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Legal Page

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 Table of Contents

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

Chart: Highlights...........................................................................................................................2
1.1 Objectives....................................................................................................................................2
1.2 Mission...........................................................................................................................................2
1.3 Keys to Success.........................................................................................................................2
2.0 Company Summary......................................................................................................................2
2.1 Company Ownership................................................................................................................2
2.2 Start-up Summary....................................................................................................................3
Table: Start-up Funding.............................................................................................................3
Chart: Start-up..............................................................................................................................4
Table: Start-up..............................................................................................................................4
3.0 Products............................................................................................................................................5
4.0 Market Analysis Summary.........................................................................................................5
4.1 Market Segmentation..............................................................................................................5
Table: Market Analysis................................................................................................................6
Chart: Market Analysis (Pie).....................................................................................................6
4.2 Target Market Segment Strategy.......................................................................................6
4.3 Industry Analysis.......................................................................................................................7
4.3.1 Competition and Buying Patterns...............................................................................7
5.0 Strategy and Implementation Summary.............................................................................7
5.1 Competitive Edge......................................................................................................................8
5.2 Marketing Strategy...................................................................................................................8
5.3 Sales Strategy............................................................................................................................8
5.3.1 Sales Forecast....................................................................................................................9
Table: Sales Forecast..............................................................................................................9
Chart: Sales Monthly...............................................................................................................9
Chart: Sales by Year..............................................................................................................10
5.4 Milestones..................................................................................................................................11
Chart: Milestones........................................................................................................................11
Table: Milestones........................................................................................................................11
6.0 Management Summary.............................................................................................................12
6.1 Personnel Plan..........................................................................................................................12
Table: Personnel..........................................................................................................................12
7.0 Financial Plan................................................................................................................................13
7.1 Important Assumptions........................................................................................................13
Table: General Assumptions...................................................................................................13
7.2 Projected Cash Flow...............................................................................................................13
Chart: Cash...................................................................................................................................13
Table: Cash Flow.........................................................................................................................14
7.3 Break-even Analysis...............................................................................................................15
7.3 Break-even Analysis...............................................................................................................15
Table: Break-even Analysis....................................................................................................15
Chart: Break-even Analysis....................................................................................................15
7.4 Projected Profit and Loss.....................................................................................................16

Page 1
 Table of Contents

Chart: Profit Monthly.................................................................................................................16

Chart: Profit Yearly.....................................................................................................................16
Chart: Gross Margin Monthly.................................................................................................17
Chart: Gross Margin Yearly.....................................................................................................17
Table: Profit and Loss................................................................................................................18
7.5 Projected Balance Sheet......................................................................................................19
7.5 Projected Balance Sheet......................................................................................................19
Table: Balance Sheet.................................................................................................................19
7.6 Business Ratios........................................................................................................................19
7.6 Business Ratios........................................................................................................................19
Table: Ratios.................................................................................................................................20
Table: Sales Forecast..........................................................................................................................1
Table: Personnel....................................................................................................................................2
Table: Personnel....................................................................................................................................2
Table: General Assumptions.............................................................................................................3
Table: General Assumptions.............................................................................................................3
Table: Profit and Loss..........................................................................................................................4
Table: Profit and Loss..........................................................................................................................4
Table: Cash Flow...................................................................................................................................5
Table: Cash Flow...................................................................................................................................5
Table: Balance Sheet...........................................................................................................................6
Table: Balance Sheet...........................................................................................................................6

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 Malone's Maternity

1.0 Executive Summary

Malone's Maternity, a start-up company, is a boutique style retailer of maternity and child
clothing and accessories. Malone's Maternity will offer its customers a wide range of upscale
products to choose from. The business has been formed as an Ohio corporation by Sandy
Malone. By offering a nice selection of upper-end merchandise with benchmarked customer
service, Malone's Maternity will quickly gain market share.

The Market
Malone's Maternity has identified two distinct market segments to target. The first segment is
the actual parents, those that are buying the products for themselves or for their spouses. This
segment is growing at an impressive 9% annual rate and contains 135,457 potential
customers. The second group are friends and other people buying gifts. This market segment
has a 8% annual growth rate with 299,454 potential customers.

The Concept
Imagine this. You walk into a new retail space and it is an upscale boutique, as if you were on
Fifth Avenue or Beverly Hills Drive. But wait, the clothes are not for upscale models, but for
expecting moms and their infants/kids. While this may seem a bit unusual, it is truly needed.
Fashion conscious women have been looking for an upscale boutique where they can get good
looking, chic clothing for themselves as well as fashionable clothes for the toddlers and a wide
range of gifts and accessories. While there is one other store in the Cleveland Metropolitan area
that sells clothes at a similar price point, the store itself does not communicate the feeling of an
exclusive boutique. Malone's Maternity will thrive by offering upscale products to upscale
clients.

