Barton Interiors

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Table of Contents

Page 1

1.0 Executive Summary.............................................................................................................................1Chart: Highlights ......................................................................................................................1

1.1 Objectives ...................................................................................................................................21.2 Mission ........................................................................................................................................21.3 Keys to Success ........................................................................................................................2

2.0 Company Summary.............................................................................................................................22.1 Company Ownership .................................................................................................................22.2 Company Locations and Facilities ..........................................................................................3

3.0 Products and Services........................................................................................................................33.1 Product and Service Description .............................................................................................33.2 Competitive Comparison ..........................................................................................................33.3 Sales Literature ..........................................................................................................................4

4.0 Market Analysis Summary ..................................................................................................................4Chart: Sales Monthly ...............................................................................................................5

4.1 Market Segmentation ................................................................................................................5Chart: Market Analysis (Pie) ..................................................................................................7Table: Market Analysis ...........................................................................................................7

4.2 Target Market Segment Strategy .............................................................................................74.2.1 Market Trends................................................................................................................84.2.2 Market Growth ...............................................................................................................9

Chart: Sales by Year ...................................................................................................104.2.3 Market Needs ..............................................................................................................10

4.3 Service Business Analysis .....................................................................................................104.3.1 Distributing a Service .................................................................................................114.3.2 Competition and Buying Patterns .............................................................................114.3.3 Main Competitors .......................................................................................................114.3.4 Business Participants.................................................................................................12

5.0 Strategy and Implementation Summary ..........................................................................................145.1 SWOT Analysis ........................................................................................................................145.2 Strategy Pyramid .....................................................................................................................155.3 Value Proposition ....................................................................................................................165.4 Competitive Edge....................................................................................................................165.5 Marketing Strategy ..................................................................................................................16

5.5.1 Pricing Strategy...........................................................................................................165.5.2 Promotion Strategy .....................................................................................................175.5.3 Distribution Strategy ...................................................................................................175.5.4 Marketing Programs ...................................................................................................175.5.5 Positioning Statement ................................................................................................18

5.6 Sales Strategy..........................................................................................................................195.6.1 Web Plan Summary ....................................................................................................195.6.2 Sales Forecast ............................................................................................................19

Table: Sales Forecast.................................................................................................19Chart: Gross Margin Yearly ........................................................................................20

5.6.3 Sales Programs ..........................................................................................................205.7 Strategic Alliances...................................................................................................................205.8 Milestones ................................................................................................................................21

Table: Milestones..................................................................................................................21

Table of Contents

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6.0 Management Summary ....................................................................................................................216.1 Organizational Structure..........................................................................................................216.2 Personnel Plan .........................................................................................................................22

Table: Personnel ...................................................................................................................227.0 Financial Plan ....................................................................................................................................23

7.1 Break-even Analysis................................................................................................................24Table: Break-even Analysis .................................................................................................24Chart: Break-even Analysis .................................................................................................24

7.2 Important Assumptions............................................................................................................24Table: General Assumptions ...............................................................................................25

7.3 Key Financial Indicators ..........................................................................................................25Chart: Benchmarks ...............................................................................................................25

7.4 Start-up Summary ....................................................................................................................26Table: Start-up.......................................................................................................................26Table: Start-up Funding........................................................................................................27

7.5 Projected Profit and Loss .......................................................................................................27Table: Profit and Loss ..........................................................................................................28Chart: Profit Yearly ................................................................................................................28Chart: Profit Monthly .............................................................................................................29

7.6 Projected Cash Flow ...............................................................................................................30Chart: Cash ...........................................................................................................................30Table: Cash Flow ..................................................................................................................31

7.7 Projected Balance Sheet ........................................................................................................32Table: Balance Sheet ...........................................................................................................32

7.8 Business Ratios .......................................................................................................................33Table: Ratios .........................................................................................................................34

Table: Sales Forecast ...............................................................................................................................1Table: General Assumptions ....................................................................................................................2Table: Profit and Loss ...............................................................................................................................3Table: Cash Flow .......................................................................................................................................4Table: Balance Sheet ................................................................................................................................5Table: Personnel ........................................................................................................................................6

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1.0 Executive Summary

Barton Interiors is a proposed venture that will offer comprehensive interior design services forhomes and offices in the Boulder, Colorado area. Barton Interiors also will provide accessto products to complement the design consulting services including furniture, both new andantique, decorator fabric, and home and office accessories. This venture offers the personalizedservices the target market desires and can afford in a way that is unique from concept toimplementation.

