Hacketts Helicopter Hobbies LLC

BY Andy Hackett

Business Plan BA 499

NAICS CODE 4511

Table of Contents
Executive Summary .................................................................................................................................................3 Company.......................................................................................................................................................................3 Target Market.............................................................................................................................................................3 Competitive Advantage ..........................................................................................................................................3 Ownership and Organization ...............................................................................................................................3 Start-Up Business Opportunity ...........................................................................................................................3 Mission Statement ....................................................................................................................................................4 Products and Services.............................................................................................................................................4 Location ...................................................................................................................................................................4 Cascade Village - Space VS-80 - Cascade .......................................................................................................5 Company Objectives ................................................................................................................................................6 Core Competencies ..................................................................................................................................................6 Ownership and Organization ...............................................................................................................................6 Industry Overview and Trends ...........................................................................................................................7 Company Marketing Objectives ..........................................................................................................................7 Market Research .......................................................................................................................................................8 Primary Market Research .....................................................................................................................................9 Market Analysis .........................................................................................................................................................9 S.W.O.T Analysis ..................................................................................................................................................... 11 Barriers to Entry .................................................................................................................................................... 12 Seasonality................................................................................................................................................................ 12 Market Statistic....................................................................................................................................................... 12 Customer Profile .................................................................................................................................................... 13 Market Share Distribution ................................................................................................................................. 14 Competitive Edge ................................................................................................................................................... 15 Competition.............................................................................................................................................................. 15 Technology ............................................................................................................................................................... 16 Social Responsibility and Sustainability ...................................................................................................... 16 Community Involvement .................................................................................................................................... 17 Development and Exit Plan ............................................................................................................................... 17 1

Appendix A Interview .......................................................................................................................................... 18 Appendix B Radio Demographics - Combined Communications ....................................................... 21 Appendix C Financials Assumptions .......................................................................................................... 22 Start-up Costs ..................................................................................................................................................... 23 Summary of Expenses ..................................................................................................................................... 23 Financial Resources ......................................................................................................................................... 23 Profit/Loss projections .................................................................................................................................. 23 Year-Over-Year Sales Projections .............................................................................................................. 24 Year One Cash Flow Detail ............................................................................................................................ 24 Appendix D Product Sales Weighted Averages ......................................................................................... 25 Helicopter Kits Weighted Average............................................................................................................. 25 Helicopter Parts Weighted Average .......................................................................................................... 26 Airplane Kits Weighted Average ................................................................................................................ 27 Airplane Parts Weighted Average .............................................................................................................. 27 Electronic Components Weighted Average ........................................................................................... 28 Transmitters Weighted Average ................................................................................................................ 28 Appendix E Financial Reports .......................................................................................................................... 29 Cash flow first year 2014 ............................................................................................................................... 29 Income Statement first year 2014 ............................................................................................................. 30 Balance Sheet Year End 2014-2017 .......................................................................................................... 31 Statement of Cash Flow by Month ............................................................................................................. 32 Income Statement for Month End .............................................................................................................. 33 Balance Sheet for Month End ....................................................................................................................... 34 Bibliography ............................................................................................................................................................ 36

Executive Summary Company

Hacketts Helicopter Hobbies is a retail store and E-commerce website specializing in Radio Controlled helicopters and airplanes. The Retail store will be located in Bend, Oregon and will serve all of Deschutes County. With the growing interest in radio controlled hobbies in the Central Oregon area, Hacketts Helicopter Hobbies will provide service to three radio controlled flying clubs, as well as E-commerce customers via the Web.

Target Market
The target market is males 25-65 years of age who make up 60 percent of hobby-related sales according to IBIS world. The current numbers of males in the 24-65 age group, within Deschutes County are approximately 46,577 according to US Census 2010 report (US Census). The median household income in Bend Oregon is $40,751 (Esri). The income level for Hacketts target market is $25,000 and up for males 25-65 years of age.

Competitive Advantage
Hacketts Helicopter Hobbies will leverage Social media and our CRM management system to keep up with customers birthdays and special events. By being active in all of the flying clubs in Central Oregon we will be able to provide discounts to current members. We will use MailChimp for email marketing campaigns and a monthly newsletter. We will leverage our extensive product knowledge to help individual customers have success with all of their RC products. We will warranty all defective products directly so the customer will not have to send back their defective product to the manufacturer and wait to receive the new product in the mail.

Ownership and Organization

The company will be organized as an Oregon-registered LLC with two working partners Andy and Pat, as well as several other limited liability partners with equity stakes. Andy will receive 50% and Pat will receive 25% stake. Other limited partners will be found for the other 25% of the of the business, giving Andy and Pat controlling interest in business decisions as working partners

Marketing Plan
Hacketts marketing strategy will be to capture all current RC Enthusiasts in the Central Oregon area by advertising in club newsletters and offering all club members a discount. Hacketts will target potential customers with a direct mail campaign to let them know about the business and services offered. A rewards program offer will be extended to all customers, with incentives and discounts to all members. The rewards program will be able to capture customer information and email addresses, to start building a customer list and build a database for use with a Customer Relationship Management software program.

Start-Up Business Opportunity

Hacketts Helicopter Hobbies is a retail store and E-commerce website specializing in Radio Controlled helicopters and airplanes. The Retail store will be located in Bend, Oregon and will serve all of Deschutes County. With the growing interest in radio controlled hobbies in the Central Oregon area, Hacketts Helicopter Hobbies will provide service to three radio controlled flying clubs, as well as E-commerce customers via the Web. Bend, Oregon has been growing in the hobby of RC, especially RC helicopters, and has limited competition from one other local store, Ds Hobbies. Andy has many years of experience in radio controlled airplanes and helicopters along with E-commerce and website development. The focus of the store will be to provide extensive product knowledge and excellent customer service to all its customers. Pat Balzer is also very involved in radio control and is a member of several RC flying clubs in the Central Oregon area with 25 plus years of flying experience.

Mission Statement
Hackett Helicopter Hobbies offers high quality products with extensive product knowledge, coupled with exceptional customer service at affordable prices. We put the fun in RC.

Products and Services

Hacketts Helicopter Hobbies will offer a specialized range of helicopter and airplane kits and accessories from micro to giant scale. Ready To Fly Helicopter Kits Ready To Fly Airplane Kits Radio Controlled Transmitters Electronic Accessories Unassembled Helicopter Kits Unassembled Airplane Kits Helicopter Parts and Accessories Airplane Parts and Accessories Shop Labor for Custom Instillation and Repair

Hacketts Helicopter Hobbies will have a retail location in Bend, Oregon as well as an Ecommerce website and use social media and community involvement to promote the business.

Location
Hacketts Helicopter Hobbies will be located in the Cascade Village Mall at 63455 N Hwy 97 in Bend, Oregon. I chose this location for a number of reasons with the foremost reason being the central location between all three flying fields. Bends Cascade Village mall lies on a stretch of

highway traveled by approximately 38,000 autos per day on average and is right near Trader Joes and several other large retailers.

Bend Metro Area Map Showing Drive Time Proximity to Flying Fields (Esri)

Cascade Village - Space VS-80 - Cascade Village

This 965 square foot retail space is located next to Mio Sushi, near center court, a prime location near the shopping center`s custom water feature. Center court serves as the social gathering place for families and friends, and is where Cascade Village hosts several highly attended entertainment events.

Company Objectives
The company objectives are as follows: To Provide the best products at competitive prices To Provide superior customer service Develop a strong and trusted reputation with our customers and the community Develop lifelong relationship with our customers Construct a profitable and sustainable business model Year over year market share growth designed to increase customer retention and customer acquisition Develop long lasting relationships with our suppliers

Core Competencies
As a hobby enthusiast in radio controlled airplanes, cars, and helicopters for the past ten years, along with my business partner Pat who has 20 plus years in the RC hobby, we have experienced almost every problem imaginable. We have both dealt with many hobby shops across the country. By bringing my marketing and customer service skills to life, Hacketts Helicopter Hobbies will focus on the individual needs of every customer we serve. We will be able to sell quality aircraft at competitive prices. We will create a customer reward program to use direct marketing to keep customers for life.

Ownership and Organization

The company will be organized as an Oregon-registered LLC with two working partners Andy and Pat, as well as several other limited liability partners with equity stakes. Andy will receive 50% and Pat will receive 25% stake. Other limited partners will be found for the other 25% of the of the business, giving Andy and Pat controlling interest in business decisions as working partners. Andy and Pat will be looking to acquire five equity investors for $25,000 startup capital. Shares in the company will involve a 5% stake in the company for $5,000 equity limited partnership investment. All equity partners will receive an equal distribution of net profits each year at year-end.