Management
Malone's Maternity will be led by its founder Sandy Malone. Sandy has an undergraduate
degree in Sociology. Upon graduation Sandy went to work for Saks Fifth Avenue, an upscale
retail chain. Within four years Sandy was one of the main buyers for the entire chain, a job that
provided her with unique insight into the retail industry. Sandy spent several years in this
position, collecting a wealth of knowledge and developing important skills. Then Sandy
underwent the necessary practical experience for this venture, she had three children. Sandy
became keenly aware of the lack of high end offerings available in the Cleveland area for
expecting mothers and their small children. With this insight, industry experience, and
important skill sets, Sandy will lead Malone's Maternity to become the premier boutique in the
area. Malone's Maternity will achieve strong sales for years two and three while earning
moderate net profit for those years.

Page 1
 Malone's Maternity

Chart: Highlights

Highlights

$320,000

$280,000

$240,000

$200,000 Sales

$160,000 Gross Margin

$120,000 Net Profit

$80,000

$40,000

$0

($40,000)
Year 1 Year 2 Year 3

1.1 Objectives

 To create a maternity clothes and accessory boutique.

 Quickly gain market share by addressing the upper-end price point of maternity and infant
clothing.
 To become profitable within two years.

1.2 Mission

It is Malone's Maternity's mission to become the premier maternity boutique for the upscale
expectant mother and her child. This will be accomplished by offering the newest fashions and
the highest level of customer attention.

1.3 Keys to Success

 Offer the finest maternity clothing and accessories for the mothers and children.
 Pamper the customers.
 Develop a strict financial control regime for the business.

2.0 Company Summary

Malone's Maternity was formed by Sandy Malone as an Ohio registered corporation.

2.1 Company Ownership

Sandy Malone is the primary shareholder in Malone's Maternity.

Page 2
 Malone's Maternity

2.2 Start-up Summary

Malone's Maternity will incur the following start-up expenses:

 Point of purchase computer with back-end server.

 Additional computer for the office with an Internet connection and laser printer. Required
software is Business Plan Pro, Microsoft Office, QuickBooks Pro.
 Three extension phone system.
 Copier and fax machine.
 Two office desk setups.
 Various shelving on the walls
 Build-out expenses including the shelving units, store fixtures, changing rooms, various
chairs and couches, etc.

Table: Start-up Funding

Start-up Funding
Start-up Expenses to Fund $65,950
Start-up Assets to Fund $74,050
Total Funding Required $140,000

Assets
Non-cash Assets from Start-up $22,500
Cash Requirements from Start-up $51,550
Additional Cash Raised $0
Cash Balance on Starting Date $51,550
Total Assets $74,050

Liabilities and Capital

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

Capital

Planned Investment
Investor 1 $55,000
Investor 2 $45,000
Other $40,000
Additional Investment Requirement $0
Total Planned Investment $140,000

Loss at Start-up (Start-up Expenses) ($65,950)

Total Capital $74,050

Total Capital and Liabilities $74,050

Total Funding $140,000

Page 3
 Malone's Maternity

Chart: Start-up

Start-up

$140,000

$120,000

$100,000

$80,000

$60,000

$40,000

$20,000

$0
Expenses Assets Investment Loans

Table: Start-up

Start-up

Requirements

Start-up Expenses
Legal $2,500
Stationery etc. $500
Brochures $250
Consultants $0
Insurance $200
Rent $2,500
Research and Development $0
Build-out $50,000
Inventory $10,000
Total Start-up Expenses $65,950

Start-up Assets
Cash Required $51,550
Start-up Inventory $0
Other Current Assets $3,500
Long-term Assets $19,000
Total Assets $74,050

Total Requirements $140,000

Page 4
 Malone's Maternity

3.0 Products

Malone's Maternity is a new boutique that offers a wide range of fancy maternity clothes and
accessories as well as baby clothing. The concept is to offer high-end products for both the
mother and child in one store. This level of convenience is not offered by anyone else. While
there is one other store that offers upscale maternity clothing, no one offers products for both
mother and child in the same store. Some of Malone's Maternity's product offerings include:

 Maternity clothes.
 Baby clothes.
 New mother gift baskets.
 Gift registries.
 Fancy photo albums.
 New baby pamper kits (a nice assortment of oils, soaps, and other luxuries).
 Assorted fancy containers for diapers and wet wipes.

4.0 Market Analysis Summary

Malone's Maternity has identified two distinct attractive market segments. The first
segment includes expecting and just delivered mothers. The second segment encompasses
family, friends, coworkers, and others purchasing gifts. Malone's Maternity operates within the
large maternity industry, which offers a wide range of products for mothers and children.
Malone's Maternity will compete within the upper echelon of this market.

