net Worth

46.55%
23.22%
69.78%
30.22%

30.73%
18.05%
48.78%
51.22%

27.05%
6.33%
33.38%
66.62%

40.70%
9.00%
49.70%
50.30%

100.00%
42.44%
42.42%
11.29%
0.84%

100.00%
40.00%
36.29%
10.00%
5.75%

100.00%
40.00%
31.23%
9.30%
12.73%

100.00%
24.80%
14.80%
0.90%
2.00%

2.15
1.30
69.78%
0.34%
0.10%

3.25
1.99
48.78%
50.77%
26.00%

3.70
2.49
33.38%
78.03%
51.98%

2.36
1.09
49.70%
4.90%
9.70%

Sales Growth
Percent of Total Assets

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

Year 1

Year 2

Year 3

Net Profit Margin

Return on Equity

0.02%
0.24%

3.71%
35.54%

8.77%
54.62%

n.a
n.a

10.91
6.11
27
3.25

7.17
12.17
40
4.90

8.95
12.17
25
4.15

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

2.31
0.67

0.95
0.63

0.50
0.81

n.a
n.a

$357,185
1.04

$423,737
12.98

$756,030
62.21

n.a
n.a

0.31
47%
1.30
10.74

0.20
31%
1.99
9.57

0.24
27%
2.49
6.23

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

Activity Ratios
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

Page 18

Liquid Culture

Dividend Payout

0.00

0.00

0.00

n.a

Page 19

Appendix
Table: Sales Forecast

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
Clothing
Other
Total Sales
Direct Cost of Sales
Clothing
Other
Subtotal Direct Cost of Sales

0%
0%

$40,000
$0
$40,000
Month 1
$20,000

$40,000
$0
$40,000
Month 2
$20,000

$60,000
$0
$60,000
Month 3
$31,000

$80,000
$0
$80,000
Month 4
$42,000

$110,000
$0
$110,000
Month 5
$58,000

$140,000
$0
$140,000
Month 6
$78,000

$180,000
$0
$180,000
Month 7
$100,000

$220,000
$0
$220,000
Month 8
$120,000

$250,000
$0
$250,000
Month 9
$150,000

$300,000
$0
$300,000
Month 10
$180,000

$350,000
$0
$350,000
Month 11
$210,000

$400,000
$0
$400,000
Month 12
$240,000

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$20,000

$20,000

$31,000

$42,000

$58,000

$78,000

$100,000

$120,000

$150,000

$180,000

$210,000

$240,000

Page 1

Appendix
Table: Personnel

Personnel Plan
Month 1
Marketing/Website Director
Design Director
Designers
Web Administrator
Office Manager
Marketing Staff
Accountant
Other
Total People
Total Payroll

0%
0%
0%
0%
0%
0%
0%
0%

Month 10

Month 11

Month 12

$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
8

Month 2
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
8

Month 3
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
8

Month 4
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
8

Month 5
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
8

Month 6
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
8

Month 7
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
8

Month 8
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
8

Month 9
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
8

$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
8

$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
8

$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
8

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

Page 2

Appendix
Table: General Assumptions

General Assumptions
Plan Month

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

10

11

Month 12
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
Tax 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%

