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Cover Page

.his sample business plan has been made available to users of Business Plan Pro4, business planning software published by alo Alto #oftware, ,nc. 5ames, locations and numbers may have been changed, and substantial portions of the original plan te6t may have been omitted to preserve confidentiality and proprietary information. You are welcome to use this plan as a starting point to create your own, but you do not have permission to resell, reproduce, publish, distribute or even copy this plan as it e6ists here. 7e-uests for reprints, academic use, and other dissemination of this sample plan should be emailed to the marketing department of alo Alto #oftware at marketing8paloalto.com. )or product information visit our website! www.paloalto.com or call! 9:;++:**<:=2*>. Copyright Palo Alto Software, Inc., 1 !"#$$ All rights reser%ed.

Legal age 1onfidentiality Agreement .he undersigned reader acknowledges that the information provided by ????????????????????????? in this business plan is confidential@ therefore, reader agrees not to disclose it without the e6press written permission of ?????????????????????????. ,t is acknowledged by reader that information to be furnished in this business plan is in all respects confidential in nature, other than information which is in the public domain through other means and that any disclosure or use of same by reader, may cause serious harm or damage to ?????????????????????????. Apon re-uest, this document is to be immediately returned to ?????????????????????????. ??????????????????? #ignature ??????????????????? 5ame $typed or printed& ??????????????????? Bate .his is a business plan. ,t does not imply an offering of securities.

Table of Contents

1.0 Executive Summary...............................................................................................................................1 Chart: Highlights..................................................................................................................................2 1.1 b!ectives.........................................................................................................................................." 1.2 Positioning Statement........................................................................................................................" 1." #eys to Success.................................................................................................................................." 1.$ %ission...............................................................................................................................................$ 2.0 Com&any Summary...............................................................................................................................$ 2.1 Start'u& Summary..............................................................................................................................$ Chart: Start'u&......................................................................................................................................$ Table: Start'u&.....................................................................................................................................( ..............................................................................................................................................................( 2.2 )uture )inancial Pre*ictions..............................................................................................................+ ".0 Services.................................................................................................................................................., ".1 Service -uarantee.............................................................................................................................., $.0 r*er Process........................................................................................................................................., $.1 r*er .umber..................................................................................................................................../ $.2 0eturn Policies.................................................................................................................................../ $." 0eturn 1abel......................................................................................................................................./ $.$ Se2uence of Process...........................................................................................................................3 (.0 4enefits Summary..................................................................................................................................3 (.1 4enefits to %erchants......................................................................................................................10 (.2 4enefits to Consumers.....................................................................................................................10 (." 4enefits to nline Community........................................................................................................10 +.0 %ar5et 6nalysis Summary..................................................................................................................11 +.1 Service 7escri&tion..........................................................................................................................11 +.2 Promotion8 Sales8 an* %ar5eting.....................................................................................................1" +." 7istribution an* 9nformation Structure............................................................................................1( +.".1 Strategic 6lliances....................................................................................................................1+ +.$ %ar5et Segmentation.......................................................................................................................1+ +.$.1 7escri&tion of 9tems Sol*.........................................................................................................1, Table: %ar5et 6nalysis......................................................................................................................1/ Chart: %ar5et 6nalysis :Pie;.............................................................................................................1/ +.( %ar5et .ee*s...................................................................................................................................1/ +.+ Service 4usiness 6nalysis...............................................................................................................13 +.+.1 .e< %ar5ets.............................................................................................................................13 +.+.2 .e< Services............................................................................................................................20 +.+." .e< Customers.........................................................................................................................20 ,.0 Com&etition..........................................................................................................................................21 ,.1 7irect Com&etitors...........................................................................................................................21 ,.2 9nternal Com&etitors........................................................................................................................21 ,." Channel Com&etitors.......................................................................................................................22 /.0 Strategy an* 9m&lementation Summary...............................................................................................22 /.1 Pricing..............................................................................................................................................2$ /.2 Sales )orecast...................................................................................................................................2( Table: Sales )orecast.........................................................................................................................2+ Page 1

Table of Contents

3.0 4usiness %o*el an* Structure.............................................................................................................2+ 3.1 rgani=ational Structure..................................................................................................................2+ Table: Personnel.................................................................................................................................2, 10.0 )inancial Plan.....................................................................................................................................2, 10.1 Pro!ecte* Cash )lo<......................................................................................................................2, Chart: Cash.........................................................................................................................................2, Table: Cash )lo<...............................................................................................................................2/ 10.2 4rea5'even 6nalysis......................................................................................................................23 Chart: 4rea5'even 6nalysis...............................................................................................................23 Table: 4rea5'even 6nalysis...............................................................................................................23 ................................................................................................................................................................23 Table: -eneral 6ssum&tions.............................................................................................................."0 10.$ Pro!ecte* Profit an* 1oss..............................................................................................................."0 Table: Profit an* 1oss........................................................................................................................"1 ................................................................................................................................................................"1 10.( Pro!ecte* 4alance Sheet................................................................................................................."2 Table: 4alance Sheet.........................................................................................................................."2 10.+ 4usiness 0atios.............................................................................................................................."2 Table: 0atios......................................................................................................................................"" Table: Personnel...........................................................................................................................................1 ......................................................................................................................................................................1 Table: Sales )orecast...................................................................................................................................2 ......................................................................................................................................................................2 Table: -eneral 6ssum&tions........................................................................................................................" ......................................................................................................................................................................" Table: Profit an* 1oss..................................................................................................................................$ ......................................................................................................................................................................$ Table: Cash )lo<.........................................................................................................................................( ......................................................................................................................................................................( Table: 4alance Sheet....................................................................................................................................+

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9.+ C6ecutive #ummary 5oDassle7eturn.com is an e:commerce start:up company positioning itself to become the market leader in offering online merchants and consumers a uniform and trouble:free way to return merchandise purchased online. .he company offers a business:to:business solution to online merchants of physical, non:perishable products. .he company utiliEes a consolidation approach in handling all product returns that allows online merchants to instantly save bad sales, restore customer satisfaction and stimulate repeat sales, while offering consumers a convenient, centraliEed online location to claim returns. 'y creating a new service category and utiliEing the first:mover advantage, 5oDassle7eturn.com positions itself for rapid growth and gains a strong opportunity to raise entry barriers for possible competition. The &arket C:commerce continues to accelerate and the amount of money spent on purchases made through the ,nternet shows no sign of decline. Buring the past holiday season $5ovember *+ to Becember 9<&, retailers saw online revenues -uadruple, jumping F++3 to about G99 billion and far e6ceeding e6pectations, according to a study by #hop.org and 'oston 1onsulting Hroup. .he study of F+ retailers in such categories as apparel, books and music, home and garden, specialty foods and electronics showed a *=+3 growth in the number of orders. .he study indicated that online sales were growing at 9I23 annually and it projected online retailer revenues of more than GF> billion for last year. An earlier study conducted by Crnst J Young, before the holiday frenEy, already estimated that total revenues for online retail and consumer products for the calendar year just completed were around G*2:F+ billion. 1urrently, the average rate of returns for ,nternet:based companies is <3. ,n the coming year the value of returned merchandise was G9.2 billion. .his indicates an amaEing opportunity. Ser%ice 'fferings 5oDassle7eturn.comKs services streamline the entire return process for retailers. .hey allow retailers to outsource a large part of their business, allowing the retailer to concentrate on their core competencies and not get distracted with activities that add little value. 5oDassle7eturn.com will reduce capital e6penditures of a company that uses their services, increase customer service of the retailer, increase sales opportunities, increase revenues, and improve inventory management. 1ustomers will benefit by having a convenient, easy way to return their purchases as well as the ability to track their returns. (eys To S)ccess 5oDassle7eturn.com has three ambitious and obtainable keys to success. .he first is the development of a customer service L customer satisfaction software application. .his robust software will be 5oDassle7eturn.comKs engine that ensures a seamless management of all of their business activities. .heir second key is the formation of strategic relationships with online merchants, shippers, and credit card companies. .he relationships with merchants will allow 5oDassle7eturn.com to -uickly grow their customer base of retailers served. Alliances with shipping companies will be formed since the actual cost of shipping is their largest cost driver. artnerships with credit card companies will allow 5oDassle7eturn.com to offer the respective cards as the preferred credit card thereby generating an additional source of revenue.

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&anagement Team .here are two principals that are responsible for the idea and the progress of the firm up. .hey recogniEe as the companies -uickly grows, certain positions such as 1CM and 1)M will need to be filled. .he company was founded by #teve Logic and Ban 1odder. #teve has spent the last ten years at )ederal C6press. While at )edC6, #teve was responsible for their logistics system. #teve has the incredible skill of perceiving business needs and creating a solution to address the need. At )edC6, #teve was the architect behind their benchmarked logistic system that has the ability to track customer packages and share the information with the client. What this meant for )edC6 is that they could tell the customer e6actly where their package is at any one point. .his logistics system is the main driver behind )edC6Ks e6ponential growth. Ban 1odder is a twenty:year veteran in the computer industry. #elf taught, Ban has worked at ,'N, 1adence, .ektroni6, and several other companies. Ban has the ability to design and write computer code very -uickly and accurately. 5oDassle7eturn.com will leverage BanKs skills for the completion of their customer service software engine. *inancials 5oDassle7eturn.comKs financials are conservative yet -uite promising. Mnce they are up and running and sign up some merchants as customers, 5oDassle7eturn.com will -uickly gain momentum and generate impressive sales. 7evenue for year two will be G9< million, climbing to G2< million by year three. 5et profit for these years respectively will be GI.= million and G*=.F million. Cven more impressive is 5oDassle7eturn.comKs net profit margin. Year two will only see a net margin of *23, but the following year will see a sustainable I23. 5oDassle7eturn.com will be creating a new service category leveraging their first mover status and seiEing the incredible market potential of ,nternet:based retailers.

1hart! Dighlights

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9.9 Mbjectives .he ultimate benefit of the program is that it enhances the overall image of the online merchant. 1onsumers demand not only convenience but a peace of mind. .he proposed program offers both, and it will increase the number of online shoppers, thus causing a market e6pansion for online merchants. .he first retailers who implement the proposed program will also be able to differentiate themselves and capture larger market shares in their respective segments. Mnce embraced by the majority of retailers, the program will become an industry standard. Bue to lack of current competition, 5oDassle7eturn.com has the first:mover advantage and is well positioned to establish itself as the leader in the newly created service category. 5oDassle7eturn.com therefore has an enormous upside potential and is poised for rapid growth. 'y securing agreements with companies such as AML.com and Yahoo% that host large numbers of merchants, 5oDassle7eturn.com will raise high entry barriers for possible competition and will significantly minimiEe the replication factor. 9.* ositioning #tatement 5oDassle7eturn.com strives to position itself as a strategic partnership between online merchants, Web hosting companies and portals, shipping companies, and online payment agents such as credit card issuers. Bue to demand aggregation, the strategy will produce reduced or totally free shipping of returned merchandise to consumers. .his differentiating element will multiply the consumer acceptance factor and will draw more revenues to all participating companies. .he proposed program is therefore a win:win solution to all parties involved. Noreover, the software architecture and website format will be wireless:friendly thus designing the service in such a way that consumers will later be able to easily use it via cellular phones and other personal wireless devices. 9.F Oeys to #uccess ,n order for the company to operate, a number of specific ingredients are needed. )ollowing are things to put in place before the service can be offered. 9. Bevelop a customer service J customer satisfaction software application that uses order number $of a merchandise item& and merchantKs Web address to! o 7etrieve all pertinent information on a participating merchant. o Natch appropriate return procedures against the returning item. o resent procedures to the consumer in the most concise format. o rovide reference to the merchantKs entire return policies if re-uested. o ,nform the merchant of the entire transaction as it occurs. o Hain authoriEation from the merchant to return merchandise if needed. o resent the merchantKs website to consumer for selling opportunities. o rovide confirmation emails to the customer of the actions taking place if re-uested. o ,nteract with the merchantKs database for further customer details if needed. o Naintain a record of the transactions for the companyKs own database. *. Bevelop successful relationships with online merchants to facilitate e6change of information. F. Bevelop strategic alliances with online merchants, shipping companies, and credit card issuers to negotiate reduction or elimination of the shipping costs to consumers on returned merchandise. I. Besign, maintain, and promote a user:friendly website, the corporate trademark, that offers an easy and trouble:free merchandise return procedure for consumers.