Industry Overview and Trends

The hobby industry is in the mature stage of its life cycle. The industry is expected to grow at a slower rate than the US economy at around 6 percent. The hobby industry exhibits a somewhat saturated market with greater competition from discount retailers. In the past five years, this segments share of the revenue has increased slightly, as consumers with less income have turned to DIY hobbies (IBIS World). The recent decrease in disposable income has slowed growth; however as consumers become more price sensitive, they turn to less expensive hobbies. The 25 to 65 age demographic segment makes up 60 percent of the sales of hobby- related products. The third and fourth quarter make up the largest percentage of sales for these products, with summer weather and the demand for Christmas gifts. The Southwest, West and Mid-Atlantic regions account for approximately 56 percent of the sales nationally. The west region accounts for approximately 17 percent of national sales (IBIS World). Estimates that by the end of 2012 approximately 19,133 firms will be in business and about 72.6 percent of those firms will be operated by a single-owner or a small family business (IBIS World Industry Analysis March 2012).

Company Marketing Objectives

Hacketts marketing strategy will be to capture all current RC Enthusiasts in the Central Oregon area by advertising in club newsletters and offering all club members a discount. Hacketts will target potential customers with a direct mail campaign to let them know about the business and services offered. A rewards program offer will be extended to all customers, with incentives and discounts to all members. The rewards program will be able to capture customer information and email addresses, to start building a customer list and build a database for use with a Customer Relationship Management software program. Hacketts Helicopter Hobbies will start an indoor RC club and rent a facility to fly in the winter months to pick up off-season revenue. Also, the company will start a local fun fly event during the summer months at all the different clubs in order to gain exposure for new customers. The company will build an E-commerce site to subsidize the retail location with a free help section, which will be used to answer customer questions and help with problems. By providing excellent customer service and free help with RC related problems, Hacketts should be able to capture many new customers. The managers will develop social media pages and offer free prize drawings to customers for referring people to the site. Social media will be a great, low-cost way to drive traffic to the website and retail store locations. With a website and a rewards program, Hacketts hopes to capture customers for life, and work on developing a successful retail and E-commerce hobby business to service customer needs and decrease buyer price sensitivity. The initial integrated marketing campaign will consist of a direct mail marketing campaign, a television commercial, radio commercial and an advertisement in the flying clubs monthly newsletter, all directed at our target market and the establishment of the new business. 7

The cost per monthly newsletter will be approximately $150 per club per month, with an initial cost of $450. The initial cost of the direct mail campaign will be approximately $878.00 for 6,000 prospects, which will focus on current RC club members as well as our target market. The direct mail flyer will have an ad for a 10% initial discount for the first purchase and the ads will be numbered so that we can track the conversion rate for future purposes. We will be running 4 radio 30 second spots a day on Rock 98.3 The Twins, which has a 70% male audience 25-54 years of age. The reach will cover 20,100 listeners per week in the Central, Oregon area. The cost will be $700 dollars a week and will run 4 weeks prior to our grand opening. The total cost for the first month will be $2800 and we will evaluate the effectiveness from there. The television advertisement will have an initial cost of $250 for the production cost and $525 per week for two ads on the morning and evening news on KOHD channel 9 in bend. The totals reach of 25,000 households in the Central Oregon Area. This should give us a CPM of approximately 68.09 and have a monthly total cost of $2,100 for the first month. We will use a promotion that says mention the television ad for an initial 10% discount on the first purchase. We will also track the conversion rate of the television advertisements to evaluate future campaigns. The total cost for the integrated marketing campaign will be $7,178 for the initial grand opening. We will have a grand opening drawing for a new airplane or helicopter, costing us approximately $700. The drawing will allow us to start our database with customer information from the drawing.

Market Research
According to the market research report by IBIS World for SIC code 4511, the toy and hobby industry is a 17.1 billion dollar industry annually. The hobby shop industry comprises 24 percent of that, with a projected growth rate of 6 percent per year from 2012 to 2017. According to the IBIS report, the competition is high and the barriers to entry are at a medium level (IBIS World). The biggest competition will be from large online retailers like Amain Hobbies and other large ECommerce retailers. These retailers offer low prices, but no help with technical related issues. Industry performance is expected to rise slowly over 2012 creating a potential opportunity for this industry, according to IBIS World. Hobby stores will likely experience strong sales, thanks to aging baby boomers, accounting for 37.4 percent of sales. This demographic is anticipated to expand its share of revenue as they reach retirement age. In addition, players will likely place major emphasis on good customer service, as large discount retailers lack this type of service (IBIS World). According to the Hobby Manufacturing Association, Radio Controlled hobbies accounted for $362,912,500 dollars of total hobby related sales in 2010. The average markup for retail stores is 40 to 50 percent (www.hmahobby.org).

Primary Market Research

I spoke to Brett, the owner of Als Cycle and Hobbies, who has been successful in the Medford area for over 30 years. He provides excellent customer service and has products in stock at competitive prices. One of the important factors we talked about was seasonality in the off months. Brett said that January through March were very slow sales months for the store. Brett does not do any E-commerce business or any Social Media of any type. His highest profit margins are on small parts and accessories. I also spoke to Steve who works at Chief Aircraft in Grants Pass. Their business is almost completely opposite of Als Hobbies. Chief does 95% of their business as E-commerce from their website. Their sales have been increasing 10-15 percent over the last two years. They specialize in high-end specialty products and accessories. They leverage Social Media and SEO and SEM marketing techniques along with a CRM Management system.

Market Analysis
RC Helicopter sales are strongly correlated to the presence of disposable income. For this reason, it is believed that the bulk of Hacketts Helicopters patrons will fall in the following 3 Life Mode segments: L1 High Society: Responsible for 25% of national income. Participate often in recreation activities and sports. L5 Senior Styles: Retirees with free time and the desire to enjoy it. L7 High Hopes: Young families with college educations and good jobs. These segments tend to cultivate long-term, relatively expensive hobbies (mountain biking; motorcycling; photography).

Given that the desired tapestry segments are present in acceptable numbers in the Bend, Oregon MSA, Hacketts Helicopter Hobbies ought to have sufficient potential customers to justify opening shop in the area. The location scouted is adjacent to Bends mall, Cascade Village, and lies on a stretch of highway traveled by an average of approximately 38,000 autos per day on average. Beyond the scope of this report lies Hacketts ability to effectively engage the target customer groups. There remain a number of unknowns to examine. Namely whether RC flying will continue to grow as an industry, whether the target customer demographic accurately portrays actual (and potential) RC enthusiasts, and whether Bend is the best place to open such a business compared to other Pacific Northwest cities.

Map showing L5 High Society households Bend, Oregon (Esri)

Map showing L5 Senior Styles households Bend, Oregon (Esri)

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Map showing L7 High Hopes households (Esri)

S.W.O.T Analysis
Strengths: Excellent customer service and product knowledge will be our largest strength. Building customer relationships within the flying community and clubs will be foremost in our keys to success. Having the products in stock at competitive prices will increase impulse buying. We will incorporate a CRM system to manage customer information and build positive relationships with one to one marketing activities. We will incorporate the use of social media to enhance our CRM system and allow our customers to show off their models and interact with other members. We will develop an indoor flying center during the winter months to keep customer interest in the hobby. Weakness: We will not be the low price leader like other E-commerce websites; however, we will stay competitive on price. Opportunities: Central Oregon is growing in baby boomers and retired people who will have more time and disposable income for hobby activities. We will be the only helicopter and airplane specific hobby shop in Central Oregon. RC Flying is growing among children and we plan on incorporating some free seminars catered towards families and children to introduce them to the hobby. Threats: Legislation aimed at limiting the RC hobby and increasing restrictions will be ever increasing with the introduction of Drone legislation in the State and US governments. Every increasing threats from online retailers will always be a problem in the hobby industry. Ever

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decreasing margins is another problem we may encounter in the future. The seasonality of RC flying is another threat we will face in the winter months.

