Professional Documents
Culture Documents
Team 2
Fall 2021
Business Plan
The Bernard Emergency Distress Signal, or EDS, is a satellite assisted global positioning
system that uses a distress signal to directly contact emergency services with the location
of the user. What makes our product stand out is our simplified design and user interface
which allows the simple press of a button to send out the distress signal. Every day, millions
of people take part in extreme outdoor sports and hobbies, from white water rafting and
mountain biking to backcountry skiing. Unfortunately, these activities have accepted risks
and dangers, and in the worst-case scenario, can result in injury or death. With our product,
we seek to alleviate the worries associated with these activities. The Bernard EDS is a
lightweight, handheld emergency device that consumers can use as a lifeline if they ever
find themselves lost, injured, or in dire situations.
Executive Summary
Bernard
Matthew Snead
2715 Delta Place, Colorado Springs, CO 80910
Phone: 434-962-4493
Email: Sneadml@bernard.com
Distribution Channels: Our sole distribution channel is our company’s website, where we will be
selling directly to our customers.
Competition: Our current competition is Garmin and ACR by Artex. These two companies offer the
same or similar products that we do. Garmin offers a couple of different products in different
variations that are more complex and can be used multiple times while the ACR is one product that is
simple and for one time use only.
Skiing in the backcountry and hunting deep in the mountains present more than their fair
share of risks. Bernard offers a safety net – a satellite communication device to the nearest
rescue service. Portable and simple, the Bernard EDS allows you to easily communicate
your current situation and if you need help. As an organization, we’ve committed ourselves
to providing a product that lets thrill-seekers get back into their natural element. Wherever
communication device that will provide our customers with easy access to rescue services.
Our product is lightweight, handheld, and can clip onto the strap of a backpack to stay
handy. Its simple design has a series of buttons with preset messages and a button to send
the message. This bypasses the need for a complicated system while still allowing flexibility
in choice of responses.
interface offers customers a product that’s easier to use. The Bernard EDS’s convenience
differentiate our product by offering two different colors options, which is not something any
Value Proposition: Our product allows outdoor thrill-seekers and adventurers to have
communication with rescue services while going wherever they want. Investing in our
product gives an assurance of safety. We also create value due to the usability of our
product compared to our competitors. No prior knowledge is needed to operate it. Our
product is also manufactured in our own plant, and we have quality assurance checks and
software technicians who ensure that our product’s communication software will operate as
intended.
Page 3
Business Strategy: Our main business strategy is to focus on differentiation. Our company
fits into a niche area between competitors that offers a simpler product. We have also
differentiated our company in our marketing. Our competitors' marketing targets general
hikers and outdoor lovers. We will market our product to more extreme outdoor sports,
which our competitors ignore, that will also encapsulate hikers that embrace challenges.
because we are close to all three of our target markets. Extreme winter sports are
skiing/snowboarding, snowmobile rides. Also, during the warmer months, extreme sports
including rock face climbing, white water rafting, mountain biking, and “14er” (14,000 feet
elevation) hiking are popular. Lastly, Colorado Springs is an affordable area, so the cost of
extreme sports to take part in during all seasons, Colorado is the most desirable and cost-
Outsourced functions: With reliability being a primary focus of our product, we will
outsource the production of satellite communication chips and the internals such as wiring
and buttons. As the companies that produce these items are well respected among their
competitors, we feel that we can rely on their products. At the start of year 3 human
resources will be outsourced to ADP Inc.. We will also outsource our accounting to a
$2,639,326 from 6,773 total units, and a net loss of $2,055,246. Over the next 4 years, our
market share increases from 0.0046% to 0.0706%, and our revenue grows to $43,271,695 by
year 5. By year 5, we are operating at a gain, with a net income of $2,282,104. We financed our
operations with investors and a standard SBA 7(a) loan, with $650,000 in debt at a negotiated
6% interest rate.
Page 4
Organizational Chart
Our staff is increasing every year in relation to our sales. As our sales start to
increase and the business becomes bigger and more well known, we will have to acquire
more staff and salespeople to properly assist with the increased demand for our product.
