Table of Contents

Page 1

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

1.1 Objectives .................................................................................................................................... 1

Chart: Highlights .......................................................................................................................... 2

1.2 Mission .......................................................................................................................................... 2

1.3 Keys to Success ........................................................................................................................ 2

2.0 Company Summary ..................................................................................................................... 2

2.1 Company Ownership ............................................................................................................... 2

2.2 Start-up Summary ................................................................................................................... 3

Table: Start-up .............................................................................................................................. 3

Table: Start-up Funding ............................................................................................................ 4

Chart: Start-up ............................................................................................................................. 5

3.0 Services ............................................................................................................................................ 5

4.0 Market Analysis Summary ........................................................................................................ 6

4.1 Market Segmentation ............................................................................................................. 6

Table: Market Analysis ............................................................................................................... 7

Chart: Market Analysis (Pie) .................................................................................................... 7

4.2 Target Market Segment Strategy ...................................................................................... 7

4.3 Service Business Analysis ..................................................................................................... 8

4.3.1 Competition and Buying Patterns .............................................................................. 8

5.0 Strategy and Implementation Summary ............................................................................ 9

5.1 Competitive Edge ..................................................................................................................... 9

5.2 Marketing Strategy .................................................................................................................. 9

5.3 Sales Strategy ......................................................................................................................... 10

5.3.1 Sales Forecast.................................................................................................................. 10

Chart: Sales by Year ............................................................................................................. 12

Table: Sales Forecast ........................................................................................................... 11

Chart: Sales Monthly ............................................................................................................ 12

5.4 Milestones.................................................................................................................................. 13

Table: Milestones ....................................................................................................................... 13

Chart: Milestones ....................................................................................................................... 14

6.0 Management Summary ............................................................................................................ 14

6.1 Personnel Plan ......................................................................................................................... 15

Table: Personnel ......................................................................................................................... 15

7.0 Financial Plan ............................................................................................................................... 15

7.1 Important Assumptions ....................................................................................................... 15

Table: General Assumptions .................................................................................................. 15

7.2 Break-even Analysis .............................................................................................................. 16

Chart: Break-even Analysis ................................................................................................... 16

Table: Break-even Analysis .................................................................................................... 16

7.3 Projected Profit and Loss ..................................................................................................... 17

Chart: Gross Margin Monthly ................................................................................................. 17

Chart: Gross Margin Yearly .................................................................................................... 18

Table: Profit and Loss ............................................................................................................... 18

Chart: Profit Monthly ................................................................................................................ 19

Table of Contents

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Chart: Profit Yearly .................................................................................................................... 19

7.4 Projected Cash Flow .............................................................................................................. 20

Chart: Cash .................................................................................................................................. 20

Table: Cash Flow ........................................................................................................................ 21

7.5 Business Ratios ....................................................................................................................... 21

Table: Ratios ................................................................................................................................ 22

7.6 Projected Balance Sheet ...................................................................................................... 23

7.6 Projected Balance Sheet ...................................................................................................... 23

Table: Balance Sheet ................................................................................................................ 23

Table: Sales Forecast ......................................................................................................................... 1

Table: Personnel ................................................................................................................................... 2

Table: Personnel ................................................................................................................................... 2

Table: General Assumptions ............................................................................................................ 3

Table: General Assumptions ............................................................................................................ 3

Table: Profit and Loss ......................................................................................................................... 4

Table: Profit and Loss ......................................................................................................................... 4

Table: Cash Flow .................................................................................................................................. 5

Table: Cash Flow .................................................................................................................................. 5

Table: Balance Sheet .......................................................................................................................... 6

Table: Balance Sheet .......................................................................................................................... 6

PC Repair

Page 1

1.0 Executive Summary

PC Repair will provide computer and technical consulting (repairs, training, networking and

upgrade service) to local small businesses as well as home PC users. The company will focus on marketing, responsiveness, quality, and creating and retaining customer relations.

PC Repair was initially formed as a sole proprietorship, but was reconfigured as an S

Corporation in December of 2004. PC Repair will at first be a home office start-up, utilizing one

studio room in the owner's home and serving customers in the local Ramsford-on-

Bitstream area. In the third month of our plan, we will move into a leased office space and hire

a second technician. As sales increase, we will hire additional personnel.

The Market

The very nature of the computing industry, with its extraordinary rate of technological

development, creates a constant need for businesses skilled in updating and advising customers

on computer-related issues. In town, the majority of potential customers are dissatisfied with

existing options, creating an attractive niche for an innovative start-up. Small business PC

users will provide the majority of our business revenue. Business Week expects the computing

industry to grow at a rate of 12% and the processor speeds to continue to expand for years to come, providing a rich resource for sales.

PC Repair has decided to focus mainly on the small business market, as these customers

typically don't have a full-time IT person, but have full-time IT needs. PC Repair will offer an

affordable, on-demand service for these customers. We can also offer maintenance agreements

that generate additional monthly income. For our residential customers, we will offer a very

affordable and helpful service with a very flexible schedule to meet their needs. Our target

market will focus on Ramsford-on-Bitstream and the surrounding areas. Market research indicates there is an abundance of business for a small company such as PC Repair.

Start-up Funding and Financials

To get PC Repair started the owner is providing cash and assets. We are also seeking a short-

term loan, to be secured with the owner's home equity, and repaid within three years. Our

conservative sales forecasts, based on industry research within the local area, project hefty

sales in year one, steadily increasing through year three. To reach these goals, we will use an

aggressive advertising campaign to exploit our competitors' weaknesses. With good cost

control, we will see a modest, yet comfortable, net profit the first year, even after moving into a leased space and hiring additional technicians.

1.1 Objectives

1. To provide the best service available to the community at an affordable price.

2. To generate substantial market share so that PC Repair is a common name.

3. Constant growth in sales from start up through year three.

4. To generate customer satisfaction so that at least 40% of our customer base is repeat business.

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Chart: Highlights

1.2 Mission

Our goal is to set the standard for on-site computer solutions through fast, on-site service and

response. Our customers will always receive one-on-one personal attention at a very affordable

price. Our customers will receive the highest quality of customer service available. Our

employees will receive extensive training, a great place to work, fair pay and benefits, and incentives to use their own good judgement to solve customers' problems.

