Beruflich Dokumente
Kultur Dokumente
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Table of Contents
1.0 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 Keys to Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Company Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 Company Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Start-up Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 Company Locations and Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 Product and Service Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 Competitive Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 Fulfillment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 Future Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Market Analysis Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 Market Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Target Market Segment Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.1 Market Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.2 Market Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.3 Market Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3 Service Business Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.1 Business Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.2 Distributing a Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.3 Competition and Buying Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.4 Main Competitors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.4.1 Grandmas Music and Sound . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.4.2 Guitar Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.4.3 Marc's Guitar Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.4.4 Music World . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.4.5 Other Competitors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategy and Implementation Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 Strategy Pyramids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 Value Proposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 Competitive Edge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.1 Positioning Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.2 Pricing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.3 Promotion Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.4 Marketing Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5 Sales Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5.1 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5.2 Sales Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6 Strategic Alliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 2 3 3 3 3 5 5 6 6 7 7 8 8 9 10 11 11 12 12 12 13 13 13 13 14 14 14 15 16 16 16 16 17 17 17 18 18 18 19 20 21
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3.0
4.0
5.0
6.0 7.0
Web Plan Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Management Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2 Management Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3 Management Team Gaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4 Personnel Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 22 22 23 24 24
8.0
Table of Contents
8.1 8.2 8.3 8.4 8.5 8.6 Important Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Projected Profit and Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Projected Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Projected Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Business Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 25 26 29 30 32 33
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MusicWest
1.0 Executive Summary
An exciting opportunity currently exists for a full service musical instrument retailer in Albuquerque. Although there are a number of musical instrument retailers in this city of over 500,000 people, there are currently only three very small school band and orchestral instrument dealers; these stores have small selections and short hours. At the other end of the spectrum (stores with a more guitar and electrical focus), big chains are competing on prices at the expense of customer service. MusicWest will offer the buying public a superior shopping alternative, with a huge selection of school band and orchestra instruments, plus guitars, keyboards and accessories, at reasonable prices. Our products will be supported by skilled repair services and a knowledgeable and friendly staff, as focused on educating the customer as on closing the sale. We will exploit our competitors' weaknesses by offering ongoing music community events, from free lessons, to music clubs, to after-sale follow up to turn one-time shoppers into lifelong customers. Our unique marketing schemes include "You Play, We Pay" (whereby a portion of instrument sales and rentals are donated to local school band programs) and "100% Money Back" trade up programs, where customers receive 100% of their purchase price toward upgrading their instrument within one year. MusicWest will focus on the novice, hobbyist, and semi-professional musician; these three groups are seeking value, customer service, and knowledgeable assistance in making what can be a rather significant purchase. MusicWest will gain a reasonably large percentage of market share in a short period by immediately differentiating ourselves from our competitors. We will establish our branding with our superior service and selection, the excitingly modern look of our retail environment, our "hands on" merchandising approach, and a series of ads with our motto: Stop Dreaming, Start Playing. Once in the store, our clients want to come back often for the special treatment they receive here and nowhere else. The co-owner of MusicWest, David Moore, has over seven years of experience as the store manager at two successful local music stores. He has seen firsthand where opportunities are missed through lack of follow-through or careful planning, and knows what local customers are looking for. Based on his experience at other local music stores, David Moore conservatively projects sales of over $500,000 in the first year, increasing to almost $700,000 by year three. We will start generating a profit in August, and profits will increase steadily thereafter. Although MusicWest may not become the biggest, our intention is to become a "Must-Shop Destination" for those looking to buy a new or used musical instrument in Albuquerque!
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MusicWest
Highlights
$700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 FY 2006 FY 2007 FY 2008
1.1 Objectives
Gain 25% of the local market share within the first three years. Maintain a minimum gross profit margin of 40%. Create a hands-on, educational approach to musical instrument merchandising. Target the large number of school band instrument customers who currently bypass local music stores for catalog or internet sales, due to poor service, selection and prices. Aggressively target the public school system and local religious organizations.
1.2 Mission
MusicWest provides musical instruments to the community. We separate ourselves from our direct competitors by paying intense personal attention to our customers, and educating our clients about the products they need or desire before, during, and after the sale. We offer creative programs to reward customer loyalty, and we provide on-site repair services for the items we sell. We consider our staff our partners and insist they prosper equitably with the growth and success of the company. We will have the largest selection of School Band and Orchestral instruments in New Mexico, and will use that advantage to separate ourselves from the competition.
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MusicWest
1.3 Keys to Success
Establish a well-respected music lesson department and start a rapport early with school band and church music leaders. Offer extended hours to serve a larger portion of the buying public than our competitors do. Educate the buying public by merchandising our products with informational/tutorial signage and literature, and by backing that up with knowledgeable salespeople. Offer the services of a full time repair department to our client base. Continually modify the product and service offerings to stay on the leading edge of technology within our market. Exploit the many weaknesses of our local and national competitors to differentiate ourselves from them.
