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Table of Contents
1.0 Executive Summary.............................................................................................................................1
Chart: Highlights ......................................................................................................................2
1.1 Objectives ...................................................................................................................................2
1.2 Keys to Success ........................................................................................................................2
1.3 Mission........................................................................................................................................3
2.0 Company Summary.............................................................................................................................3
2.1 Company Ownership .................................................................................................................3
2.2 Start-up Summary ......................................................................................................................4
Chart: Start-up .........................................................................................................................4
Table: Start-up .........................................................................................................................5
Table: Start-up Funding ..........................................................................................................6
3.0 Products ...............................................................................................................................................6
4.0 Market Analysis Summary..................................................................................................................7
4.1 Market Segmentation ................................................................................................................7
Table: Market Analysis ...........................................................................................................8
Chart: Market Analysis (Pie) ..................................................................................................8
4.2 Industry Analysis .........................................................................................................................8
4.2.1 Competition and Buying Patterns................................................................................9
5.0 Strategy and Implementation Summary ............................................................................................9
5.1 Competitive Edge....................................................................................................................10
5.2 Marketing Strategy ..................................................................................................................10
5.3 Sales Strategy..........................................................................................................................10
5.3.1 Sales Forecast ............................................................................................................10
Chart: Sales Monthly ...................................................................................................11
Chart: Sales by Year ...................................................................................................11
Table: Sales Forecast.................................................................................................12
6.0 Management Summary ....................................................................................................................12
6.1 Personnel Plan.........................................................................................................................13
Table: Personnel ...................................................................................................................13
7.0 Financial Plan ....................................................................................................................................13
7.1 Important Assumptions............................................................................................................13
Table: General Assumptions ...............................................................................................13
7.2 Break-even Analysis................................................................................................................14
Chart: Break-even Analysis .................................................................................................14
Table: Break-even Analysis .................................................................................................14
7.3 Projected Profit and Loss .......................................................................................................15
Table: Profit and Loss ..........................................................................................................15
Chart: Profit Monthly .............................................................................................................16
Chart: Profit Yearly................................................................................................................16
Chart: Gross Margin Monthly ...............................................................................................17
Chart: Gross Margin Yearly..................................................................................................17
7.4 Projected Cash Flow...............................................................................................................17
Chart: Cash ...........................................................................................................................18
Table: Cash Flow..................................................................................................................19
7.5 Projected Balance Sheet ........................................................................................................20
Table: Balance Sheet ...........................................................................................................20
7.6 Business Ratios .......................................................................................................................21
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Table of Contents
Table: Ratios .........................................................................................................................22
Table: Sales Forecast ...............................................................................................................................1
Table: Personnel ........................................................................................................................................2
Table: General Assumptions ....................................................................................................................3
Table: Profit and Loss ...............................................................................................................................4
Table: Cash Flow .......................................................................................................................................5
Table: Balance Sheet ................................................................................................................................6

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Flyleaf Books
1.0 Executive Summary
Introduction
Flyleaf Books is a start-up used bookstore in the Cleveland, Ohio area. It is the goal of the
company management to ac quire loc al market share in the used bookstore industry through
low price, a dominant selection of products, a competitive variety of services including a
buybac k/trade program and hard to find book search, plus a relaxing, friendly environment that
encourages browsing and reading.
Company
Flyleaf will be a limited liability corporation registered in the state of Ohio. The company will be
jointly owned by Mr. James Vinck, a former head librarian of the Philadelphia City Library, and
his wife Arac ela.
Mr. Vinck is establishing this firm as a growth-oriented endeavor in order to supplement his
retirement, continue meeting people with similar interests, and to leave a viable business to his
children. Flyleaf Books will be establishing its store in one of the busiest section of Brecksville, an
outlying suburb of Cleveland. This area is well know for its upsc ale residents and high-quality
establishments. Our fac ility is a former 8,000 square ft. furniture store which allows the company
to stoc k a large amount of inventory.
Products/Services
Flyleaf Books will offer a wide range of book, magazine, and music selections. This includes just
about every conceivable category including fiction, non-fiction, business, sc ience, children's,
hobbies, collecting, and other types of books. Our music selection will concentrate on CD's as
these are the most popular and take up the least amount of floor space. In addition, we will be
offering a competitive buy and trade service to assist in lowering our inventory ac quisition
costs and making our store more attrac tive to our customers. In addition, we offer a search
and order service for customer seeking to find hard to get items. Flyleaf Books will have a
relaxed "reading room" type atmosphere that we will encourage through the plac ement of
chairs, couches, etc.
Market
Our market is fac ing a dec line in growth over the past two years. This is attributed to the overall
weak economy. Book store industry sales rose only 3.6% for last year whereas overall U.S.
retail sales grew by 4.3%. However, management believes that this may be an advantage to the
used bookstore industry. As customers cut bac k on purchasing, used bookstores will look more
attrac tive to customers who still wish to purchase books. Therefore, management believes
this may be a good time to get into the industry and gain market share.
The bookstore industry as a whole is going through a large consolidation. Previously, the
market was dominated by loc al, small stores and regional chains. With the advent of the
"superstore" as created by Barnes & Noble, the largest players in the market have been able to
gather significant market share and drive many independent booksellers out of the market.
Where independent booksellers can still create a viable position for themselves within the market
is in the used books segment. This segment generally does not attrac t big companies since the
"superstore" concept is much more difficult to replicate in a market with such low profit
margins. This tends to favor the loc al independent bookseller in the used book market segment
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Flyleaf Books
as long as they can ac quire a sufficiently large enough fac ility to house an attrac tive inventory
and compete with the national chains.
Financial Considerations
Our start-up expenses come to $178,000, which are single time fees associated with opening the
store. These costs are financed by both private investors and SBA loans. Please note that we
expec t to be operating at a loss for the first couple of months before advertising begins to
take effect and draw in c ustomers. Flyleaf Books will be receiving periodic influxes of cash to
cover operating expenses during the first two years as it strives toward sustainable
profitability. Funding has been arranged through lending institutions and private investors
already. We do not anticipate any cash flow problems during the next three years.