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9.I Nission Mur mission is to enhance customer service of online merchants, boost their customer retention and increase their sales. We strive to improve the overall image of the online merchant and therefore stimulate growth of online shopping. We put our efforts to increase customer satisfaction when consumers deal with retailers, to enhance the interaction process when retailers communicate with consumers, and to streamline the problem resolution order in all possible ways. *.+ 1ompany #ummary .he vision behind the company is to provide a return service that is safe, convenient, and easy to use. *.9 #tart:up #ummary 5oDassle7eturn.com is currently looking for early:stage funding and strategic partnerships to e6ecute the program. .he company plans to raise up to G*.> million in two rounds of financing during Year 9, along with securing access to additional G9.I million for the cash flow purposes, before making its program fully available to online merchants and consumers. .he preliminary rollout timing is set for .hanksgiving this year. 'ased on conservative financial projections, the company will become profitable from early Year *. .he dual:pricing strategy generates solid net income and nearly eliminates the downside risks. 'y Year 2:end , the GI million investment will produce G92+ million in cash flows, all internally generated. .he company can go public as early as Year *. #hould an , M be undertaken at Year F:end, the financial standing of the company should support a market capitaliEation of more than G9.I billion. .he table below outlines the start:up e6penses.

1hart! #tart:up

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.able! #tart:up

Start-up Requirements Start-up Expenses Legal Stationery etc. Brochures onsultants !nsurance Rent Research an# #e$elopment Expense# equipment &ther 'otal Start-up Expenses Start-up )ssets ash Require# &ther urrent )ssets Long-term )ssets 'otal )ssets Total Requirements $4*%000 $0 $0 $4*%000 $50%000 $200 $50 $450 $0 $"00 $500 $400 $"%"00 $200 $(%000

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.able! #tart:up )unding

Start-up Funding Start-up Expenses to +un# Start-up )ssets to +un# 'otal +un#ing Require# )ssets ,on-cash )ssets -rom Start-up ash Requirements -rom Start-up )##itional ash Raise# ash Balance on Starting .ate 'otal )ssets $0 $4*%000 $0 $4*%000 $4*%000 $(%000 $4*%000 $50%000

Lia/ilities an# Lia/ilities

apital

urrent Borro0ing Long-term Lia/ilities )ccounts 1aya/le 2&utstan#ing Bills3 &ther urrent Lia/ilities 2interest--ree3 'otal Lia/ilities apital 1lanne# !n$estment o-o0ner o-o0ner &ther )##itional !n$estment Requirement 'otal 1lanne# !n$estment Loss at Start-up 2Start-up Expenses3 'otal apital

$0 $0 $0 $0 $0

$25%000 $25%000 $0 $0 $50%000 2$(%0003 $4*%000

'otal

apital an# Lia/ilities

$4*%000 $50%000

Total Funding

*.* )uture )inancial redictions .he company anticipates to start approaching potential investors in )ebruary of this year. .he first round of finance needs is estimated at appro6imately G>++,+++. .he funds will be used to develop the core of the proprietary software program, begin designing the website, test:market the service, and set up corporate head-uarters. Also, recruitment of the key sales representatives will begin and major strategic alliances initiated. .he second round of financing is estimated at G* million and should take place in the #ummer Year 9. .he funds will be used to fully cover the software, systems and website development@ test:run and fine:tune the operational process@ provide necessary staffing@ and start the industrial marketing campaign. .he company plans to offer its services right before .hanksgiving of this year. As part of the promotion, and to simplify accounting for revenues, services for the remainder of Year 9 will be offered free of charge and no revenues will be recorded during that year.

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According to the financial statements, the company will need to raise G*.> million during the two rounds of financing. At the same time, the company may need to have access to additional G9.I million to support ade-uate cash flows during the early stages. An e6it strategy for the primary investors will be the initial public offering. .he company may go public as early as Year *. According to the financial statements, however, the company is capable of supporting growth internally, as well as generating siEable cash flows. ,t may be prudent to go public at Year F:end when the company will have substantial revenues that should support a market valuation of more than G9.I billion. .he funds raised during the , M will be used to further strengthen the market leader position, raise entry barriers through continuing brand:building programs, establish a more bureaucratic corporate structure, fund e6pansion initiatives, and to retire any financial obligations created during the first two rounds of financing. .he company has no immediate plans for ac-uisitions. 5either has it a preferred list of potential ac-uirers. Although all reasonable offers will be considered, the company plans to utiliEe the first:mover advantage to establish itself as the market leader and to remain a stand:along corporation for the foreseeable future. F.+ #ervices .he service offered by the company simplifies and streamlines the entire product return procedure. 'y accessing the 5oDassle7eturn.com website consumers can claim product returns in a -uick and trouble:free fashion. .he only necessary inputs are merchantKs domain name, itemKs order number, consumerKs last name $for verification only&, reason for return, and preferred way to resolve the issue $refund, replacement, or e6change&. 5oDassle7eturn.com serves as a centraliEed online location that matches the return policy of a given merchant against the returning item, obtains authoriEation if re-uired by merchant, and assists consumers in following the return time frames. .he companyKs website also generates and prints a return label to ease the shipping process for consumers. F.9 #ervice Huarantee ,t is important to note that during the interaction process with consumers, 5oDassle7eturn.com does not ask for or tries to obtain consumerKs credit card numbers. .he company therefore avoids consumer security concerns and substantially limits its possible liabilities. I.+ Mrder rocess Mnly two input variables are needed to easily find the merchant and identify a particular merchandise item. .he customerKs last name is asked for verification purposes only. 5oDassle7eturn.com website serves as a centraliEed online location for consumers to claim and process returns for participating merchants. As online shopping continues to grow, the added convenience of one single online destination to do returns for multiple merchants will increase. At the same time, participating merchants will place 5oDassle7eturn.com banner on their pages under return policies so that consumers could access the service directly from there. .hat way the domain name of the merchant will be pre:entered and the initial step even further simplified.

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,n case the merchandise was sent as a gift to another person who does not have access to the ,nternet, a toll:free telephone number will be provided to call in. An operator, with access to the ,nternet, will use the same e6act se-uence of onscreen entries and will relay options and procedures to the customer over the phone. I.9 Mrder 5umber .he order number should ensure that the right item is identified. Dowever, it is possible that the customer has ordered a few similar items but only wishes to return one of them, or the order number included multiple items. Dence a modification option is added to address that. ,n case the order number was assigned to a shipment that included multiple items, all items will be displayed and the customer will be asked to select those they wish to return. ,n case a wrong item is identified, the customer will be taken one step back and asked to re: enter the initial information. I.* 7eturn olicies Mnce the item has been identified, the return policies that apply to that particular item will be retrieved. 5oDassle7eturn.com will summariEe the return policy to the point of available options. .his means that based on the item $regular merchandise, on:sale merchandise, etc.& different return options and procedures may apply. .he customer will be given the shortest description of what needs to be done and when. While some merchants have Pno:-uestions:askedP return policies, others re-uire justification to return merchandise. )or the purposes of uniformity and the reasons described below, the customer should courteously be asked to provide reasons for return. .he answer format is -uite simple $check marks and short narrative& and it eliminates much of the ambiguity. .he narrative part is also a chance for consumers to Pvent outP their concerns or frustrations. .he customer will be given three options to resolve the issue! e6change, refund, or replacement. Buring this stage the merchant is informed that a particular item is claimed for return and why. ,n case of e6change or replacement, the merchant receives an invaluable opportunity to instantly sell another item to the customer $the merchantKs website will appear onscreen for selection and shopping&. #hould the reason be incorrect or defective item, the merchant can send the correctLnew item right away, thus instantly restoring customer satisfaction and saving the sale. .he terms of the new sale are up to the merchant to decide $charge customerKs credit card right away, give grace period for the returning item to arrive, etc.& An option to look up the merchantKs entire return procedures will also be given to consumers. A link will be established that brings up the page containing return procedures in a separate window. Mnce reviewed, the window can simply be closed. I.F 7eturn Label Mnce the merchant has authoriEed the return, if re-uired, the customer will be asked to print the return label for shipping. ,f customer does not have access to a printer, a larger view of the label will be presented onscreen for the customer to copy down necessary information. .he customer may also be given an option to make adjustments to certain information on the label before printing it. .he label will have the merchantKs address $destination where the returning item should be forwarded&, returning itemKs identification $7eturned Nerchandise AuthoriEation

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5umber&, the customerKs return address, and possibly tracking and payment information for the shipping company. .he customer will also be advised on refund, e6change, or replacement options, and when it will occur. #ince some companies already include pre:printed return labels in all shipments, the printing step may be skipped. 'ut because consumers sometimes lose or throw away enclosed labels, the online print version will always be there as a backup thus adding convenience and peace of mind. Nore importantly, 5oDassle7eturn.com will strike strategic alliances with shipping companies to take and deliver all returned items so the printing of the labels will add uniformity to the entire return process. .he label can then incorporate the shipperKs information, and as a consolidator and demand aggregator of all returns 5oDassle7eturn.com will be able to negotiate a rate reduction. As an add:on to its customer service, 5oDassle7eturn.com will offer an email reminder service to ship the claimed item. ,t may also offer customers a confirmation email to record the claim. 1ustomerKs email address will then be asked for. )or its own database purposes, 5oDassle7eturn.com will record all transactions and details thereof. Mnce the customer has finished the online entry process, the merchantKs website will appear where the merchant will be able to approach consumers with new sales offers. .his will be an additional selling opportunity for the merchant, which is part of the overall 5oDassle7eturn.com service. I.I #e-uence of rocess .he list below describes the se-uence of actions taking place during the return process. 9. 1onsumer claims an item through 5oDassle7eturn.com. *. 5oDassle7eturn.com gains merchantKs authoriEation, if re-uired, and alerts the merchant about what is claimed for return and why. F. Nerchant tries to save the sale by offering a replacement or other products. I. 1onsumer makes a new purchase, unless refund is demanded. 2. 5oDassle7eturn.com generates a return label for the returning item. >. NerchantKs website appears again to offer new products to the consumer. =. 1onsumer makes a new purchase. ;. 1onsumer ships back the returning item. <. #hipping company delivers the item to the merchant. 9+. 1onsumer buys more from the merchant knowing that the return process is easy and trouble:free. 2.+ 'enefits #ummary At 5oDassle7eturn.com, we feel we provide a value:added service to a variety of consumers. 'y having a safe and easy:to:use return service, the company benefits more people than simply the average customer.

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2.9 'enefits to Nerchants ,ncrease revenues% 5oDassle7eturn.com turns the systemic problem of product returns into new selling opportunities. Cnhance customer satisfaction and retention with the -uick and easy return process and boost repeat sales% 5oDassle7eturn.com provides the opportunity to instantly deal with returns, save bad sales, and turn unhappy customers into loyal patrons. ,mprove customer service with a simple, trouble:free way to return merchandise% 5oDassle7eturn.com makes it easy for consumers to return products and follow return procedures. #implify the shipping hassle for consumers% 5oDassle7eturn.com provides the option to print a shipping label since pre:printed labels sometimes get lost or misplaced, which provides added convenience and peace of mind to consumers. ,mprove inventory management and logistics% 5oDassle7eturn.com immediately alerts you when your customer initiates the return process so that you can act on it right then, not when the merchandise arrives at your door. )ine:tune your internal efficiencies and product offerings% 5oDassle7eturn.com provides you with invaluable new data on all your product returns by customer group, product category, etc., so you can analyEe your operations better. Cnhance your image% 5oDassle7eturn.com underscores your customer orientation, which you can use to promote your business.

