Computer Consulting Business Plan

Calico Computer Consulting

Executive Summary
Calico Computer Consulting is in the process of being formed as a sole proprietorship owned
and operated by Doug Burham. This plan is written as a guide for starting and managing this
new business and will also serve as the basis for a separate, detailed marketing plan.
Following is a summary of the main points of this plan.

 The objectives of CCC are to generate a profit, grow at a challenging and manageable rate,
and to be a good citizen.
 The mission of CCC is to provide fast and reliable technical assistance to small office
computer users.
 The keys to success for CCC are marketing and networking, responsiveness and quality, and
generating repeat customers.
 The initial primary service offered will be hourly technical aid, although retainer contracts
and projects will be considered in the future growth.
 The local market for this business, while not new, is wide open for new and expanding
consulting firms.
 An initial financial analysis of the viability of this venture shows outstanding promise and
results. Several sources note that the computer consulting business is easy to start, requires
little up-front capital, and has the potential to be quite lucrative in today's high tech world.

In conclusion, as shown in the highlights chart below, this plan projects rapid growth and
high net profits over the next three years. Implementing this plan, in conjunction with a
comprehensive and detailed marketing plan, will ensure that Calico Computer Consulting
rapidly becomes a profitable venture for the owner.
1.1 Objectives

The objectives of this business plan are:

1. To provide a written guide for starting and managing this computer consulting business; a
strategic framework for developing a comprehensive tactical marketing plan.
2. The intended audience is the owner of this business only; this plan is not intended to obtain
financing from outside sources.
3. The scope of this plan is to provide detailed monthly projections for the current plan year,
and yearly summaries for the following two years.

The objectives of Calico Computer Consulting are:

1. Profit - To generate sufficient profit to finance future growth and to provide the resources
needed to achieve the other objectives of the company and its owner. (Net profit of at least
45% of sales in first year).
2. Growth - To grow the business at a rate that is both challenging and manageable, leading
the market with innovation and adaptability. (Grow from 24 billable hours/week at end of
Year 1 to 35 hours/week in Year 3).
3. Citizenship - To be an intellectual and social asset to the community and environment.
(Contribute 5 hours per week as volunteer, contribute 5% of pretax profits to charity).

1.2 Mission

Calico Computer Consulting's mission is simple and straightforward:

 Purpose - CCC exists to provide fast, reliable technical assistance to local business/small
office/home office computer users. CCC sells solutions & results!
 Vision - By providing fast response, informed expertise, and consistently high quality
solutions, CCC generates enough satisfied repeat customers to provide a stable retainer
base. This generates sufficient profit to provide a comfortable living for the owner.
 Mission - The short term objective is to start this company quickly and inexpensively, with a
minimum of debt. The long term objective is to grow the company into a stable and
profitable entity that the owner can easily and comfortably manage.
 Marketing Slogan - "Calico Computer Consulting is your computer paramedic..."

1.3 Keys to Success

The keys to success for Calico Computer Consulting are:

 Marketing and Networking (getting the name out there -TOMA).

 Responsiveness (being an on-call computer paramedic with fast response time).
 Quality (getting the job done right the first time, offering 100% guarantee).
 Relationships (developing loyal repeat customers - retainers).

Company Summary
Calico Computer Consulting will be a start-up venture with the following characteristics:

 CCC will initially be a sole proprietorship.

 The goal will be to start the venture as inexpensively as possible, with no debt financing.
 CCC will be a home office start-up, utilizing one studio room in the owner's home.

2.1 Start-up Summary

In keeping with the company philosophy of avoiding the use of debt, the goal is to start-up as
inexpensively as possible. This is in line with industry figures that show that computer
consulting start-ups are ideal entrepreneurial opportunities with very low start-up costs. Total
start-up expenses for CCC come to $2,050, all of which will be financed through owner
investment.

 Most expenses are typical start-up paperwork fees (legal, accounting, etc.).
 Cash requirements consist of one month's rent as a reserve.
 $500 for expensed equipment will be used to purchase a new All-In-One printer, fax,
answering machine to replace an aging inkjet printer.

