Appendix 1: WorkChairs (BSBMGT617)

Contents
Executive Summary ....................................................................................................... 2
1.1 Mission ..................................................................................................................... 3
1.2 Keys to Success.................................................................................................... 3
1.3 Objectives ............................................................................................................... 3
Company Summary ........................................................................................................ 4
2.1 Company Ownership .......................................................................................... 4
2.2 Start-up Summary .............................................................................................. 4
Products.............................................................................................................................. 7
Market Analysis Summary .......................................................................................... 8
4.1 Market Segmentation ........................................................................................ 8
4.2 Target Market Segment Strategy ............................................................... 10
4.3 Industry Analysis .............................................................................................. 11
4.3.1 Competition and Buying Patterns .......................................................... 11
Strategy and Implementation Summary ............................................................ 12
5.1 Competitive Edge .............................................................................................. 12
5.2 Marketing Strategy ........................................................................................... 12
5.3 Sales Strategy..................................................................................................... 14
5.3.1 Sales Forecast ................................................................................................. 14
5.4 Milestones ............................................................................................................ 16
Web Plan Summary...................................................................................................... 18
6.1 Website Marketing Strategy ......................................................................... 18
6.2 Development Requirements ......................................................................... 19
Management Summary .............................................................................................. 20
7.1 Personnel Plan .................................................................................................... 20
Financial Plan ................................................................................................................. 21
8.1 Important Assumptions ................................................................................. 21
8.2 Break-even Analysis ........................................................................................ 22
8.3 Projected Profit and Loss............................................................................... 23
8.4 Projected Cash Flow ........................................................................................ 26
8.5 Projected Balance Sheet ................................................................................ 29
8.6 Business Ratios .................................................................................................. 30
Appendix........................................................................................................................... 33

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Executive Summary
WorkChairs is an ergonomic product business located in Studio City, California that
focuses on selling hard-to-find ergonomic products to both the local community and
through their website online. WorkChairs is owned by Jake and Lisa Wilson, and is a
corporation with one other employee, Peter Wilson.

WorkChairs will use two sales channels and focus on selling niche products that solve
ergonomic health problems that have become more common as people use computers
more and more in their daily work days. By using traditional local marketing and sales
techniques, WorkChairs will establish a solid local customer base in the home office,
small business, and large business communities. To supplement the business and take
advantage of manufacturer relationships that include drop-shipping, WorkChairs will
have a website that has both an online store and an educational section to teach people
about ergonomic problems.

WorkChairs has a conservative financial plan with low expenses, low payroll, and a
conservative sales forecast. WorkChairs will always maintain a positive cash balance
while slowly growing the total cash and company net worth.

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1.1 Mission

WorkChairs is a specialty ergonomic product retailer in both the local market and in
the online space. We aim to provide quality products to satisfy our customers desire to
work in a healthy work environment that keeps them injury and pain-free. Keeping
our customers happy and solving their problems by providing great products at an
affordable price is our goal.

We also take pride in educating our customers on ergonomic issues that they might
not be aware of, to prevent them from experiencing pain and discomfort in the future
as well. We find doing this is rewarding in a personal and business sense.

1.2 Keys to Success

 Provide specialty products that can't be found at "large box" retailers such as
Office Max, Office Depot, Staples, Costco, Ikea, and others. We want niche
products that can't be found at these stores, because we can't compete with them
on price.

 Provide excellent customer service. It's difficult to find customers who are aware
enough of the health issues of standard office work to actually realize they need
ergonomic products. So once we find these customers, we need to keep them
happy and keep them coming back to us for future products they need.

 Keep our growth slow and organic so we can make sure we keep expenses low
and operate efficiently.

 Build an easy-to-use website that educates our customers and potential customers
while also selling our products effectively.

1.3 Objectives

 Becoming profitable after six months of operation.

 Be the market share leader of specialty ergonomic products in the local market.
There is no official measurement, but it should be relatively easy to guess how
our few competitors are doing.

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 Have our website be one of the top five websites for specialty ergonomic products
measured by both traffic and sales. Unfortunately, we can't get sales statistics for
other competing sites, but we can judge by their traffic levels based on their
search engine placement, pay per click advertising, links in to their site, and
Google Pagerank. From there we can guess at how well their site converts visitors
into sales.

 Have fun helping our customers work in a safer and more comfortable work
environment.

Company Summary
WorkChairs is a small business based in Studio City, CA that sells specialty
ergonomic products to local businesses and home office workers while also selling
those products on their website online. The company is operated out of the home of
owners Jake and Lisa Wilson. Their son Peter also is part of the company.

2.1 Company Ownership

Workchairs is a private C corporation owned by Jake and Lisa Wilson. They each own
50% of the company.

2.2 Start-up Summary

WorkChairs will require total start-up expenses which include legal fees in setting up
the business, stationery, sales brochures and collateral, insurance, expensed computer
equipment, and a domain name.

Jake and Lisa Wilson will be providing the investment which will cover the start-up
expenses while also leaving a cash reserve. We have no start-up liabilities to be
considered in our start-up phase. We will purchase examples of our products, as
Current Assets, for customers to test-sit, but we will have very little inventory on
hand.

