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Table of Contents
1.0 Executive Summary.............................................................................................................................1
Chart: Highlights ......................................................................................................................2
1.1 Objectives ...................................................................................................................................2
1.2 Keys to Success ........................................................................................................................2
1.3 Mission........................................................................................................................................3
2.0 Company Summary.............................................................................................................................3
2.1 Start-up Summary ......................................................................................................................3
Chart: Start-up .........................................................................................................................4
Table: Start-up .........................................................................................................................4
Table: Start-up Funding ..........................................................................................................5
2.2 Company Ownership .................................................................................................................5
3.0 Services................................................................................................................................................5
4.0 Market Analysis Summary..................................................................................................................6
4.1 Market Segmentation ................................................................................................................6
Chart: Market Analysis (Pie) ..................................................................................................7
Table: Market Analysis ...........................................................................................................7
4.2 Service Business Analysis........................................................................................................7
4.2.1 Competition and Buying Patterns................................................................................8
5.0 Strategy and Implementation Summary ............................................................................................9
5.1 Marketing Strategy.....................................................................................................................9
5.2 Sales Strategy............................................................................................................................9
5.2.1 Sales Forecast ..............................................................................................................9
Chart: Sales Monthly ...................................................................................................10
Table: Sales Forecast.................................................................................................10
6.0 Management Summary ....................................................................................................................11
6.1 Personnel..................................................................................................................................11
Table: Personnel ...................................................................................................................11
7.0 Financial Plan ....................................................................................................................................12
7.1 Important Assumptions............................................................................................................12
Table: General Assumptions ...............................................................................................12
7.2 Break-even Analysis................................................................................................................13
Chart: Break-even Analysis .................................................................................................13
Table: Break-even Analysis .................................................................................................13
7.3 Projected Cash Flow...............................................................................................................14
Chart: Cash ...........................................................................................................................14
Table: Cash Flow..................................................................................................................15
7.4 Projected Profit and Loss .......................................................................................................16
Chart: Profit Monthly .............................................................................................................16
Chart: Profit Yearly................................................................................................................17
Chart: Gross Margin Monthly ...............................................................................................17
Chart: Gross Margin Yearly..................................................................................................18
Table: Profit and Loss ..........................................................................................................18
7.5 Projected Balance Sheet ........................................................................................................19
Table: Balance Sheet ...........................................................................................................19
7.6 Business Ratios .......................................................................................................................20
Table: Ratios .........................................................................................................................21
Table: Sales Forecast ...............................................................................................................................1
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Table of Contents
Table: Personnel ........................................................................................................................................2
Table: General Assumptions ....................................................................................................................3
Table: Profit and Loss ...............................................................................................................................4
Table: Cash Flow .......................................................................................................................................5
Table: Balance Sheet ................................................................................................................................6

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Marrowstone Advertising Consultants


1.0 Executive Summary
Introduction
It is the mission of Marrowstone Advertising Consultants to provide comprehensive marketing
consultation and creation of advertising campaigns for the nonprofit industry. It is our longterm goal to bec ome THE preferred advertising agency for nonprofit institutions nationwide. Our
firm is not interested in simply producing a service for our clients. We believe in c reating a longterm relationship with them so that the delivery of their message bec omes a seemless,
thought-provoking experience that engenders ac tion.
The Company
Marrowstone Advertising Consultants will be a limited liability partnership registered in the state
of Delaware for tax purposes. Its founder is Mr. Curtiss Cole, a former marketing executive with
the Boy Sc outs of America. Mr. Cole has brought together a highly respected group of marketing,
development, and graphic art specialists who, combined, have a total of 35 years of
experience with nonprofit organizations.
The company has a limited number of private investors and does not plan to go public. The
company has its main offices in Reston, Virginia. The fac ilities include a design lab, conference
rooms and office spaces. The company expec ts to begin offering its services in January.
The Services
The firm offers a complete, custom advertising campaign that covers all audio-visual and
printed media. Examples include radio and television ads, billboards, building advertisements,
broc hures, direct mailing, business cards, etc. Management has designed a proven and
effective seven step proc ess to building a winning campaign.
The company's main c lients will be small and start-up nonprofit institutions and loc al
governments. By foc using on institutions such as these that have special needs, we believe
we will be able to better serve our clients and produce a superior service that is more effective
that other advertising firms.
The Market
Marrowstone Advertising Consultants will be concentrating on three main types of nonprofits who
operate in the environmental, youth development, and cultural awareness fields. This is
bec ause these types of organizations have the greatest needs and/or are the best capitalized in
the nonprofit industry.
Profitability and growth in this untapped market is expec ted to be strong, as evidenced by the
fac t that over the past 15 years the U.S. has seen an explosion of nonprofits in new fields
such as environmental awareness. Furthermore with the greater capitalization of such
agencies, we are seeing a widening gap between these organizations needs and what
conventional advertising companies can provide.
Financial Considerations
Start-up assets required are $122,300, which includes cash needed to support operations until
revenues reac h an acceptable level. Start-up expenses are $31,700. Most of the company's
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liabilities will come from outside private investors and management investment, however, we
have obtained $16,000 in c urrent borrowing from Bank of America Commercial Investments, the
principal to be paid off in two years. A long-term loan of $45,000 through Charter Bank of
Richmond will be paid off in ten years.
The company expec ts to reac h profitability in Year 2 and does not anticipate any serious cash
flow problems. We conservatively believe that during the first three years, about three
projects per month will guarantee a break-even point.

