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Confidentiality Agreement
The undersigned reader acknowledges that the information provided by _________________________ in this marketing plan is confidential; therefore, reader agrees not to disclose it without the express written permission of _________________________. It is acknowledged by reader that information to be furnished in this marketing 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 ________________________. Upon request, this document is to be immediately returned to _________________________. ___________________ Signature ___________________ Name (typed or printed) ___________________ Date This is a marketing plan. It does not imply an offering of securities.

Table Of Contents
1.0 2.0 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Situation Analysis . . . . . . . . . . . . . 2.1 Market Summary . . . . . . . . . 2.1.1 Market Demographics . . 2.1.2 Market Needs . . . . . . 2.1.3 Market Trends . . . . . 2.1.4 Market Growth . . . . . 2.2 SWOT Analysis . . . . . . . . . . 2.2.1 Strengths . . . . . . . 2.2.2 Weaknesses . . . . . . 2.2.3 Opportunities . . . . . . 2.2.4 Threats . . . . . . . . . 2.3 Competition . . . . . . . . . . . 2.4 Services . . . . . . . . . . . . . 2.4.1 Service Business Analysis 2.5 Keys to Success . . . . . . . . . . 2.6 Critical Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 .2 .3 .3 .4 .5 .5 .5 .6 .6 .6 .6 .7 .7 .7 .8

3.0

Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.1 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.2 Marketing Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 Financial Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.4 Target Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 Positioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.6 Strategy Pyramids . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 Marketing Mix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 Marketing Research . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Financials . . . . . . . . . 4.1 Break-even Analysis 4.2 Sales Forecast . . . 4.3 Expense Forecast . Controls 5.1 5.2 5.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 . 11 . 12 . 13 . 14 . 14 . 15 . 15

4.0

5.0

. . . . . . . . . . . . Implementation . . . . Marketing Organization . Contingency Planning .

Water Tubes Plumbing
1.0 Executive Summary
Water Tubes Plumbing (WTP) is a Eugene based construction plumbing contractor that has chosen residential new homes as their niche. Water Tubes will be able to handle any service request for plumbing of volume home builds or custom new homes. By concentrating on a specific segment of the market, Water Tubes will be able to rapidly gain market share, demonstrating proficiency and professionalism in serving new housing developers and general contractors. While the margins are decent for plumbing repairs that include service calls, it is not a sustainable business. The requirement of being on call 24 hours a day takes its toll. Some people can do it for a few years, but it is not a sustainable line of work for one person. Over time the on-call status will wear aware any enjoyment that the person has for their job. Recognizing this, owner Don Roto will concentrate on new home plumbing, ensuring a long lasting, happy business. Water Tubes will leverage its competitive edges of professionalism and trim quality by properly training all employees and impress all of the customers who are used to the lackadaisical attitude of most plumbers. Water Tubes will have a total of four employees and will reach profitability by month eight.

2.0 Situation Analysis
Water Tubes Plumbing is entering its first year of operation. As a start-up organization, WTP must have a concerted marketing effort to ensure success and future profitability. Water Tubes offers the market a professional plumbing service for residential new home builds. WTP's level of professionalism will stand out in an industry that is not known for professionalism.

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Water Tubes Plumbing
2.1 Market Summary
WTP possesses good information about its market and knows a great deal about the common attributes of the most prized customers. This information will be leveraged to better understand who is served, their specific needs, and how WTP can better communicate with them.

Target Markets

Volume home builder Custom home builder

Table 2.1: Target Market Forecast

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Water Tubes Plumbing
2.1.1 Market Demographics
The profile for Water Tubes' customers consists of the following geographic, demographic, and behavior factors: Geographics • The immediate geographic target is the city of Eugene, OR with a population of 165,000. • A 60 mile radius is in need of the services. • The total targeted population is 165. Demographic • • • • 99% male builders. Ages 30-52 (87% of the people are concentrated in the 35-45 age segment). Build from 5-30 homes a year. 78% of the structures built are residential homes.

Behavior Factors • • • • Tend to stay with a subcontractor once a good relationship had been established. Build for quality, not quantity. Reputation is important. 68% of the homes are built speculatively as opposed to specification.