Barriers to Entry
The barriers to entry are competition, concentration, life cycle stage, capital intensity and technology change. The largest barrier to entry is the level of external competition followed by the initial cost of establishing a retail outlet. New entrants may find it difficult to compete with national retail chains in terms of brand awareness, product range, and price. The larger retailers have economies of scale and exclusive product agreements with manufacturers (IBIS World). Retailers need to have established relationships with manufacturers to secure reliable and consistent supply of merchandise. Globalization levels have remained stable for the hobby industry over the past five years. The industry has historically been characterized by a large number of small and independent retail stores, operating locally or regionally. In terms of international trade there has been an influx of merchandise imported from China, allowing smaller retailers access to cheaper goods within the domestic market (IBIS World Industry Analysis March 2012)

Seasonality
The hobby industry has some seasonality to it with most of the flying activities occurring in the spring and summer months. However, the months leading up to the Christmas season are a very busy time for sales. In order to combat some slow times after Christmas, we are planning on renting a venue for indoor micro flying. My hope is to rent a gym from the armory or a church to have a once a week indoor fun fly free of charge to all RC enthusiasts in the Central Oregon Area. This, in turn will try to keep customers involved with the hobby in winter months and help to drive sales at the hobby shop. By developing an E-commerce website we will be able to supplement sales from warm weather cities who actually do more flying in the winter months.

Market Statistic
The current estimate for the market size in Deschutes County is approximately 33,535 males 2565 with income levels of $25,000 and up (Esri). The total market potential for Deschutes, County in Oregon for the target market is 6,888.64. Males ages 45-65 make up 39.1% of the total household population of 17,618 in Deschutes, County, according to the age and income demographic of the 2010 US Census report. Baby boomers will comprise about 30 percent of total market potential. Education is also a factor with the RC hobby industry as more educated people pursue intellectual hobbies. About 36.4 percent of people in the Bend area have an Associates degree or higher according to the Esri report (Esri).

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Customer Profile
The target market is males 25-65 years of age who make up 60 percent of hobby-related sales according to IBIS world. The current numbers of males in the 24-65 age group, within Deschutes County are approximately 46,577 according to US Census 2010 report (US Census). The median household income in Bend Oregon is $40,751 (Esri). The income level for Hacketts target market is $25,000 and up for males 25-65 years of age. Baby boomers make up 37.5 percent of hobby sales nationwide and have larger income levels as well more free time for hobbies (IBIS). Hacketts current estimate of the market size in Deschutes County is approximately 33,535 males 25-65 with disposable income levels of $25,000 and up (Esri). There are three RC flying clubs in Deschutes County with well over 200 members. Bend is a tourist town and many of the summertime visitors are males with income levels above $25,000 a year, who are also potential customers but not figured into Hacketts market potential. Deschutes County, OR 2010 Retail Sales Potential Sports/Hobby (4511) by Zip (Esri)

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Median Household Income Males Age 45 - 65 Year 2009 Deschutes County, OR (Esri)

Market Share Distribution

The market share for Central Oregon currently is about 80% online sales. Small inexpensive items were purchased at Ds hobbies to avoid shipping costs. I have talked to several friends and club members who make the majority of their purchases online because of the lack of availability of specialty products at the local hobby shop. Because of the spread out nature of Central Oregon and convenience of online shopping, we will never gain 100% market share. However, if we can capture 50% of customers, which is approximately 200 current club members at three different flying fields, we should be able to effectively penetrate the online market. Then there are also the new enthusiasts who have not joined a flying club as well as tourists on vacation in Central Oregon. The helicopter segment is the fastest growing RC segment because of technological innovations allowing people to learn to fly helicopters much easier than in the past. By having all the latest products available and in stock, we will increase access by new pilots. The Cascade Fliers club has 50 active members of whom almost half fly helicopters as well as airplanes. By developing relationships with all of the local clubs we will be able to capture 50% of the current market. By having an E-commerce site we will be able to capture customers who are outside of the Central Oregon area. By starting an aggressive advertising campaign in the first few weeks of starting the shop we will be able to get the word out about the new business. I personally already know most of the members at the Cascade Fliers club from flying there in the summer months in the last couple years. It is difficult to determine the exact size and scope of the market for hobbyrelated products in Central Oregon. So my market analysis will focus on club members of all 14

three clubs, which is approximately 200. If we can capture 100 customers out of the 200 potential customers out of the gate, we will be doing a good job. The target market for Central Oregon is approximately 6,888 males in the age, income and educational level. If we can capture 5% of the target, market we would have 345 customers for our hobby shop. Our other goal is to capture 50% of the current flying club members of the three flying clubs in Central Oregon, which are approximately 100 potential customers. If my estimates are correct, we should be able to capture 445 potential customers in the Central Oregon area. This equals approximately $1000 average per customer per year to reach our sales objective.

Competitive Edge
Hacketts Helicopter Hobbies is entering a highly competitive industry, but by emphasizing our core competencies we can gain a competitive edge over our competition. We will leverage Social media and our CRM management system to keep up with customers birthdays and special events. By being active in all of the flying clubs in Central Oregon we will be able to provide discounts to current members. We will use MailChimp for email marketing campaigns and a monthly newsletter. We will leverage our extensive product knowledge to help individual customers have success with all of their RC products. We will warranty all defective products directly so the customer will not have to send back their defective product to the manufacturer and wait to receive the new product in the mail. We will actively participate in Social Media and constantly update our Facebook page with new product releases and upcoming events.

Competition
The RC hobby industry is an extremely competitive industry that is facing lower margins and increased competition from large online retailers. Because of their small size and the intense competition from external players, most stores in this industry will maintain one or two stores throughout the next five years (IBIS World Industry Analysis March 2012). However, customer service can go a long way in gaining customer loyalty. Once a customer has been acquired, we can build a relationship with that customer that can last a lifetime. Because of the complexity of the RC hobby, people always have problems that need resolving. However, large online hobby stores offering low prices will be a problem. My largest online competition will come from Hobby King.com out of China who basically offers wholesale prices to retail consumers. Amain Hobbies.com is also an online competitor who offers great prices and service out of Chico, CA. Bend has one local hobby shop, Ds Hobbies. Ds does sell RC planes and helicopters, but also offers paintball equipment, model trains, remote-control cars, and other hobby and recreation equipment. Ds is not a specialist in RC flyers, so the threat of direct competition with Hacketts Helicopter Hobbies is minimal.

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Ds Hobbies 757 NE Greenwood Ave, Bend, OR

Technology
The technology we will be using will be using Amazon Web Services for web hosting and our Ecommerce site, which will add scalability and lower the initial startup costs. We will be using two open source software programs one for Point of Sale and one for CRM management. The point of sale system will incorporate our server with Opensource point of sale software. For the CRM system we will be using our server and Sugarforge open source software. We will also be using MailChimp for use with our email marketing campaigns. We will use multiple forms of social media like Facebook, Yelp, and Twitter along with a customer help section of our E-commerce website and Facebook page. We will incorporate mobile technology using Twitter and advertise specials and upcoming events. We will use You Tube to show video of recent flying events and training on product setup and maintenance. We will incorporate Search Engine Optimization techniques to increase traffic to our E-commerce site.

Social Responsibility and Sustainability

Hacketts Helicopter Hobbies understands that we have a responsibility to use ethical standards and business practices as well as promote the RC Hobby. We will recycle whenever possible and use green energy like Pacific Powers Blue sky Program. We will promote the responsible use

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and recycling of Lithium Polymer batteries as well as the proper disposal of nitro fuel that has expired.

Community Involvement
We will become active members in the community and offer discounts to schools and other flying clubs in the Central Oregon area. We will try to sponsor some events like summer fun-flys at local clubs and offer an indoor venue for wintertime flying activities. We will try to offer some free instructional clinics for setup and model building as well as instructional videos on You Tube.

Development and Exit Plan

The exit plan strategy is to build the business to a successful level for future sale, as I am in my forties and may want to retire in 15-20 years. The other option is to build a management team that can take over the day-to-day operations in the next ten to fifteen years. We may look to sell the business if the value reaches an acceptable level for all the stakeholders. If the business is unsuccessful in the first year, I plan is to sell all assets and left over inventory, with the proceeds going to the equity investors in an equal distribution.

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Appendix A Interview
My Interviews are with Brett the owner of Als Cycle and Hobbies in Medford and Steve at Chief Aircraft in Grants Pass. How long have you owned Als Cycle and Hobbies? 30 years in Medford and 5 years in Klamath Fall Which produces more income the hobby shop or the cycle shop? It takes both business to survive due to the cyclical nature of both hobbies and bicycles. The best months for the hobby shop are October thru January with February being a very slow month. Bikes make more than hobbies in the third and fourth quarter of the year. Who are your best customers? Males 25-70 years of age spend more on hobby related products What products produce the highest margin? Smaller accessories make more margin than large ticket items and tend to be less price sensitive to customers because of shipping costs. Larger ticket items have smaller profit margins. Large items carry about a 30% margin due to heavy Internet competition. However small parts and items carry a 35% profit margin, which is larger than other items. Are planes or Helicopters more profitable? Both are about equal in terms of kit sales; however helicopters require more spare parts and seem to turnover parts more rapidly. Who is your largest competitor? Internet stores like Amain Hobbies when price becomes an issue. How do you differentiate yourself from your competition? Excellent customer service and having the products in stock at competitive prices is there main competitive advantage . What marketing activities are most beneficial to your business? Sponsor fun flys and donates to the schools and has an indoor flying event every other Monday at the Medford Armory. Do you have a website and do e-commerce business? Does not have an ecommerce site or plans at this time. His suppliers are actually his competitors. For example Horizon Hobbies and Great Planes both have e-commerce sites. He is worried that they may cannibalize his current customers. Do you use any social media? Not at this time he does not use any social media of any kind. What forms of advertising have been most effective? Word of mouth advertising is the best form of advertising and television commercials are effective.

