Cranium Filament Reductions Hair Salon Business Plan Cranium Filament Reductions is a hair salon offering value-priced services

for the entire family. There are many "quick salons" like Cranium, but many of these provide only minimal services, whereas the upscale salons can be inconvenient due to scheduling requirements and cost. We will address a market need for low-cost salons with customer service.

Hair Salon Business Plan

Cranium Filament Reductions Executive Summary
Introduction Cranium Filament Reductions is a hair salon that allows the entire family to have their hair needs satisfied in one convenient visit. There are many "quick salons" like Cranium, however, many of these salons, such as Cost Cutters, only provide the minimum services, whereas the upscale salons can be inconvenient due to scheduling requirements and cost. The owner of Cranium perceives an unfulfilled customer need for a low-cost salon that provides maximum flexibility and strong customer attention. Using this strategy, Cranium will gain significant market share and create critical long-term relationships with its clients. The Company Cranium Filament Reductions is an Oregon corporation owned entirely by Susan Sever and is located in Shaker Hts., Oregon. Ms. Sever will be handling all hiring and training, purchasing, and retail sales. She will also hire a receptionist to manage all of the appointments as well as the people who walk in and be responsible for the point of sale transactions. Cranium will also be hiring six part-time hair stylists who will operate on a hourly/commission basis. Ms. Sever will be using a partial commission basis to create incentives for superior customer attention. The more her stylists attend to the customer's needs, the more money they will make off commissions. Cranium will invest time and money into training to ensure that clients receive the best experience possible making it easier to turn them into long-term customers. Services Cranium Filament Reductions provides hair styling for the entire family. This includes hair cuts for men and women, permanents and hair coloring for women, as well as hair cuts for children. Shampoos will be offered for all adult services. Service is offered on a walk-in basis or by appointment. Cranium Filament Reductions will emphasize a customer-centric service where the customer's needs are always the priority. Cranium Filament Reductions will also sell hair care products which is forecasted to account for 15% of sales. These professional-quality supplies will include shampoos, conditioners, reconstructors, brushes, combs, and other styling aids.

The Market The hair styling industry is highly fragmented with national chains such as Regis Corporation, which operates diverse franchises catering to all the market segments, and also including thousands of "mom and pop" salons that are very restricted in scope and services. This makes for a highly competitive market that has low barriers to entry and exit. In addition, the clients of hair styling have significant leverage due to the low switching costs they have. However, most companies have tried to pursue only one general strategy in gaining market share. Cranium believes that it is possible to offer a differentiated service through improved customer service at no greater significant cost if the right employee incentives are provided. With this strategy in mind, the company's goal is to increase the number of clients served by at least 20% per year. Cranium Filament Reductions will target three different market segments:
Men will typically make up 70-75% of the clientele. Females who cannot afford an upscale salon. Young mothers with children.

1.1 Mission

Cranium Filament Reductions' mission is to provide reasonably priced, convenient hair styling. We exist to attract and maintain customers. When we adhere to this maxim, everything else will fall into place. Our services will exceed the expectations of our customers.
1.2 Objectives

The objectives for the first three years of operation include:

1. To create a service-based company whose goal is to exceed customer's expectations. 2. To increase the number of clients served by at least 20% per year through superior performance and word-of-mouth referrals.

3. To develop a sustainable start-up business, contributing to increased employment of community residents.

Company Summary
Cranium Filament Reductions, soon to be located in Shaker Hts., OH, will offer reasonably priced, convenient hair styling. Cranium Filament Reductions will accept walk-ins as well as appointments for the entire family. Cranium Filament Reductions will grow its market share based on superior customer attention. Cranium Filament Reductions is a family hair salon, also known as a "quick hair salon."
2.1 Company Ownership

Cranium Filament Reductions is an Oregon corporation owned entirely by Susan Sever.

2.2 Start-up Summary

Cranium Filament Reductions will incur the following start-up costs:

Computer with point of sale terminal. Computer with printer for back office. Five cutting stations, each station requires a barber chair, cabinet, large mirror, blow dryer, curling iron, electric razor, several pairs of scissors, spray bottle, two sided mirror, and assorted combs and brushes. Desk for reception area. Three couches for the reception area. Display shelf for sale of retail products. Assorted plants. Assorted toys for the children. Legal fees for business formation and generation/review of contracts.