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START-UP REQUIREMENTS

Start-up Expenses

Legal $1,000

Stationery etc. $250

Brochures $1,000

Insurance $500

Expensed Equipment $1,000

Domain Name $75

TOTAL START-UP EXPENSES $3,825

Start-up Assets

Cash Required $6,175

Other Current Assets $2,000

Long-term Assets $0

Page 5 of 38
TOTAL ASSETS $8,175

Total Requirements $12,000

START-UP FUNDING

Start-up Expenses to Fund $3,825

Start-up Assets to Fund $8,175

TOTAL FUNDING REQUIRED $12,000

Assets

Non-cash Assets from Start-up $2,000

Cash Requirements from Start-up $6,175

Additional Cash Raised $0

Cash Balance on Starting Date $6,175

TOTAL ASSETS $8,175

Liabilities and Capital

Liabilities

Current Borrowing $0

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $0

Other Current Liabilities (interest-free) $0

TOTAL LIABILITIES $0

Capital

Page 6 of 38
Planned Investment

Jake and Lisa Wilson $12,000

Other $0

Additional Investment Requirement $0

TOTAL PLANNED INVESTMENT $12,000

Loss at Start-up (Start-up Expenses) ($3,825)

TOTAL CAPITAL $8,175

TOTAL CAPITAL AND LIABILITIES $8,175

Total Funding $12,000

Products
WorkChairs sells niche ergonomic products that are hard to find at standard office
furniture or office supply stores. Our primary products include:

 Chairs - There is a large number of specialty chairs that are built to solve various
physical problems caused by sitting in an office chair all day. These chairs aim to
solve back, hip, leg, neck, shoulder, arm, and wrist problems.

 Workstations - Computer and regular workstations that are specially designed to

be ergonomically correct.

 Computer Accessories - Special mice, keyboards, glare screens, keyboard trays,

wrist rests, monitor supports, and other computer accessories.

 Document Holders - Copy holders to allow the head to stay looking up at eye
level.

 Foot Rests - A proper foot rest complements an ergonomic chair for better
posture alignment.
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 Lighting - Various types of lighting to make things easier on the eyes while
working.

 Back/Arm/Wrist Supports - Various supports for various reasons.

 Headsets/Microphones - For phone-related problems.

Market Analysis Summary

As computer and office jobs get more and more common, the general working
population will experience more health problems caused by improper office working
environments. It may be it's their wrists aching from typing, their back hurting from
their chair being bad, or their eyes damaged from staring at a computer screen.
Ergonomic products focus on solving these problems. Unfortunately, these products
are often hard to find at general furniture stores or office supply stores. WorkChairs
aims to supply these products to both our local market and in the online space.

Specifically, we'll target a few different types of worker:

 The home office user.

 The small business office manager.

 The large organization purchasing manager.

4.1 Market Segmentation

We have broken down our target market into the following categories:

 Home Office - This segment is the huge market of people running businesses
from their home. We estimate there to be about 20,000,000 home office
businesses in the United States, with about a 5% growth rate. Since we can reach
the whole United States with our website, we can, potentially, reach the entire
market.

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  Small Office Managers - The small office market is also quite large, with a 5%
growth rate. Most of these businesses have office workers who would be in need
of ergonomic products.

 Large Office Purchase Managers - This market segment is much smaller in

size, but has huge potential for sales as purchase managers usually make bulk
buying decisions for multiple workers. It has a slower 2% growth rate due to
fewer large businesses being created.

MARKET ANALYSIS

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Potential
Growth CAGR
Customers

Home
5% 20,000,000 21,000,000 22,050,000 23,152,500 24,310,125 5.00%
Office

Small
Office 5% 2,000,000 2,100,000 2,205,000 2,315,250 2,431,013 5.00%
Managers

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Large
Business
2% 500,000 510,000 520,200 530,604 541,216 2.00%
Purchase
Managers

Total 4.94% 22,500,000 23,610,000 24,775,200 25,998,354 27,282,354 4.94%

4.2 Target Market Segment Strategy

The following are our market segments along with our reasoning for targeting each
segment:

 Home Office - This segment is very large, and because most home offices now
involve people spending long hours on a computer, these people are prime targets
for needing ergonomic equipment. Since these offices are also in their home,
they're more likely to spend some money on nicer furniture and equipment they
can use for both home and work purposes.

 Small Business Managers - Most small businesses have a manager in charge of

equipment purchasing decisions. At some point, most of these managers usually
have an employee who suffers from a problem that can be solved with ergonomic
equipment. Even if they haven't, these people can usually be educated on the
benefits of an ergonomically-sound workplace. They are usually pretty careful
with their money though, as most small businesses try to keep their costs low. It's
a good market, especially locally, because these business often support other local
small businesses.

 Large Business Purchase Managers - Large businesses usually have a purchase

manager who's sole job is making equipment and supply purchasers. It's usually
harder to reach these managers, and there are fewer large businesses, but they
make for very lucrative accounts. Once you can build a good relationship with a
purchase manager, they can be responsible for a lot of sales. Most purchasers buy
equipment in bulk, and they usually have budgets that allow them to buy good
equipment.