1.1 Objectives
The three year goals for Marrowstone Advertising are the following:

Ac hieve break-even by Year 2.


Establish a long-term contrac t with The Nature Conservancy.
Establish a minimum of 95% customer satisfac tion rate to establish long-term
relationships with our clients and create word-of-mouth marketing.

1.2 Keys to Success


Marrowstone Advertising's keys to long-term survivability and profitability are as follows:

Differentiate our services to nonprofits so that our clients realize that we are able to
better serve their needs than a more generic competitor.
Keeping close contac t with c lients and establishing a well functioning long-term
relationship with them to generate repeat business and a top notch reputation.
Establish a comprehensive service experience for our clients that includes consultation,
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analysis of nonprofit's goals and target markets. Creation of streamlined and custom
advertising campaigns based on needs, total design work of all audio-visual advertising
tools, implementation, and follow-up analysis.

1.3 Mission
It is the mission of Marrowstone Advertising Consultants to provide comprehensive marketing
consultation and creation of advertising campaigns for the nonprofit industry. Our firm is not
interested in simply producing a service for our clients. We believe in c reating a long-term
relationship with them so that the delivery of their message bec omes a seemless, thoughtprovoking experience that engenders ac tion. Marrowstone understands that nonprofit groups and
institutions have special needs in delivering their information and messages to the public and
creating inspiration to ac t on these messages.

2.0 Company Summary


Marrowstone Advertising Consultants will be a limited liability partnership registered in the state
of Delaware for tax purposes. Its founder is Mr. Curtiss Cole, a former marketing executive with
the Boy Sc outs of America. Mr. Cole has brought together a highly respected group of marketing,
development, and graphic art specialists who, combined, have a total of 35 years of
experience with nonprofit organizations.
The company has a limited number of private investors and does not plan to go public. The
company has its main offices in Reston, Virginia. The fac ilities include a design lab, conference
rooms and office spaces. The company expec ts to begin offering its services in January.
The company's main c lients will be small and start-up nonprofit institutions and loc al
governments. By foc using on institutions such as these that have special needs, we believe
we will be able to better serve our clients and produce a superior service that is more effective
that other advertising firms.

2.1 Start-up Summary


Start-up assets required are $122,300, which includes cash needed to support operations until
revenues reac h an acceptable level. Start-up expenses are $31,700. Most of the company's
liabilities will come from outside private investors and management investment, however, we
have obtained $16,000 in c urrent borrowing from Bank of America Commercial Investments, the
principal to be paid off in two years. A long-term loan of $45,000 through Charter Bank of
Richmond will be paid off in ten years.

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Table: Start-up
Start-up
Requirements
Start-up Expenses
Legal
Insurance
Utilities
Rent
Accounting and bookkeeping fees

$2,000
$1,000
$200
$2,000
$2,000

Expensed equipment
Advertising
Other

$10,000
$6,500
$8,000

Total Start-up Expenses

$31,700

Start-up Assets
Cash Required
Other Current Assets
Long-term Assets

$117,300
$5,000
$10,000

Total Assets

$132,300

Total Requirements

$164,000

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Table: Start-up Funding
Start-up Funding
Start-up Expenses to Fund
Start-up Assets to Fund
Total Funding Required

$31,700
$132,300
$164,000

Assets
Non-cash Assets from Start-up
Cash Requirements from Start-up
Additional Cash Raised
Cash Balance on Starting Date

$15,000
$117,300
$0
$117,300

Total Assets

$132,300

Liabilities and Capital


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

$16,000
$45,000
$3,000
$0
$64,000

Capital
Planned Investment
Mr. Curtis Cole
Ms. Jennie Marks
Mr. David Danielson

$25,000
$20,000
$20,000

Mr. Milo Winn


Others
Additional Investment Requirement

$8,000
$27,000
$0

Total Planned Investment

$100,000

Loss at Start-up (Start-up Expenses)


Total Capital

($31,700)
$68,300

Total Capital and Liabilities

$132,300

Total Funding

$164,000

2.2 Company Ownership


The company will have a number of outside private investors who will own 27% of the company's
shares. The rest will be owned by the senior management including Mr. Curtis Cole, (25%), Ms.
Jennie Marks (20%), Mr. David Danielson, (20%), and Mr. Milo Winn (8%). All other financing
will come from loans.

3.0 Services
Marrowstone Advertising Consultants offers a complete, custom advertising campaign that
covers all audio-visual and printed media. Examples include radio and television ads, billboards,
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building advertisements, broc hures, direct mailing, business cards, etc. Our proven and
effective seven step proc ess to building a winning campaign incudes the following:

Initial consultation.
Analysis of nonprofit's goals and target market demographics.
Planning.
Creation of streamlined and custom advertising campaigns based on needs.
Total design work of all audio-visual/printed advertising tools.
Implementation (usually through subcontrac tors).
Follow-up analysis.

Each project is customized to our client and its scope, length, depth, reac h, and cost are
unique.

