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January 2001

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Table of Contents

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


1.1 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2.0 Company Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2


2.1 Company Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Start-up Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

3.0 Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

4.0 Market Analysis Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4


4.1 Market Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Target Market Segment Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.3 Competition and Buying Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

5.0 Strategy and Implementation Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6


5.1 Competitive Edge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.2 Sales Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.2.1 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.3 Milestones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

6.0 Management Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9


6.1 Personnel Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

7.0 Financial Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10


7.1 Important Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.2 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3 Projected Profit and Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 Projected Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 Projected Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
The Basket of Goodies

1.0 Executive Summary

Introduction
Basket of Goodies (BOG) is a premier gift basket manufacturer and retailer. BOG is
concentrating on making gourmet gift baskets out of a wide range of high-quality ingredients.
In addition to having several flagship baskets, BOG will also offer the option of a custom
basket allowing the customer to choose the ingredients themselves. BOG will be selling to
individuals as well as corporations. Initially the bulk of BOG's business will be generated by
individuals from word of mouth referrals, but as time passes, corporations will become a
growing percentage of sales.

Once up and running with some momentum, BOG will be steadily producing profits. It is
projected that BOG will be making a profit by December. By the end of year three, it is
projected that BOG will be generating over $5,000 in income.

The Company
The Basket of Goodies' mission is to create the finest gift baskets available. BOG, soon to be
located in Salem, OR, will be hand assembling our products out of premier ingredients, local
when possible. The business will be based out of Susan Presento's home. Although this will be
a home-based business, toward the end of year one Susan will have an employee.

Susan Presento, founder and owner, managed a flower shop in Salem for three years and this
has given her insight to the gift giving practices of Oregonians. The primary gift baskets that
will be offered are: smoked fish basket, fruit basket, pasta dinner basket, and picnic basket
that has caviar, crackers, fruit, and smoked fish. BOG also offers a custom basket which allows
customers to pick items from a list and BOG will assemble the basket with its custom
ingredients.

The Market
The purchasing of gift baskets is very "seasonal." More than half of the gift basket purchasing
occurs during a wide variety of holidays.

BOG's competitive advantage will be based on two factors, low overhead which allows
reasonable prices, and an unrelenting desire for the highest quality product and service.

1. Low overhead.
2. Highest quality product and service.

BOG's sales strategy will be targeted at obtaining both the individual and corporate clients
through word-of-mouth referrals. Customers will be able to place an order at the office, over
the phone or via the website.

Financials
BOG's start-up costs will include all the equipment needed for the home-based office, legal
fees, website creation, and start-up advertising. The home office equipment will be the largest
chunk of the start-up expenses. This equipment includes a computer system, fax machine,
office supplies, cellular phone, and pager. Additionally, there will be the installation of a
broadband connection, and furniture for the home office. Total start-up expenses are expected
to be $28,000, all of which will be provided through Susan Presento's own equity.

The Break-even Analysis indicates BOG will need to sell 267 baskets per month to break even.
BOG expects to earn approximately $14,000 in year two and $21,000 in year three.

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1.1 Objectives

The objectives for the first three years of operation include:


1. To create a home-based company whose primary goal is to exceed customer's
expectations.
2. To increase the number of clients served by at least 20% per year through superior
performance and word of mouth referrals.
3. To develop a sustainable home business, surviving off its own cash flow.

1.2 Mission

The Basket of Goodies' mission is to create the finest gift baskets available. We exist to attract
and maintain customers. When we adhere to this maxim, everything else will fall into place.
Our products and services will exceed the expectations of our customers.

2.0 Company Summary

BOG, soon to be located in Salem, OR will offer a wide range of gourmet gift baskets,
production as well as custom units. BOG will be hand assembling the baskets out of premier
ingredients, local when possible. The business will be based out of Susan Presento's home.
Although this will be a home-based business, toward the end of year one Susan will have an
employee. If the business goes per the forecasted plan, the business will achieve profits by the
end of year one.

2.1 Company Ownership

The Basket of Goodies will be a sole proprietorship, owned by Susan Presento.