Start-up

Requirements

Start-up Expenses

Legal $250

Stationery etc. $100

Brochures $125

Accountant $75

Insurance $150

Rent $425
Expensed Equipment $500

Total Start-up Expenses $1,625

Start-up Assets

Cash Required $0

Other Current Assets $0

Long-term Assets $0

Total Assets $0

Total Requirements $1,625

Start-up Funding

Start-up Expenses to Fund $1,625

Start-up Assets to Fund $0

Total Funding Required $1,625

Assets

Non-cash Assets from Start-up $0

Cash Requirements from Start-up $0

Additional Cash Raised $425

Cash Balance on Starting Date $425

Total Assets $425

Liabilities and Capital

Liabilities

Current Borrowing $0

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $0

Other Current Liabilities (interest-free) $0

Total Liabilities $0

Capital

Planned Investment

Owner Investment $2,050

Other $0

Additional Investment Requirement $0

Total Planned Investment $2,050

Loss at Start-up (Start-up Expenses) ($1,625)

Total Capital $425

Total Capital and Liabilities $425

Total Funding $2,050

2.2 Company Locations and Facilities

This is a home office venture, located in one studio of the owner's home.

 Computer facilities will initially consist of the owner's existing system.

 Telephone - one line currently serves the location. A second line for data use should be
added soon.
 Utilities are already provided, included in the space rent of $425.

2.3 Company Ownership

Calico Computer Consulting will be created initially as a sole proprietorship, owned and
operated by Doug Burham. Incorporation, probably as a LLC, will be explored as a later
option.

Services
Calico Computer Consulting will offer small office/home office business owners a quick-
response, reliable source of technical help for their computers.

 CCC will offer three main services - Hourly Technical Aid, Retainer contracts for specific skills
or systems, and Project consulting.
 There appear to be four main classes of competition, the largest of which consists of
individual proprietors and smaller consulting firms such as CCC. The competitive edge for
CCC will be to expand on already existing relationships.
 CCC will start with some basic sales literature, including logo and stationary, a brochure, and
a basic web page. These will be self-designed and computer generated, of course.
 Fulfillment of services will be provided exclusively by CCC's owner.
 Technology is obviously a critical component of this business: It will be important to stay up
to date on both equipment and knowledge to remain competitive in the future.

Detailed descriptions of these points are found in the sections below.

3.1 Service Description

Calico Computer Consulting will offer three main services, corresponding to what industry
experts have identified as the primary opportunities in computer consulting:

1. Hourly (Temporary Technical Aid) - The less traditional sort of short term assignment helping
a company solve a software or hardware related problem. Includes both emergency and
non-emergency technical assistance.
2. Retainer (Specific Skill) - The more traditional form of consulting, including regular system
maintenance, software and hardware upgrades, and network administration. The owner's
particular area of expertise is in management consulting with regard to MIS.
3. Project (Bail-out or Specific Skill) - This will include such things as consulting on major
purchases, system/network installation and testing, and major disaster recovery.

3.2 Sales Literature

Calico Computer Consulting will start with some basic self-generated literature to establish
initial positioning:

 Logo and theme - A national catalog sales paper goods company has a wonderful line of
blank papers with a computer theme that will serve as the "look" for CCC. A graphic artist
friend of the owner has already commenced work on a matching logo.
 Stationery - The theme paper is available in various formats for use as company stationery.
 Brochure - Likewise, pre-printed paper is available, along with software templates for
generating brochures
 Web Presence - Eventually a website will be developed as an "electronic brochure" as well
as a resource site for the owner's established client base.
 Response Templates - As common problems/solutions are encountered and solved, a set of
standardized templates for initial responses will be developed. This will shorten response
time and eliminate confusion in providing quick solutions to routine issues.

3.3 Fulfillment

The fulfillment of services for CCC is provided by the owner. The ultimate deliverable is the
owner's expertise and problem solving ability, coupled with an open mind and ease of
communication that will result in the customer's complete confidence in immediate and
lasting results.