1.3 Keys to Success

Establishing a brand identity and generating brand recognition through marketing.

Responsiveness: being an on-call computer paramedic with fast response time.

Quality: getting the job done right the first time, offering 100% guarantee. Relationships: developing loyal repeat customers--retainers.

2.0 Company Summary

PC Repair is an S Corporation located in Ramsford-on-Bitstream, owned by Jack Hacker. With a

small 3-year loan, PC Repair will grow in one year from a one-man, home-office based repair

shop to a profitable, 3-person business in a leased location. We will build the necessary

infrastructure to quickly and efficiently respond to customers' computer needs, guaranteeing speedy, friendly, competent, and cost-effective technical support.

2.1 Company Ownership

PC Repair was initially envisioned as a sole proprietorship in the owner's home. However, recent

feedback from our marketing outreach has suggested a much higher sales potential than

originally imagined, and PC Repair has been reformed as an S Corporation. This change will

provide additional legal protection for the owner, and will also streamline the financial

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operations of the company as we expand the personnel to 5 within the next three years, lease a separate space for offices, and purchase company vehicles and cell phones.

The owner, Jack Hacker, has 10 years of experience in the fields of technical support,

networking, and computer training and repair. Jack has also spent the last three years as the

manager of a custom computer building and repair store, and understands the computer needs of small businesses.

2.2 Start-up Summary

Total start-up expenses include initial expenses for establishing our website, setting up the business, and doing our pre-opening advertising. Exact allocations are shown in the table.

The bulk of our start-up requirements are asset needs: we need diagnostic and repair

equipment, half of which will be contributed to the business by the owner from his own

materials. We are treating this equipment as assets because we expect it to last at least three

years, and to have some resale value when we are through with it; we will buy additional

expensed equipment in years two and three. We also need start-up inventory which includes

RAM, spare hard drives, cables, and cases. Although we will keep expenses to a minimum for

the first three months, before we move, we will also need cash at start-up, to see us through the next several months with a positive cash balance.

We plan to fund our total start-up requirements direct owner investment (including the

contributed assets), and a three-year loan secured with the owner's collateral (his home

equity). We should be able to easily repay this loan within three years, even with a much lower sales revenue than projected. (See the Cash Flow table for projected repayment.)

Table: Start-up

Start-up

Requirements

Start-up Expenses Legal $650 Website $350 Business Cards $100 Insurance $150 Uniforms $300 CPA $275 Advertisement $1,200 Total Start-up Expenses $3,025

Start-up Assets Cash Required $28,000 Start-up Inventory $1,200 Other Current Assets $10,000 Long-term Assets $0 Total Assets $39,200

Total Requirements $42,225

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Table: Start-up Funding

Start-up Funding Start-up Expenses to Fund $3,025 Start-up Assets to Fund $39,200 Total Funding Required $42,225

Assets Non-cash Assets from Start-up $11,200 Cash Requirements from Start-up $28,000 Additional Cash Raised $0 Cash Balance on Starting Date $28,000 Total Assets $39,200

Liabilities and Capital

Liabilities Current Borrowing $19,225 Long-term Liabilities $0 Accounts Payable (Outstanding Bills) $0 Other Current Liabilities (interest-free) $0 Total Liabilities $19,225

Capital

Planned Investment Owner $23,000 Investor $0 Additional Investment Requirement $0 Total Planned Investment $23,000

Loss at Start-up (Start-up Expenses) ($3,025) Total Capital $19,975

Total Capital and Liabilities $39,200

Total Funding $42,225

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Chart: Start-up

3.0 Services

PC Repair will offer computer repairs, training, networking and upgrade service to clients in two

major categories: home PC users and small business users. As PC Repair and the client

demands grow, we will offer software development to our business clients.

From the very first day, we will offer on-site repair and consulting services, so that our clients

don't need to take time out of their busy days to haul a computer in to our workshop. This is

the single biggest frustration Jack has seen among small business owners needing computer

help. Much of our diagnostic equipment is portable, and we will remove a PC to our workshop

only when the problem requires more detailed diagnosis or repair. We will also offer free pick-

up and delivery of PCs needing repair. To meet the growing demand for this service, we will purchase a company vehicle in the third month.

We will also offer extended maintenance contracts, so that business clients can deal with

technical support and repair needs as a single line-item expense, rather than having to plan for

unexpected crashes and problems with a rainy-day fund they may never use. Maintenance contracts yield a high gross margin for us, and provide peace of mind for the customer.

We will offer limited software support (installation and compatibility issues), and focus on

hardware and networking support - this is a vital distinction, since software is evolving much

more rapidly than hardware, and our clients will have such diverse software needs that we

couldn't possibly keep up with all of them. We will encourage clients to register their software

and use the software's own support options to their full potential. We will, however, keep up to

date with multiple operating systems and networking developments, working with clients to

make sure they have the most appropriate combinations of hardware, OS, networking, backup

systems, and software. Backup and security are becoming higher priorities for all our potential

customers, as internet usage (and its pitfalls) becomes more common, and as more and more daily records are stored electronically.

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4.0 Market Analysis Summary

PC Repair will provide computer support in both a consulting and technical capacity to small

business owners as well as home PC users. Since PC Repair is currently a one man operation,

its growth in the first three months will be limited by the owner's capacity to complete work.

However, these first three months are critical for establishing our credibility and a reputation

for getting the job done quickly and well. We will focus on delivering excellent service, and using the good word of mouth from this initial period to network with other potential clients.

Personal market research by the owner indicates an attractive market niche for our services, of

which PC Repair will take full advantage. The very nature of the computing industry, with its

extraordinary rate of technological development, creates a constant need for businesses skilled in updating and advising customers on computer-related issues.

National chains, such as "Geeks on Call," and Best Buy's "Geek Squad" have seen rapid growth

in demand for these services in the last few years. Customers are seeking skilled help with

everything from installation of software and hardware components, to networking, to

transferring files from an old computer to a new one. Those who can often enlist their tech-

savvy children's help, but others are not so fortunate, and small-business owners need reliable

and quick help with all their computer needs, since every hour down may mean an hour or

more of lost revenue, especially for any business with a website or those doing e-commerce.