Additional software technicians will be needed in years 3 and 4 to support our bottleneck
and the increase in demand. The General Manager will conduct Human Resource operations
for the first two years, then after than it will be outsourced. Also, accounting will be
General Manager- S 130,000 1,500,000 1 $ 191,000 14612 42 497 5157 20307 13728 5000 11883 30,611 241,919 241,919
Middle Manager - S 95,000 350,000 3 $ 105,000 8033 42 497 2835 11406 13728 5000 11883 30,611 147,018 441,053
Marketing Representative- S 60,000 120,000 3 $ 70,000 5355 42 497 1890 7784 13728 5000 11883 30,611 108,395 325,186
Sales Person - S 60,000 120,000 12 $ 70,000 5355 42 497 1890 7784 13728 5000 11883 30,611 108,395 1,300,743
PR Representative - S 50,000 80,000 2 $ 55,000 4208 42 497 1485 6231 13728 5000 11883 30,611 91,843 183,685
Distribution Specialist - S 36,000 80,000 1 $ 55,000 4208 42 497 1485 6231 13728 5000 11883 30,611 91,843 91,843
$14 per hr =
Quality Assurance Tech - w 14 25 1 $28336 2168 42 497 765 3472 13728 2833.6 11883 28,445 60,253 60,253
$15 per hr =
Software Technician - W 15 26 1 $30360 2323 42 497 765 3626 13728 3036 11883 28,647 62,634 62,634
$14 per hr =
Manufacturing Hand - W 14 25 2 $28336 2168 42 497 765 3472 13728 3036 11883 28,647 60,455 120,910
$14 per hr =
Machine Technicians - W 14 25 1 $28336 2168 42 497 765 3472 13728 2833.6 11883 28,445 60,253 60,253
Totals 21 491,000 50,595 420 4,968 17,802 73,785 137,280 41,739 118,834 297,854 1,033,007 2,888,478
Standard Time-off Benefits
Holidays (list all): New Years Day, MLK jr Day, Washingtons Birthday, Memorial Day, Juneteenth, July 4th, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, Christmas Day
Other Insurance (include cost, deductables, co-pay, terms or limitations): Life Insurance ($250,000 death benefit, $253.62 average monthly cost per employee)
Services (include cost and descriptions for each): Childcare Allowance ($8840 allowance for childcare related services per employee)
Enter Co-
Enter Pay per
Total Enter medical
Benefits
Cost Per Percent Total Enter visit for
Employ- Paid by Paid by Annual Primary/
Mandatory Payroll Deductions ee per Compan Compa Deductib Specialis
FICA 7.65% $ Caps or Limits Month y ny le t
Health
0.60% $7,000
FUTA Insurance 1144 100 $1,144 N/A 15/30
Sick
6.2% $ 8,000.00 Vacation Leave (in
SUTA (in Days) Days)
WC 2.7% Time off 15 5
Other Benefits: In addition to the benefits listed above we will also offer 14 days of vacation time to all of our employees, 7 days Total Enter
Positions
of sick time, and 2 mental health days. Employee Salary or Percent Enter $ cap Retirement
Added by Year
Year 1 Year 2 Year 3 Year 4 Year 5 s Wage matching or limit Costs
General
Manager- S 1 0 0 0 0 1 191000 0.1 5000 5000
Middle
Manager - S 2 0 0 0 0 2 105000 5000
Skills with heavy machinery can be secured by recruiting employees from factories and suppliers of heavy
machinery. Knowledge of Iridium software can be secured by partnering with Iridium to recruit, as well as
Skills with heavy machinery in a
Quality Assurance Tech, Software recruiting at technology conventions and other industry-related meetups, which is also where we can find
factory setting, knowledge of Iridium
Technician, Manufacturing Hand, employees with tech manufacturing experience. All three of these qualifications could be verified through
software, technology manufacturing
Machine Technician talking to their previous employers, as well as hands-on tests with our equipment. We will also include current
expertise
employees on the interviewing and testing processes as they have the best understanding of whether or not a
potential employee will fit well.
Motivating Employees
Our annual percentage pay increase is at 3%. This accounts for the cost of living in addition to
inflation. As part of motivating employees, we offer a profit-sharing plan. At the end of each
year, we distribute back one third of the company's pre-tax profits. The compensation given
back is correlated with the percentage of the total salaries paid out. For example, the General
Manager will be paid 10.5% of the one third because the General Manager makes 10.5% of
total salaries.
Page 6
We prioritize this market segment because there is the most risk of injury
or death associated with these specific sports per capita. Over 600,000
skiing related injuries occur in the US and on average 38 of them die
every season (unofficial networks, 2020). Over 14,000 snowmobiling
Affluent people between the ages of 21-55 injuries occur in the US with an average of 200 deaths per year (Pierz,
who seek outdoor thrills in unconventional 2003). Over 25 people operating snowmobiles died in avalanches between
ways via backcountry skiing, heli skiing, the 2018-2019 seasons and over 60% of the people who died had no form
Pow Chasers 7,196,439 5% 1
backcountry snowmobiling, and of tracking device on them (BCA, 2019). Pow Chasers is our top priority
snowshoeing. (ISMA, 2021) (Statista, because there are many different sports that occur in the snow that this
2017) (Dotsie, 2010) product could be used for. Relating back to a fact previously mentioned in
this segment, over 600,000 people get injured just from skiing alone and
because that number is so big, and neither Garmin nor ACR directly
targets them, the addition of the Bernard EDS would save many lives in
this dangerous market.