Recent market research indicates a specific and growing need in the area for the interiordesign consulting services and products Barton Interiors offers the market it will serve. Themarket strategy will be based on a cost effective approach to reach this clearly defined targetmarket. Although the population of Boulder is under 100,000, the market has a significantquantity of relatively wealthy households that are conscious of the appearance and feel oftheir home and offices.

The approach to promote Barton Interiors with be through establishing relationships with keypeople in the community and then through referral activities once a significant client base isestablished. Barton Interiors will focus on developing solid and loyal client relationships offeringdesign solutions based on the client's taste, budget, use, and goals for the space. Theadditional selection, accessibility of product, design services, and value-based pricing willdifferentiate Barton Interiors from the other options in the area.

Total revenues in the first year are projected to exceed $46,000 with a loss. The venture willshow increasing profits in year two and three, with revenues projected to increase to almost$80,000. This interior design business plan outlines the concept and implementation and detailsregarding the first three years of this venture.

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1.1 Objectives

1. Realize an average of $3,870 of sales each business month for the first year, $5,720 forthe second, and $6,600 for the third year.

2. Generate a minimum of 45% of revenues from product sales versus consulting billing.3. Establish a commercial revenue client base accounting for 10% of total revenues.

1.2 Mission

Barton Interiors is an interior design service for discerning, quality-conscious clients that seekassistance in their design choices for their primary residences, vacation homes, andbusinesses. This experience offers personal attention through the design process and alsoprovides design resources and products to its clients through special purchases of furniture,fabric, and accessories. The total experience is provided in a way to inform, inspire, andassist people through the process of transforming their home or business environment tobecome a unique and personalized expression of themselves and add to their enjoyment of thatinterior space.

1.3 Keys to Success

The primary keys to success for Barton Interiors will be based on the following factors:

· Provide the highest quality interior design consulting experience possible.· Sell specially selected products to these clients to further meet their interior design

needs.· Communicate with our client base through the website and personalized communication

techniques.· Retain clients to generate repeat purchases and initiate referrals.

2.0 Company Summary

Barton Interiors is a start-up business that will offer comprehensive interior design services forhome and office. This business will assist those that want to have guidance and council indeveloping a basic design concept of their project, to the person that desires someone to take itfrom concept to complete implementation. Barton Interiors will offer the ability for clients topurchase new and antique furniture, art work, decorator fabric, and home accessories. Thewebsite www.bartoninteriors.com will be used as another way to communicate theservices available and provide a portfolio of the work accomplished. The business will begin asa home-based business and is expected to remain in this structure through at least the firstthree years.

2.1 Company Ownership

Barton Interiors, located in Boulder, Colorado is registered in the State of Colorado as a sole

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proprietorship owned and operated by Jill Barton dba Barton Interiors.

2.2 Company Locations and Facilities

Barton Interiors is operated from a home office located in Boulder, Colorado. A room is dedicatedto support a work area, a client contact work center, and display samples of design concepts,products, and past work.

3.0 Products and Services

Barton Interiors focuses on providing interior design consulting. This is complementedby specially purchased furniture, art pieces, decorator fabric, and accessories for the homeand office. The sales process will begin with interior design consulting services, and thenprogress on to offer specially selected components to complement the design theme.

Products available through Barton Interiors include:

· Furniture available through special purchase arrangements with Thomasville, DrexelHeritage, and Henredon and local craftsman.

· A selection of decorator fabrics from Waverly, P Kaufmann, Fabricut, Ralph Lauren, Regal,Robert Allen, Latimer Alexander, Covington, and Portfolio.

· A line of drapery hardware called "Oval Office Iron" purchased through Dept. of theInterior Decorator Fabrics in Eugene, Oregon found at www.fabric-online.com.