3.4 Competitive Comparison

There seems to be four major classes of competition in the local computer consulting
industry:

 In-house MIS consultants - Usually employed by larger companies that can afford the fixed
cost of a salaried or hourly employee.
 Individual proprietors & smaller consulting firms - As noted elsewhere in this plan, the bulk
of Yellow Page advertisements are comprised of this group.
 Larger network and telecommunications consulting firms - Large, known-name companies
such as Network One that specialize in providing total MIS services to larger companies that
choose to outsource.
  Computer and electronics stores offering consulting services.

Of course, Calico Computer Consulting fits into the largest group as a sole proprietorship.
The primary reason that customers would buy from CCC rather than competitors is the
existing relationships that exist. Customer loyalty and satisfaction are the way to success for
small service businesses such as this.

3.5 Technology

Technology is, of course, vital to the success of Calico Computer Consulting. It is imperative
that the owner stay up-to-date on the latest technological developments in the computer
industry. In addition, it will be important to devote a reasonable portion of each year's
revenues toward upgrading the equipment and software used by CCC in its normal
operations.

Market Analysis Summary

Calico Computer Consulting will adopt a fairly intently focused market strategy.

 A logical segmentation breaks the market down into the following: Home Office Businesses,
Small Businesses, Medium Businesses and Large Businesses. Descriptions are provided
below.
 The largest and most logical target markets for CCC are the Home Office and Small
Businesses. These businesses mostly have a need for temporary technical aid, usually billed
at an hourly rate. Some opportunity does exist, however, for retainer and/or specific project
contracts.
 While there are a fair number of competitors in the local area, they seem to be widely
specialized and widely sized, leaving ample opportunity for CCC to create and expand a niche
in the chosen market segments.
 Finally worth noting is the growth trend for this market, estimated at around 9 to 10 percent
annually through the beginning of the next century.

4.1 Market Segmentation

The following chart and table reflect the market segmentation for this business. The size and
growth numbers are based on US Census data for the local region.

 Home Office Businesses - The largest and fastest growing segment, this segment is obviously
defined as small businesses that are based primarily out of the owner's home. This is not the
same as simple home computer users, which sources warn are NOT a viable market segment
for computer consulting.
 Small Businesses - Defined by the government as businesses with 1 to 99 employees, this is
the second largest and fastest growing segment in Eugene and Lane County.
 Medium Businesses - 100 to 499 employees.
 Large Businesses - 500 or more employees.

As is obvious in the pie chart, the first two segments comprise the bulk of opportunity for
Calico Computer Consulting.
Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5

Potential Customers Growth CAGR

Home Office Businesses 10% 4,259 4,685 5,154 5,669 6,236 10.00%

Small Businesses 9% 3,931 4,285 4,671 5,091 5,549 9.00%

Medium Businesses 9% 159 173 189 206 225 9.07%

Large Businesses 9% 192 209 228 249 271 9.00%

Total 9.50% 8,541 9,352 10,242 11,215 12,281 9.50%

4.2 Target Market Segment Strategy

Entrepreneur Magazine suggests six market segments as a starting point:

 Businesses not using computers

 Small entrepreneurial businesses using one or more computers
 Small to medium sized corps using computers on networks
 Large corps seeking problem-solving assistance (trouble-shooting) with specific projects
 Government agencies, corporations, and other organizations in search of computer training
 Businesses in search of custom computer programming services

Calico Computer Consulting will focus on the top market segments only - an intently focused
marketing strategy.

4.2.1 Market Trends

Three primary market trends seem to be most important in this industry:

  Trend #1 - most important -rapid growth in technology, need for continuous upgrades in
both hardware and software.
 Trend #2 - moderately important -predicted continued growth in consulting/outsourcing -
companies being unwilling to pay fixed costs of salaries, choosing instead to treat computer
upgrades and repair as variable costs.
 Trend #3 - least important - rapid growth in ratio of SOHO businesses to traditional medium
sized businesses.