4.0 Market Analysis Summary


Marrowstone Advertising Consultants will be concentrating on three main types of nonprofits who
operate in the environmental, youth development, and cultural awareness fields. This is
bec ause these types of organizations have the greatest needs and/or are the best capitalized in
the nonprofit industry.
Profitability and growth in this little tapped market is expec ted to be strong, as evidenced by the
fac t that over the past 15 years the U.S. has seen an explosion of nonprofits in new fields
such as environmental awareness. Furthermore with the greater capitalization of such
agencies, we are seeing a widening gap between these organizations needs and what
conventional advertising companies can provide.
An analysis of the market using the five forces of profitability indicates that there will be a
short time where growth of market share and profitability will be extremely high while demand
outstrips supply. As new entrants move into the market this opportunity will disappear. This is
the time for Marrowstone to create its reputation and niche in the industry.

4.1 Market Segmentation


There are various nonprofit institutions nationwide that concentrate on various public issues.
Marrowstone will be foc using on the following groups of clients:

Environmental nonprofit institutions.


Youth development nonprofit institutions.
Cultural nonprofit institutions.
Other.

We are concentrating on these specific market segments for a variety of reasons. The
environmental segment which includes organizations such as the Sierra Club and the Nature
Conservancy is the fastest growing segment at the moment, and Marrowstone's management
concludes that in the near future, they will also include some of the largest nonprofits in the
nation. Youth development nonprofits such as the Boy Sc outs, Camp Fire girls, 4-F, and The
Boys and Girls Club includes some of the largest and most well capitalized nonprofit organizations
in the country. Finally, although they tend to be small in size, there are a huge number of
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cultural nonprofits such as museums.
The market analysis table and graph which follows shows the number of eac h type of
organization in the greater Washington D.C. area. This will be our initial geographical foc us for
the first three to four years of our company's existance. Later, as we expand to a nationwide
sc ope, our future business plans will include all our potential clients ac ross the country.

Table: Market Analysis


Market Analysis
Year 1

Year 2

Year 3

Year 4

Year 5

Potential Customers
Environmental nonprofits
Youth development nonprofits

Growth
8%
4%

34
44

37
46

40
48

43
50

46
52

CAGR
7.85%
4.26%

Cultural nonprofits
Other
Total

4%
5%
4.85%

128
72
278

133
76
292

138
80
306

144
84
321

150
88
336

4.04%
5.14%
4.85%

4.2 Service Business Analysis


The advertising industry for nonprofits is at the moment, an unfulfilled market with demand
greater than supply. Many nonprofit organizations have found that only the largest and most
expensive advertising agencies will enter into contrac ts with nonprofits and this leaves a great
void which must be filled by in-house advertising.
Marrowstone believes that the greatest threat at the moment is in new entrants to the
market who will also perceive this opportunity. The most likely entrants will be pre-existing
advertising agencies wishing to horizontally integrate and enter new sub-markets. However,
the one major disadvantage to new entrants is that all firms engaged in c ontrac ting to
advertising agencies fac e significant switching costs when bringing on a new advertising partner.
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Furthermore, Marrowstone understands that in this industry there is a significant learning curve
that creates dec lining "unit" costs as a firm gains more cumulative experience in the field itself
and with long-term clients specifically.
Rivalry among different advertising agencies as stated before is quite intense. The advertising
market as a whole is mature with low growth. Most of the largest agencies are mutually
dependent when it comes to joc keying for position and market share. The fac t that there are
so many diverse and seemingly "generic" or general advertising agencies makes this a cutthroat
industry.
The threat of clients bac kwardly integrating so as to have all their advertising done in-house is
one of the major fac tors that buyers use to indirectly control price in this industry, and
increase competition among firms. This must always be foremost in the minds of Marrowstone's
management when offering services and setting prices.

4.2.1 Competition and Buying Patterns


Competition
Competition includes all potential advertising agencies that are willing to ac cept nonprofit
contrac ts and nonprofit organizations that handle all their advertising in-house. Prac tically
speaking, this means the largest advertising agencies such as Werner & Voss, Price,
Waterhouse, & Cooper, and other large, nationwide agencies that hold significant market
share. The advertising agency industry is highly fragmented, with a large number of small
companies that mainly cater to small firms and a few large companies that seek the largest
contrac ts from companies such as Mc Donald's, GM, etc. This makes competition within the
industry very intense. Through our niche strategy we intend to avoid such a debilitating
environment and avoid its drawbac ks such as price wars, etc.
Buying patterns and needs
Companies usually enter into contrac ts with advertising agencies based on their reputation of
professionalism and effective campaigns in the past. This reputation is difficult to obtain by
new advertising firms unless its personnel bring it with them from previous firms such as ours.
Price and sc ope are also important reasons for ac cepting contrac ts, espec ially if the company
is small.
nonprofit organizations have very different needs that other firms. Companies offering a
product or service need to inform the public about the benefits of their product/service and then
inspire them to purchase by leading them through an implicit or explicit cost-benefit analysis.
On the other hand, nonprofits must appeal to a person's higher sense of community duty in order
to obtain c ontributions. Advertisements must be a thought-provoking experience that
engenders ac tion. This is a far more difficult task to ac hieve than ordinary marketing and
usually requires more resources and time than product/service marketing. Many advertising
agencies do not desire to ac cept these types of contrac ts and leave it to the nonprofit
organizations to create their own marketing. This leads to higher costs, more emphasis on
obtaining contributions, and less effective management of the organization's goals.

