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June 2001

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Table of Contents

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


1.1 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Keys to Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2.0 Company Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3


2.1 Company Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Start-up Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

3.0 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Service Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Competitive Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

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


4.1 Market Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Target Market Segment Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2.1 Market Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2.2 Market Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2.3 Market Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Service Business Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3.1 Competition and Buying Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3.2 Main Competitors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

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


5.1 Competitive Edge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Value Proposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3 Sales Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3.1 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.4 Milestones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

6.0 Management Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12


6.1 Personnel Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

7.0 Financial Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13


7.1 Important Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.2 Key Financial Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.4 Projected Profit and Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.5 Projected Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.6 Projected Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.7 Business Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Creative Concepts Computer Design

1.0 Executive Summary

Introduction
Creative Concepts Computer Design will provide computer and technical consulting to local
small businesses as well as home PC users. In doing so the company will focus on marketing,
responsiveness, quality, and creating and retaining customer relations.

The Company
Creative Concepts will initially be a sole proprietorship with mimimum outside financing.
Creative Concepts will be a home office start-up, utilizing one studio room in the owner's
home and serving customers in the local Eugene, Oregon area.

Creative Concepts will be initially owned by Bram Ekstrand. Depending on growth, the
company will possibly add additional employees and expand operations.

The Market
Market research indicates an available market niche able to be occupied by additional
businesses of this nature. The very nature of the computing industry, with its extraordinary
rate of technological development, creates a constant need for businesses skilled in updating
and advising customers on computer-related issues. Home PC users will provide the majority
of our business revenue. These jobs will typically consist of minor upgrades services and
advising. Business Week expects the computing industry to grow at a rate of 12% and the
processor speeds to continue to expand for years to come, providing a rich resource for sales.

Creative Concepts has decided to focus mainly on the home PC market for many reasons.
These home customers typically request jobs that are easier, faster, and less resource
intensive then the opposing small business customer. In addition, this market tends to offer
more flexibility for service times allowing a more productive workday.

Our target market will focus on Eugene and the surrounding areas. Market research indicates
there is an abundance of business for a small company such as Creative Concepts. If a need
exists for increased business, such promotional mediums as radio or print ads will be
explored.

There are two main competitors for the computer upgrade business in the greater
Eugene/Springfield area. These companies are VOS and Suntech Computers. Both of these
companies charge rates in excess of Creative Concepts, therefore we expect to be able to
attract the price-sensitive market without much work.

Financial Considerations
Total start-up expenses come to $720. Since this is a service business and not product
oriented, operational costs should remain low through the start-up process.

Fixed costs have been set at a reasonably accurate level of $375 a month. This should allow
for equipment maintenance and purchase or replacement of basic tools used in performing
our services. Variable costs have been set at $29.98 per unit to allow for additional expenses
such as gas or other travel costs specific to each job.

Profits are expected to reach ~$2,000 by year three based on ~$31,000 in sales. This is net
of the owners payroll. The company does not expect any cash flow shortages in the
foreseeable future.

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Creative Concepts Computer Design

Highlights (Planned)

$35,000

$30,000

$25,000

$20,000 Sales
Gross Margin
$15,000
Net Profit
$10,000

$5,000

$0
2002 2003 2004

1.1 Objectives

1. To provide a service to the community that is in sufficient demand as to generate a


profit.
2. Gain a strong repeat customer base to maximize growth.
3. Become a positive influence in the community in which we operate.

1.2 Mission

To become a contributing unit of society while delivering a product of exceptional quality,


value, and in a timely fashion. We will treat every customer as if they were our only
customer.

1.3 Keys to Success

• Marketing and Networking (being known to the public).


• Responsiveness (being an on-call computer paramedic with fast response time).
• Quality (getting the job done right the first time, offering 100% guarantee).
• Relationships (developing loyal repeat customers--retainers).

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Creative Concepts Computer Design

2.0 Company Summary

Creative Concepts will initially be a sole proprietorship.

The goal will be to start the venture as inexpensively as possible, with minimal outside
financing.

Creative Concepts will be a home office start-up, utilizing one studio room in the owner's
home.

2.1 Company Ownership

Creative Concepts will be initially owned by Bram Ekstrand as a sole proprietorship. Possibly
later adding additional employees and expanding operations as well as clientele.