These trends are predicted by industry experts to continue well into the next century.

4.2.2 Market Growth

As noted in the previous section, several factors are predicted to continue well into the next
decades, not the least of which are the growth rates for this market:

 Growth rate citation - Entrepreneur Magazine says that the consulting industry in general
will continue to grow at an annual rate of 9.1%
 Growth rate citation - Census data for each identified segment in the Lane County area
roughly parallel this growth rate.
 Growth rate citation - Eugene Chamber of Commerce published data supports the Federal
Census data, predicting continued and rapid growth particularly in the small office/home
office market segment.

4.2.3 Market Needs

According to Entrepreneur Magazine, experts in the consulting industry have identified three
different opportunities that exist for computer consultants:

1.  Temporary Technical Aid

 Short term assignments finding solutions for businesses - this is noted as the largest market

2.  Specific Skill - the largest area is software specialty, the second largest area

 System setup & purchasing guidance

 Systems reengineering/optimization
 Network Admin
 Training
 Repair
 Database/Application development
 Data Storage
 Disaster Recovery
 Security/Data Protection
 Telecommunications

3.  Bail-Out (Trouble shooting)

According to Entrepreneur Magazine, private home computer users are NOT a viable market
for computer consultants.
4.3 Service Business Analysis

The computer consulting business for the local area is already well established, yet still
allows ample opportunity for entry and growth for new participants. This is supported by the
following points:

 While there already exists a large number of consultants, there is also a wide range of sizes
and specialties. This leaves plenty of opportunity for CCC to find and develop a particular
niche.
 Customers in this industry tend to be loyal, relying on the same consultant for future needs
once a relationship has been established.
 An analysis of CCC's main competitors shows no overwhelming strengths that would be
significant barriers to CCC's success. Likewise, identifying competitor's weaknesses has
illuminated several areas that CCC can target as marketing strategies.

In short, this business arena, while no longer brand new, is far from exhausted as an
opportunity for a new and aggressive company or sole proprietor. By utilizing a logical and
comprehensive marketing approach, CCC should easily find success in the computer
consulting business.

4.3.1 Business Participants

A search of the local Yellow Pages revealed the following:

 Under the heading Consultants - Computer & Data Processing there were a total of four
listings
 Under Computers - Service & Repair there were 51 total listings, the majority of which
seemed to be stores or companies
 Under Computers - Software & Services there were 88 total listings. Thirteen of those were
large companies such as [name omitted], [name omitted], and [name omitted] (a Portland
firm). Sixteen were specialists in accounting software that listed CPA's on their staff.
 Under Computers - System Designers & Consultants there were 45 total listings. About half
had larger listings and/or company names that implied larger size. Throughout all the
listings, only four were clearly listed as individual practitioners. The most unique (and
catching) name amongst all listings was "[name omitted]."

The conclusion is that while there a fair number of competitors in the geographic area, they
are widely specialized and widely sized. Many of the larger participants appear to cater to
larger clients, thus leaving plenty of opportunity for Calico Computer Consulting to focus on
its chosen market segments.

4.3.2 Main Competitors

Below are examples of a brief analysis of CCC's main competitors.

1. Competitor 1 [name omitted]

 Top strength - A very memorable name that will stick in customer's minds.
 Primary weakness - a focus primarily on one operating system (not used by businesses).
2. Competitor 2 [name omitted]

 Top strength - Longevity and experience, someone who has been in the business locally a
long time.
 Primary weakness - Slow response and an unwillingness to take on new customers.

A much more comprehensive discussion of these strategies is presented in the CCC

Marketing Plan (written in Marketing Plan Pro).

4.3.3 Competition and Buying Patterns

As noted above, the local computer consulting industry is fragmented, with a wide variety of
sizes and specialties. Two general factors of competition immediatly show up in the analysis:

 The larger competitors seem to be grouped into two main categories: those who provide
network expertise to large companies, and those who provide "consulting" service to
products they sell.
 Of the smaller sized companies, about half still seemed to favor larger businesses as their
clients.