4.1 Market Segmentation

The existing computer service market is so extensive that categorizing it is rather difficult. We

have broken our potential market down into two groups, based on their needs: home PC users and small business clients.

Home PC User

Our home PC user market includes non-tech-savvy residents of the local area (15 mile radius),

generally between the ages of 30 and 70, with at least one home computer. We are not

expecting income from users below 30, who tend to be more comfortable with technology and

willing to attempt repairs and upgrades on their own, without seeking professional assistance.

Such home users generally own a computer to do email, play games, write letters, scan and

print photos, and occasionally to do bookkeeping or taxes. Home PC users with more

sophisticated applications generally have enough tech savvy, from tech experience at work, to

do their own repairs and upgrades. Their hardware needs will include the computer itself,

monitors, keyboards, mouse, printer, and scanner.

This group is growing slightly faster than the overall population growth in our area, in part due

to the increasing demand for computers among retired people and young families, about 7% a year.

Small Business Users

Small business users will provide the majority of our business revenue. The small business

market will be defined as customers within a 15 mile radius, with 2 or more computers or a

network which they use for business purposes at least 25% of the time. Their business use may

include minor usage, such as updating a business website for a brick-and-mortar store, keeping

the books, designing graphics or ad campaigns, and writing copy for press releases. It may also

be more extensive, incorporating inventory tracking, POS systems, customer databases, online

product/service delivery, or product development. The more intensive their computer usage for

business, the more critical it is to them that their technology work well and reliably, and that

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quality repairs and support are available in a crisis. Their hardware needs will include the same items as home users, plus servers, backup systems, data storage, and wireless networking.

The portion of the small business market we are targeting is growing at around 2% a year.

Table: Market Analysis

Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5 Potential Customers Growth CAGR

Home PC Users 7% 25,000 26,750 28,623 30,626 32,770 7.00% Small Business Users 2% 10,000 10,100 10,201 10,303 10,406 1.00% Other 0% 0 0 0 0 0 0.00% Total 5.39% 35,000 36,850 38,824 40,929 43,176 5.39%

Chart: Market Analysis (Pie)

4.2 Target Market Segment Strategy

Although there are more potential customers among home PC users, we expect the majority of

our revenue to come from small business clients, since their need for our services is more

urgent, and they are willing to invest in technology as part of their business plan. The majority

of our marketing efforts will thus be focused on small business owners. These customers

typically don't have a full-time IT person, but have full-time IT needs. Home PCs are often used

by multiple people, and serve multiple purposes. Our home PC users need help with managing

their settings to integrate the different needs of all household members as much as they need technical assistance.

ComputingNet magazine recently reported on the substantial need for timely and cost-effective

computer upgrades and repairs in this region; Jack Hacker has seen this market need in

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person, as frustrated clients waited for days or weeks for their critical components to be

returned to full capacity, with no inexpensive alternative to the existing computer repair shops.

All of our clients need technical assistance, but we are also selling peace of mind: our clients

will know that friendly, efficient help is just a phone call away. As more and more companies

switch their support services to automated call centers or touch-tone menus, the simple

reassurance of hearing another human voice on the phone within a few rings is immeasurable.

Even better is knowing that within a few hours, someone will show up and take care of their problem.

Both the software and hardware side of the computer industry continue to turn out new and

revised computer components at alarming rates. For PC Repair this means job security well into

the future. As reported by the Wall Street Journal, there seems to be no end to the

development of the computer market. Business Week expects the computing industry to grow at a rate of 12% and the processor speeds to continue to expand for years to come.

4.3 Service Business Analysis

Secondary market research shows computer service customers tend to be very loyal to

providers that do good work and satisfy their needs. An analysis of PC Repair's main

competitors shows no overwhelming strengths that would be significant barriers to entry into

the market, as our local competitors have serious weaknesses.

The computer maintenance and repair industry is fragmented, with a few large, national players

and hundreds of small, local stores. While most computers are actually repaired in-store, near

the customer, parts for the repair come from major manufacturers and distributors; delays in

receiving necessary parts can significantly slow down the repair process. Large chains have

solved this problem by keeping vast amounts of inventory in stock at all times, while local

stores offer customers the trade-off of personal interaction and trust that may make up for some delay.

PC Repair has established a relationship with a local distributor to do rapid special-ordering;

although this capability is more expensive than normal channels, it will enable us to quickly

establish a reputation as efficient and responsive to customer needs, particularly for our small

business users. We will leverage this customer loyalty into great word of mouth marketing and steady growth.

4.3.1 Competition and Buying Patterns

Customers choose computer repair and assistance services based on reputation, previous

experience, and price. They may choose to return to a mediocre provider with whom they're

familiar, rather than try out a new unknown company about whom they've heard nothing. Large

stores, especially the service departments of national chains, have a great advantage simply in

their affiliation with an established brand. Establishing our brand identity and a great reputation

in the first few months is critical to our success. Once we have broken in to the local market, our great service will turn new clients into permanent clients.

Our services will be second to no one and our prices will be very reasonable for the high quality

service we offer. By providing superior service, word of mouth alone will bring in many new

clients. The satisfaction our consumers find will keep them coming back. There are two main

competitors for the computer upgrade and repair business in this area:

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1. Competitor A. They are a well established provider of computer upgrades and services,

and do quick work. However, they have a high staff turnover, a young and inexperienced

staff, and are more interested in selling new components than in maintaining existing

machines or finding custom solutions. They do not offer any kind of pick-up and drop-off

service, and do not offer on-site help. They really only offer hardware support.

2. Competitor B. Smaller and less known then A, B provides many services for residents

living in east and south parts of town. They are more willing to spend time with a client,

figuring out exactly what his or her needs are, and suggesting new options than competitor

A. However, they have an inefficient ordering system and an unkempt shop, which deters

potential customers and can turn existing customers to the competition. They also do not

offer on-site services, although they are considering instituting a trial pick-up/drop-off

service. They are in the best position to copy our innovations and steal customers, but their

management is complacent and may not respond to competition.

Both of these companies charge rates in excess of PC Repair; we will be able to attract the price-sensitive market without much work.

5.0 Strategy and Implementation Summary

Our Strategy and Implementation turn on three points:

1. A value proposition of timely and practical solutions, at a reasonable rate, coupled with a

100% guarantee.

