Greeting Card Business Plan

Business Plan Business Plan Prepared By Chris Straka, President

45 Industry Road Seaside, StateA 50011 (090) 555-2400 (090) 555-2492 Mobile [email protected]

Date Prepared January, 200B

First Class Greetings LLC Business Plan

Table of Contents Executive Summary ..........................................................................................................................5 Management and Organization .....................................................................................................7 Management team ...................................................................................................................................7 Compensation and ownership .................................................................................................................8 Contracts and franchise agreements ........................................................................................................8 Board of directors/advisory council .........................................................................................................8 Infrastructure ...........................................................................................................................................9 Insurance..................................................................................................................................................9 Employee stock option plan and other incentives .................................................................................10 Organization charts ...............................................................................................................................10 Product and Service Plan ..............................................................................................................11 Purpose of the product or service ..........................................................................................................11 Unique features......................................................................................................................................11 Stage of development ............................................................................................................................11 Future research and development ..........................................................................................................12 Trademarks, patents, copyrights, licenses, royalties................................................................................12 Government approvals...........................................................................................................................12 Product and service limitations..............................................................................................................12 Product liability .....................................................................................................................................13 Related services and spin-offs................................................................................................................13 Production .............................................................................................................................................13 Facilities.................................................................................................................................................13 Suppliers ................................................................................................................................................14 Environmental factors............................................................................................................................14 Marketing Plan ..................................................................................................................................15 Industry profile ......................................................................................................................................15 Current size .....................................................................................................................................15 Growth potential .............................................................................................................................15 Geographic location ........................................................................................................................15 Industry trends ................................................................................................................................15 Seasonality factors ...........................................................................................................................16 Profit characteristics ........................................................................................................................16 Distribution channels ......................................................................................................................17 Basis of competition ........................................................................................................................17 Competition profile ...............................................................................................................................17 2

Customer profile....................................................................................................................................18 Target market profile .............................................................................................................................18 Pricing profile ........................................................................................................................................18 Gross margin on products .....................................................................................................................18 Break-even analysis................................................................................................................................19 Market penetration ................................................................................................................................19 Distribution channels ......................................................................................................................19 Sales representatives ........................................................................................................................19 Direct sales force..............................................................................................................................19 Direct mail/telemarketing................................................................................................................19 Advertising and promotion....................................................................................................................20 Packaging and labeling ..........................................................................................................................20 Service and warranties ...........................................................................................................................20 Trade shows ...........................................................................................................................................20 Future markets .......................................................................................................................................20

Operating and Control Systems..................................................................................................21 Administrative policies, procedures, and controls..................................................................................21 Receiving orders ..............................................................................................................................21 Billing the customers .......................................................................................................................21 Paying the suppliers.........................................................................................................................21 Collecting the accounts receivable...................................................................................................21 Reporting to management...............................................................................................................21 Staff development............................................................................................................................22 Inventory control .............................................................................................................................22 Handling warranties and returns .....................................................................................................22 Monitoring the company budgets ...................................................................................................22 Security systems...............................................................................................................................23 Documents and paper flow....................................................................................................................23 Planning chart .......................................................................................................................................23 Product development.......................................................................................................................24 Manufacturing .................................................................................................................................24 Financial requirements ....................................................................................................................24 Marketing flow chart.......................................................................................................................24 Market penetration..........................................................................................................................24 Sales Representatives .......................................................................................................................25 Management and infrastructure ......................................................................................................25 3

Risk analysis...........................................................................................................................................25 Salvaging assets......................................................................................................................................26

Growth Plan .......................................................................................................................................27 New offerings to market ........................................................................................................................27 Capital requirements..............................................................................................................................27 Personnel requirements..........................................................................................................................28 Exit strategy...........................................................................................................................................28 Financial Plan ....................................................................................................................................29 Sales Projections ....................................................................................................................................29 Income Projections ................................................................................................................................29 Cash Requirements................................................................................................................................29 Sources of Financing .............................................................................................................................29 Projected Financial Statements Projected Cash Flow Statements Projected Year-End Income Statements Projected Year-End Balance Sheet Ratio Analysis Supporting Documents .................................................................................................APPENDIX Historical Balance Sheet Sales Projections Inventory Projections Operating Expenses Projections Depreciation Schedules Capital Budget Projection Equity & Debt Worksheet Amortization Table

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Executive Summary Venture History First Class Greetings, LLC continues to impact the national stationery market with patent pending, innovative, stamped and ready-to-mail greeting cards. The First Class Greetings’ card line includes the major greeting card categories of birthday, thank-you, seasonal holidays and general humor. First Class Greetings offers a full selection of original artwork, photographs and seasonal images by numerous artists with national and international recognition. First Class Greetings competes within the midmarket price range at $2.75 with a first class postage stamp affixed, creating an added sense of value.

Venture Description The uniqueness of the First Class Greetings concept is simple. Each greeting card is stamped and ready to mail. An envelope, with its corner removed, reveals the stamp affixed to the greeting card. The obvious benefit to the consumer is convenience. The consumer is spared the hassle of searching for a stamp to send the greeting card. This added value makes it an attractive product for targeted locations such as airports, hotels, card shops and cafés.

Venture Organization The management of the company will be the responsibility of Chris Straka. Chris Straka has over seven years of business development and analysis experience. Chris served as the business analyst for the national Hoofin’ Joe’s Restaurant chain, and was a founding partner in Enviro-Juice, a $1,500,000 four-unit company in the Seaside area.

Venture Market First Class Greetings’ product line is positioned in the 7 billion dollar a year U.S. greeting card industry. Greeting cards can be found in over 100,000 retail outlets in the United States. Over 90% of American households participated in the greeting card industry in 200A, with the average household purchasing 35 individual cards per year. This successful national market business model can be applied to international markets for continued growth. For marketing and distribution, First Class Greetings is enlisting sales representatives nationwide. First Class Greetings selected 20 representatives to cover the Western regions of the United States, and it will soon add over 80 additional sales reps to cover the remainder of the nation.

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Venture Operations First Class Greetings is seeking a $300,000 loan in order to implement the second phase of its business plan. The funding will help to secure an office/shipping location, increase the current line from 100 images to over 300, provide working capital, attract an experienced marketing director from within the greeting card industry, and market at national tradeshows and in industry trade magazines. Current test locations support the business plan assumptions and project gross income by year three at nearly $4,000,000.

Venture Financing The marketing advantage created from the patent pending greeting card system will position First Class Greetings as an attractive candidate for acquisition within the competitive greeting card industry. The long-term strategy is to concentrate on building value in the company through increasing cash flow and to harvest this value by merging with a larger competitor or by taking the company public. Consistent with these end goals, considerable attention will be placed on business fundamentals as outlined in the plan. Investor distributions are planned in year three, assuming projections are realized and market saturation and reinvestment needs begin to level off. Following year three, new limited partners will replace limited partners wishing to withdraw capital from the company, or, if prudent, their equity will be purchased by the company.

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Management and Organization Management team The following three individuals of the management team comprise the original members of First Class Greetings, LLC, and will continue to take an active role in the leadership of the organization as additional management staff persons are added. Chris Straka — All initial First Class Greetings operations, including marketing distribution, advance planning and business analysis will be under Chris Straka’s direction. Chris Straka is the founder of First Class Greetings with over 6 years of business development and analysis experience. Chris Straka recently served as the business analyst for Hoofin’ Joe’s Restaurants—voted America’s number one eatery in the 1990s—a $300 million restaurant chain with 101 restaurants nationwide. Chris Straka also brings to the table a successful entrepreneurial background as a founding partner in Enviro-Juice, a $1.5 million four-unit restaurant chain in the Seaside area. Under Chris Straka’s direction, Enviro-Juice received national recognition including a write-up in Blue Planet Magazine and was voted best Seaside area juice chain in 1999. The first Enviro-Juice was profitable after only three months of operation, while the Suntown, StateA, location was profitable from day one. The restaurants were sold to a larger corporation at a multiplier of nearly three times net. Jody Arbek — Jody Arbek serves as a part-time art director. Jody is owner and founder of Startling Visions art gallery, located in Conch Ville, StateA. Since founding Startling Visions art gallery in 1980, Jody has been responsible for the production of over 60 original art shows showcasing as many artists. Jody has also received awards and recognition for contribution to the arts. All First Class Greetings original art procurement will be under Jody Arbek’s direction. Shaun Patrick — Shaun Patrick serves as a part-time marketing consultant to First Class Greetings. Shaun brings over six years of marketing and tradeshow experience. Shaun was instrumental in the start-up months of First Class Greetings, seeing the company through its initial product rollout as well as the first two tradeshows. Marketing Director — The marketing director position is currently open. The director will be fully responsible for all marketing aspects of the business including full implementation and revisions of the marketing plan, tradeshow organization, sales rep negotiations, brand promotion and market expansion. During the early stages of the business, the current management group will manage these functions. As funding permits, a qualified candidate from within the greeting card industry will be sought to fill the position. During 200B, the primary management of the company will be Chris Straka’s responsibility. Chris will build a management team focused on issues of marketing, finance and distribution beginning in 200C. Up to 12 additional production positions will be hired for shipping and order fulfillment. All other jobs, such as printing, bookkeeping and accounting will be subcontracted out. As the business matures beyond its entrepreneurial beginnings, long-term objectives include seeking experienced and seasoned personnel from within the greeting card industry.

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Compensation and ownership Compensation at the management level will be achieved through salary, while shipping and order fulfillment personnel will be paid on an hourly basis. Cash bonuses tied to profitability will be awarded throughout the company. Majority ownership will remain with member, Chris Straka. Minority ownership positions will be made available to investors and employees.

Contracts and franchise agreements First Class Greetings has employed Lea Liu, Attorney at Law, to provide legal counsel concerning contracts and other legal matters. Ms. Liu has developed several contractual agreements to aid in the operations between vendors, suppliers, artists, manufacturer’s representatives, and employees. These contracts are designed to protect the assets of First Class Greetings and its members. At this time, there are no plans for franchising or licensing.