In 2019 there were over 49 million people who hiked in the United States
(Statista, 2020). In addition to hikers, there are over 40 million mountain
bikers and 15 million hunters (IMBA)(OIA, 2019). With such a large target
Individuals between the ages of 21-55 who segment, our product will be attractive to a significant amount of people
enjoy being active in nature. This includes because these activities all have inherent risk. For example In the united
Granola Heads 117,940,000 2% 2
hikers, hunters, mountain bikers and lake states, 2000 hikers get lost each year and on average, 330 hikers die
fisherman. (Statista, 2019) each year in national parks alone. (Outside polls, 2019) (NPS, 2016).
Granola Heads are a viable target market because some of our
competitors, Garmin and ACR, target this market effectively and we think
our product could succeed in this market as well.
This market segment is included due to the risk of injury or getting swept
away in water activities. Over half of whitewater kayakers report injuries,
and 87% reported injuries while still in their boat (Fiore, 2001). This risk
of drifting with the inability to stop oneself presents the danger. In 2020
Individuals between the ages of 21-65 who
alone, 3,191 people got injured in boating accidents and 767 died (Fiore,
partake in water based activities. This
2001). Most of the injuries reported are traumatic brain injuries,
Mermaids 21,769,909 -1% includes kayaking/canoeing, open ocean 3
lacerations, or burns. These kinds of injuries can prevent one from getting
sailing, and whitewater rafting. (Statista,
themselves back to shore. With Mermaids being three on our priority
2019) (Ellis & Layne, 2013)
level, we do not prioritize it because we feel it has the least relevance to
the product out of our markets. That being said, we still want to target
this market because it is untouched and has the potential to thrive with a
product like ours.
Page 7
Market Quantification
Unit Price
Mkt Growth
Tot Mkt Potential Market Annual Unit or Annual $
Year Projection* Product
(# Customers)* Share*** Sales Weighted Revenue
*
ASP
2022 146,906,348 2% 0.0050% Bernard EDS 7,332 $359.99 $2,639,326
2023 149,844,475 2% 0.0185% Bernard EDS 27,772 $359.99 $9,997,448
2024 152,841,364 2% 0.0406% Bernard EDS 61,990 $359.99 $22,315,732
2025 155,898,192 2% 0.0629% Bernard EDS 98,086 $359.99 $35,309,703
2026 159,016,156 2% 0.0756% Bernard EDS 120,203 $359.99 $43,271,695
We found our market potential in our marketing segmentation exhibit by combining our three
target markets of Pow Chasers, Granola Heads, and Mermaids which came to a total of
146,906,348.
We took each segmented target market population from our market segmentation exhibit and
multiplied it by the growth rate for each particular segment, those being 5%, 2%, and -1%
respectively. We then mutiplied each growth percentage by each respective potential market
throughout the segment, then added them together to find our total market growth projection
for each year.
We determined our market share by taking each years estimated unit sales forecast and then
dividing that by the total market potential of each year. This accounts for the growth of our
total market potential and our unit sales forecast growth to show an accurate picture our of
market standing.
The calculations below are showing how we took Garmin's outdoor revenue in 2005, then found
how much of their outdoor revenue made up the entire outdoor recreation spending market.
With this ratio we then multiplied that by our total possible cost of goods sold as if we were
selling to our entire market potential. From there we then divided that number by our unit cost
to find out how many units we would be selling and then multiplied it by our price to get our
revenue. Equation for reference:
(((595,660,000/788,000,000,000)*(159,016,156*216.89))/216.89)*360=26' revenue
{595,660,000=Garmins outdoor revenue(2005), 788,000,000,000=Total outdoor recreation
spending, 159,016,156=Bernard mkt potential 2026, 216.89=unit cost, 360=unit selling
price}
Simplicity
Tile Pro
ACR ACR
EDS
Low High
Price Price
Garmin inReach
Complexity
Positioning Statement: The Bernard EDS is a satellite communication device that can
transmit a distress signal, designed for outdoor thrill seekers as well as more casual hikers
and extreme sport enthusiasts. We provide a high quality product to a broad target
market. Our product differs from our competitors by offering the most essential aspect of
emergency signaling without unnecessary features. Its ease of use will provide satisfaction
and a sense of comfort to our customers because they know if they're in need of
emergency services, they can easily communicate their needs. Garmin is closer to the
complex side of the graph because their products have much more complicated software
and functions. The ACR is similar to the Bernard EDS in price but has one simple feature
that our product provides and more. This makes it the better option to seak out and
purchase the Bernard EDS that has more features for a close price difference. Lastly, the
Tile Pro only has the feature to track the location of the product and does have the
capability of long range locating like other available products.