2. Exploiting our competitors weaknesses: a competitive edge based on quick, effective, and

sympathetic customer service, which meets the customer where his needs are, rather than

trying to fit him into an existing box.

3. Quickly establishing a brand identity and developing a great reputation among local customers to generate word of mouth advertising.

5.1 Competitive Edge

Quick response: PC Repair will provide same day and after hours service.

A flat rate policy: This undermines the competition, who charge by the hour. The pricing

has been set to reflect the average amount of time it takes to perform the task. With this

strategy we can undercut most competitors and gain local market power.

On-site and pick-up/drop-off services: This will minimize the time and effort a

customer needs to put into dealing with his computer problem.

Suprisingly, our small size is an advantage: customers will recognize me (and future

employees), and will know they will get the same great service every time they call.

5.2 Marketing Strategy

Our marketing strategy will aggressively exploit our competitors' weaknesses. During the start-

up phase, we will run large ads in the business section of the local newspaper, asking, "Are you

fed up with poor customer service for your computer needs?" These ads will focus on

our advantages, including on-site service, competitive rates, and quick response and turn-

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around times. They will announce our opening date, and include a coupon for free diagnostic service for the first 20 customers.

We will follow up on these opening ads with a smaller direct-marketing campaign to small

business owners, with lists drawn from the local Chamber of Commerce. Jack will use his

contacts with business customers from his years as a manager to create a "buzz" about this new business.

We will continue periodic advertisements, including several promotions (discounts, free

diagnosis, etc.) throughout the first year. We expect a small but steady response from home PC

users who see our ads elsewhere, but will also run monthly ads in sections other than the business one.

We will offer a promotion during the first 90 days of business to generate business traffic and

word of mouth. Our promo is Spyware removal on any desktop PC for $70 including tax and

software. Spyware is a huge problem for a lot of residential and small business customers, and

the offer should draw a lot of interest.

5.3 Sales Strategy

Our marketing strategy will generate customer inquiries. We will close the deals by offering an

outstanding service and a very reasonable price. Happy customers generate repeat business

and word of mouth. Our toll free number is operational 24 hours a day, seven days a week, and

from 8am to 9pm, I will be available to answer calls. At other times, or when I am on the

phone, an answering service we have hired will catch callers and give them an estimated wait

time for a call-back; this is another step towards delivering a complete solution to our customers.

Sales forecast figures are based on industry figures for the typical growth of a start-up and reflect repeat business generated through meeting customer needs.

5.3.1 Sales Forecast

The sales strategy is a prediction of controllable growth for the first year. PC Repair will focus

on quality and attention to detail to avoid some potential pitfalls encountered by many new

businesses. The predicted growth is moderate in the home PC market and in the small business

arena. However, with aggressive advertising and word of mouth, this will increase. Our

agressive TV advertising will increase our residential and small business customer base as well

as word of mouth within the first year. Within a few months we will have the need for additional

employees to handle the work load. At that time, we will move into a leased space with additional square footage, and buy a company vehicle to help with the on-site calls.

Our competitors average 75+ calls a month. Given that our advertising will be aggressive, we

expect the same results. The sales forecast is conservative, which gives us a chance to gauge

our experience and adjust the plan accordingly.

We will service all of Ramsford-on-Bitstream, and the surrounding area. We expect that the

majority of our jobs will be performed in the immediate town area. A service technician can

perform an average of 3 jobs per day. Our sales forecast predictions are less than that. With

our agressive advertising campaign we expect nominal growth. We predict it will take a few

weeks for the marketing to settle in with customers. However, we are going to offer a promo for our services which should generate some substantial results.

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The one element of sales not represented in the table below is direct costs for our maintenance

contracts. We estimate these costs at 12% of sales revenue, but expect a delayed occurrence -

that is, we will sell maintenance contracts starting in February, but do not expect to actually

perform maintenance on computers guaranteed under them for the first few months. We will

incur more and more costs from these as time goes on, and the computers age - most of the

service in a maintenance contract is performed within the last quarter of the specified period.

Projections for the direct costs for these contracts can be found in the Profit and Loss Table, as other costs of sales.

Table: Sales Forecast

Sales Forecast

Year 1 Year 2 Year 3

Unit Sales Home PC Unit 166 200 225 Small Business Unit 264 300 350 Promo 235 0 0 Maintenance Contracts 32 60 85 Total Unit Sales 697 560 660

Unit Prices Year 1 Year 2 Year 3 Home PC Unit $280.00 $300.00 $300.00 Small Business Unit $500.00 $600.00 $600.00 Promo $50.00 $0.00 $0.00 Maintenance Contracts $400.00 $600.00 $600.00

Sales Home PC Unit $46,480 $60,000 $67,500 Small Business Unit $132,000 $180,000 $210,000 Promo $11,750 $0 $0 Maintenance Contracts $12,800 $36,000 $51,000 Total Sales $203,030 $276,000 $328,500

Direct Unit Costs Year 1 Year 2 Year 3 Home PC Unit $84.00 $90.00 $90.00 Small Business Unit $105.00 $126.00 $126.00 Promo $4.00 $0.00 $0.00 Maintenance Contracts $0.00 $0.00 $0.00

Direct Cost of Sales Home PC Unit $13,944 $18,000 $20,250 Small Business Unit $27,720 $37,800 $44,100 Promo $940 $0 $0 Maintenance Contracts $0 $0 $0 Subtotal Direct Cost of Sales $42,604 $55,800 $64,350

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Chart: Sales by Year

Chart: Sales Monthly

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5.4 Milestones

Our milestones, listed in the table below, outline the major events that will promote, as well as

insure the success of PC Repair and keep it a going concern well into the future. We will

measure our success in meeting these milestones every month, and adjust the plan to keep up

with our objectives. Name recognition, in particular, is very important to breaking into this

market - we will conduct a survey by calling 200 randomly selected small businesses from the

Chamber of Commerce listings on the specified dates and asking them whether they have

heard of PC Repair, and if so, what their impression is of our service. If any of the respondents

have actually used our services, we will elicit feedback on their experience with us, and suggestions for improvement. We will also ask if they would recommend us to a colleague.