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5.0 Strategy and Implementation Summary
Marrowstone Advertising Consultants' business strategy is to enter into a foc used or niche
market where it can offer a higher standard of quality to its specialized clients. This will allow
us to charge a higher profit margin to our clients for these differentiated services. This will also
require average project times to be somewhat longer, and therefore we expec t initial profitability
levels to be lower than average.

5.1 Marketing Strategy


In order to attrac t clients, Marrowstone will begin to contac t promising organizations and offer
free consultations, and an initial contrac t at reduced prices. These promotions will allow us to
begin to make our reputation. In addition, Mr. Cole and Mrs. Marks will be traveling to six
conventions ac ross the Eastern part of the country during the first year of operations where
we will have booths to advertise our services. Finally we will be setting up cold calls to
potential clients and have half and full page advertisements in various publications catering to
nonprofit organization's needs.

5.2 Sales Strategy


Marrowstone's management will be foc using on leveraging its extensive contac ts in the
nonprofit industry to generate contrac ts. In October of 2002 the Nature Conservancy announced
it was ac cepting bids for a new long-term advertising contrac t. Marrowstone's founder Mr. Curtis
Cole has been aggressively pursuing this contac t and based on recent events, it is likely that
Marrowstone will win the bid, to be announced in February 2003. This will generate both much
needed revenue, and if successful, will generate the reputation Marrowstone needs for further
contrac ts. In addition, Mr. Danielson will be pursuing a number of other open-ended contrac ts
through his contac ts with youth organizations. At the current time, the Holson Foundation has
entered into negotiations with Marrowstone for its disadvantaged youth drive. Finally, our
company has bid with the city of Fredrick, Maryland to create a stop smoking campaign for its
public offices.

5.2.1 Sales Forecast


Sales are based on the various contrac t projects we anticipate ac quiring in the various market
segments. Revenues are based on average costs per project based on estimated time and
complexity of project plus and undisc losed profit margin. The company does not have any
significant direct costs of sales.

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Table: Sales Forecast


Sales Forecast
Sales
Environmental nonprofits
Youth development nonprofits
Cultural nonprofits
Other
Total Sales
Direct Cost of Sales
Row 1
Other
Subtotal Direct Cost of Sales

Year 1

Year 2

Year 3

$93,000

$145,000

$224,000

$33,000
$69,000
$36,000
$231,000

$56,000
$110,000
$45,000
$356,000

$98,000
$93,000
$45,000
$460,000

Year 1

Year 2

Year 3

$0
$0
$0

$0
$0
$0

$0
$0
$0

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6.0 Management Summary
The company will have four officers including our president, Mr. Curtiss Cole. Our head of
operations will be Mr. David Danielson, plus two advertising consultants, and a graphic artist. Mr.
Winn will handle all of our audio-visual design work and he will eventually have a staff of
graphic artists working under him. Finances and general admin will be handled by Mrs. Marks.
The company plans to hire additional advertising consultants, graphic artists and administrative
personnel as we begin to get large numbers of contrac ts.

6.1 Personnel
Marrowstone's management brings to the company strong capabilities in c reative flair,
research, and a unique combination of skills drawn from other businesses.
Mr. Curtis Cole is a former marketing executive with the Land Trust Alliance and has many
years of experience working with nonprofits in the environmental field. Previous companies Mr.
Cole has worked for include the Sierra Club and the Audubon Society. Mr. Cole has successfully
launched numerous advertising and public awareness campaigns with these organizations
including efforts to preserve the orca population in the Puget Sound region and to reduce the
pollution levels in Denver, CO. Mr. Cole has an MBA in marketing and a BS in international
relations.
Mr. David Danielson graduated from Penn State University with a bac helors degree in marketing
in 1975. From 1978-1988 Mr. Danielson worked for Ford Motor Company as an advertising
executive. In 1989 he went to work for Anderson Consulting in their marketing and advertising
division. Four years later, Mr. Danielson went to work as the Boy Sc outs of America's chief
marketing executive.

Table: Personnel
Personnel Plan
Mr. Curtis Cole- president
Mrs. Jennie Marks - CFO
Mr. David Danielson - projects manager

Year 1
$36,000
$36,000
$36,000

Year 2
$36,000
$36,000
$36,000

Year 3
$60,000
$60,000
$45,000

Mr. Milo Winn - audio-visual director


Advertising consultant
Advertising consultant
Graphic artist

$36,000
$36,000
$0
$0

$36,000
$36,000
$36,000
$0

$36,000
$36,000
$36,000
$21,000

Total People

Total Payroll

$180,000

$216,000

$294,000

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7.0 Financial Plan
Our financial plan anticipates one year of negative profits as we gain sales volume. We have
budgeted enough investment to cover these losses and have an additional credit line of
$60,000 available if sales do not match predictions.

7.1 Important Assumptions


We are assuming approximately 75% sales on credit and average interest rates of 10%. These
are considered to be conservative in c ase our predictions are erroneous.