2.2 Start-up Summary

BOG's start-up costs will include all the equipment needed for the home-based office, legal
fees, website creation, and start-up advertising. The home office equipment will be the largest
chunk of the start-up expenses. This equipment includes a computer system, fax machine,
office supplies, cellular phone, and pager. The computer should have a 500 megahertz
Celeron/Pentium processor, 64 megabytes of RAM (preferably 128), 6 gigabyte hard drive, and
a rewritable CD-ROM for backing up the system. Additionally, there will be the expense
installation of a broadband connection. While a broadband connection is not totally necessary,
it only costs between $40-50 per month for service and will make working on the Internet
significantly faster and easier.

The home office will also require a few pieces of furniture such as a desk, chair, and bookshelf
to transform a standard room into an office. Lastly, an additional land phone line will be
required. The legal fees are used for the formation of the business as well as for
reviewing/generating standard client contracts. The Web creation fees at start-up costs are for
design and creation of the website. The start-up advertising will be the production of brochures.

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Table: Start-up

Start-up

Requirements

Start-up Expenses
Legal $300
Stationery etc. $100
Brochures $200
Consultants $1,500
Office Supplies $100
General Supplies $250
Website Creation $500
Mailings $400
Total Start-up Expense $3,350

Start-up Assets Needed


Cash Balance on Starting Date $22,650
Start-up Inventory $0
Other Short-term Assets $0
Total Short-term Assets $22,650

Long-term Assets $2,000


Total Assets $24,650
Total Requirements $28,000

Funding

Investment
Investor 1 $28,000
Other $0
Total Investment $28,000

Short-term Liabilities
Accounts Payable $0
Current Borrowing $0
Other Short-term Liabilities $0
Subtotal Short-term Liabilities $0

Long-term Liabilities $0
Total Liabilities $0

Loss at Start-up ($3,350)


Total Capital $24,650
Total Capital and Liabilities $24,650

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Start-up

$30,000

$25,000

$20,000

$15,000

$10,000

$5,000

$0
Expenses Assets Investment Loans

3.0 Products

BOG sells gourmet, hand-assembled gift baskets. Their premier baskets are: smoked fish
basket, fruit basket, pasta dinner basket, and picnic basket that has caviar, crackers, fruit, and
smoked fish. BOG also offers a custom basket which allow customers to pick items from a list
and BOG will assemble the basket with their custom ingredients.

For the customer baskets, BOG will provide a list of options grouped into four different
categories. The customer then chooses two items from each of the four categories and the gift
basket is made for them. BOG highlights four previously mentioned premier baskets. In
addition to these, BOG will typically have one or two specials, often seasonally based.

4.0 Market Analysis Summary

BOG will be going after two distinct market segments, individuals and corporations. Both
groups buy gift baskets as a goodwill gesture, typically for different reasons. Individuals
typically buy the baskets as a present with over half of sales occur during holidays.
Corporations buy the baskets as presents as well, but usually for events unrelated to the
holidays. By going after both of these groups, sales will be less seasonal (relative to if only the
individuals were targeted).

There are many different "gift basket" retailers in Salem. BOG will differentiate themselves
through the use of premium ingredients in their baskets. The gourmet baskets, coupled with a
custom option and reasonable prices (attributed to low overhead) will spell success for BOG.

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4.1 Market Segmentation

BOG's has two distinct groups of customers, individuals and corporate customers:
1. Individuals- The individuals are people who are looking to give a friend, relative,
colleague, etc., a gift basket as a gesture of goodwill. These customers typically do not
have a specific type of gift basket in mind when they look at BOG's product offerings,
they just want to give a gift.
2. Corporate- The corporate customer is typically buying the basket for a colleague at
work, either as a sign of appreciation, for a special event, or as a thank you for a
customer. The corporate market can be further broken down to banks, health care,
employment gifts, real estate, apartments, special events/promotions, corporate
headquarters, hotels/vacation resorts, and automobile dealerships.