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4.3 Industry Analysis

The ergonomic industry is growing by leaps and bounds. As the use of computers
increases in offices, people are experiencing lots of health problems from repetitious
use of computers all day long. The ailments can really vary, but knowledge of
ergonomic products is growing as people realize these problems exist.

The ergonomic product manufacturing industry is also growing as more companies

are putting out new products for cheaper prices.

WorkChairs aims to sell locally to small and large businesses, while also serving those
two markets and the home office market on the Web. We believe this combination of
local and nationwide sales will provide a solid base for a business.

4.3.1 Competition and Buying Patterns

People shopping for ergonomic products choose their retailer based on the following
criteria:

Product selection: They want to work with a company that provides a number of
ergonomic products to choose from, including competing brands.

Price: Nobody wants to pay more than they have to, and generally ergonomic
products are more expensive than people anticipate, so price is usually a big issue.

Customer Service: People usually have questions before purchasing an ergonomic

product because, for the most part, they have never seen or worked with the product
before. This means that our website must explain things well and make it easy to
contact us. We also must provide great customer service locally to keep our clients
educated and happy.

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Strategy and Implementation Summary
The primary strategies of WorkChairs are:

 Sell niche ergonomic products that are hard to find in normal sales channels and
usually take some education to understand and use.

 Educate our customers and nurture relationships with them by providing superior
customer service.

 Sell locally and online to maximize two different sales channels.

5.1 Competitive Edge

The primary competitive edge of WorkChairs is our product selection and how we
educate our customers. We carry hard-to-find products that solve specific ergonomic
needs. These are products you can't find at local office furniture stores or superstores
such as Office Depot, Staples, etc. These products are only carried by a few
ergonomic specialty retailers both locally and online. In our local market, there are
only a few small office supply stores that carry these products, and they aren't very
active in selling them or educating their customers about them.

We will have samples of a range of our products on hand for our local customers to
test-sit. Part of the education process is give people the kinesthetic experience of using
properly designed and sized chairs, workstations, etc. Purchases will be drop-shipped
directly from the manufacturers to the customers, or to us, as our customers prefer.

Online, we hope to educate our customers better than anyone else and show why they
need our products and how these will help solve their problems. There are lots of
websites that carry ergonomic products, but most of them just list the products and
don't give much information about them.

5.2 Marketing Strategy

Our marketing strategy has two categories that both hit our three target markets:

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Local Marketing Strategy - We intend to hit our three target markets locally "the old
fashioned way."

 Cold Calls - Jake Wilson will call on local businesses both small and large to
educate them on our company and our ergonomic products.

 Yellow Pages - We will be listed in the local yellow pages under office products,
office furniture, etc.

 Business Groups - Jake and Lisa Wilson will each be joining a number of local
business groups in order to network and make contacts at local companies. We
will use these contacts to get a foot in the door to build relationships with new
customers.

Online Marketing Strategy - Our online marketing strategy will be run by Peter
Wilson who is in charge of our website.

 Search Engines - We will pay to be listed in all the paid inclusion search engines
and directories, as well as submitting to all the free search engines. Peter Wilson
is an expert in this area, and will have our site optimized to do well in the engines.

 Pay-per-click Advertising - We will be spending a limited monthly budget on

pay-per-click advertising on Overture and Google for targeted ergonomic
keywords.

 Link-building Campaign - Our website will be more than just an online store.
We will provide tons of information about ergonomics that will be educational for
people trying to solve health problems. This will make our site an ergonomic
resource worth linking to from other websites. We will have an ergonomic
resources directory that will allow us to do link exchanges with other websites.

 Affiliate Program - We will have an affiliate program for other websites to sign
up and earn a 10% commission on sales they refer to us.

 Word of Mouth - We will have features on our site to allow users to send pages
from our site to their friends or co-workers.

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5.3 Sales Strategy

Our sales strategy is broken down into two different areas:

 Local Sales - We will sell to local customers and employ a traditional local
business sales strategy. Jake Wilson will be our primary salesman, and he'll work
in a normal fashion of calling on local businesses and informing them about our
company and our products. Mr. Wilson will also join local business groups to
network, and try to be the kind of salesman people refer to others. He does not
earn a commission, as he will be working on salary as part owner. It's possible
that an additional local salesperson will be brought onto the team in the future.

 Online Sales - Obviously, selling online is different from selling locally. We'll
rely on our website to provide product information and answer the questions
customers have about their products. Jake and Lisa Wilson will be available by
phone and email to answer questions the site alone can't answer. Otherwise, it's a
traditional e-commerce setup where the customer orders the product and
WorkChairs either ships out the product themselves if it's in inventory, or alerts
the manufacturer who will drop ship the product.

5.3.1 Sales Forecast

The Sales Forecast table outlines sales and cost projections for our four product
groups. We expect to be able to sell products in the first month due to relationships we
already have with customers who have agreed to purchase our products. As our name
grows in the local community and as our website gets more links and better search
placement online we feel our sales will continue to grow.