Customer buying patterns also highlight the opportunity for Calico Computer Consulting.
While larger companies tend to hire larger consulting firms, the home business/small
business owner tends to favor the personal relationship that can develop with the smaller
consulting firm. Several small business owners interviewed for this research admitted being
intimidated and overwhelmed by the prospect of calling a larger firm to come "rescue them."
They much preferred calling a person they already knew for help.

This leads to another very important buying pattern. Customers who have established a
relationship with a computer consultant tend to stay very loyal as long as the service and
results remain acceptable. This will be critical to the success of a new company like CCC.

Strategy and Implementation Summary

Calico Computer Consulting will focus on the following to establish and grow the business:

 Four main promotion strategies: networking and referrals, web based promotion, traditional
media advertising, and some non-traditional promotion methods.
 A value proposition of timely and practical solutions, at a reasonable rate, coupled with a
100% guarantee.
 A competitive edge based on cultivating existing customer relationships.
 A comprehensive and detailed marketing and sales strategy, covered in depth in a separate
marketing plan.
5.1 Strategy Pyramid

Most of the textbooks and/or experienced business people who contributed to the research for
this plan suggested some combination of the following four marketing strategies. These are
especially suited for a modern high tech business such as computer consulting.

 Strategy 1 - Networking & Referrals - Using existing contacts and clients to build a larger
network of potential clients.
 Strategy 2 - Web promotion - Using a web page to showcase the owner's skills and
knowledge, providing an "electronic brochure" as well as useful technical information free of
charge.
 Strategy 3 - Advertising - Traditional methods such as Yellow Page ads, newspaper classified
and display ads, local television cable access advertisements.
 Strategy 4 - Non-traditional - Creative and unique advertising such as door hangers, bumper
stickers, etc.

A much more comprehensive discussion of these strategies is presented in the CCC

Marketing Plan (written in Marketing Plan Pro).

5.2 Value Proposition

The value proposition offered by Calico Computer Consulting is quite simple: timely and
practical solutions for client's computer problems and/or upgrades, all at a very reasonable
and competitive rate. Most important, CCC offers a 100% satisfaction guarantee, thus
building and retaining the client's confidence.

5.3 Competitive Edge

CCC's competitive edge is that the owner already has a significant number of high quality
relationships with current and potential clients. In essence, CCC has already overcome the
barriers to entry in the consulting field and is simply in the process of formalizing the
business.

5.4 Marketing Strategy

The topics below briefly outline the marketing strategy for Calico Computer Consulting. A
much more comprehensive discussion of these strategies is presented in the CCC Marketing
Plan (written in Marketing Plan Pro).

5.4.1 Marketing Programs

The most important marketing program for CCC is to get the word out, through a
combination of the following:

 Sending a letter of announcement and brochure to all existing contacts and customers.
 Following the well-established steps of a public relations campaign (press releases,
announcements, etc.).
 Developing and purchasing "grand opening" announcements in the local news media.
A much more comprehensive discussion of these programs is presented in the CCC
Marketing Plan (written in Marketing Plan Pro).

5.4.2 Positioning Statement

For the home business/small business owner who needs technical help with their business
computers, Calico Computer Consulting provides fast and effective response that gets the
business back up and running. Unlike [key competition], CCC offers a 100% satisfaction
guarantee.

5.4.3 Pricing Strategy

Calico Computer Consulting will adopt a price matching strategy rather than entry pricing. A
survey of local consulting businesses revealed the following:

 Hourly Rate Pricing - The average price charged was $75.00 per hour.
 Retainer Pricing - Based on the expected minimum number of hours per month, the average
was $150.
 Project Pricing - Based on a daily rate (8 hours x $75.00/hour)

5.4.4 Promotion Strategy

The primary promotion strategy for CCC will be directly in line with the strategy pyramids
mentioned previously. The lead strategy will be to focus on cultivating existing relationships,
using known networking techniques to develop referrals and new customer leads. Added to
this will be a blend of web based marketing and traditional public relations and media
marketing. The ultimate promotion strategy, however, will be in guaranteeing customer
satisfaction: happy customers will generate repeat and new business.