Pricing
2021 2022 2023 2024 2025
Unit Variable Cost: $216.89 $216.89 $216.89 $216.89 $216.89
Wholesale Price: $359.99 $359.99 $359.99 $359.99 $359.99
Retail Price: $424.99 $424.99 $424.99 $424.99 $424.99
Our pricing strategy is odd-even because we have a product in a luxury field and customers are willing to pay a high price for a reliable
product. Using the odd-even pricing strategy will appeal to consumers who not only see a difference in our product's price compared to
competitors but also feel as if they are getting a deal on our product because of the psychological pricing. Our wholesale price is $359.99 and
our retail price is $424.99. The wholesale price allows about a $65 margin for the retailer. The customer price is appropriate because
customers are willing to pay a high price in our market, and this price fits within a similar range to other products in our market while still
keeping the odd-even pricing that will appeal to customers.
Distribution/Location Strategy
Our distribution strategy is to sell our product online directly to customers via our own company's website. The product will be produced, then
distributed to customers through Saia LTL Freight. We located our warehouse in Colorado Springs, near mountains and rural areas, so that we
would be located by all three of our target markets. We will offer selective distribution because we will be competing against Garmin and ACR
and allow customers to have options now for this product type.
Promotional Strategy
2021 2022 2023 2024 2025
Total IMC Budget: $365,761 $365,761 $1,385,459 $3,092,542 $4,893,263
For each major quality step:
Quality Step What is measured? How often? How will you ensure quality?
Q1 Raw Materials & Every new Ensure outsourced items are up to quality standards by
Subassembly shipment picking a box from each new shipment to measure if
any materials are damaged or are incorrect.
Q2 SPC (Statistical Process 3 times a day Select 3 mold batches of 20 units a day to analyze and
Control) assure product is molding correctly into product form.
Q3 Assurance that entire Every product Physically test product functions with a diagnostic
product is working correctly (60/hour) code reader to ensure quality standards. (100% of
products tested)
Indicate the Why is this dimension important, given your industry & target Identify the Quality Step(s)
Dimensions of market? on the Process Flowchart /
Quality on which Service Blueprint to which
you will focus. this corresponds.
Reliability Given that our target market is for thrill seekers, quality assurance tests to Q1 – Outsourced items
guarantee our product performs as intended is a key component. With our quality assurance
focus on “wherever you are, we are,” ensuring that our product will pass
multiple quality assurance tests minimizes the possibility that our product Q3- Assurance that project
will fall short of expectations. functions properly
Performance The key component of our product is satellite communication technology Q1 – Outsourced items
that allows for an emergency distress signal to be triggered if necessary. quality assurance
Ensuring that our main feature is successful and has a minimal failure rate is
a top priority since our main selling point of the product is an emergency
distress system.
Durability The material chosen to produce all components of the Bernard EDS were Q2 –SPC
picked with durability in mind. The poly-carbonate blend plastic was chosen
because of its heat-resistant, flame-retardant, water-resistant, and shock- CR1- plastic mold injection
resistant qualities. machine
Special Features Unlike competing products, the Bernard EDS includes a simple Q1- Outsourced items quality
communication component that features multiple, preset messaging options. assurance
Ensuring that this feature is simple and efficient is a selling point since our
target market is looking for a product that will ensure their safety no matter
what situation they are in.
Use the space below to describe any additional Proactive Quality Assurance Plans that are not connected to a
specific activity on your Process Flowchart / Service Blueprint.
Our additional proactive quality assurance plan includes collecting and evaluating feedback from customers to ensure that
our product meets quality standards as well as customers' intended use for the product. Monthly standards reviews will also be
put in place to go over the manufacturing and production process, as well as review employees involved in the process, to
ensure the assembly line is moving smoothly and efficiently. Additionally in preparation for our seasonal strategy, production
and inventory will increase by 5% during April/May and September/October to prepare for our busy seasons.
Describe any reactive quality assurance plans. Include a recovery plan should a customer receive poor quality
goods and/or services.
Our reactive quality assurance plan revolves around customer satisfaction. If a customer receives a broken or
faulty product, they have a 30-day period from the day the product was delivered to report the damage. We will pay for the
return shipping of the damaged product as well as the shipping cost for a replacement product.