Each product category has a different growth rate for the first year based on our
projections for how much growth there is in each area. We feel Chairs and Other will
each see a 20% growth rate. We feel that the growth rate of Workstations and
Computer Accessories will be slower at 15%.

After year one, we anticipate an overall growth rate of about 20%.

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SALES FORECAST

YEAR 1 YEAR 2 YEAR 3

Sales

Chairs $79,161 $94,993 $113,992

Computer Accessories $11,601 $13,921 $16,705

Workstations $29,002 $34,802 $41,762

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Other $19,790 $23,748 $28,498

TOTAL SALES $139,554 $167,464 $200,957

Direct Cost of Sales Year 1 Year 2 Year 3

Chairs $39,581 $41,560 $43,638

Computer Accessories $5,800 $6,091 $6,395

Workstations $14,501 $15,226 $15,987

Other $9,895 $10,390 $10,910

Subtotal Direct Cost of Sales $69,777 $73,266 $76,929

5.4 Milestones

The accompanying table is a list of our initial milestones for the launch of
WorkChairs. It lists the actual milestone, date that we start working on the milestone,
the date the milestone should be accomplished, the employee in charge, and the
department. We are not rushed to get this business going, but we still feel it's crucial
to hit our milestones on time to get the business going before the slow summer season
hits. We'd like to use the summer season to fine tune our website and make sure our
relationships with our manufacturers are all solid and working well. We will use the
Plan vs. Actual feature of Business Plan Pro® PREMIER to track our progress in
getting everything done on time.

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MILESTONES

Milestone Start Date End Date Budget Manager Department

Corporation Formed 1/4/2002 1/15/2002 $1,000 Jake Executive

Product Selection 1/1/2002 2/1/2002 $0 Jake and Executive

Finalized Lisa
Website 1/1/2002 2/15/2002 $75 Peter Web

Seach Engine 2/15/2002 3/1/2002 $500 Peter Web

Submissions
Link Campaign 3/1/2002 3/15/2002 $0 Peter Web

Affiliate Program 4/1/2002 4/15/2002 $0 Peter Web

Launch
Business Groups 4/1/2002 4/1/2002 $0 Jake and Executive
Joined Lisa
Cold Calls Launch 4/1/2002 4/1/2002 $0 Jake Sales

Totals $1,575

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Web Plan Summary
The WorkChairs' website will be more than just a brochure for our local business, it
will be a huge sales channel to the online world.

The focus of our site will be a combination of a store for our products and an
ergonomic educational resource.

The store section of our site will be a very clean design that is similar to most e-
commerce sites so users are familiar with the way things work. We'll provide lots of
information about our products and how they help solve people's problems. We'll also
make it very clear to users how they can contact us for individual sales support and
customer service. We think users might need some hand holding to choose the right
product.

The ergonomic information section of our site will provide information about all the
most common health problems caused by office working conditions. It will outline the
health problems, the causes, and provide solutions in the form of positioning and
posture, as well as links to products that can be purchased. We feel this section of our
site will validate WorkChairs as experts in the field, and provide incentive for other
websites to link to our website.

6.1 Website Marketing Strategy

Our overall online marketing strategy falls into the following strategies:

 Search Engines - We will be paying for listings in the paid inclusion engines as
well as submitting to free engines like Google. Peter Wilson is an expert in this
field and he will be designing our site from the start to have keywords built into
the copy and give the site an overall search-engine friendly design.

 Pay-per-click Advertising - We'll have a limited monthly budget for pay-per-

click advertising on Google and Overture for selected targeted ergonomic
keywords that fit our products. We will monitor our return on investment closely
here to make sure we're profitable with this advertising.

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 Link-building Campaign - The educational aspect of our site along with our
resources section will allow us to get links from other sites either through the
quality of our content or in a link exchange manner. We will try to get links from
good sites in ergonomics, furniture, office supplies, and other related areas.

 Affiliate Program - We will have an affiliate program that pays other websites
10% for sales that they refer to our website. This will get us more links, and
provide incentive for other sites to market our products to their visitors.

 Word of Mouth - Our site will be set up so that's it's easy for visitors to send
pages of our site to their friends and co-workers. We also hope their satisfaction
with our products will lead them to tell others about us.

6.2 Development Requirements

The development of the WorkChairs website will start on January 1st of 2002. The
estimated finish date of the website will be February 15, 2002. Peter Wilson will be
developing all aspects of the website.

 Front End - The front end of the website is the graphic user design and interface
that will be designed by Peter Wilson. The design will be simple with bland
colors and feature a similar interface of popular e-commerce websites.

 Back End - The back end of our system is also being developed by Peter Wilson.
It will feature a mySQL database and will use PHP as the programming language
for the site logic. The e-commerce package is in PHP and is a combination of a
base package and custom programming by Peter Wilson. The advantage of this
setup is that we can customize it, it's free, and it's extremely fast. The product
information will be stored in the database.

 Administration - It will be easy to add and edit content and product information
on the website due to the administrative interface programmed by Peter Wilson.
Both Jake and Lisa Wilson will be able to add/edit/delete products and content at
any time.