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MusicWest
Table: Start-up Start-up Requirements Start-up Expenses Legal Stationery etc. Space Renovation/Preparation/Signage Miscellaneous Expenses Insurance Rent & Deposits Pre-Opening Salaries Phone System Other Total Start-up Expenses Start-up Assets Cash Required Start-up Inventory Other Current Assets Long-term Assets Total Assets Total Requirements Table: Start-up Funding Start-up Funding Start-up Expenses to Fund Start-up Assets to Fund Total Funding Required Assets Non-cash Assets from Start-up Cash Requirements from Start-up Additional Cash Raised Cash Balance on Starting Date Total Assets $1,000 $500 $20,000 $1,500 $500 $4,000 $4,000 $2,500 $0 $34,000
Liabilities and Capital Liabilities Current Borrowing Long-term Liabilities Accounts Payable (Outstanding Bills) Other Current Liabilities Total Liabilities Capital Planned Investment Investment by Dave & Kayle Moore Investment by Ray Himes Additional Investment Requirement Total Planned Investment Loss at Start-up (Start-up Expenses) Total Capital
$0 $200,000 $0 $0 $200,000
$226,000 $260,000
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MusicWest
Start-up
$250,000
$200,000
$150,000
$100,000
$50,000
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MusicWest
Although offering school band and orchestral instruments, service and lessons will be our main competitive advantage, guitars will remain the primary revenue producer for musical instrument stores for the foreseeable future.
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Musical instruments cannot be fully enjoyed without knowledge and experience. Unfortunately, we cannot sell these products at a higher price just because we offer repair and instructional services; the market does not support dealers who have tried this. We must offer varied services and product mixes and be competitively priced as well, in order to survive in this new economy. In addition to educating our customer base, we are committed to providing the best product value.
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MusicWest
Accessories are the highest profit center for the store and we have to expose our competitors' weakness in this area if we wish to expand market share from day one of operations. Competitors that do not stock the necessary accessories will send their customers to competing stores, from which customers may not return. We must keep our accessory department well-stocked to take advantage of our competitors' flaws, and avoid this pitfall ourselves.
3.3 Fulfillment
When feasible, MusicWest will buy its inventory directly from the manufacturer in order to obtain the lowest price possible. We will make use of one or two jobbers that sell a large variety of small goods that would be impractical to obtain directly. We will frequently compare prices of these distributors to ensure we are getting the very best price possible per item. That said, MusicWest will always put the quality/value of the product we pass on to the consumer ahead of price. The majority of our competitors buy by the piece rather than by the box or case lot. We intend to buy our key, best-selling items in bulk, to obtain a pricing advantage over our direct competitors. Common discounts in the industry consist of free freight, repayment term incentives, additional free merchandise or incremental percentage discounts on quantity purchases. Although we will buy key items in bulk when practical, we will also remind ourselves that sometimes a better deal for the sake of lower prices is not the best move for our bottom line. We should not risk over-stocking new or unproven merchandise just to get a small advantage in price over competitors.
3.4 Technology
The Music Industry is currently riding a trend toward high-tech electronics in several product areas, most notably in guitar related effects and multi-track recording hard/software. Sales increases in these areas are due to the slashing of the price barrier in the home recording market, and the pace at which new products become obsolete. This high tech boom has increased the M.I. market substantially. Digital keyboards are also seeing increased market share as technology becomes more accessible. These units offer families state-of-the-art sounds and capabilities without a huge learning curve. For instance, digital piano sales are currently the fastest growing segment of the total piano market in the U.S., and sales have increased 450% over the last ten years. One downside of technological innovations is that prices in this industry are dropping sharply, lowering revenues per unit. It is therefore essential that the Musical Instrument retailer of today bundle products together as packages, to increase profits and build sales.
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MusicWest
3.5 Future Products and Services
MusicWest will rotate its stock so that new products are always available. The store will balance what is popular today with what will be popular tomorrow. We will institute the following programs in order to ensure expansion of the store: 1. We hope to become the only store in New Mexico to institute the "Weekend Warrior" program, sponsored by the National Association of Music Merchants (N.A.M.M.). This program is responsible for bringing back into the fold many who had given up on music. The program has successfully raised income opportunities for the stores who have implemented it. By the end of the first year of operations, we must place major emphasis on developing our own school band instrument rental program. This rental program will allow us to insulate ourselves from any large-scale competitors that might locate here, and generate consistent year round high profit income opportunities. MusicWest will take advantage of the internet as a major tool for passing along information about our store and products to potential and current clients. We will maintain this site as a local site, geared toward information and service. We believe that placing a sales engine in our website would only lower our initial profit margin and limit sales opportunities, so we will avoid this for now. We hope to start music clubs geared to children and seniors. These will be clubs that we can support with little cost, but which can generate additional sales not actively targeted by our competitors. In the long term, there are many avenues we can explore, such as traditional piano sales, professional sound installations, and service contracts with the public and private school systems.