1.1 Objectives
These are the goals for the next three years for Flyleaf Books:

Ac hieve profitability by July Year 2.

Earn approximately $200,000 in sales by Year 3.
Pay owners a reasonable salary while running at a profit.

1.2 Keys to Success

In order to survive and expand, Flyleaf Books must keep the following issues in mind:

We must attain a high level of visibility through the media, billboards, and other
advertising.
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Flyleaf Books

We must establish rigid proc edures for cost control and incentives for maintaining tight
control in order to bec ome THE low-cost leader in used books.
In order to continually attrac t customers, we must be able to keep the maximum
amount of inventory available and ac hieve a high level of customer service.

1.3 Mission
Flyleaf Book's mission is to provide used quality literature of all types at the lowest possible
prices in the Cleveland, OH area. The company additionally seeks to provide a comfortable
atmosphere for its clients that promotes browsing, relaxation, and an enjoyable environment to
spend extend time in. Flyleaf's attrac tion to its customers will be our large selection of books,
magazines, used CD's and our purchasing/buyback option, which lower our book ac quisition costs
and allows our customers to disc ard unwanted books/CD's in exchange for cash.

2.0 Company Summary

Flyleaf will be a limited liability corporation registered in the state of Ohio. The company will be
jointly owned by Mr. James Vinck, a former head librarian of the Philadelphia City Library, and
his wife Arac ela.
Flyleaf Books will be establishing its store in one of the busiest section of Brecksville, an
outlying suburb of Cleveland. This area is well know for its upsc ale residents and high-quality
establishments. Our fac ility is a former 8,000 square ft. furniture store which allows the company
to stoc k a large amount of inventory.

2.1 Company Ownership

Flyleaf will be a limited liability corporation registered in the state of Ohio. The company will be
jointly owned by Mr. James Vinck, a former head librarian of the Philadelphia City Library, and
his wife Arac ela. Due to high start-up costs, the income and dividends to the principals will be
limited for at least the first three years of operation.
The company plans to be leveraged through private investment and a limited number of loans.
Mr. Vinck is establishing this firm as a growth-oriented endeavor in order to supplement his
retirement, continue meeting people with similar interests, and to leave a viable business to his
children. Flyleaf Books will be establishing its store at 14539 Greenhouse Ave NW, one of the
busiest section of Brecksville, an outlying suburb of Cleveland. This area is well know for its
upsc ale residents and high-quality establishments. Our fac ility is a former 8,000 square ft.
furniture store which allows the company to stoc k a large amount of inventory. This fac ility is
loc ated in the front of the Loeman's Square strip mall. This is an excellent loc ation since it is
ac ross the street from the Twin Towers shopping mall. Other establishments within this strip mall
include Fry's Food and Drug, Subway Sandwiches, Boaters World, Michael's Arts and Crafts,
Office Depot, and Jared Jewelry. The company expec ts to begin offering its services in July.

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Flyleaf Books
2.2 Start-up Summary
Our start-up expenses come to $178,000, which are largely single time fees assoc iated with
opening the store. These costs are financed by both private investment and short- and longterm SBA guaranteed loans.

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Flyleaf Books
Table: Start-up
Start-up
Requirements
Start-up Expenses
Legal
Pre-sale advertising/marketing
Land location and finders fee
Insurance
Rent
Expensed Equipment
Initial store facilities
Other
Total Start-up Expenses

$2,400
$4,000
$20,000
$1,780
$6,000
$25,000
$50,000
$3,000
$112,180

Start-up Assets
Cash Required
Start-up Inventory
Other Current Assets

$33,820
$16,000
$8,000

Long-term Assets
Total Assets

$8,000
$65,820

Total Requirements

$178,000

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Flyleaf Books
Table: Start-up Funding
Start-up Funding
Start-up Expenses to Fund
Start-up Assets to Fund
Total Funding Required

$112,180
$65,820
$178,000

Assets
Non-cash Assets from Start-up
Cash Requirements from Start-up
Additional Cash Raised
Cash Balance on Starting Date

$32,000
$33,820
$0
$33,820

Total Assets

$65,820

Liabilities and Capital

Liabilities
Current Borrowing
Long-term Liabilities
Accounts Payable (Outstanding Bills)
Other Current Liabilities (interest-free)
Total Liabilities

$15,000
$75,000
$8,000
$10,000
$108,000

Capital
Planned Investment
Mr. James Vinck
Mrs. Aracela Vinck
Additional Investment Requirement

$50,000
$20,000
$0

Total Planned Investment

$70,000

Loss at Start-up (Start-up Expenses)

Total Capital

Total Capital and Liabilities

Total Funding

($112,180)
($42,180)

$65,820
$178,000

3.0 Products
Flyleaf Books will offer a wide range of book, magazine, and music selections. This includes just
about every conceivable category including fiction, non-fiction, business, sc ience, children's,
hobbies, collecting, and other types of books.
Our music selection will concentrate on CDs as these are the most popular and take up the least
amount of floor space. In addition, we will be offering a competitive buy and trade service to
assist in lowering our inventory ac quisition costs and making our store more attrac tive to our
customers. We also offer a search and order service for customer seeking hard to find items.
Another less obvious service to our customers will be the relaxed "reading room" type
atmosphere that we will encourage through the plac ement of chairs, couches, and etc. We
strongly encourage our customers to spend as long as they like reading through our book
selection and enjoying a quiet, relaxing environment. Our store hours will be 8:30 a.m. to 8:00
p.m. Monday-Friday and 10:00 a.m. to 6:00 p.m. Saturday. Once profitability bec omes stable,
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Flyleaf Books
we will extend these hours.