5.5 Sales Strategy

Sales strategy for Calico Computer Consulting is simple and straightforward: customer
satisfaction! Happy customers will be repeat customers, and they will provide referrals to
new customers.

 Sales forecast figures are based on industry figures for the typical growth of a consulting
startup and reflect repeat business generated through meeting customer needs.
 Sales programs must be based on the notion that business is driven on customer demand
when problems arise. While some business can be generated by soliciting customers to
upgrade their systems and software, by and large the bulk of the business will be emergency
technical aid.

A much more comprehensive discussion of the sales strategy is presented in the CCC
Marketing Plan (written in Marketing Plan Pro).

5.5.1 Sales Forecast

The sales figures shown below include the projection based solely on hourly rate consulting
during the first year of business. Yearly figures for subsequent years include the growth of
retainer and project consulting income as business grows.
Cost of sales for consulting services are the hourly payments earned by the owner.

Sales Forecast

Year 1 Year 2 Year 3

Unit Sales

Hourly Rate Consulting 660 1,152 1,152

Retainer Consulting 0 5 10

Project Consulting 0 6 12

Total Unit Sales 660 1,163 1,174

Unit Prices Year 1 Year 2 Year 3

Hourly Rate Consulting $75.00 $75.00 $75.00

Retainer Consulting $0.00 $150.00 $150.00

Project Consulting $0.00 $600.00 $600.00

Sales

Hourly Rate Consulting $49,500 $86,400 $86,400

Retainer Consulting $0 $750 $1,500

Project Consulting $0 $3,600 $7,200

Total Sales $49,500 $90,750 $95,100

Direct Unit Costs Year 1 Year 2 Year 3

Hourly Rate Consulting $10.00 $10.00 $10.00

Retainer Consulting $0.00 $20.00 $20.00

Project Consulting $0.00 $79.98 $79.98

Direct Cost of Sales

Hourly Rate Consulting $6,598 $11,517 $11,517

Retainer Consulting $0 $100 $200

Project Consulting $0 $480 $960

Subtotal Direct Cost of Sales $6,598 $12,097 $12,677

5.6 Strategic Alliances

Calico Computer Consulting will need to focus on networking with local computer stores and
local business organizations (such as Chamber of Commerce and local SBDC) to develop
strategic alliances. Such organizations, which may not be customers in themselves, will be
valuable in providing leads to new customers.

5.7 Milestones

The milestones listed in the table below outline primarily the tasks needed to develop this
business plan and get the start-up business to opening day. The milestones table in the
marketing plan will be a more comprehensive listing of the tasks involved in promoting and
sustaining CCC's business.
Milestones