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In the musical instrument industry, consumers are looking for wide selections, prompt and knowledgeable service, good product value, and music lessons to further their understanding and enjoyment of the products. They prefer to find stores offering these benefits through word of mouth.
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MusicWest
The musical instrument market has recently been driven by a number of low-cost, highselection internet and mail order companies, which has caused prices to level out, by giving consumers comparison shopping at their fingertips. In response, various large chains have tried to offer similarly wide selections in their physical retail spaces, at the expense of staff training and customer service. However, the high-profile advertising generated by these chains has rippled down even to small stores, as more and more musicians at all levels start to seek out the missing elements of these sales model. MusicWest has the experience, prices, and focus on customer service to fill these gaps.
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MusicWest
Table: Market Analysis Market Analysis 2005 Potential Customers Musicians in Albuquerque In Rio Rancho In Los Ranchos In Corrales Total Growth 3% 5% 1% 3% 3.14% 280,050 23,920 2,308 3,051 309,329 288,452 25,116 2,331 3,143 319,041 297,105 26,372 2,354 3,237 329,068 306,018 27,690 2,378 3,334 339,420 315,199 29,075 2,402 3,434 350,109 2006 2007 2008 2009 CAGR 3.00% 5.00% 1.00% 3.00% 3.14%
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MusicWest
4.2.1 Market Needs
Our target clientele, though varied, can be approached in very much the same manner. Their most important market needs are: Selection Value Service and Lessons
Most musicians need support and service. The instruments that we sell can be difficult or impossible for end users to service. Potential clients tend to seek stores that can fulfill these services through word of mouth referrals and/or direct shopping experiences. These musicians come back time after time if they feel they are getting a fair deal. One of the most common complaints from musicians in our market is the high turnover of sales staff at other dealers, and the resulting inconsistencies in their shopping experiences from day to day. Consumers like to see the same faces on each visit and this business is one that thrives with the personal relationships salespeople develop with their clientele. In addition, female customers have traditionally been treated poorly by this male dominated field. By reversing this trend, reinforced by ongoing sales training and with unbiased customer interaction by our sales staff, we can further exploit the weaknesses of our top local competitors.
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MusicWest
4.2.3 Market Growth
The musical instrument market has seen steady growth over the last ten years, with revenue increasing from $4.2 billion in 1995 to $7.1 billion in 2000. 2003 sales were down to $6.9 billion, still the second highest year in industry history. These numbers were reached in spite of the difficulties with the economy and turmoil on Wall Street. The most dramatically declining product was acoustic pianos, a product we are not interested in at the present time. The market had seen steady growth of around 4% over the last few years, despite other key industries being down (for example, automobiles down 7%, personal computers down 3% and new home construction down 1.8%). In addition, 10-year growth patterns for the last decade show incredible gains in key instrument categories. We expect these trends to continue as the economy strengthens.
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MusicWest
4.3.2 Distributing a Service
Musical instrument re-sellers are supplied by a variety of means: 1. 2. 3. 4. Direct purchases from manufacturers - generally the best price, but higher minimum orders. Purchases from national distributors - large selections, good prices. Purchases from regional distributors - small selection, average pricing. Specialty distributors/mfg. reps - good to great pricing based on yearly volume.
MusicWest
The stores pricing is adjusted to the knowledge level of the customer. The store in general is very well laid out and has state of the art lighting and displays, but is also very cluttered, with hazardous audio cables strewn about the floor where one might trip over them. As of this plan, Grandma's is relocating to the Westside at the intersection of Paseo Del Norte and Coors Blvd. They have no plans to add teachers at the new location.
MusicWest
between the two locations, but sales had fallen off by more than half when Mr. Johnson purchased them. The stores have always had the reputation for high prices and have always pushed the idea that they provide more service than most. In fact, the stores offer little more service than one normally expect to receive. Music World is extremely out of date in their sales and marketing techniques, and is on the declining slope of technology. These stores sell basic items available anywhere. The store recently lost its largest piano line (Baldwin/Wurlitzer). As of the date of this plan, Music World is experiencing severe cash flow problems and is in litigation for discriminatory employment practices with former employees. A second lawsuit has been filed by his former landlord for damages done to the premises.
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MusicWest
5.0 Strategy and Implementation Summary
We will build strong relationships with our customers by providing stellar personal service and by exceeding our customers' expectations on each visit. We will provide unique programs to reward them and gain repeat business. MusicWest intends to attract customers away from the mail order firms and bring them back to the local market. It will not be easy, but with a commitment to offer our customers an exciting educational environment along with up front, fair pricing, and excellent before and after the sale service, we can succeed.
