arrow mail

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Table of Contents

Page 1

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

Chart: Highlights ......................................................................................................................2

1.1 Mission ........................................................................................................................................2

1.2 Objectives ...................................................................................................................................2

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

2.1 Company Ownership .................................................................................................................3

2.2 Start-up Summary ......................................................................................................................3

Table: Start-up .........................................................................................................................3

Table: Start-up Funding ..........................................................................................................4

Chart: Start-up .........................................................................................................................5

2.3 Company Locations and Facilities ..........................................................................................5

3.0 Services................................................................................................................................................5

4.0 Market Analysis Summary ..................................................................................................................6

4.1 Market Segmentation ................................................................................................................6

Table: Market Analysis ...........................................................................................................7

Chart: Market Analysis (Pie) ..................................................................................................7

4.2 Target Market Segment Strategy .............................................................................................7

4.3 Service Business Analysis........................................................................................................8

4.4 Competition and Buying Patterns ............................................................................................8

5.0 Strategy and Implementation Summary ............................................................................................8

5.1 Marketing Strategy.....................................................................................................................8

5.2 Competitive Edge ......................................................................................................................9

5.3 Sales Forecast.........................................................................................................................10

Chart: Sales by Year.............................................................................................................10

Table: Sales Forecast ..........................................................................................................10

5.4 Milestones ................................................................................................................................11

Table: Milestones..................................................................................................................11

Chart: Milestones ..................................................................................................................11

6.0 Personnel Plan ..................................................................................................................................12

Table: Personnel ...................................................................................................................12

7.0 Financial Plan ....................................................................................................................................13

7.1 Break-even Analysis................................................................................................................13

Table: Break-even Analysis .................................................................................................13

Chart: Break-even Analysis .................................................................................................13

7.2 Projected Profit and Loss .......................................................................................................14

Chart: Profit Yearly ................................................................................................................14

Table: Profit and Loss ..........................................................................................................15

7.3 Projected Cash Flow ...............................................................................................................15

Chart: Cash ...........................................................................................................................16

Table: Cash Flow ..................................................................................................................17

7.4 Projected Balance Sheet ........................................................................................................18

Table: Balance Sheet ...........................................................................................................18

7.5 Business Ratios .......................................................................................................................18

Table: Ratios .........................................................................................................................19

Table: Sales Forecast ...............................................................................................................................1

Table: Personnel ........................................................................................................................................2

Table: General Assumptions ....................................................................................................................3

Table of Contents

Page 2

Table: Profit and Loss ...............................................................................................................................4

Table: Cash Flow .......................................................................................................................................5

Table: Balance Sheet ................................................................................................................................6

Arrow Mail

Page 1

1.0 Executive Summary

Arrow Mail is a creative and high-quality personalized direct mail business for financial services

companies that focus on small businesses.

There are numerous traits that separate Arrow Mail from other target marketing companies:

Quality: Arrow Mail delivers the highest-quality mail piece. The mailing file is put

through rigorous procedures to ensure the cleanest address block in the industry. The

company creates a highly personalized piece that does not scream "junk mail." The

personalization is done on high-resolution (600 dpi) laser printers to produce a mailing

piece that looks like personal correspondence.

Service: Most marketing staffs are limited in size, time, and resources. Arrow Mail

becomes an extension of the customer's staff and provides a superior level of customer

service and attention to detail. Our team-oriented environment insures the mailing goes

out correctly and on time.

Creativity: Direct mail must grab the reader's attention and get the customer's

message across. Arrow Mail can design a creative custom direct mail plan that fits the

customer's tastes and budget; or the company can modify its "proven programs" to suit a

customer's needs. All of the designs and copy are customized to the customer's

satisfaction because "one size does not fit all."

Knowledge: Arrow Mail is not a printer or lettershop that has recently decided to add

personalization. The company is a direct marketing agency that, through 20+ years of

experience, has acquired valuable knowledge about prospect selection, database

analysis, and creative techniques, as well as expertise in financial industry customer files,

products, and services.

