September 21, Re-Bath Liberty Road Montgomery, TX Ms. Lisa Cox People Fund 2921 E. 17 th Street Austin, TX, USA 78702

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1 September 21, 2011 Re-Bath Liberty Road Montgomery, TX Ms. Lisa Cox People Fund 2921 E. 17 th Street Austin, TX, USA Re: Loan Request for $200,000 Dear Ms. Cox, With over four years of Lead Installer experience with Re-Bath, we are requesting a loan to buy our own Re- Bath franchise, in Texas Montgomery County. Re-Bath is a franchise operation that specializes in bathroom remodels in homes that are 15 years or older. It has been in operation for over twenty years with over 200 franchises worldwide, and is the largest bathroom remodeling franchise in the industry. The climate for a successful Re-Bath in Montgomery County is perfect. Montgomery County, TX is the 24 th fastest growing county in the United States. Between 1990 and ,393 houses were built in Montgomery County. Sixty-three percent of the residential areas built between 1990 and 2009 were middle to high income households that are due for a 15 year remodel. We will be buying an already existing franchise store in Montgomery, TX that has an excellent reputation and has seen between 25 and 30 percent growth from 2009 to Our target market is owners of homes that are 15 years or older that are due for a bathroom remodel, in addition to commercial business owners. We plan to reach this target market with focused marketing, which you will read about in our business plan. In addition, we have a good working relationship with suppliers and the community since the Re-Bath we are purchasing has been in operation for three years. Re-Bath has become the largest bathroom remodeling franchise in its industry due to its convenience, affordability, and quality products. These attributes, along with a lifetime guarantee have allowed Re-Bath to beat out local competition and spread the word of our superior service through satisfied customers. We are investing $15k in savings and are requesting a $200K loan from your bank. We would like seven years to repay the loan, using the cash flow of the business. Our secondary source of repayment will be from collateralized equipment. Our house and two vehicles, valued at $153,300.00, are offered as collateral for the loan. Our business plan is attached; in it you will find the information you need. If you have any questions or need more information, please contact Mr. Matt Vonruden at (512) Respectfully Submitted, Matt Vonruden Daniel Vonruden 1

2 Executive Summary The Woodlands Re-Bath s strategic focus will be to improve its sales, marketing and customer service functions. The goal is to increase sales to more than $1 million in three years, while also improving the gross profit and working capital. We want to become known as the best quality bathroom remodeling company around. This business plan leads the way. It renews our vision and strategic focus: adding value to our target market segments in our local market. It also provides the step-by-step plan for improving our sales, gross margin, and profitability. This plan includes this summary, and chapters on the company, products and services, market focus, action plans and forecasts, management team, financial plan and management and working capital. 1.1 Objectives 1. Sales increasing to $1 million by June Year Improve net profitability to 28% by end of fiscal year Provide 10% of gross sales for Owner and 10% of gross sales for company. 1.2 Mission Re-Bath is a full service remodeling company that is devoted to building the dream bathrooms of local high-end and medium income clients. We believe that attention to detail and customer service sets us apart from our competition. We work with the property owner to select products that will last for the lifetime of their home and fit the needs of their family or business. To ensure longstanding customer satisfaction, we will also continue to contact the customer even after the job has been completed. 1,600,000 1,400,000 1,200,000 Highlights 1,000, , , , , Sales Gross Margin Net Profit 2

3 1.3 Keys to Success Marketing: Creating a desire for our services above all competitors is a key to our continued success, as well as creating the perception that we are the top of the line. Craftsmanship: No matter how good the marketing program is, poor-quality of work will destroy our base referral business. It will also take us out of our high end market. Communication: Our communication systems, both internally and with our customers, are the key to excellent performance - projects completed on schedule, on budget and to our customers' satisfaction. We also must ensure that the customer feels like we have been responsive to his/her every request so that we can get a good referral. Building Material prices: In order to turn a profit, we need to have a good feel for the prices of materials in our area, and where to get the best deals. Company Summary Over the past 30 years Re-Bath has become the largest bathroom remodeling franchise in the bathroom remodeling industry. With over 200 franchise locations, this company owes its success to its innovative Dura bath SSP material and a quick, affordable one stop solution to customer s remodeling needs. Re-Bath typically services bathrooms that are 15 years old and guarantees its products with a lifetime warranty. 2.1 Company Ownership Re-Bath is a Limited Liability Company. Matt Vonruden and his father Daniel Vonruden will be purchasing franchise rights to Montgomery county Texas under a Co-ownership. The Woodlands Re-Bath was started by Jeff Housley as a Sole Proprietorship in In his one and a half years of ownership, he has increased gross sales from $500,000 to $800,000 from 2009 to Matt Vonruden and his father, Daniel Vonruden, will be purchasing The Woodlands Re-Bath under Co-Ownership with the intent of continuing to exploit the area for an increased sales growth of 12% per year for the next five years. Increased sales growth will be realized through experience and financial stability. Matt Vonruden s four plus years of experience working as a lead installer for Re-Bath brings experienced leadership to this business proposal. In his over four years working for Re-Bath, he has earned the highest title of Grade A Installer, trained six other Re-Bath installers, and helped build the San Antonio, TX &Texas Bell County Re-Baths from the ground up. Matt s experienced will be enhanced by the assistance of Ryan Garrod, an experienced Re-Bath installer, and, Daniel Vonruden, the Financier. 3