4.0 Market Analysis Summary

Our market is fac ing a dec line in growth over the past two years. This is attributed to the overall
weak economy. Book store industry sales rose only 3.6% for 2002 whereas overall U.S. retail
sales grew by 4.3%. Management believes that the economic slump may be an advantage to the
used bookstore industry. As customers cut bac k on purchasing, used bookstores will look more
attrac tive to customers who still wish to purchase books. Therefore, management believes
this may be a good time to get into the industry and gain market share.
Used bookstores serve the entire purchasing population of its geographical area but foc uses on
the customer who desire to purchase books/music at a disc ount price and, with regards to
books, often do not see a long-term attac hment to the product.
Our main c ompetitors are: Barnes & Noble (which holds approximately 22% nationwide market
share), Borders (which holds approximately 15%), and other loc al new and used bookstores.

4.1 Market Segmentation

The company anticipates serving the needs of all the potential customers within a ten to
fifteen mile radius in which the approximate population is 150,000 (based on census information).
The majority of the residents in this area are Caucasian (78.8%) Blac k (13.6%) and Hispanic
(9%) with occupations classified as professional, homemaker, or retired. The majority of
household incomes range from $50,000 - $100,000 (50.3%). The median income in this area is
$68,096, compared to the whole Cleveland area which is $34,248. The typical "head of
household" age is 25 - 34 (22.4%) or age 34 - 44 (23.1%) with a median age of 44.4 years old
and an average age of 32 years old.
Target market segments
Used bookstores serve the entire purchasing population of its geographical area but foc uses on
customers who desire to purchase books/music at disc ount prices bec ause they are seen
either as near commodity items or, in the case of books, are not considered to be a long-term
investment (i.e. they will trade them bac k). Because of this relatively low value plac ed upon
our merchandise by potential customers, Flyleaf Books can still flourish in an upsc ale environment
like Brecksville. This is especially true with people seeking to cut costs with the bad economy.
Even though we service the entire book reading population in Brecksville and the surrounding
area, we can divide our customers based on purchasing habits.

Casual Shoppers: These are customers who go to the bookstore with no set idea of
what they want to purchase. They seek to spend a fair amount of time browsing the
store and often are considered impulse buyers. Often they leave the store with small
purchases or without buying anything. These customers are attrac ted to bookstores with
low prices and large inventory.
"Hard to Find" Shoppers: These are customers with very specific needs. They are
looking for a difficult to obtain item, usually a book that is out of print. If we can satisfy
this customer, then we are able to build significant customer loyalty. These clients are
generally price insensitive and are also drawn to stores that have large inventory.
Specific Category Shoppers: These customers are those types that generally buy
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Flyleaf Books
books or music of one category, such as fiction or romance. These customers generally
have a good idea of what they want to purchase and have the greatest buybac k/trade
potential. These customers represent the highest volume purchaser, often leaving the
store having spent $30-$50.
The following table and pie graph show how our market segments are broken up into size and
relative percentages. We use the city of Brecksville census information to determine growth
figures.

Table: Market Analysis

Market Analysis
Potential Customers
Casual shoppers
"Hard to find" shoppers
Specific category shoppers
Total

Growth
2%
2%
2%
2.00%

Year 1

Year 2

Year 3

Year 4

Year 5

78,000
22,000
50,000
150,000

79,560
22,440
51,000
153,000

81,151
22,889
52,020
156,060

82,774
23,347
53,060
159,181

84,429
23,814
54,121
162,364

CAGR
2.00%
2.00%
2.00%
2.00%

4.2 Industry Analysis

Our market is fac ing a dec line in growth over the past two years. This is attributed to the overall
weak economy. Book store industry sales rose only 3.6% for 2002 whereas overall U.S. retail
sales grew by 4.3%. However, management believes that this may be an advantage to the
used bookstore industry. Ac cording to interviews made by Mr. Vinck with bookstore owners
and managers, the used book industry has typically done better than other retailers during
economic downturns. As customers cut bac k on purchasing, used bookstores will look more
attrac tive to purchase books. Therefore, management believes this may be a good time to get
into the industry and gain market share. As the weak economy continues, we expec t growth
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Flyleaf Books
to be initially quite high but overall volume sales to be low, and then seeing this taper off to
industry norms.
The bookstore industry as a whole is going through a large consolidation. Previously, the
market was dominated by loc al, small stores and regional chains. With the advent of the
"superstore" as created by Barnes & Noble, the largest players in the market have been able to
gather significant market share and drive a lot of independent booksellers out of the market.
Where independent booksellers can still create a viable position for themselves is within the used
books segment. This segment generally does not attrac t big companies since the "superstore"
concept is much more difficult to replicate in a market with such low profit margins. Dominant
selection, both in used and new books is the key to bringing in new customers and the only
way to do that is to operate at a low-price leader. These two fac tors tend to favor the loc al
independent bookseller in the used book market segment as long as they can ac quire a
sufficiently large enough fac ility to house an attrac tive inventory and LOCALLY compete with the
national chains.