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2.2 Start-up Summary

Total start-up expenses come to $720. This is composed of mostly equipment costs along
with a few dollars for research of consumer wants and desires and a few pads of stationary.
Exact allocations are shown on the table. Since this is a service business and not product
oriented, operational costs should remain low through the start-up process.

Table: Start-up

Start-up

Requirements

Start-up Expenses
Legal $150
Stationery etc. $50
Brochures $0
Consultants $0
Insurance $0
Rent $0
Research and development $20
Expensed equipment $500
Other $0
Total Start-up Expense $720

Start-up Assets Needed


Cash Balance on Starting Date $280
Other Short-term Assets $0
Total Short-term Assets $280

Long-term Assets $0
Total Assets $280
Total Requirements $1,000

Funding

Investment
Investor 1 $1,000
Investor 2 $0
Other $0
Total Investment $1,000

Short-term Liabilities
Accounts Payable $0
Current Borrowing $0
Other Short-term Liabilities $0
Subtotal Short-term Liabilities $0

Long-term Liabilities $0
Total Liabilities $0

Loss at Start-up ($720)


Total Capital $280
Total Capital and Liabilities $280

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Creative Concepts Computer Design

Start-up

$1,000
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
Expenses Assets Investment Loans

3.0 Services

Creative Concepts will offer computer support and upgrade service to clients of two major
categories, home PC users and small office users. These categories will define 95% of our
operations.

3.1 Service Description

Our services can be obtained through direct hourly compensation, or if preferred or more
applicable, through a contract situation with pre-defined limits.

3.2 Competitive Comparison

Our services are more thorough and precise than any existing competition in the surrounding
metro area. Since we have no extravagant overhead we can be focused on delivering exactly
what the customer wants, something other computer support providers in this area have a
hard time with.

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Creative Concepts Computer Design

3.3 Technology

Creative Concepts will operate in an environment with technology that is constantly evolving.
Keeping up to date will be of vital importance to the profitability of this venture. Keeping this
in mind, we will maintain working, as well as functional, knowledge of all the latest software
available to the public. Our customers will receive the most current versions of all software
and hardware upgrades requested.

4.0 Market Analysis Summary

Creative Concepts Computer Design will provide computer support in both a consulting and
technical capacity to home PC users as well as small business owners. Since Creative
Concepts is currently a one man operation it will be limited in growth to the capacity of work
able to be completed. Personal market research indicates an available market niche able to
be occupied by additional businesses of this nature. The very nature of the computing
industry, with its extraordinary rate of technological development, creates a constant need
for businesses skilled in updating and advising customers on computer-related issues.

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Creative Concepts Computer Design

4.1 Market Segmentation

The existing computer service market is so extensive categorizing it is a rather difficult task.
For our revenue-oriented purposes we will define the market into home PC users and small
business clients. Home PC users will provide the majority of our business revenue. These jobs
will typically consist of minor upgrades services and advising. The small business market will
be defined as customers with five or more computers or a network requiring service or repair.

Market Analysis (Pie)

Home PC Users
Small Business Contracts
Other

Table: Market Analysis

Market Analysis
Potential Customers Growth 2001 2002 2003 2004 2005 CAGR
Home PC Users 2% 25,000 25,500 26,010 26,530 27,061 2.00%
Small Business Contracts 1% 10,000 10,100 10,201 10,303 10,406 1.00%
Other 0% 0 0 0 0 0 0.00%
Total 1.72% 35,000 35,600 36,211 36,833 37,467 1.72%

4.2 Target Market Segment Strategy

Creative Concepts has decided to focus mainly on the home PC market for many reasons.
These home customers typically requests jobs that are easier, faster, and less resource
intensive then the opposing small business customer. In addition, this market tends to offer
more flexibility for service times allowing a more productive workday.

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Creative Concepts Computer Design

4.2.1 Market Needs

As reported by ComputingNet magazine, there is a substantial need for individuals capable of


performing computer upgrades and repairs in a timely and cost-effective manner in this
region. Creative Concepts is directed specifically at that market niche.

4.2.2 Market Trends

Both the software and hardware side of the computer industry continue to turn out new and
revised computer components at alarming rates. For Creative Concepts this means job
security well into the future.

4.2.3 Market Growth

As reported by the Wall Street Journal, there seems to be no end to the development of the
computer market. Business Week expects the computing industry to grow at a rate of 12%
and the processor speeds to continue to expand for years to come.