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How do you plan to grow your business? At this time he is looking to not lose business due to heavy Internet competition. How do you acquire new customers? Television ads aimed at new hobbyist with an emphasis in community involvement. Do you have a marketing plan? The main focus of his marketing plan is to support local fun fly events and to support the school districts with special deals on rockets and other hobby related products. Do you have sales forecasts in place to compare growth year over year? Yes however forecasts are never completely accurate, he never forecasts that far ahead. Last year was a slower than normal sales year, but this year looks good so far but really hard to tell this early in the year Would you start another store in another location if you could? He had one in Klamath Falls that was not successful. What ways would you change your business if you could? To incorporate an e-commerce website if he was going to try to be more competitive. Not interested in e-commerce because of his age and the stage in the life cycle of the business What do you think the future objectives and goals will be? He is working on an exit strategy of selling the business or closing it down as he is reaching retirement age. If you could go back in time would you do it all over again? No partially because of his age and the ever-decreasing profit margins from e-commerce retailers Chief Aircraft http://www.chiefaircraft.com/ Talked to Steve Coleman Sales associate and a personnel friend. Chief Aircraft sells mainly large Scale Avionics and other specialty products for Airplane pilots. They have two locations One in Florida and one in Grants Pass Oregon. The RC business is a supplement to their large Airplane electronics and accessories. Chief does 90 percent of their business from their e-commerce website. They operate at about a 30% overall margin selling high-end specialty products. They buy most of their large-scale RC plane kits directly from china by the container load. Because they have great expertise in large-scale expensive products there is less price sensitivity and allows them greater margins than smaller hobby shops. They use Social media and SEO and SEM marketing activities for their website.

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The RC aspect is roughly 40% of their total sales each year. The Airplane electronics for fullscale planes makes up the largest portion of the annual sales. Chief Aircraft does several million dollars a year in sales from both locations, however the Florida store does twice the business as the Grants Pass location. Chief has only been selling RC products for about five years, but sales have been increasing 10 to 15 percent in this category the last two years. Most of their marketing activities are focused around search engine optimization and customer acquisition. Excellent customer service and help with specialty products set them apart from many other ecommerce retailers. You can always get help from a live person.

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Appendix B Radio Demographics - Combined Communications

Target Demo 35-64 year old / Audience, 55% Male 45% Female This local and live News Talk Station reaches 19,800 loyal listeners per week* #1 Adults 35+ in Deschutes County M-F 6a-3p.

Target Demo 25-54 year old / Audience, 60% Female - 40% Male Central Oregons community driven station reaches 12,600 listeners per week* Celebrating 25 years in Central Oregon!

Target Demo 25-54 year old / Audience, 65% Female - 45% Male This family fun station reaches a total of 24,300 listeners per week*

Target Demo 25-54 year old / Audience, 70% Male 30% Female This Heritage Rock Station reaches 20,100 listeners per week* #1 Males 25+ in Deschutes County / Over 30 years in C.O.

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Appendix B KOHD Television Program schedule And Direct Mail Costs

Postcard Mania Direct Mail Advertisement Product Quantity Price per

6000 4.25 x 6 Postcards: 4/1 14 pt coated one side w/UV 1 Full Design 6000 Mailing List: Resident/Occupant One Time Use 6000 Addressing $0.025 $0.025 $199.00 $0.0548

Price
$329.00

$199.00 $150.00

$150.00 $878.00

Total

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Appendix C Financials Assumptions

Start-up Costs
Dell Computer Display cases Integrated marketing campaign Incorporation Fees Store Sign Initial Inventory Total $899 $1,900 $7,178 $,1000 $2,500 $7,338 $20,815

Summary of Expenses
The largest operational expense is labor, which will cost $60,744 in the first year. Taxes on salaries for Andy and Pat are figured according to US tax laws in the sales tab. The second largest expense is the building lease payments, which costs $18,288 a year at a fixed rate for 5 years. My product inventory will cost approximately 25% of my cost of goods sold at approximately $7,338 for startup inventory and $7,338 for the initial integrated marketing campaign. Credit card fees are estimated at 1.5% of gross sales per month and are figured into the summary of sales and costs on the sales tab.

Financial Resources
The $25,000 initial startup capital for the retail store will be raised by selling equity in the business to investors as limited liability partners. A 5% share in the business will sell for a $5,000 dollar investment in the company. The Equity investors will share in the equal distribution of yearly profit at the end of each fiscal year. Taxes will be considered on the individual at their current tax rate, according to the year-end equity distribution.

Profit/Loss projections
The sales figures for year one are estimates based on interviews with two hobby shops and will be adjusted accordingly after the first year sales totals. A weighted average was used in each product category to determine the total sales based on individual product sales estimates. The first years projected net profit is approximately $42,249. The second year projections are a 10% increase in sales resulting in a second year profit of $56,725. The third year is expected to result in another 10% increase in sales of $63,639. This increase in sales will be formulated as an industry standard of 10% according to the business were surveyed and the industry average. The income distribution to all partners will be roughly $2,212 per 5% of equity in the company for the first year. The second year equity distribution will be $2,836 per 5% equity stake in the company. The third year equity distribution will be roughly $3,168 per 5% equity stake in the company. The rate

23

of return for a $5,000 investment the first year will be approximately 40%. Even if the projected sales are 50% of our sales forecast for the first year, the rate of return will be 20% for a $5,000 investment.

Year-Over-Year Sales Projections

700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 Gross Sales Total COS Gross Profit Net Income Year 2014 Year 2015 Year 2016

Year One Cash Flow Detail

24

Helicopter Kits Weighted Average

HACKETT'S HELICOPTER HOBBIES MONTHLY WEIGHTED AVERAGE SALES TOTAL RETAIL PRICE DISCOUNT WHOLSALE PRICE AVERAGE 109.99 65% 71.49 349.99 65% 227.49 486.99 65% 316.54 439.99 65% 285.99 599.99 65% 389.99 839.99 65% 545.99 904.99 65% 588.24 905.99 65% 588.89 699.99 65% 454.99 1073.99 65% 698.09 1282.99 65% 833.94 1799.99 65% 1169.99 1578.99 65% 1026.34 MONTHLY UNIT SALES MONTHLY SALES RETAIL MONTHLY COST 4 439.96 285.974 2 699.98 454.987 418.49 2 973.98 633.087 2 879.98 571.987 2 1199.98 779.987 1 839.99 545.9935 872.49 1 904.99 588.2435 2 1811.98 1177.787 1 699.99 454.9935 886.99 2 2147.98 1396.187 1 1282.99 833.9435 1 1799.99 1169.9935 1553.99 1 1578.99 1026.3435 22 15260.78 9919.507 5341.27 13.82 717.79 1104.30

Appendix D Product Sales Weighted Averages

ALIGN HELICOPTER KITS TREX 100X KX022008 TREX 250 DFC PRO COMBO TREX 250 DFCPRO SUPER COMBO TREX 450 SUPER COMBO TREX 450 PRO DFC SUPER COMBO TREX 500E PRO SUPER COMBO TREX 500PRO DFC SUPER COMBO TREX 550 PRO DFC SUPER COMBO TREX 600 NITRO PRO KIT TREX 600E PRO DFC SUPER COMBO TREX 700 NITRO DFC SUPER COMBO TREX 700E DFC HV SUPER COMBO TREX 700E DFC SUPER COMBO MONTHLY TOTAL MONTHLY PROFIT WEIGHTED AVERAGE HELICOPTER KITS COST WEIGHTED AVERAGE HELICOPTER KITS RETAIL ASSURANCE RC WHOLESALE DISTRUBUTER US

25
RETAIL PRICE DISCOUNT WHOLSALE PRICE AVERAGE 189.99 65% $ 123.49 249.99 65% 162.49 149.99 65% 97.49 129.99 65% 84.49 149.99 65% 97.49