4.2.1 Competition and Buying Patterns

Our main c ompetitors are: Barnes & Noble (which holds approximately 22% nationwide market
share), Borders (which holds approximately 15%), and other loc al new and used bookstores.
The used bookstore that most closely rivals our own is Greenbaum Books which is loc ated
approximately 13 miles away in Ashbury. It is estimated that they hold 9% of the loc al market
share.
Management feels it must be clearly stated that we do not intend to directly compete with the
Barnes & Noble/Borders superstores. Superstores are large and carry approximately 150,000 titles
per loc ation. Over the years, these large companies has successfully leveraged their resources
to engineer customer experience to a degree that consistently differentiates otherwise
commodity-like products and services. This differentiation provides these companies strategic
competitive advantage. Resources such as distribution technology, strategic alliances, proc ess
research and development, and brand name combine into value-added services that provide
the customer with proximity, dominant selection, disc ounts, and store ambiance. This is simply
beyond our capacity and we will be fulfilling a sufficiently different need for our customers.
However, we believe that we can successfully duplicate the differentiated experience for our
customer without the overall costs.

5.0 Strategy and Implementation Summary

Flyleaf's competitive edge will be the lower prices we will charge our customers and the dominant
selection above what our used bookstore rivals can offer. This is based on management's
industry knowledge, greater capitalization and excellent loc ation. One of the most critical
element of Flyleaf's success will be its marketing and advertising. In order to capture attention
and sales our company will use prominent signs at the store loc ations, billboards, media bites on
loc al news, and radio advertisements to capture customers. We expec t an average 4.5%
increase in sales during the first three years as we establish ourselves in the community. After
that we assume a much higher average growth of between 10%-15% growth over the next
five years with growth then tapering off to the industry average of 2.5% from year to year.
These figures may seem very high, but considering the level of initial sales and the growth
possibilities, management ac tually considers this to be conservative.
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Flyleaf Books

5.1 Competitive Edge

The company's competitive edge will be the lower prices we will charge our customers and the
larger selection we can offer: through our large store, buybac k/trade program, and leveraging
management excellent supplier contac ts. As stated before, in the bookstore industry, low cost
and dominate selection are the two success criteria. We plan to create these advantages in a
new, comforting environment that will retain c ustomers.

5.2 Marketing Strategy

One of the most critical elements of Flyleaf Book's success will be its marketing and advertising.
In order to capture attention and sales our company will use prominent signs at the store
loc ations, billboards, media bites on loc al news, and radio advertisements to capture customers.

5.3 Sales Strategy

Since our store will be a stand alone fac ility, there is little in the way to directly influence how
we close the sale other than to have an attrac tive storefront with our low prices and excellent
selection. We believe this in itself is its own seller. One critical proc edure we will be establishing
is to insure top customer service and reliability and that our store always has enough inventory
of all our products. We will be using industry data on inventory for bookstore chains to assist us.

5.3.1 Sales Forecast

Based on a 10% mark-up, our forecasted sales will increase by an average of 4.5% from year
to year.
These sales figures are based on a conglomerate of commuter and walk-by traffic established by
the Loeman/Twin Towers Mall management and with an average $3.00 purchase amount
conforming to industry averages. The target profit margin was defined as an average net profit
of all merchandise. As retained earnings increase, a debt retirement fund will be established to
encourage early repayment, thus relieving interest expense. Also, a cash basis for purchases
will be used to avoid incurring liabilities.

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Flyleaf Books

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Flyleaf Books
Table: Sales Forecast
Sales Forecast
Year 1

Year 2

Year 3

Sales
Fiction Books
Sci-Fi Books
Magazines/newspapers
Children's Books
Biography Books
Business Books
CD's and Music
Other
Total Sales

$164,292
$184,829
$143,756
$184,829
$123,219
$112,951
$184,829
$205,366
$1,304,071

$172,507
$194,070
$150,944
$194,070
$129,380
$118,599
$188,526
$209,473
$1,357,569

$182,512
$205,327
$159,698
$205,327
$136,884
$125,477
$199,460
$214,081
$1,428,767

Direct Cost of Sales

Fiction Books
Sci-Fi Books
Magazines/newspapers
Children's Books
Biography Books

Year 1
$126,505
$142,318
$110,692
$142,318
$94,879

Year 2
$131,105
$147,494
$114,717
$147,494
$98,329

Year 3
$136,884
$153,995
$119,774
$153,995
$102,663

$86,972
$142,318
$158,131
$1,004,135

$90,135
$143,279
$159,199
$1,031,752

$94,108
$149,595
$160,561
$1,071,575

Business Books
CD's and Music
Other
Subtotal Direct Cost of Sales

6.0 Management Summary

As stated earlier, Flyleaf Books will be an LLC company owned by Mr. James Vinck and his wife,
Arac ela. Mrs. Vinck is expec ted to assist Mr. Vinck in various ways and to ac t as the
company's bookkeeper. The ower's son, Todd, is currently a business major at OSU and is
expec ted to graduate in 2005. He has expressed an interest in eventually taking over the
management of the company and will be working as a part-time manager with this goal in mind.
The company also plans to hire various part-time salespeople as needed. Additional personnel will
be added if nec essary.
Mr. James Vinck is a graduate of the Dartmouth University, with a degree in library sc ience. He
has worked for more than twenty years for the Philadelphia city library system and in 1995
bec ame the head librarian. Over that time Mr. Vinck has established excellent contac ts in the
book ac quisition industry and plans to leverage these contac ts in his new business.

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Flyleaf Books
6.1 Personnel Plan
Initially the company will have a small staff including upper management and sales personnel. We
expec t to expand our personnel and extend our hours once we begin to make a profit.

Table: Personnel
Personnel Plan
Mr. James Vinck
Mr. Todd Vinck
Salesperson

Year 1
$42,000
$18,000
$10,200

Year 2
$48,000
$25,000
$11,000

Year 3
$48,000
$30,000
$11,000

Salesperson
Salesperson
Salesperson
Salesperson
Total People

$10,200
$10,200
$10,200
$10,200
5

$11,000
$10,200
$10,200
$10,200
5

$11,000
$10,200
$10,200
$10,200
5

Total Payroll

$111,000

$125,600

$130,600

7.0 Financial Plan

The following is our financial projects over the next three years. Please note that we expec t to
be operating at a loss for the first couple of months before advertising begins to take effect
and draw in c ustomers.