Table: General Assumptions


General Assumptions
Plan Month
Current Interest Rate
Long-term Interest Rate
Tax Rate
Other

Year 1
1
10.00%
10.00%
30.00%
0

Year 2
2
10.00%
10.00%
30.00%
0

Year 3
3
10.00%
10.00%
30.00%
0

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7.2 Break-even Analysis
Our Break-even Analysis is based on the assumptions that our gross margin is 100%. In other
words, we will have insignificant direct cost of sales. Since eac h project will be of different
sc ope, length, and complexity, it is difficult to assign an average per unit revenue figure.
However, it is conservatively believed that during the first three years, about three projects
per month will guarantee a break-even point. This is bec ause we will be dealing with smaller
companies at first that have smaller projects.

Table: Break-even Analysis


Break-even Analysis
Monthly Revenue Break-even

$22,583

Assumptions:
Average Percent Variable Cost
Estimated Monthly Fixed Cost

0%
$22,583

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7.3 Projected Cash Flow
The following is our Cash Flow table and chart. We do not expec t to have any short-term cash
flow problems even though we will be operating at a loss for the first year. Our short-term loan
of $16,000 will be repaid in two equal payments in 2004-2005. Our $45,000 long-term loan will be
paid off in ten years.

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Table: Cash Flow
Pro Forma Cash Flow
Year 1

Year 2

Year 3

Cash from Operations


Cash Sales
Cash from Receivables
Subtotal Cash from Operations

$57,750
$121,425
$179,175

$89,000
$238,956
$327,956

$115,000
$321,668
$436,668

Additional Cash Received


Sales Tax, VAT, HST/GST Received
New Current Borrowing
New Other Liabilities (interest-free)
New Long-term Liabilities
Sales of Other Current Assets
Sales of Long-term Assets
New Investment Received
Subtotal Cash Received

$0
$5,000
$0
$0
$0
$0
$3,000
$187,175

$0
$0
$0
$0
$0
$0
$0
$327,956

$0
$0
$0
$0
$0
$0
$0
$436,668

Year 1

Year 2

Year 3

$180,000
$95,653
$275,653

$216,000
$116,295
$332,295

$294,000
$131,741
$425,741

$0
$7,992
$0
$0

$0
$3,000
$0
$4,000

$0
$3,000
$0
$4,000

$0
$0
$0

$0
$0
$0

$0
$0
$0

Subtotal Cash Spent

$283,645

$339,295

$432,741

Net Cash Flow


Cash Balance

($96,470)
$20,830

($11,339)
$9,491

$3,926
$13,418

Cash Received

Expenditures
Expenditures from Operations
Cash Spending
Bill Payments
Subtotal Spent on Operations
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out
Principal Repayment of Current Borrowing
Other Liabilities Principal Repayment
Long-term Liabilities Principal Repayment
Purchase Other Current Assets
Purchase Long-term Assets
Dividends

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7.4 Projected Profit and Loss
The following table itemizes our revenues and associated costs. We expec t to be paying higher
costs in marketing and advertising than other companies as we attempt to build sales volume. As
the reader can see, we expec t monthly profits to begin in August 2003 and yearly profits to
oc cur in 2004. The charts following the table give a visual representation.

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Table: Profit and Loss


Pro Forma Profit and Loss
Year 1
$231,000
$0

Year 2
$356,000
$0

Year 3
$460,000
$0

$7,000
$7,000

$7,000
$7,000

$7,000
$7,000

Gross Margin
Gross Margin %

$224,000
96.97%

$349,000
98.03%

$453,000
98.48%

Expenses
Payroll

Sales
Direct Cost of Sales
Other Costs of Sales
Total Cost of Sales

$180,000

$216,000

$294,000

Sales and Marketing and Other Expenses


Depreciation
Rent
Utilities
Insurance
Payroll Taxes

$12,000
$2,000
$12,000
$3,600
$3,000
$27,000

$24,000
$2,000
$12,000
$3,600
$3,000
$32,400

$24,000
$2,000
$13,000
$4,000
$3,000
$44,100

Travel
Other

$24,200
$7,200

$12,000
$8,000

$10,000
$10,000

Total Operating Expenses

$271,000

$313,000

$404,100

Profit Before Interest and Taxes


EBITDA
Interest Expense
Taxes Incurred

($47,000)
($45,000)
$5,917
$0

$36,000
$38,000
$5,451
$9,165

$48,900
$50,900
$4,751
$13,245

Net Profit
Net Profit/Sales

($52,917)
-22.91%

$21,384
6.01%

$30,904
6.72%

Page 18

Marrowstone Advertising Consultants


7.5 Projected Balance Sheet
The following table shows the Project Balance Sheet for Marrowstone Advertising.

Table: Balance Sheet


Pro Forma Balance Sheet
Year 1

Year 2

Year 3

Current Assets
Cash
Accounts Receivable
Other Current Assets
Total Current Assets