2.* 'enefits to 1onsumers 7eturn merchandise with ease% 5oDassle7eturn.com provides one centraliEed online location with a simple and trouble:free way to return merchandise in just a few easy steps. 'uy online, return online% 5o need to call in or email your merchant if authoriEation is re-uired::5oDassle7eturn.com does the communication for you. 5o need to look up every single merchant for return policies every time% 5oDassle7eturn.com summariEes it for your particular item and makes sure the return time frames are followed. Henerate a shipping label% 5oDassle7eturn.com generates a shipping label for you so that you do not have to worry about misplacing the pre:printed label or spending e6tra time at a shipping companyKs counter if the pre:printed label is not included. 7educe or eliminate shipping costs% .hrough strategic alliances, 5oDassle7eturn.com reduces or completely eliminates the cost of shipping. Oeep track of your returns% ,f you would like, 5oDassle7eturn.com will remind you to ship the claimed item and will maintain a file of your returns for your records.

2.F 'enefits to Mnline 1ommunity ,ncrease awareness in the community% 5oDassle7eturn.com serves as a Preturned merchandise credit bureau,P providing discrete information to consumers on merchants and to merchants on consumers. 1ross reference marketing leads% 5oDassle7eturn.com maintains a database of purchases that help custom:target online buyers in a more efficient way. ,mprove the overall image of the online merchant% 5oDassle7eturn.com enhances customer service of online merchants and overall customer satisfaction by simplifying and streamlining the return process.

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>.+ Narket Analysis #ummary 'ased on publicly available survey data, the average rate of online returns is <3, meaning that in *+++ alone the value of returned merchandise will be more than G9.2 billion. .he company generates revenues by utiliEing a dual:pricing approach. )irst, it charges online merchants a flat fee for the program, which averages only +.23 of a given merchantKs total sales. #econdly, 5oDassle7eturn.com charges merchants a low flat ;3 rate on every itemKs listed price that has been claimed through its website. .he pricing structure reflects the benefits of the easy and trouble:free return process for consumers, restored customer satisfaction, selling opportunities created during the claim process, and all repeat sales thereafter. .he program is estimated to cost merchants less than 9.23 of their total revenues, whereas it will increase sales to merchants by at least 923. >.9 #ervice Bescription .he service positioning in the eyes of online merchants is imperative to the success of the enterprise. .he service proposed by the company is a business:to:business solution offered to online merchants of physical, non:perishable products. Dowever, because online consumers will deal directly with the company via its website, the proposed solution also incorporates some features of a business:to:consumer service. ,t is therefore of utmost importance to clearly define what this company offers is a customer service J customer satisfaction program for online merchants. .he most uni-ue feature is that the proposed company takes the systemic problem of product returns and turns it into new selling opportunities for online merchants. ,t is also important to note that 5oDassle7eturn.com does not try to position itself as a competitor to any incumbents with a similar service, online merchants, or shipping companies. .he proposed company strives to position itself as a strategic partner to all parties participating in handling product returns. ,f nothing else, 5oDassle7eturn.com should be viewed as an outsourcing company to online merchants with the core competency and focus in handling returned merchandise. .he service offered by 5oDassle7eturn.com is designed to enhance customer retention and loyalty by offering an easy and trouble:free merchandise return process to online shoppers. According to Qupiter 1ommunications, the goal of the 9<<< holiday season was not about generating impressive sales, but rather securing long:term relationships. 7etailers now need to focus on retention and loyalty. 5oDassle7eturn.com will help to achieve just that through establishing lasting, productive relationships with online merchants. roviding an easy, uniform, and trouble:free return process to all online shoppers will enhance the overall image of online merchants. While the number of retailers continues to grow, consumers will not have to look up every single one to find out about return policies and later keep abreast for possible changes. A centraliEed ,nternet location::the companyKs website::will retrieve, summariEe, and present the appropriate policies. 'ased on product information, it will make sure the correct procedures are used. .he companyKs banner with a notation P)or an Casy, .rouble:)ree roduct 7eturn 1lick DereP will be placed visibly on retailersK websites and will serve as a symbol of customer orientation and care. Noreover, the shipping process will be streamlined. 1ustomers will be able to generate a shipping label on the companyKs website thus reducing the hassle at the shipperKs counter. Although some online retailers already supply pre:printed shipping labels for sold items, customers sometimes lose, or throw away, those labels when they first see and like the products they ordered. #hortly after they may change their mind and would like to return a particular item, but the label is gone. With the proposed program, the label is always available online so that consumers can have peace of mind and also reduce the amount of documents

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they need to keep just in case. .he service therefore offers a dual benefit to consumers. .he retailers may then choose to stop including a pre:printed return label with every outgoing shipment thus reducing costs of selling. )rom a shipping companyKs perspective, the shipping process is streamlined because the online:generated label will have all the necessary information, possibly including a tracking number if it is going to be shipped by A #. .hat way consumers do not have to spend time at A # counters filling out forms::both a customer service and operations improvement for A #. 5oDassle7eturn.com will be a strategic merger between online merchants, carriers, and their partners targeted at overall improvement of customer satisfaction and ultimately the bottom line of merchants. Another important feature of 5oDassle7eturn.com is that shipping of returned merchandise should be free of charge to consumers. $Neans of achieving it are discussed in more detail in the ricing and 7evenue Heneration section.& .his differentiating feature will tremendously increase the consumer acceptance factor of the proposed service. .he fact that products purchased online can be returned in an easy and trouble:free way, and that shipping is also free, will help e6pand the entire online shopping industry. .he added convenience and peace of mind consumers will gain with 5oDassle7eturn.com will translate into more shopping with those online merchants that participate in the 5oDassle7eturn.com program. When customers go through the se-uence of online entries on the companyKs website, the retailer whose product is being claimed for return will be offered at least one selling opportunity. At the end of the se-uence the retailer will be able to target the consumer with any new sales offers as its website will appear onscreen. #hould an e6change or replacement be preferred by the customer during the online return process, the retailer will receive an additional selling opportunity as its website will appear with offers during that step. .hese opportunities will translate into more sales for retailers. .his will also stimulate customer retention, which means repeat sales. All in all, the program will increase customer satisfaction and generate more sales. .he program has a number of uni-ue features. )irst, it alerts the retailer that a particular customer is claiming a particular product for return as it happens. .hat way the retailer knows about it as it occurs and not when the merchandise arrives at its warehouse. .his allows to plan ahead. #ince <3 of all products are returned, this feature offers useful information to better handle logistics and inventory. #econdly, and more importantly, by asking consumers during the online se-uence why they want to return a particular item merchants gain an invaluable piece of information. ,f the reason for return is defective product $F+3 of all reported returns&, the retailer can save the sale and turn an unhappy customer into a delighted one by sending a new item right away. ,f the reason for return is wrong color, wrong siEe, or wrong product altogether $*;3 of all reported returns&, the retailer may choose to send the correct product right then, thus instantly restoring customer satisfaction and saving a bad sale. ,t will be up to the retailer to decide on payment and credit terms of the e6change. .hese benefits ultimately translate into increased customer retention, reduced costs, more sales, and improved bottom line. ,t is estimated that the program will generate an average sales increase for merchants of at least 923. Mnline shopping is still at the early stage of consumer adoption. As stated earlier, about half the people who have not shopped online cited the cost and hassle of returns as a significant factor for not shopping online. Another recent survey found that ;<3 of online buyers said that return policies influenced their decision to shop with an online retailer. 1onsumers demand not only convenience but peace of mind. .he proposed program offers both and it should increase the number of online shoppers, thus causing a market e6pansion for online merchants. .he first retailers who implement the proposed program will also be able to

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differentiate themselves and capture a larger market share in their respective segments. Mnce embraced by the majority of online merchants, the program will become an industry standard. ,t is important to note that during the entire process the company will not ask for, or try to gain access to, consumersK credit card numbers. .his will significantly limit possible liabilities and securityLconfidentiality concerns. >.* romotion, #ales, and Narketing romotion of the service will be e6ecuted through both push and pull strategies. .he push strategy will call for the use of direct sales force and industrial marketing to introduce the service to online merchants. Mnce success has been achieved in the push strategy, the pull strategy will utiliEe a large:scale advertising campaign to further build up consumer demand. P)sh Strategy 'ecause the companyKs service is a business:to:business program, it will be initially promoted to online merchants by direct sales force. ersonal selling will be necessary to reach decision makers within online organiEations. At first, contacts will be made with ,nternet service providers, such as America Mnline, that host online stores and shops. America Mnline claims to have *+3 of the total ,nternet service provider market in the A.#. .herefore, arranging a strategic partnership where 5oDassle7eturn.com becomes the preferred or e6clusive choice for all returned merchandise bought at AML.com shops will be invaluable for establishing a well: recogniEed brand and building up entry barriers for any possible competition. ,deally, a companyKs banner with a notation P)or an Casy, .rouble:)ree roduct 7eturn 1lick DereP will be visibly displayed throughout the shopping section of AML.com. ortals such as Yahoo% will be approached as well. 7eportedly, Yahoo% hosts nearly >,+++ merchants where it charges each merchant at least G9++ to GF++ per month. Arranging a strategic partnership with Yahoo% will provide a strong leverage in negotiating return contracts with individual merchants. #imilar to that of America Mnline, the companyKs banner will be displayed throughout the entire shopping section of Yahoo% Large online merchants such as AmaEon.com and 'uy.com will be targeted by the direct sales force during the first stage as well. .hose companies have already achieved significant volumes of sales::and therefore product returns::and will find the uniform return process of much benefit to them. #trong Pcategory killersP such as e.oys and 1Bnow are also first sales targets. Auction houses such as e'ay.com and u'id.com will be approached with a service offer for products sold to consumers by merchants and direct manufacturers. Wherever possible, smaller online retailers will be personally approached by the sales force. .o stimulate awareness and service penetration among smaller players, industrial marketing techni-ues will be utiliEed. .hose will include advertising in specialiEed publications such as ,nternet World and 7ed Derring, as well as referral fees for retailers who already use the service. Cmail campaigns will be used to reach decision makers at smaller companies. .he email messages will have an invitation to the 5oDassle7eturn.com website where a specially designed presentation will e6plain the benefits of the new service. An invitation to be contacted by a service consultant to discuss details will be included. .he company plans to offer its services right before .hanksgiving *+++. ,n order to stimulate a -uicker adoption of the services, the remainder of the year *+++ will be offered free of charge.