· Accessory and art pieces available through wholesale shows.· Hunter Douglas window treatment products including a variety of hard window coverings.· Interior shutters made of wood and a plastic/resin product called "polywood."· Antiques acquired for specific client needs through an arrangement with a local antique

buyer and through direct purchases through other sources.

3.1 Product and Service Description

Our primary points of differentiation offer these qualities:

· A unique client experience from a trained and professional interior designer that isqualified and capable of meeting the needs of discerning clients with high expectations.

· Access to a wide and unique selection of new and antique furniture, accessories, andspecial-order decorator fabrics.

· Personal assistance from a complementary product offering, including hard-coveringwindow treatment, hardware, and home accessories that fit the look and objectives ofeach project.

3.2 Competitive Comparison

Our competition is primarily from other interior designers. Looking at a broader picture, there isalso competition from the "do-it-yourself" resource providers that have retail stores and websitesthat include the following:

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· Bed, Bath and Beyond moved into the market in the year 2000 at an excellent location.· Discount stores including Target, Wal-Mart and Home Depot have expanded their fabric,

bedding, pillow, and ready-made drapery selections often representing lines includingWaverly.

· Norwalk continues to make purchasing "blank" furniture and making a designer fabricselection an attractive option to recovering furniture.

· Catalog sales continue to be a strong force with a list including Pottery Barn, CalicoCorners, Ballard Design, and Eddie Bauer expanding purchasing selection.

· The list of competitors for home accessory competition includes Pier 1 and localcompetitors that provide an entire list of other furniture, accessory and gift stores.

· Web sales of furniture, fabric and other interior design-oriented products has expandeddramatically and in many cases is easily available.

3.3 Sales Literature

A simple and professional looking brochure will be available to provide to referral sources, leaveat seminars, and on a select basis, use for direct mail purposes.

4.0 Market Analysis Summary

Barton Interiors has a defined target market client that will be the basis of building thisbusiness. This client is identical for both the residence and office spaces, but the target marketis identical based on her different roles for each of those spaces.

Effective marketing combined with an optimal product offering is critical to the BartonInteriors' success and future profitability. The owner possesses solid information aboutthe market and knows a great deal about the common attributes of those that are expected tobe prized and loyal clients. This information will be leveraged to better understand who BartonInteriors will serve, their specific needs, and how to better communicate with them.

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4.1 Market Segmentation

The profile of the Barton Interior client consists of the following geographic, demographic,psychographic, and behavior factors:

Geographics

· The geographic market is the affluent sector within the Boulder, Colorado area with apopulation of 94,673. (Based on the 2000 Census data.)

· A 20-mile geographic area is in need of the products and services offered and do notintend to pursue the Denver market at this time.

· The total target market population is estimated at 24,000 based on the followingdemographics.

Demographics

· Female, married and have attended college.· Have children, but they are not necessarily at home.· A combined household annual income greater than $100,000.· Age range of 35 to 55 years, with a median age of 42.· Owns their home, townhouse and/or condominium valued at over $425,000.· They and/or their spouse work in a professional setting and may have interior design

requirements for their office space as well as their homes. · Belong to one or more business, service, and/or athletic organization including:

° Boulder Country Club.° Junior League of Boulder.° American Business Women's Association.° American Auxiliary of University Women.

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° Doctor's Wives Auxiliary.

The following is known regarding the profile of the typical resident of Boulder:

· 67% have lived in the area for seven years or more.· 23% are between the ages of 35 and 44.· 40% have completed some college.· 24% are managers, professionals and/or owners of a business.· 53% are married.· 65% have no children living at home.· 56% own their residence.

Psychographics

· The appearance of her home is a priority.· Entertaining and showing her home is important.· She perceives herself as creative, tasteful and able, but seeks validation and support

regarding her decorating ideas and choices.· She reads one or more of the following magazines:

° Martha Stewart Living.° Country Living.° Home.° House Beautiful.° Country Home.° Metropolitan Home.° Traditional Homes.° Victoria.° Elle Decor.

· If she does seek out television as an information source for home decorating that ismost likely to be "Martha Stewart" and, on a lesser basis, "Interior Motives."