Please note that the following items that are assets to be used for more than a year will be considered a long-term assets and will be depreciated using the straight-line method accepted by G.A.A.P.

Start-up Funding

Start-up Expenses to Fund Start-up Assets to Fund Total Funding Required

1,100 103,900 105,000

Assets Non-cash Assets from Start-up 7,320 Cash Requirements from Start96,580 up Additional Cash Raised 0

Cash Balance on Starting Date 96,580 Total Assets 103,900

Liabilities and Capital

Liabilities Current Borrowing 0

Long-term Liabilities

45,000

Accounts Payable (Outstanding 0 Bills) Other Current Liabilities (interest-free) Total Liabilities 0 45,000

Capital

Planned Investment Susan Investor 2 Other Additional Investment Requirement Total Planned Investment 60,000 0 0 0 60,000

Loss at Start-up (Start-up Expenses) Total Capital

(1,100) 58,900

Total Capital and Liabilities

103,900

Total Funding

105,000

Start-up

Requirements

Start-up Expenses Legal 1,000

Stationery etc. Other

100 0

Total Start-up Expenses 1,100

Start-up Assets Cash Required Other Current Assets Long-term Assets Total Assets 96,58 0 0 7,320 103,9 00

Total Requirements

105,0 00

Services
Cranium Filament Reductions provides hair styling for the entire family. This includes hair cuts for men and women, permanents and hair coloring for women, as well as hair cuts for children. Shampoos will be offered for all adult services. Service is offered on a walk-in basis or by appointment. Cranium Filament Reductions will emphasize a customer-centric service where the customer's needs are always the priority. Cranium Filament Reductions will also sell hair care products which is forecasted to account for 15% of sales. These professional-quality supplies will include shampoos, conditioners, reconstructors, brushes, combs, and other styling aids.

Market Analysis Summary

Cranium Filament Reductions will be targeting three diverse groups of customers. Cranium will work hard to distinctly appeal to each of these groups. By focusing on more than one group, Cranium is lowering their risk that in a downturn one group will negatively effect the company.
4.1 Market Segmentation

Cranium Filament Reductions will target three different market segments:

Men will typically make up 70-75% of the clientele. Men have shorter hair requiring a faster, simpler job.

Females who cannot afford an upscale salon. Women tend to favor a female specific upscale salon if they can afford it. There is not often a difference in quality of an upscale salon relative to a family hair salon other than a upscale salon will tend to pamper you more, only accepts appointments, and the facility is generally a bit plusher. Someone who is fiscally responsible as opposed to someone who likes opulence will favor a family style salon. Young mothers with children. Most young children are notoriously difficult when it comes to getting haircuts. A family style salon is a more laid-back place that allows the children to play while they are waiting and then will work with the parents in calming the kids nerves when they are ready for their shearing.

Market Analysis Year 1 Potential Customers Males Females Mothers with young children Total 9% 10% 9% 9.27% Growth 54,000 28,000 23,400 105,400 58,860 30,800 25,506 115,166 64,157 33,880 27,802 125,839 69,931 37,268 30,304 137,503 76,225 40,995 33,031 150,251 Year 2 Year 3 Year 4 Year 5 CAGR 9.00% 10.00% 9.00% 9.27%

4.2 Target Market Segment Strategy

Cranium Filament Reductions will target each of the three groups separately. The males will be targeted by offering a quick, convenient, service. Because men tend to have shorter hair, they usually require haircuts more often. If they are getting a cut every four weeks and work normal business hours, most barbers are closed when the male customers have free time. Cranium Filament Reductions will cater to males with evening hours, no appointments necessary, and quick turn around times. Generally females prefer the allure of upscale salons, however, not everyone can afford this luxury. For this reason Cranium Filament Reductions will provide the same quality hair styling, without the expensive price. Cranium will target these customers by emphasizing the sophisticated, ultra-hip styling that Cranium can offer. Cranium Filament Reductions will also target mothers with children by offering the kids toys to play with while they wait and child-friendly hair stylists. Additionally, children receive a special rate reflecting the fact that children's hair grows so fast that it can be expensive to keep up with regular cuts, as well as the recognition that it generally takes a lot less time to cut a child's hair so it should be inherently less expensive.
4.3 Service Business Analysis