4 2.2 Company History In 1982, Re-Bath was founded to offer bathtub liners top homeowners interested in replacement bathtubs through a dealer network. In 1991, Re-Bath converted its residential dealership business to a franchise organization. In 2000, Re-Bath is awarded its 100 th franchise, making it the largest franchise in the industry. In 2006, Re-Bath was awarded its 200 th franchise and introduced Dura bath SSP, its new proprietary sanitary-ware surface; available in bathtub replacements, walk-in bathtubs, shower bases, wall surrounds and more. In 2009, Re-Bath expanded its product offerings to encompass full bathroom remodeling, including bathroom vanities, toilets and pedestal sinks, bathroom flooring and more. Past Performance 800, , , , , ,000 Sales Gross Margin Net Profit 200, , Past Performance FY 2009 FY 2010 FY 2011 Sales $500,000 $650,000 $800,000 Gross Margin $306,827 $399,302 $490,962 Gross Margin % 61% 61% 61% Operating Expenses $480,303 $585,210 $687,116 Collection Period (days)

5 Products and Services Am Bath, LLC, with whom the Company has an Exclusive Licensing Agreement, is the exclusive manufacturer of most of the Re- Bath Products. Re-Bath products include, Dura bath SSP, replacement bathtubs, walk-in bathtubs, shower bases, wall surrounds, bathroom vanities, toilets and pedestal sinks and bathroom flooring. The Woodlands Re-Bath is a full-service bathroom remodeling company. At present we do mostly high-end and medium income bathroom remodels. It is our philosophy that we can offer a quality product in a timely fashion giving the customer one-on-one service. This includes: Residential Bathroom Remodeling Lake house (second home) Bathroom Remodeling Apartment Bathroom Remodeling Dormitory Bathroom Remodeling HUD Project Bathroom Remodeling Hotel and Motel Bathroom Remodeling Green Remodeling Market Analysis Summary The Woodlands Re-Bath is focusing on both the commercial and residential markets of Montgomery County, with the residential being about 83% of the overall volume of the company. As housing prices fall, potential clients will be more apt to remodel their high-end bathrooms, rather than try to sell them. Medium income clients will be more apt to remodel their older homes in order to increase their appeal and market value. Market Segments Available for Bathroom Remodeling in Montgomery TX 25% 17% 20% 38% Low Income Residential Middle Income Residential High Income Residential Business Remodels 5

6 4.1 Market Segmentation In an era of decreasing residential property values and relatively stable rates of personal income growth, The Woodlands Re- Bath is focusing on two segments of the residential remodeling market: 1) Neighborhoods where homeowners have achieved success in their careers and have room in their budget for investment in their homes, but are not eager to incur a much higher mortgage payment by selling their house and 'buying up.' [Such targeted neighborhoods have housing stock with room to expand and are deemed to be worth the upgrade expenditures.] 2) New build communities. Texas' Montgomery county is the 24th fastest growing county in the United States and for this reason, The Woodlands Re-Bath will target these communities for future sales. Re-Bath intends on becoming a household name for these communities. About 17% of The Woodlands Re-Bath overall volume consists of remodeling projects for businesses. Houses Built in Montgomery County TX Houses Due for a 15 Year Remodel in Montgomery County TX 26% 39% 35% % 39% 35% Due for Remodel in 2004 Due for Remodel in 2005 Due for Remodel * Note that The Woodlands Re-Bath did not open until : 66, 135 houses were built in Montgomery County, TX : 40,795 houses were built in Montgomery County, TX : 49,598 houses were built in Montgomery County, TX. 6

7 4.2 Target Market Segment Strategy Re-Bath s targeted market groups were chosen because of the long-term potential for continued sales. Assuming high quality work and effective word-of-mouth marketing, the targeted, potentially upgradeable, neighborhoods afford a continuing supply of work to do. The business remodels, while providing a smaller portion of the firm's income, offer an important opportunity to build relationships and generate trust with business owners and managers who have homes in the targeted upgradeable' homes. Montgomery County Home Improvement Loans 60,000 40,000 20, # of Loans Approved $ Value of Loans 4.3 Service Business Analysis As a whole, the building industry is a very fragmented industry. Despite large homebuilders, no single company has as much as a 2% market share. The remodeling industry is even more diluted with only a handful of companies in the nation showing annual sales in excess of $10 million. Under the standard definition, all remodelers fall into the category of a small business Competition and Buying Patterns The remodeling market is made up of potential customers who weigh three competing values: Price, Quality and Service. There is a saying that a remodeling company can deliver any two of those values. A large portion of the potential customers are asking for quality and service, and then go shopping for price. These customers are extremely difficult to work for and make a profit. There is another segment of the market that is concerned with getting a "fair" price. Re-Bath offers its customers a lifetime guarantee on their products and services. This guarantee will entice customers that are looking for an investment bargain to choose Re-Bath as their bathroom remodelers. 7