4.1 Market Segmentation

Malone's Maternity has identified two particularly attractive market segments.

Parents - This segment is primarily the expecting mother, and also includes the father.

 Ages 24-34, median age 32.

 Household income above $80,000.
 Go out to eat 2.3 times a week.
 89% have an undergraduate degree.
 39% have a graduate degree.
 Spend $350 a month on clothing for themselves.

Family & Friends - This segment is buying gifts for the new parents and child. They are
looking for something upscale, something that would be really enjoyed.

 Ages 32-57.
 Household income greater than $83,000.
 Go out to eat 2.1 times a week.
 83% have an undergraduate degree.
 23% have a graduate degree.

Page 5
 Malone's Maternity

Table: Market Analysis

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Parents 4% 135,457 140,875 146,510 152,370 158,465 4.00%
Family & Friends 4% 299,454 311,432 323,889 336,845 350,319 4.00%
Total 4.00% 434,911 452,307 470,399 489,215 508,784 4.00%

Chart: Market Analysis (Pie)

Market Analysis (Pie)

Parents

Family & Friends

4.2 Target Market Segment Strategy

Malone's Maternity has chosen parents, and family and friends, as the two most attractive
segments to target. These segments are the most desirable because they have high levels of
disposable income, and they spend it. The parents are used to having fashionable clothes and
accessories and it is totally consistent with their purchasing patterns that this preference
would remain unchanged once they get pregnant. Many expecting parents like to reward or
pamper themselves with nice gifts when they're pregnant.

Family and friends are interested in buying nice gifts for their expecting friends. This segment
recognizes their friend's appreciation for nice things and are looking for something that they
know they will enjoy. The gifts are meant to be something nice, and luxurious. Much of the
current maternity wear and accessories are utility based, and while they serve their purpose,
they are not the most engaging gift. Family and friends are looking for something that will
stand out, that the new parents will truly enjoy.

Page 6
 Malone's Maternity

4.3 Industry Analysis

The retail maternity and child industry is made up very specific retailers that generally do not
have much crossover. This means that a retailer will concentrate on either maternity or
children; it is rare for a retailer to offer products for both mother and child in the same store.
While this is somewhat intuitive because it allows the retailer to remain focused on one thing,
Malone's Maternity believes that there are many lost opportunities in that case since maternity
and children go hand in hand. Malone's Maternity will capitalize on these missed opportunities
and allow one-stop shopping for both mother and child.

Industry Trends

 There is a shift in the new millennium toward a younger mom, beginning at age 20.
 82% of 20-24 year olds think motherhood is the most important job in the world compared
with 72% of women age 24-34.
 Molded cup nursing bras are the fastest growing product. They tend to give mothers a fresh,
young look while keeping them pretty and confident.
 There is an increase in active wear as a result of two factors:
o New research indicates it is beneficial for women to exercise during and
after pregnancy.
o Women are becoming more athletic.
 Cotton/Lycra blend has become the fabric of choice for comfort.
o Cotton- for superior breathability.
o Lycra- its body sculpting properties offer youthful, natural looking support, forgiving
fit and easy-care properties.

4.3.1 Competition and Buying Patterns

Malone's Maternity faces competition from several sources.

 Mail order/Internet - Many retailers sell their products from remote locations that are
accessible either by catalog or a Website. This provides the consumer with a wide selection.
While this works for certain general items, it causes problems for clothing that must be tried
on first. Especially for the expecting mother whose size is changing rapidly. Some mothers
do not know what their size is due to fluctuation.

 Local retailers - There are six different retailers within a 20 mile radius of Malone's
Maternity. Five of them cater to the mid-price point. The sixth is a higher end store carrying
some of the same merchandise for the mother Malone's Maternity will carry. While this store
has similar stock, the store itself does not feel like a boutique. They have high-end
merchandise but the store experience does not translate into high-end boutique. The store
is somewhat drab. All of the local competing stores sell only maternity items. They do not
offer anything for children.

5.0 Strategy and Implementation Summary

Malone's Maternity will leverage their competitive edge of product selection for both women and
children to gain market share. Malone's Maternity is the only store offering clothing and
accessories for expectant and new mothers, as well as for infants and children. This will create
unmatched convenience and lead to higher customer tickets.

Page 7
 Malone's Maternity

The marketing strategy will be two-pronged in its attempt to increase the target customer's
awareness of Malone's Maternity; a focused advertising campaign and the location of the retail
space.

The sales strategy will be to offer the highest level of customer service. The ideal customer is
accustomed to excellent service and Malone's Maternity has the goal of impressing every
customer with their benchmarked level of customer attention.