The "hair" service industry is fairly diverse. On one end of the spectrum you have the traditional barber, on the other end you have the fashionable boutique salons. Somewhere in between there are independent hair stylists, franchise barbers and stylists, and beauty salons.
4.3.1 Competition and Buying Patterns

Cranium Filament Reductions' competitors include:

1. Traditional barbers. They rarely serve appointments, it is generally a walkin service. While barbers are usually willing to provide whatever cut you are interested, they are generally providing straight forward haircuts, typically on the conservative side. The advantages of a barber is they are inexpensive and easy to use. Their disadvantages is often conservative styling capacities, sometimes a long wait as the barber may be an old timer who enjoys to chit chat. 2. Franchised "quick salons." An example of this would be Supercuts or Best Cuts. In essence this is a franchised version of Cranium Filament Reductions. The advantage of this style is the store will be the same from location to location and some people like this predictability. 3. Independent salons. These shops typically focus on a specific niche and do not serve a wide group of customers. The advantages to these could be an independent salon that fulfills all of your needs. The disadvantage is that because they tend to be more focused, more often than not this type of salon will not offer exactly what customers are looking for.

The buying patterns of men and women are quite different. Typically men are more price or convenience sensitive. Men typically care less about the task of getting their hair cut. For them whatever is easiest works best. Women on the other hand are more caught up in hair styling and

tend to bond more with their stylists. Because they bond more, they are much more loyal to their stylist. Once a stylist has earned their trust they are more willing to blindly put their hair in the stylists hands.

Strategy and Implementation Summary

Cranium Filament Reductions will rely on three separate strategies to grow market share. The first is superior customer service. Customers will be blown away with the level of service that they receive. They have expectations of average (at best) customer service from a quick salon based on past experiences. Cranium will also be leveraging its high-traffic store front location in a shopping center to drive people into the store. They will benefit from the shopping center association's marketing efforts to bring more people to the center. Lastly, Cranium Filament Reductions will use financial incentives early on to build a large, loyal customer population.
5.1 Competitive Edge

Cranium Filament Reductions' competitive edge is based on faultless customer service. Cranium Filament Reductions recognizes that the hair cutting/styling market is crowded so it is difficult to stand out. Cranium Filament Reductions will stand out by providing superior customer attention. This is particularly important in the "quick salon" space that Cranium operates in because margins are a bit lower and the goal of a quick salon is to crank through customers. Cranium will invest time and money into training to ensure that clients receive the best experience possible making it easier to turn them into long-term customers. By providing superior customer service, Cranium will be able to effectively compete against and outlast larger chains and independent stores.
5.2 Marketing Strategy

Cranium Filament Reductions will be located in a shopping center in Shaker Hts., OH. While the cost of the lease per foot is higher than in other business areas, the shopping center provides the best exposure. Additionally, the shopping center association is responsible for marketing the center's common area which will help draw a lot of traffic to the shopping center. Cranium Filament Reductions will market themselves as a hair salon that serves everyone, men, women, and children. This will be done through flyers to be sent out with the local newspaper. Cranium will also have an in-store promotion for the first few months to lure new people in. Lastly, Cranium will offer a discount for a few months to people that refer new customers.
5.3 Sales Strategy

Cranium Filament Reductions' sales strategy will be based on extremely professional interactions with the customer. Typically the "quick salons" concentrate on being quick and inexpensive, often at the expense of customer service. Anytime that a prospective customer is speaking with someone at Cranium's the employee will have an opportunity to impress the customer. Employee training will emphasize seizing these opportunities. Cranium Filament Reductions will also have the opportunity to increase sales of their retail hair care products every time they have a customer in the chair. Cranium offers deep discounts on the

hair care products for employees to encourage usage so they can explain to the customer about their personal experiences. Additionally, Cranium offers a product-based commission structure for the hair care products where they give away the product to the employee for commissions for selling the items to their customers. These personal testimonials and commission structure will allow Cranium to generate good sales from the retail hair care products.
5.3.1 Sales Forecast

The first month will be used to set up the store and hire and train the employees. The store will be officially open the second month. Sales for month two through will four will be somewhat slow as Cranium will be building up a customer base. From month four on sales will grow steadily.