Market Analysis (Pie)

Individuals
Corporations

Table: Market Analysis

Market Analysis
Potential Customers Growth 2001 2002 2003 2004 2005 CAGR
Individuals 8% 14,258 15,399 16,631 17,961 19,398 8.00%
Corporations 12% 298 334 374 419 469 12.01%
Total 8.09% 14,556 15,733 17,005 18,380 19,867 8.09%

4.2 Target Market Segment Strategy

BOG is focusing on individuals and corporate customers because they are the largest segments
of purchasers for gift baskets. Individuals are the target purchaser of gift baskets. They
purchase baskets typically as a thank you in response for something the recipient did or just to
be nice. The gift basket is unmistakingly a gift so upon receipt there is no ambiguity why it was
sent or at least what it is trying to accomplish. Within the individual category, women are 69%
more likely to be the purchaser of a gift basket compared to men. This is not to say that
women more often purchase gifts, it just indicates women are more likely to buy gift baskets.

BOG is focusing on the corporate customers as they currently represent approximately a third

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of the purchasers of gift baskets. The corporate customer could be buying the basket for
someone within their company, or they could be buying it for a customer, vendor, etc. The
trend for the corporation to purchase gifts is not a new phenomenon and therefore would
appear to be a solid market segment to pursue.

4.3 Competition and Buying Patterns

There are many different forms of competition in the gift basket business:
1. Similar gift basket type retail stores: There are several of these stores located in
Salem. These competitors offer a wide range of gift baskets, however none of them are
concentrating on the higher end, gourmet product line.
2. Nut/fruit companies: There are several stores that concentrate on nuts and or fruit
baskets.
3. Bath product gift basket companies: There is currently one gift basket company
that concentrates on bath products. Bath products have a slightly smaller population of
people who appreciate these products (as women predominately appreciate bath
products more then men do).
4. Regional gift basket: There is one retailer that sells gift baskets composed of local
products. These type of baskets tend to appeal to people that are buying gifts for
people that are not from this area.
5. Candy gift baskets: There are several candy stores that offer, as one on their
products, a candy gift basket. Similar to the bath products basket, candy typically
appeals to women a bit more so then men.
6. Florists: Flowers are a similar product that competes with gift baskets. Once again
flowers tend to appeal to women more so then men.

The purchasing of gift baskets is very "seasonal." More than half of the gift basket purchasing
occurs during a wide variety of holidays.

5.0 Strategy and Implementation Summary

BOG's marketing and sales strategy will be based on two different types of media, brochures
and a website. Through these two tools, customers will become familiar with BOG's products.
BOG will also heavily rely on word of mouth referrals for business. BOG does not anticipate
any difficulties in developing these referrals as BOG's mission is customer centric. Everything
they do revolves around developing a happy customer.

5.1 Competitive Edge

Our competitive advantage will be based on two factors, low overhead which allows reasonable
prices, and an unrelenting desire for the highest quality product and service.

1. BOG's overhead is particularly low because it is a home-based business. Most of the


competition is based in retail shopping areas. While they receive more walk-by traffic
and therefore higher sales numbers, their rent is a large monthly expense. BOG avoids
this large expense by having the business run out of Susan's home. Additionally, Susan
will be using a modified version of just-in-time (JIT) inventory and assembling. Susan's
husband passes by the 90% of Susan's vendors on his way home from work and is able
to pick up needed inventory. This significantly lowers shipping and carrying costs for
inventory. BOG will have some of the standard baskets in stock for walk-by orders, but
will try not to have large amount in overhead.

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2. Unrelenting desire for the highest quality product and service. This market space is
already crowded, a mediocre gift basket service will not succeed, so there must be
some sort of differentiation. Susan only uses the finest quality ingredients and can
afford to because of her low overhead. Additionally, she always follows the maxim that
the customer must be 100% satisfied. That means she is willing to loose money in the
short run if necessary to please a customer, confident that in the long run that this is a
wise business decision.