Table 2.1.1: Target Market Analysis Target Market Analysis Market Segments Volume home builder Custom home builder Characteristic Speculative development Owner occupied Characteristic Stock floor plan Custom floor plan Characteristic Competitive bid Pays for quality Characteristic Wants on time/on budget Wants on time/on budget Characteristic New build/not repair New build/not repair

2.1.2 Market Needs
Water Tubes Plumbing is providing its customers with a high quality, professional plumbing service for new residential homes. WTP seeks to provide the following benefits that are important to their customers. • Professionalism- time is money, so hitting all targeted goals is very important. This is just one aspect of professionalism. Another aspect of professionalism is standing behind the work product under all circumstances. • Quality work- having quality work eliminates warranty claims in the future and reinforces the perception of quality for the entire home. • Competitive prices- new residential home construtction is a tight market and every percent of margin is important. Business is lost when prices are not competitive.

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Water Tubes Plumbing
2.1.3 Market Trends
There are two market trends in the plumbing industry: • Mergers and consolidation of smaller, independently owned companies. This generally occurs as a cost saving method to achieve scale of economies. • There has been a recent proliferation of new plumbing companies that specialize in new builds, both residential and commercial. This trend is occurring with the realization that providing general plumbing service is labor intensive because of the need to have a 24 hour on-call service.

Market Forecast
250

200

150

Volume home builder
100

Custom home builder

50

0 2002 2003 2004 2005 2006

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Water Tubes Plumbing
2.1.4 Market Growth
For 2000, the U.S. plumbing industry had $9 billion in revenue. The rate of growth generally parallels the rate of growth for the construction market. Currently, the outlook is quite good. Interest rates are at a five year low and this has helped the construction/plumbing industry immeasurably.

Target Market Growth

7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Volume home builder Custom home builder

2.2 SWOT Analysis
The following SWOT analysis captures the key strengths and weaknesses within the company, and describes the opportunities and threats facing Water Tubes.

2.2.1 Strengths
• Strong relationships with many different new home builders. • Extensive industry knowledge and expertise. • Well designed training programs.

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Water Tubes Plumbing
2.2.2 Weaknesses
• Since Don is the main employee, he will have difficulty balancing his limited time between doing jobs which is the source of short-term revenue, and business development which effects long-term sustainability. • A limited marketing budget to develop brand awareness and visibility within the home building community. • Possible difficulty unseating already established firms for the prime contracts.

2.2.3 Opportunities
• Participation in an industry that is generally a positive growth industry, although it occasionally goes through downturns. • Decreased customer acquisition costs as WTP becomes more rooted in the local community. • The ability to leverage employee's labor to generate profits.

2.2.4 Threats
• The recognition by other plumbing companies that customer service and professionalism are indeed keys to success. • Difficulty in controlling the work quality of the employees.

2.3 Competition
The plumbing market is quite competitive and consequently in order to reap decent profits, large quantity of work must be done. Competitors can be broken down into three groups: 1. Chains- these plumbing companies are a franchise or a division of a larger chain. The chains typically do repair work instead of new building construction, but sometimes they do work with new builds. Private companies- These companies are typically local companies that provide plumbing services. In order to generate sufficient revenue, they will offer a wide range of services. Large commercial & residential companies- These are the local Starbucks of the plumbing world and will bid on any type of plumbing project, whether commercial or residential, repair or new builds. The majority of jobs that this competitor will work on are the larger commercial projects, but getting a contract with a volume home builder would be attractive.

2. 3.

The buying habits of the target segments are based primarily on networking. Once a relationship is established, the builder will typically give the plumber one to two jobs to display their work before any type of long term contract/relationship is developed.

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Water Tubes Plumbing
2.4 Services
Water Tubes offers the finest in residential home plumbing construction as well as custom new home construction. Residential construction is chosen because it is straight forward and clean. Estimates are far more accurate and the company is dealing with a few contractors instead of many home owners. Additionally, there is no need to be on call 24 hours a day, a major downside of being a traditional plumber. New construction will be typically bid at $1 per foot plus a multiple of $400 per fixture. Fixtures include sinks, toilets, tubs, etc. The two other elements of Water Tubes services are professionalism and trim quality. Professionalism of Water Tubes is clearly a service offering that will be highlighted as well as trim quality which is the part of plumbing that is visible to the customer.