Sales Forecast Year 1 Sales Males Females Women with small children Retail hair care products Total Sales 217,11 395,45 411,54 2 8 5 21,711 39,546 41,155 2,171 3,955 4,115 Year 2 Year 3

36,149 65,844 68,522 277,14 504,80 525,33 3 2 7

Direct Cost of Sales Males Females Women with small children Retail hair care products

Year 1

Year 2

Year 3

26,053 47,455 49,385 2,605 261 4,745 475 4,939 494

14,460 26,338 27,409

Subtotal Direct Cost of 43,379 79,013 82,227 Sales

5.4 Milestones

Cranium Filament Reductions will have several milestones early on:

1. Business plan completion. This will be done as a roadmap for the organization. 2. Set up the store front. 3. Revenue exceeding 100,000. 4. Profitability.

Milestones

Milestone

Start Date

End Date

Budget

Manager Departmen

t Business plan completion Set up the store front Revenue exceeding 100,000 Profitability Totals 1/1/2001 2/1/2001 0 ABC Marketing Departmen t Departmen t Departmen t

1/1/2001

2/1/2001

ABC

1/1/2001

7/1/2001

ABC

1/1/2001

9/1/2001

0 0

ABC

Management Summary
Susan Sever received her bachelor's degree from Miami University in Oxford, OH. While pursuing her degree Susan worked in the restaurant industry. For the four years during school she was a server in an upscale restaurant. While this provided very good income, particularly on the weekends, she longed for management experience. After graduation she sat down with the owner of the restaurant and presented him with a well reasoned case as to why she should be manager of the establishment. Her main points were her intimate knowledge of the industry and the restaurant, her superior communication skills with the customers and her colleagues, and her ambition to succeed. The owner was surprised by the well-reasoned arguments, enthusiasm, and ambition to take on more work that he promoted her to manager on the spot. Susan worked as manager for three years, learning all the intricacies of operating a business. These were three rewarding, but long, years. Toward the end, the long hours and work at night took its toll on Susan and she was burned out. When contemplating new opportunities she was brainstorming a way in which she could combine something she loved with something that she would be the owner of. She loved hair and had the experience of operating a business so after a lot of market research she undertook the task of writing a business plan.
6.1 Personnel Plan

Susan will be working full time for Cranium Filament Reductions. She will be handling all hiring and training, purchasing, and retail sales. Susan will also hire a receptionist to manage all of the appointments as well as the people who walk in and be responsible for the point of sale. The receptionist will be paid an hourly wage. Susan will also be hiring six part-time hair stylists who will operate on a hourly/commission basis. Susan will be using a partial commission basis to create incentives for superior customer attention. The more her stylists attend to the customer's needs, the more money they will make off commissions. Susan is more than happy to pay for this type of performance.

Personnel Plan

Year 1 Year 2 Susan

Year 3

36,00 40,00 44,00 0 0 0 17,60 19,20 19,20 0 0 0 33,00 36,00 36,00 0 0 0 33,00 36,00 36,00 0 0 0 33,00 36,00 36,00 0 0 0 33,00 36,00 36,00 0 0 0 33,00 36,00 36,00 0 0 0 33,00 36,00 36,00 0 0 0 8 8 8

Receptionist

Part-time hair stylist

Part-time hair stylist

Part-time hair stylist

Part-time hair stylist

Part-time hair stylist

Part-time hair stylist Total People

Total Payroll

251,6 275,2 279,2 00 00 00

Financial Plan
The following sections will outline the important financial data.
7.1 Important Assumptions

The following table details important financial assumptions for Cranium Filament Reductions.

General Assumptions Year 1 Plan Month Current Interest Rate 10.00% 1 10.00% Year 2 2 10.00% Year 3 3

Long-term Interest 10.00% Rate Tax Rate 30.00%

10.00% 30.00%

10.00% 30.00%

Other

7.2 Break-even Analysis

The Break-even Analysis indicates what Cranium must achieve in monthly revenue to reach the break even point.

Break-even Analysis

Monthly Revenue Break31,511 even

Assumptions: Average Percent Variable Cost 16%

Estimated Monthly Fixed 26,579 Cost

7.3 Projected Profit and Loss

The following table and chart shows the projected profit and loss for Cranium Filament Reductions.