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Sales Str)ct)re and C)stomer Approach ,t is estimated that the initial e6penses to hire a sales force and a customer service unit of up to five people during the first year will be close to GI++,+++. Another G*++,+++ will be needed for sales program development, marketing activities, and training $e6cludes advertising&. .he initial compensation package for sales force will include a nominal base salary and a progressive commission structure. .his should ensure that during the early stage of the companyKs growth not only that sales targets are met, but also that customer $customer here means merchant& satisfaction and retention are fully addressed. .he sales force will initially be located at the corporate head-uarters. A territorial approach will later be implemented, with sales people located in regions. After one year, sales force members will split into two distinct groups. .he first group will include pure sales people, the Pgo:gettersP who will be placed in regions and will work on pure commissions. .he commission structure will become more progressive and rewarding for such individuals, including a bonus structure. .he estimate for an average commission paid on sales is appro6imately 2:9+3. .he second group will include client care professionals who will concentrate on customer satisfaction and retention to ensure the continuity of the program. .hese individuals will remain at the head-uarters and will have a base salary with a bonus structure. .he base salary for client care professionals is in the mid: five figures. ,ndustrial advertising and promotional e6penses in *+++ are estimated at G*2+,+++. ,t is also a possibility to sell the services to merchants via the ,nternet hosting service providers, portals, and software developers. .hose companies will then serve as distributors and agents, compensated on commissions. .his approach will eliminate the need for a large sales force. .he final layout will depend on how -uickly agreements with companies such as America Mnline and AmaEon.com are negotiated, how aggressively they will be able to promote the services, and on what conditions. .he following diagram describes the customer approach $customer here means merchant&. #ervice consultants are the direct sales force that approaches prospective customers with service offers. Mnce a customer has been signed, a service consultant will only approach the client with new service offers and product upgrades. A client care professional is then assigned to each customer to deal with all customer service issues. Cach customer will be advised to direct all service in-uiries to the professional. A professional will also proactively call on customers to ensure high -uality of service and customer satisfaction. .he consultants and professionals will have direct communication lines between themselves to ensure open information e6change and a -uick and efficient problem:resolution culture. .his structure will guarantee an aggressive sales approach, client:oriented service, and efficient post:sales support. P)ll Strategy ,t is important to gain critical mass in the number of signed retailers before a nation:wide advertising campaign targeted at consumers can start. Mnce major retailers have been signed and awareness achieved among the overall online merchant community about 5oDassle7eturn.com, the company plans to roll out a nationwide .R advertising campaign. .he campaign may start as early as the first -uarter of *++9@ however, the timing will depend on how -uickly 5oDassle7eturn.com gains market share. .he campaign should prompt consumers to make sure that online retailers they buy from have the 5oDassle7eturn.com service. articipating merchants will have the companyKs banner with a notation P)or an Casy, .rouble: )ree 7eturn 1lick DereP visibly displayed on their websites. .he banner later will become the symbol of customer orientation. #uccessfully e6ecuted, the .R ad campaign will prompt

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consumers to ask their merchants for the Casy and .rouble:)ree 7eturn process. .his, in turn, will prompt online merchants to call on the company. .he demand from the merchants will then be Ppulled.P .he estimated budget for the .R campaign in *++9 is up to G2 million, all internally generated. Dowever, the amount can be reduced if the preceding industrial marketing campaign achieves the key goals. Mnce the objectives of service awareness and acceptance have been achieved, subse-uent marketing budgets will be used to build up and protect the brand. .his will include print, radio, and .R. >.F Bistribution and ,nformation #tructure .he service will be made available to consumers via the ,nternet. .he company will maintain a website with its Casy and .rouble:)ree 7eturn procedure. .he domain name will underscore the ease and convenience of the merchandise return process. $.he name 5oDassle7eturn.com may not be the final choice.& Also, companyKs banners will be placed on participating merchantsK websites, most likely under return policies sections, so that consumers could access the service directly from online stores. 5oDassle7eturn.com will then be effectively incorporated into the customer service of participating merchants as an outsourcing partner that specialiEes in product returns. 1onsumers who do not have access to the ,nternet but want to return e:gifts received from friends or relatives will be provided with a toll:free telephone number. .elephone operators, with access to the ,nternet, will follow the same e6act set of onscreen entries. .hey will relay options and procedures to the consumers over the phone. .he shipping se-uence will remain the same. ,deally, the toll:free numbers should be operated by the online retailers themselves. .hat way they only have to make sure their operators have access to the Web. #hould a customer decide to e6change gifts or make a purchase during the return process, the retailersK operators will be best suited to handle it. Another option is a consolidated toll:free telephone service provided by 5oDassle7eturn.com for a fee to retailers. #uch service would be outsourced. Digh:speed communication lines will be established between the companyKs software that registers and processes all returns and individual merchants. Cvery time a product is claimed for return by a consumer via the companyKs website, the corresponding merchant is advised on the transaction as it happens. .his is an integral part of the entire program. .he connection between the company and the merchants will be established via the ,nternet. .he companyKs website will have a merchant login screen where a record of all returned items will be maintained. .he merchants will be able to sort data by various categories and copyLpaste it into other software packages such as N# C6cel@ the data format will be spreadsheet:friendly. .he ,nternet connection will be secure and password protected. While the majority of communication will be via the ,nternet, companyKs client care professionals will routinely call on their counterparts to ensure that all information and service needs are fully met.

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)or its own database purposes, 5oDassle7eturn.com will record all transactions and details thereof. While consumers are not asked to give their home addresses during the online entry process, such information should be provided by the corresponding merchant as part of the information e6change agreement. .his information will be needed for the return label to be generated online. 1redit card numbers and other sensitive information will not be asked for. At the end of the online authoriEation process the consumer will be offered a notification email to make a record of the return. #hould customer decide to have a confirmation, his or her email address will be obtained. .he company may offer a membership program with a consumer login, in which case all necessary information details will be obtained. .he company will also offer a Preminder serviceP to consumers once they have processed a return online. ,f the product has to be shipped back before a deadline, an email with a reminder will be sent prior to that. >.F.9 #trategic Alliances )or shipping and handling purposes, the company will strike strategic alliances with carriers and package service providers. Nost likely, A # will be the preferred carrier of all shipments. A # has an e6tensive network, e6cellent track record of -uality, and a number of agreements with package service providers such as Nail 'o6es Ctc. and ost5et. ,ts ground shipment option appears to be the most optimal option so far, both from the -uality and price standpoints. While retailers are able to negotiate discounts with carriers for outbound shipments, most consumers are forced to pay published rates on returned merchandise because each return is viewed as a single transaction. 5oDassle7eturn.com will act as a demand aggregator bundling all returns claimed through its website and will negotiate discounts with carriers. Noreover, the company will join membership organiEations such as 5ational 7etail Association that provides member discounts of up to I*3 on published rates with Airborne C6press. All that will be utiliEed to eliminate the shipping costs for online shoppers, which will only speed up the companyKs acceptance by consumers. Mther possible strategic alliance companies include R,#A, Naster1ard, American C6press, and large banks such as 1itibank and 1hase Nanhattan. 1redit cards are a preferred way of payment for online purchases. #ince tens of billions of dollars are now spent online, credit card issuers can notably increase their revenues by partnering with 5oDassle7eturn.com. A credit card issuer can offer a partial rebate of shipping charges for returned items as long as consumer paid for the items with the credit card. .his may later become a standard feature similar to certain kinds of insurance built into some credit cards. Also, an issuer can cover the interim risk when a merchant sends consumer a new item or a replacement before receiving the returned item back. .his offers mutual benefits to consumers and merchants, while the credit card issuer makes its cards more superior thus attracting more customers. 1o:branded promotional campaigns can be designed to promote 5oDassle7eturn.com along with more established companies. >.I Narket #egmentation As stated in the previous section, the estimated online retail revenues for 9<<< were around G*2:F> billion. 'oth sources providing the estimates indicated that only merchants selling physical products $books, 1Bs, electronics, apparel, etc.& were included in the breakdown by category. 5o mention was made of services such as online hotel reservations, news subscriptions, or online brokerage being included in the total figures. Dowever, it would be advisable to use a more conservative approach when estimating the total revenues of online merchandise sales. resented below are estimates for ,nternet retail sales made by 5ational 7etail )ederation shortly after the 9<<; holiday season.

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Year 9<<< *+++ *++9 *++*

.otal ,nternet 7etail #ales G9+,;++,+++ G9=,+++,+++ G*>,+++,+++ GI+,>++,+++

>.I.9 Bescription of ,tems #old .he ne6t step is to identify the number of items sold. According to a Qupiter 1ommunications press release, during the 9<<< holiday season *2+ million online consumers spent G= billion. .his means that an average online purchase was G*; $= billion over *2+ million&. Dowever, a single purchase may have included more than one item. A study of 9<<< holiday shopping conducted by WebAssured.com indicates that an average online shopper purchased 9* items, whereas the average purchase price was G9,>9F. Asing these two e6tremes, the average price of an online item is therefore estimated at appro6imately G9++ $$*;S9>9&L*T<I.2&. Onowing the average price, the number of total items sold is easily calculated. Year 9<<< *+++ *++9 *++* ,nternet 7etail #ales G9+,;++,+++ G9=,+++,+++ G*>,+++,+++ GI+,>++,+++ .otal ,tems #old 9+;,+++ 9=+,+++ *>+,+++ I+>,+++

Mf all items sold, some will be returned to retailers. A study of 9<<; online holiday shopping conducted by 1 Bata Mnline indicated that <3 of respondents reported returning gifts. A slightly earlier study by the same company indicated that 9*.F3 of all respondents were returning items. A survey of 9<<< holiday shoppers conducted by Hreenfield Mnline confirmed the first figure by indicating that <3 of shoppers planned to return an e:gift. .he <3 figure is still a conservative estimate. A recent survey of the retail industry by American C6press found that I>3 of all respondents typically return anywhere between one and ten holiday gifts every year. Year 9<<< *+++ *++9 *++* ,nternet 7etail #ales G9+.; G9=.+ G*>.+ GI+.> ,tems #old 9+;,+++ 9=+,+++ *>+,+++ I+>,+++ ,tems 7eturned <,=*+ 92,F++ *F,I++ F>,2I+

.he table above shows that more than 92 million items will be returned to online merchants in the year *+++ alone. .otal merchandise shipped back will be worth over G9.2 billion. .he figures more than double in *++*. .here is clearly an e6panding market for a Preturned merchandiseP service provider.

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.able! Narket Analysis

Market Analysis 4ear " 1otential ustomers 5ro0th 259 409 (09 ;59 45.:(9 4:%000 *;%000 ;5%000 <0%000 2*<%000 ;0%000 "0;%400 :4%500 "4:%500 (<<%400 *5%000 "4:%<;0 "0<%:50 245%025 5*:%:(5 <(%*50 20:%544 "42%:05 404%2<" :4<%(<0 ""*%":: 2<"%<;2 ":5%;4* ;;*%0:0 "%2;"%:** Boo6s7 .78i#eo 'oys75ames Electronics omputer Total 4ear 2 4ear ( 4ear 4 4ear 5 )5R 25.009 40.009 (0.009 ;5.009 45.:(9

1hart! Narket Analysis $ ie&

>.2 Narket 5eeds C:commerce continues to accelerate and the amount of money spent on purchases made through the ,nternet shows no sign of decline. Buring the 9<<< holiday season $5ovember *+ to Becember 9<&, retailers saw online revenues -uadruple, jumping F++3 to about G99 billion and far e6ceeding e6pectations, according to a study by #hop.org and 'oston 1onsulting Hroup. .he study of F+ retailers in such categories as apparel, books and music, home and garden, specialty foods and electronics showed a *=+3 growth in the number of orders. .he study indicated that online sales were growing at 9I23 annually and it projected online retailer revenues of more than GF> billion for 9<<<. An earlier study conducted by Crnst J Young, before the holiday frenEy, already estimated that total revenues for online retail and consumer products for the calendar year 9<<< were around G*2:F+ billion. While a notable amount of positive publicity about the ,nternet shopping has recently appeared in the media, the number of problems encountered by online shoppers actually increased more dramatically than the sales figures. According to a poll conducted by WebAssured.com, the