2.4.1 Service Business Analysis
The plumbing industry is a state regulated industry. The state regulates the industry through a licensing process based upon the Universal Building Code. The code is state specific and is a comprehensive code for all building issues. There are three skill levels of plumbers. The first is the Apprentice who is basically a skilled laborer. In Eugene, Apprentices earn from $8-$12 per hour depending on experience level. The next level is a Journeymen. To achieve the Journeymen license you must pass the state Journeymen test. Journeymen in Eugene typically earn from approximately $18 per hour. The last step in the plumbing hierarchy is a Master Plumber. A Master Plumber is a Journeymen with more than 10 years experience and their earning potential is from $35-$50 per hour. In order to do work in the state, it is required that a deposit is made into the workers compensation fund of $4000 during the first year. This is for new companies only that have no record of revenue and no record of worker compensation history. After one year of no claims, $1000 is refunded per year and after five years the entire amount is refunded. In essence, this is acting as a bond for newly formed companies. The timetable for work in this niche is as follows: • Two people, one full day, rough-in (plumbing in the floors and concrete). • Two people, one full day, top-out (plumbing in the walls). • One person, one full day trim (sections visible to the end-user).

2.5 Keys to Success
The keys to success are to provide the customer with: • A fair price. • Outstanding service. • Quality work.

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Water Tubes Plumbing
2.6 Critical Issues
Water Tubes is still in the speculative stages as a start-up business. Its critical issue is to only expand at a rate that is designed to serve the customer. Expansion should only occur when it is required to meet the needs of the current customers, not theoretical, future customers.

3.0 Marketing Strategy
The plumbing market (excluding direct to the consumer jobs) is a highly networked industry where everyone knows everyone and job contracts are won or lost by who you know. With this in mind, Don will work hard to establish himself as an experienced, professional plumber who is concentrating on the residential new builds market. This will be done in part through networking with all of the home builders and developers. The networking will be an important method to increase visibility of Water Pipes Plumbing because most home builders and general contractors are always looking for professional, high quality plumbers. It is advantageous for WTP to position itself as solely working with the residential new build market because it is attractive to builders to form a relationship with a plumber that is specializing in the same market niche and not trying to do a little of everything. WTP will also be marketing with an advertising campaign in the local home builders journal.

3.1 Mission
Water Tubes Plumbing's mission is to provide the finest new house plumbing installation. We exist to attract and maintain customers. When we adhere to this maxim, everything else will fall in to place. Our services will exceed the expectations of our customers.

3.2 Marketing Objectives
• Increase repeat customers by 9% per quarter. • Ensure 100% satisfaction with every job. • Decrease customer acquisition costs by 8% per year.

3.3 Financial Objectives
• Profitability within a year. • A double-digit growth rate for the first three years. • Don will move from laboring to managing the company by the end of year three.

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Water Tubes Plumbing
3.4 Target Markets
Water Tubes will target two distinct segments in the plumbing market: 1. Volume residential home builders- These builders are creating many different homes, often at the same time, often on the same plot of land. These builders are in need of a professional, competitively priced, reliable plumber for all of their residential new builds. This is an attractive market niche because the plumbing jobs are clean, numerous, and reasonably easy to do. Once a builder has found a plumbing company that they are happy with, a long term relationship is often established, ensuring a constant flow of future jobs. Custom home builders- These builders are in need of a plumbing company for their custom projects. This segment is attractive because the margins are better than typical build jobs and the projects can be fun to do because it requires creativity and thoughtfulness to accomplish the task within the established designed constraints. This target market makes up a smaller percentage of Water Tubes' forecasted sales.

2.

3.5 Positioning
Water Tubes will be positioned as a professional, customer-centric plumbing organization that specializes on residential home builds. The growing Eugene home market will recognize and value these unique offerings. WTP will leverage its competitive edges to achieve this desired positioning. Water Tubes has two competitive advantages that it will leverage to gain market share: • Professionalism- Fortunately for Water Tubes, professionalism seems to be absent among many plumbers' skill sets. WTP will exhibit professionalism in all aspects of customer interaction as well as job performance. It is very common for plumbers to bid out for more items that they can handle at once. This is done because the assumption is that they will not get all the jobs they bid for so it is likely that their job load will be balanced out in the long run. Some times this works, other times it fails. This is a common source of unprofessionalism that will not happen at WTP. Additionally, all employees will be indoctrinated into this customer-centric culture, ensuring that all client interactions with anyone from Water Tubes will be a very positive experience. • Trim Quality- This is the part of the job that is visible to the customer as opposed to the bulk of the work that is hidden behind cabinets and walls. There are not a lot of plumbing companies that have consistently good trim quality. This is one way that Water Tubes can easily stand out relative to the competitors. Having high trim quality is also an easy way to impress home builders since they will at some point have to fix any issues that are unsatisfying to home-buyers, so sloppy trim work will usually have to be remedied at some point, usually when it is inconvenient.