4.3 Service Business Analysis

Secondary market research shows computer service customers tend to be very loyal
providers that do good work and satisfy their needs. An analysis of Creative Concepts's main
competitors shows no overwhelming strengths that would be significant barriers to possible
success. Likewise, identifying competitor's weaknesses has illuminated several areas that
Creative Concepts can target as marketing strategies.

4.3.1 Competition and Buying Patterns

As previously noted, there are other providers of similar services in the area. Our services will
be second to no one and our prices will be rock bottom. By providing superior service word of
mouth alone will bring in many new clients. The satisfaction our consumers find will keep
them as our business.

4.3.2 Main Competitors

There are two main competitors for the computer upgrade business in this area.

1. VOS. They are a well established provider of computer upgrades and services.
2. Suntech Computers. Smaller and less known then VOS, Suntech provides many
services for residents living in East and South Eugene.

Both of these companies charge rates in excess of Creative Concepts, we will be able to
attract the price-sensitive market without much work. Our second main advantage is the
accessibility of our services. The time conscientious customer will appreciate our swift work.

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Creative Concepts Computer Design

5.0 Strategy and Implementation Summary

A value proposition of timely and practical solutions, at a reasonable rate, coupled with a
100% guarantee.

A competitive edge based on cultivating existing customer relationships.

Our target market will focus on Eugene and the surrounding areas. Market research indicates
there is an abundance of business for a small company such as Creative Concepts. If
apparent a need exists for increased business, such promotional mediums as radio or print ad
could be explored.

5.1 Competitive Edge

Our competitive advantage will be our ability to quickly take in a request from a customer
and complete the requested task in a timely fashion. Typically we will strive for a 48 hour
completion of most home PC user requests and slightly longer for small business obligations.
In addition we will conduct our services at the going wage or slightly below. Setting marginal
revenue to marginal cost until we establish a substantial customer base if not forever. With
this strategy we can undercut most competitors and gain local market power.

5.2 Value Proposition

Our business will be simple. Provide quality services at reasonable prices and take care of the
customer, for they are your business.

5.3 Sales Strategy

Happy customers will be repeat customers. If the customer feels satisfied he will tell his
friends and more business will come in the door.

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

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Creative Concepts Computer Design

5.3.1 Sales Forecast

The sales strategy is a prediction of slow, controllable growth. Since I am the sole employee I
will be focusing on quality and attention to detail especially in the beginning to avoid some
potential pitfalls encountered by many new businesses. The predicted growth is a very
moderate 2% in the home PC market and only 1% in the small business arena. This should
allow for careful examination of variations in demand with regards to season or holidays and
still allow enough flexibility to sufficiently compensate.

Sales Monthly (Planned)

$3,500

$3,000

$2,500

$2,000 Home PC Unit


Small Business Unit
$1,500
Other
$1,000

$500

$0
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May

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Creative Concepts Computer Design

Table: Sales Forecast (Planned)

Sales Forecast
Unit Sales 2002 2003 2004
Home PC Unit 396 475 570
Small Business Unit 214 235 259
Other 0 0 0
Total Unit Sales 610 710 829

Unit Prices 2002 2003 2004


Home PC Unit $30.00 $33.00 $36.30
Small Business Unit $30.00 $36.00 $43.20
Other $0.00 $0.00 $0.00

Sales
Home PC Unit $11,874 $15,674 $20,690
Small Business Unit $6,415 $8,468 $11,178
Other $0 $0 $0
Total Sales $18,289 $24,142 $31,868

Direct Unit Costs 2002 2003 2004


Home PC Unit $5.00 $7.00 $10.00
Small Business Unit $7.00 $10.00 $13.00
Other $0.00 $0.00 $0.00

Direct Cost of Sales 2002 2003 2004


Home PC Unit $1,979 $3,325 $5,700
Small Business Unit $1,497 $2,352 $3,364
Other $0 $0 $0
Subtotal Direct Cost of Sales $3,476 $5,677 $9,063

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Creative Concepts Computer Design

5.4 Milestones

The milestones, listed in the table below, outline the major events that will promote, as well
as insure the success of, Creative Concepts and keep it a going concern well into the future.