The company office and production facility is a 5,000 sq. ft. building in Monroe, Oregon (22 miles

northeast of Portland).

Arrow Mail's owner, Todd Graham, has authored a number of articles on direct mail that have

appeared in industry trade publications. He has over 20 years of experience in the field.

Working with Johnson Communication 20 years ago, Todd was a pivotal player in the company's

response to the major deregulation of the banking industry, introducing a variety of new

products that lent themselves well to quality target marketing. Since then, Todd has built his

expertise as account manager with Reilly Marketing and Triumph Direct Mail.

Arrow Mail

Page 2

1.1 Mission

Arrow Mail's mission is to provide successful creative direct mail strategies for financial services

companies that will resonate with small businesses.

1.2 Objectives

The objectives of Arrow Mail are the following:

Acquire 50 customers by the end of the first year of operation.

Achieve sales in excess of $260,000.

Increase customer base by 25% by the end of the second year of operation.

Increase sales by 15% by the end of the second year of operation.

2.0 Company Summary

Arrow Mail is a creative and high-quality personalized direct mail business for the financial

services companies that focus on small businesses. The company office and production facility is

a 5,000 sq. ft. building in Monroe, Oregon (22 miles northeast of Portland).

Over the past twenty years, the competition in the financial services industries has intensified.

The range of financial services available and the number of companies that are offering these

services is extraordinary.

Arrow Mail's expertise selling to small businesses has facilitated the development of a number

Arrow Mail

Page 3

of successful strategies in reaching the target market groups. By focusing even further on the

growing opportunities in equipment loans and motor vehicle lease programs, Arrow Mail has

created an attractive niche for its services.

2.1 Company Ownership

Arrow Mail is owned by Todd Graham and a silent partner. The business will operate as a

Limited Partnership.

2.2 Start-up Summary

The start-up expense for Arrow Mail is focused primarily on production and assembly setup. Todd

will invest $80,000. A silent partner will invest $125,000. In addition, Todd will secure a $125,000

long-term loan.

The start-up costs will cover the production and assembly equipment and the capital to cover

losses the first year. This will include computers, laser printers, scanners, and equipment to prep

material for mailing.

Table: Start-up

Start-up

Requirements

Start-up Expenses

Legal $1,000

Stationery etc. $400

Brochures $8,000

Insurance $1,000

Rent $3,000

Setup $20,000

Expensed Equipment $140,000

Total Start-up Expenses $173,400

Start-up Assets

Cash Required $152,600

Start-up Inventory $4,000

Other Current Assets $0

Long-term Assets $0

Total Assets $156,600

Total Requirements $330,000

Arrow Mail

Page 4

Table: Start-up Funding

Start-up Funding

Start-up Expenses to Fund $173,400

Start-up Assets to Fund $156,600

Total Funding Required $330,000

Assets

Non-cash Assets from Start-up $4,000

Cash Requirements from Start-up $152,600

Additional Cash Raised $0

Cash Balance on Starting Date $152,600

Total Assets $156,600

Liabil ities and Capital

Liabil ities

Current Borrowing $0

Long-term Liabil ities $125,000

Accounts Payable (Outstanding Bills) $0

Other Current Liabil ities (interest-free) $0

Total Liabil ities $125,000

Capital

Planned Investment

Todd Graham $80,000

Silent Partner $125,000

Additional Investment Requirement $0

Total Planned Investment $205,000

Loss at Start-up (Start-up Expenses) ($173,400)

Total Capital $31,600

Total Capital and Liabil ities $156,600

Total Funding $330,000

Arrow Mail

Page 5

2.3 Company Locations and Facilities

The company office and production facility is a 3,000 sq. ft. building in Monroe, Oregon (22 miles

northeast of Portland).

This site was chosen for the following reasons:

Low production overhead.

Facility is located two miles from the FedEx and US Mail regional processing centers.

3.0 Services

Arrow Mail services are as follows:

Marketing Campaign Development

Develop exceptional creative themes to compel the recipient to read the copy.

Demonstrate the prime consumer benefits and relate them to the creative concepts.