Pro Forma Profit and Loss Year 1 Sales Direct Cost of Sales Other Production Expenses Total Cost of Sales 277,143 43,379 0 43,379 Year 2 504,802 79,013 0 79,013 Year 3 525,337 82,227 0 82,227

Gross Margin Gross Margin %

233,764 84.35%

425,790 84.35%

443,111 84.35%

Expenses Payroll Sales and Marketing and Other Expenses Depreciation Leased Equipment Utilities Insurance Rent Payroll Taxes Other 251,600 1,442 1,464 0 1,200 1,500 24,000 37,740 0 275,200 0 1,464 0 1,200 1,500 24,000 41,280 0 279,200 0 1,464 0 1,200 1,500 24,000 41,880 0

Total Operating Expenses

318,946

344,644

349,244

Profit Before Interest and Taxes EBITDA Interest Expense Taxes Incurred

(85,182) (83,718) 4,500 0

81,146 82,610 4,500 22,994

93,867 95,331 4,500 26,810

Net Profit Net Profit/Sales

(89,682) -32.36%

53,652 10.63%

62,557 11.91%

7.4 Projected Cash Flow

The following table and chart shows the projected cash flow for Cranium Filament Reductions.

Pro Forma Cash Flow Year 1 Cash Received Year 2 Year 3

Cash from Operations Cash Sales Subtotal Cash from Operations 277,143 277,143 504,802 504,802 525,337 525,337

Additional Cash Received Sales Tax, VAT, HST/GST Received 0 New Current Borrowing New Other Liabilities (interestfree) New Long-term Liabilities Sales of Other Current Assets Sales of Long-term Assets New Investment Received Subtotal Cash Received 0 0 0 0 0 0 277,143 0 0 0 0 0 0 0 504,802 0 0 0 0 0 0 0 525,337

Expenditures

Year 1

Year 2

Year 3

Expenditures from Operations Cash Spending Bill Payments Subtotal Spent on Operations 251,600 101,816 353,416 275,200 172,090 447,290 279,200 181,489 460,689

Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out 0 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 0 0 0 0 0

0 0 0 0 353,416

0 0 0 0 447,290

0 0 0 0 460,689

Net Cash Flow Cash Balance

(76,273) 20,307

57,513 77,820

64,648 142,467

7.5 Projected Balance Sheet

The following table and chart shows the projected balance sheet for Cranium Filament Reductions.

Pro Forma Balance Sheet Year 1 Assets Year 2 Year 3

Current Assets

Cash

20,307 77,820 0

142,46 7 0 142,46 7

Other Current Assets 0 Total Current Assets

20,307 77,820

Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets 7,320 1,464 7,320 2,928 7,320 4,392

5,856

4,392

2,928 145,39 5

26,163 82,212

Liabilities and Capital

Year 1

Year 2

Year 3

Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Subtotal Current Liabilities 11,945 14,341 14,968 0 0 0 0 0 0

11,945 14,341 14,968

Long-term Liabilities Total Liabilities

45,000 45,000 45,000 56,945 59,341 59,968

Paid-in Capital Retained Earnings

60,000 60,000 60,000 (1,100) (90,78 (37,130 2) )

Earnings Total Capital

(89,68 53,652 62,557 2) (30,78 22,870 85,427

2) Total Liabilities and Capital 26,163 82,212 145,39 5

Net Worth

(30,78 22,870 85,427 2)

7.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7231, Beauty Shops, are shown for comparison.

Ratio Analysis Year 1 Sales Growth 0.00% Year 2 82.14% Year 3 4.07% Industry Profile 7.50%

Percent of Total Assets Other Current Assets Total Current Assets Long-term Assets Total Assets 0.00% 77.62% 22.38% 100.00% 0.00% 94.66% 5.34% 100.00% 0.00% 97.99% 2.01% 100.00% 36.10% 52.40% 47.60% 100.00%

Current Liabilities Long-term Liabilities Total Liabilities Net Worth

45.65% 172.00% 217.65% -117.65%

17.44% 54.74% 72.18% 27.82%

10.30% 30.95% 41.25% 58.75%

31.90% 26.80% 58.70% 41.30%

Percent of Sales Sales Gross Margin Selling, General & Administrative Expenses 100.00% 84.35% 116.65% 100.00% 84.35% 73.64% 100.00% 84.35% 72.26% 100.00% 0.00% 73.40%