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number of complaints filed between 5ovember *2, 9<<< and Qanuary 9F, *+++ was up I+I3 over the same period last year. Mver >*3 of the respondents claimed they had e6perienced at least one problem with an online transaction. NisrepresentationLmisinformation and delivering defective products each accounted for at least **3 of all complaints. ,n the breakdown of types of problems occurred, delivery of a wrong item accounted for 9=.*3. .hese kind of problems ultimately result in product returns that cause additional costs to the consumers and both costs and lost revenues to the retailers. resently, not all online retailers have established simple and trouble:free return procedures. ure e:tailers such as e1ost.com have no physical presence and therefore re-uire consumers to ship back the merchandise without offering much help in the process. Cven some well:known retailers such as 'est'uy.com, an e6tension of 'est 'uy, do not allow consumers to return items purchased online at their physical stores. .o make things worse, the return policies are not always well displayed on retailersK websites, and customers are sometimes re-uired an authoriEation prior to returning any merchandise such as in cases of 'uy.com and e1ost.com. 1onsumers may have to read through the entire return policies, including the notorious Pfine print,P in order to make sure they use the right procedures and that re-uired time frames are followed. .his creates additional aggravation::on top of having to return the merchandise:: which all reflects in reduced customer satisfaction. .he significance of an Peasy returnP cannot be underestimated as about half the people who have not shopped online cited the cost and hassle of returns as a significant factor for not shopping online. Noreover, a recent survey by 'iE7ate.com, an online shopping center, found that ;<3 of online buyers said that return policies influenced their decision to shop with an online retailer. When a wrong, defective, or misrepresented item was delivered to a consumer, the return process often proved uneasy. According to recent findings by 1 Bata Mnline, F+3 of all consumers who returned items found the return process difficult. ,t is apparent that e6isting return procedures are inade-uate and sometimes irritating. .he solution, however, does not lie in forcing all online retailers to establish a Pno:-uestions:askedP return policy and to post it clearly at the top of their websites. .he entire se-uence a consumer has to follow, starting from looking up the procedures on the Web and then having to make a trip to A # or the ost Mffice, has to be streamlined. .here is clearly a need, as well as an opportunity, for a new service company to improve the overall return process for online shoppers. As a result, the consumer satisfaction will be enhanced and it will translate into increased repeat sales for online retailers. >.> #ervice 'usiness Analysis .he Preturned merchandiseP market is there and it is growing. Listed below are a few major e6pansion opportunities for the new company. >.>.9 5ew Narkets Heographic e6pansion will be needed in order to provide global return services for the online community. .his will include both within:borders services and across:the:borders operations. A number of companies such as AmaEon.com and e.oys have already opened operations in the Anited Oingdom, not counting a growing local online merchant community. .his in itself presents an opportunity to replicate the service in other countries for domestic online retailers. 5oDassle7eturn.com will partner with local carriers and shippers when operating there. A country:by:country approach may be utiliEed@ however, there may be an opportunity to establish a centraliEed, consolidated operation within the Curopean Anion. As across:the:borders e:commerce keeps increasing, so does the need for a global service. Mf all consumer product complaints recently registered with WebAssured.com, over I3 were

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about companies located outside the Anited #tates. While many domestic online retailers are limited to shipping within the A.#. only, the consumers are already buying overseas. Daving to ship back overseas adds to the hassle and costs of returning a product. Mnce established and running in the A.#., 5oDassle7eturn.com will be best positioned to take advantage of the global trend and offer international services. >.>.* 5ew #ervices As more and more consumers shop online, the need to keep track of purchased products will grow. 1urrently, many online retailers offer an option to track a purchased item, but not always through the entire delivery process. An item itself may have an availability PwindowP of up to a few weeks, plus the shipping time of a few days::the customer is never -uite sure when he or she will actually receive it. As more purchases are made, there will be more items to track. .o do that, the customer has to look up websites of the merchants or use carriersK websites to in-uire on shipping status and read through the flock of notification emails from the merchants. .here is a growing need to consolidate all this information in one location for easy reference. A software that records all online purchases, tracks their status, and presents the findings to consumers in an easy:to:read format will be of much value to consumers. Daving developed partnership and information e6change agreements with online merchants and shipping companies, 5oDassle7eturn.com will be well positioned to offer such tracking services to consumers. While 5oDassle7eturn.com builds its core competency around product returns, it is also gaining the most knowledge why returns actually occur, what kind of online products are most fre-uently returned, by what kind of consumers, etc. .he company will therefore be best positioned to advise and consult the online merchant community on how to improve operations and minimiEe product returns. #ince product returns is a systemic problem of the retail industry and most likely it will not be totally eliminated, 5oDassle7eturn.com does not run the risk of putting itself out of business. Uuite the contrary, it will secure the leadership position in that segment of consulting services and will naturally e6pand its core competencies of merchandise returns into advisory. >.>.F 5ew 1ustomers 5oDassle7eturn.com will not limit its services to the online merchants only. Birect:mail orders and catalogs also e6perience the same returned merchandise problem. 7ecent publications indicate that there are more than ;,2++ consumer catalogs in the A.#. alone. According to the 5ational Nail Mrder Association, A.#. mail order sales were a staggering GF2= billion in 9<<;. Bespite the growth in online shopping, the 9<<; sales figure represented a 9*3 increase over 9<<=. 1onsumer product sales accounted for G9+< billion of the total::roughly ten times that of the online merchandise sales for the same year. 'ased on a recent comment provided by the association, the rate of returned merchandise in this business is around 9+:923. 1ategories such as apparel may e6perience a return rate close to *+3. 7eportedly, some large catalog houses have to maintain separate returned merchandise facilities just to handle the volume of returned products. A number of catalog companies, including LandsK Cnd, have been aggressively embracing the ,nternet as a new distribution channel. While catalog business has a long history and e6perience in dealing with returns, there is definitely an e6pansion opportunity for the new company in offering its returned merchandise services to the catalogers. .he service will further streamline their operations and enhance customer satisfaction. Nany department stores such as Q.1. enney and NacyKs now also use the Web to sell products. Nost of them allow customers to return merchandise purchased online at physical stores. .his serves as a goodwill, and customer satisfaction, builder. As an add:on to that,

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5oDassle7eturn.com can still offer its services to the pro:,nternet shoppers who do not wish to make an e6tra trip to the store to only return products. .he company will provide at least one selling opportunity during the online return process, which will compensate for possible purchases a customer may make while at a store. .his will underscore the convenience of online shopping, improve the return procedures by preventing the returned merchandise from spreading across physical stores, and enhance the image and bottom line of Pclick:and:mortarP department stores. When dealing with multi:distribution channel retailers such as NacyKs department stores, NacyKs catalog and NacyKs ,nternet store, 5oDassle7eturn.com will be able to offer one returned merchandise procedure that will cover all channels. ,t will streamline the entire process by relieving the retailers from having multiple return facilities and e6tra work force to operate them. =.+ 1ompetition .he company foresees three types of competition for the services we offer! 9. Birect *. ,nternal F. 1hannel .hese types of competitors are discussed in the following three sections. =.9 Birect 1ompetitors 'ased on the current intelligence, there is no independent company out there specialiEing in a Preturned merchandiseP service to online consumers. 5o single company is known to be employing a concept of establishing a single point of presence on the ,nternet for consumers to claim returns. .he current situation allows the new company to gain the first:mover advantage and build entry barriers for any possible new entrants. =.* ,nternal 1ompetitors .he first competitors to the new service are the online retailers themselves. #ince 5oDassle7eturn.com will need to strike partnerships and strategic agreements with retailers in order to offer its services, they are classified as internal competitors. 7etailers may perceive that their internal return procedures are ade-uate and fully meet customer demands. Dowever, the discussion under the 5eed Assessment section of this plan clearly indicated that there are significant drawbacks and shortcomings in the return process across the entire industry. Cven companies like AmaEon.com that touts a -uick and easy return policy now sees its customers go to 'arnes J 5oble superstores to return books. artnering with brick:and:mortar retailers may be seen as a solution by some e:tailers. Dowever, from the consumer perspective, there still will not be a centraliEed location to return merchandise, no -uick and easy return procedure, and no savings on shipping costs. 1onsumers may end up having to go from one physical retailer to another to return various items. Mnline retailers may try to partner with carriers and service providers such as A #, Nail 'o6es Ctc., or 7ite C6press. 7eportedly, e'ay.com is working out an agreement with Nail 'o6es Ctc. to appoint them as a preferredLe6clusive service for product returns. e'ay.com may receive rebates per shipment for directing its clients to Nail 'o6es Ctc., but consumers again will have little or no benefit. .he standard shipping rates are applied, the choice of carriers is now

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limited, and online merchants are not informed about product returns ahead of time so that bad sales could be saved. With 5oDassle7eturn.com, at least one selling opportunity will be given to retailers while consumer is on the Web::something a partnership with a carrier cannot provide. Noreover, serving as a demand aggregator 5oDassle7eturn.com should be able to arrange necessary agreements and provide consumers with greatly reduced, or even free, shipping for all returned merchandise. =.F 1hannel 1ompetitors .hinking in reverse to the previous paragraph, service providers such as Nail 'o6es Ctc. and ost5et may try to forge strategic partnerships with numerous online retailers to simplify the return process. 'ut as it was described, online retailers will be shortchanged in overall customer satisfaction, information e6change, total costs, and additional selling opportunities. 1onsumers, on the other hand, will lose out on the limited number of Pe6clusiveP carriers for particular retailers, and uniform simplicity in the return process will not be achieved. Noreover, both Nail 'o6es Ctc. and ost5et combined do not have sufficient physical presence in the market. 1arriers such as A # and )edC6 may try to enter the arena. .hose organiEations have e6tensive networks of facilities, e6perience in shipping, and a track record of -uality. .he A.#. ostal #ervice has recently started a .R advertising campaign of a service for online merchants that allows consumers to print return labels online. .his is a step towards addressing the shipping end of the return problem, but it falls short of saving bad sales and creating new selling opportunities for merchants. 5o single shipping company can fully provide the range of benefits the proposed company can. 5oDassle7eturn.com will be able to arrange strategic alliances with numerous carriers and even play one against the other in negotiating rate reductions and preferential service terms for both merchants and consumers. 'eing a smaller company with a focus on the e:commerce community, it will also have a greater degree of fle6ibility in adjusting to customer needs. ;.+ #trategy and ,mplementation #ummary .he company will utiliEe a dual:pricing approach to ensure a recurring revenue model. Mnline retailers will be charged a flat annual or -uarterly program fee based on their sales volume, product categories, and specific return conditions $Pno:-uestions:askedP or prior authoriEations re-uired, etc.&. .he company will also collect payments in a form of a fi6ed percentage charge on all items claimed for return through its website. 'efore getting into details about pricing, an important perception issue needs to be discussed. resently, only few online retailers offer free shipping with purchases. )or the returned merchandise, in most cases the retailers reimburse shipping costs only if an incorrect or defective item was delivered. $#ephora, a retailer of beauty products, offers free returns on all online purchases regardless.& ,n many instances shipping and handling costs represent a large percentage of the selling price. Nost retailers therefore may not see free shipping of returned merchandise economically possible. Dowever, it is financially feasible to offer free returned merchandise shipping to consumers at a nominal cost to retailers. .he following table displays four sample companies in different product categories that differentiate in average price per unit sold and average shipping cost.