$20,830
$51,825
$5,000
$77,655

$9,491
$79,869
$5,000
$94,360

$13,418
$103,201
$5,000
$121,619

Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets

$10,000
$2,000
$8,000
$85,655

$10,000
$4,000
$6,000
$100,360

$10,000
$6,000
$4,000
$125,619

Year 1

Year 2

Year 3

Accounts Payable
Current Borrowing
Other Current Liabilities

$9,264
$13,008
$0

$9,585
$10,008
$0

$10,939
$7,008
$0

Subtotal Current Liabilities

$22,272

$19,593

$17,947

Long-term Liabilities
Total Liabilities

$45,000
$67,272

$41,000
$60,593

$37,000
$54,947

Paid-in Capital

$103,000

$103,000

$103,000

Retained Earnings
Earnings
Total Capital

($31,700)
($52,917)
$18,383

($84,617)
$21,384
$39,767

($63,233)
$30,904
$70,672

Total Liabilities and Capital

$85,655

$100,360

$125,619

Net Worth

$18,383

$39,767

$70,672

Assets

Liabilities and Capital


Current Liabilities

Page 19

Marrowstone Advertising Consultants


7.6 Business Ratios
We have included industry standard ratios from the advertising consultant industry to compare
with ours. As this is a new sub-market of the overall industry, we expec t some significant
differences especially in sales growth, financing ratios, long-term asset investments and net
worth. However, our projections indicate a healthy company that will be able to obtain and
retain long-term profitability.

Page 20

Marrowstone Advertising Consultants


Table: Ratios
Ratio Analysis
Year 1
n.a.

Year 2
54.11%

Year 3
29.21%

Industry Profile
7.51%

60.50%
5.84%
90.66%
9.34%
100.00%

79.58%
4.98%
94.02%
5.98%
100.00%

82.15%
3.98%
96.82%
3.18%
100.00%

39.92%
39.01%
82.32%
17.68%
100.00%

26.00%
52.54%
78.54%
21.46%

19.52%
40.85%
60.38%
39.62%

14.29%
29.45%
43.74%
56.26%

39.13%
10.54%
49.67%
50.33%

Percent of Sales
Sales
Gross Margin
Selling, General & Administrative Expenses
Advertising Expenses
Profit Before Interest and Taxes

100.00%
96.97%
119.88%
0.00%
-20.35%

100.00%
98.03%
92.03%
0.00%
10.11%

100.00%
98.48%
91.76%
0.00%
10.63%

100.00%
100.00%
84.13%
3.06%
2.36%

Main Ratios
Current
Quick
Total Debt to Total Assets
Pre-tax Return on Net Worth

3.49
3.49
78.54%
-287.86%

4.82
4.82
60.38%
76.82%

6.78
6.78
43.74%
62.47%

1.76
1.49
5.71%
55.31%

-61.78%

30.44%

35.15%

12.78%

Additional Ratios

Year 1

Year 2

Year 3

Net Profit Margin


Return on Equity

-22.91%
-287.86%

6.01%
53.77%

6.72%
43.73%

n.a
n.a

3.34
54

3.34
90

3.34
97

n.a
n.a

11.00
28
2.70

12.17
29
3.55

12.17
28
3.66

n.a
n.a
n.a

Debt Ratios
Debt to Net Worth

3.66

1.52

0.78

n.a

Current Liab. to Liab.

0.33

0.32

0.33

n.a

$55,383
-7.94

$74,767
6.60

$103,672
10.29

n.a
n.a

0.37
26%

0.28
20%

0.27
14%

n.a
n.a

1.16
12.57
0.00

0.74
8.95
0.00

1.03
6.51
0.00

n.a
n.a
n.a

Sales Growth
Percent of Total Assets
Accounts Receivable
Other Current Assets
Total Current Assets
Long-term Assets
Total Assets
Current Liabilities
Long-term Liabilities
Total Liabilities
Net Worth

Pre-tax Return on Assets

Activity Ratios
Accounts Receivable Turnover
Collection Days
Accounts Payable Turnover
Payment Days
Total Asset Turnover

Liquidity Ratios
Net Working Capital
Interest Coverage
Additional Ratios
Assets to Sales
Current Debt/Total Assets
Acid Test
Sales/Net Worth
Dividend Payout

Page 21

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

0%

$6,000

$6,000

$6,000

$6,000

$6,000

$6,000

$6,000

$6,000

$6,000

$6,000

$9,000

$24,000

0%

$0

$0

$0

$0

$0

$2,000

$4,000

$4,000

$5,000

$5,000

$6,000

$7,000

0%
0%

$0
$0

$0
$0

$0
$0

$0
$0

$7,000
$0

$5,000
$0

$3,000
$7,000

$26,000
$5,000

$4,000
$12,000

$7,000
$5,000

$10,000
$2,000

$7,000
$5,000

Total Sales

$6,000

$6,000

$6,000

$6,000

$13,000

$13,000

$20,000

$41,000

$27,000

$23,000

$27,000

$43,000

Direct Cost of Sales

Sales
Environmental nonprofits
Youth development nonprofits
Cultural nonprofits
Other

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Row 1
Other

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

Subtotal Direct Cost of Sales

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Page 1

Appendix
Table: Personnel
Personnel Plan
Mr. Curtis Cole- president
Mrs. Jennie Marks - CFO
Mr. David Danielson - projects manager