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MusicWest
5.4 Marketing Strategy
The marketing strategy is as follows: Emphasize our superior service and support. Aggressively expose competitors' weaknesses in order to attract new clientele. Key in on consumers who have been pushed out of the market by local dealer apathy. Educate our clients and respect their needs. Address these needs to keep them coming back. Exude our excitement and enthusiasm for music to our customers. Always, always differentiate ourselves from our competition. Consistently end all of our advertising with our motto, "Stop dreaming, start playing," to make our advertisements easily recognizable to the public.
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MusicWest
5.4.3 Promotion Strategy
MusicWest will target our desired customer base using Radio, Direct Mail, Newspapers and word of mouth. Radio is the greatest vehicle to reach musicians for the simple reason that the love of music is what drives us to become musicians. Direct Mail will target consumers who are budget or coupon minded. Newsprint reaches a large portion of the public, letting them see what we have to offer before making a trip to the store. Word of mouth is the one area we really hope to see develop, as a personal endorsement by a customer is worth more to us than any advertisement can achieve. MusicWest will always promote itself as an education oriented store, offering private and group lessons for all the instruments we sell. Our motto is "Stop Dreaming, Start Playing!"
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MusicWest
5.5.1 Sales Forecast
Our projections are largely based on Dave Moore's experiences as manager of King Music and Marc's Guitar Center, respectively. We believe we can easily meet the projected sales figures for the first year and believe we may be conservative in our projections for the next two years. The fact that there are only two band instrument dealers in our targeted territory and that these two dealers are weak, should provide a great opportunity for garnering instant credibility in the market we serve. Mr. Moore has compiled a list of over 4,000 musicians he has helped during his tenure in the Musical Instrument market. This will allow us to save time and money by drawing in proven customers for the opening of the store, and a client base to operate from during the initial months.
Table: Sales Forecast Sales Forecast FY 2006 Sales Guitar Sales Band and Orchestral Instruments Amplifiers, Keyboards etc. Accessories Print & DVD Rentals Repair Labor Total Sales Direct Cost of Sales Guitar Sales Band and Orchestral Instruments Amplifiers, Keyboards etc. Accessories Print & DVD Rentals Repair Labor Subtotal Direct Cost of Sales $195,000 $58,144 $27,600 $196,274 $15,550 $4,950 $17,260 $514,778 FY 2006 $117,000 $29,072 $16,560 $78,510 $9,330 $4,950 $2,589 $258,011 FY 2007 $263,500 $79,000 $26,200 $243,000 $13,500 $4,950 $20,000 $650,150 FY 2007 $158,100 $39,500 $15,720 $97,200 $8,100 $4,950 $3,000 $326,570 FY 2008 $283,000 $85,000 $27,500 $259,000 $14,000 $5,900 $22,500 $696,900 FY 2008 $169,800 $42,500 $16,500 $103,600 $8,400 $5,900 $3,375 $350,075
Sales Monthly
Guitar Sales Band and Orchestral Instruments Amplifiers, Keyboards etc. Accessories Print & DVD Rentals Repair Labor
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MusicWest
Sales by Year
$700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 FY 2006 FY 2007 FY 2008
Guitar Sales Band and Orchestral Instruments Amplifiers, Keyboards etc. Accessories Print & DVD Rentals Repair Labor
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MusicWest
5.6 Strategic Alliances
MusicWest will become a member of N.A.M.M. (National Association of Music Merchants). This organization plans many events throughout the year, such as, "International Guitar Month." We intend to follow this group's promotion schedule and to tie it in to our own advertising campaigns. No local storefront is currently taking full advantage of these offerings. By taking advantage of this trade organization's expertise, we can save ourselves time and money on developing an effective advertisement campaign from day one. Some manufacturers also have advertising co-ops that we will use when feasible. In addition, these manufacturers provide nationally known musicians on a fee basis to their dealers, to use in informational/instructional clinics and to drive additional sales opportunities.
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MusicWest
7.1 Organizational Structure
MusicWest will require its staff to be multi-skilled. Each employee will likely oversee many aspects of the business on a given day. Our main divisions will be Sales, Service and Administration. Our focus on customer service will depend on all of our employees knowing as much about each area of the business as possible. A complete book of structures and policies, along with successful actions, will be created and maintained from the date of opening to streamline the process of adding new employees as they become necessary. Ongoing training for all employees will be necessary in order to keep our edge on the competition.
Related Management Strengths: CEO/COO level responsibility. Ability to get others to produce to their potential. Writing sales programs to generate and maintain consistent sales goals. Excellent communication skills. Maintains mutually beneficial vendor relations. Ability to anticipate and adapt to changing economic conditions. Experience negotiating complex sales contracts, including financing and shipment options with large corporate clients such as Wal-Mart and Target. Implemented the use of EDT computerized ordering software with clients to streamline the ordering process and allow the manufacturer to stock less raw inventory, simultaneously reducing overhead and increasing profits. David Moore - Co-Owner Store Manager Qualifications: Dave is currently the Store Manager of Marc's Guitar Center in Albuquerque. Dave was previously Store Manager for King Music's Westside location, where he was able to turn around a declining location and outsell the company's flagship store for two years straight, despite fewer customers and staff. Dave has been a musician for over 23 years and toured professionally in the 80's. Dave has been involved in sales and sales management since the age of eight. Dave has taken many sales/management courses and has had full profit and loss experience. Dave was the co-owner of a 7,500 sq.ft. retail furniture store in the early 1980's.