Board of directors/advisory council The following advisors will form an informal advisory council to the management of First Class Greetings. Throughout the year, the management team will call on the advisors asking for their viewpoint and expertise on strategic matters. At least once each year, all advisors will be invited to an advisory council meeting where a more formal discussion of the following year’s goals and strategies will take place. Stefanie Samuelsen — Stefanie Samuelsen is a Clinical Professor of Finance and Management at Western-Thomas Graduate School of Management, Western University. She has also been an Entrepreneur-in-Residence at the Foundation for Advancement in America since 1994. In 1998, Commerce Weekly named her one of the top 12 entrepreneurship professors at graduate business schools in the U.S. In 200A, Wallace and Timberton Accounting Firm selected her as Entrepreneur of the Year. Her guidance and feedback in the areas of financial strategies and entrepreneurship will be immeasurable. James Task, Ph.D. — James Task is vice president of the Center for Entrepreneurs at the Foundation for Advancement in America in Center City. James Task was selected as one of the Entrepreneurs of the Year in 1998 for his work in support of entrepreneurship. James has great insights and experiences to share concerning strategic assessment, planning and entrepreneurship. Rashaun Gamberden — Rashaun Gamberden is currently the president and CEO of Hoofin’ Joe’s Restaurant chain. Rashaun has already offered his support and business experience to First Class Greetings throughout the start-up. In addition, Rashaun’s personal ties to Mary Ann Sparkington, CFO of Mugga Coffee, have proven to be advantageous for acquiring industry trend information concerning the retail coffee industry. This connection is important for the marketing of the Coffee Notes line of cards.

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Sandra Wu — CPA MS-Tax — Sandra Wu, owner of Accounting Specialists, Inc., is handling the accounting and capital growth needs of the company. Sandra Wu will use many business resources, contacts and knowledge to help secure capital and bank financing for First Class Greetings. Daniel Renkin – Daniel Renkin is the senior director of business finance and analysis for Hoofin’ Joe’s Restaurant. With over 15 years of business analysis experience, Daniel Renkin’s knowledge of corporate business strategy and financial models will help guide anticipated growth.

Infrastructure Many outside advisors will be relied upon for their contracted services, among them: Cara Cuthbert — Insurance advice and coverage, paid for through policies obtained. Lea Liu, Attorney at Law — Legal services as needed, paid hourly or by project. Michelle Norris — Mailbox/display rack designs and all marketing and tradeshow displays and materials, paid by the project. W. J. Peete, ITS — Computer and information technology services as needed, paid hourly. Sandra Wu, CPA MS-Tax — Accounting and tax services provided quarterly and yearly paid by the project.

Insurance All LLC members of First Class Greetings will have an individual life insurance policy owned by the LLC. In the unfortunate occurrence of a member’s death, the proceeds of the life insurance policy will be used to purchase that member’s portion of the equity ownership in the company—as established by a valuation calculation previously agreed upon. This ownership portion will be distributed based on the then-current percentages of ownership in the company. Other insurance needs, as outlined by Cara Cuthbert, insurance agent, specializing in commercial company protection, include: ■

General liability

■

Product liability

■

Equipment and Property coverage

■

Employee health insurance – as deemed necessary

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Employee stock option plan and other incentives Members and employees of the LLC will receive yearly cash bonuses tied to profitability. In 200D, and every year after, investors will receive profit distributions. Various incentive programs encourage outside (non-employee) involvement in the company. Sales representatives are offered a commission based on gross sales (15%) and artists are offered a commission for their artwork based on gross sales associated with their artwork (6%).

Organization charts Chris Straka, Member President

Director Position Operations, Distribution, Art Procurement

Director Position Finance

Director Position Sales and Marketing

Beginning 200C

Beginning 200B

Jody Arbek, Member Art Director Beginning 200A

Beginning 200C

Shaun Patrick, Member Marketing Consultant

Distribution Staff

Beginning 200A

Beginning 200C

Production Staff

Advisory Council Members

Beginning 200C

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Product and Service Plan Purpose of the product or service The company’s objective is to develop, market and distribute postage pre-paid greeting cards to selected upscale card shops, airports, hotels and coffeehouse locations. The First Class Greetings’ product line is positioned in the high-quality, mid-price range of the market. The company’s product line differentiates itself by offering consumers a greeting card that is stamped and ready to mail. First Class Greetings will also further differentiate its product through unique, high-quality artwork.

Unique features Card Designs and Images The First Class Greetings’ card line includes the major greeting card categories of birthday, thank-you, seasonal, holidays and general humor. The line consists of original artwork from a number of different artists. Different styles include watercolors, oils, photography and other mediums to help diversify and keep the line fresh, original and appealing to varied demographics and tastes. The initial Coffee Notes line consisted of 15 coffee-related images. The second run produced 15 additional images including seasonal and general designs. An additional 88 images debuted at the Stationery Show of America, May 200A, in New York. These 118 images will help solidify First Class Greetings as a viable stationery company.

Envelope Design The envelope is a patent pending original design that incorporates functional and aesthetic features. The original feature of the envelope design is that the top right hand corner is cut off to reveal a postage stamp adhered directly to the note card rather than the envelope.

Display Racks First Class Greetings can be displayed from a variety of customized counter-top, floor-spinners and wall display racks. The original rack design is a patent pending counter-top model, designed with a mailbox built into the display. Floor-spinners and wall racks have recently been added to the display line to offer space saving alternatives as well as the ability to hold a larger number of the upgraded cards.

Stage of development First Class Greetings is a new business operating as a limited liability company. After considerable product/market research and product design, First Class Greetings began Phase One-Start-Up operations the first quarter 200A. During Phase One, efforts were concentrated on proving marketability and profitability of the concept. Since the feasibility of the concept was established, First Class Greetings is moving into Phase Two-Operations. The initial Coffee Notes line of cards now contains 30 coffee-related images. Another 88 images debuted at the Stationery Show of America, May 200A, in New York.

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Future research and development Continual research concerning trends in the greeting card industry and artwork preferences will have a large impact on the salability of future card lines. Jody Arbek, Art Director beginning in 200A, will continue to serve as an art consultant to First Class Greetings. Jody will offer guidance based on her considerable experience procuring artwork for her gallery, Startling Visions. In addition, experienced and seasoned personnel from within the greeting card industry will be sought as the business matures.

Trademarks, patents, copyrights, licenses, royalties First Class Greetings has trademarked its logo, which appears on the backs of all cards and envelopes. This trademark will become recognized by consumers as a sign of quality and convenience and will help to establish First Class Greetings as a superior greeting card company. The envelope is a patent pending original design that incorporates utility functions as well as aesthetic features. The patent approval process should be completed in 200B. All artwork created under contract for First Class Greetings is held as copyrighted material by First Class Greetings, not the artist. The artist is compensated through commissions based on gross sales associated with the specific artwork.

Governmental approvals Since First Class Greetings is an already established limited liability company, all governmental approvals have been satisfied for its start-up—including local, state, and federal registrations. In addition to these regular necessary approvals, the U.S. Postmaster of San Morton, StateA, has tested First Class Greetings, finalizing its compatibility with the U.S. postal system and its machinery. To date, all envelopes sold have successfully passed through the postal system.

Product and service limitations One product limitation could be additional pilfering and shoplifting of the product because of the added value of having a stamp affixed to the card. The patent pending design will limit stealing of the envelopes, since the stamp is affixed to the card itself. A stamped note card is less likely to be stolen due to its perceived higher value ($2.75 value) than a stamped envelope. In addition, the cut envelope corner renders the envelope useless since no stamp can be adhered to it in the appropriate place.

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Product liability Product liability risk was discussed at length with people from the greeting card industry, the advisory council members, legal counsel, and the insurance broker. The product does not in and of itself create extreme risk above and beyond what is deemed reasonable. Therefore, the insurance and legal status of the company should be sufficient to cover the unlikely risk associated with the product.

Related services and spin-offs First Class Greetings can easily grow from the current marketing strategy and spin-off product lines to include stationery, wrapping paper, boxed note cards, postcards, etc. Of these related products, postcards would be the most likely choice since they are consistent with the current marketing strategy—a postage-ready product that provides convenience to the customer. Another option for future growth is to enter the e-market on the Internet. Several card companies have experienced phenomenal growth, in terms of visitors, in the last year. In most cases, e-cards are made available for free to visitors. Advertising spots shown while visitors are selecting cards are meant to bring in the profits. As of yet, profitability is often sought after but not attained on the Internet. Opportunities will be evaluated for profitability to make cards available in this medium.

Production The two main components for production are the greeting cards and the envelopes. In the Seaside area alone 12 major printing companies are capable of producing the quality and quantity needs projected. The two vendors currently being used were selected in consideration of quality and price. Beachcombers Printing and Lithograph out of Seaside publishes the greeting cards, while MidContinent Envelope out of Midtown manufactures the patent pending envelope. Since there are many companies that can provide this service, First Class Greetings has developed relationships with back-up production companies as well.

Facilities Currently, First Class Greetings operates out of a 1,300-square-foot facility in Seaside that provides adequate space for current operations. Members and employees work both virtually from their remote location and from the Seaside facility. Each Wednesday, all members work at the Seaside facility. As sales top $4 million (anticipated in 200E), the business will move all offices, storage and shipping facilities to one central location in San Morton, StateA. San Morton has been chosen for its proximity to current printing, employee and financial resources.

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Suppliers Since production is handled by subcontractors, the most pressing concern is to have enough artists to supply artwork to grow the product line from 100 images to 300—the average number of images an established, mid-sized greeting card company carries. It will be necessary to attract artists with different styles including watercolors, oils, photography and other mediums to help diversify and keep the line appealing to the intended customers. Jody Arbek, Art Director beginning in 200A, will use her background, network, and expertise to establish a group of artists that will meet these needs. Many incentive programs, including commissions on sold cards, will be employed to keep the artists interested in the potential of working with First Class Greetings.

Environmental factors All paper used in the production of note cards and envelopes are created from recycled products. In addition, environmentally safe printing and manufacturing practices by subcontractors are assured through state and county requirements and regulations.

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Marketing Plan Industry profile Current size First Class Greetings’ product line is positioned in the $7 billion a year U.S. greeting card industry. Large companies command nearly 85 percent of the market share (Market Group Research, Inc.). Given that these companies have greater financial resources, market penetration, and brand recognition, First Class Greetings will target the remaining $1+ billion market currently divided between as many as 1,700 small- to medium-sized independent card companies.