 Future Development - As an employee of WorkChairs, Peter will be working

part-time developing new features for the website and marketing it online.

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Management Summary
WorkChairs is owned and managed by Jake and Lisa Wilson. The only other
employee is our manager of the website, Peter Wilson. We don't initially plan on
hiring any additional employees, but there is a possibility of adding a local salesperson
in the future.

 Jake Wilson - Jake has over 30 years experience in the office supply/furniture
and ergonomics industry. He owned his own local store for 25 years and worked
as President and the head of the sales division. Jake built up a huge knowledge of
products, developed relationships with manufacturers, and made many valuable
local contacts at businesses in the area which WorkChairs can use. Jake will work
as the President of WorkChairs as well as being the primary local salesperson and
expert on products.

 Lisa Wilson - Lisa also has over 30 years experience as she ran the local office
store with her husband Jake. Lisa has more experience in the accounting and
organizational aspects of the business, so she'll be taking that role with
WorkChairs.

 Peter Wilson - Peter grew up working in the office store, but has since left that
industry and became a seasoned expert in Web development, online sales, and
online marketing. Peter will be in charge of the website and it's marketing for
WorkChairs.

7.1 Personnel Plan

The accompanying Personnel Table explains the salaries of the three employees of
WorkChairs. Jake and Lisa Wilson will not be taking salaries until the business has
sales up and running in the middle of the year. Peter will be paid a modest salary for
his part-time work from the start and will remain consistent at that level until 2003
when he will see a slight raise. Jake and Lisa Wilson will also see a raise in 2003
when the business has reached a high enough level of sales to make that possible.

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PERSONNEL PLAN

YEAR 1 YEAR 2 YEAR 3

Jake Wilson $21,000 $36,000 $36,000

Lisa Wilson $21,000 $36,000 $36,000

Peter Wilson $12,000 $12,000 $20,000

TOTAL PEOPLE 3 3 3

Total Payroll $54,000 $84,000 $92,000

Financial Plan
The financial plan of WorkChairs is very simple and conservative. We aim to keep
our expenses low while growing sales very slowly and under control. Because we
don't have any major expenditures to make, we don't need to have huge amounts of
cash on hand. We just need enough to pay our bills and our salary, and provide
additional cushion to our account.

We expect to have a positive cash balance at all times.

We expect to be profitable in 2002 and 2004 while losing a little bit of money in 2003
as our payroll growth jumps up.

We expect our cash on hand to be stable and growing steadily by 2004.

8.1 Important Assumptions

We assume that interest rates and tax rates will stay the same as can be seen in our
general assumptions table. We assume the economy will not become much worse than
it is right now. At the current level of the economy we believe our goals and
projections are attainable.

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GENERAL ASSUMPTIONS

YEAR 1 YEAR 2 YEAR 3

Plan Month 1 2 3

Current Interest Rate 10.00% 10.00% 10.00%

Long-term Interest Rate 10.00% 10.00% 10.00%

Tax Rate 30.00% 30.00% 30.00%

Other 0 0 0

8.2 Break-even Analysis

Our Break-even Analysis is based on an average revenue per sale. This is an average
because although we sell high-priced chairs that range from $200-$2,000, we also sell
a larger number of cheaper products like copy holders, mice, wrist rests, keyboards,
keyboard trays, monitor glare screens, and other products.

We aim to take a keystone mark-up on our products, i.e. 100%.

Our monthly fixed costs consist of three salaries and operating expenses.

The table and chart below calculate our break-even point in revenue per month.

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 .

BREAK-EVEN ANALYSIS

Monthly Revenue Break-even $10,950

Assumptions:

Average Percent Variable Cost 50%

Estimated Monthly Fixed Cost $5,475

8.3 Projected Profit and Loss

The accompanying Profit and Loss table is a good example of how we will be keeping
our expenses and payroll low while we grow sales. This will cause us to lose a little
money in 2003, but we'll be profitable from 2004 on. Our sales projections are very
conservative, so we're actually hoping that we'll be profitable in 2003 as well, but
we're going with the conservative estimates shown in the table.

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We aim to keep our gross margin up, and we think we can improve this over time as
we gain more customers because we won't have to battle on price with other retailers.

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PRO FORMA PROFIT AND LOSS

YEAR 1 YEAR 2 YEAR 3

Sales $139,554 $167,464 $200,957

Direct Cost of Sales $69,777 $73,266 $76,929

Other Costs of Goods $0 $0 $0

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TOTAL COST OF SALES $69,777 $73,266 $76,929

Gross Margin $69,777 $94,198 $124,028

Gross Margin % 50.00% 56.25% 61.72%

Expenses

Payroll $54,000 $84,000 $92,000

Sales and Marketing and Other $1,200 $1,200 $1,200

Expenses
Depreciation $0 $0 $0

Rent $0 $0 $0

Utilities $0 $0 $0

Insurance $1,200 $1,200 $1,200

Payroll Taxes $8,100 $12,600 $13,800

Web Hosting $1,200 $1,200 $1,200

Total Operating Expenses $65,700 $100,200 $109,400

Profit Before Interest and Taxes $4,077 ($6,002) $14,628

EBITDA $4,077 ($6,002) $14,628

Interest Expense $0 $0 $0

Taxes Incurred $1,223 $0 $4,388

Net Profit $2,854 ($6,002) $10,240

Net Profit/Sales 2.04% -3.58% 5.10%

8.4 Projected Cash Flow

Our Projected Cash Flow table and chart show that we have little risk in this business
as we'll always keep a sizeable cash balance. We have a projected period of three

Page 26 of 38
 months in the slow summer period were we'll see a negative net cash flow, but our
balance will stay positive so we'll be able to pay our bills and stay in the positive.