Milestone Start Date End Date Budget Manager Department

Research the right business 10/1/1998 5/1/1999 $0 Owner N/A

Test assumptions 10/1/1998 5/1/1999 $0 Owner N/A

Improve business mgmt. skills 10/1/1998 10/1/1999 $0 Owner N/A

Determine the right business 5/1/1999 6/1/1999 $0 Owner N/A

Prepare personal financials 5/1/1999 7/1/1999 $0 Owner N/A

Decide on target customers 5/1/1999 6/1/1999 $0 Owner N/A

Know the industry 5/1/1999 8/1/1999 $0 Owner N/A

Decide on location 5/1/1999 6/1/1999 $0 Owner N/A

Select business name 7/1/1999 8/1/1999 $0 Owner N/A

Secure location 7/1/1999 8/1/1999 $0 Owner N/A

Establish business contacts 7/1/1999 9/1/1999 $0 Owner N/A

Expand information base 7/1/1999 9/1/1999 $0 Owner N/A

Choose business form 7/1/1999 8/1/1999 $0 Owner N/A

Establish good information flow 7/1/1999 8/1/1999 $0 Owner N/A

Research demographic info 7/1/1999 7/15/1999 $0 Owner N/A

Establish financial objectives 8/1/1999 8/15/1999 $0 Owner N/A

Establish pricing strategy 8/1/1999 9/1/1999 $0 Owner N/A

Establish sales forecast 8/1/1999 8/15/1999 $0 Owner N/A

Determine capital needs 8/1/1999 9/1/1999 $0 Owner N/A

Prepare marketing plan 9/1/1999 9/15/1999 $0 Owner N/A

Prepare balance sheet 9/1/1999 10/1/1999 $0 Owner N/A

Establish bank relationship 9/1/1999 9/15/1999 $0 Owner N/A

Prepare for opening 9/1/1999 9/15/1999 $0 Owner N/A

Check all systems 9/15/1999 10/1/1999 $0 Owner N/A

Opening final prep 9/15/1999 10/1/1999 $0 Owner N/A

Totals $0

Financial Plan
The following sections include the annual estimates for the standard set of financial tables.
Detailed monthly pro-forma tables are included in the appendix.

7.1 Important Assumptions

This information is presented in the table below.

General Assumptions

Year 1 Year 2 Year 3

Plan Month 1 2 3

Current Interest Rate 10.00% 10.00% 10.00%

Long-term Interest Rate 10.00% 10.00% 10.00%

Tax Rate 30.00% 30.00% 30.00%

Other 0 0 0

7.2 Key Financial Indicators

This information is presented in the chart below.

7.3 Break-even Analysis

The following table and chart summarize the break-even analysis for Calico Computer
Consulting. Fixed costs are minimal, consisting mostly of rent and utilities for the home
office. Variable costs are assumed as 13% of sales, an average figure provided by sources
within the consulting field.

Break-even Analysis

Monthly Units Break-even 14

Monthly Revenue Break-even $1,046

Assumptions:

Average Per-Unit Revenue $75.00

Average Per-Unit Variable Cost $10.00

Estimated Monthly Fixed Cost $906

7.4 Projected Profit and Loss

This information is presented in the table below. The owner's salary is represented in the
Sales Forecast table as Direct Unit Cost and appear here as Direct Cost of Sales.  Payroll Tax
is computed using that figure.
Pro Forma Profit and Loss

Year 1 Year 2 Year 3

Sales $49,500 $90,750 $95,100

Direct Cost of Sales $6,598 $12,097 $12,677

Other Costs of Sales $0 $0 $0

Total Cost of Sales $6,598 $12,097 $12,677

Gross Margin $42,902 $78,653 $82,423

Gross Margin % 86.67% 86.67% 86.67%

Expenses

Payroll $0 $0 $0

Marketing/Promotion $2,477 $4,500 $4,680

Depreciation $0 $0 $0

Rent $5,100 $5,100 $5,100

Utilities $1,500 $1,500 $1,500

Insurance $1,800 $2,000 $2,200

Payroll Taxes $0 $0 $0

Other $0 $0 $0

Total Operating Expenses $10,877 $13,100 $13,480

Profit Before Interest and Taxes $32,025 $65,553 $68,943

EBITDA $32,025 $65,553 $68,943

Interest Expense $0 $0 $0

Taxes Incurred $9,607 $19,666 $20,683

Net Profit $22,417 $45,887 $48,260

Net Profit/Sales 45.29% 50.56% 50.75%

7.5 Projected Cash Flow

This information is presented in the chart and table below.

Pro Forma Cash Flow

Year 1 Year 2 Year 3

Cash Received

Cash from Operations

Cash Sales $12,375 $22,688 $23,775

Cash from Receivables $26,168 $58,931 $70,362

Subtotal Cash from Operations $38,543 $81,619 $94,137

Additional Cash Received

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 Current Assets $0 $0 $0

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

New Investment Received $0 $0 $0

Subtotal Cash Received $38,543 $81,619 $94,137

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending $0 $0 $0

Bill Payments $23,441 $44,817 $46,677

Subtotal Spent on Operations $23,441 $44,817 $46,677

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 Current Assets $0 $0 $0

Purchase Long-term Assets $0 $0 $0

Dividends $0 $0 $0

Subtotal Cash Spent $23,441 $44,817 $46,677

Net Cash Flow $15,101 $36,802 $47,460

Cash Balance $15,526 $52,328 $99,788

7.6 Projected Balance Sheet

This information is presented in the table below.