READY TO FLY HELICOPTERS E-FLIGHT BLADE NANO CP RTF E-FLIGHT BLADE MCPX BIND AND FLY E-FLIGHT BLADE NANO CP BIND AND FLY E-FLIGHT BLADE MCPX V2 BIND AND FLY E-FLIGHT MQX READY TO FLY QUAD COPTER

MONTHLY UNIT SALES MONTHLY SALES RETAIL 4 $ 759.96 2 $ 499.98 4 $ 599.96 4 $ 519.96 2 $ 299.98 16 $ 2,679.84 4.70 $ $ 937.94

MONTHLY COST $ 493.97 $ 324.99 $ 389.97 $ 337.97 $ 194.99 $ 1,741.90

MONTHLY SALES TOTAL MONTHLY PROFIT WEIGHTED AVERAGE READY TO FLY HELICOPTERS COST WEIGHTED AVERAGE READY TO FLY HELICOPTERS RETAIL

$ 569.97

370.48

TOTAL MONTHLY UNITS TOTAL WHOLESALE COST TOTAL RETAIL SALES

38 $ $ 17,940.62 6,279.22

11,661.40

Helicopter Parts Weighted Average

Hackett's Helicopter Hobbies Align Helicopter parts TREX 250 DFC PRO CANOPY 205D CARBON BLADES FEATHERING SHAFT MAIN SHAFT SET 250MX MOTOR THOR 800 MAH 3S LIPO BATTERY TORQUE TUBE REAR DRIVE GEARS TORQUE TUBE FRONT DRIVE GEARS TORQUE TUBE METAL TAIL TORQUE TUBE UNIT MAIN ROTOR HEAD UPGRADE LANDING SKIDS SET TAIL BOOM/BLACK MONTHLY SALES TOTAL MONTHLY PROFIT WEIGHTED AVERAGE 250 DFC PRO PARTS COST WEIGHTED AVERAGE 250 DFC PRO PARTS RETAIL WHOLSALE RETAIL PRICE DISCOUNT PRICE $ 20.99 65% $ 13.64 $ 16.99 65% $ 11.04 $ 4.99 65% $ 3.24 $ 5.99 65% $ 3.89 $ 34.99 65% $ 22.74 $ 11.99 65% $ 7.79 $ 10.99 65% $ 7.14 $ 12.99 65% $ 8.44 $ 8.99 65% $ 5.84 $ 27.99 65% $ 18.19 $ 35.99 65% $ 23.39 $ 6.99 65% $ 4.54 $ 5.99 65% $ 3.89 $ 205.87 $ 133.82 MONTHLY AVERAGE UNIT SALES 2 6 6 6 3 10 6 6 6 3 3 5 5 67 MONTHLY SALES RETAIL MONTHLY COST $ 41.98 $ 27.29 $ 101.94 $ 66.26 $ 29.94 $ 19.46 $ 35.94 $ 23.36 $ 104.97 $ 68.23 $ 119.90 $ 77.94 $ 65.94 $ 42.86 $ 77.94 $ 50.66 $ 53.94 $ 35.06 $ 83.97 $ 54.58 $ 107.97 $ 70.18 $ 34.95 $ 22.72 $ 29.95 $ 19.47 $ 889.33 $ 578.06 $ 311.27 $ 45.52 $ 70.03

450 DFC PRO 450 PRO DFC PAINTED CANOPY 32D 3G CARBON BLADES 325MM FEATHERING SHAFT MAIN SHAFT SET 450 MX BRUSHLESS MOTOR THOR 220MAH 3S LIPO TORQUE TUBE REAR DRIVE GEARS TORQUE TUBE FRONT DRIVE GEARS TORQUE TUBE METAL TAIL TORQUE TUBE UNIT MAIN ROTOR HEAD UPGRADE LANDING SKIDS SET TAIL BOOM/BLACK MONTHLY SALES TOTAL MONTHLY PROFIT WEIGHTED AVERAGE 450 DFC PRO PARTS COST WEIGHTED AVERAGE 450 DFC PRO PARTS RETAIL

WHOLSALE RETAIL PRICE DISCOUNT PRICE $ 31.99 65% $ 20.79 $ 18.99 65% $ 12.34 $ 6.99 65% $ 4.54 $ 4.99 65% $ 3.24 $ 49.99 65% $ 32.49 $ 39.99 65% $ 25.99 $ 7.99 65% $ 5.19 $ 9.99 65% $ 6.49 $ 9.99 65% $ 6.49 $ 32.99 65% $ 21.44 $ 49.99 65% $ 32.49 $ 6.99 65% $ 4.54 $ 7.99 65% $ 5.19 $ 278.87 $ 181.27

MONTHLY AVERAGE MONTHLY UNIT SALES SALES RETAIL MONTHLY COST 2 $ 63.98 $ 41.59 6 $ 113.94 $ 74.06 6 $ 41.94 $ 27.26 6 $ 29.94 $ 19.46 2 $ 99.98 $ 64.99 6 $ 239.94 $ 155.96 6 $ 47.94 $ 31.16 6 $ 59.94 $ 38.96 6 $ 59.94 $ 38.96 3 $ 98.97 $ 64.33 3 $ 149.97 $ 97.48 6 $ 41.94 $ 27.26 6 $ 47.94 $ 31.16 64 $ 1,096.36 $ 712.63 $ 383.73 $ 52.56 $ 77.93

WHOLSALE 550/600 PRO DFC PARTS RETAIL PRICE DISCOUNT PRICE 550 PRO DFC PAINTED CANOPY $ 65.99 65% $ 42.89 600 PRO DFC PAINTED CANOPY $ 65.99 65% $ 42.89 550 PRO MAIN BLADES $ 59.99 65% $ 38.99 600 PRO MAIN BLADES $ 79.99 65% $ 51.99 MAIN SHAFT SET $ 16.99 65% $ 11.04 FEATHERING SHAFT $ 6.99 65% $ 4.54 600 MX BRUSHLESS MOTOR $ 147.99 65% $ 96.19 THOR 3850MAH 6S LIPO $ 109.99 65% $ 71.49 TORQUE TUBE REAR DRIVE GEARS $ 19.99 65% $ 12.99 TORQUE TUBE FRONT DRIVE GEARS $ 13.99 65% $ 9.09 TORQUE TUBE $ 15.99 65% $ 10.39 METAL TAIL TORQUE TUBE UNIT $ 49.99 65% $ 32.49 MAIN ROTOR HEAD UPGRADE $ 69.99 65% $ 45.49 LANDING SKIDS SET $ 6.99 65% $ 4.54 TAIL BOOM/BLACK $ 12.99 65% $ 8.44 MONTHLY SALES TOTAL MONTHLY PROFIT WEIGHTED AVERAGE 550/600 DFC PRO PARTS COST WEIGHTED AVERAGE 550/600 DFC PRO PARTS RETAIL

MONTHLY MONTHLY AVERAGE UNIT SALES SALES RETAIL MONTHLY COST 1 $ 65.99 $ 42.89 1 $ 65.99 $ 42.89 4 $ 239.96 $ 155.97 4 $ 319.96 $ 207.97 4 $ 67.96 $ 44.17 4 $ 27.96 $ 18.17 1 $ 147.99 $ 96.19 6 $ 659.94 $ 428.96 4 $ 79.96 $ 51.97 4 $ 55.96 $ 36.37 4 $ 63.96 $ 41.57 4 $ 199.96 $ 129.97 1 $ 69.99 $ 45.49 4 $ 27.96 $ 18.17 4 $ 51.96 $ 33.77 49 $ 2,145.50 $ 1,394.58 $ 750.93 $ 115.08 177.04

TREX 700E DFC PRO 700 PRO DFC PAINTED CANOPY 700 PRO MAIN BLADES MAIN SHAFT SET FEATHERING SHAFT 750 MX BRUSHLESS MOTOR THOR 3850MAH 6S LIPO TORQUE TUBE REAR DRIVE GEARS TORQUE TUBE FRONT DRIVE GEARS TORQUE TUBE METAL TAIL TORQUE TUBE UNIT MAIN ROTOR HEAD UPGRADE LANDING SKIDS SET TAIL BOOM/BLACK MONTHLY SALES TOTAL MONTHLY PROFIT WEIGHTED AVERAGE 700 DFC PRO PARTS COST WEIGHTED AVERAGE 700 DFC PRO PARTS RETAIL TOTAL MONTHLY UNITS TOTAL WHOLESALE COST TOTAL RETAIL SALES TOTAL PROFIT TOTAL WEIGHTED AVERAGE COST TOATAL WEIGHTED AVERAGE RETAIL