Page 12
Inventory, Suppliers, and Distribution
Item(s) Supplier Name & Reason for selecting this supplier Supplier Frequency System of Mode(s) of Transportation
Location (City, lead time of Management
State, Country) (in days) replenishme
nt (in days)
Polycarbonate Grainger Located close to our manufacturing 14 Days 30 days Fixed Order ☒ Highway ☐ Rail
Blend Resin Colorado Springs, facility, Grainger supplies high quality, durable plastic and is Interval ☐ Waterway ☐ Air
CO, USA committed to operating sustainably.
Waterproof Waytek Waytek is a certified distributor that supplies 7 Days 30 days Fixed Order ☒ Highway ☐ Rail
Push Buttons Chanhassen, MN, round waterproof push buttons which works best with our Interval ☐ Waterway ☐ Air
USA product.
123 Lithium Fastenal It is geographically close to our manufacturing facility and 7 Days 30 days Fixed Order ☒ Highway ☐ Rail
Battery Colorado Springs, committed to helping increase our company's productivity. Interval ☐ Waterway ☐ Air
CO, USA
Iridium 9603 Iridium Iridium is a global satellite communications company that 7 Days Every 3 Fixed Order ☒ Highway ☐ Rail
Module McLean, VA, USA supplies developer tools. Their quality standards align with months Interval ☐ Waterway ☐ Air
our company's commitment to communicate with
anybody who is in danger all over the globe.
Antenna TTI Inc. TTI has been recognized as one of the world’s leading 7 Days 30 days Fixed Order ☒ Highway ☐ Rail
Westminster, CO, distributor specialists. Their high standards for product Interval ☐ Waterway ☐ Air
USA quality align with our company's mission of providing a
reliable product.
FINISHED GOODS INVENTORY If your organization does not have finished goods inventory, please check this box: ☐NA
Finished goods produced Frequency of shipping Average level of Finished goods inventory Amount of safety stock on site
(per hour) finished goods on site
At the end of Year 1 4 / hr. Biweekly 277 units 448 units
At the end of Year 2 13 / hr. Biweekly 989 units 1,456 units
At the end of Year 3 29 / hr. Biweekly 2,457 units 3,248 units
At the end of Year 4 45 / hr. Weekly 4,205 units 5,040 units
At the end of Year 5 55 / hr. Weekly 5,648 units 6,160 units
What is the lifespan of your finished ☐NA Our product will have an estimated lifespan of ten years because that is the shelf life of the 123-lithium battery. With our product’s
goods inventory? exterior being made of polycarbonate blend resin, which is durable plastic that has qualities such as heat-resistant, flame-retardant,
water-resistant, and shock-resistant, it will be able to withstand extreme winter sports, the wilderness, and more.
How will you manage perishability ☒NA
of Finished Goods Inventory?
DISTRIBUTION If your organization does not require distribution, please check this box: ☐NA
Name of transportation Reason(s) for selecting this provider/carrier Frequency of Pick Up / Drop off
provider/carrier
Saia LTL Freight Saia LTL Freight is one of the nation’s leading carriers, located in Colorado Springs, Colorado Finished goods will be shipped out biweekly. As
about 15 minutes away from our warehouse. Saia offers many services including regional and demand increases in years 3 and 4, we will ship
interregional less-than-truckload services. products out weekly.
Page 13
Capacity
Demand(per Capacity Utilization Hours of Bottleneck name and How will you manage /adjust the bottleneck
hour) (per (%) Operation description to ensure you can appropriately serve or
hour) supply your customers?
At the end of Year 1 4/hr. 24/hr. 16.67% 2,016 Insert Tech and Our demand does not exceed our production
Battery capacity, so our bottleneck does not need to
be adjusted.
At the end of Year 2 13/hr. 24/hr. 54.17% 2,016 Same as Year 1 Same as Year 1
At the end of Year 3 29/hr. 48 /hr. 60.42% 2,016 Same as Year 1 Our demand exceeds our production so we
must hire an additional software technician.
At the end of Year 4 45/hr. 72/hr. 62.50% 2,016 Same as Year 1 To keep our utilization from getting too high,
we must hire an additional software
technician.
At the end of Year 5 55/hr. 72/hr. 76.39% 2,016 Same as Year 1 Same as Year 4
Show your calculations for the following parameters at the end of Year 1.
Hours of Demand/month Demand/hour Capacity/month Capacity/hour Utilization
operation/month
253 workdays per yr/12 7332 units per 733 units per month / 24 units/hr x 8 hours/day 60 mins / 2.5 4 units per hour / 24
months per yr x 8 hrs yr/10 months = 168 hours per month x 5 days x 4 weeks = mins per unit = units per hour = 16.67%
per day=168 hr/month 733 units/month = 4 units/hour 3,840 units/month 24 units/hour
Additional resources (beyond your bottleneck) must be allocated appropriately to support operations. Identify which resources have a
significant impact on capacity at start up and describe why these are appropriate amounts of resources at start up.