5.1 Competitive Edge

Malone's Maternity's competitive edge of product offerings for both mother and child offers two
distinct advantages:

 Convenience - Having items for both mother and child makes a trip to Malone's Maternity
convenient. Gifts for both groups can be purchased at once.

 Higher tickets per customer - Because there are products for mothers and children, the
ticket prices per customer will be higher as customers buy gifts for both as instead of only
one. These customers typically buy gifts for both, but ordinarily have to travel to different
stores to satisfy both needs.

5.2 Marketing Strategy

The marketing strategy has several approaches to develop awareness of this new boutique.

 Advertising - Ads will be placed in several different media, but primarily in the fashion
section of Cleveland's The Plain Dealer, the region's largest newspaper. The Plain Dealer
also has a child birth/care section each week and advertisements will be placed there as
well.

 Location - Malone's Maternity is located the store in an upscale mall that attracts a large
amount of foot traffic. The additional money spent on rent will assist the marketing effort.
By strategically locating the store in a posh, busy center Malone's Maternity will increase
awareness and traffic within the store.

5.3 Sales Strategy

The sales strategy will rely on customer service. All employees will receive training on customer
attention. The overriding maxim is that all customers be given as much attention as they need,
and, no customers should leave the store unsatisfied, even if they do not make a purchase.
Employees will be taught how to handle any type of problem that may arise. All employees are
empowered to remedy most problems. If something occurs that the employee is unable to fix,
they will pass the issue on to the manager. The net effect of this approach is that customers
are immediately greeted upon entering the store and in a subtle but helpful way their needs are
met. Ensuring all customers are both satisfied and impressed with the service that they
received, will ensure a steady increase in sales.

Page 8
 Malone's Maternity

5.3.1 Sales Forecast

Malone's Maternity has developed a sales forecast that is fairly conservative in its
projections. This approach was chosen to increase the likelihood of achieving the sales goals.
The following chart indicates that sales are expected to increase slowly. These forecasts will be

12
monitored monthly to verify that the sales are rising as expected. The personnel needs,

10 Month
specifically for employees to help customers on the sales floor will be monitored to ensure that

11
there are sufficient numbers of employees to serve the customers.

9 Month
8 Month
Table: Sales Forecast

MonthMonth
Sales Forecast

7
Year 1 Year 2 Year 3

Month
Sales

Month 6
Parents $59,671 $149,090 $178,998
Family & Friends 5 $53,644 $134,032 $160,919
Total Sales $113,315 $283,122 $339,917
Month
4

Direct Cost of Sales Year 1 Year 2 Year 3

Month

Parents $23,868 $59,636 $71,599

3

Family & Friends $21,458 $53,613 $64,368

Month

Subtotal Direct Cost of Sales $45,326 $113,249 $135,967

MonthMonth
1 2

Chart: Sales Monthly

Sales Monthly

$14,000

$12,000

$10,000

Parents
$8,000
Family & Friends
$6,000

$4,000

$2,000

$0

Page 9
 Malone's Maternity

Chart: Sales by Year

Sales by Year

$320,000

$280,000

$240,000
Parents
$200,000
Family & Friends
$160,000

$120,000

$80,000

$40,000

$0
Year 1 Year 2 Year 3

Page 10
 Malone's Maternity

5.4 Milestones

Malone's Maternity has identified four quantifiable milestones for the organization. By
identifying four performance goals and setting the goals to be ambitious but obtainable,
Malone's Maternity will have developed a target for everyone to shoot for. The following table
details the milestones.

Chart: Milestones

Milestones

Business plan completion

Secure store location

Store build-out

Grand Openning

Profitability

$300,000 in revenue

Q1 `03 Q2 Q3 Q4 Q1 `04 Q2 Q3 Q4 Q1 `05 Q2 Q3

Table: Milestones

Milestones

Milestone Start Date End Date Budget Manager Department

Business plan completion 1/1/2003 2/15/2003 $0 Sandy Business formation
Secure store location 1/2/2003 1/30/2003 $0 Sandy Business formation
Store build-out 2/15/2003 3/15/2003 $0 Sandy Accounting
Grand Openning 3/16/2003 3/31/2003 $0 Sandy Accounting
Profitability 3/16/2003 6/30/2004 $0 Sandy Accounting
$300,000 in revenue 3/16/2003 9/30/2005 $0 All Sales
Totals $0

Page 11
 Malone's Maternity

6.0 Management Summary

Sandy Malone is the leader of the organization. Sandy received her undergraduate degree in
sociology from Case Western Reserve. After graduation Sandy began to work for the Saks Fifth
Avenue Corporation. Initially, Sandy was on the sales floor but she quickly moved up in the
organization. After four years Sandy was one of the main buyers for the chain, in charge of
procurement of inventory valued at $55 million.