Behaviors

· She takes pride in having an active role in decorating their home.· Her home is a form of communicating "who she is" to others.· Comparison positioning and stature within social groups are made on an ongoing basis,

but rarely discussed.

Barton Interiors is providing its clients the opportunity to create a home environment toexpress who they are. They seek design assistance and have the resources to accomplishtheir goals. They desire their home to be personal, unique, and tasteful as it communicates amessage about what is important to them. Barton Interiors will seek to fulfill the followingbenefits that are important to our clients.

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Table: Market Analysis

Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5

Potential Customers Growth CAGR

Country Club Women 12% 34,400 38,528 43,151 48,329 54,128 12.00%

Boomers in Transition 9% 12,000 13,080 14,257 15,540 16,939 9.00%

Professional Youngsters 8% 8,000 8,640 9,331 10,077 10,883 8.00%

Home Builders 5% 8,000 8,400 8,820 9,261 9,724 5.00%

Other 0% 0 0 0 0 0 0.00%

Total 10.09% 62,400 68,648 75,559 83,207 91,674 10.09%

4.2 Target Market Segment Strategy

Our marketing strategy will create awareness, interest, and appeal from our target market forwhat Barton Interiors offers its clients. The target markets are separated into four segments;"Country Club Women," "Boomers in Transition," "Professional Youngsters," and "Home Builders."The primary marketing opportunity is selling to these well defined and accessible target marketsegments that focuses on investing discretionary income in these areas:

Country Club Women - The most dominant segment of the four is comprised of women in the agerange of 35 to 50. They are married, have a household income greater than $100,000, own atleast one home or condominium, and are socially active at and away from home. They aremembers of the Boulder Country Club, Junior League of Boulder, AAUW, and/or the Doctor'sWives Auxiliary. They have discretionary income, and their home and how it looks is a priority.The appearance of where they live communicates who they are and what is important tothem. This group represents the largest collection of "Martha Stewart Wanna Be's," with theirprofile echoing readers of Martha Stewart Living magazine, based on the current demographicsdescribed in the 2001 Martha Stewart Living Media Kit.

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Boomers in Transition - This group, typically ranging in age from 50 to 65, is going through apositive and planned life transition. They are changing homes (either building or moving) orremodeling due to empty nest syndrome, retirement plans, general downsizing desires, or tojust get closer to the golf course. Their surprisingly high level of discretionary income is firstspent on travel, with decorating their home a close second. This is what makes this segment soattractive. The woman of the couple is the decision maker, and often does not always includethe husband in the selection or purchase process.

Professional Youngsters - Couples between the ages of 25 and 35 establishing their first "adult"household fall into this group. They both work, earn in excess of $80,000 annually, and nowwant to invest in their home. They seek to enjoy their home and communicate a "successful"image and message to their contemporaries. They buy big when they have received apromotion, a bonus, or an inheritance.

Home Builders - People in the home building process, typically ranging in age from 40 to 55, areprime candidates for Barton Interiors. This applies to both primary residences and vacations andsecondary homes. Although only expected to occur two to fives times each year for thebusiness, this event will be the single largest dollar transaction amount.

4.2.1 Market Trends

The home textile market, considered to include sheets, towels, draperies, carpets, blankets,and upholstery, accounts for 37% of all textile output. The trade publication "Home TextilesToday" estimates the size of the U.S. home textiles market at the wholesale level, excludingcarpets, to be between $6.5 billion to $7 billion annually. The industry is expected to realize asteady increase over the next few years.

The industry is driven by the number of "household formations" which is expected to continuethrough the first years of the new millennium. This is primarily due to the solid growth in thenumber of single-parent and non-family households. This growth also comes from babyboomers needing bigger houses to accommodate growing and extended families and, as peopleget older, they are buying homes rather than renting to realize tax and equity building benefits.Favorable mortgage rates will also enable others to invest in their existing home.