5.2 Sales Strategy

BOG's sales strategy will be targeted at obtaining both the individual and corporate clients. It
is our belief that the individual customers will be primarily obtained through word of mouth
referrals. It is likely that they will have spoken to a previous client about BOG and the referral
of our services will speak for itself. Our sales strategy will be to use an emphasis on our value
and high quality when trying to close the sale of the prospect. The prospective client can get a
similar product from a number of different vendors. BOG will attempt to close the sale by
showing the high quality of the basket by highlighting some of the individual ingredients.
BOG's expectation is that once they are impressed with the quality of the basket, they will
then be surprised that it is priced the same as competing products. The combination of the
perception of higher quality and the recognition of value should turn a lead into a customer.

Additionally, we provide several ways to procure the baskets. One way is for the customer to
come by the office and place the order. The customer can also place the order through a
phone call. Either they have ordered before, or are looking at a brochure and know what they
want, or they can visit our website for a complete catalog of our products. To receive the
product, they can pick up the product, or they may have it shipped via UPS. BOG believes that
by providing the customer a wide range of options, they will feel that they are special as we
will do a wide range of services to accommodate them. Our sales strategy for individuals and
particularly corporations will be based on our Web presence in conjunction with our printed
catalog. Both media will have detailed information about our service offerings.

Through our marketing efforts we will be driving people to our website and/or catalog. Once on
our website, people will see the wide range of product offerings we have and then can contact
us. The website will be especially useful for someone out of town who is need of a gift for
someone. BOG expects the corporate customers to utilize the website as a catalog, as well as
an order taker, because it takes less time for them to order on the Web then it does from
them to do in person.

5.2.1 Sales Forecast

The first month will be spent setting up the business. It is unlikely that there will be much
sales activity. In addition to dealing with legal and accounting issues, equipment will need to
be purchased, an office created, and an assembly/inventory room set up in the basement.
Susan will be developing a system for assembly within the first month as a way to streamline
the entire process, as well as working on having the website designed and set up. This will
require a bit of time spent with her Web designer to perfect the look and feel of the site as well
as to set up the option of taking orders online.

Month two or three will begin to see some sales activity. BOG recognizes that it will take a bit
of time to really ramp up the sales. Susan will be doing a lot of networking in an attempt to
spread awareness about BOG's products and services. Susan will also be doing some direct
mailing to some local corporations in an attempt to drive in some corporate business. Susan

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The Basket of Goodies
has a friend who works at a large company and she will serve as a consultant for ways of
increasing corporate purchases. Because Susan's husband will be helping out with picking up
some of the materials, Susan will not need an employee until near the end of year one.

Sales Monthly (Planned)

$12,000

$10,000

$8,000

$6,000 Individuals
Corporations
$4,000

$2,000

$0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Table: Sales Forecast (Planned)

Sales Forecast
Sales 2001 2002 2003
Individuals $33,640 $64,575 $78,452
Corporations $9,905 $28,744 $31,458
Total Sales $43,545 $93,319 $109,910

Direct Cost of Sales 2001 2002 2003


Individuals $11,484 $18,474 $24,124
Corporations $3,505 $7,854 $9,898
Subtotal Direct Cost of Sales $14,989 $26,328 $34,022

5.3 Milestones

BOG will have several milestones early on:


1. Business plan completion. This will be done as a road map for the company. While BOG
does not need a business plan to raise capital, it will be an indispensable tool for the
ongoing performance and improvement of the company.
2. Set-up office.
3. Production of brochure and website.
4. BOG's 100th basket.
5. BOG's first profitable month.

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Table: Milestones (Planned)

Milestones
Milestone Start Date End Date Budget Manager Department
Business plan completion 1/1/01 1/1/01 Susan
Set-up office 1/1/01 1/1/01 Susan
Production of brochure and 1/1/01 2/1/01 Susan
website
Name me 3/1/01 3/1/01 Susan
Totals $0

6.0 Management Summary

BOG will be formed as a sole proprietorship, owned and operated by Susan Presento. There is
no compelling need to incorporate. The advantage of incorporation would be limited liability,
yet the disadvantage would be the set-up costs and maintenance (tax disadvantages). A
comprehensive insurance policy should cover any liability that BOG is exposed to.