Write clear, concise, and interesting lettercopy and response vehicle to achieve desired

action.

Design and develop collateral material.

Database Analysis & Management

Analyze customer base to demonstrate product breakdown.

Use modeling techniques to identify customers with a propensity to buy other products.

Generate reports to analyze marketing information.

Arrow Mail

Page 6

Market Analysis & Prospect List Selection

Review the client's positioning, product offer, and market area.

Determine the best audience for the product based on demographics.

Produce maps to assist in targeting specific geographic areas.

Develop the best marketing approach and mailing package to fit the product and

audience.

Research and recommend appropriate prospect mailing lists including demographic &

geographic selections.

Obtain virtually any mailing list available in the country.

Mailing List Hygiene & Preparation

Enhance name/address data to achieve the highest quality address block possible.

Merge/purge different mailing lists to reduce current customers and/or duplicates.

Process mailing file with CASS certified pre-sorting software to increase deliverability

and achieve the lowest postage rate (3 & 5 digit sort, BMC, SCF).

Develop/modify programs to create complex variables (old/new account, potential

borrowing power, etc.).

Offset Printing

Typeset, layout and produce mechanicals for custom projects or existing stationery.

Manage production of all stationery, postcards and/or collateral material needed for

mailing.

Laser Personalization

Produce high-quality, personalized letters/envelopes on laser equipment in resolutions

up to 600 dpi.

Incorporate variable text, data, and signatures as appropriate.

4.0 Market Analysis Summary

Over the past 20 years, the competition in the financial services industries has intensified.

Currently, there are numerous financial products/services being offered by the financial

community to a wide range of business customers.

Finance companies are an important source of funds for small businesses (less than 500

employees). The area where funds are sought is in leasing of motor vehicles and purchasing

equipment. Arrow Mail notes these trends and has created unique strategies in marketing both

equipment loans and motor vehicle lease programs to small businesses.

4.1 Market Segmentation

Arrow Mail will focus on two customer groups:

Top 20 financial firms;

2nd tier financial firms.

Arrow Mail

Page 7

Table: Market Analysis

Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5

Potential Customers Growth CAGR

Top 20 Financial Firms 0% 15,000 15,015 15,030 15,045 15,060 0.10%

2nd Tier Financial Firms 1% 1,500 1,508 1,516 1,524 1,532 0.53%

Total 0.14% 16,500 16,523 16,546 16,569 16,592 0.14%

4.2 Target Market Segment Strategy

Finance companies provide loans and leases to consumers, as well as short- and intermediate-

term loans and leases to business firms.

This segment of the industry sector is quite concentrated, with the 20 largest firms accounting

for more than two-thirds of total industry receivables. There was essentially no change in the

concentration in the finance industry during from 1996-2001.

Over the five years the total assets of the 20 largest firms grew from $524.9 billion to $770.3

billion. Over the same period, their share of total industry assets fell slightly, from 70.1% to

68.8%. There are an additional 1,200 2nd Tier firms that have captured the remaining 31% of

the market.

The total receivables of finance companies grew by almost 50% over the past five years. In

mid-2000, about 45% of the industry's portfolio was comprised of business loans.

Arrow Mail

Page 8

4.3 Service Business Analysis

Finance companies are an important source of funds of small businesses, firms with less than 500

employees. Of the loans and leases to business firms in mid-2000, 57% were for business

equipment other than motor vehicles.

At mid-2000, 21% of finance companies' portfolios was invested in motor vehicle loans and

leases, down from 26% five years earlier. The past five years marked a major shift by business

firms towards the leasing of motor vehicles. Finance companies' portfolios of business leases of

motor vehicles grew at an annual rate of 23.6% over the five years.

Arrow Mail notes these trends and has created unique strategies in marketing both equipment

loans and motor vehicle lease programs to small businesses. Arrow Mail will sell services to 2nd

Tier Firms.

4.4 Competition and Buying Patterns

The competition between direct marketing firms is intense yet many of these firms are not

focused on marketing financial loan and leasing products to small businesses.