As a startup, we have one polycarbonate mold machine which has the capacity to produce 80 units per hour. This resource does not impact our
bottleneck, but as our demand increases throughout the years, another machine may have to be purchased to meet our production demand. Another
employee may have to be hired to test our product for quality assurance if our demand exceeds 60 units per hour. In addition to equipment, we have
employees assembling our product at a rate of 120 units per hour and packaging our product at a rate of 80 units per hour.
Describe adjustments you will make as resource requirements vary with time. Be specific regarding which key resources (beyond your
bottleneck) will be adjusted, when and how. If you will make multiple adjustments, explain each.
Due to an increase in demand over the years, production capacity will have to be increased, adding a second software technician in year 3 and a third
in year 4. Additionally, we will have to increase our units of outsourced materials over the years to meet manufacturing demand requirements.
How will you manage seasonality? If your organization does not have seasonal demand, please check this box: ☐NA
With most of our sales coming during the seasonal months of May through August and November through December, we will have a large amount of
finished goods in our inventory to meet our demand during that time.
Page 14
Sales Revenue $ 2,639,326 100.00% $ 9,997,448 100.00% $ 22,315,732 100.00% $ 35,309,703 100.00% $ 43,271,695 100.00%
COGS 1,590,165 60.25% 6,023,352 60.25% 13,444,982 60.25% 21,273,706 60.25% 26,070,718 60.25%
Gross Profit $ 1,049,161 39.75% $ 3,974,096 39.75% $ 8,870,750 39.75% $ 14,035,997 39.75% $ 17,200,977 39.75%
Operating Expenses
Salaries and Wages $ 1,337,774 50.69% $ 1,864,704 18.65% $ 3,105,516 13.92% $ 4,461,152 12.63% $ 5,393,071 12.46%
Payroll Tax Expenses 149,236 5.65% 207,544 2.08% 345,128 1.55% 494,596 1.40% 596,976 1.38%
Employee Benefits and Retirement 601,590 22.79% 816,230 8.16% 1,334,813 5.98% 1,855,737 5.26% 2,191,330 5.06%
Advertising and Promotion Expense 395,899 15.00% 395,899 3.96% 1,499,617 6.72% 3,347,360 9.48% 5,296,455 12.24%
Rent Expense 130,560 4.95% 130,560 1.31% 130,560 0.59% - 0.00% - 0.00%
Research and Development Expense 15,700 0.59% 16,119 0.16% 16,550 0.07% 16,992 0.05% 17,445 0.04%
General Insurance Expense 1,000 0.04% 1,000 0.01% 1,000 0.00% 1,000 0.00% 1,000 0.00%
Website Expense 15,000 0.57% 3,000 0.03% 3,000 0.01% 3,000 0.01% 3,000 0.01%
Utilities Expense 5,160 0.20% 5,253 0.05% 5,347 0.02% 5,444 0.02% 5,542 0.01%
Office Expense 3,950 0.15% 4,650 0.05% 6,250 0.03% 7,950 0.02% 8,950 0.02%
Outsourced HR Expense - 0.00% - 0.00% 52,800 0.24% 73,200 0.21% 86,400 0.20%
Outsourced Accounting Expense 26,393 1.00% 79,980 0.80% 133,894 0.60% 211,858 0.60% 259,630 0.60%
Travel and Entertainment Expense 52,320 1.98% 123,132 1.23% 285,104 1.28% 457,076 1.29% 558,352 1.29%
Depreciation Expense 3,309 0.13% 3,868 0.04% 5,144 0.02% 6,673 0.02% 7,471 0.02%
Total Operating Expenses $ 2,737,892 103.73% $ 3,651,940 36.53% $ 6,924,724 31.03% $ 10,942,039 30.99% $ 14,425,623 33.34%
Earnings Before Interest and Taxes $ (1,688,731) -63.98% $ 322,156 3.22% $ 1,946,026 8.72% $ 3,093,958 8.76% $ 2,775,354 6.41%
Interest Expense 86,596 3.28% 86,596 0.87% 86,596 0.39% 86,596 0.25% 86,596 0.20%
Earnings Before Taxes $ (1,775,327) -67.26% $ 235,560 2.36% $ 1,859,430 8.33% $ 3,007,362 8.52% $ 2,688,758 6.21%