The "do-it-yourself" (DIY) market continues to grow and closely parallels the professional home-improvement market. DIY market growth is attributed to an increased presence of products,the personal satisfaction experienced, and the cost savings clients realize. A portion of the do-it-yourself market is the "buy-it-yourself" (BIY) market. Consumers are buying the product andarranging for someone else to do the fabrication and/or installation. This is more expensivethen the do-it-yourself approach, but less costly than buying finished products from othersources. It also provides similar feelings of creativity, pride, and individuality associated withdirect creative involvement. This sense of "participation" in home decorating is an importantfactor for many of these committed clients.

Regardless of this data, the following trends and issues impact the success and challenges ofBarton Interiors.

· National economic health: The industry performs better when the countryexperiences "good times" regardless of its direct impact on the local economy. Salesdecrease when the stock market falls and when NATO takes military action. An upbeatState of the Union address by the President correlates with an increase in sales.

· New home construction activity: More closely related to what is taking place in our

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local economy, new home construction has a significant impact on sales across allproduct lines.

· Shifts in design trends: Major changes in design trends increase sales. The Bouldermarket lags behind metropolitan design trends by six to 12 months. This offers a buyingadvantage for the store, offering a preview of what is coming and how we shouldadjust our in-stock inventory.

4.2.2 Market Growth

American Demographics projects the number of U.S. households will grow by 16% to 115million by the year 2010. Almost half of the households comprised of people from 35 to 44years old are married couples with children under the age of 18. Based on this research,households in the 45 to 65 age range will grow to 34 million by the year 2000. Thesehouseholds will increase another 32 percent to 45 million in 2010 as baby boomers add to thispeak-earning and spending age group. These families will either build new homes or move intoexisting dwellings. With approximately 46.2% of the nation's 93.3 million dwellings built before1960, many of these homeowners are also expected to update.

One important factor is that married couples in the 35 to 65 age range represent a growthsegment and enjoy larger incomes than other family structures. They enjoy the choice tospend their disposable income on life's amenities. They may demonstrate "cocooning" by makingtheir home a more comfortable and attractive haven. They choose to spend resources hererather than on vacations and other discretionary options. This group represents a largersubsegment of the target market.

These factors contribute to an increased need for home decorator fabrics for window treatment,upholstery, pillows, bedding, and other fabric accessory needs. This demand is expected to becomplemented by the growth in the Boulder market. The majority of homeowners spend a largepercentage of their disposable income on home goods within two years after buying a newhouse. Therefore, positive trends in new housing activity represents growth and opportunityfor home textiles.

Recent slow downs in the local economy have resulted in falling below sales projections andthese factors will affect market growth. Adding additional revenues through the website willhopefully add a more stable factor in to the revenue stream.

The publication, American Demographics, projects the number of U.S. households will grow by16% between 1995 and the year 2010, an increase from 98.5 million to 115 million. Of thehouseholds comprised of people from 35 to 44 years old, almost half are married couples withchildren under the age of 18. Based on research by American Demographics, households in the45 to 65 age range should grow to 34 million by the year 2000. These households will increaseanother 32 percent to 45 million in 2010 as baby boomers add to this peak-earning andspending age group. With approximately 46.2% of the nation's 93.3 million dwellings built before1960, many of these homeowners are also expected to update. These factors contribute to anincreased need for home decorator fabrics for window treatment, upholstering, pillows,bedding, and other fabric accessory needs. This demand is expected to be complemented by thegrowth in the Boulder market. The majority of homeowners spend a large percentage of theirdisposable income on home goods within two years after buying a new house. Therefore, positivetrends in new housing activity represents growth and opportunity for home textiles.

One important factor is that married couples in the 35 to 65 age range represent a growthsegment and enjoy larger incomes than other family structures. They enjoy the choice to

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spend their disposable income on life's amenities. They may demonstrate "cocooning" by makingtheir home a more comfortable and attractive haven. They choose to spend resources hererather than on vacations and other discretionary options. This group represents a larger sub-segment of the target market.

4.2.3 Market Needs

Barton Interiors will provide its clients the opportunity to create a home environment toexpress who they are. They have the choice to actively participate in the design, look, andfeel of their home. They desire their home to be personal, unique, and tasteful as well ascommunicate a message about what is important to them. Barton Interiors seek to fulfill thefollowing benefits that we know are important to our clients.