7.1 Important Assumptions

The company is basing it assumptions on a stable growth market using average interest rates
over the past ten years.

Table: General Assumptions

General Assumptions
Plan Month
Current Interest Rate

Year 1
1
10.00%

Year 2
2
10.00%

Year 3
3
10.00%

Long-term Interest Rate

Tax Rate
Other

10.00%
30.00%
0

10.00%
30.00%
0

10.00%
30.00%
0

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Flyleaf Books
7.2 Break-even Analysis
The following table and chart show our Break-even Analysis. We are deliberately setting these
average costs a little low in order to be conservative and give us an idea of the maximum
amount of inventory we need to move per month.

Table: Break-even Analysis

Break-even Analysis
Monthly Revenue Break-even

$90,541

Assumptions:
Average Percent Variable Cost
Estimated Monthly Fixed Cost

77%
$20,824

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Flyleaf Books
7.3 Projected Profit and Loss
The following table explains our itemized costs and determines gross and net margin. Please note
that these predictions are weighted toward having higher costs in c omparison to revenues in
case unexpec ted hidden costs arise.

Table: Profit and Loss

Pro Forma Profit and Loss
Year 1
$1,304,071
$1,004,135
$0
$1,004,135

Year 2
$1,357,569
$1,031,752
$0
$1,031,752

Year 3
$1,428,767
$1,071,575
$0
$1,071,575

Gross Margin
Gross Margin %

$299,936
23.00%

$325,817
24.00%

$357,192
25.00%

Expenses
Payroll

Sales
Direct Cost of Sales
Other Costs of Goods
Total Cost of Sales

$111,000

$125,600

$130,600

Sales and Marketing and Other Expenses

Depreciation
Leased equipment

$36,000
$0
$0

$15,000
$0
$0

$15,000
$0
$0

Rent
Utilities
Insurance
Payroll Taxes
Other

$60,000
$3,600
$7,200
$17,093
$15,000

$65,000
$4,000
$7,200
$18,840
$10,000

$68,000
$4,000
$7,500
$19,590
$10,000

$249,893

$245,640

$254,690

Profit Before Interest and Taxes

$50,044

$80,177

$102,502

EBITDA
Interest Expense
Taxes Incurred

$50,044
$13,750
$10,888

$80,177
$13,900
$19,883

$102,502
$12,050
$27,136

Net Profit
Net Profit/Sales

$25,406
1.95%

$46,394
3.42%

$63,316
4.43%

Total Operating Expenses

Page 15

Flyleaf Books

Page 16

Flyleaf Books

7.4 Projected Cash Flow

Our company will be receiving periodic influxes of cash in order to cover operating expenses
during the first two years as it strives toward sustainable profitability. Almost all of this funding
has been arranged through lend institutions and private investors already. We do not

Page 17

Flyleaf Books
anticipate any cash flow problems during the next three years.

Page 18

Flyleaf Books
Table: Cash Flow
Pro Forma Cash Flow
Year 1

Year 2

Year 3

$1,304,071
$1,304,071

$1,357,569
$1,357,569

$1,428,767
$1,428,767

Cash Received
Cash from Operations
Cash Sales
Subtotal Cash from Operations
Additional Cash Received
Sales Tax, VAT, HST/GST Received

$0

$0

$0

$5,000
$0
$50,000
$0
$0
$54,000
$1,413,071

$0
$0
$0
$0
$0
$0
$1,357,569

$0
$0
$0
$0
$0
$0
$1,428,767

Year 1

Year 2

Year 3

$111,000
$1,156,323
$1,267,323

$125,600
$1,190,738
$1,316,338

$130,600
$1,233,157
$1,363,757

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out
Principal Repayment of Current Borrowing

$0
$0

$0
$7,000

$0
$15,000

Other Liabilities Principal Repayment

Long-term Liabilities Principal Repayment
Purchase Other Current Assets

$0
$0
$0

$0
$5,000
$0

$0
$10,000
$0

$0
$0
$1,267,323

$0
$0
$1,328,338

$0
$0
$1,388,757

$145,748
$179,568

$29,231
$208,799

$40,010
$248,809

New Current Borrowing

New Other Liabilities (interest-free)
New Long-term Liabilities
Sales of Other Current Assets
Sales of Long-term Assets
New Investment Received
Subtotal Cash Received
Expenditures
Expenditures from Operations
Cash Spending
Bill Payments
Subtotal Spent on Operations

Purchase Long-term Assets

Dividends
Subtotal Cash Spent
Net Cash Flow
Cash Balance

Page 19

Flyleaf Books
7.5 Projected Balance Sheet
The following table is the Projected Balance Sheet for Flyleaf Books.

Table: Balance Sheet

Pro Forma Balance Sheet
Year 1

Year 2

Year 3

Current Assets
Cash
Inventory
Other Current Assets
Total Current Assets

$179,568
$122,562
$8,000
$310,130

$208,799
$97,179
$8,000
$313,978

$248,809
$102,019
$8,000
$358,828

Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets

$8,000
$0
$8,000
$318,130

$8,000
$0
$8,000
$321,978

$8,000
$0
$8,000
$366,828

Year 1

Year 2

Year 3

Accounts Payable
Current Borrowing
Other Current Liabilities

$125,904
$20,000
$10,000

$95,358
$13,000
$10,000

$101,892
($2,000)
$10,000

Subtotal Current Liabilities

$155,904

$118,358

$109,892

Long-term Liabilities
Total Liabilities

$125,000
$280,904

$120,000
$238,358

$110,000
$219,892

Assets

Liabilities and Capital

Current Liabilities

Paid-in Capital
Retained Earnings
Earnings
Total Capital
Total Liabilities and Capital
Net Worth

$124,000

$124,000

$124,000

($112,180)
$25,406
$37,226

($86,774)
$46,394
$83,619

($40,381)
$63,316
$146,935

$318,130

$321,978

$366,828

$37,226

$83,619

$146,935

Page 20

Flyleaf Books
7.6 Business Ratios
We are using the industry standard Business Ratios for independent used bookstore chains as a
comparison to our own.