Table: Milestones (Planned)

Milestones
Milestone Start Date End Date Budget Manager Department
Aquisition of Capital for initial 8/1/02 9/1/02 $0 BNE Admin
opening
Procurement of materials for 9/1/02 10/1/02 $500 BNE Admin
opening
Open for Business 10/1/02 Never $0 BNE Admin
Name me 3/1/99 4/1/99 $0 ABC Department
Totals $500

6.0 Management Summary

Since Creative Concepts is a sole proprietorship, this topic is currently not valid. However if
employees are added in the future this will be revised at that time.

6.1 Personnel Plan

The following table shows my expected compensation. Since I am the sole employee I am the
only one on the books. I have decided to have my pay directly reflective of the businesses
success. Additionally, I have decided to leave a residual amount of income with the company
each month. This is intended to allow a means of adaptation or evolution of the business
should circumstances dictate expansion or the hiring of additional employees in the future.

Table: Personnel (Planned)

Personnel Plan
2002 2003 2004
Payroll $4,500 $15,000 $20,000

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Creative Concepts Computer Design

7.0 Financial Plan

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

7.1 Important Assumptions

Creative Concepts customer base would fluctuate if there was a recess in the economy or
other extenuating circumstances that pertain directly to consumer or industry behavior.

Table: General Assumptions

General Assumptions
2002 2003 2004
Short-term Interest Rate % 10.00% 10.00% 10.00%
Long-term Interest Rate % 10.00% 10.00% 10.00%
Tax Rate % 25.00% 25.00% 25.00%
Expenses in Cash % 10.00% 10.00% 10.00%
Sales on Credit % 100.00% 100.00% 100.00%
Personnel Burden % 0.00% 0.00% 0.00%

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Creative Concepts Computer Design

7.2 Key Financial Indicators

This information is presented in the chart and table below.

Benchmarks (Planned)

3 2001
2002
2
2003
2

0
Sales Gross OpEx AR Est.

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Creative Concepts Computer Design

7.3 Break-even Analysis

Fixed costs have been set at a reasonably accurate level of $375 a month. This should allow
for equipment maintenance and purchase or replacement of basic tools used in performing
our services. Variable costs have been set at $29.98 per unit to allow for additional expenses
such as gas or other travel costs specific to each job.

Break-even Analysis

$600

$400

$200

$0

($200)

($400)
0 6 12 18 24 30

Monthly break-even point

Break-even point = where line intersects with 0

Table: Break-even Analysis

Break-even Analysis:
Monthly Units Break-even 15
Monthly Sales Break-even $463

Assumptions:
Average Per-Unit Revenue $29.98
Average Per-Unit Variable Cost $5.70
Estimated Monthly Fixed Cost $375

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Creative Concepts Computer Design

7.4 Projected Profit and Loss

The profit and loss shown for this company is a source of inspiration. For the first year of
operation the books show a net profit of 42.29%. This should allow for great flexibility and
survival in the start-up phase in case of unexpected problems or expenses. The profit margin
declines incrementally in the following two years as greater payroll allocations are made.
These increased allocations will be contingent upon the continued success of this going
concern. Additionally, since this business is operated out of the home, expenses such as rent,
utilities, and insurance are sunk costs and not reflective of the business venture.

Table: Profit and Loss (Planned)

Pro Forma Profit and Loss


2002 2003 2004
Sales $18,289 $24,142 $31,868
Direct Cost of Sales $3,476 $5,677 $9,063
Other $0 $0 $0
------------ ------------ ------------
Total Cost of Sales $3,476 $5,677 $9,063
Gross Margin $14,814 $18,465 $22,804
Gross Margin % 80.99% 76.48% 71.56%
Operating Expenses:
Advertising/Promotion $0 $0 $0
Travel $0 $0 $0
Miscellaneous $0 $0 $0
Payroll Expense $4,500 $15,000 $20,000
Payroll Burden $0 $0 $0
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $0 $0 $0
Insurance $0 $0 $0
Rent $0 $0 $0
Contract/Consultants $0 $0 $0
------------ ------------ ------------
Total Operating Expenses $4,500 $15,000 $20,000
Profit Before Interest and Taxes $10,314 $3,465 $2,804
Interest Expense Short-term $0 $0 $0
Interest Expense Long-term $0 $0 $0
Taxes Incurred $2,578 $866 $701
Extraordinary Items $0 $0 $0
Net Profit $7,735 $2,599 $2,103
Net Profit/Sales 42.29% 10.76% 6.60%

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Creative Concepts Computer Design

7.5 Projected Cash Flow

This information is presented in the chart and table below.