WHOLSALE RETAIL PRICE DISCOUNT PRICE 95.99 0.65 $ 62.39 119.99 0.65 $ 77.99 17.99 0.65 $ 11.69 8.99 0.65 $ 5.84 189.99 0.65 $ 123.49 109.99 0.65 $ 71.49 19.99 0.65 $ 12.99 12.99 0.65 $ 8.44 12.99 0.65 $ 8.44 16.99 0.65 $ 11.04 14.99 0.65 $ 9.74 11.99 0.65 $ 7.79 16.99 0.65 $ 11.04

MONTHLY MONTHLY AVERAGE UNIT SALES SALES RETAIL MONTHLY COST 1 $ 95.99 $ 62.39 3 $ 359.97 $ 233.98 3 $ 53.97 $ 35.08 3 $ 26.97 $ 17.53 2 $ 379.98 $ 246.99 6 $ 659.94 $ 428.96 3 $ 59.97 $ 38.98 3 $ 38.97 $ 25.33 3 $ 38.97 $ 25.33 3 $ 50.97 $ 33.13 2 $ 29.98 $ 19.49 3 $ 35.97 $ 23.38 3 $ 50.97 $ 33.13 38 $ 1,882.62 $ 1,223.70 $ 658.92 $ 120.18 $ 184.89 218 $ $ $ 54.5 $ $ 127.47 83.33 6,013.81 2,104.83 3,908.98

26

Airplane Kits Weighted Average

HACKETT'S HELICOPTER HOBBIES MONTHLY WEIGHTED AVERAGE SALES TOTAL MONTHLY MONTHLY RETAIL WHOLESALE UNIT SALES PRICE DISCOUNT PRICE AVERAGE SALES RETAIL 239.00 65% $ 155.35 2 $ 478.00 419.00 65% $ 272.35 2 $ 838.00 629.00 65% $ 408.85 1 $ 629.00 1,049.00 65% $ 681.85 1 $1,049.00 1,499.00 65% $ 974.35 1 $1,499.00 3,835.00 $ 2,492.75 7 $4,493.00 $1,572.55 5.41 $ 829.86 MONTHLY PRODUCT COST $ 310.70 $ 544.70 $ 408.85 $ 681.85 $ 974.35 $2,920.45

PILOT AIRPLANE KITS Yak 54 19% ARF Yak 54 26% ARF YAK 54 30% ARF YAK 54 35% Arf YAK 54 37.5% SALES TOTAL PROFIT WEIGHTED AVERAGE PLANE KITS COST WEIGHTED AVERAGE PLANE KITS RETAIL

$ $ $ $ $ $

$ 539.41

Airplane Parts Weighted Average

HACKETT'S HELICOPTER HOBBIES AIRPLANE PARTS WEIGHTED AVERAGE RETAIL WHOLSALE MONTHLY MONTHLY SALES PRICE DISCOUNT PRICE AVERAGE UNIT SALES RETAIL $ 28.95 0.65 $ 18.82 4 $ 115.80 $ 49.95 0.65 $ 32.47 4 $ 199.80 $ 59.95 0.65 $ 38.97 4 $ 239.80 $109.95 0.65 $ 71.47 3 $ 329.85 $119.95 0.65 $ 77.97 2 $ 239.90 $122.95 0.65 $ 79.92 2 $ 245.90 $159.95 0.65 $ 103.97 1 $ 159.95 20 $ 1,531.00 $ 535.85 $ 217.14 MONTHLY COST $ 75.27 $ 129.87 $ 155.87 $ 214.40 $ 155.94 $ 159.84 $ 103.97 $ 995.15 $ WEIGHTED AVERAGE PROPELLER SPINNERS COST WEIGHTED AVERAGE PROPELLER SPINNERS RETAIL 141.14

AIRPLANE PARTS 2.25" PROPELLER SPINNER 3.25" PROPELLER SPINNER 3.5" PROPELLER SPINNER 4" PROPELLER SPINNER 4.25" PROPELLER SPINNER 4.5" PROPELLER SPINNER 5" PROPELLER SPINNER MONTHLY SALES TOTAL MONTHLY PROFIT

AIRPLANE PROPELLERS XOAR 12X6 BEECHWOOD 13X8 BEECHWOOD 15X8 BEECHWOOD 16X8 BEECHWOOD 17X8 BEECHWOOD 18X8 BEECHWOOD 19X8 BEECHWOOD 20X8 BEECHWOOD 21X8 BEECHWOOD 22X8 BEECHWOOD 23X8 BEECHWOOD 24X8 BEECHWOOD 25X8 BEECHWOOD 30X10 BEECHWOOD 32X10 BEECHWOOD MONTHLY SALES TOTAL MONTHLY PROFIT WEIGHTED AVERAGE PROPELLER COST WEIGHTED AVERAGE PROPELLER RETAIL TOTAL MONTHLY UNITS TOTAL WHOLESALE COST TOTAL RETAIL SALES TOTAL PROFIT TOTAL WEIGHTED AVERAGE COST TOATAL WEIGHTED AVERAGE RETAIL

RETAIL WHOLSALE MONTHLY MONTHLY SALES PRICE DISCOUNT PRICE AVERAGE UNIT SALES RETAIL $ 8.50 0.65 $ 5.53 6 $ 51.00 $ 9.50 0.65 $ 6.18 6 $ 57.00 $ 10.40 0.65 $ 6.76 4 $ 41.60 $ 13.75 0.65 $ 8.94 4 $ 55.00 $ 15.75 0.65 $ 10.24 4 $ 63.00 $ 17.50 0.65 $ 11.38 4 $ 70.00 $ 18.50 0.65 $ 12.03 4 $ 74.00 $ 21.50 0.65 $ 13.98 4 $ 86.00 $ 22.50 0.65 $ 14.63 4 $ 90.00 $ 24.50 0.65 $ 15.93 4 $ 98.00 $ 27.50 0.65 $ 17.88 4 $ 110.00 $ 30.00 0.65 $ 19.50 4 $ 120.00 $ 32.00 0.65 $ 20.80 4 $ 128.00 $ 52.00 0.65 $ 33.80 4 $ 208.00 $ 56.50 0.65 $ 36.73 4 $ 226.00 64 $ 1,477.60 $ 517.16 $ 95.73

MONTHLY COST $ 33.15 $ 37.05 $ 27.04 $ 35.75 $ 40.95 $ 45.50 $ 48.10 $ 55.90 $ 58.50 $ 63.70 $ 71.50 $ 78.00 $ 83.20 $ 135.20 $ 146.90 $ 960.44 $ 62.22

84 $ $ $ 42 $ 156.43 3,008.60 1,053.01 $ 101.68 1,955.59

27

Electronic Components Weighted Average

ELECTRONIC COMPONENTS Hachett's Helicopter Hobbies Monthly MONTHLY WHOLSAL UNIT MONTHLY E PRICE SALES SALES RETAIL $ 162.49 1 $ 249.99 $ 123.49 1 $ 189.99 $ 103.99 1 $ 159.99 $ 84.49 1 $ 129.99 $ 77.99 4 $ 479.96 $ 45.49 5 $ 349.95 $ 19.49 3 $ 89.97 $ 22.74 6 $ 209.94 22 $ 1,859.78 $ 650.92 MONTHLY COST $ 162.49 $ 123.49 $ 103.99 $ 84.49 $ 311.97 $ 227.47 $ 58.48 $ 136.46 $1,208.86

SPECTRUM RECEIVERS 12 CHANNEL DSMX RECEIVER 10 CHANNEL DSMX 9 CHANNEL DSMX 8 CHANNEL DSMX 7 CHANNEL DXMX 6 CHANNEL 4 CHANNELL DSMX REMOTE RECEIVER MONTHLY SALES TOTAL MONTHLY PROFIT WEIGHTED AVERAGE RECIEVERS COST WEIGHTED AVERAGE RECIEVERS RETAIL

RETAIL PRICE DISCOUNT $ 249.99 65% $ 189.99 65% $ 159.99 65% $ 129.99 65% $ 119.99 65% $ 69.99 65% $ 29.99 65% $ 34.99 65%

$ 175.18 $ 269.50

Transmitters Weighted Average

TRANSMITTERS MONTHLY WHOLSAL MONTHLY SALES DISCOUNT E PRICE UNIT SALES RETAIL 70% $ 125.99 4 $ 719.96 70% $ 174.99 3 $ 749.97 70% $ 300.99 3 $ 1,289.97 70% $ 559.99 1 $ 799.99 11 $ 3,559.89 $ 1,067.97