8 Strategy and Implementation Summary Re-Bath will change its focus to differentiate their services from fly-by-night contractors, improve its sales and customer service functions and increase the amount of work received from past clients and referrals. The marketing challenge is to improve the company's image, allowing estimators to price work more profitably, reduce or eliminate the amount of work competitively bid for, and to raise the perceived value the client gains by hiring Re-Bath. 5.1 Sales Strategy 1. The Woodland s Re-Bath needs to sell the company and its lifetime guarantee, not the price. 2. Re-Bath has to sell its quality, convenience and service. It is Re-Bath s goal to install our quality products as quickly and conveniently as possible so that our customers home life will not be disturbed for more than one to two days. Re-Bath s specially designed tub liners and bathroom enclosures ensure the installation of a quality product with convenience and well trained service technicians. The Yearly Total Sales chart summarizes an ambitious sales forecast. The Woodlands Re-Bath expects sales to increase significantly from $800,000 last year. 8

9 Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov Sales Forecast The important elements of the sales forecast are shown in the Total Sales by Month in Year 1 chart. Total sales will increase substantially over the next several years. 120, , Monthly Sales 80, , , , Residential Commercial Other 0.00 Yearly Sales 1,600,000 1,400,000 1,200,000 1,000, , , , , Residential Commercial Other 9

10 Sales Forecast FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Sales Commercial $136,000 $152,320 $170,598 $191,070 $213,999 $239,678 Residential $592,000 $725,760 $812,851 $910,393 $1,019,640 $1,141,997 Other $72,000 $80,640 $90,317 $101,154 $113,293 $126,889 Total Sales $800,000 $896,000 $1,003,520 $1,123,942 $1,258,815 $1,409,873 Absorption Cost of Sales FY 2011 FY 2012 FY2013 FY 2014 FY 2015 FY 2016 Materials $217,006 $243,284 $271,258 $305,165 $341,615 $382,304 Permits & Licensing $4,608 $4,608 $4,608 $4,608 $4,608 $4,608 Sales Commission $79,872 $89,544 $99,840 $112,320 $125,736 $140,712 Vehicle Rental & Ins. $7,200 $7,200 $10,800 $10,800 $10,800 $10,800 Employee Benefits $40,000 $40,000 $70,000 $70,000 $70,000 $70,000 Utilities $23,988 $23,988 $23,988 $23,988 $23,988 $23,988 Labor Wage $45,000 $48,000 $50,000 $55,000 $58,000 $60,000 Sales Tax $68,000 $76,160 $85,299 $95,535 $106,999 $119,893 Franchise Tax $8,000 $8,960 $10,035 $11,239 $12,588 $14,099 Medicare $2,580 $2,580 $4,118 $4,118 $4,118 $4,118 Labor Commission $79,872 $89,544 $99,840 $112,320 $125,736 $140,712 Administrative Pay $22,800 $22,800 $22,800 $22,800 $22,800 $22,800 Loan Payment with 7.5 interest $36,812 $36,812 $36,812 $36,812 $36,812 $36,812 Trash $720 $720 $720 $720 $720 $720 Other $49,992 $49,992 $49,992 $49,992 $49,992 $49,992 Subtotal Absorption Cost of Sales $686,450 $744,192 $840,110 $915,417 $994,512 $1,081, Marketing Strategy The marketing strategy is the core of the main strategy: 1. Emphasize quality, convenience and service. 2. Build a relationship business--treat the customers like members of the family. 3. Take care of the customers for the rest of their life. 5.3 Competitive Edge The Woodlands Re-Bath s competitive edge is its reputation in the community. Over the past five years, Re-Bath has become the largest bathroom remodeling company in the nation. In fact, the first Re-Bath franchises will be opening this year in Ireland, and the UK. Its satisfied customer base continues to expand and spread the word. 10