Cash (Planned)

$6,000

$5,000

$4,000

$3,000
Net Cash Flow
$2,000 Cash Balance

$1,000

$0

($1,000)
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May

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Creative Concepts Computer Design

Table: Cash Flow (Planned)

Pro Forma Cash Flow 2002 2003 2004

Cash Received
Cash from Operations:
Cash Sales $0 $0 $0
From Receivables $15,307 $23,188 $30,608
Subtotal Cash from Operations $15,307 $23,188 $30,608

Additional Cash Received


Extraordinary Items $0 $0 $0
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of other Short-term Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $15,307 $23,188 $30,608

Expenditures 2002 2003 2004


Expenditures from Operations:
Cash Spent on Costs and Expenses $605 $654 $976
Wages, Salaries, Payroll Taxes, etc. $4,500 $15,000 $20,000
Payment of Accounts Payable $4,998 $5,853 $8,548
Subtotal Spent on Operations $10,103 $21,507 $29,524

Additional Cash Spent


Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Short-term Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Adjustment for Assets Purchased on Credit $0 $0 $0
Subtotal Cash Spent $10,103 $21,507 $29,524

Net Cash Flow $5,204 $1,681 $1,084


Cash Balance $5,484 $7,165 $8,249

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Creative Concepts Computer Design

7.6 Projected Balance Sheet

This information is presented in the table below.

Table: Balance Sheet (Planned)

Pro Forma Balance Sheet

Assets
Short-term Assets 2002 2003 2004
Cash $5,484 $7,165 $8,249
Accounts Receivable $2,982 $3,936 $5,196
Other Short-term Assets $0 $0 $0
Total Short-term Assets $8,466 $11,102 $13,445
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $8,466 $11,102 $13,445

Liabilities and Capital


2002 2003 2004
Accounts Payable $451 $488 $728
Current Borrowing $0 $0 $0
Other Short-term Liabilities $0 $0 $0
Subtotal Short-term Liabilities $451 $488 $728

Long-term Liabilities $0 $0 $0
Total Liabilities $451 $488 $728

Paid-in Capital $1,000 $1,000 $1,000


Retained Earnings ($720) $7,015 $9,614
Earnings $7,735 $2,599 $2,103
Total Capital $8,015 $10,614 $12,717
Total Liabilities and Capital $8,466 $11,102 $13,445
Net Worth $8,015 $10,614 $12,717

7.7 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on
the Standard Industrial Classification (SIC) code 7379, Computer Related Servies NEC, are
shown for comparison.

Page 19
Creative Concepts Computer Design

Table: Ratios (Planned)

Ratio Analysis
2002 2003 2004 Industry Profile
Sales Growth 0.00% 32.00% 32.00% 7.20%

Percent of Total Assets


Accounts Receivable 35.22% 35.46% 38.65% 21.70%
Inventory 0.00% 0.00% 0.00% 3.50%
Other Short-term Assets 0.00% 0.00% 0.00% 46.70%
Total Short-term Assets 100.00% 100.00% 100.00% 71.90%
Long-term Assets 0.00% 0.00% 0.00% 28.10%
Total Assets 100.00% 100.00% 100.00% 100.00%

Short-term Liabilities 5.33% 4.39% 5.41% 51.40%


Long-term Liabilities 0.00% 0.00% 0.00% 19.10%
Total Liabilities 5.33% 4.39% 5.41% 70.50%
Net Worth 94.67% 95.61% 94.59% 29.50%

Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 80.99% 76.48% 71.56% 0.00%
Selling, General & Administrative Expenses 38.70% 65.72% 64.96% 80.70%
Advertising Expenses 0.00% 0.00% 0.00% 1.20%
Profit Before Interest and Taxes 56.39% 14.35% 8.80% 1.70%

Main Ratios
Current 18.76 22.76 18.47 1.27
Quick 18.76 22.76 18.47 1.01
Total Debt to Total Assets 5.33% 4.39% 5.41% 70.50%
Pre-tax Return on Assets 121.82% 31.21% 20.86% 3.50%
Pre-tax Return on Net Worth 128.68% 32.65% 22.05% 11.80%