After three years in this position Sandy had the first of three children. What struck Sandy as
being odd was how difficult is was to get nice maternity clothes and the fact that although the
mother and child are intertwined, she was forced to go to two different stores when she wanted
to get something for herself and for the upcoming child. This phenomenon was something that
she was aware of throughout the pregnancy of all three children. While she saw a business
opportunity after her first child, she was unable to act upon it since she was dedicating her time
to raising the children. After the second child Sandy began taking several management
courses thinking that once her children were older, she wanted to operate her own business,
capitalizing on this market opportunity. By the time that the third child was two years old
Sandy was seriously considering opening her own business. She recognized that it would
occupy significant amount of her time initially, but that over time she would be able to build it
into a thriving business.

6.1 Personnel Plan

Malone's Maternity has identified the following people or positions that will be needed to
smoothly operate the business:

 Sandy - As the owner, she will have a wide range of responsibilities including: purchasing,
training and hiring, customer service, some accounting, and whatever else may come up.
 Sales staff - Malone's Maternity will employ several sales staff to help assist customers.
 Manager - By year two Malone's Maternity will hire a part-time manager to assist Sandy
with operational responsibilities.
 Bookkeeper - This person will perform accounts payable and receivable functions.

Table: Personnel

Personnel Plan
Year 1 Year 2 Year 3
Sandy $24,000 $20,000 $24,000
Sales staff $14,000 $16,800 $16,800
Sales staff $12,600 $16,800 $16,800
Sales staff $9,800 $16,800 $16,800
Bookkeeper $8,000 $9,600 $9,600
Manager $0 $14,000 $14,000
Total People 5 6 6

Total Payroll $68,400 $94,000 $98,000

Page 12
 Malone's Maternity

7.0 Financial Plan

The following sections outline important financial information.

7.1 Important Assumptions

The following table details important Financial Assumptions.

Table: General Assumptions

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

7.2 Projected Cash Flow

The following chart and table show the Projected Cash Flow.

Chart: Cash

Cash
$50,000

$40,000

$30,000
Net Cash Flow

$20,000 Cash Balance

$10,000

$0

Month 1 Month 3 Month 5 Month 7 Month 9 Month 11

Month 2 Month 4 Month 6 Month 8 Month 10 Month 12

Page 13
 Malone's Maternity

Table: Cash Flow

Pro Forma Cash Flow

Year 1 Year 2 Year 3
Cash Received

Cash from Operations

Cash Sales $113,315 $283,122 $339,917
Subtotal Cash from Operations $113,315 $283,122 $339,917

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $113,315 $283,122 $339,917

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending $68,400 $94,000 $98,000
Bill Payments $93,011 $188,000 $196,164
Subtotal Spent on Operations $161,411 $282,000 $294,164

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 Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $161,411 $282,000 $294,164

Net Cash Flow ($48,096) $1,122 $45,753

Cash Balance $3,454 $4,576 $50,329

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 Malone's Maternity

7.3 Break-even Analysis

The Break-even Analysis indicates what will be needed in monthly revenue to achieve the
break-even point.

Table: Break-even Analysis

Break-even Analysis

Monthly Revenue Break-even $17,160

Assumptions:
Average Percent Variable Cost 40%
Estimated Monthly Fixed Cost $10,296

Chart: Break-even Analysis

Break-even Analysis
$10,000

$8,000

$6,000

$4,000

$2,000

$0

($2,000)

($4,000)

($6,000)

($8,000)

($10,000)
$0 $6,000 $12,000 $18,000 $24,000 $30,000
$3,000 $9,000 $15,000 $21,000 $27,000 $33,000

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 Malone's Maternity

7.4 Projected Profit and Loss

The following table and charts illustrate the Projected Profit and Loss.

Chart: Profit Monthly

Profit Monthly

$0

($1,000)

($2,000)

($3,000)

($4,000)

($5,000)

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

Page 16
 Malone's Maternity

Chart: Profit Yearly

Profit Yearly

$30,000

$20,000

$10,000

$0

($10,000)

($20,000)

($30,000)

($40,000)

($50,000)

Year 1 Year 2 Year 3

Chart: Gross Margin Monthly

Gross Margin Monthly

$9,000

$8,000

$7,000

$6,000

$5,000

$4,000

$3,000

$2,000

$1,000

$0
Month 1 Month 3 Month 5 Month 7 Month 9 Month 11
Month 2 Month 4 Month 6 Month 8 Month 10 Month 12