Susan Presento, founder and owner, has a degree in communications from the University of
Portland. During her undergraduate years, Susan worked at Nothstroms, perfecting her
customer-centric perspective. After graduation, Susan managed a flower shop in Salem. It was
during these three years that Susan gained her insight to the gift giving practices of
Oregonians. Susan also gained valuable management experience in her work at the florist.
Susan will be relying on Robert Presento, her husband to help out in the pick up of the
ingredients of her products. In addition to Robert's help, Susan will be using Jennifer Simon
who works in the purchasing department of a large corporation. Jennifer will act as a
consultant regarding the purchasing habits of corporations, a niche of the industry that Susan
would like to be a part of.

6.1 Personnel Plan

The staff of BOG will consist of Susan working full time. Susan's husband Robert will help with
inventory procurement but will not be listed on the payroll. Robert will be picking up inventory
on his way home from work occasionally and will not be billing BOG for his work. Jennifer
Simon will be an consultant for BOG for insight into the corporate market. By month eight BOG
will have gotten fairly busy, at least for Susan and she will bring on board a part-time
employee. This employee will be used for the assembly of the baskets.

Table: Personnel (Planned)

Personnel Plan
2001 2002 2003
Susan $24,000 $24,000 $24,000
Part-time employee $7,500 $15,000 $15,000
Other $0 $0 $0
Total Payroll $31,500 $39,000 $39,000

Total People 2 2 2
Payroll Burden $4,725 $5,850 $5,850
Total Payroll Expenditures $36,225 $44,850 $44,850

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7.0 Financial Plan

The following sections will outline the important financial data.

7.1 Important Assumptions

The following table details important financial assumptions for BOG.

Table: General Assumptions

General Assumptions
2001 2002 2003
Short-term Interest Rate % 10.00% 10.00% 10.00%
Long-term Interest Rate % 10.00% 10.00% 10.00%
Tax Rate % 25.00% 25.00% 25.00%
Expenses in Cash % 10.00% 10.00% 10.00%
Personnel Burden % 15.00% 15.00% 15.00%

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7.2 Break-even Analysis

The Break-even Analysis indicates BOG will need to sell 267 baskets per month to break even.

Break-even Analysis

$3,000

$2,000

$1,000

$0

($1,000)

($2,000)

($3,000)

($4,000)
$0 $1,600 $3,200 $4,800 $6,400 $8,000

Monthly break-even point

Break-even point = where line intersects with 0

Table: Break-even Analysis

Break-even Analysis:
Monthly Units Break-even 4,917
Monthly Sales Break-even $4,917

Assumptions:
Average Per-Unit Revenue $1.00
Average Per-Unit Variable Cost $0.34
Estimated Monthly Fixed Cost $3,225

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7.3 Projected Profit and Loss

The following table will indicate projected profit and loss.

Table: Profit and Loss (Planned)

Pro Forma Profit and Loss


2001 2002 2003
Sales $43,545 $93,319 $109,910
Direct Cost of Sales $14,989 $26,328 $34,022
Other $0 $0 $0
------------ ------------ ------------
Total Cost of Sales $14,989 $26,328 $34,022
Gross Margin $28,556 $66,991 $75,888
Gross Margin % 65.58% 71.79% 69.05%
Operating Expenses:
Advertising/Promotion $0 $0 $0
Travel $0 $0 $0
Miscellaneous $1,200 $1,200 $1,200
Payroll Expense $31,500 $39,000 $39,000
Payroll Burden $4,725 $5,850 $5,850
Depreciation $672 $672 $672
Leased Equipment $0 $0 $0
Utilities $0 $0 $0
Insurance $600 $600 $600
Rent $0 $0 $0
Contract/Consultants $0 $0 $0
------------ ------------ ------------
Total Operating Expenses $38,697 $47,322 $47,322
Profit Before Interest and Taxes ($10,141) $19,669 $28,566
Interest Expense Short-term $0 $0 $0
Interest Expense Long-term $0 $0 $0
Taxes Incurred $0 $4,917 $7,142
Extraordinary Items $0 $0 $0
Net Profit ($10,141) $14,752 $21,425
Net Profit/Sales -23.29% 15.81% 19.49%

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7.4 Projected Cash Flow

The following chart and table will indicate projected cash flow.