Net Income (Loss) $ (1,775,327) -67.26% $ 235,560 2.36% $ 1,859,430 8.33% $ 3,007,362 8.52% $ 2,688,758 6.21%
Current Assets
Cash and Cash Equivalents $ 2,350,000 100.00% $ 527,845 73.27% $ 401,345 42.37% $ 2,471,943 68.37% 3,079,248 42.44% 5,483,192 54.58%
Accounts Receivable - 52,161 7.24% 197,578 20.86% 441,022 12.20% 697,820 9.62% 855,172 8.51%
Inventory - 74,051 10.28% 277,007 29.24% 619,838 17.14% 981,867 13.53% 1,204,022 11.98%
Total Current Assets $ 2,350,000 100.00% $ 654,057 90.79% $ 875,931 92.47% $ 3,532,804 97.72% $ 4,758,935 65.58% $ 7,542,386 75.07%
Property Plant and Equipment - 23,300 3.23% 23,300 2.46% 23,300 0.64% 2,423,300 33.40% 2,423,300 24.12%
Furniture 45,984 6.38% 51,388 5.43% 63,740 1.76% 79,864 1.10% 87,584 0.87%
Office Supplies - 395 0.05% 465 0.05% 625 0.02% 795 0.01% 895 0.01%
Total Gross Fixed Assets $ - $ 69,679 9.67% $ 75,153 7.93% $ 87,665 2.42% $ 2,503,959 34.51% $ 2,511,779 25.00%
Less: Accumulated Depreciation - 3,309 0.46% 3,868 0.41% 5,144 0.14% 6,673 0.09% 7,471 0.07%
Net Fixed Assets $ - $ 66,370 9.21% $ 71,285 7.53% $ 82,521 2.28% $ 2,497,286 34.42% $ 2,504,308 24.93%
Total Assets $ 2,350,000 100.00% $ 720,426 100.00% $ 947,216 100.00% $ 3,615,325 100.00% $ 7,256,221 100.00% $ 10,046,694 100.00%
Liabilities
Current Liabilities
Accounts Payable - 0.00% 228,158 31.67% 304,328 32.13% 577,060 15.96% 911,837 12.57% 1,202,135 11.97%
Accrued Salaries and Wages - 0.00% 3,853 0.53% 3,853 0.41% 624,381 17.27% 1,007,162 13.88% 901,739 8.98%
Accrued Payroll Taxes and Benefits - 0.00% 338 0.05% 338 0.04% 419 0.01% 419 0.01% 517 0.01%
Current Maturity of LT Debt 0.00% 86,596 12.02% 86,596 9.14% 86,596 2.40% 86,596 1.19% 86,596 0.86%
Total Current Liabilities $ - $ 318,945 44.27% $ 395,115 41.71% $ 1,288,456 35.64% $ 2,006,013 27.65% $ 2,190,988 21.81%
Long-Term Liabilities
LT Debt Less Current Maturities $ 650,000 27.66% $ 476,808 66.18% $ 390,212 41.20% $ 303,616 8.40% $ 217,020 2.99% $ 130,424 1.30%
Total Liabilities $ 650,000 27.66% $ 795,753 110.46% $ 785,328 82.91% $ 1,592,072 44.04% $ 2,223,033 30.64% $ 2,321,412 23.11%
STOCKHOLDER'S EQUITY
Common Stock 1,700,000 72.34% 1,700,000 235.97% 1,700,000 179.47% 1,700,000 47.02% 1,700,000 23.43% 1,700,000 16.92%
Retained Earnings $ - (1,775,327) -246.43% (1,538,111) -162.38% 323,253 8.94% 3,333,187 45.94% 6,025,282 59.97%
Total Stockholders' Equity $ 1,700,000 72.34% $ (75,327) -10.46% $ 161,889 17.09% $ 2,023,253 55.96% $ 5,033,187 69.36% $ 7,725,282 76.89%
Total Liabilities and Stockholders' Equity $ 2,350,000 100.00% $ 720,426 100.00% $ 947,216 100.00% $ 3,615,325 100.00% $ 7,256,221 100.00% $ 10,046,694 100.00%
Page 16
Net Cash Flow From (For) Operating $ - $ (1,665,880) $ (32,774) $ 2,171,640 $ 3,112,766 $ 2,501,697
Net Cash Flow (For) From Investing $ - $ (69,679) $ (5,474) $ (12,512) $ (2,416,294) $ (7,820)
Bernard uses straight-line depreciation for all fixed assets and furniture.
Note 2: Assumptions
The following assumptions were made in developing the pro forma statements:
• The accounts receivables are assumed to reflect our lead time (5 days).
• The inventory balance at the end of the year is assumed to be 10% of forecasted demand.
• Office supplies is assumed to have 10% of supplies remaining at the end of each year.
• The accounts payables are assumed to be in terms of net 30.
• Accrued salaries and wages is assumed to be two weeks of the annual salaries and wages.
• Total benefits assumed to be at least 40% of all salaries and wages.