Growth potential Annual growth in the greeting card industry is expected to remain at 1% to 3% throughout the year 200G. This growth comes from two sources. The first is based on the number of consumers in the marketplace. Greeting cards are primarily purchased by women between the ages of 35 and 65—baby boomers. The number of this customer segment is expected to remain the same until the year 200G. The second source is greeting card prices, which are expected to increase at a rate slightly higher than the rate of inflation (Cards and Gifts Magazine, January 200B). First Class Greetings’ growth projections are based on these findings and new market sales. Geographic locations Greeting card sales are highly relational to population figures. Therefore, the highest populated geographic areas will generate the highest sales. Due to First Class Greetings’ unique offering, geographic locations with high tourism and travel will be targeted. These areas will have the highest concentration of potential customers that will respond to a more convenient greeting card—one with the postage already affixed. Industry trends Many of the marketing and card design decisions will be guided by the following greeting card industry trends: ■

Of total greeting cards purchased annually, roughly half is from seasonal sales and the remaining half is from everyday card sales. Sales of non-occasion cards are on the increase (USA Research Plus, July 200A).

■

Major card selling holidays are, in order, Christmas, Valentines Day, Easter, Mother’s Day, Father’s Day, and Graduation (USA Research Plus, July 200A).

■

Women between ages 35 and 65 purchase over 80 percent of all greeting cards (Cards and Gifts Magazine, January 200B).

■

The average person receives 30 cards per year, eight of which are birthday cards. In fact, nine in 10 Americans aged 16 to 69 received at least one card on their last birthday (Global Marketing, Spring 200A).

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■

The number of substitutable products for greeting cards is dramatically increasing with technology, including e-mail, e-cards, telephone, mobile phones, digital technology, etc.

First Class Greetings will respond to these trends in the following ways: Due to the special offering of First Class Greetings—a convenient card with postage affixed—everyday cards, including birthday cards, will be produced. Limited selections of holiday cards may be made available in holiday point-ofpurchase displays for established retail customers. Cards will be designed to appeal primarily to women between the ages of 35 to 65. In addition, a larger demographic group including men and women concerned with time and convenience will be targeted. In the future, cards appealing to young men and women will also be developed to begin to harvest this future market of potential customers.

Seasonality factors Of the total greeting cards purchased annually, roughly half are seasonal while the remaining half are everyday card-sending situations. The most popular everyday card-sending situation is still birthday, which accounts for nearly 60 percent of everyday cards sold. First Class Greetings would like to concentrate on everyday cards in an effort to stabilize revenues and output. A limited selection of holiday cards may be made available for established retail customers.

Profit characteristics Net profit margins in the greeting card industry (SIC 2771) have shown some consistency in the last four years. (Figures listed from most recent to least recent.) The lowest profit percentage year, 1.4% net profit, reveals the impact on greeting card sales during a dramatic shift in distribution towards card sales in large discount retailers.

Net Profit for Greeting Card Companies

8.0% 6.0% 4.0% 2.0% 0.0% Series1

S1 1 6.7%

2

3

1.4% 7.2% Years Previous to 200B

4 5.8%

(Statistics taken from the RMA Annual Reports for the cited years)

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Distribution channels Distribution channels within the greeting card industry are experiencing many changes. Over the past ten years, the typical card shop distribution channel has shrunk from about 40% of industry sales to less than 30% today. The main cause is increased distribution of cards in mass-merchandisers such as grocery stores, discount stores, etc. This trend is expected to continue into 200E when this distribution is expected to maintain 15-20% of sales. The number of cards distributed through specialty shops and trendy gift shops has increased slightly. A newer distribution channel, the Internet, will also create many changes. This channel is highly speculative at this point. Some companies are willing to spend the money to attract the next wave of consumers—the 20-somethings. These Internet efforts are expected to bring losses of some magnitude for the next three to 10 years (Gift Shop Manager Magazine, August 200A).

Basis of competition Since the large greeting card companies command nearly 85 percent of the market share, First Class Greetings will compete for the market share of smaller alternative card companies such as Special Arts, E-notes, Century and Sunset Publications, and Green Living Products, Inc. The greeting card industry is extremely competitive; therefore, it is critical to long-term success to establish First Class Greetings in as many locations and in as short a time as possible. The National Association for Greeting Card Producers (NAGCP) estimates as many as 2,000 greeting card publishers in America, ranging from major corporations to small family organizations. Similar to the competitors, First Class Greetings addresses the largest segment of consumers by providing images that appeal to the largest group of consumers—women. First Class Greetings will set itself apart from the competition by appealing to an even larger demographic group including men and women concerned with time and convenience. First Class Greetings can better service this sector over larger competitors by tailoring the product, offerings, prices, distribution, promotional efforts, and services towards that particular market segment.

Competition profile One competitor worth close examination is Green Living Products (GLP). GLP is a publicly traded company that specializes in wildlife and nature related greeting cards and grosses over $3 million annually. The company is similar in size and revenue to First Class Greetings’ budget figures. GLP utilizes 130 independent sales reps to support and service 5,200 national retail locations (Source: GLP SEC filing). A complete list of direct competitors is included in the Appendix. One of First Class Greetings’ greatest marketing advantages is the originality of a greeting card that is stamped and ready to mail. At this time, no other greeting card company has attempted this combination. This allows First Class Greetings a brief window of opportunity to rapidly gain market share and saturation.

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Customer profile Although people of all ages and types exchange greeting cards, women, aged 35 to 65 still purchase over 80 percent of all greeting cards. This demographic will define the primary target customer for most product lines. In addition, First Class Greetings will focus on an even larger demographic group including men and women concerned with time and convenience. Potential customers will be found in hotel gift shops, airports, tourist locations, cafés, card shops, etc.

Target market profile Greeting cards can be found in over 100,000 retail outlets in the United States. Over 90 percent of American households participated in the greeting card industry in 200A, with the average household purchasing 35 individual cards per year. First Class Greetings seeks entrance into this retail market through ■

Airport concession/retail companies.

■

Hotel gift shops.

■

Unique card and gift shops.

■

Cafés.

A complete list of potential target markets appears in the Appendix.

Pricing profile First Class Greetings will compete near the mid-price range within the market. While greeting cards range in price from $0.38 to $10.00, the average counter card retails for around $2.65. Most of the First Class Greetings’ cards retail at $2.75 with a first class postage stamp already affixed, creating an added sense of value.

Gross margin on products The gross margin for the industry ranges from 52 to 57 percent. First Class Greetings’ gross margin will have little fluctuation since the costs are based on raw paper goods and postage stamps. Goods are subcontracted out at a set price and quantity, which can be controlled through competitive bidding. First Class Greetings’ gross margin is 46.4 percent in 200B. The gross margin will rise slightly by year 200D to 52.3 percent. This increase is attributed to established ordering patterns and batch quantity increases.

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Break-even analysis To determine break-even sales, First Class Greetings uses this formula: Fixed costs Gross Margin % - Commissions %

=

$227,029 = (46.4% - 16%)

$746,806

Since sales of $835,169 are projected for year 200B, First Class Greetings will exceed break-even in 200B. The break-even number of card sales in units can also be calculated. This number can be very helpful in initial communication, goal setting, and evaluation of sales representatives. Fixed costs Unit Gross Margin - Unit Commissions

=

$227,029 (1.23 - .43)

=

281,814 cards

This amount is the equivalent of 23,385 cards sold per month and 5,871 cards sold per week.

Market penetration Distribution channels There are two main channels for product sales and distribution. The first plan is to integrate First Class Greetings into as many locations as quickly as possible through national independent sales representatives. The second channel targets specialized stationery, hotel, and coffee tradeshows.

Sales representatives Independent sales representatives provide the best mode for distribution in order to maintain pricing controls and higher margins. Independent sales reps are not full-time employees of First Class Greetings, thus benefits are not necessary. Independent sales reps receive a flat commission based on gross sales. First Class Greetings’ sales reps are set at a commission rate of 15% of gross sales. The average sales rep can service up to 40 accounts with the average location generating around $1,000 per year. Twenty independent sales reps covering 13 states sell the company’s product. The company anticipates adding over 80 additional sales reps to cover the remainder of the United States. In addition to field calls, sales reps will represent the product line at all regional tradeshows, with the marketing director attending all national tradeshows.

Direct-sales force A direct-sales force will not be used to sell the greeting cards at this time.

Direct mail/telemarketing Direct mail and telemarketing efforts will not be used to sell the greeting cards at this time.

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Advertising and promotion The company will use various methods to promote its product at the retail level as well as to the end consumer—for example, tradeshows, point-of-sale materials, and the website (www.firstclasscards.com). In addition, sales materials will be produced at the beginning of each season featuring new products and merchandising programs. One of the company’s most effective forms of retail advertising is the visual point-of-purchase display in retail stores.

Packaging and labeling Two important packaging and labeling issues face First Class Greetings. First, the card and envelope must be manufactured and arranged in an attractive, appealing way. Since each card is stamped and ready to mail, an envelope with its corner removed will be packaged with each card to be sold together. The second packaging issue is the way in which First Class Greetings cards are displayed. The cards can be displayed from a variety of customized counter-top, floor-spinners and wall display racks. The original point-of-purchase rack design is an award-winning patent pending counter-top model, designed with a mailbox built into the display.

Service and warranties First Class Greetings retail accounts have the option of exchanging slow-selling images for new images. This pledge will encourage first-time orders. This exchange is handled via UPS’s three-day service in order to help keep customers’ inventory on the racks.

Trade shows Trade shows are an essential strategy to the future success of First Class Greetings and are the most efficient means of acquiring new accounts as well as new sales reps. A tradeshow presence also helps to secure brand awareness within the industry. Tradeshows offer a targeted market of owners and buyers looking for new items for their businesses. With proper marketing and booth location, new accounts will be obtained. The first 60 Coffee Notes accounts were located through two regional coffee-related tradeshows.

Future markets First Class Greetings will focus on national sales while keeping an eye on international potential. Greeting cards have international acceptance, meaning the concept could have similar potential overseas. One of the major markets, the U.S. coffeehouse itself, is a carryover from Europe. A recent study released in the United Kingdom indicates that five percent of the British population is passionate about greeting cards. Consumer research findings show that more avid enthusiasts are sending cards for a wide range of occasions (National Association for Greeting Card Producers—NAGCP).

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Operating and Control Systems Administrative policies, procedures, and controls Receiving orders After receiving faxed orders from sales reps, the orders are shipped via UPS Ground to their final destination. The main exceptions are orders from Hawaii and Alaska, which are shipped through the U.S. postal system. Current orders are shipped directly from the home office in Seaside, StateA. All First Class Greetings retail accounts also have the option of exchanging slow-selling images for new images. This exchange is also handled via UPS but on the faster three-day service in order to help keep customer’s inventory on the racks.