Page 17
 Malone's Maternity

Chart: Gross Margin Yearly

Gross Margin Yearly

$210,000

$180,000

$150,000

$120,000

$90,000

$60,000

$30,000

$0
Year 1 Year 2 Year 3

Page 18
 Malone's Maternity

Table: Profit and Loss

Pro Forma Profit and Loss

Year 1 Year 2 Year 3
Sales $113,315 $283,122 $339,917
Direct Cost of Sales $45,326 $113,249 $135,967
Other Costs of Goods $0 $0 $0
Total Cost of Sales $45,326 $113,249 $135,967

Gross Margin $67,989 $169,873 $203,950

Gross Margin % 60.00% 60.00% 60.00%

Expenses
Payroll $68,400 $94,000 $98,000
Sales and Marketing and Other Expenses $4,200 $4,400 $4,600
Depreciation $3,792 $3,792 $3,792
Rent $30,000 $30,900 $31,827
Utilities $3,000 $3,090 $3,120
Insurance $2,400 $2,400 $2,400
Payroll Taxes $10,260 $14,100 $14,700
Other $1,500 $1,500 $1,500

Total Operating Expenses $123,552 $154,182 $159,939

Profit Before Interest and Taxes ($55,563) $15,691 $44,011

EBITDA ($51,771) $19,483 $47,803
Interest Expense $0 $0 $0
Taxes Incurred $0 $4,707 $13,203

Net Profit ($55,563) $10,984 $30,808

Net Profit/Sales -49.03% 3.88% 9.06%

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 Malone's Maternity

7.5 Projected Balance Sheet

The following table presents the Projected Balance Sheet.

Table: Balance Sheet

Pro Forma Balance Sheet

Year 1 Year 2 Year 3
Assets

Current Assets
Cash $3,454 $4,576 $50,329
Inventory $6,119 $25,938 $14,964
Other Current Assets $3,500 $3,500 $3,500
Total Current Assets $13,073 $34,014 $68,793

Long-term Assets
Long-term Assets $19,000 $19,000 $19,000
Accumulated Depreciation $3,792 $7,584 $11,376
Total Long-term Assets $15,208 $11,416 $7,624
Total Assets $28,281 $45,430 $76,417

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities
Accounts Payable $9,793 $15,959 $16,138
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $9,793 $15,959 $16,138

Long-term Liabilities $0 $0 $0
Total Liabilities $9,793 $15,959 $16,138

Paid-in Capital $140,000 $140,000 $140,000

Retained Earnings ($65,950) ($121,513) ($110,529)
Earnings ($55,563) $10,984 $30,808
Total Capital $18,487 $29,471 $60,279
Total Liabilities and Capital $28,281 $45,430 $76,417

Net Worth $18,487 $29,471 $60,279

7.6 Business Ratios

The following table indicates Business Ratios specific to Malone's Maternity and to the industry.
Their NAICS industry class is currently Woman's clothing including, Maternity clothing
448120. Please note that the variance in gross margin between Malone's Maternity and the
industry as a whole can be explained by the fact that Malone's Maternity is a high-end boutique
that enjoys above industry margins.

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 Malone's Maternity

Table: Ratios

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 149.85% 20.06% -10.29%

Percent of Total Assets

Inventory 21.64% 57.09% 19.58% 41.71%
Other Current Assets 12.38% 7.70% 4.58% 22.42%
Total Current Assets 46.22% 74.87% 90.02% 89.70%
Long-term Assets 53.78% 25.13% 9.98% 10.30%
Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 34.63% 35.13% 21.12% 43.23%

Long-term Liabilities 0.00% 0.00% 0.00% 13.53%
Total Liabilities 34.63% 35.13% 21.12% 56.76%
Net Worth 65.37% 64.87% 78.88% 43.24%

Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 60.00% 60.00% 60.00% 23.67%
Selling, General & Administrative Expenses 109.03% 56.12% 50.94% 14.57%
Advertising Expenses 0.00% 0.00% 0.00% 0.75%
Profit Before Interest and Taxes -49.03% 5.54% 12.95% 0.35%

Main Ratios
Current 1.33 2.13 4.26 1.84
Quick 0.71 0.51 3.34 0.72
Total Debt to Total Assets 34.63% 35.13% 21.12% 1.03%
Pre-tax Return on Net Worth -300.55% 53.24% 73.01% 61.46%
Pre-tax Return on Assets -196.47% 34.54% 57.59% 2.68%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin -49.03% 3.88% 9.06% n.a
Return on Equity -300.55% 37.27% 51.11% n.a

Activity Ratios
Inventory Turnover 10.91 7.07 6.65 n.a
Accounts Payable Turnover 10.50 12.17 12.17 n.a
Payment Days 27 24 30 n.a
Total Asset Turnover 4.01 6.23 4.45 n.a

Debt Ratios
Debt to Net Worth 0.53 0.54 0.27 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a