SPECTRUM DX6I DX7 DX8 DX18 MONTHLY SALES TOTAL MONTHLY PROFIT

RETAIL PRICE $ 179.99 $ 249.99 $ 429.99 $ 799.99

MONTHLY COST $ 503.97 $ 524.98 $ 902.98 $ 559.99 $ 2,491.92

WEIGHTED AVERAGE TRANSMITTERS COST WEIGHTED AVERAGE TRANSMITTERS RETAIL

$ $ 890.88

623.61

28

Appendix E Financial Reports

Cash flow first year 2014
HACKETT'S HELICOPTER HOBBIES Pro Forma Statement of Cash Flows for the 12 Month Period Ending Feb-15 Cash Flows from Operations Net Income Depreciation Changes in Working Capital Accounts Receivable1 Inventories 1 Other Current Assets 1 Accounts Payable2 Other Current Liabilities 2 Net Cash Provide by Operating Activities Cash Flows from Investing Activities Purchases of Property and Equipment Land Buildings Building/Leasehold Improvements Machinery & Equipment Automobiles Office Equipment/Other Total Property and Equipment Acquisition of Other Assets Net Cash Used in Investing Activities Cash Flows from Financing Activities Short-term Borrowings Repayment of Short-term Borrowings Long-term Borrowings Repayment of Long-term Borrowings Acquire (Repay) Other Liabilities Sale of Stock Payment of Dividends Net Cash Provided by (Used in) Financing Activities Net Increase (Decrease) in Cash Plus Beginning Cash Ending Cash $ $ $ $ $ $ $ $ 42,931 $ 1,127 $ (6,251) 37,807 $ $ $ $ $ $ Feb-16 56,725 $ 1,180 $ (720) 57,185 $ $ $ $ $ $ Feb-17 63,639 1,180 (650) 64,169

$ $ $ $ $ $ $ $ $

4,400 899 5,299 1,900 7,199

$ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $ $ $

42,249 (42,249)

$ $ $ $ $ $ $ $

56,725 (56,725)

$ $ $ $ $ $ $ $

63,639 (63,639) 530 13,819 14,349

(11,641) $ 25,000 $ 13,359 $

460 $ 13,359 $ 13,819 $

29

Income Statement first year 2014

HACKETT'S HELICOPTER HOBBIES Pro Forma Income Statement for the 12 Month Period Ending Feb-15 Sales Less Cost of Sales: Material Labor (including benefits) Other Cost of Sales Total Cost of Sales Gross Profit Operating Expenses Personnel Depreciation BUILDING LEASE AMAZON WEB HOSTING MONTHLY BOOKKEEPING BEND BROADBAND PACIFIC POWER PROPERTY INSURANCE OFFICE SUPPLIES ADT MONTHLY ALARM Advertising Expense Armory Indoor Rental Initial Marketing campaign Oper exp 12 Oper exp 13 Oper exp 14 Oper exp 15 Other Operating Expenses Total Operating Expenses Earnings Before Interest and Taxes Interest Expense Other Expense (Income) Earnings Before Taxes Income Taxes Net Income $ 433,504 $ 280,477 $ $ 7,270 $ 287,747 $ 145,757
100.0% 64.7% 0.0% 1.7% 66.4% 33.6%

Feb-16 $ 483,410 $ 313,039 $ $ 8,000 $ 321,039 $ 162,371

100.0% 64.8% 0.0% 1.7% 66.5% 33.5%

Feb-17 $ 528,468 $ 342,271 $ $ 9,000 $ 351,271 $ 177,197

100.0% 64.8% 0.0% 1.7% 66.5% 33.5%

$ 58,213 $ 1,127 $ 18,288 $ 4,500 $ 4,800 $ 600 $ 720 $ 720 $ 600 $ 480 $ 4,400 $ 1,200 $ 7,178 $ $ $ $ $ $ 102,826 $ $ $ $ $ $ 42,931 42,931 42,931

13.4% 0.3% 4.2% 1.0% 1.1% 0.1% 0.2% 0.2% 0.1% 0.1% 1.0% 0.3% 1.7% 0.0% 0.0% 0.0% 0.0% 0.0% 23.7% 9.9% 0.0% 0.0% 9.9% 0.0% 9.9%

$ 66,818 $ 1,180 $ 18,288 $ 4,500 $ 4,800 $ 600 $ 800 $ 800 $ 680 $ 480 $ 5,500 $ 1,200 $ $ $ $ $ $ $ 105,646 $ $ $ $ $ $ 56,725 56,725 56,725

13.8% 0.2% 3.8% 0.9% 1.0% 0.1% 0.2% 0.2% 0.1% 0.1% 1.1% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 21.7% 11.8% 0.0% 0.0% 11.8% 0.0% 11.8%

$ 73,500 $ 1,180 $ 18,288 $ 4,500 $ 4,800 $ 600 $ 880 $ 880 $ 750 $ 480 $ 6,500 $ 1,200 $ $ $ $ $ $ $ 113,558 $ $ $ $ $ $ 63,639 63,639 63,639

13.9% 0.2% 3.5% 0.9% 0.9% 0.1% 0.2% 0.2% 0.1% 0.1% 1.2% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 21.5% 12.0% 0.0% 0.0% 12.0% 0.0% 12.0%

Return on Sales Return on Assets Return on Equity

9.90% 167.16% 167.16%

11.73% 220.87% 220.87%

12.04% 247.80% 247.80%

30

Balance Sheet Year End 2014-2017

HACKETT'S HELICOPTER HOBBIES Pro Forma Balance Sheet for the Period Ending Feb-14 Assets Cash Accounts Receivable Inventory Other Current Assets Total Current Assets Property and Equipment Land Buildings Building/Leasehold Improvements Machinery & Equipment Automobiles Office Equipment/Other Total Property & Equipment less acculumlated depreciation Total Fixed Assets Other Assets Total Assets Feb-15 Feb-16 Feb-17

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

25,000 25,000 25,000

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

13,359 6,251 19,610 4,400 899 5,299 (1,127) 4,172 1,900 25,682

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

13,819 6,971 20,790 4,400 899 5,299 (2,307) 2,992 1,900 25,682

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

14,349 7,621 21,970 4,400 899 5,299 (3,487) 1,812 1,900 25,682

Liabilities and Equity Accounts Payable Short-term Loans Payable Other Current Liabilities Total Current Liabilities Long-term Debt Other Liabilities Total Liabilities Equity Stock and Paid-in Capital Retained Earnings Current Year Earnings Total Equity Total Liabilities and Equity

$ $ $ $ $ $ $

$ $ $ $ $ $ $

$ $ $ $ $ $ $

$ $ $ $ $ $ $

$ $ $ $ $

25,000 25,000

$ $ $ $

25,000 (42,249) 42,931 25,682

$ $ $ $

25,000 (56,043) 56,725 25,682

$ $ $ $

25,000 (62,957) 63,639 25,682 25,682

25,000 $

25,682 $

25,682 $

31

Statement of Cash Flow by Month

HACKETT'S HELICOPTER HOBBIES Pro Forma Statement of Cash Flows for the Month Ending Mar-14 Cash Flows from Operations Net Income Depreciation Changes in Working Capital Accounts Receivable1 Inventories1 Other Current Assets 1 Accounts Payable2 Other Current Liabilities 2 Net Cash Provide by Operating Activities Cash Flows from Investing Activities Purchases of Property and Equipment Land Buildings Building/Leasehold Improvements Machinery & Equipment Automobiles Office Equipment/Other Total Property and Equipment Acquisition of Other Assets Net Cash Used in Investing Activities Cash Flows from Financing Activities Short-term Borrowings Repayment of Short-term Borrowings Long-term Borrowings Repayment of Long-term Borrowings Acquire (Repay) Other Liabilities Sale of Stock Payment of Dividends Net Cash Provided by (Used in) Financing Activities Net Increase (Decrease) in Cash Plus Beginning Cash Ending Cash $ (12,999) $ $ 49 $ $ $ $ $ $ $ (12,950) $ $ $ $ $ $ Apr-14 6,823 $ 98 $ (8,819) (1,898) $ $ $ $ $ $ May-14 6,823 $ 98 $ 6,921 $ $ $ $ $ $ Jun-14 6,823 $ 98 $ 6,921 $ $ $ $ $ $ Jul-14 6,823 $ 98 $ 6,921 $ $ $ $ $ $ Aug-14 4,919 $ 98 $ 1,089 6,106 $ $ $ $ $ $ Sep-14 2,473 $ 98 $ 1,344 3,915 $ $ $ $ $ $ Oct-14 1,813 $ 98 $ 394 2,305 $ $ $ $ $ $ Nov-14 10,482 $ 98 $ (5,201) 5,379 $ $ $ $ $ $ Dec-14 3,976 $ 98 $ 3,857 7,931 $ $ $ $ $ $ Jan-15 2,728 $ 98 $ 798 3,624 $ $ $ $ $ $ Feb-15 2,247 $ 98 $ 287 2,632 $ $ $ $ $ $ Annual Total Feb-15 42,931 1,127 (6,251) 37,807