Cash (Planned)

$25,000

$20,000

$15,000

$10,000 Net Cash Flow


Cash Balance
$5,000

$0

($5,000)
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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Table: Cash Flow (Planned)

Pro Forma Cash Flow 2001 2002 2003

Cash Received
Cash from Operations:
Cash Sales $43,545 $93,319 $109,910
From Receivables $0 $0 $0
Subtotal Cash from Operations $43,545 $93,319 $109,910

Additional Cash Received


Extraordinary Items $0 $0 $0
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of other Short-term Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $43,545 $93,319 $109,910

Expenditures 2001 2002 2003


Expenditures from Operations:
Cash Spent on Costs and Expenses $1,986 $3,159 $3,000
Wages, Salaries, Payroll Taxes, etc. $36,225 $44,850 $44,850
Payment of Accounts Payable $17,704 $43,505 $100,775
Subtotal Spent on Operations $55,915 $91,514 $148,624

Additional Cash Spent


Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Short-term Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Adjustment for Assets Purchased on Credit $0 $0 $0
Subtotal Cash Spent $55,915 $91,514 $148,624

Net Cash Flow ($12,370) $1,805 ($38,714)


Cash Balance $10,280 $12,085 ($26,630)

Page 14
The Basket of Goodies

7.5 Projected Balance Sheet

The following table will indicate the projected balance sheet.

Table: Balance Sheet (Planned)

Pro Forma Balance Sheet

Assets
Short-term Assets 2001 2002 2003
Cash $10,280 $12,085 ($26,630)
Inventory $12,656 $27,440 $59,620
Other Short-term Assets $0 $0 $0
Total Short-term Assets $22,936 $39,525 $32,991
Long-term Assets
Long-term Assets $2,000 $2,000 $2,000
Accumulated Depreciation $672 $1,344 $2,016
Total Long-term Assets $1,328 $656 ($16)
Total Assets $24,264 $40,181 $32,975

Liabilities and Capital


2001 2002 2003
Accounts Payable $174 ($14,902) ($88,681)
Current Borrowing $0 $0 $0
Other Short-term Liabilities $0 $0 $0
Subtotal Short-term Liabilities $174 ($14,902) ($88,681)

Long-term Liabilities $0 $0 $0
Total Liabilities $174 ($14,902) ($88,681)

Paid-in Capital $28,000 $28,000 $28,000


Retained Earnings ($3,350) ($13,491) $1,261
Earnings ($10,141) $14,752 $21,425
Total Capital $14,509 $29,261 $50,685
Total Liabilities and Capital $14,683 $14,359 ($37,995)
Net Worth $24,090 $55,083 $121,655

Page 15
Appendix

Appendix Table: Sales Forecast (Planned)

Sales Forecast
Sales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Individuals $0 $0 $1,245 $1,854 $1,987 $2,854 $3,254 $3,475 $3,654 $3,758 $4,014 $7,545
Corporations $0 $0 $75 $187 $421 $564 $745 $887 $998 $1,014 $1,645 $3,369
Total Sales $0 $0 $1,320 $2,041 $2,408 $3,418 $3,999 $4,362 $4,652 $4,772 $5,659 $10,914

Direct Cost of Sales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Individuals $0 $0 $621 $751 $812 $1,354 $1,547 $1,354 $1,345 $1,345 $154 $2,201
Corporations $0 $0 $35 $64 $158 $225 $354 $321 $351 $352 $658 $987
Subtotal Direct Cost of Sales $0 $0 $656 $815 $970 $1,579 $1,901 $1,675 $1,696 $1,697 $812 $3,188