Table: Milestones

Milestones

Milestone Start Date End Date Budget Manager Department Procurement of materials for opening

12/1/2004 2/1/2005 $1,200 JMH Department

Start-up Ad Campaign 12/15/2004 2/6/2005 $1,200 JMH Department Get Loan Approved 1/1/2005 1/17/2005 $0 JMH Department Open Business 2/7/2005 2/8/2005 $0 JMH Department Name Recognition by 5% of potential market

2/28/2005 2/28/2005 $0 JMH Department

Meet with Leasing Agent 3/1/2005 3/10/2005 $0 JMH Department Interview potential Techs 3/1/2005 4/25/2005 $0 JMH Department Move into Leased Space 4/1/2005 4/10/2005 $2,000 JMH Department Sign on Leased Vehicle 4/15/2005 4/20/2005 $6,000 JMH Department Targeted Ads Begin 4/15/2005 5/15/2005 $4,000 JMH Department 1st Tech Starts 5/1/2005 5/1/2005 $0 JMH Department 2nd Round Tech Interviews 7/1/2005 7/31/2005 $0 JMH Department Direct marketing to Small Businesses

7/1/2005 9/30/2005 $8,000 JMH Department

Increase Name Recognition to 20%

8/1/2005 8/2/2005 $0 JMH Department

2nd Tech Starts 8/1/2005 8/7/2005 $0 JMH Department Totals $22,400

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Chart: Milestones

6.0 Management Summary

PC Repair will be owned and managed by Jack Hacker. Jack has 10 years of experience in the

fields of technical support, networking, and computer training and repair. Jack has also spent

the last three years as the manager of a custom computer building and repair store, and

understands the computer needs of small businesses. Jack is adept at managing his time, and at quickly responding to multiple customer calls and needs.

For the first three months, Jack will be in charge of all aspects of the business. In the third

month, when another tech is hired, Jack will shift some of his energy from directly responding

to customer needs, to training and managing others to do this work effectively. Jack will

maintain direct control over inventory ordering and bookkeeping, and will try to do as many of

the on-site calls as possible himself. Part of our brand recognition strategy is to identify PC

Repair with Jack's efficiency, friendliness, and technical expertise. The easiest way to associate

the two is for Jack to be a major part of many customers' experiences with us. He will delegate

technical repairs later in the year to the techs working in the leased office space, and will also train them in his method of direct phone support.

Jack has worked extensively with computer technicians and support staff in the past, and

knows that they work best when given free rein within a set of mutually-agreed-upon

guidelines. The first week of each tech's employment will be dedicated to helping them understand PC Repair's guidelines:

the customer needs help, and we're here to help them;

the customer is frustrated, upset, or confused - but that doesn't make the customer a

problem; the customer needs reassurance as well as solutions.

Within this framework, the techs can solve the customer's problem the best way they see fit - Jack is not a micro manager.

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6.1 Personnel Plan

Jack Hacker will be the only employee for the first few months; his salary is directly related to

the success of the business, and will never exceed 18% of sales revenue. In the third month,

we will move to a leased office space and hire a second employee, with a third hire planned for

August, if projections are on target. We plan to hire additional part-time employees in the second year, to better handle the increasing sales.

Our employees will be skilled professionals, with equally strong technical and people skills. It is

very important to Jack that they be paid salaries commensurate with their abilities and

dedication- happy tech support people make for happy customers. To that end, our full-time

employees will receive health benefits (premiums split between the employee and PC Repair), paid holidays, and sick time. Those benefits are included in the payroll totals listed below.

Table: Personnel

Personnel Plan

Year 1 Year 2 Year 3

Owner $33,000 $38,000 $40,000 Tech1 $21,600 $30,000 $30,000 Tech2 $14,400 $30,000 $30,000 Part Time $0 $12,000 $15,000 Total People 3 5 5

Total Payroll $69,000 $110,000 $115,000

7.0 Financial Plan

The following sections include the annual estimates for the standard set of financial tables. Detailed monthly pro-forma tables are included in the appendix.

Our financial plan calls for limited growth in the first three months, followed by much higher

sales when we move and hire additional employees. These projections are based on sound

market research and ratios for comparable businesses. As we grow, we will keep our operating expenses down, and maintain a positive cash balance as we repay our three-year loan.

7.1 Important Assumptions

PC Repair's customer base would fluctuate if there was a recess in the economy or other

extenuating circumstances that pertain directly to consumer or industry behavior. However,

given the steady increase in computer users despite the recent recession, we assume that sales

forecasts are unlikely to be dramatically altered by economic events. The table below shows some of our other assumptions.

Table: General Assumptions

General Assumptions

Year 1 Year 2 Year 3

Plan Month 1 2 3 Current Interest Rate 7.00% 70.00% 70.00% Long-term Interest Rate 10.00% 10.00% 10.00% Tax Rate 30.00% 30.00% 30.00% Other 0 0 0

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7.2 Break-even Analysis

Fixed costs are projected at a monthly average for the first year. This includes payroll, moving

expenses and rent, purchase of a company vehicle, and other necessities like cell phones and

the answering service. Variable costs (inventory used in repairing or servicing computers) are

projected as well. At these levels, what we need to bring in per month to break even is shown

in the table and chart below. We will reach our break-even point mid-year, although we expect

sales in November and December to dip below this level because of holidays.

Chart: Break-even Analysis

Table: Break-even Analysis

Break-even Analysis

Monthly Units Break-even 52 Monthly Revenue Break-even $15,110

Assumptions: Average Per-Unit Revenue $291.29 Average Per-Unit Variable Cost $70.00 Estimated Monthly Fixed Cost $11,479

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7.3 Projected Profit and Loss The table below shows our projected profit and loss. There are two lines for direct cost of sales

- the second line shows projected inventory costs of fulfilling our maintenance contracts. The

marketing/promotion line shows our planned advertising program expenses. Although these are

aggressive, we must spend heavily in the first year in order to establish the brand recognition that will help us break in to the local market.

This table also shows our projected expense increases as we hire more employees and move

into a larger rented space. Before the move, the owner will absorb expenses related to utilities.

In years two and three, we have budgeted for additional expensed equipment to expand our diagnostic and repair capabilities to keep up with orders.