11 5.4 Milestones The following table lists important program milestones, with dates and persons in charge, and budgets for each. The milestone schedule indicates our emphasis on planning for implementation. The most important programs are the sales and marketing programs listed in detail in the previous topics. Milestones Milestones Start Date End Date Budget Manager Department Business Plan Aug Sept $ Rebecca Eastman Contract New Computer System Nov Nov $800 Daniel Vonruden Co-owner Thank You Cards Dec Dec $20 Matt Vonruden Co-owner SCORE Business Start-up Seminar Oct Oct $0 Matt Vonruden Co-owner Dec. 30 Matt 2011 $0 Vonruden Co-owner Assess Current Store Location Oct Start Woodlands Re-Bath Website Oct Nov $500 Daniel Vonruden Co-owner Web Plan Summary The Woodland s Re-Bath website will be the virtual business card and portfolio for the company, as well as its online "home." It will showcase the construction experience within the company, as well as the portfolio of all the past and current projects done by Re-Bath. The website will include a resources area, offering articles, research and weekly newsletters to interested parties. The key to the website strategy will be combining a very well designed front end, with a back end capable of recording leads and proposal requests. Management Summary The Woodlands Re-Bath is a company that desires to be of service to others. Its whole existence is keyed to helping people who have need to improve the quality of their life. Re-Bath encourages team work and cooperation in helping the customer. The company is very loyal to its employees and provides them with the security and satisfaction to know that they are the business and that without them the company would not exist. 11

12 7.1 Personnel Plan The Personnel Plan reflects the need to bolster our capabilities to match our positioning. Our total head-count should increase to 5 this first year, and to 8 by the third year. This reflects a ~5% growth per year. Personnel Plan FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Labor $89,544 $99,840 $112,320 $125,736 $140,712 Installation Manager $48,000 $50,000 $55,000 $58,000 $60,000 Sales (commission) $89,544 $99,840 $112,320 $125,736 $140,712 Office $22,800 $22,800 $22,800 $22,800 $22,800 Owners $90,808 $102,410 $140,525 $174,303 $211,186 Total People Total Payroll $340,696 $374,890 $442,965 $506,575 $572,593 Financier: Daniel Vonruden (Co-owner) Profession: Senior Electrical Technician with 15 plus years experience. Sales and Marketing: Jose Leva 7 years of Sales and Marketing experience. Leva will be responsible for office staff, sale estimated, customer service and potential service plans. One office staff member: One full time Administrative Assistant. The Administrative assistant would be paid a salary of $22, annually. The Salesman will work on commission that is estimated to be $89,544 the first year, $99840 the second year and $112,320 the third year. They will receive medical insurance. Operations Matt Vonruden 4 Plus years of operational experience as a Re-Bath installer. Vonruden will be categorized as a lead installer and holds a plumber card. Ryan Garrod 1 year of operational experience as a Re-bath installer, 5 years of general constriction experience, and three years of mechanical experience. Vonruden will be working for a minimum wage of plus 2.5 % weekly in addition to owner s profit. Garrod will be working as Installation Manager for $48,000 the first year, $50,000 the second year and $55,000 the third year. They will both work Monday Saturday, 6:00 am 4:00pm. A 14 day training period is required before joining the company. Employees will receive full health coverage costing, $9, per employee annually. 12

13 Financial Plan The most important element in the financial plan is the critical need for improving several of the key factors that impact cash flow: 1. The Woodlands Re-Bath must do a better job of collecting deposits and asking for (demanding) prompt payment from the customers. 2. We must bring the gross margin up to 61%. This is related to improving the marketing program which will generate higher quality leads and jobs. 8.1 Important Assumptions The financial plan depends on important assumptions, most of which are shown in the General Assumptions table below. The key underlying assumptions are: A slow-growth economy, without major recession. There are no unforeseen changes in technology to make our services immediately obsolete (very unlikely). We assume access to equity capital and financing sufficient to maintain our financial plan as shown in the tables. General Assumptions FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Plan Month Current Interest Rate 7.50% 7.50% 7.50% 7.50% 7.50% Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% Tax Rate 25.00% 25.00% 25.00% 25.00% 25.00% Other Projected Profit and Loss The most important assumption in the Projected Profit and Loss statement is the gross margin, which is supposed to increase, up quite a bit from the last year. The increase in gross margin is based on changing our sales mix due to increased target marketing based on 5% assumptions between years. Profit $500,000 $0 FY 2012 FY 2013 FY 2014 FY 2015 FY