Billing the customers A packing slip is included with all shipments. This packing slip can be used by the customer to compare what is received with the original order and the invoice when it arrives. The invoice is mailed after the shipment is sent. New account collections are COD and 30-day net for established accounts. If the invoice is not paid within 30 days, a reminder statement is sent and a late fee charged.

Paying the suppliers All suppliers will be paid upon their payment terms. Most vendors allow 30 days to pay. Any advance payment discounts will be evaluated and utilized when appropriate. In order to process payment, the original invoice must be attached to the internal approval form with an account number (for categorizing expenses) and approval signature on it.

Collecting the accounts receivable The first attempt to collect a late receivable is to send a statement that lists the late invoice and adds a late fee to the total. One of the keys to keeping accounts receivable current is to provide payment terms only to those customers who fill out a credit application. The credit application requests basic financial information including the name of their bank and credit references. All applications will go through an approval process that includes calling the references to establish the customer’s payment patterns. Collection agencies will be used for accounts over 90 days past due.

Reporting to management Because of the current virtual operations of the company, excellent communication systems are being put into place. These systems, including e-mail, project manager software, and a budding intranet, will provide the foundation for clear communication as the company grows.

21

Staff development Certain training and development of staff will be beneficial to the overall efficiency of business operations. Computer training, equipment training, and personal development will all be sought and encouraged by management.

Inventory control Inventory will be ordered as needed so that stock is held for a very short time before it is sent on to the customer. Therefore, our inventory turn will be shorter than six weeks. One inventory challenge is the inevitable postal increases. Given the frequency of postal increases in recent years, it is necessary to stay ahead of the rate increases so that inventory with non-compliant postage is not left on the market. The best way to handle this issue is through advance planning. The post office usually gives unofficial notice of a rate increase at least a year in advance. The best-case scenario is to begin placing the proper postage in advance of the change. The next rate increase will occur mid-200B by one cent. Because the new stamp is not yet available, First Class Greetings has already begun to apply the stamp that is currently available—two cents above the current rate of first class postage. Although the extra cent will raise the cost of goods for the product, this one-cent increase is preferable to the costs associated with directly exchanging merchandise already distributed to current accounts. In a direct exchange, First Class Greetings loses the cost of the exchanged card which ranges from $.16-$.20. The cost of the invalidated stamp can be recovered from the post office, but the card is destroyed. Direct exchange is the least desirable option.

Handling warranties and returns First Class Greetings’ retail accounts have the option of exchanging slow-selling images for new images. This exchange is handled via UPS on the three-day service in order to help keep customers’ inventory on the racks. Returns are accepted for damaged or incorrectly shipped merchandise.

Monitoring the company budgets Budgets will be prepared yearly to determine benchmarks for: ■

Revenue

■

Inventory

■

Sales and Marketing Expenses

■

Administrative Expenses

■

General Expenses

■

Capital Expenditures

22

The budgets will be used to establish benchmarks and then to review actual performance against the benchmarks.

Security systems A sophisticated security system is established for the inventory and equipment areas within the office space. This system includes 24-hour surveillance.

Documents and paper flow At this time all documents are scanned into the computer system and stored digitally. This system supports the virtual operations of the company and aids in security and storage. Planning Chart Phase One (Complete):

First-Round Financing – Start-up

Total Finance:

$128,000 Investor contribution

Minimum Investment:

$150,000 Original member contribution

Time Line:

2 months start-up, 10 complete months of sales figures

Goals:

1) Generate actual business plan figures. 2) Establish a viable test market composed of 20 units. Analyze budget revenues, costs, sales distribution and product mix.

Phase Two (Current):

Second-Round Financing – Operations

Finance:

$300,000 debt financing

Goals:

1) Provide free display racks to help secure rapid market share. 2) Introduce 200 new images (300 minimum total). 3) Implement business plan.

23

Product development The product line will be developed from 100 images to 300—the average number of images an established, mid-sized greeting card company carries. It will be necessary to attract artists with different styles including watercolors, oils, photography and other mediums to help diversify and keep the line appealing to the intended customers. Jody Arbek, Art Director beginning in 200A, will use her background, network, and expertise to establish a group of artists that will meet these needs. Many incentive programs, including commissions on sold cards, will be employed to keep the artists interested in the potential of working with First Class Greetings.

Manufacturing Few factors limit the physical manufacturing of the product. The two main products for production are the greeting cards and the envelopes. In the Seaside area alone, 12 major printing companies are capable of producing the quality and quantity needs projected. Beachcombers Printing and Lithograph out of Seaside publishes the greeting cards, while Mid-Continent Envelope out of Midtown manufactures the patent pending envelope.

Financial requirements First Class Greetings has raised close to $130,000 from individuals in exchange for an overall equity position of 40%. The second phase funding will help to secure an office/shipping location, increase the current line from 100+ images to over 300, provide working capital, and help attract an experienced marketing director from within the greeting card industry.

Marketing flow chart For marketing and distribution, First Class Greetings is enlisting the service of sales representatives nationwide. First Class Greetings selected 20 representatives that cover the Western regions of the United States, and will soon add over 80 additional sales reps to cover the remainder of the nation. Efforts will be made to recruit and evaluate enough sales reps to secure the services of 10 representatives each month until 100-120 sales representatives are selling the products.

Market penetration There are two main channels for product sales and distribution. The first plan is to integrate First Class Greetings into as many locations as quickly as possible through national independent sales representatives. This plan is well on its way with 20 sales representatives currently selling the products and more than 80 to be added within the next year. The second plan for distribution is through specialized stationery, hotel, and coffee tradeshows. These tradeshows will be held in May, July, and September of each year.

24

Sales representatives Independent sales representatives provide the best mode for distribution in order to maintain pricing controls and higher margins. Independent sales reps are not full-time employees of First Class Greetings, thus benefits are not necessary. Independent sales reps receive a flat commission based on gross sales. First Class Greetings’ sales reps are set at a commission rate of 15% of gross sales. The average sales rep can service up to 40 accounts with the average location generating around $1,000 per year. In addition to field calls, sales reps will represent the product line at all regional tradeshows, with the marketing director attending all national tradeshows.

Management and infrastructure Three individuals from the original team of members in the LLC comprise the current management team. This team will add a marketing director by May 200B. This management position will be fully responsible for all marketing aspects of the business. The expanded management team will include a director of operations, distribution and art procurement, and a director of finance. These two positions will be added in 200C. The management team relies heavily on the infrastructure and advisory council for certain contracted services and advice on the strategic direction of the company.

Risk analysis Despite all planned mitigation, there are always inherent risks especially with a start-up company. The major risks are identified and addressed as follows: 1. Unique stamped and ready to mail concept is not accepted. ■ The public can be fickle and unsure of new items introduced to the market. Educating the public through marketing, and providing them with as traditional a product as possible should help to integrate the acceptance of the new product. Non-acceptance is perceived as one of the greatest risks. If there is a public inability to adapt to the new envelope and concept, First Class Greetings can always drop the stamp from the product and form a standard greeting card company with the remaining inventories. The company would operate under a new name and logo to help shed any ghosts in a post First Class Greetings closet. 2. Too few images are published, or public does not respond to the images. ■ Established, mid-sized greeting card companies carry an average of 300 different images. First Class Greetings already has 100 images ready to debut at the National Stationery Tradeshow. In addition, First Class Greetings will closely follow the trends in the market place such as category types (e.g. Christmas), popular images (e.g. flowers), and colors/hues (e.g. vibrant or pastels).

25

3. A lack of funding undermines flexibility. ■ Critical to the success of First Class Greetings is proper funding. The majority of the funding will go towards display racks and in-store point-of-purchase marketing material to help educate the public on the new concept. Free displays are essential to quick market penetration. Should First Class Greetings be unable to secure the necessary financing, the option remains to charge retail accounts for the display racks. This action will severely limit the ability of First Class Greetings to quickly expand and take advantage of the new product in a timely fashion. 4. Better-financed competitor overtakes market share. ■ This risk can also turn to First Class Greetings’ favor. If other companies begin to challenge First Class Greetings for the stamped greeting card market they will, in effect raise awareness of the concept as a whole. This turn could lead to attracting investors or bankers to loan money to the concept originator. In addition, First Class Greetings will pursue any company that violates the pending patents.

Salvaging assets If the risks became too excessive for continued involvement in the greeting card industry, many options exist. The two primary options are: 1.

Sell the business to another greeting card company. The amount would be determined through a valuation assessment at the time of sale.

2.

Sell the artwork and inventory to another greeting card company and liquidate the assets of the company. The amount would be determined by market value of the assets at the time of sale.

26


Growth Plan New offerings to market New Offerings – First Class Greetings can easily grow from the current marketing strategy and spin-off product lines to include stationery, wrapping paper, boxed note cards, postcards, etc. Of these related products, postcards would be the most likely choice since they are consistent with the current marketing strategy—postage-ready products that provide convenience to the customer. It is anticipated that the market for postcards would bring a 50% increase in sales volume. New Markets – Greeting cards have international acceptance, meaning the concept could have similar potential overseas. One of the major markets, the U.S. coffeehouse itself, is a carryover from Europe. The viability of these markets will be assessed.

Capital requirements Providing new offerings to market will be similar to building our initial inventory of greeting cards. Therefore, many of the same costs apply. The costs associated with entering international markets have yet to be assessed. Sources and Uses (New Offerings) Sources: Financing

$200,000

Uses: Working Capital

$75,000

300 new images

$90,000

Marketing (Tradeshows/Advertising)

$35,000

27

Personnel requirements Additional personnel requirements include support functions such as order entry, order fulfillment, etc. The management team included in this plan is sufficient to incorporate additional growth without added management personnel.

Exit strategy The marketing advantage created from the patent pending greeting card system will position First Class Greetings as an attractive acquisition candidate within the competitive greeting card industry. The long-term strategy is to concentrate on building value in the company through increasing cash flow and to harvest this value by merging with a larger competitor or by taking the company public. Consistent with these end goals, considerable attention will be placed on the business fundamentals as outlined in the plan. Partner distributions are planned in year three, assuming projections are realized and market saturation and reinvestment needs begin to level off. Following year three, new limited partners will replace limited partners wishing to withdraw capital from the company, or, if prudent, their equity will be purchased by the company.