Traditionally, the firms build a track record with specific product to a specific target customer

group. Financial services is still an emerging product line for direct marketing firms so there is

no clear leader in the field.

The buying pattern for financial firms is similar to the selection process in a marketing campaign.

Direct marketing firms present proposals for a campaign and the company selects the proposal

that best fits their budget and overall marketing strategy. The duration of the marketing

campaign is one to three years.

Building company loyalty is the most crucial element in winning market share. Companies will stay

with a company that has proven to be a valued partner.

5.0 Strategy and Implementation Summary

Arrow Mail's owner, Todd Graham, has over 20 years of experience in the financial services

field and has extensive contacts throughout the country. He will lead the company's sales

campaign. Todd Graham will present the firm's campaign proposals and follow up with potential

customers.

5.1 Marketing Strategy

Arrow Mail will create a direct marketing campaign that fits within a client's budget range and

effectively targets the firm's potential customers. Arrow Mail employs a matrix of direct

marketing strategies that the customer can tailor to fit their desired brand imaging and product

Arrow Mail

Page 9

positioning as well as focusing on specific customer characteristics.

5.2 Competitive Edge

The competitive advantage of Arrow Mail is experience. We offer our customers time-tested

strategies that been successful in the market over the past 20 years. There have been many

winners and losers in the growth of financial services. Todd Graham has a superior track record

of satisfied customers.

Arrow Mail

Page 10

5.3 Sales Forecast

Arrow Mail anticipates that sales will be slow for the first and second month of operation as the

focus will be on presentations to firms. After that point, sales will increase.

The following is the sales forecast for three years.

Table: Sales Forecast

Sales Forecast

Year 1 Year 2 Year 3

Sales

Marketing Campaigns $209,000 $242,000 $280,000

Market Analysis $130,000 $150,000 $170,000

Database Analysis $106,000 $135,000 $166,000

Mailing Production $93,000 $140,000 $195,000

Other $0 $0 $0

Total Sales $538,000 $667,000 $811,000

Direct Cost of Sales Year 1 Year 2 Year 3

Marketing Campaigns $0 $0 $0

Market Analysis $0 $26,000 $32,000

Database Analysis $0 $0 $0

Mailing Production $20,450 $33,000 $44,000

Other $0 $0 $0

Subtotal Direct Cost of Sales $20,450 $59,000 $76,000

Arrow Mail

Page 11

5.4 Milestones

The accompanying table lists important program milestones, with dates and managers in

charge, and budgets for each. The milestone schedule indicates our emphasis on planning for

implementation.

What the table doesn't show is the commitment behind it. Our business plan includes complete

provisions for plan-vs.-actual analysis, and we will hold monthly follow-up meetings to discuss

the variance and course corrections.

Table: Milestones

Milestones

Milestone Start Date End Date Budget Manager Department

Office Set-up 4/1/2002 4/27/2002 $20,000 Office Mgr Marketing

Production Set-up 4/1/2002 4/27/2002 $120,000 Production Mgr Department

Marketing Program 2/1/2002 4/1/2002 $20,000 Todd Graham Web

Totals $160,000

Arrow Mail

Page 12

6.0 Personnel Plan

Arrow Mail's owner, Todd Graham, has authored a number of articles on direct mail that have

appeared in industry trade publications. He has over 20 years of experience in the field.

Working with Johnson Communication 20 years ago, Todd was a pivotal player in the company's

response to the major deregulation of the banking industry, introducing a variety of new

products that lent themselves well to quality target marketing. Since then, Todd has built his

expertise in the field as an account manager with Reilly Marketing and Triumph Direct Mail.

Arrow Mail personnel will be the following:

Todd Graham, creative/sales director;

Creative team (2);

Production manager;

Production team (3);

Sales team (2);

Office manager.