14 Pro Forma Profit and Loss FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Sales $896,000 $1,003,520 $1,123,942 $1,258,815 $1,409,873 Absorption Cost of Sales $744,192 $840,110 $915,417 $994,512 $1,081,504 Other Cost of Goods $0 $0 $0 $0 $0 Total Cost of Sales $744,192 $840,110 $915,417 $994,512 $1,081,504 Gross Margin $550,085 $616,625 $690,041 $773,087 $867,497 Gross Margin % 61.39% 61.45% 61.39% 61.41% 61.53% Expenses Payroll $340,696 $374,890 $442,965 $506,575 $572,593 Advertising $6,000 $4,000 $4,000 $4,000 $5,000 Marketing $0 $0 $0 $0 $0 Sales Tax $76,160 $85,299 $95,535 $106,999 $119,839 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Bad Credit $12,210 $12,210 $12,210 $12,210 $12,210 Donations $0 $0 $0 $0 $0 Marketing $0 $0 $0 $0 $0 Entertainment $0 $0 $0 $0 $0 Employee Benefits $40,000 $70,000 $70,000 $70,000 $70,000 Equipment Rental $3,000 $3,000 $3,000 $3,000 $3,000 Bank Interest $13, $12, $10, $8, $5, Tool Repair / Replacement $500 $500 $500 $500 $500 Computer Hardware $800 $100 $100 $500 $100 Other $61,000 $61,000 $68,000 $90,000 $120,000 Dues/Sub./Licenses $4,608 $4,608 $4,608 $4,608 $4,608 Depreciation $8,498 $9,884 $13,937 $17,208 $19,988 Franchise Tax $8,960 $10,035 $11,239 $12,588 $14,099 Legal Expenses $0 $0 $0 $0 $0 Accounting Expenses $2,331 $2,453 $2,582 $2,718 $2,861 Rent Office / Warehouse $10,800 $10,800 $10,800 $10,800 $10,800 Repairs / Maintenance $1,137 $1,197 $1,260 $1,326 $1,396 Utilities $7,200 $7,200 $7,200 $7,200 $7,200 Office Expenses $4,208 $4,430 $4,450 $4,820 $5,139 Employee Liability Insurance $2,689 $3,756 $3,756 $3,756 $3,756 Vehicle Expenses / Insurance $7,200 $7,200 $7,200 $7,200 $7,200 Insurance (general) $1,000 $1,000 $1,000 $1,000 $1,000 Payroll Taxes $64,271 $69,742 $81,704 $95,452 $110,814 Total Operating Expenses $670,209 $745,771 $849,350 $964,253 $1,091,675 Profit Before Interest & Taxes $99,163 $109,959 $142,035 $175,954 $211,186 Net Profit $99,163 $109,959 $142,035 $175,954 $211,186 Net Profit / Sales 11.06% 10.96% 12.64% 13.98% 14.98% 14

15 8.4 Projected Cash Flow The cash flow depends on assumptions for payment days and accounts receivable management. The projected 75-day collection days are critical, and it is also reasonable. Pro Forma Cash Flow FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Cash Received Cash from Operations Cash Sales $447,720 $501,760 $561,971 $629,408 $704,937 Cash from Receivables $447,720 $501,760 $561,971 $629,408 $704,937 Subtotal Cash from Operations $896,000 $1,003,520 $1,123,942 $1,258,815 $1,409,873 Additional Cash Received $0 $0 $0 $0 $0 Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0 New Current Borrowing $0 $0 $0 $0 $0 New Other Liabilities $0 $0 $0 $0 $0 New Long - Term Liabilities $0 $0 $0 $0 $0 Sale of Other Current Assets $0 $0 $0 $0 $0 Sale of Long - Term Assets $0 $0 $0 $0 $0 New Investments Received $0 $0 $0 $0 $0 Subtotal Cash Received $896,000 $1,003,520 $1,123,942 $1,258,815 $1,409,873 Expenditures FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Expenditures from Operations Cash Spending $178,207 $136,318 $223,534 $250,234 $280,038 Bill Payments $670,209 $745,771 $849,350 $964,253 $1,091,675 Subtotal Spent on Operations $848,416 $882,089 $1,072,884 $1,214,469 $1,371,713 Additional Cash Spent Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0 Principle Repayment on Current Borrowing $0 $0 $0 $0 $0 Other Liabilities Principle Payment $0 $0 $0 $0 $0 Purchase Other Current Assets $0 $0 $0 $0 $0 Dividends $0 $0 $0 $0 $0 Subtotal Cash Spent $848,416 $882,089 $1,072,884 $1,214,469 $1,371,713 Net Cash Flow $47,584 $121,431 $51,058 $44,346 $38,160 Cash Balance $161,747 $246,390 $208,093 $235,300 $264,346 15

16 8.5 Projected Balance Sheet The Projected Balance Sheet is quite solid. We do not project any real trouble meeting our debt obligations--as long as we can achieve our specific objectives. 8.6 Business Ratios The table follows with our main business ratios. We do intend to improve gross profit and collection days. 8.7 Long-term Plan The long-term plan is shown in the Appendix. Appendix Sales Forecast Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Sales Commercial $3,237 $3,699 $5,780 $11,098 $16,416 $20,116 $19,884 $16,647 $12,486 $9,249 $6,705 $6,474 Residential $73,410 $76,879 $77,746 $89,884 $96,243 $101,156 $99,711 $109,827 $111,850 $119,075 $116,301 $116,532 Other $151 $151 $151 $151 $151 $151 $151 $151 $2,900 $3,587 $151 $151 Total Sales $76,798 $80,729 $83,677 $101,133 $112,810 $121,423 $119,746 $126,625 $127,236 $131,911 $123,157 $123,157 16