PRO FORMA CASH FLOW

YEAR 1 YEAR 2 YEAR 3

Cash Received

Cash from Operations

Cash Sales $139,554 $167,464 $200,957

SUBTOTAL CASH FROM OPERATIONS $139,554 $167,464 $200,957

Additional Cash Received

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

New Current Borrowing $0 $0 $0

New Other Liabilities (interest-free) $0 $0 $0

New Long-term Liabilities $0 $0 $0

Page 27 of 38
Sales of Other Current Assets $0 $0 $0

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

New Investment Received $0 $0 $0

SUBTOTAL CASH RECEIVED $139,554 $167,464 $200,957

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending $54,000 $84,000 $92,000

Bill Payments $68,052 $96,760 $97,957

SUBTOTAL SPENT ON OPERATIONS $122,052 $180,760 $189,957

Additional Cash Spent

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

Principal Repayment of Current Borrowing $0 $0 $0

Other Liabilities Principal Repayment $0 $0 $0

Long-term Liabilities Principal Repayment $0 $0 $0

Purchase Other Current Assets $0 $0 $0

Purchase Long-term Assets $0 $0 $0

Dividends $0 $0 $0

SUBTOTAL CASH SPENT $122,052 $180,760 $189,957

Net Cash Flow $17,501 ($13,296) $11,000

Cash Balance $23,676 $10,380 $21,381

Page 28 of 38
 8.5 Projected Balance Sheet

WorkChairs is not looking to grow at a super-fast pace, but we do project to grow our
net-worth and cash slowly as time goes on. By 2004 we project to have a cushion of
cash on hand while still paying our three employees decent salaries for their work.

PRO FORMA BALANCE SHEET

YEAR 1 YEAR 2 YEAR 3

Assets

Current Assets

Cash $23,676 $10,380 $21,381

Other Current Assets $2,000 $2,000 $2,000

TOTAL CURRENT ASSETS $25,676 $12,380 $23,381

Long-term Assets

Long-term Assets $0 $0 $0

Accumulated Depreciation $0 $0 $0

TOTAL LONG-TERM ASSETS $0 $0 $0

TOTAL ASSETS $25,676 $12,380 $23,381

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities

Accounts Payable $14,647 $7,353 $8,114

Current Borrowing $0 $0 $0

Other Current Liabilities $0 $0 $0

Page 29 of 38
SUBTOTAL CURRENT LIABILITIES $14,647 $7,353 $8,114

Long-term Liabilities $0 $0 $0

TOTAL LIABILITIES $14,647 $7,353 $8,114

Paid-in Capital $12,000 $12,000 $12,000

Retained Earnings ($3,825) ($971) ($6,973)

Earnings $2,854 ($6,002) $10,240

TOTAL CAPITAL $11,029 $5,027 $15,267

TOTAL LIABILITIES AND CAPITAL $25,676 $12,380 $23,381

Net Worth $11,029 $5,027 $15,267

8.6 Business Ratios

The following table outlines some of the more important ratios from the Office Furniture industry.
The final column, Industry Profile, details specific ratios based on the industry as it is classified by the
Standard Industry Classification (SIC) code, 5712.9904. Our Gross Margin will increase from 2002-
2004 as well are our profit ratio. Both will dip in 2003 as our expense ratio grows from a payroll
increase.

RATIO ANALYSIS

YEAR 1 YEAR 2 YEAR 3 INDUSTRY

PROFILE
Sales Growth 0.00% 20.00% 20.00% 2.90%

Percent of Total Assets

Other Current Assets 7.79% 16.15% 8.55% 22.82%

Total Current Assets 100.00% 100.00% 100.00% 85.19%

Long-term Assets 0.00% 0.00% 0.00% 14.81%

Page 30 of 38
TOTAL ASSETS 100.00% 100.00% 100.00% 100.00%

Current Liabilities 57.05% 59.40% 34.70% 39.96%

Long-term Liabilities 0.00% 0.00% 0.00% 11.39%

Total Liabilities 57.05% 59.40% 34.70% 51.35%

NET WORTH 42.95% 40.60% 65.30% 48.65%

Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 50.00% 56.25% 61.72% 33.55%