28


Financial Plan Sales Projections Sales for the next three years are projected to be $744,106, $2,450,000, and $3,877,594. In year 200A, First Class Greetings increased their independent sales force from 10 representatives to 20. The plan is to add approximately 80-100 additional sales reps to cover the United States in year 200B (the first year for the plan). It is estimated that each representative can service 40 locations with an average sales volume of $1,000. By Year 3 of the plan, each of those sales reps will be selling $40,000.

Income Projections Net income projections for the next three years are $(68,715), $381,606, and $849,789. The company is not currently profitable, but expects to be profitable in Year 2 of the plan. The large, national sales force is expected to integrate First Class Greetings into as many retail locations as possible, allowing for relatively quick market penetration and growth.

Cash Requirements First Class Greetings has received $278,000 in start-up funds to date. The original owner has contributed $150,000, and investors have supplied the remaining $128,000 of capital. An additional $330,000 will be required to fund working capital requirements, additional personnel, additional artwork images, and marketing/trade show. The growth plan could include spin-off product lines to include stationery, wrapping paper, boxed note cards, post cards, and expansion into the international market. Many of the same types of costs would apply, and an additional $200,000 in financing would be required to improve working capital, acquire additional images, and promote the new offerings.

Sources of Financing First Class Greetings expects to obtain an additional $30,000 in equity financing and is seeking a 3-year business loan in the amount of $300,000. It is estimated that the interest rate on the loan will be 8%.

29

First Class Greetings LLC Cash Flow Statement 200B Cash In Cash Sales Collections from Accounts Receivables Equity Received Loans Received Other Cash In (receipts from other assets) Other Cash In (interest, royalties etc.) Total Cash In Total Cash Available Cash Out Inventory Expenditures Inventory/Raw Material (Cash) Inventory/Raw Material (Paid on Account) Production Expenses Operating Expenses Advertising Bank Charges Dues & Subscriptions Insurance Licenses & Fees Marketing & Promotion Meals & Entertainment Miscellaneous Office Expense Office Supplies Outside Services Payroll Expenses Salaries & Wages Payroll Taxes Benefits Professional Fees Property Taxes Rent Repairs & Maintenance Shipping & Delivery Telephone Training & Development Travel Utilities Vehicle Other Other Other Paid on Account Non-operating Costs Capital Purchases Estimated Income Tax Payments Interest Payments Loan Principal Payments Owner's Draw Other Cash Out Total Cash Out Monthly Cash Flow (cash in - cash out) Beginning Cash Balance Ending Cash Balance

Pre Start-up

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

TOTAL

44,412

108,129 108,129 152,541

31,679 300,000 331,679 440,761

45,264 45,264 400,810

38,370 38,370 388,613

23,904 23,904 371,726

54,147 54,147 352,029

49,534 49,534 336,586

72,637 72,637 320,939

82,385 82,385 313,914

72,685 72,685 298,803

89,102 89,102 293,738

75,393 30,000 105,393 315,526

743,228 30,000 300,000 1,073,228 1,117,640

-

-

24,468 -

20,697 -

13,105 -

29,292 -

26,944 -

39,379 -

44,553 -

39,441 -

48,168 -

40,957 -

54,611 -

381,615 -

-

38 250 250 -

38 400 400 -

38 1,000 500 -

38 500 450 -

38 6,600 750 -

38 1,000 750 -

38 6,750 750 -

38 1,000 750 -

38 6,500 750 -

38 400 750 -

38 200 750 -

38 500 750 -

456 25,100 7,600 -

-

12,998 1,562 750 1,300 435 150 325 400 -

15,837 1,562 400 1,300 435 150 325 400 -

14,359 1,562 400 1,300 435 150 325 400 -

11,385 1,562 750 1,300 1,425 150 325 400 -

21,227 2,437 500 1,300 1,425 150 325 400 -

20,306 2,437 500 1,300 1,425 150 325 400 -

25,178 2,438 750 1,300 1,425 150 325 400 -

27,205 2,438 425 1,300 1,425 150 325 400 -

25,203 2,438 425 1,300 1,425 150 325 400 -

28,622 2,438 750 1,300 1,425 150 325 400 -

25,797 2,438 425 1,300 1,425 150 325 400 -

31,146 2,438 425 1,300 1,425 200 325 400 -

259,262 25,750 6,500 15,600 14,130 1,850 3,900 4,800 -

-

25,000 43,458

39,500 85,215

2,000 7,401 50,567

1,951 7,450 40,791

1,901 7,500 73,845

1,851 7,550 64,976

1,801 7,600 88,284

1,750 7,651 89,410

1,699 7,702 87,796

1,648 7,753 94,167

1,596 7,805 83,606

1,544 7,857 102,959

64,500 17,741 76,269 905,073

44,412 44,412

64,670 44,412 109,082

246,464 109,082 355,546

(5,303) 355,546 350,243

(2,421) 350,243 347,822

(49,941) 347,822 297,881

(10,829) 297,881 287,052

(38,750) 287,052 248,302

(16,774) 248,302 231,528

(5,410) 231,528 226,118

(21,482) 226,118 204,636

5,496 204,636 210,133

2,434 210,133 212,567

168,155 44,412 212,567

-

First Class Greetings LLC Cash Flow Statement 200C Cash In Cash Sales Collections from Accounts Receivables Equity Received Loans Received Other Cash In (receipts from other assets) Other Cash In (interest, royalties etc.) Total Cash In Total Cash Available

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

TOTAL

100,829 100,829 313,396

104,303 104,303 314,493

149,033 149,033 325,614

126,333 126,333 330,716

78,703 78,703 307,751

178,282 178,282 318,725

163,094 163,094 315,719

239,160 239,160 340,946

271,257 271,257 380,635

239,320 239,320 362,657

293,372 293,372 408,170

248,235 248,235 442,116

2,191,920 2,191,920 2,404,486

55,000 -

80,562 -

68,146 -

43,149 -

96,445 -

88,715 -

129,657 -

146,693 -

129,862 -

158,596 -

134,853 -

179,810 -

1,311,488 -

38 250 750 -

38 400 750 -

38 1,000 750 -

38 500 750 -

38 6,600 750 -

38 1,000 750 -

38 6,750 750 -

38 1,000 750 -

38 6,500 750 -

38 400 750 -

38 200 750 -

38 500 750 -

456 25,100 9,000 -

31,969 2,437 750 1,300 435 150 325 400 -

41,314 2,437 400 1,300 435 150 325 400 -

36,449 2,437 400 1,300 435 150 325 400 -

26,656 2,437 750 1,300 1,425 150 325 400 -

47,537 2,437 500 1,300 1,425 150 325 400 -

44,508 2,437 500 1,300 1,425 150 325 400 -

60,548 2,438 750 1,300 1,425 150 325 400 -

67,223 2,438 425 1,300 1,425 150 325 400 -

60,628 2,438 425 1,300 1,425 150 325 400 -

71,886 2,438 750 1,300 1,425 150 325 400 -

62,584 2,438 425 1,300 1,425 150 325 400 -

80,198 2,438 425 1,300 1,425 200 325 400 -

631,500 29,250 6,500 15,600 14,130 1,850 3,900 4,800 -

-

-

-

-

-

1,279 8,122 167,308

15,151 1,224 8,177 166,099

2,170 7,231 213,933

1,115 8,286 231,568

43,655 1,060 8,341 257,297

1,004 8,397 247,859

948 8,453 214,289

60,368 892 8,509 11,448 349,026

133,562 15,341 97,471 11,448 2,311,396

(88,605) 229,048 140,442

12,183 140,442 152,626

(50,839) 152,626 101,787

7,592 101,787 109,379

13,959 109,379 123,338

(8,540) 123,338 114,798

79,083 114,798 193,881

(100,791) 193,881 93,090

Cash Out Inventory Expenditures Inventory/Raw Material (Cash) Inventory/Raw Material (Paid on Account) Production Expenses Operating Expenses Advertising Bank Charges Dues & Subscriptions Insurance Licenses & Fees Marketing & Promotion Meals & Entertainment Miscellaneous Office Expense Office Supplies Outside Services Payroll Expenses Salaries & Wages Payroll Taxes Benefits Professional Fees Property Taxes Rent Repairs & Maintenance Shipping & Delivery Telephone Training & Development Travel Utilities Vehicle Other Other Other Paid on Account Non-operating Costs Capital Purchases Estimated Income Tax Payments Interest Payments Loan Principal Payments Owner's Draw Other Cash Out Total Cash Out

-

-

-

-

-

-

1,492 7,909 103,205

1,439 7,962 137,912

1,386 8,015 121,231

14,388 1,332 8,069 101,669

Monthly Cash Flow (cash in - cash out) Beginning Cash Balance Ending Cash Balance

(2,376) 212,567 210,190

(33,609) 210,190 176,581

27,802 176,581 204,383

24,664 204,383 229,048

-

(119,476) 212,567 93,090

First Class Greetings LLC Cash Flow Statement 200D Cash In Cash Sales Collections from Accounts Receivables Equity Received Loans Received Other Cash In (receipts from other assets) Other Cash In (interest, royalties etc.) Total Cash In Total Cash Available Cash Out Inventory Expenditures Inventory/Raw Material (Cash) Inventory/Raw Material (Paid on Account) Production Expenses Operating Expenses Advertising Bank Charges Dues & Subscriptions Insurance Licenses & Fees Marketing & Promotion Meals & Entertainment Miscellaneous Office Expense Office Supplies Outside Services Payroll Expenses Salaries & Wages Payroll Taxes Benefits Professional Fees Property Taxes Rent Repairs & Maintenance Shipping & Delivery Telephone Training & Development Travel Utilities Vehicle Other Other Other Paid on Account Non-operating Costs Capital Purchases Estimated Income Tax Payments Interest Payments Loan Principal Payments Owner's Draw Other Cash Out Total Cash Out Monthly Cash Flow (cash in - cash out) Beginning Cash Balance Ending Cash Balance