17 Direct Cost of Sales Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Materials $13,056 $13,724 $14,225 $17,193 $19,178 $20,642 $20,357 $21,526 $21,630 $22,425 $20,937 $20,937 Sub-Contractor Costs $26,879 $28,255 $29,287 $35,397 $39,484 $42,498 $41,911 $44,319 $44,533 $46,169 $43,105 $43,105 Permits & Licensing $282 $282 $282 $282 $282 $282 $282 $282 $282 $282 $282 $282 Sales Costs w/commission $484 $509 $527 $637 $711 $765 $754 $798 $802 $831 $776 $776 Warranties $377 $385 $393 $401 $409 $417 $425 $434 $443 $452 $461 $470 Trash $530 $530 $530 $530 $530 $530 $530 $530 $530 $530 $530 $530 Other $161 $161 $161 $161 $161 $161 $161 $161 $161 $161 $161 $161 Subtotal Direct Cost of Sales $41,769 $43,846 $45,406 $54,601 $60,754 $65,295 $64,421 $68,050 $68,381 $70,850 $66,252 $66,261 Personnel Plan Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Labor $14,986 $14,986 $14,986 $14,986 $14,986 $14,986 $14,986 $14,986 $14,986 $14,985 $14,985 $14,985 Prod. Manager $3,153 $3,153 $3,153 $3,153 $3,153 $3,153 $3,153 $3,153 $3,153 $3,154 $3,154 $3,154 17

18 Design $887 $887 $887 $887 $887 $887 $887 $888 $888 $888 $888 $888 Prod Mgr. (office) $773 $773 $773 $773 $773 $773 $773 $773 $773 $773 $773 $773 Sales (salaried/draw) $712 $713 $713 $713 $713 $713 $713 $713 $713 $713 $713 $713 Office $3,555 $3,555 $3,555 $3,555 $3,555 $3,555 $3,555 $3,555 $3,555 $3,555 $3,555 $3,555 Owners $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 Total People Total Payroll $30,566 $30,567 $30,567 $30,567 $30,567 $30,567 $30,567 $30,568 $30,568 $30,568 $30,568 $30,568 General Assumptions Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Plan Month Current Interest Rate 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% Tax Rate 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 18

19 Other Pro Forma Profit and Loss Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Sales 76,798 80,729 83, , , , ,746 $126,625 $127,236 $131,911 $123,157 $123,157 Direct Cost of Sales $41,769 $43,846 $45,406 $54,601 $60,754 $65,295 $64,421 $68,050 $68,381 $70,850 $66,252 $66,261 Other Costs of Goods $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Cost of Sales 41,769 43,846 45,406 $54,601 $60,754 $65,295 $64,421 $68,050 $68,381 $70,850 $66,252 $66,261 Gross Margin 35,029 36,883 38,271 $46,532 $52,056 $56,128 $55,325 $58,575 $58,855 $61,061 $56,905 $56,896 Gross Margin % 45.61% 45.69% 45.74% 46.01% 46.14% 46.22% 46.20% 46.26% 46.26% 46.29% 46.21% 46.20% Expenses Payroll 30,566 30,567 30,567 $30,567 $30,567 $30,567 $30,567 $30,568 $30,568 $30,568 $30,568 $30,568 Advertising $556 $612 $673 $740 $814 $895 $985 $1,084 $1,192 $1,311 $1,442 $1,586 Depreciation $738 $738 $738 $738 $738 $738 $738 $738 $738 $738 $738 $738 Marketing $643 $707 $778 $856 $942 $1,036 $1,140 $1,254 $1,379 $1,517 $1,669 $1,836 19

20 Bad Debts $187 $187 $187 $187 $187 $187 $187 $187 $187 $187 $187 $187 Donations $197 $197 $197 $197 $197 $197 $197 $197 $197 $197 $197 $197 Entertainment 50% $175 $175 $175 $175 $175 $175 $175 $175 $175 $175 $175 $175 Employee Benefits $4,129 $4,335 $4,552 $4,780 $5,019 $5,270 $5,534 $5,811 $6,102 $6,407 $6,727 $7,063 Equipment Buy/Rental $244 $256 $269 $282 $296 $311 $327 $343 $360 $378 $397 $417 Interest/Bank Charges ($17) ($17) ($17) ($17) ($17) ($17) ($17) ($17) ($17) ($17) ($17) ($17) Tool Repair/Replacement $230 $230 $230 $230 $230 $230 $230 $230 $230 $230 $230 $230 Computer/Hardware/Software Consultants $541 $568 $596 $626 $657 $690 $724 $760 $798 $838 $880 $924 Dues/Sub/Licenses/Royalties/Trade Assoc. $237 $237 $237 $237 $237 $237 $237 $237 $237 $237 $237 $237 Corp & Business Taxes $175 $175 $175 $175 $175 $175 $175 $175 $175 $175 $175 $175 Legal Expenses $109 $109 $109 $109 $109 $109 $109 $109 $109 $109 $109 $109 Accounting Expenses $194 $194 $194 $194 $194 $194 $194 $194 $194 $194 $194 $194 Rent of Office/Warehouse Space $1,210 $1,210 $1,210 $1,210 $1,210 $1,210 $1,210 $1,210 $1,210 $1,210 $1,210 $1,210 Repairs/Maintenance $95 $95 $95 $95 $95 $95 $95 $95 $95 $95 $95 $95 20