Advertising Expenses Profit Before Interest and Taxes

0.52% -30.74%

#VALUE! 16.07%

#VALUE! 17.87%

2.50% 3.20%

Main Ratios Current Quick Total Debt to Total Assets Pre-tax Return on Net Worth Pre-tax Return on Assets 1.70 1.70 217.65% 291.35% -342.78% 5.43 5.43 72.18% 335.13% 93.23% 9.52 9.52 41.25% 104.61% 61.46% 1.79 1.34 58.70% 5.20% 12.50%

Additional Ratios Net Profit Margin Return on Equity

Year 1 -32.36% 0.00%

Year 2 10.63% 234.59%

Year 3 11.91% 73.23% n.a n.a

Activity Ratios Accounts Payable Turnover Payment Days Total Asset Turnover 9.52 27 10.59 12.17 27 6.14 12.17 29 3.61 n.a n.a n.a

Debt Ratios Debt to Net Worth Current Liab. to Liab. 0.00 0.21 2.59 0.24 0.70 0.25 n.a n.a

Liquidity Ratios Net Working Capital Interest Coverage 8,362 -18.93 63,478 18.03 127,499 20.86 n.a n.a

Additional Ratios Assets to Sales Current Debt/Total Assets 0.09 46% 0.16 17% 0.28 10% n.a n.a

Acid Test Sales/Net Worth Dividend Payout

1.70 0.00 0.00

5.43 22.07 0.00

9.52 6.15 0.00

n.a n.a n.a

Appendix
Sales Forecast Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Sales Males Females Women with small children Retail hair care products Total Sales 0% 0% 0% 0% 0 0 0 0 0 5,484 548 55 913 7,000 6,254 625 63 1,041 7,983 8,547 855 85 1,423 10,910 16,455 18,545 21,545 23,555 26,874 28,745 1,646 165 2,740 1,855 185 3,088 2,155 215 3,587 2,356 236 3,922 2,687 269 4,475 2,875 287 4,786 29,854 2,985 299 4,971 38,109 31,254 3,125 313 5,204 39,896 Month 11 Month 12

21,005 23,673 27,502 30,068 34,305 36,693

Direct Cost of Sales Males Females Women with small children Retail hair care products Subtotal Direct Cost of Sales

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 0 0 0 0 0 658 66 7 365 1,096 750 75 8 417 1,250 1,026 103 10 569 1,708 1,975 197 20 1,096 3,288 2,225 223 22 1,235 3,705 2,585 259 26 1,435 4,305 2,827 283 28 1,569 4,706 3,225 322 32 1,790 5,369 3,449 345 34 1,914 5,743

Month 11 3,582 358 36 1,988 5,965 3,750 375 38 2,082 6,245

Month 12

Personnel Plan Month 1 Month 2 Month 3 Susan Receptionist Part-time hair stylist Part-time hair stylist Part-time hair stylist Part-time hair stylist Part-time hair stylist Part-time hair stylist Total People 0% 0% 0% 0% 0% 0% 0% 0% 3,000 0 0 0 0 0 0 0 1 3,000 3,000 1,600 1,600 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 8 8 Month Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 4 3,000 3,000 3,000 1,600 1,600 1,600 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 8 8 8 3,000 1,600 3,000 3,000 3,000 3,000 3,000 3,000 8 3,000 1,600 3,000 3,000 3,000 3,000 3,000 3,000 8 3,000 1,600 3,000 3,000 3,000 3,000 3,000 3,000 8 3,000 1,600 3,000 3,000 3,000 3,000 3,000 3,000 8 Month 11 Month 12 3,000 1,600 3,000 3,000 3,000 3,000 3,000 3,000 8 3,000 1,600 3,000 3,000 3,000 3,000 3,000 3,000 8