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

TOTAL

333,793 333,793 426,883

165,079 165,079 349,720

235,873 235,873 382,346

199,946 199,946 405,796

124,563 124,563 364,223

282,166 282,166 392,533

258,127 258,127 377,421

378,516 378,516 428,523

429,315 429,315 498,974

378,769 378,769 457,564

464,317 464,317 537,072

392,879 392,879 597,968

3,643,344 3,643,344 3,736,435

181,090 -

127,505 -

107,854 -

68,291 -

152,643 -

140,408 -

205,208 -

232,170 -

205,531 -

251,008 -

213,431 -

284,583 -

2,169,722 -

38 250 750 -

38 400 750 -

38 1,000 750 -

38 500 750 -

38 6,600 750 -

38 1,000 750 -

38 6,750 750 -

38 1,000 750 -

38 6,500 750 -

38 400 750 -

38 200 750 -

38 500 750 -

456 25,100 9,000 -

44,916 2,437 750 1,300 435 150 325 400 -

59,706 2,437 400 1,300 435 150 325 400 -

52,006 2,437 400 1,300 435 150 325 400 -

36,506 2,437 750 1,300 1,425 150 325 400 -

76,221 4,103 500 1,300 1,425 150 325 400 -

71,427 4,103 500 1,300 1,425 150 325 400 -

96,814 4,103 750 1,300 1,425 150 325 400 -

107,377 4,103 425 1,300 1,425 150 325 400 -

96,941 4,103 425 1,300 1,425 150 325 400 -

114,759 4,103 750 1,300 1,425 150 325 400 -

100,036 4,103 425 1,300 1,425 150 325 400 -

127,914 4,103 425 1,300 1,425 200 325 400 -

984,623 42,572 6,500 15,600 14,130 1,850 3,900 4,800 -

-

-

-

-

-

604 8,797 253,856

42,013 546 8,855 273,239

487 8,914 327,414

427 8,974 358,864

92,890 368 9,033 420,179

307 9,094 384,809

247 9,154 331,983

118,661 186 9,215 38,241 588,265

297,426 6,169 106,643 38,241 3,726,732

(129,293) 239,660 110,367

8,926 110,367 119,293

(69,286) 119,293 50,007

19,652 50,007 69,658

9,136 69,658 78,795

132,333 72,755 205,088

(195,386) 205,088 9,703

-

-

-

-

-

-

835 8,566 242,243

778 8,623 203,247

721 8,680 176,496

43,862 663 8,738 166,136

91,550 93,090 184,640

(38,168) 184,640 146,473

59,377 146,473 205,850

33,810 205,850 239,660

-

(6,040) 78,795 72,755

(83,388) 93,090 9,703

First Class Greetings LLC Year-End Income Statement (Projected) Net Sales (less returns & allowances) Cost of Goods Sold Gross Margin Operating Expenses Advertising Bad Debt Expense Bank Charges Depreciation & Amortization Dues & Subscriptions Insurance Licenses & Fees Marketing & Promotion Meals & Entertainment Miscellaneous Office Expense Office Supplies Outside Services Payroll Expenses Salaries & Wages Payroll Taxes Benefits Professional Fees Property Taxes Rent Repairs & Maintenance Shipping & Delivery Telephone Training & Development Travel Utilities Vehicle Other Other Other Total Operating Expenses Operating Income

$

$

200D 3,877,594 1,849,612 2,027,982

24,500 24,717 456 25,100 9,000 -

38,776 24,717 456 25,100 9,000 -

$

259,262 25,750 6,500 15,600 14,130 1,850 3,900 4,800 396,239

$

631,500 29,250 6,500 15,600 14,130 1,850 3,900 4,800 791,303

$

984,623 42,572 6,500 15,600 14,130 1,850 3,900 4,800 1,172,023

$

(50,974)

$

396,947

$

855,958

17,741 $

Income Taxes (if C Corp) Net Income

$

200C 2,450,000 1,261,750 1,188,250

7,441 23,849 456 25,100 7,600 -

Interest Expense Other Income (interest, royalties, etc.) Income Before Taxes

200B 744,106 398,841 345,265

(68,715)

15,341 $

$

(68,715)

381,606

6,169 $

$

381,606

849,789 -

$

849,789

First Class Greetings LLC Year-End Balance Sheet (Projected) 200B

200C

200D

Assets Current Assets Cash & Equivalents Accounts Receivable Inventory Security Deposits Other Current Assets Total Current Assets

$

212,567 101,887 141,986 456,440

$

93,090 335,467 317,814 746,372

Fixed Assets Property, Plant & Equipment Less: Accumulated Depreciation Other Non-Current Assets Total Non-Current Assets

$

107,763 (35,263) 72,500

$

107,763 (59,980) 47,783

$

Total Assets

$

528,939

$

794,155

$

1,307,154

$

122,240 122,240

$

248,330 248,330

$

353,850 353,850

Long-term Liabilities Loans Mortgages Other Non-Current Liabilities Total Non-Current Liabilities

$

223,731 223,731

$

126,260 126,260

$

19,617 19,617

Total Liabilities

$

345,971

$

374,590

$

373,467

$

308,000 (125,032) 182,968

$

308,000 256,575 (145,010) 419,564

$

308,000 1,106,364 (480,677) 933,687

$

528,939

$

794,155

$

1,307,154

Liabilities Current Liabilities Accounts Payable Line of Credit Other Current Liabilities Total Current Liabilities

$

9,703 530,941 743,444 1,284,088

107,763 (84,697) 23,066

Equity Equity Investments Retained Earnings Less: Owner's & Investor's Draws Total Equity

Total Liabilities and Equity

First Class Greetings LLC Financial Ratios 200B

200C

200D

Profitability Ratios Gross Margin

Gross Income Net Sales

46.40%

48.50%

52.30%

Operating Income Net Sales

-6.85%

16.20%

22.07%

Net Margin

Net Income Net Sales

-9.23%

15.58%

21.92%

Return on Assets (ROA)

Net Income Total Assets

-12.99%

48.05%

65.01%

Return on Equity (ROE)

Net Income Shareholders' Equity

-37.56%

90.95%

91.01%

Total Current Assets Total Current Liabilities

3.73

3.01

3.63

Current Assets - Inventory Current Liabilities

2.57

1.73

1.53

Total Liabilities Total Assets

0.65

0.47

0.29

Total Liabilities Shareholders' Equity

1.89

0.89

0.40

Operating Margin

Liquidity Ratios Current Ratio

Quick Ratio

Risk Ratios Debt Ratio

Debt to Equity

Efficiency Ratios Inventory Turnover

Days Sales Outstanding (DSO)

Investment Turnover Ratio

Cost of Goods Sold Inventory

2.81

3.97

2.49

Accounts Receivable Net Sales/365

49.98

49.98

49.98

Net Sales Total Assets

1.41

3.09

2.97


Supporting Documents

Appendix

30

HISTORICAL BALANCE SHEET First Class Greetings LLC 12/31/02 Assets Current Assets Cash & Equivalents Accounts Receivable Inventory Security Deposits Other Current Assets Total Current Assets Fixed Assets Property, Plant & Equipment Computer Equipment Equipment/Machinery Furniture & Fixtures Vehicles Leasehold Improvements Building Land Less: Accumulated Depreciation (Do not enter a negative number) Other Non-current Assets Total Non-current Assets

Total Assets

Liabilities Current Liabilities Accounts Payable Line of Credit Other Current Liabilities Total Current Liabilities Long-term Liabilities Loans Real Estate Loans Other Non-current Liabilities Total Long-term Liabilities Total Liabilities

$

44,412 108,450 104,212 257,074

$

34,215 9,048 11,414 31,849

$

288,923

$

67,240 67,240

$

-

$

67,240

Equity Owners Equity Retained Earnings (Enter a negative number for a loss) Less: Owner's & Investor's Draws (Not for use by C Corporations)

278,000 (56,317) -

Total Equity

$

221,683

Total Liabilities and Equity

$

288,923

Appendix

YEAR 1 YEAR 1 YEAR 1 YEAR 1

SALES PROJECTIONS First Class Greetings LLC Year 1 Sales Budget Product/Service Category A Product/Service Category B Product/Service Category C Product/Service Category D Product/Service Category E Product/Service Category F Product/Service Category G Gross Sales Less: Returns & Allowances Net Sales Other Income Total Income Credit Management Sales (cash) Sales (credit) Received on Account Bad Debt Expense

YEAR 1 YEAR 1 YEAR 1

Year 1 Assumptions Product/Service Category A Product/Service Category B Product/Service Category C Product/Service Category D Product/Service Category E Product/Service Category F Product/Service Category G Less: Returns & Allowances Other Income Sales (cash) Sales (credit) Received on Account Bad Debt Expense

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

TOTAL

32,135 32,135 32,135 32,135

45,650 45,650 45,650 45,650

38,614 38,614 38,614 38,614

24,450 24,450 24,450 24,450

54,650 54,650 54,650 54,650

50,269 50,269 50,269 50,269

73,468 73,468 73,468 73,468

83,121 83,121 83,121 83,121

73,584 73,584 73,584 73,584

89,866 89,866 89,866 89,866

76,412 76,412 76,412 76,412

101,887 101,887 101,887 101,887

744,106 744,106 744,106 744,106

32,135 108,450 321

45,650 32,135 457

38,614 45,650 386

24,450 38,614 245

54,650 24,450 547

50,269 54,650 503

73,468 50,269 735

83,121 73,468 831

73,584 83,121 736

89,866 73,584 899

76,412 89,866 764

101,887 76,412 1,019

744,106 750,669 7,441

Sales are based on total number of sales reps, minimum sales orders and seasonally adjusted cards sold.