Pro Forma Balance Sheet

Year 1 Year 2 Year 3

Assets

Current Assets

Cash $15,526 $52,328 $99,788

Accounts Receivable $10,958 $20,089 $21,052

Other Current Assets $0 $0 $0

Total Current Assets $26,484 $72,417 $120,839

Long-term Assets

Long-term Assets $0 $0 $0

Accumulated Depreciation $0 $0 $0

Total Long-term Assets $0 $0 $0

Total Assets $26,484 $72,417 $120,839

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities

Accounts Payable $3,641 $3,687 $3,850

Current Borrowing $0 $0 $0

Other Current Liabilities $0 $0 $0

Subtotal Current Liabilities $3,641 $3,687 $3,850

Long-term Liabilities $0 $0 $0

Total Liabilities $3,641 $3,687 $3,850

Paid-in Capital $2,050 $2,050 $2,050

Retained Earnings ($1,625) $20,792 $66,679

Earnings $22,417 $45,887 $48,260

Total Capital $22,842 $68,729 $116,990

Total Liabilities and Capital $26,484 $72,417 $120,839

Net Worth $22,842 $68,729 $116,990

7.7 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the
Standard Industrial Classification (SIC) code 7379, Computer Related Services, are shown
for comparison.

Ratio Analysis

Year 1 Year 2 Year 3 Industry Profile

Sales Growth 0.00% 83.33% 4.79% 7.20%

Percent of Total Assets

Accounts Receivable 41.37% 27.74% 17.42% 21.70%

Other Current Assets 0.00% 0.00% 0.00% 50.20%

Total Current Assets 100.00% 100.00% 100.00% 71.90%

Long-term Assets 0.00% 0.00% 0.00% 28.10%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 13.75% 5.09% 3.19% 51.40%

Long-term Liabilities 0.00% 0.00% 0.00% 19.10%

Total Liabilities 13.75% 5.09% 3.19% 70.50%

Net Worth 86.25% 94.91% 96.81% 29.50%

Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 86.67% 86.67% 86.67% 0.00%

Selling, General & Administrative Expenses 41.38% 36.11% 35.92% 80.70%

Advertising Expenses 0.00% 0.00% 0.00% 1.20%

Profit Before Interest and Taxes 64.70% 72.23% 72.50% 1.70%

Main Ratios

Current 7.27 19.64 31.39 1.27

Quick 7.27 19.64 31.39 1.01

Total Debt to Total Assets 13.75% 5.09% 3.19% 70.50%

Pre-tax Return on Net Worth 140.20% 95.38% 58.93% 3.50%

Pre-tax Return on Assets 120.92% 90.52% 57.05% 11.80%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin 45.29% 50.56% 50.75% n.a

Return on Equity 98.14% 66.76% 41.25% n.a

Activity Ratios

Accounts Receivable Turnover 3.39 3.39 3.39 n.a

Collection Days 55 83 105 n.a

Accounts Payable Turnover 7.44 12.17 12.17 n.a

Payment Days 27 30 29 n.a

Total Asset Turnover 1.87 1.25 0.79 n.a

Debt Ratios

Debt to Net Worth 0.16 0.05 0.03 n.a

Current Liab. to Liab. 1.00 1.00 1.00 n.a

Liquidity Ratios

Net Working Capital $22,842 $68,729 $116,990 n.a

Interest Coverage 0.00 0.00 0.00 n.a

Additional Ratios

Assets to Sales 0.54 0.80 1.27 n.a

Current Debt/Total Assets 14% 5% 3% n.a

Acid Test 4.26 14.19 25.92 n.a

Sales/Net Worth 2.17 1.32 0.81 n.a

Dividend Payout 0.00 0.00 0.00 n.a