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Water Tubes Plumbing
3.6 Strategy Pyramids
The single objective is to position WTP as the premier new residential home plumber in the Eugene area. The marketing strategy will initially generate awareness among the target customers. The strategy will then develop the customer base, and work toward the development of long-term customers. The message that WTP seeks to communicate is the offer of a high quality work product supported by industry benchmarked professionalism and customer service. The message will be communicated through two methods. The first is a comprehensive networking campaign that leverages the personal and professional contacts that owner Don Roro has developed during his decade of service within the industry. The message will also be communicated by an advertising campaign. This campaign will rely on ads in the Eugene Home Builders Guide, an industry journal that has a 78% market penetration for the residential home building market.

3.7 Marketing Mix
WTP's marketing mix is comprised of the following approaches to pricing, distribution, advertising and promotion, and customer service. • Pricing- Margins are tight in the industry, so WTP will offer competitive pricing to avoid being shut out. • Distribution- WTP will be able to service any job within 60 miles of the center of Eugene. • Advertising and Promotion- Advertising in the well read local Home Builder's Guide and productive marketing will be used to gain market share. • Customer Service- The company will be set apart from its competitors because of its concentration on ensuring customer satisfaction.

3.8 Marketing Research
For the last two years while working for a large plumbing company, Don began to keep records of his observations regarding the industry and which business models he thought would be most successful. This information provided Don with a good groundwork of information that he could work with. Don however, felt that more targeted market research was needed before he proceeded with the idea of starting his own business. Consequently, Don held a total of three focus groups. One group was just with volume builders, the second was just custom builders, and the third was a combination of the two target market participants. The groups were on the small size with five to six people. Don spent a great deal of time preparing the material for discussion to ensure productive sessions. The focus groups yielded a wealth of information for WTP. While some of the information served to support previously held assumptions, a lot of information provided invaluable insight into the needs of the customers as well as information regarding their decision making processes.

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Water Tubes Plumbing
4.0 Financials
This section will offer a financial overview of WTP as it relates to the marketing activities. Water Tubes will address break-even analysis, sales forecast, expense forecast, and how they relate to the marketing strategy.

4.1 Break-even Analysis
The break-even analysis indicates that $12,644 is needed in monthly revenue to reach the breakeven point.

Break-even Analysis
$20,000 $15,000 $10,000 $5,000 $0 ($5,000) ($10,000) ($15,000) $0 $6,000 $12,000 $18,000 $24,000 $30,000

Monthly break-even point
Break-even point = where line intersects with 0

Table 4.1: Break-even Analysis Break-even Analysis: Monthly Units Break-even Monthly Sales Break-even Assumptions: Average Per-Unit Revenue Average Per-Unit Variable Cost Estimated Monthly Fixed Cost 4 $12,644 $3,000.00 $300.00 $11,380

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Water Tubes Plumbing
4.2 Sales Forecast
The first month will be used to set up the business. The second month will be used to train an employee as well as to undertake several jobs. The third month will be used to train two more employees as well as do a few other jobs. By the fourth month it is forecasted that Water Tubes Plumbing will have a volume relationship with one builder. Month four will also see a custom home built. Month six will mark the development of another volume builder working relationship. From month six on there should be a steady increase in sales activity.

Monthly Sales Forecast
$20,000 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Volume new home builds Custom new home builds

Table 4.2: Sales Forecast Sales Forecast Sales Volume new home builds Custom new home builds Total Sales Direct Cost of Sales Volume new home builds Custom new home builds Subtotal Cost of Sales 2002 $104,858 $29,000 $133,858 2002 $10,486 $2,900 $13,386 2003 $151,987 $38,765 $190,752 2003 $15,199 $3,877 $19,075 2004 $165,454 $49,876 $215,330 2004 $16,545 $4,988 $21,533

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Water Tubes Plumbing
4.3 Expense Forecast
Marketing expenses are to budgeted to be fairly high during the first quarter to increase visibility for WTP as a start-up organization. The expenses will subside for a couple of months until July where they will ramp up again for several months in anticipation for the increase of new home builds.