Total Payroll

3,000

22,600 22,600

22,60 22,600 22,600 22,600 22,600 22,600 22,600 0

22,600

22,600

General Assumptions Month 1 Month 2 Plan Month Current Interest Rate Long-term Interest Rate Tax Rate Other 10.00% 10.00% 30.00% 0 1 2 10.00% 10.00% 10.00% 10.00% 30.00% 30.00% 0 0 Month 3 3 10.00% 10.00% 30.00% 0 Month 4 4 10.00% 10.00% 30.00% 0 Month 5 Month 6 Month 7 5 6 10.00% 10.00% 10.00% 10.00% 30.00% 30.00% 0 0 7 10.00% 10.00% 30.00% 0 Month 8 8 10.00% 10.00% 30.00% 0 Month 9 Month 10 Month 11 Month 12 9 10.00% 10.00% 30.00% 0 10 10.00% 10.00% 30.00% 0 11 12 10.00% 10.00% 30.00% 0

Pro Forma Profit and Loss Month 1 Sales Direct Cost of Sales Other Production Expenses Total Cost of Sales 0 0 0 0 Month 2 7,000 1,096 0 1,096 Month 3 7,983 1,250 0 1,250 Month 4 10,910 1,708 0 1,708 21,005 3,288 0 3,288 Month 5 Month 6 Month 7 Month 8 Month 9 23,673 27,502 3,705 0 3,705 4,305 0 4,305 30,068 4,706 0 4,706 Month 10 Month Month 12 11

34,305 36,693 38,109 39,896 5,369 0 5,369 5,743 0 5,743 5,965 0 5,965 6,245 0 6,245

Gross Margin Gross Margin %

0 0.00%

5,905 84.35%

6,734 84.35%

9,203 84.35%

17,717 84.35%

19,967 23,198 84.35% 84.35%

25,362 84.35%

28,935 30,950 32,144 33,651 84.35% 84.35% 84.35% 84.35%

Expenses Payroll Sales and Marketing and Other Expenses Depreciation Leased Equipment Utilities Insurance Rent 0% 3,000 100 122 0 100 125 2,000 22,600 122 122 0 100 125 2,000 3,390 0 22,600 122 122 0 100 125 2,000 3,390 0 22,600 122 122 0 100 125 2,000 3,390 0 22,600 122 122 0 100 125 2,000 3,390 0 22,600 22,600 122 122 0 100 125 2,000 3,390 0 122 122 0 100 125 2,000 3,390 0 22,600 122 122 0 100 125 2,000 3,390 0 22,600 22,600 22,600 22,600 122 122 0 100 125 2,000 3,390 0 122 122 0 100 125 2,000 3,390 0 122 122 0 100 125 2,000 3,390 0 122 122 0 100 125 2,000 3,390 0

Payroll Taxes 15% 450 Other 0

Total Operating Expenses Profit Before Interest and Taxes EBITDA Interest Expense

5,897

28,459

28,459

28,459

28,459

28,459 28,459

28,459

28,459 28,459 28,459 28,459

(5,897) (5,775) 375

(22,554) (22,432) 375

(21,725) (21,603) 375

(19,256) (19,134) 375

(10,742) (10,620) 375

(8,492) (5,261) (3,097) 476 (8,370) (5,139) (2,975) 598 375 375 375 375

2,491 2,613 375

3,685 3,807 375

5,192 5,314 375

Taxes Incurred

Net Profit Net Profit/Sales

(6,272) 0.00%

(22,929) -327.55%

(22,100) -276.83%

(19,631) -179.94%

(11,117) -52.93%

(8,867) (5,636) (3,472) 101 -37.45% -20.49% -11.55% 0.30%

2,116 5.77%

3,310 8.69%

4,817 12.07%

Pro Forma Cash Flow Month 1 Cash Received Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month Month 11 Month 12 10

Cash from Operations

Cash Sales Subtotal Cash from Operations

0 0

7,000 7,000

7,983 7,983

10,910 10,910

21,005 21,005

23,673 27,502 23,673 27,502

30,068 30,068

34,305 34,305

36,693 38,109 36,693 38,109

39,896 39,896

Additional Cash Received Sales Tax, VAT, HST/GST 0.00% 0 Received New Current 0 Borrowing New Other Liabilities 0 (interest-free) New Long-term 0 Liabilities Sales of Other 0 Current Assets Sales of Long0 term Assets New Investment 0 Received Subtotal Cash 0 Received