Table: Personnel

Personnel Plan


Todd Graham $36,000 $40,000 $44,000

Sales Team (2) $72,000 $78,000 $84,000

Creative Team (2) $96,000 $100,000 $108,000

Production Manager $36,000 $40,000 $44,000

Production Team (3) $64,800 $95,000 $104,000

Office Manager $33,600 $35,000 $37,000

Creative Director $0 $0 $60,000

Other $0 $0 $0

Total People 10 12 12

Total Payroll $338,400 $388,000 $481,000

Arrow Mail

Page 13

7.0 Financial Plan

The following is the financial plan for Arrow Mail.

7.1 Break-even Analysis

The monthly break-even point is approximately $38,400.

Table: Break-even Analysis

Break-even Analysis

Monthly Revenue Break-even $38,493

Assumptions:

Average Percent Variable Cost 4%

Estimated Monthly Fixed Cost $37,030

Arrow Mail

Page 14

7.2 Projected Profit and Loss

The following table and chart highlights the projected profit and loss for three years.

Arrow Mail

Page 15

Table: Profit and Loss

Pro Forma Profit and Loss


Sales $538,000 $667,000 $811,000

Direct Cost of Sales $20,450 $59,000 $76,000

Other Production Expenses $0 $0 $0

Total Cost of Sales $20,450 $59,000 $76,000

Gross Margin $517,550 $608,000 $735,000

Gross Margin % 96.20% 91.15% 90.63%

Expenses

Payroll $338,400 $388,000 $481,000

Sales and Marketing and Other Expenses $12,000 $8,000 $10,000

Depreciation $0 $0 $0

Leased Equipment $0 $0 $0

Util ities $7,200 $3,300 $3,300

Insurance $0 $0 $0

Rent $36,000 $18,000 $18,000

Payroll Taxes $50,760 $58,200 $72,150

Other $0 $0 $0

Total Operating Expenses $444,360 $475,500 $584,450

Profit Before Interest and Taxes $73,190 $132,500 $150,550

EBITDA $73,190 $132,500 $150,550

Interest Expense $11,460 $9,620 $7,700

Taxes Incurred $18,519 $36,864 $42,855

Net Profit $43,211 $86,016 $99,995

Net Profit/Sales 8.03% 12.90% 12.33%

7.3 Projected Cash Flow

The following table and chart highlights the projected cash flow for three years.

Arrow Mail

Page 16

Arrow Mail

Page 17

Table: Cash Flow

Pro Forma Cash Flow


Cash Received

Cash from Operations

Cash Sales $538,000 $667,000 $811,000

Subtotal Cash from Operations $538,000 $667,000 $811,000

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0

New Current Borrowing $0 $0 $0

New Other Liabil ities (interest-free) $0 $0 $0

New Long-term Liabil ities $0 $0 $0

Sales of Other Current Assets $0 $0 $0

Sales of Long-term Assets $0 $0 $0

New Investment Received $0 $0 $0

Subtotal Cash Received $538,000 $667,000 $811,000

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending $338,400 $388,000 $481,000

Bill Payments $127,662 $223,267 $219,612

Subtotal Spent on Operations $466,062 $611,267 $700,612

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0

Principal Repayment of Current Borrowing $0 $0 $0

Other Liabil ities Principal Repayment $0 $0 $0

Long-term Liabil ities Principal Repayment $19,200 $19,200 $19,200

Purchase Other Current Assets $0 $0 $0

Purchase Long-term Assets $0 $0 $0

Dividends $0 $0 $0

Subtotal Cash Spent $485,262 $630,467 $719,812

Net Cash Flow $52,738 $36,533 $91,188

Cash Balance $205,338 $241,871 $333,059

Arrow Mail

Page 18

7.4 Projected Balance Sheet

The following table highlights the projected balance sheet for three years.