We are seeking a modest net profit in the first year. As our reputation grows, we will see higher revenues and net profit over the next three years.

Chart: Gross Margin Monthly

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Chart: Gross Margin Yearly

Table: Profit and Loss

Pro Forma Profit and Loss

Year 1 Year 2 Year 3

Sales $203,030 $276,000 $328,500 Direct Cost of Sales $42,604 $55,800 $64,350 Costs of Fulfilling Maintenance Contracts $1,488 $4,320 $6,120 Total Cost of Sales $44,092 $60,120 $70,470

Gross Margin $158,938 $215,880 $258,030 Gross Margin % 78.28% 78.22% 78.55%

Expenses Payroll $69,000 $110,000 $115,000 Marketing/Promotion $28,000 $6,000 $12,000 Depreciation $0 $0 $0 Lease $10,000 $12,000 $12,000 Expensed Equipment $0 $10,000 $12,000 Insurance $3,150 $1,200 $1,200 Website $2,080 $480 $480 Answering Service $200 $2,400 $2,400 Mileage $2,660 $5,400 $5,400 Vehicles $13,200 $15,000 $17,000 Cell Phones $1,260 $1,260 $1,260 Utilities $5,000 $6,000 $7,000 Internet $1,200 $1,200 $1,200 Moving Expenses $2,000 $0 $0

Total Operating Expenses $137,750 $170,940 $186,940

Profit Before Interest and Taxes $21,188 $44,940 $71,090 EBITDA $21,188 $44,940 $71,090 Interest Expense $1,097 $6,570 $2,139 Taxes Incurred $6,027 $11,511 $20,685

Net Profit $14,064 $26,859 $48,266 Net Profit/Sales 6.93% 9.73% 14.69%

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Chart: Profit Monthly

Chart: Profit Yearly

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7.4 Projected Cash Flow

The Cash Flow chart, below, shows our projected cash position for the first year; the table

following it shows highlights for the first three years. With the requested start-up funding, we will maintain a positive cash balance throughout, and repay the loan within three years.

Chart: Cash

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Table: Cash Flow

Pro Forma Cash Flow

Year 1 Year 2 Year 3

Cash Received

Cash from Operations Cash Sales $203,030 $276,000 $328,500 Subtotal Cash from Operations $203,030 $276,000 $328,500

Additional Cash Received Sales Tax, VAT, HST/GST Received $0 $0 $0 New Current Borrowing $0 $0 $0 New Other Liabilities (interest-free) $0 $0 $0 New Long-term Liabilities $0 $0 $0 Sales of Other Current Assets $0 $0 $0 Sales of Long-term Assets $0 $0 $0 New Investment Received $0 $0 $0 Subtotal Cash Received $203,030 $276,000 $328,500

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations Cash Spending $69,000 $110,000 $115,000 Bill Payments $110,873 $142,543 $163,375 Subtotal Spent on Operations $179,873 $252,543 $278,375

Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 Principal Repayment of Current Borrowing $6,564 $6,550 $6,111 Other Liabilities Principal Repayment $0 $0 $0 Long-term Liabilities Principal Repayment $0 $0 $0 Purchase Other Current Assets $0 $0 $0 Purchase Long-term Assets $0 $0 $0 Dividends $0 $0 $0 Subtotal Cash Spent $186,437 $259,093 $284,486

Net Cash Flow $16,593 $16,907 $44,014 Cash Balance $44,593 $61,500 $105,514

7.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the

Standard Industrial Classification (SIC) code 7379, Computer Related Services, (NAICS 811212) are shown for comparison.

Our projected growth is much higher than the industry average; in part, this is because we are

a start-up, growing sales steadily in these first three years. We are sure that our sales forecast

is conservative, given the dissatisfaction among local computer users with existing options, and

our planned aggressive marketing campaign.

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Table: Ratios

Ratio Analysis

Year 1 Year 2 Year 3 Industry Profile

Sales Growth n.a. 35.94% 19.02% 5.23%

Percent of Total Assets Inventory 8.22% 9.07% 5.90% 2.79% Other Current Assets 16.81% 12.72% 8.15% 51.19% Total Current Assets 100.00% 100.00% 100.00% 75.09% Long-term Assets 0.00% 0.00% 0.00% 24.91% Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 42.77% 22.55% 11.07% 31.75% Long-term Liabilities 0.00% 0.00% 0.00% 18.48% Total Liabilities 42.77% 22.55% 11.07% 50.23% Net Worth 57.23% 77.45% 88.93% 49.77%

Percent of Sales Sales 100.00% 100.00% 100.00% 100.00% Gross Margin 78.28% 78.22% 78.55% 100.00% Selling, General & Administrative Expenses 38.70% 65.72% 64.96% 80.06% Advertising Expenses 0.00% 0.00% 0.00% 1.23% Profit Before Interest and Taxes 10.44% 16.28% 21.64% 1.95%

Main Ratios Current 2.34 4.43 9.03 1.53 Quick 2.15 4.03 8.50 1.24 Total Debt to Total Assets 42.77% 22.55% 11.07% 57.27% Pre-tax Return on Net Worth 59.02% 63.01% 63.16% 2.73% Pre-tax Return on Assets 33.78% 48.80% 56.17% 6.39%

Additional Ratios Year 1 Year 2 Year 3 Net Profit Margin 6.93% 9.73% 14.69% n.a Return on Equity 41.32% 44.10% 44.21% n.a

Activity Ratios Inventory Turnover 10.25 9.29 8.96 n.a Accounts Payable Turnover 9.67 12.17 12.17 n.a Payment Days 27 32 28 n.a Total Asset Turnover 3.41 3.51 2.68 n.a

Debt Ratios Debt to Net Worth 0.75 0.29 0.12 n.a Current Liab. to Liab. 1.00 1.00 1.00 n.a

Liquidity Ratios Net Working Capital $34,039 $60,898 $109,163 n.a Interest Coverage 19.32 6.84 33.24 n.a

Additional Ratios Assets to Sales 0.29 0.28 0.37 n.a Current Debt/Total Assets 43% 23% 11% n.a Acid Test 2.15 4.03 8.50 n.a Sales/Net Worth 5.96 4.53 3.01 n.a Dividend Payout 0.00 0.00 0.00 n.a

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7.6 Projected Balance Sheet

The Balance Sheet shows a steadily increasing net worth over the next three years. Since we

are planning to rent, and because computer technology changes so rapidly, we will have only

short-term assets, such as computer equipment and furniture. This will make our net worth

much more liquid than many similar businesses.