Liquidity Ratios
Net Working Capital $3,279 $18,055 $52,655 n.a
Interest Coverage 0.00 0.00 0.00 n.a

Additional Ratios
Assets to Sales 0.25 0.16 0.22 n.a
Current Debt/Total Assets 35% 35% 21% n.a
Acid Test 0.71 0.51 3.34 n.a
Sales/Net Worth 6.13 9.61 5.64 n.a
Dividend Payout 0.00 0.00 0.00 n.a

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 Appendix

Table: Sales Forecast

Sales Forecast
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales
Parents 0% $0 $0 $4,340 $4,909 $5,232 $5,453 $5,890 $6,112 $6,323 $6,878 $7,211 $7,323
Family & Friends 0% $0 $0 $3,902 $4,413 $4,704 $4,902 $5,295 $5,495 $5,684 $6,183 $6,483 $6,583
Total Sales $0 $0 $8,242 $9,322 $9,936 $10,355 $11,185 $11,607 $12,007 $13,061 $13,694 $13,906

Direct Cost of Sales Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Parents $0 $0 $1,736 $1,964 $2,093 $2,181 $2,356 $2,445 $2,529 $2,751 $2,884 $2,929
Family & Friends $0 $0 $1,561 $1,765 $1,881 $1,961 $2,118 $2,198 $2,274 $2,473 $2,593 $2,633
Subtotal Direct Cost of Sales $0 $0 $3,297 $3,729 $3,974 $4,142 $4,474 $4,643 $4,803 $5,225 $5,477 $5,563

Page 1
 Appendix

Table: Personnel

Personnel Plan
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sandy 0% $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Sales staff 0% $0 $0 $1,400 $1,400 $1,400 $1,400 $1,400 $1,400 $1,400 $1,400 $1,400 $1,400
Sales staff 0% $0 $0 $0 $1,400 $1,400 $1,400 $1,400 $1,400 $1,400 $1,400 $1,400 $1,400
Sales staff 0% $0 $0 $0 $0 $0 $1,400 $1,400 $1,400 $1,400 $1,400 $1,400 $1,400
Bookkeeper 0% $0 $0 $800 $800 $800 $800 $800 $800 $800 $800 $800 $800
Manager 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total People 0 1 3 4 4 5 5 5 5 5 5 5

Total Payroll $2,000 $2,000 $4,200 $5,600 $5,600 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000

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 Appendix

Table: General Assumptions

General Assumptions
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Plan Month 1 2 3 4 5 6 7 8 9 10 11 12
Current Interest Rate 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 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0 0 0 0 0 0 0 0

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 Appendix

Table: Profit and Loss

Pro Forma Profit and Loss

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales $0 $0 $8,242 $9,322 $9,936 $10,355 $11,185 $11,607 $12,007 $13,061 $13,694 $13,906
Direct Cost of Sales $0 $0 $3,297 $3,729 $3,974 $4,142 $4,474 $4,643 $4,803 $5,225 $5,477 $5,563
Other Costs of Goods $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $0 $0 $3,297 $3,729 $3,974 $4,142 $4,474 $4,643 $4,803 $5,225 $5,477 $5,563

Gross Margin $0 $0 $4,945 $5,593 $5,961 $6,213 $6,711 $6,964 $7,204 $7,837 $8,216 $8,344
Gross Margin % 0.00% 0.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00%

Expenses
Payroll $2,000 $2,000 $4,200 $5,600 $5,600 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000
Sales and Marketing and Other $350 $350 $350 $350 $350 $350 $350 $350 $350 $350 $350 $350
Expenses
Depreciation $316 $316 $316 $316 $316 $316 $316 $316 $316 $316 $316 $316
Rent $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500
Utilities $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250
Insurance $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200
Payroll Taxes 15% $300 $300 $630 $840 $840 $1,050 $1,050 $1,050 $1,050 $1,050 $1,050 $1,050
Other $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125

Total Operating Expenses $6,041 $6,041 $8,571 $10,181 $10,181 $11,791 $11,791 $11,791 $11,791 $11,791 $11,791 $11,791

Profit Before Interest and Taxes ($6,041) ($6,041) ($3,626) ($4,588) ($4,220) ($5,578) ($5,080) ($4,827) ($4,587) ($3,954) ($3,575) ($3,447)
EBITDA ($5,725) ($5,725) ($3,310) ($4,272) ($3,904) ($5,262) ($4,764) ($4,511) ($4,271) ($3,638) ($3,259) ($3,131)
Interest Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Net Profit ($6,041) ($6,041) ($3,626) ($4,588) ($4,220) ($5,578) ($5,080) ($4,827) ($4,587) ($3,954) ($3,575) ($3,447)
Net Profit/Sales 0.00% 0.00% -44.00% -49.21% -42.47% -53.86% -45.42% -41.59% -38.20% -30.27% -26.11% -24.79%