0%
0%
0%

Month 1
$3,000
$3,000
$3,000

Month 2
$3,000
$3,000
$3,000

Month 3
$3,000
$3,000
$3,000

Month 4
$3,000
$3,000
$3,000

Month 5
$3,000
$3,000
$3,000

Month 6
$3,000
$3,000
$3,000

Month 7
$3,000
$3,000
$3,000

Month 8
$3,000
$3,000
$3,000

Month 9
$3,000
$3,000
$3,000

Month 10
$3,000
$3,000
$3,000

Month 11
$3,000
$3,000
$3,000

Month 12
$3,000
$3,000
$3,000

Mr. Milo Winn - audio-visual director


Advertising consultant
Advertising consultant
Graphic artist

0%
0%
0%
0%

$3,000
$3,000
$0
$0

$3,000
$3,000
$0
$0

$3,000
$3,000
$0
$0

$3,000
$3,000
$0
$0

$3,000
$3,000
$0
$0

$3,000
$3,000
$0
$0

$3,000
$3,000
$0
$0

$3,000
$3,000
$0
$0

$3,000
$3,000
$0
$0

$3,000
$3,000
$0
$0

$3,000
$3,000
$0
$0

$3,000
$3,000
$0
$0

500%

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

Total People
Total Payroll

Page 2

Appendix
Table: General Assumptions
General Assumptions
Plan Month
Current Interest Rate

Month 1
1
10.00%

Month 2
2
10.00%

Month 3
3
10.00%

Month 4
4
10.00%

Month 5
5
10.00%

Month 6
6
10.00%

Month 7
7
10.00%

Month 8
8
10.00%

Month 9
9
10.00%

Month 10
10
10.00%

Month 11
11
10.00%

Month 12
12
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
Other

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

Page 3

Appendix
Table: Profit and Loss
Pro Forma Profit and Loss
Month 1
$6,000
$0

Month 2
$6,000
$0

Month 3
$6,000
$0

Month 4
$6,000
$0

Month 5
$13,000
$0

Month 6
$13,000
$0

Month 7
$20,000
$0

Month 8
$41,000
$0

Month 9
$27,000
$0

Month 10
$23,000
$0

Month 11
$27,000
$0

Month 12
$43,000
$0

Other Costs of Sales

$500

$500

$500

$500

$500

$500

$500

$700

$700

$700

$700

$700

Total Cost of Sales

$500

$500

$500

$500

$500

$500

$500

$700

$700

$700

$700

$700

$5,500
91.67%

$5,500
91.67%

$5,500
91.67%

$5,500
91.67%

$12,500
96.15%

$12,500
96.15%

$19,500
97.50%

$40,300
98.29%

$26,300
97.41%

$22,300
96.96%

$26,300
97.41%

$42,300
98.37%

Sales
Direct Cost of Sales

Gross Margin
Gross Margin %

Expenses
Payroll

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

Sales and Marketing and Other


Expenses
Depreciation
Rent

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$166
$1,000

$166
$1,000

$166
$1,000

$166
$1,000

$166
$1,000

$166
$1,000

$166
$1,000

$166
$1,000

$166
$1,000

$166
$1,000

$166
$1,000

$174
$1,000

Utilities
Insurance
Payroll Taxes

15%

$300
$250
$2,250

$300
$250
$2,250

$300
$250
$2,250

$300
$250
$2,250

$300
$250
$2,250

$300
$250
$2,250

$300
$250
$2,250

$300
$250
$2,250

$300
$250
$2,250

$300
$250
$2,250

$300
$250
$2,250

$300
$250
$2,250

Travel

15%

$1,200

$3,000

$1,000

$2,000

$2,000

$3,000

$2,000

$1,000

$2,000

$3,000

$1,000

$3,000

$600

$600

$600

$600

$600

$600

$600

$600

$600

$600

$600

$600

$21,766

$23,566

$21,566

$22,566

$22,566

$23,566

$22,566

$21,566

$22,566

$23,566

$21,566

$23,574

Profit Before Interest and Taxes

($16,266)

($18,066)

($16,066)

($17,066)

($10,066)

($11,066)

($3,066)

$18,734

$3,734

($1,266)

$4,734

$18,726

EBITDA
Interest Expense

($16,100)
$503

($17,900)
$497

($15,900)
$492

($16,900)
$486

($9,900)
$481

($10,900)
$475

($2,900)
$511

$18,900
$506

$3,900
$500

($1,100)
$495

$4,900
$489

$18,900
$483

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

($16,769)
-279.48%

($18,563)
-309.39%

($16,558)
-275.96%

($17,552)
-292.54%

($10,547)
-81.13%

($11,541)
-88.78%

($3,577)
-17.89%

$18,228
44.46%

$3,234
11.98%

($1,761)
-7.65%

$4,245
15.72%

$18,243
42.42%

Other
Total Operating Expenses

Taxes Incurred
Net Profit
Net Profit/Sales

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 from Operations


Cash Sales
Cash from Receivables

$1,500
$0

$1,500
$150

$1,500
$4,500

$1,500
$4,500

$3,250
$4,500

$3,250
$4,675

$5,000
$9,750

$10,250
$9,925

$6,750
$15,525

$5,750
$30,400

$6,750
$20,150

$10,750
$17,350

Subtotal Cash from Operations

$1,500

$1,650

$6,000

$6,000

$7,750

$7,925

$14,750

$20,175

$22,275

$36,150

$26,900

$28,100

Cash Received

Additional Cash Received


Sales Tax, VAT, HST/GST Received

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

New Current Borrowing


New Other Liabilities (interest-free)

0.00%

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$5,000
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

New Long-term Liabilities


Sales of Other Current Assets

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$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