Appendix





JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

TOTAL

105,806 105,806 105,806 105,806

150,305 150,305 150,305 150,305

127,138 127,138 127,138 127,138

80,503 80,503 80,503 80,503

179,937 179,937 179,937 179,937

165,513 165,513 165,513 165,513

241,896 241,896 241,896 241,896

273,679 273,679 273,679 273,679

242,278 242,278 242,278 242,278

295,888 295,888 295,888 295,888

251,590 251,590 251,590 251,590

335,467 335,467 335,467 335,467

2,450,000 2,450,000 2,450,000 2,450,000

105,806 101,887 1,058

150,305 105,806 1,503

127,138 150,305 1,271

80,503 127,138 805

179,937 80,503 1,799

165,513 179,937 1,655

241,896 165,513 2,419

273,679 241,896 2,737

242,278 273,679 2,423

295,888 242,278 2,959

251,590 295,888 2,516

335,467 251,590 3,355

2,450,000 2,216,420 24,500


Appendix





JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

TOTAL

167,458 167,458 167,458 167,458

237,886 237,886 237,886 237,886

201,221 201,221 201,221 201,221

127,411 127,411 127,411 127,411

284,785 284,785 284,785 284,785

261,956 261,956 261,956 261,956

382,847 382,847 382,847 382,847

433,150 433,150 433,150 433,150

383,452 383,452 383,452 383,452

468,299 468,299 468,299 468,299

398,189 398,189 398,189 398,189

530,941 530,941 530,941 530,941

3,877,594 3,877,594 3,877,594 3,877,594

167,458 335,467 1,675

237,886 167,458 2,379

201,221 237,886 2,012

127,411 201,221 1,274

284,785 127,411 2,848

261,956 284,785 2,620

382,847 261,956 3,828

433,150 382,847 4,331

383,452 433,150 3,835

468,299 383,452 4,683

398,189 468,299 3,982

530,941 398,189 5,309

3,877,594 3,682,120 38,776


Appendix

YEAR 1

INVENTORY PROJECTIONS First Class Greetings LLC Year 1 Inventory Management Inventory Purchases Inventory/ Raw Material Purchases (Cash) Inventory/ Raw Material Purchases (Credit) Payment on Account


Production Expenses Freight-in & Trucking Insurance Payroll Expenses - production Salaries & Wages Employee Benefits Payroll Taxes Rent Repairs & Maintenance Rework Subcontracting Utilities Other Production Expenses Inventory Production Expenses

YEAR 1

Inventory Balance Beginning Inventory Balance Inventory Purchased Inventory Production (Cost of Goods Sold) Ending Inventory Balance


Year 1 Assumptions Inventory/ Raw Material Purchases Freight-in & Trucking Insurance Payroll Expenses - production Salaries & Wages Employee Benefits Payroll Taxes Rent Repairs & Maintenance Rework Subcontracting Utilities Other Production Expenses

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

TOTAL

24,468 24,468 -

20,697 20,697 24,468

13,105 13,105 20,697

29,292 29,292 13,105

26,944 26,944 29,292

39,379 39,379 26,944

44,553 44,553 39,379

39,441 39,441 44,553

48,168 48,168 39,441

40,957 40,957 48,168

54,611 54,611 40,957

55,000 55,000 54,611

436,615 436,615 381,615

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

104,212 24,468 (17,224) 111,456

111,456 20,697 (24,468) 107,684

107,684 13,105 (20,697) 100,092

100,092 29,292 (13,105) 116,279

116,279 26,944 (29,292) 113,931

113,931 39,379 (26,944) 126,365

126,365 44,553 (39,379) 131,540

131,540 39,441 (44,553) 126,428

126,428 48,168 (39,441) 135,155

135,155 40,957 (48,168) 127,943

Inventory will be ordered as needed so that stock is held for a very short time before it is shipped. The inventory turn should be shorter than six weeks.

Appendix

127,943 54,611 (40,957) 141,598

141,598 55,000 (54,611) 141,986

104,212 436,615 (398,841) 141,986

YEAR 2




YEAR 2




JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

TOTAL

80,562 80,562 55,000

68,146 68,146 80,562

43,149 43,149 68,146

96,445 96,445 43,149

88,715 88,715 96,445

129,657 129,657 88,715

146,693 146,693 129,657

129,862 129,862 146,693

158,596 158,596 129,862

134,853 134,853 158,596

179,810 179,810 134,853

181,090 181,090 179,810

1,437,578 1,437,578 1,311,488

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

141,986 80,562 (54,490) 168,058

168,058 68,146 (77,407) 158,798

158,798 43,149 (65,476) 136,470

136,470 96,445 (41,459) 191,457

191,457 88,715 (92,668) 187,504

187,504 129,657 (85,239) 231,922

231,922 146,693 (124,577) 254,038

254,038 129,862 (140,945) 242,955

242,955 158,596 (124,773) 276,777

276,777 134,853 (152,382) 259,248


Appendix

259,248 179,810 (129,569) 309,489

309,489 181,090 (172,766) 317,814

141,986 1,437,578 (1,261,750) 317,814

YEAR 3




YEAR 3




JAN

FEB

127,505 127,505 181,090

107,854 107,854 127,505

68,291 68,291 107,854

152,643 152,643 68,291

-

-

-

-

-

-

317,814 127,505 (79,877) 365,442

MAR

365,442 107,854 (113,471) 359,824

APR

359,824 68,291 (95,982) 332,134

MAY

JUN

JUL

140,408 140,408 152,643

205,208 205,208 140,408

232,170 232,170 205,208

205,531 205,531 232,170

251,008 251,008 205,531

213,431 213,431 251,008

284,583 284,583 213,431

286,610 286,610 284,583

2,275,242 2,275,242 2,169,722

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

332,134 152,643 (60,775) 424,002

424,002 140,408 (135,843) 428,567

428,567 205,208 (124,953) 508,822

AUG

508,822 232,170 (182,618) 558,374

SEP

558,374 205,531 (206,613) 557,292

OCT

557,292 251,008 (182,907) 625,393

625,393 213,431 (223,378) 615,446


Appendix

NOV

DEC

615,446 284,583 (189,936) 710,093

TOTAL

710,093 286,610 (253,259) 743,444

317,814 2,275,242 (1,849,612) 743,444

YEAR 1 YEAR 1 YEAR 1 YEAR 1 YEAR 1 YEAR 1

OPERATING EXPENSE PROJECTIONS First Class Greetings LLC Year 1 JAN Operating Expenses Advertising Bank Charges Dues & Subscriptions Insurance 38 Licenses & Fees Marketing & Promotion 250 Meals & Entertainment Miscellaneous Office Expense (postage) Office Supplies 250 Outside Services Payroll Expenses 12,998 Salaries & Wages Payroll Taxes 1,562 Benefits Professional Fees 750 Property Taxes Rent 1,300 Repairs & Maintenance Shipping & Delivery Telephone 435 Training & Development Travel 150 Utilities 325 Vehicle Other 400 Other Other Total Operating Expenses 18,458


Assumptions - Year 1 Advertising Bank Charges Dues & Subscriptions Insurance Licenses & Fees Marketing & Promotion Meals & Entertainment Miscellaneous Office Expense (postage) Office Supplies Outside Services Payroll Expenses Salaries & Wages Payroll Taxes Benefits Professional Fees Property Taxes Rent Repairs & Maintenance Shipping & Delivery Telephone Training & Development Travel Utilities Vehicle Other Other Other

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

TOTAL

38 400 400 -

38 1,000 500 -

38 500 450 -

38 6,600 750 -

38 1,000 750 -

38 6,750 750 -

38 1,000 750 -

38 6,500 750 -

38 400 750 -

38 200 750 -

38 500 750 -

456 25,100 7,600 -

15,837 1,562 400 1,300 435 150 325 400 21,247

14,359 1,562 400 1,300 435 150 325 400 20,469

11,385 1,562 750 1,300 1,425 150 325 400 18,285

21,227 2,437 500 1,300 1,425 150 325 400 35,152

20,306 2,437 500 1,300 1,425 150 325 400 28,631

25,178 2,438 750 1,300 1,425 150 325 400 39,504

27,205 2,438 425 1,300 1,425 150 325 400 35,456

25,203 2,438 425 1,300 1,425 150 325 400 38,954

28,622 2,438 750 1,300 1,425 150 325 400 36,598

25,797 2,438 425 1,300 1,425 150 325 400 33,248

31,146 2,438 425 1,300 1,425 200 325 400 38,947

259,262 25,750 6,500 15,600 14,130 1,850 3,900 4,800 364,948

Insurance estimates provided by Cara Cuthbert, insurance broker. Print costs for brochues, mailers, etc. Trade shows 3 @ $6K each in May, July, and September.

Estimates for basic office supplies and computer supplies. Sales commission @ 15% of sales, artist commission @ 6% of sales, Mktg Dir @ $42K/yr starting May 200B, Mgr @ $40K/yr & support @ $35K/yr 25% of non-commission payroll General legal representation and bookeeping and tax preparation Based on 1,300 quare foot office/storage facilities at $1/sq ft. Telephone system lease, local service, long-distance service, 1-800 service, and mobile phone charges. Utilities for rental property based on 25% of rent. Contingency for additional costs not considered.

Appendix





FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

TOTAL

38 400 750 -

38 1,000 750 -

38 500 750 -

38 6,600 750 -

38 1,000 750 -

38 6,750 750 -

38 1,000 750 -

38 6,500 750 -

38 400 750 -

38 200 750 -

38 500 750 -

456 25,100 9,000 -

41,314 2,437 400 1,300 435 150 325 400 47,949

36,449 2,437 400 1,300 435 150 325 400 43,684

26,656 2,437 750 1,300 1,425 150 325 400 34,731

47,537 2,437 500 1,300 1,425 150 325 400 61,462

44,508 2,437 500 1,300 1,425 150 325 400 52,833

60,548 2,438 750 1,300 1,425 150 325 400 74,874

67,223 2,438 425 1,300 1,425 150 325 400 75,474

60,628 2,438 425 1,300 1,425 150 325 400 74,379

71,886 2,438 750 1,300 1,425 150 325 400 79,862

62,584 2,438 425 1,300 1,425 150 325 400 70,035

80,198 2,438 425 1,300 1,425 200 325 400 87,999

631,500 29,250 6,500 15,600 14,130 1,850 3,900 4,800 742,086


Estimates for basic office supplies and computer supplies. Sales & artists commissions (15% & 6%), Mktg Dir @ $42K/yr, Mgr @ $40K/yr & support @ $35K/yr 25% of non-commission payroll General legal representation and bookeeping and tax preparation Based on 1,300 quare foot office/storage facilities at $1/sq ft. Telephone system lease, local service, long-distance service, 1-800 service, and mobile phone charges. Utilities for rental property based on 25% of rent. Contingency for additional costs not considered.

Appendix





FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

TOTAL

38 400 750 -

38 1,000 750 -

38 500 750 -

38 6,600 750 -

38 1,000 750 -

38 6,750 750 -

38 1,000 750 -

38 6,500 750 -

38 400 750 -

38 200 750 -

38 500 750 -

456 25,100 9,000 -

59,706 2,437 400 1,300 435 150 325 400 66,341

52,006 2,437 400 1,300 435 150 325 400 59,241

36,506 2,437 750 1,300 1,425 150 325 400 44,581

76,221 4,103 500 1,300 1,425 150 325 400 91,812

71,427 4,103 500 1,300 1,425 150 325 400 81,418

96,814 4,103 750 1,300 1,425 150 325 400 112,805

107,377 4,103 425 1,300 1,425 150 325 400 117,293

96,941 4,103 425 1,300 1,425 150 325 400 112,357

114,759 4,103 750 1,300 1,425 150 325 400 124,400

100,036 4,103 425 1,300 1,425 150 325 400 109,152

127,914 4,103 425 1,300 1,425 200 325 400 137,380

984,623 42,572 6,500 15,600 14,130 1,850 3,900 4,800 1,108,531


Estimates for basic office supplies and computer supplies. Sales & artists (15% & 6%), Mktg Dir @ $42K/yr, Mgr @ $40K/yr & support @ $35K/yr, & directors of operations & finance in May @40k/yr 25% of non-commission payroll General legal representation and bookeeping and tax preparation Based on 1,300 quare foot office/storage facilities at $1/sq ft. Telephone system lease, local service, long-distance service, 1-800 service, and mobile phone charges. Utilities for rental property based on 25% of rent. Contingency for additional costs not considered.