Page 21

Flyleaf Books
Table: Ratios
Ratio Analysis
Year 1
n.a.

Year 2
4.10%

Year 3
5.24%

Industry Profile
2.27%

38.53%
2.51%
97.49%
2.51%
100.00%

30.18%
2.48%
97.52%
2.48%
100.00%

27.81%
2.18%
97.82%
2.18%
100.00%

22.18%
26.81%
56.12%
43.88%
100.00%

49.01%
39.29%
88.30%
11.70%

36.76%
37.27%
74.03%
25.97%

29.96%
29.99%
59.94%
40.06%

26.39%
24.87%
51.26%
48.74%

100.00%
23.00%

100.00%
24.00%

100.00%
25.00%

100.00%
23.55%

21.05%
0.00%
3.84%

20.58%
0.00%
5.91%

20.57%
0.00%
7.17%

16.21%
0.85%
1.02%

1.99

2.65

3.27

1.68

1.20
88.30%
97.50%
11.41%

1.83
74.03%
79.26%
20.58%

2.34
59.94%
61.56%
24.66%

0.71
4.63%
57.28%
10.83%

Additional Ratios

Year 1

Year 2

Year 3

Net Profit Margin

Return on Equity

1.95%
68.25%

3.42%
55.48%

4.43%
43.09%

n.a
n.a

10.91
10.12
27
4.10

9.39
12.17
35
4.22

10.76
12.17
29
3.89

n.a
n.a
n.a
n.a

7.55
0.56

2.85
0.50

1.50
0.50

n.a
n.a

$154,226
3.64

$195,619
5.77

$248,935
8.51

n.a
n.a

0.24
49%
1.20
35.03
0.00

0.24
37%
1.83
16.24
0.00

0.26
30%
2.34
9.72
0.00

n.a
n.a
n.a
n.a
n.a

Sales Growth
Percent of Total Assets
Inventory
Other Current Assets
Total Current Assets
Long-term Assets
Total Assets
Current Liabilities
Long-term Liabilities
Total Liabilities
Net Worth
Percent of Sales
Sales
Gross Margin
Selling, General & Administrative Expenses
Advertising Expenses
Profit Before Interest and Taxes
Main Ratios
Current
Quick
Total Debt to Total Assets
Pre-tax Return on Net Worth
Pre-tax Return on Assets

Activity Ratios
Inventory Turnover
Accounts Payable Turnover
Payment Days
Total Asset Turnover
Debt Ratios
Debt to Net Worth
Current Liab. to Liab.
Liquidity Ratios
Net Working Capital
Interest Coverage
Additional Ratios
Assets to Sales
Current Debt/Total Assets
Acid Test
Sales/Net Worth
Dividend Payout

Page 22

Appendix
Table: Sales Forecast
Sales Forecast
Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$8,000