4.3 Service Business Analysis

The industry continues to be competitive with a "commodity" concern with "designers" of allskill and background levels available throughout the market.

· Potential Competitors: There are many other interior designers in the Boulder areaand these competitors range from those that provide simple-focused services, such asdraperies only, to a more full-service interior design approach similar to Barton Interiors.

· Power of Suppliers: Moderately high in most anyone that has a business licence canhave access to wholesale purchase of furniture, fabrics and accessories.

· Power of Buyers: Very low as buyers work within the financial terms and productavailability offered through the suppliers that specify the terms and conditions.

· Substitute Products: High as many people refer to themselves as interior designersregardless of background, training, or certification. Substitute products are also high in

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the area of window treatment as hardcovering solutions have become available andincreasingly affordable. This includes blinds, shutters, and other "manufactured"treatments. Substitute products are not as prevalent in the area of antiques and artpieces.

· Rivalry: Moderately low with the "territorial" structure that the industry experiencesand moderately low exit barriers. The easy entry is accompanied with an easy exit andpeople get out when it is not working.

With the slow, but steady, growth of the past few years, the industry is now experiencing a"cautious optimism" regarding the future. Growth and expansion activities for most areas of theinterior design industry appear to be carefully considered. Many in the industry continues todecide what to do and buy as the economy has experienced a slowdown and increaseduncertainty from the more economically confident 1990's.

4.3.1 Distributing a Service

Our primary method of distribution will be on a direct sales basis for each individual client.

4.3.2 Competition and Buying Patterns

Competition in the area is strong, with designers ranging from the home-based, no formal trainingindividuals to the more formalized store front, American Association of Interior Designers (ASID)certified designers that have close relationships with prestigious architects. In mostcases, clients make the provider decision on the basis of three criteria in this order withthese percent influences indicated after each:

1. Referrals and relationship with other professionals, particularly architects (55%).2. Personality and "expected relationship" with the designer (25% ).3. Past work (15%).4. ASID certification (5%).

Understanding the influence of these factors on the prospective client will be key in themarketing strategy.

4.3.3 Main Competitors

Current local competition includes the following:

· Interior Designers: There are 37 interior designers listed in the Boulder Yellow Pages (Year2000-2001 issue) that offer fabric as a part of their services. Interior designers makeprofit off mark-up of fabric in addition to their hourly services charges. Their costs peryard are typically higher since they do not benefit from retail or volume discounts.Therefore, their costs to their client is often two to four times higher than the price peryard from Barton Interiors.

· House of Fabrics: Nationwide recognition and buying power of numerous types of datedfabric with strong product availability. This store has experienced financial difficulty inrecent years and has closed several locations throughout the country.

· Warehouse Fabrics: Locally owned, offering low-cost products with a wide selection of

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discontinued fabrics and only a limited number of "current" fabrics. This warehouseconcept offers marginal client service with what many "upper end" clients consider tobe an "undesirable" shopping environment.

· JoAnn's: Nationwide chain with strong buying power. They have a broad fabric selectionfor clothing with a limited number of in-store decorator fabrics available. Their primarytarget markets are the clothing seamstress, with an increasing emphasis on craft items.Low prices are fabric main point of competitive differentiation.

· Website Providers: Fabric sales over the Web are limited at this time, and this will be asource of competition for the future to watch. Currently, there is no measurable impacton our market through competitive websites.

Catalog Competitors

An increasing level of competition is anticipated from catalog sales. Recent trends, such asthose demonstrated in the well established but evolving Pottery Barn catalog, indicatesincreased interest in offering decorator fabric, window designs, and other home decoratingproducts through this increasingly popular channel of distribution. Catalog sources do not offerclients the option to see, touch, and have the fabric in their homes. Price is the mostsignificant competitive factor this product source presents. The most aggressive catalogcompetitor is Calico Corners followed by Pottery Barn and other home-accessory-basedproviders.