Appendix

DEPRECIATION SCHEDULES First Class Greetings LLC Year 1 Existing Assets Set-up Assets (no detail entered) Set-up Assets (detail entered) Start-up Purchases Total Year 2 Existing Assets Set-up Assets (no detail entered) Set-up Assets (detail entered) Start-up Purchases Total Year 3 Existing Assets Set-up Assets (no detail entered) Set-up Assets (detail entered) Start-up Purchases Total Year 1 New Purchases Computer Equipment Computer Equipment Depreciation Equipment/Machinery Equipment Depreciation Furniture Furniture Depreciation Leasehold Improvements Leasehold Depreciation Vehicles Vehicle Depreciation Building Building Depreciation Year 2 New Purchases Computer Equipment Computer Equipment Depreciation Equipment/Machinery Equipment Depreciation Furniture Furniture Depreciation Leasehold Improvements Leasehold Depreciation Vehicles Vehicle Depreciation Building Building Depreciation Year 3 New Purchases Computer Equipment Computer Equipment Depreciation Equipment/Machinery Equipment Depreciation Furniture Furniture Depreciation Leasehold Improvements Leasehold Depreciation Vehicles Vehicle Depreciation Building Building Depreciation

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

TOTAL

776 776

776 776

776 776

776 776

776 776

776 776

776 776

776 776

776 776

776 776

776 776

776 776

9,312 9,312

776 776

776 776

776 776

776 776

776 776

776 776

776 776

776 776

776 776

776 776

776 776

776 776

9,312 9,312

776 776

776 776

776 776

776 776

776 776

776 776

776 776

776 776

776 776

776 776

776 776

776 776

9,312 9,312

JAN 25,000 417 -

FEB 25,000 694 14,500 173 417 -

694 173 417 694 173 417 -

MAR 694 173 417 -

APR 694 173 417 -

MAY 694 173 417 -

JUN 694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

TOTAL 25,000 7,639 14,500 1,899 25,000 5,000 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

8,333 2,071 5,000 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

694 173 417 -

8,333 2,071 5,000 -

Appendix

JUL

AUG

SEP

OCT

NOV

DEC


CAPITAL BUDGET PROJECTIONS Year 1 Capital Budget Owner's Draw Investor's Draw Dividends Paid Security Deposits Amortization Depreciation (existing assets) Capital Asset Purchases Depreciation (new purchases) Land

JAN 776 25,000 417 -

FEB 776 39,500 1,284 -

MAR 776 1,284 -

APR 776 1,284 -

MAY

JUN

776 1,284 -


Assumptions - Year 1 Owner's Draw Investor's Draw Dividends Paid Security Deposits Amortization Equipment Equipment Depreciation Furniture Furniture Depreciation Leasehold Improvements Leasehold Depreciation Vehicles Vehicle Depreciation Building Building Depreciation Land

Appendix

776 1,284 -

JUL 776 1,284 -

AUG

SEP 776 1,284 -

776 1,284 -

OCT 776 1,284 -

NOV

DEC

776 776 1,284 1,284 Year 1 Total Depreciation

TOTAL 9,312 64,500 14,538 23,849



JAN 776 1,284 -

FEB 776 1,284 -

MAR 776 1,284 -

APR 776 1,284 -

MAY

JUN

776 1,284 -



Appendix

776 1,284 -

JUL 776 1,284 -

AUG

SEP 776 1,284 -

776 1,284 -

OCT 776 1,284 -

NOV

DEC

11,448 776 776 1,284 1,284 Year 2 Total Depreciation

TOTAL 11,448 9,312 15,405 24,717



JAN 776 1,284 -

FEB 776 1,284 -

MAR 776 1,284 -

APR 776 1,284 -

MAY

JUN

776 1,284 -



Appendix

776 1,284 -

JUL 776 1,284 -

AUG

SEP 776 1,284 -

776 1,284 -

OCT 776 1,284 -

NOV

DEC

25,494 12,747 776 776 1,284 1,284 Year 3 Total Depreciation

TOTAL 25,494 12,747 9,312 15,405 24,717

Equity Investment First Class Greetings LLC Year 1 Year 2 Year 3 Real Estate Loans First Class Greetings LLC Existing Balance New Borrowing Year 1 Outstanding balance Year 2 Outstanding balance Year 3 Outstanding balance Repayment Year 1 - principal Year 1 - interest Year 2 - principal Year 2 - interest Year 3 - principal Year 3 - interest

JAN

FEB -

MAR -

Loan 2 Borrowing Year 1 Outstanding balance Year 2 Outstanding balance Year 3 Outstanding balance Repayment Year 1 - principal Year 1 - interest Year 2 - principal Year 2 - interest Year 3 - principal Year 3 - interest

FEB -

JAN

MAR -

FEB -

JAN

JAN

MAR

7,962 1,439 8,623 778

FEB -

JAN

JUN -

FEB

MAY -

APR -

MAR

JUL -

AUG -

SEP -

OCT -

NOV -

-

DEC 30,000 -

TOTAL 30,000 -

JUN -

MAY -

APR

JUL -

JUN -

JUL -

SEP -

AUG -

OCT -

SEP -

DEC

TOTAL

OCT -

NOV -

DEC -

-

TOTAL -

262,499 168,246 65,087

254,848 159,960 56,113

247,146 151,619 47,080

239,393 143,222 37,986

231,588 134,769 28,832

223,731 126,260 19,617

MAR 7,401 2,000 8,015 1,386 8,680 721

APR 7,450 1,951 8,069 1,332 8,738 663

MAY 7,500 1,901 8,122 1,279 8,797 604

JUN 7,550 1,851 8,177 1,224 8,855 546

JUL 7,600 1,801 7,231 2,170 8,914 487

AUG 7,651 1,750 8,286 1,115 8,974 427

SEP 7,702 1,699 8,341 1,060 9,033 368

OCT 7,753 1,648 8,397 1,004 9,094 307

NOV 7,805 1,596 8,453 948 9,154 247

DEC 7,857 1,544 8,509 892 9,215 186

TOTAL 76,269 17,741 97,471 15,341 106,643 6,169

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

TOTAL

MAR -

APR -

MAY -

JUN -

JUL -

AUG

-

SEP

-

OCT

-

DEC

-

JUL

-

NOV

-

270,099 175,477 74,001

-

OCT

-

JUN

-

SEP

-

277,649 183,654 82,856

-

AUG

NOV -

285,149 191,776 91,653

-

MAY

AUG -

292,599 199,845 100,391

-

-

APR -

-

FEB

7,909 1,492 8,566 835

Line of Credit First Class Greetings LLC Existing Balance

NOV

-

TOTAL 300,000 -

DEC

-

-

TOTAL -

-

-

Borrowing Year 1 Outstanding balance Year 2 Outstanding balance Year 3 Outstanding balance

JAN

Repayment Year 1 - principal Year 1 - interest Year 2 - principal Year 2 - interest Year 3 - principal Year 3 - interest

JAN

Year 1 - total principal paid Year 1 - total interest paid Year 2 - total principal paid Year 2 - total interest paid Year 3 - total principal paid Year 3 - total interest paid

MAY -

JAN

Traditional Business Loan and/or other Long-term Loans First Class Greetings LLC Loan 1 Existing Balance New Borrowing JAN FEB Year 1 300,000 Outstanding balance 300,000 Year 2 Outstanding balance 215,822 207,860 Year 3 Outstanding balance 117,694 109,071 Repayment Year 1 - principal Year 1 - interest Year 2 - principal Year 2 - interest Year 3 - principal Year 3 - interest

APR -

FEB -

MAR -

FEB -

APR -

MAR -

MAY -

APR -

JUN -

MAY -

JUL -

JUN -

JUL -

76,269 17,741 97,471 15,341 106,643 6,169

Appendix

AUG -

SEP -

AUG -

OCT -

SEP -

NOV -

OCT -

DEC -

NOV -

TOTAL -

DEC -

-

TOTAL -

-

Amount of Loan Annual Interest Rate Term of Loan (in months)

Month 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Monthly Payment $9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91 9,400.91

300,000 8.0% 36

Principal 7,400.91 7,450.25 7,499.92 7,549.92 7,600.25 7,650.92 7,701.92 7,753.27 7,804.96 7,856.99 7,909.37 7,962.10 8,015.18 8,068.62 8,122.41 8,176.56 8,231.07 8,285.94 8,341.18 8,396.79 8,452.77 8,509.12 8,565.85 8,622.95 8,680.44 8,738.31 8,796.56 8,855.21 8,914.24 8,973.67 9,033.49 9,093.72 9,154.34 9,215.37 9,276.81 9,338.65

Appendix

Interest 2,000.00 1,950.66 1,900.99 1,850.99 1,800.66 1,749.99 1,698.99 1,647.64 1,595.95 1,543.92 1,491.54 1,438.81 1,385.73 1,332.29 1,278.50 1,224.35 1,169.84 1,114.97 1,059.73 1,004.12 948.14 891.79 835.06 777.96 720.47 662.60 604.35 545.70 486.67 427.24 367.42 307.19 246.57 185.54 124.10 62.26

Outstanding Balance 300,000.00 292,599.09 285,148.84 277,648.92 270,099.01 262,498.76 254,847.84 247,145.92 239,392.65 231,587.69 223,730.70 215,821.32 207,859.22 199,844.04 191,775.42 183,653.02 175,476.46 167,245.40 158,959.46 150,618.28 142,221.49 133,768.72 125,259.60 116,693.76 108,070.81 99,390.37 90,652.06 81,855.50 73,000.29 64,086.05 55,112.38 46,078.89 36,985.17 27,830.83 18,615.46 9,338.65 (0.00)

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