Business Vitality Profile 2001 2002 2003 Industry


Sales per Employee $18,289 $24,142 $31,868 $0
Survival Rate 0.00%

Additional Ratios 2001 2002 2003


Net Profit Margin 42.29% 10.76% 6.60% n.a
Return on Equity 96.51% 24.48% 16.54% n.a

Activity Ratios
Accounts Receivable Turnover 6.13 6.13 6.13 n.a
Collection Days 30 52 52 n.a
Inventory Turnover 0.00 0.00 0.00 n.a
Accounts Payable Turnover 12.07 12.07 12.07 n.a
Total Asset Turnover 2.16 2.17 2.37 n.a

Debt Ratios
Debt to Net Worth 0.06 0.05 0.06 n.a
Short-term Liab. to Liab. 1.00 1.00 1.00 n.a

Liquidity Ratios
Net Working Capital $8,015 $10,614 $12,717 n.a
Interest Coverage 0.00 0.00 0.00 n.a

Additional Ratios
Assets to Sales 0.46 0.46 0.42 n.a
Current Debt/Total Assets 5% 4% 5% n.a
Acid Test 12.15 14.69 11.33 n.a
Sales/Net Worth 2.28 2.27 2.51 n.a
Dividend Payout $0 0.00 0.00 n.a

Page 20
Appendix

Appendix Table: Sales Forecast (Planned)

Sales Forecast
Unit Sales Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Home PC Unit 10 12 14 17 21 25 30 36 43 52 62 74
Small Business Unit 10 11 12 13 15 16 18 19 21 24 26 29
Other 0 0 0 0 0 0 0 0 0 0 0 0
Total Unit Sales 20 23 27 31 35 41 48 55 64 75 88 103

Unit Prices Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Home PC Unit $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00
Small Business Unit $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00
Other $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Sales
Home PC Unit $300 $360 $432 $518 $622 $746 $896 $1,075 $1,290 $1,548 $1,858 $2,229
Small Business Unit $300 $330 $363 $399 $439 $483 $531 $585 $643 $707 $778 $856
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Sales $600 $690 $795 $918 $1,061 $1,230 $1,427 $1,660 $1,933 $2,255 $2,636 $3,085

Direct Unit Costs Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Home PC Unit $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00
Small Business Unit $7.00 $7.00 $7.00 $7.00 $7.00 $7.00 $7.00 $7.00 $7.00 $7.00 $7.00 $7.00
Other $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Direct Cost of Sales Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Home PC Unit $50 $60 $72 $86 $104 $124 $149 $179 $215 $258 $310 $372
Small Business Unit $70 $77 $85 $93 $102 $113 $124 $136 $150 $165 $182 $200
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $120 $137 $157 $180 $206 $237 $273 $316 $365 $423 $491 $571

Page 1
Appendix

Appendix Table: Personnel (Planned)

Personnel Plan
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Payroll $0 $50 $150 $300 $500 $500 $500 $500 $500 $500 $500 $500

Page 2
Appendix

Appendix Table: General Assumptions

General Assumptions
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Short-term Interest Rate % 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate % 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate % 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00%
Expenses in Cash % 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Sales on Credit % 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Personnel Burden % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Page 3
Appendix

Appendix Table: Profit and Loss (Planned)

Pro Forma Profit and Loss


Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Sales $600 $690 $795 $918 $1,061 $1,230 $1,427 $1,660 $1,933 $2,255 $2,636 $3,085
Direct Cost of Sales $120 $137 $157 $180 $206 $237 $273 $316 $365 $423 $491 $571
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Cost of Sales $120 $137 $157 $180 $206 $237 $273 $316 $365 $423 $491 $571
Gross Margin $480 $553 $638 $738 $855 $992 $1,154 $1,344 $1,568 $1,832 $2,144 $2,514
Gross Margin % 80.00% 80.14% 80.29% 80.43% 80.57% 80.71% 80.85% 80.98% 81.12% 81.24% 81.37% 81.48%
Operating Expenses:
Advertising/Promotion $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Travel $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Miscellaneous $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Payroll Expense $0 $50 $150 $300 $500 $500 $500 $500 $500 $500 $500 $500
Payroll Burden $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Leased Equipment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Utilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Insurance $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Rent $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Contract/Consultants $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Operating Expenses $0 $50 $150 $300 $500 $500 $500 $500 $500 $500 $500 $500
Profit Before Interest and Taxes $480 $503 $488 $438 $355 $492 $654 $844 $1,068 $1,332 $1,644 $2,014
Interest Expense Short-term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Interest Expense Long-term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Taxes Incurred $120 $126 $122 $110 $89 $123 $163 $211 $267 $333 $411 $503
Extraordinary Items $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Net Profit $360 $377 $366 $329 $266 $369 $490 $633 $801 $999 $1,233 $1,510
Net Profit/Sales 60.00% 54.67% 46.07% 35.81% 25.10% 30.04% 34.36% 38.14% 41.44% 44.30% 46.80% 48.96%