0 0 0 0 0 0 0 7,000

0 0 0 0 0 0 0 7,983

0 0 0 0 0 0 0 10,910

0 0 0 0 0 0 0 21,005

0 0 0 0 0 0 0

0 0 0 0 0 0 0

0 0 0 0 0 0 0 30,068

0 0 0 0 0 0 0 34,305

0 0 0 0 0 0 0

0 0 0 0 0 0 0

0 0 0 0 0 0 0 39,896

23,673 27,502

36,693 38,109

Expenditures

Month 1

Month 2

Month 3

Month 4

Month 5 Month 6

Month 7 Month 8 Month 9

Month Month 11 Month 12 10

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 Longterm Assets Dividends Subtotal Cash Spent

3,000 105 3,105

22,600 3,285 25,885

22,600 7,213 29,813

22,600 7,377 29,977

22,600 7,872 30,472

22,600 22,600 9,414 9,837

22,600 10,430 33,030

22,600 10,840 33,440

22,600 22,600 11,494 11,863 34,094 34,463

22,600 12,086 34,686

32,014 32,437

0 0 0 0 3,105

0 0 0 0 25,885

0 0 0 0 29,813

0 0 0 0 29,977

0 0 0 0 30,472

0 0 0 0

0 0 0 0

0 0 0 0 33,030

0 0 0 0 33,440

0 0 0 0

0 0 0 0

0 0 0 0 34,686

32,014 32,437

34,094 34,463

Net Cash Flow Cash Balance

(3,105) (18,885) 93,475 74,590

(21,830) 52,760

(19,067) 33,694

(9,468) 24,226

(8,341) (4,935) 15,885 10,950

(2,962) 864 7,988 8,852

2,599

3,646

5,210 20,307

11,452 15,098

Pro Forma Balance Sheet Month 1 Assets Starting Balances Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Current Assets Cash Other Current Assets Total Current Assets 96,580 0 96,580 93,475 0 93,475 74,590 0 74,590 52,760 0 52,760 33,694 24,226 0 0 15,885 0 15,885 10,950 0 10,950 7,988 0 7,988 8,852 0 8,852 11,452 15,098 0 0 20,307 0 20,307

33,694 24,226

11,452 15,098

Long-term Assets Long-term 7,320 Assets Accumulate d 0 Depreciation Total Long7,320 term Assets Total Assets 103,900

7,320 122 7,198

7,320 244 7,076

7,320 366 6,954 59,714

7,320 488 6,832

7,320 610 6,710

7,320 732 6,588 22,473

7,320 854 6,466 17,416

7,320 976 6,344 14,332

7,320 1,098 6,222 15,074

7,320 1,220 6,100

7,320 1,342 5,978

7,320 1,464 5,856 26,163

100,673 81,666

40,526 30,936

17,552 21,076

Month 1 Liabilities

Month 2

Month 3 Month 4

Month 5

Month 6

Month 7

Month 8

Month 9 Month 10 Month 11 Month 12

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

0 0 0 0

3,045 0 0 3,045

6,967 0 0 6,967

7,116 0 0 7,116

7,559 0 0 7,559

9,086 0 0 9,086

9,490 0 0 9,490

10,069 0 0 10,069

10,458 0 0 10,458

11,099 0 0 11,099

11,460 11,674 0 0 0 0

11,945 0 0 11,945

11,460 11,674

45,000 45,000

45,000 48,045

45,000 51,967

45,000 52,116

45,000 45,000 52,559 54,086

45,000 54,490

45,000 55,069

45,000 55,458

45,000 56,099

45,000 45,000 56,460 56,674

45,000 56,945

60,000 (1,100) 0

60,000 (1,100) (6,272) 52,628

60,000 (1,100)

60,000 (1,100)

60,000 60,000 (1,100) (1,100)

60,000 (1,100) (90,917) (32,017) 22,473

60,000 (1,100)

60,000 (1,100)

60,000 (1,100)

60,000 60,000 (1,100) (1,100)

60,000 (1,100)

(29,201) (51,302) (70,933) (82,050) 29,699 7,598 59,714 (12,033) (23,150) 40,526 30,936

(96,553) (100,025) (99,924) (97,808) (94,499) (89,682) (37,653) (41,125) 17,416 14,332 (41,024) (38,908) (35,599) (30,782) 15,074 17,552 21,076 26,163

Total Capital 58,900 Total Liabilities 103,900 and Capital

100,673 81,666

Net Worth

58,900

52,628

29,699

7,598

(12,033) (23,150)

(32,017)

(3