Monthly Expense Budget
$800 $700 $600 $500 $400 $300 $200 $100 $0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Networking Advertising

Table 4.3: Marketing Expense Budget Marketing Expense Budget Networking Advertising Total Sales and Marketing Expenses Percent of Sales Contribution Margin Contribution Margin / Sales 2002 $3,100 $4,300 -----------$7,400 5.53% $113,072 84.47% 2003 $3,500 $4,600 -----------$8,100 4.25% $163,577 85.75% 2004 $3,800 $4,800 -----------$8,600 3.99% $185,197 86.01%

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Water Tubes Plumbing
5.0 Controls
The purpose of Water Tubes' marketing plan is to serve as a guide for the organization. The following areas will be monitored to track performance. • Customer satisfaction. • Repeat business. • Profit margins- monthly and annual.

5.1 Implementation
The following milestones identify the key marketing programs. It is important to accomplish each one on time and on budget.

Milestones

Marketing plan completion

Landing first custom job

Volume home business becomes fuller

Networking campaign

Advertising campaign

Jan

Feb Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Table 5.1: Milestones Milestones Milestone Marketing plan completion Landing first custom job Volume home business becomes fuller Networking campaign Advertising campaign Totals Plan Start Date 1/1/02 3/1/02 1/1/02 1/1/02 1/1/02 End Date 2/1/02 4/15/02 8/31/02 12/31/02 12/31/02 Budget $0 $0 $0 $3,100 $4,300 $7,400 Manager Don Roto Don Roto Don Roto Don Roto Don Roto Department

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Water Tubes Plumbing
5.2 Marketing Organization
Don will be responsible for all of the networking activities. Don will outsource the advertising production to a well-known local agency.

5.3 Contingency Planning
Difficulties and risks: • Problems generating visibility for WTP among the other service providers. • Difficulties finding qualified employees. Worst case risks may include: • A serious slump in the economy that has a devastating effect on the building of new homes. • Having to liquidate equipment to cover liabilities.

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Appendix: Water Tubes Plumbing
Table 4.2 Sales Forecast Sales Forecast Sales Volume new home builds Custom new home builds Total Sales Direct Cost of Sales Volume new home builds Custom new home builds Subtotal Cost of Sales Plan Jan $0 $0 $0 Jan $0 $0 $0 Feb $4,000 $0 $4,000 Feb $400 $0 $400 Mar $8,000 $0 $8,000 Mar $800 $0 $800 Apr $5,000 $7,000 $12,000 Apr $500 $700 $1,200 May $6,000 $4,000 $10,000 May $600 $400 $1,000 Jun $6,545 $3,000 $9,545 Jun $655 $300 $955 Jul $7,332 $0 $7,332 Jul $733 $0 $733 Aug $9,876 $3,500 $13,376 Aug $988 $350 $1,338 Sep $11,232 $2,500 $13,732 Sep $1,123 $250 $1,373 Oct $14,454 $3,000 $17,454 Oct $1,445 $300 $1,745 Nov $15,654 $3,500 $19,154 Nov $1,565 $350 $1,915 Dec $16,765 $2,500 $19,265 Dec $1,677 $250 $1,927

Page 1

Appendix: Water Tubes Plumbing
Table 4.3 Marketing Expense Budget Marketing Expense Budget Networking Advertising Total Sales and Marketing Expenses Percent of Sales Contribution Margin Contribution Margin / Sales Jan $300 $400 -----------$700 0.00% ($700) 0.00% Feb $300 $400 -----------$700 17.50% $2,900 72.50% Mar $300 $400 -----------$700 8.75% $6,500 81.25% Apr $300 $400 -----------$700 5.83% $10,100 84.17% May $200 $300 -----------$500 5.00% $8,500 85.00% Jun $200 $300 -----------$500 5.24% $8,091 84.76% Jul $300 $450 -----------$750 10.23% $5,849 79.77% Aug $300 $450 -----------$750 5.61% $11,288 84.39% Sep $300 $400 -----------$700 5.10% $11,659 84.90% Oct $200 $300 -----------$500 2.86% $15,209 87.14% Nov $200 $250 -----------$450 2.35% $16,789 87.65% Dec $200 $250 -----------$450 2.34% $16,889 87.66%

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