Subtotal Cash Received

$0
$1,500

$0
$1,650

$0
$6,000

$0
$6,000

$0
$7,750

$0
$7,925

$1,500
$21,250

$1,500
$21,675

$0
$22,275

$0
$36,150

$0
$26,900

$0
$28,100

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

Cash Spending
Bill Payments

$15,000
$3,253

$15,000
$7,663

$15,000
$9,330

$15,000
$7,425

$15,000
$8,386

$15,000
$8,414

$15,000
$9,343

$15,000
$8,384

$15,000
$7,639

$15,000
$8,633

$15,000
$9,528

$15,000
$7,655

Subtotal Spent on Operations

$18,253

$22,663

$24,330

$22,425

$23,386

$23,414

$24,343

$23,384

$22,639

$23,633

$24,528

$22,655

Expenditures from Operations

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


Other Liabilities Principal Repayment

$666
$0

$666
$0

$666
$0

$666
$0

$666
$0

$666
$0

$666
$0

$666
$0

$666
$0

$666
$0

$666
$0

$666
$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


Dividends

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$18,919

$23,329

$24,996

$23,091

$24,052

$24,080

$25,009

$24,050

$23,305

$24,299

$25,194

$23,321

Net Cash Flow

($17,419)

($21,679)

($18,996)

($17,091)

($16,302)

($16,155)

($3,759)

($2,375)

($1,030)

$11,851

$1,706

$4,779

Cash Balance

$99,881

$78,202

$59,206

$42,115

$25,813

$9,658

$5,899

$3,524

$2,494

$14,345

$16,051

$20,830

Subtotal Cash Spent

Page 5

Appendix
Table: Balance Sheet
Pro Forma Balance Sheet
Assets

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Starting Balances

Current Assets
Cash
Accounts Receivable

$117,300
$0

$99,881
$4,500

$78,202
$8,850

$59,206
$8,850

$42,115
$8,850

$25,813
$14,100

$9,658
$19,175

$5,899
$24,425

$3,524
$45,250

$2,494
$49,975

$14,345
$36,825

$16,051
$36,925

$20,830
$51,825

Other Current Assets


Total Current Assets

$5,000
$122,300

$5,000
$109,381

$5,000
$92,052

$5,000
$73,056

$5,000
$55,965

$5,000
$44,913

$5,000
$33,833

$5,000
$35,324

$5,000
$53,774

$5,000
$57,469

$5,000
$56,170

$5,000
$57,976

$5,000
$77,655

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000

$0

$166

$332

$498

$664

$830

$996

$1,162

$1,328

$1,494

$1,660

$1,826

$2,000

$10,000
$132,300

$9,834
$119,215

$9,668
$101,720

$9,502
$82,558

$9,336
$65,301

$9,170
$54,083

$9,004
$42,837

$8,838
$44,162

$8,672
$62,446

$8,506
$65,975

$8,340
$64,510

$8,174
$66,150

$8,000
$85,655

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets
Liabilities and Capital
Current Liabilities
Accounts Payable

$3,000

$7,349

$9,084

$7,145

$8,107

$8,101

$9,063

$8,131

$7,352

$8,313

$9,275

$7,336

$9,264

Current Borrowing
Other Current Liabilities

$16,000
$0

$15,334
$0

$14,668
$0

$14,002
$0

$13,336
$0

$12,670
$0

$12,004
$0

$16,338
$0

$15,672
$0

$15,006
$0

$14,340
$0

$13,674
$0

$13,008
$0

Subtotal Current Liabilities

$19,000

$22,683

$23,752

$21,147

$21,443

$20,771

$21,067

$24,469

$23,024

$23,319

$23,615

$21,010

$22,272

Long-term Liabilities

$45,000

$45,000

$45,000

$45,000

$45,000

$45,000

$45,000

$45,000

$45,000

$45,000

$45,000

$45,000

$45,000

Total Liabilities

$64,000

$67,683

$68,752

$66,147

$66,443

$65,771

$66,067

$69,469

$68,024

$68,319

$68,615

$66,010

$67,272

Paid-in Capital

$100,000

$100,000

$100,000

$100,000

$100,000

$100,000

$100,000

$101,500

$103,000

$103,000

$103,000

$103,000

$103,000

Retained Earnings

($31,700)

($31,700)

($31,700)

($31,700)

($31,700)

($31,700)

($31,700)

($31,700)

($31,700)

($31,700)

($31,700)

($31,700)

($31,700)

$0
$68,300

($16,769)
$51,531

($35,332)
$32,968

($51,890)
$16,410

($69,442)
($1,142)

($79,988)
($11,688)

($91,529)
($23,229)

($95,107)
($25,307)

($76,878)
($5,578)

($73,644)
($2,344)

($75,405)
($4,105)

($71,160)
$140

($52,917)
$18,383

$132,300

$119,215

$101,720

$82,558

$65,301

$54,083

$42,837

$44,162

$62,446

$65,975

$64,510

$66,150

$85,655

$68,300

$51,531

$32,968

$16,410

($1,142)

($11,688)

($23,229)

($25,307)

($5,578)

($2,344)

($4,105)

$140

$18,383

Earnings
Total Capital
Total Liabilities and Capital
Net Worth

Page 6

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