'ookL1BLRideo

.oyLHame

Clectronic

1omputer

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.otal #ales Avg riceL,tem ,tems #old 7eturned ,tem 7ate ,tems 7eturned Avg #hipping 1ost .otal #hipping 1ostV .#1 as 3 of #ales Narkup er ,tem

G9+ million G9* ;FF,FFF <3 =2,+++ GI.2+ GFF=,2++ F.F;3 G.I+

G9+ million GF2 *;2,=9I <3 *2,=9I G>.++ G92I,*;> 9.2I3 G.2I

G9+ million G9;+ 22,22> <3 2,+++ G92.++ G=2,+++ .=23 G9.F2

G9+ million G9,+++ 9+,+++ <3 <++ G>+.++ G2I,+++ .2I3 G2.I+

V.otal #hipping 1ost $.#1& .he amount of total sales is set at G9+ million for each company and any change in the amount would not influence the important percentage and absolute figures. .he average price per unit is based on general observations and is a simple representation of various prices in an increasing order. .he average shipping cost is the actual A # ground rate for the corresponding product category on average. According to the previous table, for online retailers that sell books, 1Bs and videos to cover shipping costs of all returned merchandise will only cost F.F;3 of their total sales. )or a toy company, the cost will only be 9.2I3. 1ompanies such as 'eyond.com and e.oys were recently spending over ;+3 of total revenues on sales and marketing programs alone. Cven if most of the marketing budget is dedicated to customer ac-uisition, a customer satisfaction and retention program can still be easily allocated for. Cven if an online toy merchant decides not to allocate any of the marketing budget money to this program, to fully cover the shipping costs it will only have to raise the average price of an item by 2I cents. An online computer retailer with an average unit price of G9,+++ will only have to add G2.I+ to the list price. Mr it only has to allocate an e-uivalent of +.2I3 of total sales to cover the total shipping costs. ,n the majority of cases the retailers will have to reimburse the shipping costs to consumers anyway. According to a study conducted by 1 Bata Mnline, F+3 of all returns were due to the item being broken, *;3 because of an incorrect item was shipped, and only **3 because the customer did not want the item.

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;.9 ricing .he following table presents the proposed allocations to cover the shipping costs so that consumers could enjoy free returned merchandise shipping. 'ooksL1BLRideo .oysLHames Clectronics 1omputers Average rice er ,tem $A ,& Average #hipping 1ost $A#1& NerchantKs #hare of A#1, >23 #hipping 1ompanyKs #hare of A#1, *+3 1redit 1ard 1ompanyKs #hare of A#1, 23 .otal #hares of A#1, <+3 5oDassle7eturn.com 7ebate, I3 of A , .otal Allocations A#1 1overage 7atio G9* GI.2+ G*.<F G.<+ G.*F GI.+2 G.I; GI.2F 9+93 GF2 G> GF.<+ G9.*+ G.F+ G2.+I G9.I+ G>.;+ 99F3 G9;+ G92 G<.=2 GF G.=2 G9F.2+ G=.*+ G*+.=+ 9F;3 G9,+++ G>+ GF< G9* GF G2I GI+ G<I 92=3

5oDassle7eturn.com will strive to eliminate the shipping costs to consumers by means of strategic agreements with online merchants, shipping companies, and credit card companies. As stated in the last -uote, 2;3 of all product returns were due to merchantsK faults, hence merchants will have to reimburse shipping costs to consumers in those cases. 5oDassle7eturn.com therefore proposes that >23 of a given shipping cost should be allocated to corresponding merchants. Bue to demand aggregation, the company will be able to negotiate a shipping rate discount with companies such as A # or )edC6. Dence *+3 of shipping costs should be allocated to shipping companies in a form of a discount. 1redit card issuers such as 1hase and 'ancMne currently offer a 23 rebate to consumers on purchases with selected online merchants. ,t is therefore feasible to arrange an agreement with credit card companies andLor issuers to include a 23 shipping cost rebate on all returned merchandise. #ince product returns are only <3 of all purchases, it will not represent a large cost to credit card companies to add this differentiating feature to their products. .hese allocations in total will cover <+3 of the shipping cost. .he remaining 9+3 will be absorbed by 5oDassle7eturn.com via a special Pinstant rebate.P 5oDassle7eturn.com will charge merchants a program fee that will average only +.23 of a given merchantKs total sales. Also, the company will charge a low per:claim fee of 9*3 of each itemKs listed price $each item that has been claimed through the companyKs website&. Dowever, of the 9*3 charged per item, up to I3 will be instantly given back to merchants to cover the remaining portion of the shipping cost. .he previous table indicates that the I3 rebate is sufficient to cover the remainder of the shipping cost in the first product category. ,t is actually far more than sufficient in other product categories $refer to A#1 1overage 7atio&. 5oDassle7eturn.com can then decide whether to offer merchants a reimbursement of the remaining portion of shipping costs only or a flat I3 Pinstant rebateP regardless of shipping costs. )or the purpose of this business plan and financial projections, a flat I3 Pinstant rebateP was used thus reducing the per:claim fee from 9*3 to ;3 across the board. As it was stated in a prior chapter, retailers should see an average sales increase of at least 923 due to the service offered by the company. Mn the other hand, based on the proposed

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pricing structure the service should not cost merchants more than 9.23 of their total revenues. .he cost:benefit ratio of 9+ will be a strong promotional point for 5oDassle7eturn.com. While it is a possibility to charge merchants commissions on all sales made through the companyKs website $when consumers claim their returns&, it would not capture all sales stimulated by the company. .he program will increase consumer satisfaction and loyalty. Dowever, when consumers start buying more due to the programKs effect but dealing directly with the merchant, the company will not receive any commissions and will in effect be giving its services away for free. Dence both fees charged should fully reflect the benefits of the easy: return procedure, early information on all returning items, restored customer satisfaction, selling opportunities created during the claim process, and all repeat sales thereafter. .he company also plans to draw revenues from advertising on its website, but for the purpose of this business plan advertising revenues will be considered negligible. A feeLrebate agreement may be arranged with such companies as A # and Nail 'o6es Ctc. for bringing customers to them for shipping needs. Mther revenue generating activities such as affiliate programs with R,#A, American C6press, or 1itibank can be arranged to promote certain credit cards as a preferred method of payment online. .hose revenues will also be omitted in the financial projections. Mnce the company has generated a sufficient customer database, it may also market information to retailers and other organiEations for a fee. Any fees and payments 5oDassle7eturn.com could generate from consulting activities in the field of product returns will not be included in the financial projections either. ;.* #ales )orecast .he table and chart below outline the companyKs projected sales volume in )Y*+++:*++*. 1st Program +e%en)es! represent the flat program fee assessed on annual or -uarterly basis. .he average fee charged by the company is +.23 of a given merchantKs total sales. .he program is estimated to increase merchandise sales by at least 923 for a given merchant. .he dollar figure in this line is based on the conservative estimates of total online sales provided by 5ational 7etail )ederation $one third of the most optimistic current estimates provided by #hop.org& and the market share gained by the company. )rom *++* to *++I, the growth of total online merchandise sales is estimated at 9I23 annually, which is in line with the growth figure for 9<<<. #nd Program +e%en)es! represent the per:claim charges of ;3 $net of 9*3 charged less the I3 Pinstant rebateP& of each itemKs listed price $each item claimed by consumers through the companyKs website&.

.he company plans to make its services available just prior to .hanksgiving *+++. .he programs will be offered to the online merchants for free for the remainder of *+++, therefore, we will not generate any revenue from sales for the year *+++.

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.able! #ales )orecast

Sales Forecast 4ear " Sales "st 1rogram Re$enues 2n# 1rogram Re$enues 'otal Sales .irect ost o- Sales "st 1rogram Re$enues 2n# 1rogram Re$enues Subtotal Direct Cost of Sales $0 $0 $0 4ear " $0 $0 $0 $*%:00%000 $""%2(2%000 $"<%0(2%000 4ear 2 $0 $0 $0 $24%(;0%000 $(5%0*:%400 $5<%4(:%400 4ear ( $0 $0 $0 4ear 2 4ear (

<.+ 'usiness Nodel and #tructure .he company plans to locate its head-uarters in a metropolitan area that can provide access to a large pool of high:tech labor force, current e:commerce intelligence, and sources of financial capital. .he location should ensure the best logistics when reaching e6isting and potential clientele, as well as strategic partners. Mperations in which the company cannot develop core competencies should be outsourced. A close pro6imity to outsourcing companies should be maintained. .he head-uarters will initially host the entire e6ecutive team, sales force, and staff. As company progresses through its growth stages, sales regions will be assigned for various parts of the A.#. and either in:field sales representatives be placed or distributors assigned. resently, 5oDassle7eturn.com is head-uartered in 'ala 1ynwyd, ennsylvania. .he company will initially be a privately:held corporation. .he state of incorporation will mainly depend on the location of corporate head-uarters. .he company plans to raise two rounds of venture capital financing before going public. <.9 MrganiEational #tructure .hose activities that are not crucial to the corporate success $i.e. payroll& will be outsourced or subcontracted. 'elow are brief summaries of major responsibilities for corporate officers. Board of ,irectors! oversees the overall strategic direction and progress of the company. #pecific areas include operational soundness, financial stability, and long:term well:being of the corporation. President! responsibilities include strategic guidance of the enterprise, e6ploration of e6pansion opportunities, and strategic alliance facilitation and management. Chief -.ec)ti%e 'fficer! the main responsibility is to maintain a strategic fit between the corporate resources and e6ternal factors. 7esponsibilities include running of the overall day: to:day operations, technological and operational soundness, and financial stability. ,irector of *inance and 'perations! responsibilities include financial oversight, safeguarding of assets, and human resources management. ,irector of Information Technology! responsibilities include overall technological efficiency, software development, and information control. ,irector of Sales and &arketing! responsibilities include sales generation, marketing programs development, and public relations.

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.able! ersonnel

Personnel Plan 4ear " )ll .epartments &ther 'otal 1eople Total Payroll $200%000 $0 5 $200%000 4ear 2 $"%<;0%000 $0 40 $"%<;0%000 4ear ( $4%"05%000 $0 :0 $4%"05%000

9+.+ )inancial lan .he statements incorporate two rounds of venture capital investments of G*.> million total, plus access to additional G9.I million for cash flow purposes. .he statements do not include any funds raised during the proposed , M. Any revenues from advertising, affinity, consulting, and partnership programs were omitted. Year:end is Becember F9. 9+.9 rojected 1ash )low .he following chart shows monthly cash balance and cash flow. .he table shows the e6pected cash flow for the first twelve months of operation, with yearly estimates thereafter. 1apital e6penditures include computer e-uipment and technology J software investment! 1omputer C-uipment! represents *+3 of the current fi6ed corporate costs. ,n *+++, it represents G;+,+++ from the fi6ed corporate costs. .echnology J #oftware ,nvestment! represents 2+3 of the current fi6ed technology costs. ,n *+++, it represents the G9.F million of the fi6ed technology costs.