21 Communications $780 $780 $780 $780 $780 $780 $780 $780 $780 $780 $780 $780 Utilities $77 $77 $77 $77 $77 $77 $77 $77 $77 $77 $77 $77 Office Expenses $701 $701 $701 $701 $701 $701 $701 $701 $701 $701 $701 $701 Miscellaneous/Other $382 $382 $382 $382 $382 $382 $382 $382 $382 $382 $382 $382 Liability Insurance $626 $626 $626 $626 $626 $626 $626 $626 $626 $626 $626 $626 Vehicle Expenses & Insurance $866 $866 $866 $866 $866 $866 $866 $866 $866 $866 $866 $866 Liability Insurance for employees $42 $42 $42 $42 $42 $42 $42 $42 $42 $42 $42 $42 Vehicle Expenses & Insurance $337 $337 $337 $337 $337 $337 $337 $337 $337 $337 $337 $337 Insurance - General (#43) $85 $85 $85 $85 $85 $85 $85 $85 $85 $85 $85 $85 Payroll Taxes $5,471 $5,472 $5,472 $5,472 $5,472 $5,472 $5,472 $5,472 $5,472 $5,472 $5,472 $5,472 Total Operating Expenses 49,578 49,944 50,334 $50,750 $51,194 $51,668 $52,176 $52,719 $53,298 $53,918 $54,582 $55,293 Profit Before Interest and Taxes (14549) (13061) (12062) ($4,217) $862 $4,460 $3,150 $5,856 $5,557 $7,143 $2,323 $1,603 EBITDA (13811) (12323) (11324) ($3,479) $1,600 $5,198 $3,888 $6,594 $6,295 $7,881 $3,061 $2,341 Interest Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 21

22 Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Net Profit (14549) (13061) (12062) (4,217) 862 4,460 3,150 5,856 5,557 7,143 2,323 1,603 Net Profit/Sales -18.9% -16.2% -14.4% -4.2% 0.76% 3.67% 2.63% 4.62% 4.37% 5.42% 1.89% 1.30% Pro Forma Cash Flow Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Cash Received Cash from Operations Cash Sales $19,200 $20,182 $20,919 $25,283 $28,203 $30,356 $29,937 $31,656 $31,809 $32,978 $30,789 $30,789 Cash from Receivables $294,000 $294,000 $177,719 $59,171 $61,726 $69,740 $80,521 $88,053 $90,396 $92,561 $95,213 $97,297 Subtotal Cash from Operations $313,200 $314,182 $198,638 $84,454 $89,928 $100,096 $110,457 $119,709 $122,205 $125,539 $126,002 $128,086 Additional Cash Received Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 New Current $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 22

23 Borrowing New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Cash Received $313,200 $314,182 $198,638 $84,454 $89,928 $100,096 $110,457 $119,709 $122,205 $125,539 $126,002 $128,086 Expenditures Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Expenditures from Operations Cash Spending $30,566 $30,567 $30,567 $30,567 $30,567 $30,567 $30,567 $30,568 $30,568 $30,568 $30,568 $30,568 Bill Payments $71,721 $60,124 $62,550 $64,755 $74,265 $80,810 $85,646 $85,430 $89,493 $90,475 $93,331 $89,552 Subtotal Spent on Operations $102,288 $90,691 $93,117 $95,322 $104,832 $111,377 $116,213 $115,998 $120,061 $121,044 $123,899 $120,120 Additional Cash 23

24 Spent Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Cash Spent $102,288 $90,691 $93,117 $95,322 $104,832 $111,377 $116,213 $115,998 $120,061 $121,044 $123,899 $120,120 Net Cash Flow $210,912 $223,491 $105,522 ($10,868) ($14,904) ($11,281) ($5,756) $3,710 $2,144 $4,495 $2,103 $7,967 Cash Balance $394,340 $617,831 $723,353 $712,485 $697,581 $686,300 $680,544 $684,255 $686,399 $690,894 $692,997 $700,964 We recommend using Business Plan Pro as the easiest way to create automatic financials for your own business plan. Pro Forma Balance Sheet 24