Page 1
Appendix

Appendix Table: Personnel (Planned)

Personnel Plan
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Susan $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Part-time employee $0 $0 $0 $0 $0 $0 $0 $1,500 $1,500 $1,500 $1,500 $1,500
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Payroll $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $3,500 $3,500 $3,500 $3,500 $3,500

Total People 1 1 1 1 1 1 1 2 2 2 2 2
Payroll Burden $300 $300 $300 $300 $300 $300 $300 $525 $525 $525 $525 $525
Total Payroll Expenditures $2,300 $2,300 $2,300 $2,300 $2,300 $2,300 $2,300 $4,025 $4,025 $4,025 $4,025 $4,025

Page 2
Appendix

Appendix Table: General Assumptions

General Assumptions
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Short-term Interest Rate % 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate % 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate % 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00%
Expenses in Cash % 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Personnel Burden % 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00%

Page 3
Appendix

Appendix Table: Profit and Loss (Planned)

Pro Forma Profit and Loss


Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Sales $0 $0 $1,320 $2,041 $2,408 $3,418 $3,999 $4,362 $4,652 $4,772 $5,659 $10,914
Direct Cost of Sales $0 $0 $656 $815 $970 $1,579 $1,901 $1,675 $1,696 $1,697 $812 $3,188
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Cost of Sales $0 $0 $656 $815 $970 $1,579 $1,901 $1,675 $1,696 $1,697 $812 $3,188
Gross Margin $0 $0 $664 $1,226 $1,438 $1,839 $2,098 $2,687 $2,956 $3,075 $4,847 $7,726
Gross Margin % 0.00% 0.00% 50.30% 60.07% 59.72% 53.80% 52.46% 61.60% 63.54% 64.44% 85.65% 70.79%
Operating Expenses:
Advertising/Promotion $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Travel $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Miscellaneous $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100
Payroll Expense $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $3,500 $3,500 $3,500 $3,500 $3,500
Payroll Burden $300 $300 $300 $300 $300 $300 $300 $525 $525 $525 $525 $525
Depreciation $56 $56 $56 $56 $56 $56 $56 $56 $56 $56 $56 $56
Leased Equipment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Utilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Insurance $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50
Rent $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Contract/Consultants $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Operating Expenses $2,506 $2,506 $2,506 $2,506 $2,506 $2,506 $2,506 $4,231 $4,231 $4,231 $4,231 $4,231
Profit Before Interest and Taxes ($2,506) ($2,506) ($1,842) ($1,280) ($1,068) ($667) ($408) ($1,544) ($1,275) ($1,156) $616 $3,495
Interest Expense Short-term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Interest Expense Long-term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Extraordinary Items $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Net Profit ($2,506) ($2,506) ($1,842) ($1,280) ($1,068) ($667) ($408) ($1,544) ($1,275) ($1,156) $616 $3,495
Net Profit/Sales 0.00% 0.00% -139.55% -62.71% -44.35% -19.51% -10.20% -35.40% -27.41% -24.22% 10.89% 32.02%

Page 4
Appendix

Appendix Table: Cash Flow (Planned)

Pro Forma Cash Flow Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Cash Received
Cash from Operations:
Cash Sales $0 $0 $1,320 $2,041 $2,408 $3,418 $3,999 $4,362 $4,652 $4,772 $5,659 $10,914
From Receivables $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash from Operations $0 $0 $1,320 $2,041 $2,408 $3,418 $3,999 $4,362 $4,652 $4,772 $5,659 $10,914

Additional Cash Received


Extraordinary Items $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of other Short-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $0 $0 $1,320 $2,041 $2,408 $3,418 $3,999 $4,362 $4,652 $4,772 $5,659 $10,914