Discounters

Channels of distribution continue to shift in favor of discounters, who account for a significantportion of the growth in the industry. As consumers experience lower levels of disposableincome, discounters leverage frequent store promotions to entice frugal, value-orientedconsumers. One of the biggest criticism of discounters is their failure to offer a quality serviceexperience and their failure to present inviting displays to promote sales. These discounters,along with specialty store chains, present one of the most severe competitive threats forindividually-owned specialty stores. This is partially due to extensive promotional efforts, priceadvantages, and established relationships with their vendors. One example of these discountersis the "home improvement" chains, such as Home Base. This aggressive retailer has adopted astrategy to include complete decorator departments in their metropolitan stores. Currentlyexisting in the Los Angeles market, this strategy is anticipated to be introduced into theSeattle area and other select metropolitan markets within the year. Although the Boulder HomeBase store sells basic curtain rod hardware and other hard cover window treatment, there are noknown plans at this time for the Boulder Home Base store to implement this in the foreseeablefuture. This will be an important issue to monitor for competitive purposes.

4.3.4 Business Participants

Industry participants in the area of interior design comes from six general categories; interiordesigners, traditional furniture stores, traditional fabric retail stores, catalog and Web-basedsales, click and mortar discounters, and individually owned stores. Most of these players havesome type of an online presence. The following provides an overview of the type ofparticipants that are most active and most successful in this arena.

Interior DesignersThis large group makes up a substantial quantity of higher-end fabric purchases. For example,there are 37 interior designers listed in the Boulder Yellow Pages (Year 2001-2002 issue) thatoffer fabric as a part of their services. Interior designers make profit off mark-up of fabric in

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addition to their hourly services charges. Their costs per yard are typically higher since theydo not benefit from retail or volume discounts. Therefore, their costs to the client is often twoto four times higher than the price per yard from Barton Interiors. It is unusual to find anindependent interior designer that has a website.

Traditional Fabric Retail Stores

The traditional retail stores are corporate stores (not franchises) that have multiple locationsin select metropolitan markets. Example of these stores include:

· JoAnn's www.joanns.com - Nationwide chain with strong buying power. They have abroad fabric selection for clothing with a limited number of in-store decorator fabricsavailable. Their primary target markets are the clothing seamstress, with an increasingemphasis on craft items. JoAnn's purchased the House of Fabric chain and has a link setup from the previous URL www.houseoffabrics.com.

· Calico Corners www.calicocorners.com - This national chain was a franchise throughthe 1980s (no longer selling licenses) and has been purchasing those stores throughoutthe country. Calico Corners stores number about 90 and are in most larger cities, with aconcentration in the Northeast.

Catalog and Web-based CompetitorsVirtually every catalog and major retail store in the industry now has a website. The mostaggressive and direct catalog competitor is Calico Corners at www.calicocorners.com whichcomplements their 80+ retail store network. An increasing level of competition is anticipated fromthese catalog and Web-based sales. Recent trends, such as those demonstrated in the wellestablished, but evolving, Pottery Barn catalog at www.potterybarn.com and Ballard Design atwww.ballarddesigns.com indicates increased interest in offering decorator fabric for windowdesign and upholstery through this increasingly popular channel of distribution.

Click and Mortar DiscountersChannels of distribution continue to shift in favor of discounters, who account for a significantportion of the growth in the industry and who have been extremely active on the Web. Asconsumers experience lower levels of disposable income, discounters leverage frequent storepromotions to entice frugal, value-oriented consumers. One of the biggest criticism ofdiscounters is their failure to offer a quality service experience and their failure to presentinviting displays to promote sales. One example of these discounters is the "homeimprovement" chains, such as Home Base at www.homebase.com. This aggressive retailer hasadopted a strategy to include complete decorator departments in their metropolitan stores.Currently existing in the Los Angeles market, this strategy is anticipated to be introduced intothe Seattle area and other select metropolitan markets within the year. Although the BoulderHome Base store sells basic curtain rod hardware and other hard cover window treatment,there are no known plans at this time for the Boulder Home Base store to implement this in theforeseeable future. Bed, Bath & Beyond at www.bedbathandbeyond.com has an even largerassortment of hardware with a selection of pre-made solutions for window treatments, beddingand pillows. Both of these retailers have stores in our market and with selection activity onthe Web, this will be important to monitor for competitive purposes.