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Related, industry-specific strengths: Music Store Management. (7 years +) Direct purchasing of up to $400,000 in inventory annually. Top sales producer in the musical instrument combo department, in addition to his full time management responsibilities at both music stores where he has worked. Outstanding employee relations, with lower than industry average turnover. Excellent relations with vendors. Vast knowledge of Musical Instruments and the Musical Instrument Industry locally and nationally. Superior customer interaction/retention skills. Additional Qualifications: Sales, Sales Manager and Finance Manager in the automotive industry. Trade show management and Sales in the Wholesale Jewelry Trade. Certified computer skills. C. Ray Himes Service Department - Manager Qualifications: Graduate of the prestigious Roberto Venn School of Luthiery in Phoenix, Arizona. Trained in all aspects of fretted instrument repair from the simple to the complex, including re-frets, neck resets, crack repair, wiring and modification work. Completely versed on new construction of electric and acoustic guitars, from the planning and design phase to final product. Instructed in all phases of managing a full service repair shop as part of his training at Roberto Venn School of Luthiery. Trained personally by Dave Moore in the area of guitar sales and accessory sales, in addition to his repair duties at King Music Center and Marc's Guitar Center. Great at improvising and solving difficult problems as they arise. Good woodworking skills essential to this position. Ongoing commitment to furthering my skills and knowledge of fretted instruments, in order to provide extensive repair services to clients. Plays in a local band: "Tanuki."
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7.4 Personnel Plan
The personnel plan highlights our intent to hire as few employees as possible, in order to keep control over how our customers are treated during the crucial first stages of our business. We will have four full time salespeople and two to three part time employees to call upon as traffic demands. In addition, all key employees have agreed to work at lower pay structures to keep personnel costs at minimum during the critical first two years.
Table: Personnel Personnel Plan Dave Moore Kayle Moore Full Time Employee #1 Full Time Employee #2 Part Time Employee #1 Part Time Employee #2 Seasonal Employee #1 Total People Total Payroll FY 2006 $31,000 $31,000 $20,400 $20,400 $6,600 $6,600 $1,750 7 $117,750 FY 2007 $31,000 $31,000 $22,000 $22,000 $6,800 $6,800 $2,350 7 $121,950 FY 2008 $35,000 $35,000 $25,000 $25,000 $7,200 $7,200 $2,450 7 $136,850
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Table: General Assumptions General Assumptions Plan Month Current Interest Rate Long-term Interest Rate Tax Rate Other FY 2006 1 6.50% 6.50% 30.00% 0 FY 2007 2 6.50% 6.50% 30.00% 0 FY 2008 3 6.50% 6.50% 30.00% 0
Table: Break-even Analysis Break-even Analysis Monthly Revenue Break-even Assumptions: Average Percent Variable Cost Estimated Monthly Fixed Cost $40,771 50% $20,336
Break-even Analysis
$20,000 $10,000 $0 ($10,000) ($20,000) ($30,000) $0 $14,000 $28,000 $42,000 $56,000 $70,000
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8.3 Projected Profit and Loss
If we take advantage of the current market conditions in Albuquerque, we can achieve great gains in market share during our start-up year and beyond. Our assumptions for sales are conservative compared to industry averages in similarly sized markets.
Table: Profit and Loss Pro Forma Profit and Loss Sales Direct Costs of Goods Other Production Expenses Cost of Goods Sold Gross Margin Gross Margin % FY 2006 $514,778 $258,011 $0 -----------$258,011 $256,767 49.88% FY 2007 $650,150 $326,570 $0 -----------$326,570 $323,580 49.77% FY 2008 $696,900 $350,075 $0 -----------$350,075 $346,825 49.77%
Expenses Payroll Sales and Marketing and Other Expenses Depreciation Acountant Expense Utilities Insurance Rent Payroll Taxes Website Maintenance Total Operating Expenses Profit Before Interest and Taxes Interest Expense Taxes Incurred Net Profit Net Profit/Sales
$117,750 $51,200 $0 $5,200 $17,120 $4,800 $30,000 $17,663 $300 -----------$244,033 $12,735 $11,746 $297 $693 0.13%
$121,950 $55,400 $0 $5,500 $18,000 $5,200 $30,000 $18,293 $325 -----------$254,668 $68,913 $9,526 $17,816 $41,570 6.39%
$136,850 $58,900 $0 $6,000 $19,000 $5,700 $30,000 $20,528 $350 -----------$277,328 $69,498 $7,210 $18,686 $43,601 6.26%
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Profit Monthly
$15,000
$10,000
$5,000
$0
($5,000)
($10,000) Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
Profit Yearly
$45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 FY 2006 FY 2007 FY 2008
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$350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 FY 2006 FY 2007 FY 2008
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8.4 Projected Cash Flow
Our cash flow projections show only a slight negative cash flow that our cash "in bank" will easily allow us to cover, without the need for accessing additional lines of credit financing. We will maintain a positive cash balance throughout the foreseeable future.