Page 4
 Appendix

Table: Cash Flow

Pro Forma Cash Flow

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

Cash from Operations

Cash Sales $0 $0 $8,242 $9,322 $9,936 $10,355 $11,185 $11,607 $12,007 $13,061 $13,694 $13,906
Subtotal Cash from Operations $0 $0 $8,242 $9,322 $9,936 $10,355 $11,185 $11,607 $12,007 $13,061 $13,694 $13,906

Additional Cash Received

Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $0 $0 $8,242 $9,322 $9,936 $10,355 $11,185 $11,607 $12,007 $13,061 $13,694 $13,906

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

Expenditures from Operations

Cash Spending $2,000 $2,000 $4,200 $5,600 $5,600 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000
Bill Payments $124 $3,725 $3,967 $10,894 $8,471 $8,519 $8,819 $9,314 $9,308 $9,478 $10,166 $10,227
Subtotal Spent on Operations $2,124 $5,725 $8,167 $16,494 $14,071 $15,519 $15,819 $16,314 $16,308 $16,478 $17,166 $17,227

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 Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $2,124 $5,725 $8,167 $16,494 $14,071 $15,519 $15,819 $16,314 $16,308 $16,478 $17,166 $17,227

Net Cash Flow ($2,124) ($5,725) $75 ($7,172) ($4,135) ($5,164) ($4,634) ($4,707) ($4,301) ($3,417) ($3,472) ($3,321)
Cash Balance $49,426 $43,701 $43,776 $36,604 $32,468 $27,305 $22,671 $17,964 $13,663 $10,247 $6,775 $3,454

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 Appendix

Table: Balance Sheet

Pro Forma Balance Sheet

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

Current Assets
Cash $51,550 $49,426 $43,701 $43,776 $36,604 $32,468 $27,305 $22,671 $17,964 $13,663 $10,247 $6,775 $3,454
Inventory $0 $0 $0 $3,626 $4,102 $4,372 $4,556 $4,921 $5,107 $5,283 $5,747 $6,025 $6,119
Other Current Assets $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500
Total Current Assets $55,050 $52,926 $47,201 $50,902 $44,205 $40,340 $35,361 $31,093 $26,571 $22,446 $19,494 $16,300 $13,073

Long-term Assets
Long-term Assets $19,000 $19,000 $19,000 $19,000 $19,000 $19,000 $19,000 $19,000 $19,000 $19,000 $19,000 $19,000 $19,000
Accumulated Depreciation $0 $316 $632 $948 $1,264 $1,580 $1,896 $2,212 $2,528 $2,844 $3,160 $3,476 $3,792
Total Long-term Assets $19,000 $18,684 $18,368 $18,052 $17,736 $17,420 $17,104 $16,788 $16,472 $16,156 $15,840 $15,524 $15,208
Total Assets $74,050 $71,610 $65,569 $68,954 $61,941 $57,760 $52,465 $47,881 $43,043 $38,602 $35,334 $31,824 $28,281

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

Current Liabilities
Accounts Payable $0 $3,601 $3,601 $10,612 $8,187 $8,225 $8,508 $9,004 $8,993 $9,139 $9,824 $9,890 $9,793
Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $0 $3,601 $3,601 $10,612 $8,187 $8,225 $8,508 $9,004 $8,993 $9,139 $9,824 $9,890 $9,793

Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Liabilities $0 $3,601 $3,601 $10,612 $8,187 $8,225 $8,508 $9,004 $8,993 $9,139 $9,824 $9,890 $9,793

Paid-in Capital $140,000 $140,000 $140,000 $140,000 $140,000 $140,000 $140,000 $140,000 $140,000 $140,000 $140,000 $140,000 $140,000
Retained Earnings ($65,950) ($65,950) ($65,950) ($65,950) ($65,950) ($65,950) ($65,950) ($65,950) ($65,950) ($65,950) ($65,950) ($65,950) ($65,950)
Earnings $0 ($6,041) ($12,082) ($15,708) ($20,296) ($24,515) ($30,093) ($35,173) ($40,000) ($44,587) ($48,541) ($52,116) ($55,563)
Total Capital $74,050 $68,009 $61,968 $58,342 $53,754 $49,535 $43,957 $38,877 $34,050 $29,463 $25,509 $21,934 $18,487
Total Liabilities and Capital $74,050 $71,610 $65,569 $68,954 $61,941 $57,760 $52,465 $47,881 $43,043 $38,602 $35,334 $31,824 $28,281

Net Worth $74,050 $68,009 $61,968 $58,342 $53,754 $49,535 $43,957 $38,877 $34,050 $29,463 $25,509 $21,934 $18,487

Page 6