$ $ $ $ $ $ $ $ $

4,400 899 5,299 1,900 7,199

$ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $

4,400 899 5,299 1,900 7,199

$ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $

$ $ $ $ $ $ $ 42,249 $ (42,249)

$ $ $ $ $ $ $ $

42,249 (42,249) (11,641) 25,000 13,359

$ (20,149) $ $ $ 25,000 $ 4,851 $

(1,898) $ 4,851 $ 2,953 $

6,921 $ 2,953 $ 9,874 $

6,921 $ 9,874 $ 16,795 $

6,921 $ 16,795 $ 23,716 $

6,106 $ 23,716 $ 29,822 $

3,915 $ 29,822 $ 33,737 $

2,305 $ 33,737 $ 36,042 $

5,379 $ 36,042 $ 41,421 $

7,931 $ 41,421 $ 49,352 $

3,624 $ (39,617) $ 49,352 $ 52,976 $ 52,976 $ 13,359 $

32

HACKETT'S HELICOPTER HOBBIES Pro Forma Income Statement for the Month Ending Mar-14 Sales Less Cost of Sales: Material Labor (including benefits) Other Cost of Sales Total Cost of Sales Gross Profit $ $ $ $ $ 682 682 (682) $ $ $ $ $ 28,469 682 29,151 14,942 $ $ $ $ $ 28,469 682 29,151 14,942 $ $ $ $ $ 28,469 682 29,151 14,942 $ $ $ $ $ 28,469 682 29,151 14,942 $ $ $ $ $ Operating Expenses Personnel Depreciation BUILDING LEASE AMAZON WEB HOSTING MONTHLY BOOKKEEPING BEND BROADBAND PACIFIC POWER PROPERTY INSURANCE OFFICE SUPPLIES ADT MONTHLY ALARM Advertising Expense Armory Indoor Rental Initial Marketing campaign Oper exp 12 Oper exp 13 Oper exp 14 Oper exp 15 Other Operating Expenses Total Operating Expenses $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (12,999) $ $ $ - $ - $ $ (12,999) $ $ Net Income - $ $ (12,999) $ 6,823 $ - $ - $ 6,823 $ - $ 6,823 $ 6,823 $ - $ - $ 6,823 $ - $ 6,823 $ 2,531 49 1,524 375 400 50 60 60 50 40 7,178 12,317 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 5,062 98 1,524 375 400 50 60 60 50 40 400 8,119 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 5,062 98 1,524 375 400 50 60 60 50 40 400 8,119 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Earnings Before Interest and Taxes Interest Expense Other Expense (Income) Earnings Before Taxes Income Taxes $ - $ 44,093 $ 44,093 $ 44,093 $ 44,093 $ 38,648 $ 25,026 584 25,610 13,038 $ $ $ $ $ Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 31,932 $ 20,661 479 21,140 10,792 $ $ $ $ $ Oct-14 29,959 $ 19,378 449 19,827 10,132 $ $ $ $ $ Nov-14 55,964 $ 36,324 839 37,163 18,801 $ $ $ $ $ Dec-14 36,681 $ 23,836 550 24,386 12,295 $ $ $ $ $ Jan-15

Annual Total Feb-15 32,691 $ 21,154 490 21,644 11,047 $ $ $ $ $ Feb-15 31,257 $ 433,504 20,222 469 20,691 10,566 $ 280,477 $ $ 7,270 $ 287,747 $ 145,757

Income Statement for Month End

33
5,062 98 1,524 375 400 50 60 60 50 40 400 8,119 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6,823 $ - $ - $ 6,823 $ - $ 6,823 $

5,062 98 1,524 375 400 50 60 60 50 40 400 8,119

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6,823 $ - $ - $ 6,823 $ - $ 6,823 $

5,062 98 1,524 375 400 50 60 60 50 40 400 8,119

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 4,919 $ - $ - $ 4,919 $ - $ 4,919 $

5,062 98 1,524 375 400 50 60 60 50 40 400 200 8,319

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2,473 $ - $ - $ 2,473 $ - $ 2,473 $

5,062 98 1,524 375 400 50 60 60 50 40 400 200 8,319

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1,813 $ - $ - $ 1,813 $ - $ 1,813 $

5,062 98 1,524 375 400 50 60 60 50 40 400 200 8,319

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 10,482 $ - $ - $ 10,482 $ - $ 10,482 $

5,062 98 1,524 375 400 50 60 60 50 40 400 200 8,319

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 3,976 $ - $ - $ 3,976 $ - $ 3,976 $

5,062 98 1,524 375 400 50 60 60 50 40 400 200 8,319

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2,728 $ - $ - $ 2,728 $ - $ 2,728 $

5,062 98 1,524 375 400 50 60 60 50 40 400 200 8,319

$ 58,213 $ 1,127 $ 18,288 $ 4,500 $ 4,800 $ 600 $ 720 $ 720 $ 600 $ 480 $ 4,400 $ 1,200 $ 7,178 $ $ $ $ $ $ 102,826 2,247 $ - $ - $ 2,247 $ - $ 2,247 $ 42,931 42,931 42,931

Balance Sheet for Month End

34
Beginning Balance Feb-14 Mar-14 $ $ $ $ $ 25,000 25,000 $ $ $ $ $ Assets Cash Accounts Receivable Inventory Other Current Assets Total Current Assets Property and Equipment Land Buildings Building/Leasehold Improvements Machinery & Equipment Automobiles Office Equipment/Other Total Property & Equipment less acculumlated depreciation Total Fixed Assets Other Assets Total Assets $ $ $ $ $ $ $ $ $ $ $ 25,000 $ $ $ $ $ $ $ $ $ $ $

HACKETT'S HELICOPTER HOBBIES Pro Forma Balance Sheet for the Month Ending Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-

49 7 56 4,851 4,851 $ $ $ $ $ 2,953 8,819 11,772 $ $ $ $ $ 9,874 8,819 18,693 $ $ $ $ $ 16,795 8,819 25,614 $ $ $ $ $ 23,716 8,819 32,535 $ $ $ $ $ 29,822 7,730 37,552 $ $ $ $ $ 33,737 6,386 40,123 $ $ $ $ $ 36,042 5,992 42,034 $ $ $ $ $ 41,421 11,193 52,614 $ $ $ $ $

5 4 1 62

4,400 899 5,299 (49) 5,250 1,900 12,001

$ $ $ $ $ $ $ $ $ $ $

4,400 899 5,299 (147) 5,152 1,900 18,824

$ $ $ $ $ $ $ $ $ $ $

4,400 899 5,299 (245) 5,054 1,900 25,647

$ $ $ $ $ $ $ $ $ $ $

4,400 899 5,299 (343) 4,956 1,900 32,470

$ $ $ $ $ $ $ $ $ $ $

4,400 899 5,299 (441) 4,858 1,900 39,293

$ $ $ $ $ $ $ $ $ $ $

4,400 899 5,299 (539) 4,760 1,900 44,212

$ $ $ $ $ $ $ $ $ $ $

4,400 899 5,299 (637) 4,662 1,900 46,685

$ $ $ $ $ $ $ $ $ $ $

4,400 899 5,299 (735) 4,564 1,900 48,498

$ $ $ $ $ $ $ $ $ $ $

4,400 899 5,299 (833) 4,466 1,900 58,980

$ $ $ $ $ $ $ $ $ $ $

Bibliography
Als Cycle and Hobbies. Brett, Owner. Personal interview. April 20th 2013 Bend (city) Quick Facts. US Census Bureau 2011. WEB http://quickfacts.census.gov/qfd/states/41/4105800.html Chief Aircraft. Coleman, Steve. Personal Interview April 27th 2013 Combined Communications, Bend, OR. Kooistra Angie. Radio Advertising Information Demographic and income profile. Esri Business Analyst Online 2012. WEB www.esri.com/ba Hobby Manufacturers Association Survey 2011. WEB www.hmahobby.org J. Eben. Hobby and Toy Stores in the US. IBIS World Industry Report 45112, March 2012. WEB Hannon Library Industry Market Research KOHD television station, Bend, OR. Barnes, Randall Television Advertising rates and dates Request a custom quote. (2013). Postcard Mania. Retrieved from http://www.postcardmania.com/

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