Expenditures Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Expenditures from Operations:
Cash Spent on Costs and Expenses $15 $15 $212 $128 $143 $295 $270 $137 $189 $185 $15 $383
Wages, Salaries, Payroll Taxes, etc. $2,300 $2,300 $2,300 $2,300 $2,300 $2,300 $2,300 $4,025 $4,025 $4,025 $4,025 $4,025
Payment of Accounts Payable $5 $135 $194 $1,881 $1,159 $1,333 $2,645 $2,386 $1,251 $1,736 $2,787 $2,192
Subtotal Spent on Operations $2,320 $2,450 $2,706 $4,309 $3,602 $3,927 $5,214 $6,548 $5,465 $5,946 $6,827 $6,600

Additional Cash Spent


Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Other Short-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Adjustment for Assets Purchased on Credit $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $2,320 $2,450 $2,706 $4,309 $3,602 $3,927 $5,214 $6,548 $5,465 $5,946 $6,827 $6,600

Net Cash Flow ($2,320) ($2,450) ($1,386) ($2,268) ($1,194) ($509) ($1,215) ($2,186) ($813) ($1,174) ($1,168) $4,314
Cash Balance $20,331 $17,881 $16,495 $14,226 $13,032 $12,523 $11,308 $9,122 $8,309 $7,134 $5,966 $10,280

Page 5
Appendix

Appendix Table: Balance Sheet (Planned)

Pro Forma Balance Sheet

Assets
Short-term Assets Starting Balances Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Cash $22,650 $20,331 $17,881 $16,495 $14,226 $13,032 $12,523 $11,308 $9,122 $8,309 $7,134 $5,966 $10,280
Inventory $0 $0 $0 $1,312 $1,630 $1,940 $3,158 $3,802 $3,350 $3,392 $4,674 $5,883 $12,656
Other Short-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Short-term Assets $22,650 $20,331 $17,881 $17,807 $15,856 $14,972 $15,681 $15,110 $12,472 $11,701 $11,808 $11,849 $22,936
Long-term Assets
Long-term Assets $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Accumulated Depreciation $0 $56 $112 $168 $224 $280 $336 $392 $448 $504 $560 $616 $672
Total Long-term Assets $2,000 $1,944 $1,888 $1,832 $1,776 $1,720 $1,664 $1,608 $1,552 $1,496 $1,440 $1,384 $1,328
Total Assets $24,650 $22,275 $19,769 $19,639 $17,632 $16,692 $17,345 $16,718 $14,024 $13,197 $13,248 $13,233 $24,264

Liabilities and Capital


Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Accounts Payable $0 $131 $131 $1,843 $1,116 $1,244 $2,564 $2,345 $1,195 $1,643 $1,570 ($1,082) $174
Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Short-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Short-term Liabilities $0 $131 $131 $1,843 $1,116 $1,244 $2,564 $2,345 $1,195 $1,643 $1,570 ($1,082) $174

Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Liabilities $0 $131 $131 $1,843 $1,116 $1,244 $2,564 $2,345 $1,195 $1,643 $1,570 ($1,082) $174

Paid-in Capital $28,000 $28,000 $28,000 $28,000 $28,000 $28,000 $28,000 $28,000 $28,000 $28,000 $28,000 $28,000 $28,000
Retained Earnings ($3,350) ($3,350) ($3,350) ($3,350) ($3,350) ($3,350) ($3,350) ($3,350) ($3,350) ($3,350) ($3,350) ($3,350) ($3,350)
Earnings $0 ($2,506) ($5,012) ($6,854) ($8,134) ($9,202) ($9,869) ($10,277) ($11,821) ($13,096) ($14,252) ($13,636) ($10,141)
Total Capital $24,650 $22,144 $19,638 $17,796 $16,516 $15,448 $14,781 $14,373 $12,829 $11,554 $10,398 $11,014 $14,509
Total Liabilities and Capital $24,650 $22,275 $19,769 $19,639 $17,632 $16,692 $17,345 $16,718 $14,024 $13,197 $11,968 $9,932 $14,683
Net Worth $24,650 $22,144 $19,638 $17,796 $16,516 $15,448 $14,781 $14,373 $12,829 $11,554 $11,678 $14,315 $24,090

Page 6