Table: Balance Sheet

Pro Forma Balance Sheet

Year 1 Year 2 Year 3

Assets

Current Assets Cash $44,593 $61,500 $105,514 Inventory $4,890 $7,129 $7,239 Other Current Assets $10,000 $10,000 $10,000 Total Current Assets $59,482 $78,629 $122,753

Long-term Assets Long-term Assets $0 $0 $0 Accumulated Depreciation $0 $0 $0 Total Long-term Assets $0 $0 $0 Total Assets $59,482 $78,629 $122,753

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities Accounts Payable $12,783 $11,620 $13,590 Current Borrowing $12,661 $6,111 $0 Other Current Liabilities $0 $0 $0 Subtotal Current Liabilities $25,444 $17,731 $13,590

Long-term Liabilities $0 $0 $0 Total Liabilities $25,444 $17,731 $13,590

Paid-in Capital $23,000 $23,000 $23,000 Retained Earnings ($3,025) $11,039 $37,898 Earnings $14,064 $26,859 $48,266 Total Capital $34,039 $60,898 $109,163 Total Liabilities and Capital $59,482 $78,629 $122,753

Net Worth $34,039 $60,898 $109,163

Appendix

Page 1

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

Unit Sales Home PC Unit 3 5 3 15 18 20 20 20 17 15 10 20

Small Business Unit 3 3 3 10 25 35 40 45 50 15 10 25

Promo 0 0 10 30 40 0 40 40 40 0 0 35

Maintenance Contracts 0 1 1 2 3 3 3 4 4 3 4 4

Total Unit Sales 6 9 17 57 86 58 103 109 111 33 24 84

Unit Prices Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Home PC Unit $280.00 $280.00 $280.00 $280.00 $280.00 $280.00 $280.00 $280.00 $280.00 $280.00 $280.00 $280.00

Small Business Unit $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00

Promo $50.00 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00

Maintenance Contracts $400.00 $400.00 $400.00 $400.00 $400.00 $400.00 $400.00 $400.00 $400.00 $400.00 $400.00 $400.00

Sales Home PC Unit $840 $1,400 $840 $4,200 $5,040 $5,600 $5,600 $5,600 $4,760 $4,200 $2,800 $5,600

Small Business Unit $1,500 $1,500 $1,500 $5,000 $12,500 $17,500 $20,000 $22,500 $25,000 $7,500 $5,000 $12,500

Promo $0 $0 $500 $1,500 $2,000 $0 $2,000 $2,000 $2,000 $0 $0 $1,750

Maintenance Contracts $0 $400 $400 $800 $1,200 $1,200 $1,200 $1,600 $1,600 $1,200 $1,600 $1,600

Total Sales $2,340 $3,300 $3,240 $11,500 $20,740 $24,300 $28,800 $31,700 $33,360 $12,900 $9,400 $21,450

Direct Unit Costs Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Home PC Unit 30.00% $84.00 $84.00 $84.00 $84.00 $84.00 $84.00 $84.00 $84.00 $84.00 $84.00 $84.00 $84.00 Small Business Unit 21.00% $105.00 $105.00 $105.00 $105.00 $105.00 $105.00 $105.00 $105.00 $105.00 $105.00 $105.00 $105.00 Promo 8.00% $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 Maintenance Contracts 12.00% $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Direct Cost of Sales Home PC Unit $252 $420 $252 $1,260 $1,512 $1,680 $1,680 $1,680 $1,428 $1,260 $840 $1,680

Small Business Unit $315 $315 $315 $1,050 $2,625 $3,675 $4,200 $4,725 $5,250 $1,575 $1,050 $2,625

Promo $0 $0 $40 $120 $160 $0 $160 $160 $160 $0 $0 $140

Maintenance Contracts $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Direct Cost of Sales $567 $735 $607 $2,430 $4,297 $5,355 $6,040 $6,565 $6,838 $2,835 $1,890 $4,445

Appendix

Page 2

Table: Personnel

Personnel Plan

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Owner 0% $2,000 $2,000 $2,500 $2,500 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 Tech1 0% $0 $0 $0 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 Tech2 0% $0 $0 $0 $0 $0 $0 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 Part Time 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total People 1 1 1 2 2 2 3 3 3 3 3 3

Total Payroll $2,000 $2,000 $2,500 $4,900 $5,400 $5,400 $7,800 $7,800 $7,800 $7,800 $7,800 $7,800

Appendix

Page 3

Table: General Assumptions

General Assumptions

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Plan Month 1 2 3 4 5 6 7 8 9 10 11 12

Current Interest Rate 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%

Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%

Other 0 0 0 0 0 0 0 0 0 0 0 0

Appendix

Page 4

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 $2,340 $3,300 $3,240 $11,500 $20,740 $24,300 $28,800 $31,700 $33,360 $12,900 $9,400 $21,450

Direct Cost of Sales $567 $735 $607 $2,430 $4,297 $5,355 $6,040 $6,565 $6,838 $2,835 $1,890 $4,445

Costs of Fulfilling Maintenance Contracts $0 $0 $48 $96 $144 $144 $144 $192 $192 $144 $192 $192

Total Cost of Sales $567 $735 $655 $2,526 $4,441 $5,499 $6,184 $6,757 $7,030 $2,979 $2,082 $4,637

Gross Margin $1,773 $2,565 $2,585 $8,974 $16,299 $18,801 $22,616 $24,943 $26,330 $9,921 $7,318 $16,813

Gross Margin % 75.77% 77.73% 79.78% 78.03% 78.59% 77.37% 78.53% 78.68% 78.93% 76.91% 77.85% 78.38%

Expenses Payroll $2,000 $2,000 $2,500 $4,900 $5,400 $5,400 $7,800 $7,800 $7,800 $7,800 $7,800 $7,800

Marketing/Promotion $4,000 $1,000 $3,000 $2,000 $2,000 $3,000 $3,000 $2,000 $2,000 $2,000 $2,000 $2,000

Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Lease $0 $0 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000

Expensed Equipment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Insurance $150 $0 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300

Website $40 $40 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200

Answering Service $200 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Mileage $80 $85 $95 $100 $200 $300 $300 $300 $300 $300 $300 $300

Vehicles $0 $0 $6,000 $800 $800 $800 $800 $800 $800 $800 $800 $800

Cell Phones $0 $60 $120 $120 $120 $120 $120 $120 $120 $120 $120 $120

Utilities $0 $0 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500

Internet 15% $0 $0 $120 $120 $120 $120 $120 $120 $120 $120 $120 $120 Moving Expenses $0 $0 $2,000 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Operating Expenses $6,470 $3,185 $15,835 $10,040 $10,640 $11,740 $14,140 $13,140 $13,140 $13,140 $13,140 $13,140

Profit Before Interest and Taxes ($4,697) ($620) ($13,250) ($1,066) $5,659 $7,061 $8,476 $11,803 $13,190 ($3,219) ($5,822) $3,673

EBITDA ($4,697) ($620) ($13,250) ($1,066) $5,659 $7,061 $8,476 $11,803 $13,190 ($3,219) ($5,822) $3,673

Interest Expense $109 $106 $103 $99 $96 $93 $90 $87 $83 $80 $77 $74

Taxes Incurred ($1,442) ($218) ($4,006) ($350) $1,669 $2,090 $2,516 $3,515 $3,932 ($990) ($1,770) $1,080

Net Profit ($3,364) ($508) ($9,347) ($816) $3,894 $4,878 $5,870 $8,201 $9,175 ($2,309) ($4,129) $2,519

Net Profit/Sales -143.77% -15.39% -288.48% -7.09% 18.78% 20.07% 20.38% 25.87% 27.50% -17.90% -43.93% 11.75%

Appendix

Page 5

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 $2,340 $3,300 $3,240 $11,500 $20,740 $24,300 $28,800 $31,700 $33,360 $12,900 $9,400 $21,450

Subtotal Cash from Operations $2,340 $3,300 $3,240 $11,500 $20,740 $24,300 $28,800 $31,700 $33,360 $12,900 $9,400 $21,450

Additional Cash Received Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Cash Received $2,340 $3,300 $3,240 $11,500 $20,740 $24,300 $28,800 $31,700 $33,360 $12,900 $9,400 $21,450

Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Expenditures from Operations Cash Spending $2,000 $2,000 $2,500 $4,900 $5,400 $5,400 $7,800 $7,800 $7,800 $7,800 $7,800 $7,800

Bill Payments $105 $3,102 $2,353 $10,424 $8,954 $13,556 $15,209 $15,896 $16,290 $16,282 $4,550 $4,152

Subtotal Spent on Operations $2,105 $5,102 $4,853 $15,324 $14,354 $18,956 $23,009 $23,696 $24,090 $24,082 $12,350 $11,952

Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Principal Repayment of Current Borrowing $547 $547 $547 $547 $547 $547 $547 $547 $547 $547 $547 $547

Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Cash Spent $2,652 $5,649 $5,400 $15,871 $14,901 $19,503 $23,556 $24,243 $24,637 $24,629 $12,897 $12,499

Net Cash Flow ($312) ($2,349) ($2,160) ($4,371) $5,839 $4,797 $5,244 $7,457 $8,723 ($11,729) ($3,497) $8,951

Cash Balance $27,688 $25,340 $23,179 $18,809 $24,647 $29,444 $34,688 $42,145 $50,868 $39,139 $35,642 $44,593

Appendix

Page 6

Table: Balance Sheet

Pro Forma Balance Sheet

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Assets Starting Balances

Current Assets Cash $28,000 $27,688 $25,340 $23,179 $18,809 $24,647 $29,444 $34,688 $42,145 $50,868 $39,139 $35,642 $44,593 Inventory $1,200 $633 $898 $1,291 $2,673 $4,727 $5,891 $6,644 $7,222 $7,522 $4,687 $2,797 $4,890 Other Current Assets $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 Total Current Assets $39,200 $38,321 $36,238 $34,470 $31,482 $39,374 $45,335 $51,332 $59,366 $68,390 $53,826 $48,439 $59,482

Long-term Assets Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Accumulated Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Assets $39,200 $38,321 $36,238 $34,470 $31,482 $39,374 $45,335 $51,332 $59,366 $68,390 $53,826 $48,439 $59,482

Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Current Liabilities Accounts Payable $0 $3,033 $2,004 $10,130 $8,505 $13,050 $14,680 $15,354 $15,733 $16,130 $4,422 $3,711 $12,783 Current Borrowing $19,225 $18,678 $18,131 $17,584 $17,037 $16,490 $15,943 $15,396 $14,849 $14,302 $13,755 $13,208 $12,661 Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Current Liabilities $19,225 $21,711 $20,135 $27,714 $25,542 $29,540 $30,623 $30,750 $30,582 $30,432 $18,177 $16,919 $25,444

Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Liabilities $19,225 $21,711 $20,135 $27,714 $25,542 $29,540 $30,623 $30,750 $30,582 $30,432 $18,177 $16,919 $25,444

Paid-in Capital $23,000 $23,000 $23,000 $23,000 $23,000 $23,000 $23,000 $23,000 $23,000 $23,000 $23,000 $23,000 $23,000 Retained Earnings ($3,025) ($3,025) ($3,025) ($3,025) ($3,025) ($3,025) ($3,025) ($3,025) ($3,025) ($3,025) ($3,025) ($3,025) ($3,025) Earnings $0 ($3,364) ($3,872) ($13,219) ($14,035) ($10,141) ($5,263) $607 $8,809 $17,983 $15,674 $11,544 $14,064 Total Capital $19,975 $16,611 $16,103 $6,756 $5,940 $9,834 $14,712 $20,582 $28,784 $37,958 $35,649 $31,519 $34,039 Total Liabilities and Capital $39,200 $38,321 $36,238 $34,470 $31,482 $39,374 $45,335 $51,332 $59,366 $68,390 $53,826 $48,439 $59,482

Net Worth $19,975 $16,611 $16,103 $6,756 $5,940 $9,834 $14,712 $20,582 $28,784 $37,958 $35,649 $31,519 $34,039