1hart! 1ash

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.oHassle0eturn.com

.able! 1ash )low

Pro Forma Cash Flow 4ear " ash Recei$e# 4ear 2 4ear (

ash -rom &perations ash Sales ash -rom Recei$a/les Su/total ash -rom &perations )##itional ash Recei$e# $0 $0 $0 $0 $0 $0 $4%""0%000 $4%""0%000 4ear " $0 $0 $0 $0 $0 $0 $0 $"<%0(2%000 4ear 2 $0 $0 $0 $0 $0 $0 $0 $5<%4(:%400 4ear ( $0 $0 $0 $4%*5:%000 $"4%2*4%000 $"<%0(2%000 $"4%:5<%;00 $44%5*:%:00 $5<%4(:%400

Sales 'ax% 8)'% =S'75S' Recei$e# ,e0 urrent Borro0ing ,e0 &ther Lia/ilities 2interest--ree3 ,e0 Long-term Lia/ilities Sales o- &ther urrent )ssets Sales o- Long-term )ssets ,e0 !n$estment Recei$e# Su/total ash Recei$e# Expen#itures Expen#itures -rom &perations ash Spen#ing Bill 1ayments Su/total Spent on &perations )##itional ash Spent

$200%000 $2%"4<%"50 $2%(4<%"50

$"%<;0%000 $""%445%:5: $"(%405%:5:

$4%"05%000 $2;%*(*%;:: $(0%:42%;::

Sales 'ax% 8)'% =S'75S' 1ai# &ut 1rincipal Repayment o- urrent Borro0ing &ther Lia/ilities 1rincipal Repayment Long-term Lia/ilities 1rincipal Repayment 1urchase &ther urrent )ssets 1urchase Long-term )ssets .i$i#en#s Su/total ash Spent ,et ash +lo0 Cash Balance

$0 $0 $0 $0 $0 $"%(:0%000 $0 $(%*2<%"50 $(:0%:50 $42*%:50

$0 $0 $0 $0 $0 $(2(%544 $0 $"(%*2<%402 $5%(02%5<: $5%*(0%44:

$0 $0 $0 $0 $0 $;5(%:22 $0 $("%4<;%5"0 $2*%<4"%:<0 $((%;*2%((:

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9+.* 'reak:even Analysis .he following table shows our estimated monthly break:even point to be appro6imately G***,+++

1hart! 'reak:even Analysis

.able! 'reak:even Analysis

Break-even Analysis >onthly Re$enue Brea6-e$en )ssumptions? )$erage 1ercent 8aria/le ost Estimated Monthly Fixed Cost 09 $222%4"* $222%4"*

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9+.F ,mportant Assumptions .he table below contains assumptions important to the financial success of the company. .able! Heneral Assumptions

General Assumptions 4ear " 1lan >onth urrent !nterest Rate Long-term !nterest Rate 'ax Rate ther " "0.009 "0.009 25.429 0 4ear 2 2 "0.009 "0.009 25.009 0 4ear ( ( "0.009 "0.009 25.429 0

9+.I rojected rofit and Loss .he table below shows the profit and loss statement for 5oDassle7eturn.com. .he itemiEed costs for fi6ed technology, corporate and advertising are reflected in the sales and marketing row in the table! *i.ed Technology Costs! represents a percentage of revenues allocation for all fi6ed computer and ,nternet:related developments and charges. ,n *+++, G;++,+++ is allocated for the proprietary software development, GF++,+++ for the website design, and G*++,+++ for systems integration. *i.ed Corporate Costs! represent a percentage of revenues allocation for all fi6ed corporate cost associated with office related charges. ,n *+++, G*++,+++ is allocated for initial sales force hire, G2+,+++ is allocated for hiring and training e6penses, and another G92+,+++ is allocated for the office setup and purchaseLlease of necessary computer e-uipment and infrastructure. Ad%ertising! represents a percentage of revenues allocation for advertising in all media. ,n *+++, G*2+,+++ is allocated for the industrial marketing campaign. ,n the subse-uent years, the much larger budgets include allocations for .R advertising. Sales / &arketing! represents a percentage of revenues allocation for marketing and selling activities, including commissions paid on sales. ,n *+++, G*++,+++ is allocated for the initial sales and marketing related activities. +esearch and ,e%elopment! represents a percentage of revenues allocation for 7JB activities. ,n *+++, G*++,+++ is allocated for testing and fine:tuning of the computer systems and programs. 0eneral / Administrati%e! represents a percentage of revenues allocation for e6penses associated with running a corporation. ,n *+++, G*+,+++ is e6pensed against the initial set: up, legal and accounting fees, etc. ,epreciation! represents a depreciation on all capital investment@ straight:line depreciation over *+ years.

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.able! rofit and Loss

Pro Forma Profit and oss 4ear " Sales .irect ost o- Sales &ther 'otal ost o- Sales 5ross >argin 5ross >argin 9 $0 $0 $0 $0 $0 0.009 4ear 2 $"<%0(2%000 $0 $0 $0 $"<%0(2%000 "00.009 4ear ( $5<%4(:%400 $0 $0 $0 $5<%4(:%400 "00.009

Expenses 1ayroll Sales an# >ar6eting an# &ther Expenses .epreciation Research @ .e$elopment 1ayroll 'axes &ther 'otal &perating Expenses 1ro-it Be-ore !nterest an# 'axes EB!'.) !nterest Expense 'axes !ncurre# ,et 1ro-it !et Profit"Sales $200%000 $2%"*0%000 $;<%000 $200%000 $(0%000 $0 $2%;;<%000 2$2%;;<%0003 2$2%;00%0003 $0 $0 2$2%;;<%0003 0.009 $"%<;0%000 $<%(55%520 $:5%"** $<5"%;00 $2<4%000 $0 $"2%;4;%2<* $;%(:5%*0( $;%4*0%::0 $0 $"%5<;%42; $4%*:<%2** 25.";9 $4%"05%000 $";%(*<%::2 $""*%:;: $"%*:(%"52 $;"5%*50 $0 $2(%00"%;52 $(;%4(;%*4: $(;%554%;"; $0 $<%2;"%00* $2*%"*5%*4" 45.*29

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9+.2 rojected 'alance #heet .he 'alance #heet shows solid growth in both sales and net worth. .able! 'alance #heet

Pro Forma Balance Sheet 4ear " )ssets 4ear 2 4ear (

urrent )ssets ash )ccounts Recei$a/le &ther urrent )ssets 'otal urrent )ssets Long-term )ssets Long-term )ssets )ccumulate# .epreciation 'otal Long-term )ssets 'otal )ssets Lia/ilities an# apital $"%(:0%000 $;<%000 $"%(""%000 $"%*(:%:50 4ear " $"%*0(%544 $"54%"** $"%54<%(;* $*%2*<%:"5 4ear 2 $2%(5*%(;; $2*2%045 $2%0:5%(2" $(5%*5*%;5< 4ear ( $42*%:50 $0 $0 $42*%:50 $5%*(0%44: $0 $0 $5%*(0%44: $((%;*2%((: $0 $0 $((%;*2%((:

urrent Lia/ilities )ccounts 1aya/le urrent Borro0ing &ther urrent Lia/ilities Su/total urrent Lia/ilities Long-term Lia/ilities 'otal Lia/ilities 1ai#-in apital Retaine# Earnings Earnings 'otal apital 'otal Lia/ilities an# apital !et #orth $250%:50 $0 $0 $250%:50 $0 $250%:50 $4%";0%000 2$(%0003 2$2%;;<%0003 $"%4::%000 $"%*(:%:50 $"%4::%000 $"%002%5(: $0 $0 $"%002%5(: $0 $"%002%5(: $4%";0%000 2$2%;*2%0003 $4%*:<%2** $;%2**%2** $*%2*<%:"5 $;%2**%2** $2%(04%;40 $0 $0 $2%(04%;40 $0 $2%(04%;40 $4%";0%000 $2%""*%2** $2*%"*5%*4" $((%45(%0": $(5%*5*%;5< $((%45(%0":

9+.> 'usiness 7atios .he following table presents important business ratios for the business services industry, as determined by the #tandard ,ndustry 1lassification $#,1& ,nde6 code =F;<, 'usiness #ervices, nec $not elsewhere classified&.

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.able! 7atios
!atio Analysis 4ear " Sales 5ro0th 1ercent o- 'otal )ssets )ccounts Recei$a/le &ther urrent )ssets 'otal urrent )ssets Long-term )ssets 'otal )ssets urrent Lia/ilities Long-term Lia/ilities 'otal Lia/ilities ,et Aorth 1ercent o- Sales Sales 5ross >argin Selling% 5eneral @ )#ministrati$e Expenses )#$ertising Expenses 1ro-it Be-ore !nterest an# 'axes >ain Ratios urrent Buic6 'otal .e/t to 'otal )ssets 1re-tax Return on ,et Aorth 1re-tax Return on )ssets )##itional Ratios ,et 1ro-it >argin Return on Equity )cti$ity Ratios )ccounts Recei$a/le 'urno$er ollection .ays )ccounts 1aya/le 'urno$er 1ayment .ays 'otal )sset 'urno$er .e/t Ratios .e/t to ,et Aorth urrent Lia/. to Lia/. Liqui#ity Ratios ,et Aor6ing apital !nterest o$erage )##itional Ratios )ssets to Sales urrent .e/t7'otal )ssets )ci# 'est Sales7,et Aorth n.a. "49 ".*" 0.00 0.(: "49 5.*2 (.0( 0.;0 ;9 "4.;" ".*: n.a n.a n.a n.a $"**%000 0.00 $4%*2*%<"0 0.00 $("%(;*%;<* 0.00 n.a n.a 0."* ".00 0."; ".00 0.0* ".00 n.a n.a 0.00 0 <.5* 2* 0.00 0.00 0 "2."* "< 2.;" 0.00 0 "2."* 22 ".;; n.a n.a n.a n.a n.a ".*" ".*" "4.4(9 -"*<.(*9 -"5(.4<9 4ear " 0.009 -"*<.(*9 5.*2 5.*2 "(.**9 "0".*(9 :*.*29 4ear 2 25.";9 *;.(09 "4.;" "4.;" ;.459 "0:.<29 "0".<09 4ear ( 45.*29 :".249 n.a n.a ".5< ".22 ;0.229 (.0<9 *.*;9 "00.009 0.009 0.009 0.009 0.009 "00.009 "00.009 *4.:49 ".009 ((.559 "00.009 "00.009 54.029 0.509 ;".(09 "00.009 "00.009 :2.;:9 ".;;9 ".(*9 0.009 0.009 24.;"9 *5.(<9 "00.009 "4.4(9 0.009 "4.4(9 :5.5*9 0.009 0.009 *:.*29 2".2:9 "00.009 "(.**9 0.009 "(.**9 :;.2(9 0.009 0.009 <4."*9 5.:(9 "00.009 ;.459 0.009 ;.459 <(.559 2:."29 44.":9 *;.2*9 2(.*(9 "00.009 (:.;"9 "(.;09 52.2"9 4*.*<9 n.a. 4ear 2 n.a. 4ear ( 2"2.("9 !n#ustry 1ro-ile :.*<9

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Di$idend Payout

0.00

0.00

0.00

n.a

Page "$

6&&en*ix
.able! ersonnel

Personnel Plan Month 1 All Departments Other Total People 0% 0% $16,666 $0 5 Month 2 $16,666 $0 5 Month 3 $16,666 $0 5 Month 4 $16,666 $0 5 Month 5 $16,667 $0 5 Month 6 $16,667 $0 5 Month 7 $16,667 $0 5 Month 8 $16,667 $0 5 Month 9 $16,667 $0 5 Month 10 $16,667 $0 5 Month 11 $16,667 $0 5 Month 12 $16,667 $0 5

Total Payroll

$16,666

$16,666

$16,666

$16,666

$16,667

$16,667

$16,667

$16,667

$16,667

$16,667

$16,667

$16,667

Page 1

6&&en*ix
.able! #ales )orecast

Sales Forecast Month 1 ales 1st Pro!ram "e#en$es 2n% Pro!ram "e#en$es Total ales 0% 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

D&re't (ost o) ales 1st Pro!ram "e#en$es 2n% Pro!ram "e#en$es Subtotal Direct Cost of Sales

Month 1 $0 $0 $0

Month 2 $0 $0 $0

Month 3 $0 $0 $0

Month 4 $0 $0 $0

Month 5 $0 $0 $0

Month 6 $0 $0 $0

Month 7 $0 $0 $0

Month 8 $0 $0 $0

Month 9 $0 $0 $0

Month 10 $0 $0 $0

Month 11 $0 $0 $0

Month 12 $0 $0 $0

Page 2

6&&en*ix
.able! Heneral Assumptions

General Assumptions Month 1 Plan Month ($rrent *nterest "ate ,on!-term *nterest "ate Ta. "ate Other 1 10+00% 10+00% 30+00% 0 Month 2 2 10+00% 10+00% 25+00% 0 Month 3 3 10+00% 10+00% 25+00% 0 Month 4 4 10+00% 10+00% 25+00% 0 Month 5 5 10+00% 10+00% 25+00% 0 Month 6 6 10+00% 10+00% 25+00% 0 Month 7 7 10+00% 10+00% 25+00% 0 Month 8 8 10+00% 10+00% 25+00% 0 Month 9 9 10+00% 10+00% 25+00% 0 Month 10 10 10+00% 10+00% 25+00% 0 Month 11 11 10+00% 10+00% 25+00% 0 Month 12 12 10+00% 10+00% 25+00% 0