Table: Cash Flow Pro Forma Cash Flow FY 2006 Cash Received Cash from Operations Cash Sales Subtotal Cash from Operations Additional Cash Received Sales Tax, VAT, HST/GST Received 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 Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out Principal Repayment of Current Borrowing Other Liabilities Principal Repayment Long-term Liabilities Principal Repayment Purchase Other Current Assets Purchase Long-term Assets Dividends Subtotal Cash Spent Net Cash Flow Cash Balance $514,778 $514,778 $650,150 $650,150 $696,900 $696,900 FY 2007 FY 2008
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Cash
$250,000 $200,000 $150,000 $100,000 $50,000 $0 ($50,000) Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
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Table: Balance Sheet Pro Forma Balance Sheet FY 2006 Assets Current Assets Cash Inventory Other Current Assets Total Current Assets Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets Liabilities and Capital Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Subtotal Current Liabilities Long-term Liabilities Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital Net Worth $186,445 $22,460 $0 $208,905 $207,795 $28,429 $0 $236,224 $217,743 $30,475 $0 $248,218 FY 2007 FY 2008
$22,976 $0 $2,365 $25,341 $164,372 $189,713 $60,000 ($34,000) $693 $26,693 $216,405 $26,693
$42,106 $0 $4,611 $46,717 $128,744 $175,461 $60,000 ($33,307) $41,570 $68,263 $243,724 $68,263
$44,320 $0 $6,418 $50,738 $93,116 $143,854 $60,000 $8,263 $43,601 $111,864 $255,718 $111,864
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8.6 Business Ratios
The following table shows industry relevant ratios as determined by the standard industry classification index (SIC) under category 5736 - Musical Instrument Stores.
Table: Ratios Ratio Analysis 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 Additional Ratios Net Profit Margin Return on Equity 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 FY 2006 0.00% 10.38% 0.00% 96.53% 3.47% 100.00% 11.71% 75.96% 87.67% 12.33% FY 2007 26.30% 11.66% 0.00% 96.92% 3.08% 100.00% 19.17% 52.82% 71.99% 28.01% FY 2008 7.19% 11.92% 0.00% 97.07% 2.93% 100.00% 19.84% 36.41% 56.25% 43.75% Industry Profile 4.64% 37.97% 27.27% 79.90% 20.10% 100.00% 38.59% 14.67% 53.26% 46.74%
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Appendix
Appendix Table: Sales Forecast Sales Forecast Mar Sales Guitar Sales Band and Orchestral Instruments Amplifiers, Keyboards etc. Accessories Print & DVD Rentals Repair Labor Total Sales Direct Cost of Sales Guitar Sales Band and Orchestral Instruments Amplifiers, Keyboards etc. Accessories Print & DVD Rentals Repair Labor Subtotal Direct Cost of Sales 0% 0% 0% 0% 0% 0% 0% $7,000 $3,200 $1,200 $9,000 $300 $0 $350 $21,050 Mar $4,200 $1,600 $720 $3,600 $180 $0 $53 $10,353 Apr $8,500 $3,500 $1,500 $11,004 $750 $100 $500 $25,854 Apr $5,100 $1,750 $900 $4,402 $450 $100 $75 $12,777 May $10,500 $3,460 $1,700 $11,316 $800 $250 $650 $28,676 May $6,300 $1,730 $1,020 $4,526 $480 $250 $98 $14,404 Jun $10,500 $3,632 $1,900 $13,464 $1,000 $300 $700 $31,496 Jun $6,300 $1,816 $1,140 $5,386 $600 $300 $105 $15,647 Jul $12,500 $3,200 $2,000 $13,900 $1,000 $500 $1,005 $34,105 Jul $7,500 $1,600 $1,200 $5,560 $600 $500 $151 $17,111 Aug $14,500 $6,576 $2,000 $13,500 $1,200 $500 $1,400 $39,676 Aug $8,700 $3,288 $1,200 $5,400 $720 $500 $210 $20,018 Sep $17,000 $6,576 $2,000 $18,516 $1,200 $500 $1,755 $47,547 Sep $10,200 $3,288 $1,200 $7,406 $720 $500 $263 $23,578 Oct $17,500 $5,900 $2,200 $17,590 $1,200 $600 $1,500 $46,490 Oct $10,500 $2,950 $1,320 $7,036 $720 $600 $225 $23,351 Nov $22,000 $7,000 $3,000 $20,000 $2,100 $600 $1,900 $56,600 Nov $13,200 $3,500 $1,800 $8,000 $1,260 $600 $285 $28,645 Dec $35,000 $10,000 $5,200 $30,000 $3,800 $1,000 $3,500 $88,500 Dec $21,000 $5,000 $3,120 $12,000 $2,280 $1,000 $525 $44,925 Jan $22,000 $3,100 $2,900 $22,000 $1,200 $400 $2,500 $54,100 Jan $13,200 $1,550 $1,740 $8,800 $720 $400 $375 $26,785 Feb $18,000 $2,000 $2,000 $15,984 $1,000 $200 $1,500 $40,684 Feb $10,800 $1,000 $1,200 $6,394 $600 $200 $225 $20,419
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Appendix
Appendix Table: Personnel Personnel Plan Dave Moore Kayle Moore Full Time Employee #1 Full Time Employee #2 Part Time Employee #1 Part Time Employee #2 Seasonal Employee #1 Total People Total Payroll 0% 0% 0% 0% 0% 0% 0% Mar $2,500 $2,500 $1,700 $1,700 $450 $450 $0 6 $9,300 Apr $2,500 $2,500 $1,700 $1,700 $450 $450 $0 6 $9,300 May $2,500 $2,500 $1,700 $1,700 $450 $450 $0 6 $9,300 Jun $2,500 $2,500 $1,700 $1,700 $450 $450 $0 6 $9,300 Jul $2,500 $2,500 $1,700 $1,700 $450 $450 $0 6 $9,300 Aug $2,500 $2,500 $1,700 $1,700 $450 $450 $0 6 $9,300 Sep $2,500 $2,500 $1,700 $1,700 $450 $450 $0 6 $9,300 Oct $2,500 $2,500 $1,700 $1,700 $550 $550 $0 6 $9,500 Nov $2,500 $2,500 $1,700 $1,700 $750 $750 $700 7 $10,600 Dec $3,500 $3,500 $1,700 $1,700 $950 $950 $700 7 $13,000 Jan $2,500 $2,500 $1,700 $1,700 $750 $750 $350 7 $10,250 Feb $2,500 $2,500 $1,700 $1,700 $450 $450 $0 7 $9,300
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Appendix
Appendix Table: General Assumptions General Assumptions Plan Month Current Interest Rate Long-term Interest Rate Tax Rate Other Mar 1 6.50% 6.50% 30.00% 0 Apr 2 6.50% 6.50% 30.00% 0 May 3 6.50% 6.50% 30.00% 0 Jun 4 6.50% 6.50% 30.00% 0 Jul 5 6.50% 6.50% 30.00% 0 Aug 6 6.50% 6.50% 30.00% 0 Sep 7 6.50% 6.50% 30.00% 0 Oct 8 6.50% 6.50% 30.00% 0 Nov 9 6.50% 6.50% 30.00% 0 Dec 10 6.50% 6.50% 30.00% 0 Jan 11 6.50% 6.50% 30.00% 0 Feb 12 6.50% 6.50% 30.00% 0
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Appendix
Appendix Table: Profit and Loss Pro Forma Profit and Loss Sales Direct Costs of Goods Other Production Expenses Cost of Goods Sold Gross Margin Gross Margin % Mar $21,050 $10,353 $0 -----------$10,353 $10,698 50.82% Apr $25,854 $12,777 $0 -----------$12,777 $13,077 50.58% May $28,676 $14,404 $0 -----------$14,404 $14,272 49.77% Jun $31,496 $15,647 $0 -----------$15,647 $15,849 50.32% Jul $34,105 $17,111 $0 -----------$17,111 $16,994 49.83% Aug $39,676 $20,018 $0 -----------$20,018 $19,658 49.55% Sep $47,547 $23,578 $0 -----------$23,578 $23,969 50.41% Oct $46,490 $23,351 $0 -----------$23,351 $23,139 49.77% Nov $56,600 $28,645 $0 -----------$28,645 $27,955 49.39% Dec $88,500 $44,925 $0 -----------$44,925 $43,575 49.24% Jan $54,100 $26,785 $0 -----------$26,785 $27,315 50.49% Feb $40,684 $20,419 $0 -----------$20,419 $20,265 49.81%
Expenses Payroll Sales and Marketing and Other Expenses Depreciation Acountant Expense Utilities Insurance Rent Payroll Taxes Website Maintenance Total Operating Expenses Profit Before Interest and Taxes Interest Expense Taxes Incurred Net Profit Net Profit/Sales
$9,300 $6,400 $0 $800 $1,040 $400 $2,500 $1,395 $25 -----------$21,860 ($11,163) $1,067 ($3,669) ($8,561) -40.67%
$9,300 $3,400 $0 $400 $1,040 $400 $2,500 $1,395 $25 -----------$18,460 ($5,383) $1,051 ($1,930) ($4,504) -17.42%
$9,300 $3,400 $0 $400 $1,130 $400 $2,500 $1,395 $25 -----------$18,550 ($4,278) $1,035 ($1,594) ($3,719) -12.97%