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

Page 3

Appendix
Table: Profit and Loss

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

$40,000

$40,000

$60,000

$80,000

$110,000

$140,000

$180,000

$220,000

$250,000

$300,000

$350,000

$400,000

Direct Cost of Sales

$20,000

$20,000

$31,000

$42,000

$58,000

$78,000

$100,000

$120,000

$150,000

$180,000

$210,000

$240,000

Other Production
Expenses
Total Cost of Sales

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$20,000

$20,000

$31,000

$42,000

$58,000

$78,000

$100,000

$120,000

$150,000

$180,000

$210,000

$240,000

Gross Margin

$20,000

$20,000

$29,000

$38,000

$52,000

$62,000

$80,000

$100,000

$100,000

$120,000

$140,000

$160,000

50.00%

50.00%

48.33%

47.50%

47.27%

44.29%

44.44%

45.45%

40.00%

40.00%

40.00%

40.00%

Payroll

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

Sales and Marketing and

Other Expenses
Depreciation

$30,000

$20,000

$10,000

$40,000

$15,000

$45,000

$15,000

$15,000

$25,000

$10,000

$30,000

$10,000

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$200

$200

$200

$200

$200

$200

$200

$200

$200

$200

$200

$200

Gross Margin %

Expenses

Leased Equipment
Utilities
Insurance
Rent
Payroll Taxes
Other
Total Operating
Expenses
Profit Before Interest and
Taxes
EBITDA
Interest Expense
Taxes Incurred

15%

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$6,645
$0

$6,645
$0

$6,645
$0

$6,645
$0

$6,645
$0

$6,645
$0

$6,645
$0

$6,645
$0

$6,645
$0

$6,645
$0

$6,645
$0

$6,645
$0

$83,145

$73,145

$63,145

$93,145

$68,145

$98,145

$68,145

$68,145

$78,145

$63,145

$83,145

$63,145

($63,145)

($53,145)

($34,145)

($55,145)

($16,145)

($36,145)

$11,855

$31,855

$21,855

$56,855

$56,855

$96,855

($63,145)

($53,145)

($34,145)

($55,145)

($16,145)

($36,145)

$11,855

$31,855

$21,855

$56,855

$56,855

$96,855

$1,449

$1,418

$1,387

$1,356

$1,324

$1,293

$1,636

$1,604

$1,573

$1,542

$1,511

$1,480

($19,434)

($16,425)

($10,716)

($17,006)

($5,297)

($11,288)

$3,122

$9,131

$6,140

$16,650

$16,659

$28,668

Net Profit

($45,346)

($38,325)

($25,003)

($39,681)

($12,359)

($26,338)

$7,284

$21,306

$14,328

$38,850

$38,871

$66,893

Net Profit/Sales

-113.37%

-95.81%

-41.67%

-49.60%

-11.24%

-18.81%

4.05%

9.68%

5.73%

12.95%

11.11%

16.72%

Page 4

Appendix
Table: Cash Flow

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

$40,000

$40,000

$60,000

$80,000

$110,000

$140,000

$180,000

$220,000

$250,000

$300,000

$350,000

$400,000

Subtotal Cash from Operations

$40,000

$40,000

$60,000

$80,000

$110,000

$140,000

$180,000

$220,000

$250,000

$300,000

$350,000

$400,000

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

New Other Liabilities (interestfree)

New Long-term Liabilities

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Sales of Other Current Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Sales of Long-term Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

New Investment Received

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$40,000

$40,000

$60,000

$80,000

$110,000

$140,000

$180,000

$220,000

$250,000

$300,000

$350,000

$400,000

Additional Cash Received

Sales Tax, VAT, HST/GST Received
New Current Borrowing

Subtotal Cash Received

Expenditures

0.00%

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

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$44,300

$2,102

$62,079

$34,651

$53,959

$87,754

$97,272

$144,323

$153,408

$177,993

$225,221

$251,516

$300,561

$46,402

$106,379

$78,951

$98,259

$132,054

$141,572

$188,623

$197,708

$222,293

$269,521

$295,816

$344,861

Sales Tax, VAT, HST/GST Paid Out

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Principal Repayment of Current

Borrowing
Other Liabilities Principal
Repayment
Long-term Liabilities Principal
Repayment
Purchase Other Current Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$3,733

$3,733

$3,733

$3,733

$3,733

$3,733

$3,733

$3,733

$3,733

$3,733

$3,733

$3,733

Bill Payments
Subtotal Spent on Operations
Additional Cash Spent

$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

$50,135

$110,112

$82,684

$101,992

$135,787

$145,305

$192,356

$201,441

$226,026

$273,254

$299,549

$348,594

Subtotal Cash Spent

Page 5

Appendix
Net Cash Flow

($10,135)