Page "

6&&en*ix
.able! rofit and Loss

Pro Forma Profit and Loss Month 1 ales D&re't (ost o) ales Other Total (ost o) ales $0 $0 $0 $0 Month 2 $0 $0 $0 $0 Month 3 $0 $0 $0 $0 Month 4 $0 $0 $0 $0 Month 5 $0 $0 $0 $0 Month 6 $0 $0 $0 $0 Month 7 $0 $0 $0 $0 Month 8 $0 $0 $0 $0 Month 9 $0 $0 $0 $0 Month 10 $0 $0 $0 $0 Month 11 $0 $0 $0 $0 Month 12 $0 $0 $0 $0

/ross Mar!&n /ross Mar!&n %

$0 0+00%

$0 0+00%

$0 0+00%

$0 0+00%

$0 0+00%

$0 0+00%

$0 0+00%

$0 0+00%

$0 0+00%

$0 0+00%

$0 0+00%

$0 0+00%

0.penses Pa1roll ales an% Mar2et&n! an% Other 0.penses Depre'&at&on "esear'h 3 De#elopment Pa1roll Ta.es Other 15% $16,666 $20,500 $500 $5,000 $2,500 $0 $16,666 $46,000 $1,500 $10,000 $2,500 $0 $16,666 $86,000 $3,000 $10,000 $2,500 $0 $16,666 $121,500 $4,000 $15,000 $2,500 $0 $16,667 $237,000 $7,500 $20,000 $2,500 $0 $16,667 $237,000 $7,500 $20,000 $2,500 $0 $16,667 $237,000 $7,500 $20,000 $2,500 $0 $16,667 $237,000 $7,500 $20,000 $2,500 $0 $16,667 $237,000 $7,500 $20,000 $2,500 $0 $16,667 $237,000 $7,500 $20,000 $2,500 $0 $16,667 $237,000 $7,500 $20,000 $2,500 $0 $16,667 $237,000 $7,500 $20,000 $2,500 $0

Total Operat&n! 0.penses

$45,166

$76,666

$118,166

$159,666

$283,667

$283,667

$283,667

$283,667

$283,667

$283,667

$283,667

$283,667

Pro)&t 4e)ore *nterest an% Ta.es 04*TDA *nterest 0.pense Ta.es *n'$rre%

5$45,1666 5$44,6666 $0 $0

5$76,6666 5$75,1666 $0 $0

5$118,1666 5$115,1666 $0 $0

5$159,6666 5$155,6666 $0 $0

5$283,6676 5$276,1676 $0 $0

5$283,6676 5$276,1676 $0 $0

5$283,6676 5$276,1676 $0 $0

5$283,6676 5$276,1676 $0 $0

5$283,6676 5$276,1676 $0 $0

5$283,6676 5$276,1676 $0 $0

5$283,6676 5$276,1676 $0 $0

5$283,6676 5$276,1676 $0 $0

7et Pro)&t Net Profit/Sales

5$45,1666 0+00%

5$76,6666 0+00%

5$118,1666 0+00%

5$159,6666 0+00%

5$283,6676 0+00%

5$283,6676 0+00%

5$283,6676 0+00%

5$283,6676 0+00%

5$283,6676 0+00%

5$283,6676 0+00%

5$283,6676 0+00%

5$283,6676 0+00%

Page $

6&&en*ix
.able! 1ash )low
Pro Forma Cash Flow Month 1 (ash "e'e&#e% (ash )rom Operat&ons (ash ales (ash )rom "e'e&#a8les $8total (ash )rom Operat&ons A%%&t&onal (ash "e'e&#e% ales Ta., 9AT, : T;/ T "e'e&#e% 7e< ($rrent 4orro<&n! 7e< Other ,&a8&l&t&es 5&nterest-)ree6 7e< ,on!-term ,&a8&l&t&es ales o) Other ($rrent Assets ales o) ,on!-term Assets 7e< *n#estment "e'e&#e% $8total (ash "e'e&#e% 0.pen%&t$res 0.pen%&t$res )rom Operat&ons (ash pen%&n! 4&ll Pa1ments $8total pent on Operat&ons A%%&t&onal (ash pent ales Ta., 9AT, : T;/ T Pa&% O$t Pr&n'&pal "epa1ment o) ($rrent 4orro<&n! Other ,&a8&l&t&es Pr&n'&pal "epa1ment ,on!-term ,&a8&l&t&es Pr&n'&pal "epa1ment P$r'hase Other ($rrent Assets P$r'hase ,on!-term Assets D&#&%en%s $8total (ash pent 7et (ash =lo< Cash Balance $0 $0 $0 $0 $0 $3,000 $0 $20,599 5$20,5996 $26,401 $0 $0 $0 $0 $0 $10,000 $0 $55,683 $544,317 $570,718 $0 $0 $0 $0 $0 $17,000 $0 $93,499 5$93,4996 $477,219 $0 $0 $0 $0 $0 $150,000 $0 $266,516 5$266,5166 $210,703 $0 $0 $0 $0 $0 $150,000 $0 $309,684 5$199,6846 $11,019 $0 $0 $0 $0 $0 $150,000 $0 $426,167 $1,573,833 $1,584,852 $0 $0 $0 $0 $0 $150,000 $0 $426,167 5$426,1676 $1,158,685 $0 $0 $0 $0 $0 $150,000 $0 $426,167 5$426,1676 $732,518 $0 $0 $0 $0 $0 $150,000 $0 $426,167 5$426,1676 $306,351 $0 $0 $0 $0 $0 $150,000 $0 $426,167 $973,833 $1,280,184 $0 $0 $0 $0 $0 $150,000 $0 $426,167 5$426,1676 $854,017 $0 $0 $0 $0 $0 $150,000 $0 $426,167 5$426,1676 $427,850 $16,666 $933 $17,599 $16,666 $29,017 $45,683 $16,666 $59,833 $76,499 $16,666 $99,850 $116,516 $16,667 $143,017 $159,684 $16,667 $259,500 $276,167 $16,667 $259,500 $276,167 $16,667 $259,500 $276,167 $16,667 $259,500 $276,167 $16,667 $259,500 $276,167 $16,667 $259,500 $276,167 $16,667 $259,500 $276,167 0+00% $0 $0 $0 $0 $0 $0 $0 $0 Month 1 $0 $0 $0 $0 $0 $0 $600,000 $600,000 Month 2 $0 $0 $0 $0 $0 $0 $0 $0 Month 3 $0 $0 $0 $0 $0 $0 $0 $0 Month 4 $0 $0 $0 $0 $0 $0 $110,000 $110,000 Month 5 $0 $0 $0 $0 $0 $0 $2,000,000 $2,000,000 Month 6 $0 $0 $0 $0 $0 $0 $0 $0 Month 7 $0 $0 $0 $0 $0 $0 $0 $0 Month 8 $0 $0 $0 $0 $0 $0 $0 $0 Month 9 $0 $0 $0 $0 $0 $0 $1,400,000 $1,400,000 Month 10 $0 $0 $0 $0 $0 $0 $0 $0 Month 11 $0 $0 $0 $0 $0 $0 $0 $0 Month 12 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Page (

6&&en*ix
.able! 'alance #heet

Pro Forma Balance Sheet Month 1 Assets tart&n! 4alan'es Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

($rrent Assets (ash A''o$nts "e'e&#a8le Other ($rrent Assets Total ($rrent Assets ,on!-term Assets ,on!-term Assets A''$m$late% Depre'&at&on Total ,on!-term Assets Total Assets ,&a8&l&t&es an% (ap&tal $0 $0 $0 $47,000 $3,000 $500 $2,500 $28,901 Month 1 $13,000 $2,000 $11,000 $581,718 Month 2 $30,000 $5,000 $25,000 $502,219 Month 3 $180,000 $9,000 $171,000 $381,703 Month 4 $330,000 $16,500 $313,500 $324,519 Month 5 $480,000 $24,000 $456,000 $2,040,852 Month 6 $630,000 $31,500 $598,500 $1,757,185 Month 7 $780,000 $39,000 $741,000 $1,473,518 Month 8 $930,000 $46,500 $883,500 $1,189,851 Month 9 $1,080,000 $54,000 $1,026,000 $2,306,184 Month 10 $1,230,000 $61,500 $1,168,500 $2,022,517 Month 11 $1,380,000 $69,000 $1,311,000 $1,738,850 Month 12 $47,000 $0 $0 $47,000 $26,401 $0 $0 $26,401 $570,718 $0 $0 $570,718 $477,219 $0 $0 $477,219 $210,703 $0 $0 $210,703 $11,019 $0 $0 $11,019 $1,584,852 $0 $0 $1,584,852 $1,158,685 $0 $0 $1,158,685 $732,518 $0 $0 $732,518 $306,351 $0 $0 $306,351 $1,280,184 $0 $0 $1,280,184 $854,017 $0 $0 $854,017 $427,850 $0 $0 $427,850

($rrent ,&a8&l&t&es A''o$nts Pa1a8le ($rrent 4orro<&n! Other ($rrent ,&a8&l&t&es $8total ($rrent ,&a8&l&t&es ,on!-term ,&a8&l&t&es Total ,&a8&l&t&es Pa&%-&n (ap&tal "eta&ne% 0arn&n!s 0arn&n!s Total (ap&tal Total ,&a8&l&t&es an% (ap&tal Net Worth $0 $0 $0 $0 $0 $0 $50,000 5$3,0006 $0 $47,000 $47,000 $47,000 $27,067 $0 $0 $27,067 $0 $27,067 $50,000 5$3,0006 5$45,1666 $1,834 $28,901 $1,834 $56,550 $0 $0 $56,550 $0 $56,550 $650,000 5$3,0006 5$121,8326 $525,168 $581,718 $525,168 $95,217 $0 $0 $95,217 $0 $95,217 $650,000 5$3,0006 5$239,9986 $407,002 $502,219 $407,002 $134,367 $0 $0 $134,367 $0 $134,367 $650,000 5$3,0006 5$399,6646 $247,336 $381,703 $247,336 $250,850 $0 $0 $250,850 $0 $250,850 $760,000 5$3,0006 5$683,3316 $73,669 $324,519 $73,669 $250,850 $0 $0 $250,850 $0 $250,850 $2,760,000 5$3,0006 5$966,9986 $1,790,002 $2,040,852 $1,790,002 $250,850 $0 $0 $250,850 $0 $250,850 $2,760,000 5$3,0006 5$1,250,6656 $1,506,335 $1,757,185 $1,506,335 $250,850 $0 $0 $250,850 $0 $250,850 $2,760,000 5$3,0006 5$1,534,3326 $1,222,668 $1,473,518 $1,222,668 $250,850 $0 $0 $250,850 $0 $250,850 $2,760,000 5$3,0006 5$1,817,9996 $939,001 $1,189,851 $939,001 $250,850 $0 $0 $250,850 $0 $250,850 $4,160,000 5$3,0006 5$2,101,6666 $2,055,334 $2,306,184 $2,055,334 $250,850 $0 $0 $250,850 $0 $250,850 $4,160,000 5$3,0006 5$2,385,3336 $1,771,667 $2,022,517 $1,771,667 $250,850 $0 $0 $250,850 $0 $250,850 $4,160,000 5$3,0006 5$2,669,0006 $1,488,000 $1,738,850 $1,488,000

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