25 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Assets Starting Balances Current Assets Cash $183,428 $394,340 $617, , ,485 $697,581 $686,300 $680,544 $684,255 $686,399 $690,894 $692,997 $700,964 Accounts Receivable $735,000 $498,599 $265, , ,863 $189,744 $211,071 $220,360 $227,276 $232,307 $238,679 $235,834 $230,904 Other Current Assets $31,380 $31,380 $31,380 $31,380 $31,380 $31,380 $31,380 $31,380 $31,380 $31,380 $31,380 $31,380 $31,380 Total Current Assets $949,808 $924,318 $914, , ,728 $918,705 $928,751 $932,284 $942,911 $950,086 $960,953 $960,211 $963,249 Long-term Assets Long-term Assets $145,879 $145,879 $145, , ,879 $145,879 $145,879 $145,879 $145,879 $145,879 $145,879 $145,879 $145,879 Accumulated Depreciation $56,879 $57,617 $58,355 $59,093 $59,831 $60,569 $61,307 $62,045 $62,783 $63,521 $64,259 $64,997 $65,735 Total Longterm Assets $89,000 $88,262 $87,524 $86,786 $86,048 $85,310 $84,572 $83,834 $83,096 $82,358 $81,620 $80,882 $80,144 Total Assets 1,038,808 1,012,580 1,001, , ,776 1,004,015 1,013,323 1,016,118 1,026,007 1,032,444 1,042,573 1,041,093 1,043,393 25

26 Liabilities and Capital Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Current Liabilities Accounts Payable $69,720 $58,041 $60,402 $62,286 $71,577 $77,955 $82,803 $82,448 $86,481 $87,360 $90,347 $86,543 $87,239 Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Current Liabilities $69,720 $58,041 $60,402 $62,286 $71,577 $77,955 $82,803 $82,448 $86,481 $87,360 $90,347 $86,543 $87,239 Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Liabilities $69,720 $58,041 $60,402 $62,286 $71,577 $77,955 $82,803 $82,448 $86,481 $87,360 $90,347 $86,543 $87,239 Paid-in Capital $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 Retained Earnings $949,088 $949,088 $949, , ,088 $949,088 $949,088 $949,088 $949,088 $949,088 $949,088 $949,088 $949,088 Earnings $0 ($14,549) ($27,610) (39,672) (43,889) ($43,027) ($38,567) ($35,418) ($29,562) ($24,004) ($16,861) ($14,538) ($12,935) 26

27 Total Capital $969,088 $954,539 $941, , ,199 $926,061 $930,521 $933,670 $939,526 $945,084 $952,227 $954,550 $956,153 Total Liabilities and Capital 1,038,808 1,012,580 1,001, , ,776 1,004,015 1,013,323 1,016,118 1,026,007 1,032,444 1,042,573 1,041,093 1,043,393 Net Worth $969,088 $954,539 $941, , ,199 $926,061 $930,521 $933,670 $939,526 $945,084 $952,227 $954,550 $956,153 Long-term FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Sales $1,328,403 $1,496,903 $1,666,998 $1,822,098 $1,982,202 $1,995,000 $2,024,925 $2,055,299 $2,086,128 $2,117,420 Cost of Sales $715,885 $805,135 $895,541 $978,094 $1,063,327 $1,057,350 $1,073,210 $1,089,308 $1,105,648 $1,122,233 Gross Margin $612,517 $691,768 $771,457 $844,004 $918,875 $937,650 $951,715 $965,990 $980,480 $995,188 Gross Margin % 46.11% 46.21% 46.28% 46.32% 46.36% 47.00% 47.00% 47.00% 47.00% 47.00% Operating Expenses $625,452 $668,161 $703,328 $740,345 $779,309 $778,050 $789,721 $801,567 $813,590 $825,794 Operating Income ($12,935) $23,607 $68,129 $103,658 $139,566 $159,600 $161,994 $164,424 $166,890 $169,394 Net Income ($12,935) $17,705 $51,097 $77,744 $104,675 $1,321,466 $1,453,613 $1,598,974 $1,758,872 $1,934,759 Current Assets $963,249 $989,191 $1,059,473 $1,156,141 $1,280,569 $1,283,130 $1,285,696 $1,288,267 $1,290,844 $1,293,426 27

28 Long-term Assets $80,144 $70,822 $61,009 $50,680 $39,807 $36,031 $39,634 $43,598 $47,958 $52,753 Current Liabilities $87,239 $86,155 $95,527 $104,122 $113,002 $92,950 $102,245 $112,470 $123,716 $136,088 Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Equity $956,153 $973,858 $1,024,955 $1,102,699 $1,207,374 $1,226,211 $1,223,085 $1,219,396 $1,215,085 $1,210,091 28