Selling, General & Administrative 47.96% 59.83% 56.62% 20.02%

Expenses
Advertising Expenses 0.00% 0.00% 0.00% 2.63%

Profit Before Interest and Taxes 2.92% -3.58% 7.28% 0.94%

Main Ratios

Current 1.75 1.68 2.88 1.95

Quick 1.75 1.68 2.88 0.98

Total Debt to Total Assets 57.05% 59.40% 34.70% 55.92%

Pre-tax Return on Net Worth 36.97% -119.39% 95.82% 2.53%

Pre-tax Return on Assets 15.88% -48.48% 62.57% 5.73%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin 2.04% -3.58% 5.10% n.a

Return on Equity 25.88% -119.39% 67.07% n.a

Activity Ratios

Page 31 of 38
Accounts Payable Turnover 5.65 12.17 12.17 n.a

Payment Days 27 45 29 n.a

Total Asset Turnover 5.44 13.53 8.60 n.a

Debt Ratios

Debt to Net Worth 1.33 1.46 0.53 n.a

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

Liquidity Ratios

Net Working Capital $11,029 $5,027 $15,267 n.a

Interest Coverage 0.00 0.00 0.00 n.a

Additional Ratios

Assets to Sales 0.18 0.07 0.12 n.a

Current Debt/Total Assets 57% 59% 35% n.a

Acid Test 1.75 1.68 2.88 n.a

Sales/Net Worth 12.65 33.31 13.16 n.a

Dividend Payout 0.00 0.00 0.00 n.a

Page 32 of 38
 Appendix

SALES FORECAST

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

Sales

Chairs 0% $2,000 $2,400 $2,880 $3,456 $4,147 $4,977 $5,972 $7,166 $8,600 $10,320 $12,383 $14,860

Computer 0% $400 $460 $529 $608 $700 $805 $925 $1,064 $1,224 $1,407 $1,618 $1,861
Accessories

Workstations 0% $1,000 $1,150 $1,323 $1,521 $1,749 $2,011 $2,313 $2,660 $3,059 $3,518 $4,046 $4,652

Other 0% $500 $600 $720 $864 $1,037 $1,244 $1,493 $1,792 $2,150 $2,580 $3,096 $3,715

TOTAL SALES $3,900 $4,610 $5,452 $6,449 $7,633 $9,037 $10,703 $12,682 $15,032 $17,824 $21,143 $25,089

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

Chairs $1,000 $1,200 $1,440 $1,728 $2,074 $2,488 $2,986 $3,583 $4,300 $5,160 $6,192 $7,430

Computer $200 $230 $265 $304 $350 $402 $463 $532 $612 $704 $809 $930
Accessories

Workstations $500 $575 $661 $760 $875 $1,006 $1,157 $1,330 $1,530 $1,759 $2,023 $2,326

Other $250 $300 $360 $432 $518 $622 $746 $896 $1,075 $1,290 $1,548 $1,858

Subtotal Direct Cost $1,950 $2,305 $2,726 $3,225 $3,816 $4,518 $5,352 $6,341 $7,516 $8,912 $10,572 $12,544
of Sales

PERSONNEL PLAN

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

Jake Wilson 0% $0 $0 $0 $0 $0 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000

Lisa Wilson 0% $0 $0 $0 $0 $0 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000

Peter Wilson 0% $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000

Page 33 of 38
TOTAL PEOPLE 3 3 3 3 3 3 3 3 3 3 3 3

Total Payroll $1,000 $1,000 $1,000 $1,000 $1,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000

GENERAL ASSUMPTIONS

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

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

Current 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Interest Rate

Long-term 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Interest Rate

Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%

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

PRO FORMA PROFIT AND LOSS

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

Sales $3,900 $4,610 $5,452 $6,449 $7,633 $9,037 $10,703 $12,682 $15,032 $17,824 $21,143 $25,089

Direct Cost of $1,950 $2,305 $2,726 $3,225 $3,816 $4,518 $5,352 $6,341 $7,516 $8,912 $10,572 $12,544
Sales

Other Costs of $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Goods

TOTAL COST $1,950 $2,305 $2,726 $3,225 $3,816 $4,518 $5,352 $6,341 $7,516 $8,912 $10,572 $12,544
OF SALES

Gross Margin $1,950 $2,305 $2,726 $3,225 $3,816 $4,518 $5,352 $6,341 $7,516 $8,912 $10,572 $12,544

Gross Margin % 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00%

Expenses

Payroll $1,000 $1,000 $1,000 $1,000 $1,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000

Sales and $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100
Marketing and
Other Expenses
Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Rent $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Page 34 of 38
Utilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Insurance $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100

Payroll Taxes 15% $150 $150 $150 $150 $150 $1,050 $1,050 $1,050 $1,050 $1,050 $1,050 $1,050

Web Hosting $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100

Total Operating $1,450 $1,450 $1,450 $1,450 $1,450 $8,350 $8,350 $8,350 $8,350 $8,350 $8,350 $8,350
Expenses

Profit Before $500 $855 $1,276 $1,775 $2,366 ($3,832) ($2,998) ($2,009) ($834) $562 $2,222 $4,194
Interest and
Taxes
EBITDA $500 $855 $1,276 $1,775 $2,366 ($3,832) ($2,998) ($2,009) ($834) $562 $2,222 $4,194