($70,112)

($22,684)

($21,992)

($25,787)

Cash Balance

$391,365

$321,253

$298,570

$276,578

$250,791

($5,305)
$245,487

($12,356)

$18,559

$23,974

$26,746

$50,451

$51,406

$233,130

$251,689

$275,663

$302,408

$352,859

$404,264

Table: Balance Sheet

Pro Forma Balance Sheet

Assets

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

$401,500
$0
$0
$401,500

$391,365
$22,000
$0
$413,365

$321,253
$22,000
$0
$343,253

$298,570
$34,100
$0
$332,670

$276,578
$46,200
$0
$322,778

$250,791
$63,800
$0
$314,591

$245,487
$85,800
$0
$331,287

$233,130
$110,000
$0
$343,130

$251,689
$132,000
$0
$383,689

$275,663
$165,000
$0
$440,663

$0
$0
$0
$401,500

$0
$0
$0
$413,365

$0
$0
$0
$343,253

$0
$0
$0
$332,670

$0
$0
$0
$322,778

$0
$0
$0
$314,591

$0
$0
$0
$331,287

$0
$0
$0
$343,130

$0
$0
$0
$383,689

$0
$0
$0
$440,663

Month 1

Month 2

Month 10

Month 11

Month 12

$302,408
$198,000
$0
$500,408

$352,859
$231,000
$0
$583,859

$404,264
$264,000
$0
$668,264

$0
$0
$0
$500,408

$0
$0
$0
$583,859

$0
$0
$0
$668,264

Month 11

Month 12

Starting
Balances

Current Assets
Cash
Inventory
Other Current Assets
Total Current Assets
Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets
Liabilities and Capital

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Current Liabilities
Accounts Payable
Current Borrowing
Other Current Liabilities
Subtotal Current Liabilities

$0
$0
$0
$0

$60,945
$0
$0
$60,945

$32,890
$0
$0
$32,890

$51,043
$0
$0
$51,043

$84,565
$0
$0
$84,565

$92,471
$0
$0
$92,471

$139,236
$0
$0
$139,236

$147,529
$0
$0
$147,529

$170,514
$0
$0
$170,514

$216,893
$0
$0
$216,893

$241,522
$0
$0
$241,522

$289,834
$0
$0
$289,834

$311,080
$0
$0
$311,080

Long-term Liabilities
Total Liabilities

$200,000
$200,000

$196,267
$257,212

$192,534
$225,424

$188,801
$239,844

$185,068
$269,633

$181,335
$273,806

$177,602
$316,838

$173,869
$321,398

$170,136
$340,650

$166,403
$383,296

$162,670
$404,192

$158,937
$448,771

$155,204
$466,284

Paid-in Capital
Retained Earnings
Earnings

$260,000
($58,500)
$0

$260,000
($58,500)
($45,346)

$260,000
($58,500)
($83,671)

$156,154
$413,365

$117,829
$343,253

$260,000
($58,500)
($160,71
4)
$40,786
$314,591

$260,000
($58,500)
($187,05
2)
$14,448
$331,287

$260,000
($58,500)
($179,76
7)
$21,733
$343,130

$260,000
($58,500)
($158,46
1)
$43,039
$383,689

$260,000
($58,500)
($144,13
4)
$57,366
$440,663

$260,000
($58,500)
($105,28
4)
$96,216
$500,408

$260,000
($58,500)
$481

$201,500
$401,500

$260,000
($58,500)
($148,35
5)
$53,145
$322,778

$260,000
($58,500)
($66,413)

Total Capital
Total Liabilities and Capital

$260,000
($58,500)
($108,67
4)
$92,826
$332,670

$135,087
$583,859

$201,981
$668,264

Net Worth

$201,500

$156,154

$117,829

$92,826

$53,145

$40,786

$14,448

$21,733

$43,039

$57,366

$96,216

$135,087

$201,981

Page 6