Table: Balance Sheet

Pro Forma Balance Sheet


Assets

Current Assets

Cash $205,338 $241,871 $333,059

Inventory $3,080 $23,060 $13,263

Other Current Assets $0 $0 $0

Total Current Assets $208,418 $264,931 $346,321

Long-term Assets

Long-term Assets $0 $0 $0

Accumulated Depreciation $0 $0 $0

Total Long-term Assets $0 $0 $0

Total Assets $208,418 $264,931 $346,321

Liabil ities and Capital Year 1 Year 2 Year 3

Current Liabil ities

Accounts Payable $27,807 $17,504 $18,099

Current Borrowing $0 $0 $0

Other Current Liabil ities $0 $0 $0

Subtotal Current Liabil ities $27,807 $17,504 $18,099

Long-term Liabil ities $105,800 $86,600 $67,400

Total Liabil ities $133,607 $104,104 $85,499

Paid-in Capital $205,000 $205,000 $205,000

Retained Earnings ($173,400) ($130,189) ($44,173)

Earnings $43,211 $86,016 $99,995

Total Capital $74,811 $160,827 $260,822

Total Liabil ities and Capital $208,418 $264,931 $346,321

Net Worth $74,811 $160,827 $260,822

7.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the

Standard Industrial Classification (SIC) code 8748, Business Consulting, are shown for

comparison.

Arrow Mail

Page 19

Table: Ratios

Ratio Analysis

Year 1 Year 2 Year 3 Industry Profi le

Sales Growth n.a. 23.98% 21.59% 12.40%

Percent of Total Assets

Inventory 1.48% 8.70% 3.83% 3.70%

Other Current Assets 0.00% 0.00% 0.00% 44.70%

Total Current Assets 100.00% 100.00% 100.00% 74.50%

Long-term Assets 0.00% 0.00% 0.00% 25.50%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabil ities 13.34% 6.61% 5.23% 44.30%

Long-term Liabil ities 50.76% 32.69% 19.46% 16.00%

Total Liabil ities 64.11% 39.29% 24.69% 60.30%

Net Worth 35.89% 60.71% 75.31% 39.70%

Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 96.20% 91.15% 90.63% 0.00%

Selling, General & Administrative Expenses 89.10% 78.51% 78.51% 80.80%

Advertising Expenses 2.23% 1.20% 1.23% 1.30%

Profit Before Interest and Taxes 13.60% 19.87% 18.56% 2.20%

Main Ratios

Current 7.50 15.14 19.13 1.75

Quick 7.38 13.82 18.40 1.38

Total Debt to Total Assets 64.11% 39.29% 24.69% 60.30%

Pre-tax Return on Net Worth 82.51% 76.41% 54.77% 3.80%

Pre-tax Return on Assets 29.62% 46.38% 41.25% 9.70%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin 8.03% 12.90% 12.33% n.a

Return on Equity 57.76% 53.48% 38.34% n.a

Activity Ratios

Inventory Turnover 7.38 4.51 4.18 n.a

Accounts Payable Turnover 5.59 12.17 12.17 n.a

Payment Days 33 39 30 n.a

Total Asset Turnover 2.58 2.52 2.34 n.a

Debt Ratios

Debt to Net Worth 1.79 0.65 0.33 n.a

Current Liab. to Liab. 0.21 0.17 0.21 n.a

Liquidity Ratios

Net Working Capital $180,611 $247,427 $328,222 n.a

Interest Coverage 6.39 13.77 19.55 n.a

Additional Ratios

Assets to Sales 0.39 0.40 0.43 n.a

Current Debt/Total Assets 13% 7% 5% n.a

Acid Test 7.38 13.82 18.40 n.a

Sales/Net Worth 7.19 4.15 3.11 n.a

Dividend Payout 0.00 0.00 0.00 n.a

Appendix

Page 1

Table: Sales Forecast

Sales Forecast

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Sales

Marketing Campaigns 0% $0 $0 $10,000 $12,000 $15,000 $18,000 $20,000 $24,000 $24,000 $28,000 $28,000 $30,000

Market Analysis 0% $0 $0 $6,000 $8,000 $10,000 $12,000 $16,000 $16,000 $12,000 $14,000 $16,000 $20,000

Database Analysis 0% $0 $0 $3,000 $5,000 $7,000 $9,000 $10,000 $13,000 $13,000 $14,000 $15,000 $17,000

Mailing Production 0% $0 $0 $4,000 $5,000 $7,000 $7,000 $8,000 $10,000 $10,000 $12,000 $14,000 $16,000

Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Sales $0 $0 $23,000 $30,000 $39,000 $46,000 $54,000 $63,000 $59,000 $68,000 $73,000 $83,000

Direct Cost of Sales Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Marketing Campaigns $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Market Analysis $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Database Analysis $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Mailing Production $0 $0 $1,000 $1,500 $1,750 $2,000 $2,400 $2,400 $2,000 $2,200 $2,400 $2,800

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Direct Cost of Sales $0 $0 $1,000 $1,500 $1,750 $2,000 $2,400 $2,400 $2,000 $2,200 $2,400 $2,800

Appendix

Page 2

Table: Personnel

Personnel Plan


Todd Graham 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000

Sales Team (2) 0% $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000

Creative Team (2) 0% $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000

Production Manager 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000

Production Team (3) 0% $5,400 $5,400 $5,400 $5,400 $5,400 $5,400 $5,400 $5,400 $5,400 $5,400 $5,400 $5,400

Office Manager 0% $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800

Creative Director 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total People 10 10 10 10 10 10 10 10 10 10 10 10

Total Payroll $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200

Appendix

Page 3

Table: General Assumptions

General Assumptions


Plan Month 1 2 3 4 5 6 7 8 9 10 11 12

Current 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 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%

Other 0 0 0 0 0 0 0 0 0 0 0 0

Appendix

Page 4

Table: Profit and Loss

Pro Forma Profit and Loss


Sales $0 $0 $23,000 $30,000 $39,000 $46,000 $54,000 $63,000 $59,000 $68,000 $73,000 $83,000

Direct Cost of Sales $0 $0 $1,000 $1,500 $1,750 $2,000 $2,400 $2,400 $2,000 $2,200 $2,400 $2,800

Other Production Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Cost of Sales $0 $0 $1,000 $1,500 $1,750 $2,000 $2,400 $2,400 $2,000 $2,200 $2,400 $2,800

Gross Margin $0 $0 $22,000 $28,500 $37,250 $44,000 $51,600 $60,600 $57,000 $65,800 $70,600 $80,200

Gross Margin % 0.00% 0.00% 95.65% 95.00% 95.51% 95.65% 95.56% 96.19% 96.61% 96.76% 96.71% 96.63%

Expenses

Payroll $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200

Sales and Marketing and Other

Expenses

$1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000

Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Leased Equipment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Utilities $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600

Insurance $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Rent $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000

Payroll Taxes 15% $4,230 $4,230 $4,230 $4,230 $4,230 $4,230 $4,230 $4,230 $4,230 $4,230 $4,230 $4,230

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Operating Expenses $37,030 $37,030 $37,030 $37,030 $37,030 $37,030 $37,030 $37,030 $37,030 $37,030 $37,030 $37,030

Profit Before Interest and Taxes ($37,030) ($37,030) ($15,030) ($8,530) $220 $6,970 $14,570 $23,570 $19,970 $28,770 $33,570 $43,170

EBITDA ($37,030) ($37,030) ($15,030) ($8,530) $220 $6,970 $14,570 $23,570 $19,970 $28,770 $33,570 $43,170

Interest Expense $1,028 $1,015 $1,002 $988 $975 $962 $948 $935 $922 $908 $895 $882

Taxes Incurred ($11,418) ($11,414) ($4,810) ($2,856) ($227) $1,802 $4,086 $6,791 $5,714 $8,359 $9,803 $12,687

Net Profit ($26,641) ($26,632) ($11,222) ($6,663) ($529) $4,206 $9,535 $15,845 $13,334 $19,503 $22,873 $29,602

Net Profit/Sales 0.00% 0.00% -48.79% -22.21% -1.36% 9.14% 17.66% 25.15% 22.60% 28.68% 31.33% 35.66%

Appendix

Page 5

Table: Cash Flow

Pro Forma Cash Flow


Cash Received

Cash from Operations

Cash Sales $0 $0 $23,000 $30,000 $39,000 $46,000 $54,000 $63,000 $59,000 $68,000 $73,000 $83,000