Interest Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Taxes Incurred $150 $257 $383 $532 $710 ($1,149) ($900) ($603) ($250) $169 $666 $1,258

Net Profit $350 $599 $893 $1,242 $1,656 ($2,682) ($2,099) ($1,406) ($584) $394 $1,555 $2,936

Net Profit/Sales 8.97% 12.98% 16.38% 19.26% 21.70% -29.68% -19.61% -11.09% -3.88% 2.21% 7.36% 11.70%

PRO FORMA CASH FLOW

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

Cash Received

Cash from
Operations

Cash Sales $3,900 $4,610 $5,452 $6,449 $7,633 $9,037 $10,703 $12,682 $15,032 $17,824 $21,143 $25,089

SUBTOTAL $3,900 $4,610 $5,452 $6,449 $7,633 $9,037 $10,703 $12,682 $15,032 $17,824 $21,143 $25,089
CASH FROM
OPERATIONS
Additional Cash
Received

Sales Tax, VAT, 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

HST/GST
Received
New Current $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Borrowing

New Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Liabilities
(interest-free)
New Long-term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Liabilities

Page 35 of 38
Sales of Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Current Assets

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

New Investment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Received

SUBTOTAL $3,900 $4,610 $5,452 $6,449 $7,633 $9,037 $10,703 $12,682 $15,032 $17,824 $21,143 $25,089
CASH RECEIVED

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

Expenditures
from Operations

Cash Spending $1,000 $1,000 $1,000 $1,000 $1,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000

Bill Payments $85 $2,565 $3,030 $3,580 $4,233 $4,968 $4,755 $5,845 $7,139 $8,676 $10,503 $12,674

SUBTOTAL $1,085 $3,565 $4,030 $4,580 $5,233 $11,968 $11,755 $12,845 $14,139 $15,676 $17,503 $19,674
SPENT ON
OPERATIONS
Additional Cash
Spent

Sales Tax, VAT, $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

HST/GST Paid Out

Principal $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Repayment of
Current
Other Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Borrowing
Principal
Repayment
Long-term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Liabilities Principal
Repayment
Purchase Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Current Assets

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

Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

SUBTOTAL $1,085 $3,565 $4,030 $4,580 $5,233 $11,968 $11,755 $12,845 $14,139 $15,676 $17,503 $19,674
CASH SPENT

Net Cash Flow $2,815 $1,045 $1,422 $1,869 $2,400 ($2,931) ($1,052) ($163) $893 $2,148 $3,640 $5,415

Cash Balance $8,990 $10,035 $11,456 $13,326 $15,725 $12,795 $11,743 $11,580 $12,473 $14,621 $18,261 $23,676

Page 36 of 38
PRO FORMA BALANCE SHEET

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

Assets Starting
Balances

Current
Assets

Cash $6,175 $8,990 $10,035 $11,456 $13,326 $15,725 $12,795 $11,743 $11,580 $12,473 $14,621 $18,261 $23,676

Other Current $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Assets

TOTAL $8,175 $10,990 $12,035 $13,456 $15,326 $17,725 $14,795 $13,743 $13,580 $14,473 $16,621 $20,261 $25,676
CURRENT
ASSETS
Long-term
Assets

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

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

TOTAL $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
LONG-TERM
ASSETS
TOTAL $8,175 $10,990 $12,035 $13,456 $15,326 $17,725 $14,795 $13,743 $13,580 $14,473 $16,621 $20,261 $25,676
ASSETS

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

Current
Liabilities

Accounts $0 $2,465 $2,911 $3,440 $4,067 $4,810 $4,562 $5,609 $6,852 $8,329 $10,083 $12,168 $14,647
Payable

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

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

SUBTOTAL $0 $2,465 $2,911 $3,440 $4,067 $4,810 $4,562 $5,609 $6,852 $8,329 $10,083 $12,168 $14,647
CURRENT
LIABILITIES
Long-term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Liabilities

TOTAL $0 $2,465 $2,911 $3,440 $4,067 $4,810 $4,562 $5,609 $6,852 $8,329 $10,083 $12,168 $14,647
LIABILITIES

Paid-in $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000
Capital

Retained ($3,825) ($3,825) ($3,825) ($3,825) ($3,825) ($3,825) ($3,825) ($3,825) ($3,825) ($3,825) ($3,825) ($3,825) ($3,825)
Earnings

Earnings $0 $350 $949 $1,842 $3,084 $4,740 $2,058 ($41) ($1,447) ($2,031) ($1,637) ($82) $2,854

Page 37 of 38
TOTAL $8,175 $8,525 $9,124 $10,017 $11,259 $12,915 $10,233 $8,134 $6,728 $6,144 $6,538 $8,093 $11,029
CAPITAL

TOTAL $8,175 $10,990 $12,035 $13,456 $15,326 $17,725 $14,795 $13,743 $13,580 $14,473 $16,621 $20,261 $25,676
LIABILITIES
AND
Net Worth $8,175 $8,525 $9,124 $10,017 $11,259 $12,915 $10,233 $8,134 $6,728 $6,144 $6,538 $8,093 $11,029
CAPITAL

Page 38 of 38