Page 4
Appendix

Appendix Table: Cash Flow (Planned)

Pro Forma Cash Flow Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May

Cash Received
Cash from Operations:
Cash Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
From Receivables $20 $603 $694 $799 $922 $1,067 $1,236 $1,435 $1,669 $1,944 $2,268 $2,651
Subtotal Cash from Operations $20 $603 $694 $799 $922 $1,067 $1,236 $1,435 $1,669 $1,944 $2,268 $2,651

Additional Cash Received


Extraordinary Items $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of other Short-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $20 $603 $694 $799 $922 $1,067 $1,236 $1,435 $1,669 $1,944 $2,268 $2,651

Expenditures Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Expenditures from Operations:
Cash Spent on Costs and Expenses $24 $26 $28 $29 $29 $36 $44 $53 $63 $76 $90 $107
Wages, Salaries, Payroll Taxes, etc. $0 $50 $150 $300 $500 $500 $500 $500 $500 $500 $500 $500
Payment of Accounts Payable $115 $227 $244 $256 $263 $297 $361 $436 $525 $628 $751 $895
Subtotal Spent on Operations $139 $303 $422 $585 $792 $833 $905 $989 $1,088 $1,204 $1,341 $1,502

Additional Cash Spent


Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Other Short-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Adjustment for Assets Purchased on Credit $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $139 $303 $422 $585 $792 $833 $905 $989 $1,088 $1,204 $1,341 $1,502

Net Cash Flow ($119) $300 $271 $214 $130 $234 $332 $446 $581 $740 $927 $1,148
Cash Balance $161 $461 $732 $946 $1,076 $1,310 $1,642 $2,088 $2,669 $3,409 $4,336 $5,484

Page 5
Appendix

Appendix Table: Balance Sheet (Planned)

Pro Forma Balance Sheet

Assets
Short-term Assets Starting Balances Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Cash $280 $161 $461 $732 $946 $1,076 $1,310 $1,642 $2,088 $2,669 $3,409 $4,336 $5,484
Accounts Receivable $0 $580 $667 $769 $887 $1,026 $1,189 $1,380 $1,604 $1,869 $2,180 $2,548 $2,982
Other Short-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Short-term Assets $280 $741 $1,128 $1,501 $1,833 $2,102 $2,499 $3,022 $3,692 $4,538 $5,589 $6,884 $8,466
Long-term Assets
Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Accumulated Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Assets $280 $741 $1,128 $1,501 $1,833 $2,102 $2,499 $3,022 $3,692 $4,538 $5,589 $6,884 $8,466

Liabilities and Capital


Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Accounts Payable $0 $101 $110 $117 $121 $124 $151 $183 $221 $265 $318 $379 $451
Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Short-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Short-term Liabilities $0 $101 $110 $117 $121 $124 $151 $183 $221 $265 $318 $379 $451

Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Liabilities $0 $101 $110 $117 $121 $124 $151 $183 $221 $265 $318 $379 $451

Paid-in Capital $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Retained Earnings ($720) ($720) ($720) ($720) ($720) ($720) ($720) ($720) ($720) ($720) ($720) ($720) ($720)
Earnings $0 $360 $737 $1,103 $1,432 $1,698 $2,068 $2,558 $3,191 $3,992 $4,991 $6,225 $7,735
Total Capital $280 $640 $1,017 $1,383 $1,712 $1,978 $2,348 $2,838 $3,471 $4,272 $5,271 $6,505 $8,015
Total Liabilities and Capital $280 $741 $1,128 $1,501 $1,833 $2,102 $2,499 $3,022 $3,692 $4,538 $5,589 $6,884 $8,466
Net Worth $280 $640 $1,017 $1,383 $1,712 $1,978 $2,348 $2,838 $3,471 $4,272 $5,271 $6,505 $8,015

Page 6