Subtotal Cash from Operations $0 $0 $23,000 $30,000 $39,000 $46,000 $54,000 $63,000 $59,000 $68,000 $73,000 $83,000

Additional Cash Received

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 Current 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 $23,000 $30,000 $39,000 $46,000 $54,000 $63,000 $59,000 $68,000 $73,000 $83,000

Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Expenditures from Operations

Cash Spending $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200 $28,200

Bill Payments ($1,559) ($3,076) ($1,349) $5,120 $8,056 $10,857 $13,964 $16,780 $18,891 $17,143 $20,571 $22,264

Subtotal Spent on Operations $26,641 $25,124 $26,851 $33,320 $36,256 $39,057 $42,164 $44,980 $47,091 $45,343 $48,771 $50,464

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 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600

Purchase Other Current 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

Subtotal Cash Spent $28,241 $26,724 $28,451 $34,920 $37,856 $40,657 $43,764 $46,580 $48,691 $46,943 $50,371 $52,064

Net Cash Flow ($28,241) ($26,724) ($5,451) ($4,920) $1,144 $5,343 $10,236 $16,420 $10,309 $21,057 $22,629 $30,936

Cash Balance $124,359 $97,635 $92,184 $87,263 $88,408 $93,750 $103,987 $120,407 $130,716 $151,773 $174,402 $205,338

Appendix

Page 6

Table: Balance Sheet

Pro Forma Balance Sheet


Assets Starting Balances

Current Assets

Cash $152,600 $124,359 $97,635 $92,184 $87,263 $88,408 $93,750 $103,987 $120,407 $130,716 $151,773 $174,402 $205,338

Inventory $4,000 $4,000 $4,000 $3,000 $2,500 $1,925 $2,200 $2,640 $2,640 $2,200 $2,420 $2,640 $3,080

Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Current Assets $156,600 $128,359 $101,635 $95,184 $89,763 $90,333 $95,950 $106,627 $123,047 $132,916 $154,193 $177,042 $208,418

Long-term Assets

Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Accumulated Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Assets $156,600 $128,359 $101,635 $95,184 $89,763 $90,333 $95,950 $106,627 $123,047 $132,916 $154,193 $177,042 $208,418

Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Current Liabilities

Accounts Payable $0 $0 $1,507 $7,878 $10,721 $13,418 $16,430 $19,171 $21,347 $19,482 $22,856 $24,433 $27,807

Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Current Liabilities $0 $0 $1,507 $7,878 $10,721 $13,418 $16,430 $19,171 $21,347 $19,482 $22,856 $24,433 $27,807

Long-term Liabilities $125,000 $123,400 $121,800 $120,200 $118,600 $117,000 $115,400 $113,800 $112,200 $110,600 $109,000 $107,400 $105,800

Total Liabilities $125,000 $123,400 $123,307 $128,078 $129,321 $130,418 $131,830 $132,971 $133,547 $130,082 $131,856 $131,833 $133,607

Paid-in Capital $205,000 $205,000 $205,000 $205,000 $205,000 $205,000 $205,000 $205,000 $205,000 $205,000 $205,000 $205,000 $205,000

Retained Earnings ($173,400) ($173,400) ($173,400) ($173,400) ($173,400) ($173,400) ($173,400) ($173,400) ($173,400) ($173,400) ($173,400) ($173,400) ($173,400)

Earnings $0 ($26,641) ($53,272) ($64,495) ($71,157) ($71,686) ($67,480) ($57,945) ($42,100) ($28,767) ($9,263) $13,609 $43,211

Total Capital $31,600 $4,959 ($21,672) ($32,895) ($39,557) ($40,086) ($35,880) ($26,345) ($10,500) $2,833 $22,337 $45,209 $74,811

Total Liabilities and Capital $156,600 $128,359 $101,635 $95,184 $89,763 $90,333 $95,950 $106,627 $123,047 $132,916 $154,193 $177,042 $208,418

Net Worth $31,600 $4,959 ($21,672) ($32,895) ($39,557) ($40,086) ($35,880) ($26,345) ($10,500) $2,833 $22,337 $45,209 $74,811

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