$9,200

$10,580

$12,167

$12,836

$13,542

$14,287

$15,073

$15,902

$16,776

$17,699

$18,230

$9,000
$7,000
$9,000

$10,350
$8,050
$10,350

$11,903
$9,258
$11,903

$13,688
$10,646
$13,688

$14,441
$11,232
$14,441

$15,235
$11,849
$15,235

$16,073
$12,501
$16,073

$16,957
$13,189
$16,957

$17,890
$13,914
$17,890

$18,873
$14,679
$18,873

$19,911
$15,487
$19,911

$20,509
$15,951
$20,509

0%
0%
0%

$6,000
$5,500
$9,000

$6,900
$6,325
$10,350

$7,935
$7,274
$11,903

$9,125
$8,365
$13,688

$9,627
$8,825
$14,441

$10,157
$9,310
$15,235

$10,715
$9,822
$16,073

$11,305
$10,363
$16,957

$11,926
$10,932
$17,890

$12,582
$11,534
$18,873

$13,274
$12,168
$19,911

$13,673
$12,533
$20,509

0%

Sales
Fiction Books

0%

Sci-Fi Books
Magazines/newspapers
Children's Books

0%
0%
0%

Biography Books
Business Books
CD's and Music
Other

$10,000

$11,500

$13,225

$15,209

$16,045

$16,928

$17,859

$18,841

$19,877

$20,970

$22,124

$22,788

Total Sales

$63,500

$73,025

$83,979

$96,576

$101,887

$107,491

$113,403

$119,640

$126,220

$133,163

$140,486

$144,701

Direct Cost of Sales

Fiction Books

Month 1
$6,160

Month 2
$7,084

Month 3
$8,147

Month 4
$9,369

Month 5
$9,884

Month 6
$10,427

Month 7
$11,001

Month 8
$11,606

Month 9
$12,244

Month 10
$12,918

Month 11
$13,628

Month 12
$14,037

Sci-Fi Books

$6,930

$7,970

$9,165

$10,540

$11,119

$11,731

$12,376

$13,057

$13,775

$14,533

$15,332

$15,792

Magazines/newspapers
Children's Books
Biography Books

$5,390
$6,930
$4,620

$6,199
$7,970
$5,313

$7,128
$9,165
$6,110

$8,198
$10,540
$7,026

$8,648
$11,119
$7,413

$9,124
$11,731
$7,821

$9,626
$12,376
$8,251

$10,155
$13,057
$8,705

$10,714
$13,775
$9,183

$11,303
$14,533
$9,688

$11,925
$15,332
$10,221

$12,282
$15,792
$10,528

$4,235
$6,930
$7,700
$48,895

$4,870
$7,970
$8,855
$56,229

$5,601
$9,165
$10,183
$64,664

$6,441
$10,540
$11,711
$74,363

$6,795
$11,119
$12,355
$78,453

$7,169
$11,731
$13,034
$82,768

$7,563
$12,376
$13,751
$87,320

$7,979
$13,057
$14,508
$92,123

$8,418
$13,775
$15,305
$97,190

$8,881
$14,533
$16,147
$102,535

$9,369
$15,332
$17,035
$108,175

$9,651
$15,792
$17,546
$111,420

Business Books
CD's and Music
Other
Subtotal Direct Cost of Sales

Page 1

Appendix
Table: Personnel
Personnel Plan
Mr. James Vinck
Mr. Todd Vinck
Salesperson

0%
0%
0%

Month 1
$3,500
$1,500
$850

Month 2
$3,500
$1,500
$850

Month 3
$3,500
$1,500
$850

Month 4
$3,500
$1,500
$850

Month 5
$3,500
$1,500
$850

Month 6
$3,500
$1,500
$850

Month 7
$3,500
$1,500
$850

Month 8
$3,500
$1,500
$850

Month 9
$3,500
$1,500
$850

Month 10
$3,500
$1,500
$850

Month 11
$3,500
$1,500
$850

Month 12
$3,500
$1,500
$850

Salesperson
Salesperson
Salesperson
Salesperson

0%
0%
0%
0%

$850
$850
$850
$850

$850
$850
$850
$850

$850
$850
$850
$850

$850
$850
$850
$850

$850
$850
$850
$850

$850
$850
$850
$850

$850
$850
$850
$850

$850
$850
$850
$850

$850
$850
$850
$850

$850
$850
$850
$850

$850
$850
$850
$850

$850
$850
$850
$850

Total People

Total Payroll

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

Page 2

Appendix
Table: General Assumptions
General Assumptions
Plan Month
Current Interest Rate

Month 1
1
10.00%

Month 2
2
10.00%

Month 3
3
10.00%

Month 4
4
10.00%

Month 5
5
10.00%

Month 6
6
10.00%

Month 7
7
10.00%

Month 8
8
10.00%

Month 9
9
10.00%

Month 10
10
10.00%

Month 11
11
10.00%

Month 12
12
10.00%

Long-term Interest Rate

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

Tax Rate
Other

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

Page 3

Appendix
Table: Profit and Loss
Pro Forma Profit and Loss
Month 1
$63,500
$48,895

Sales
Direct Cost of Sales
Other Costs of Goods

Month 2
$73,025
$56,229

Month 3
$83,979
$64,664

Month 4
$96,576
$74,363

Month 5
$101,887
$78,453

Month 6
$107,491
$82,768

Month 7
$113,403
$87,320

Month 8
$119,640
$92,123

Month 9
$126,220
$97,190

Month 10
$133,163
$102,535

Month 11
$140,486
$108,175

Month 12
$144,701
$111,420

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Total Cost of Sales

$48,895

$56,229

$64,664

$74,363

$78,453

$82,768

$87,320

$92,123

$97,190

$102,535

$108,175

$111,420

Gross Margin
Gross Margin %

$14,605
23.00%

$16,796
23.00%

$19,315
23.00%

$22,212
23.00%

$23,434
23.00%

$24,723
23.00%

$26,083
23.00%

$27,517
23.00%

$29,031
23.00%

$30,627
23.00%

$32,312
23.00%

$33,281
23.00%

Payroll

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

Sales and Marketing and Other

Expenses
Depreciation
Leased equipment

$3,000

$3,000

$3,000

$3,000

$3,000

$3,000

$3,000

$3,000

$3,000

$3,000

$3,000

$3,000

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

Rent
Utilities
Insurance

$5,000
$300
$600

$5,000
$300
$600

$5,000
$300
$600

$5,000
$300
$600

$5,000
$300
$600

$5,000
$300
$600

$5,000
$300
$600

$5,000
$300
$600

$5,000
$300
$600

$5,000
$300
$600

$5,000
$300
$600

$5,000
$300
$600

$1,830

$1,388

$1,388

$1,388

$1,388

$1,388

$1,388

$1,388

$1,388

$1,388

$1,388

$1,388

$2,000

$2,000

$2,000

$0

$2,000

$0

$2,000

$0

$3,000

$0

$2,000

$0

Total Operating Expenses

$21,980

$21,538

$21,538

$19,538

$21,538

$19,538

$21,538

$19,538

$22,538

$19,538

$21,538

$19,538

Profit Before Interest and Taxes

($7,375)

($4,742)

($2,222)

$2,675

$1,897

$5,185

$4,545

$7,980

$6,493

$11,090

$10,774

$13,744

EBITDA
Interest Expense

($7,375)
$750

($4,742)
$1,167

($2,222)
$1,167

$2,675
$1,167

$1,897
$1,167

$5,185
$1,167

$4,545
$1,167

$7,980
$1,167

$6,493
$1,208

$11,090
$1,208

$10,774
$1,208

$13,744
$1,208

Taxes Incurred

($2,438)

($1,773)

($1,017)

$452

$219

$1,206

$1,014

$2,044

$1,585

$2,964

$2,870

$3,761

($5,688)
-8.96%

($4,136)
-5.66%

($2,372)
-2.82%

$1,056
1.09%

$511
0.50%

$2,813
2.62%

$2,365
2.09%

$4,769
3.99%

$3,699
2.93%

$6,917
5.19%

$6,696
4.77%

$8,775
6.06%

Expenses

Payroll Taxes
Other

Net Profit
Net Profit/Sales

15%

Page 4

Appendix
Table: Cash Flow
Pro Forma Cash Flow
Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$63,500
$63,500