$9,300 $3,400 $0 $400 $1,380 $400 $2,500 $1,395 $25 -----------$18,800 ($2,951) $1,019 ($1,191) ($2,779) -8.82%
$9,300 $5,900 $0 $400 $1,790 $400 $2,500 $1,395 $25 -----------$21,710 ($4,716) $1,003 ($1,716) ($4,003) -11.74%
$9,300 $3,400 $0 $400 $1,460 $400 $2,500 $1,395 $25 -----------$18,880 $778 $987 ($63) ($146) -0.37%
$9,300 $3,400 $0 $400 $1,370 $400 $2,500 $1,395 $25 -----------$18,790 $5,179 $971 $1,263 $2,946 6.20%
$9,500 $2,400 $0 $400 $1,460 $400 $2,500 $1,425 $25 -----------$18,110 $5,029 $955 $1,222 $2,852 6.13%
$10,600 $4,500 $0 $400 $1,760 $400 $2,500 $1,590 $25 -----------$21,775 $6,180 $939 $1,572 $3,669 6.48%
$13,000 $5,700 $0 $400 $2,210 $400 $2,500 $1,950 $25 -----------$26,185 $17,390 $923 $4,940 $11,527 13.03%
$10,250 $5,900 $0 $400 $1,400 $400 $2,500 $1,538 $25 -----------$22,413 $4,903 $906 $1,199 $2,797 5.17%
$9,300 $3,400 $0 $400 $1,080 $400 $2,500 $1,395 $25 -----------$18,500 $1,765 $890 $263 $613 1.51%
15%
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Appendix
Appendix Table: Cash Flow Pro Forma Cash Flow Mar Cash Received Cash from Operations Cash Sales Subtotal Cash from Operations Additional Cash Received Sales Tax, VAT, HST/GST Received 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 Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out Principal Repayment of Current Borrowing Other Liabilities Principal Repayment Long-term Liabilities Principal Repayment Purchase Other Current Assets Purchase Long-term Assets Dividends Subtotal Cash Spent Net Cash Flow Cash Balance Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
$21,050 $21,050
$25,854 $25,854
$28,676 $28,676
$31,496 $31,496
$34,105 $34,105
$39,676 $39,676
$47,547 $47,547
$46,490 $46,490
$56,600 $56,600
$88,500 $88,500
$54,100 $54,100
$40,684 $40,684
5.81%
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Appendix
Appendix Table: Balance Sheet Pro Forma Balance Sheet Mar Assets Current Assets Cash Inventory Other Current Assets Total Current Assets Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets Liabilities and Capital Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Subtotal Current Liabilities Long-term Liabilities Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital Net Worth Starting Balances Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
$9,626 $0 $1,224 $10,850 $197,031 $207,881 $60,000 ($34,000) ($8,561) $17,439 $225,320 $17,439
$8,005 $0 $1,503 $9,508 $194,062 $203,570 $60,000 ($34,000) ($13,064) $12,936 $216,505 $12,936
$8,401 $0 $1,667 $10,068 $191,093 $201,161 $60,000 ($34,000) ($16,784) $9,216 $210,378 $9,216
$9,017 $0 $1,831 $10,848 $188,124 $198,972 $60,000 ($34,000) ($19,562) $6,438 $205,410 $6,438
$11,307 $0 $1,982 $13,290 $185,155 $198,445 $60,000 ($34,000) ($23,565) $2,435 $200,879 $2,435
$10,154 $0 $2,306 $12,460 $182,186 $194,646 $60,000 ($34,000) ($23,712) $2,288 $196,935 $2,288
$11,333 $0 $2,764 $14,096 $179,217 $193,313 $60,000 ($34,000) ($20,766) $5,234 $198,548 $5,234
$22,920 $0 $2,702 $25,622 $176,248 $201,870 $60,000 ($34,000) ($17,913) $8,087 $209,956 $8,087
$46,549 $0 $3,290 $49,839 $173,279 $223,118 $60,000 ($34,000) ($14,245) $11,755 $234,874 $11,755
$79,151 $0 $5,144 $84,295 $170,310 $254,605 $60,000 ($34,000) ($2,717) $23,283 $277,888 $23,283
$20,395 $0 $3,145 $23,540 $167,341 $190,881 $60,000 ($34,000) $80 $26,080 $216,961 $26,080
$22,976 $0 $2,365 $25,341 $164,372 $189,713 $60,000 ($34,000) $693 $26,693 $216,405 $26,693
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