The initial startup costs are first funded by an SBA 7(a) loan via the ABNB Federal Credit Union in
Chesapeake, Virginia. The loan is for $650,000 with an interest rate of 6%, paid off over 10 years. Then,
the start-up costs are funded by angel investors for $650,000 for 16% equity of the company. The rest is
all funded by owners’ personal funds, equaling $1,050,000.
One of our capital investments is the Himalia Servo Motor Plastic Injection Molding Machine for
$23,299.99. The other capital investment is the purchase of our warehouse in Year 4 for $2,400,000.
Note 5: Risks
• Risk related to the economy. Supply chain issues could lead to increased costs and cut our
margins, lowering our net income.
• Risk related to input and quality. The manufacturer of one of our major inputs, Iridium, makes a
broad range of products. If Iridium chooses to discontinue their satellite communication chip
that we need in favor of more profitable product lines, we will have to find another suitable
input. There are very limited options on the market that are still readily manufactured, so the
loss of Iridium is a huge risk.
• Risk of technological advancements. Our product could be negatively impacted by the evolution
of cellular global positioning systems, making the need for our product become obsolete.
Page 18
Liquidity Ratios
Current Ratio 2.05 2.22 2.74 2.37 3.44 1.77
Quick Ratio 1.82 1.52 2.26 1.88 2.89 1.18
Operating Cycle 24.21 24.00 24.04 24.06 24.07 29.38
Leverage Ratios
Debt/Equity -10.56 4.85 0.79 0.44 0.30 0.95
Times Interest Earned -19.50 3.72 22.47 35.73 32.05 3.75
Profitability Ratios
Gross Profit Margin 39.75% 39.75% 39.75% 39.75% 39.75% 38.21%
Operating Profit Margin -63.98% 3.22% 8.72% 8.76% 6.41% 13.19%
Return on Assets -0.89 0.95 -2.16 -235.21 1.20 6.3
DuPont Analysis
Net Profit Margin -67.26% 2.36% 8.33% 8.52% 6.21% 8.33%
Total Asset Turnover 3.66 10.55 6.17 4.87 4.31 0.76
Equity Multiplier 0.42 0.56 2.13 4.27 5.91 9.51
Return on Equity 2356.84% 145.51% 91.90% 59.75% 34.80% 10.8%
Valuation
Multiple 4.02 4.02 4.02 4.02 4.02 4.02
Projected Revenues $2,639,326 $9,997,448 $22,315,732 $35,309,703 $43,271,695
Estimated valuation $10,610,091.69 $40,189,741.27 $89,709,243.90 $141,945,006.16 $173,952,213.44
Page 19
Liquidity: Bernard has a current ratio that is above the industry average for all five years.
The quick ratio is also above the industry average for all five years. This indicates that we
are able to pay off our liabilities. The operating cycle is below the industry average for all
operating years one through five, which indicates that we can convert our inventories to
cash.
Financial Leverage: Debt to equity is below the industry average in every year except
year two. In year two, our ratio is far above the industry average because there was no
need to issue further equity at that time. Our times interest earned is over the industry
average in years three through five because the only interest we encounter is on our loan
and EBITDA increases each year.
Asset Management: The inventory turnover is well over the industry average but stays at
a consistent rate because we produce 5% more than the estimated demand for each year of
inventory. Our receivables turnover exceeds the industry average for years one through five
and our rate stays the same for those years, which means, on average, we collect accounts
receivable more frequently than the industry. The fixed asset turnover varies from well
below to well above the industry average in all five years, indicating higher efficiency in the
use of fixed assets in years two, three, and five.
Profitability: Our gross profit margin is 1.54% over the industry average in all five years.
A higher gross profit margin means that our company can cover other costs more efficiently.
The operating profit margin for years one and two is lower than the industry average but
gets closer during years three through five. The closer to the industry average, the less
financial risk we bear. Our return on assets is negative in years one through four because
we aren’t making enough profit to cover capital on assets until year five. As a company, we
are moving towards profitability, but our return on assets is holding us back from doing so.
DuPont Analysis: Our profit margin grows close to the industry average after the first two
years, which means we only start making money in year three. Asset turnover stays well
above the industry average every year, so we are doing a great job of managing our assets.
Equity multiplier is positive every year but stays below the industry average for all five
years. It then continues to rise from year one to year five.
Valuation Method: Our valuation is based on the price to sales ratio of the industry for our
projected revenues. The industry average price to sales ratio is 4.02. With this we then
multiplied the industry average P/S ratio by our projected revenue in year 5 of $43,271,695
to get a projected Year 5 valuation of $179,952,213. We feel its best to display our year 5
valuation to show the potential Bernard has to offer to investors.
Page 20
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