$73,025
$73,025

$83,979
$83,979

$96,576
$96,576

$101,887
$101,887

$107,491
$107,491

$113,403
$113,403

$119,640
$119,640

$126,220
$126,220

$133,163
$133,163

$140,486
$140,486

$144,701
$144,701

Cash Received
Cash from Operations
Cash Sales
Subtotal Cash from Operations
Additional Cash Received
Sales Tax, VAT, HST/GST Received

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

New Current Borrowing

New Other Liabilities (interest-free)

0.00%

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$5,000
$0

$0
$0

$0
$0

$0
$0

New Long-term Liabilities

$0

$50,000

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Sales of Other Current Assets

Sales of Long-term Assets
New Investment Received

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$50,000

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$4,000

Subtotal Cash Received

$63,500

$123,025

$83,979

$96,576

$151,887

$107,491

$113,403

$119,640

$131,220

$133,163

$140,486

$148,701

Expenditures

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Expenditures from Operations

Cash Spending

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

$9,250

Bill Payments
Subtotal Spent on Operations

$11,257
$20,507

$96,997
$106,247

$76,325
$85,575

$86,731
$95,981

$96,929
$106,179

$96,744
$105,994

$100,395
$109,645

$106,932
$116,182

$111,169
$120,419

$118,979
$128,229

$123,138
$132,388

$130,727
$139,977

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Principal Repayment of Current Borrowing

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Other Liabilities Principal Repayment

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Long-term Liabilities Principal Repayment

Purchase Other Current Assets

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$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

$20,507

$106,247

$85,575

$95,981

$106,179

$105,994

$109,645

$116,182

$120,419

$128,229

$132,388

$139,977

Net Cash Flow

$42,993

$16,778

($1,596)

$595

$45,708

$1,497

$3,758

$3,458

$10,802

$4,934

$8,099

$8,724

Cash Balance

$76,813

$93,590

$91,994

$92,589

$138,297

$139,794

$143,552

$147,010

$157,812

$162,746

$170,844

$179,568

Page 5

Appendix
Table: Balance Sheet
Pro Forma Balance Sheet
Assets

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Starting Balances

Current Assets
Cash
Inventory

$33,820
$16,000

$76,813
$53,785

$93,590
$61,852

$91,994
$71,130

$92,589
$81,800

$138,297
$86,298

$139,794
$91,045

$143,552
$96,052

$147,010
$101,335

$157,812
$106,909

$162,746
$112,789

$170,844
$118,992

$179,568
$122,562

Other Current Assets

Total Current Assets

$8,000
$57,820

$8,000
$138,597

$8,000
$163,443

$8,000
$171,124

$8,000
$182,388

$8,000
$232,595

$8,000
$238,839

$8,000
$247,605

$8,000
$256,345

$8,000
$272,721

$8,000
$283,534

$8,000
$297,836

$8,000
$310,130

$8,000

$8,000

$8,000

$8,000

$8,000

$8,000

$8,000

$8,000

$8,000

$8,000

$8,000

$8,000

$8,000

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$8,000
$65,820

$8,000
$146,597

$8,000
$171,443

$8,000
$179,124

$8,000
$190,388

$8,000
$240,595

$8,000
$246,839

$8,000
$255,605

$8,000
$264,345

$8,000
$280,721

$8,000
$291,534

$8,000
$305,836

$8,000
$318,130

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets
Liabilities and Capital
Current Liabilities
Accounts Payable

$8,000

$94,465

$73,446

$83,500

$93,708

$93,404

$96,835

$103,236

$107,207

$114,883

$118,780

$126,385

$125,904

Current Borrowing
Other Current Liabilities

$15,000
$10,000

$15,000
$10,000

$15,000
$10,000

$15,000
$10,000

$15,000
$10,000

$15,000
$10,000

$15,000
$10,000

$15,000
$10,000

$15,000
$10,000

$20,000
$10,000

$20,000
$10,000

$20,000
$10,000

$20,000
$10,000

Subtotal Current Liabilities

$33,000

$119,465

$98,446

$108,500

$118,708

$118,404

$121,835

$128,236

$132,207

$144,883

$148,780

$156,385

$155,904

$75,000

$75,000

$125,000

$125,000

$125,000

$125,000

$125,000

$125,000

$125,000

$125,000

$125,000

$125,000

$125,000

$108,000

$194,465

$223,446

$233,500

$243,708

$243,404

$246,835

$253,236

$257,207

$269,883

$273,780

$281,385

$280,904

Long-term Liabilities
Total Liabilities
Paid-in Capital
Retained Earnings
Earnings
Total Capital
Total Liabilities and Capital
Net Worth

$70,000

$70,000

$70,000

$70,000

$70,000

$120,000

$120,000

$120,000

$120,000

$120,000

$120,000

$120,000

$124,000

($112,180)

($112,180)

($112,180)

($112,180)

($112,180)

($112,180)

($112,180)

($112,180)

($112,180)

($112,180)

($112,180)

($112,180)

($112,180)

$0
($42,180)

($5,688)
($47,868)

($9,823)
($52,003)

($12,196)
($54,376)

($11,140)
($53,320)

($10,629)
($2,809)

($7,816)
$4

($5,451)
$2,369

($682)
$7,138

$3,018
$10,838

$9,935
$17,755

$16,631
$24,451

$25,406
$37,226

$65,820

$146,597

$171,443

$179,124

$190,388

$240,595

$246,839

$255,605

$264,345

$280,721

$291,534

$305,836

$318,130

($42,180)

($47,868)

($52,003)

($54,376)

($53,320)

($2,809)

$4

$2,369

$7,138

$10,838

$17,755

$24,451

$37,226

Page 6