Individually Owned StoresSome form of locally owned stores exist in virtually every market with a population of over50,000. Typically, the low end begins with those that carry a limited selection of decoratorfabric, often with a focus on clothing fabric and crafts. At a slightly more sophisticated level,stores may offer low-cost products with a wide selection of discontinued fabrics and only alimited number of "current" fabrics. "Full service" individually owned stores, like Barton Interiors,are less prevalent. An increasing number of these stores at all level do have websites, including

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this local competitor example: www.econosales.com.

5.0 Strategy and Implementation Summary

The primary sales and marketing strategy for Barton Interiors includes these factors:

· A premier interior design consulting experience that provides impressive client servicethroughout.

· The sale of other complementary products that adds value for the client's totalexperience.

· Providing a experience that will result in repeat business for home and/or office needs andclient referrals.

This strategy will be implemented through the tactics and programs described in this section.

5.1 SWOT Analysis

The following SWOT analysis captures the key strengths and weaknesses relating to themarket analysis summary and describes the opportunities and threats facing Barton Interiors.

Strengths

· The proven ability to establish excellent personalized client service.· Strong relationships with suppliers that offer flexibility and respond to special product

requirements.· Good referral relationships with architects, complementary vendors, and local realtors.· Client loyalty developed through a solid reputation among repeat, high-dollar purchase

clients.

Weaknesses

· The owner is still climbing the "retail experience learning curve."· Not established in a market where a variety of interior design options exist.· Challenges of the seasonality of the business.

Opportunities

· A significant portion of our target market is desperately looking for the services BartonInteriors will offer.

· Strategic alliances offering sources for referrals and joint marketing activities to extendour reach.

· Promising activity from new home construction activity.· Changes in design trends can initiate home updating and, therefore, generate sales.

Threats

· Continued price pressure due to competition or the weakening market reducingcontribution margins.

· Dramatic changes in design, including fabric colors and styles can present challenges tokeep paced with what is desired by what is expected to be a leading-edge client base.

· Expansion of products and services offered by other sources including national discount

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stores into the local market including Target, Wal-Mart, and Home Depot.· Catalog resources, including Calico Corners and Pottery Barn, with aggressively priced

trend-setting fabric products including drapery, bedding and slipcovers.

This analysis indicates solid potential success, but the weaknesses and threats must berecognized throughout the life of the venture.

5.2 Strategy Pyramid

The following three strategies summarize our implementation process for the upcoming year.They address in-store retail revenue, expansion to non-fabric revenue sources, and Web-based sales activities.

STRATEGY #1 - Generating Referrals

Tactic #1A - Build a client base through leveraging existing contacts from former clients of thearchitecture firm.

Tactic #1B - Build a referral network through professional contacts. Offer special order fabricthat will arrive in reasonable time frame and enable to provide something very unique for eachcustomer.

Program #1A - Press release in the local paper announcing the business is open.

Program #1B - Offer seminars through organizations to promote the concept of using aninterior designer and using Barton Interiors.

STRATEGY #2 - Product Sales

Tactic #2A - Promotion of products available through Barton Interiors.

Program #2A - Seminars and demonstration promotions.

Program #2B - Cross selling activities with home and office consulting.

Tactic #2B - Promotion of art and antiques.

Program #2C - Demonstrate the unique qualities they offer to promote these higherdollar transactions.

Program #2D - Display this through the online and notebook portfolio.

STRATEGY #3 - Generate Awareness Through the Website

Tactic #3A - Better facilitate and communicate Barton Interiors services andproduct through the website.

Program #3A - Design of www.bartoninteriors.com.

Program #3B - Integration of completed client work.

Tactic #3B - Monthly assessment of performance of email inquiries.

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Program #3C - Establish goals of the program (Refer to Web Strategy Plan done in WebStrategy Pro).

Program #3D - Evaluate the client work initiated through the site.

5.3 Value Proposition

Barton Interiors offers the highest interior design experience for the home and officeconveniently available for those in the Boulder area. The concept is unique through theselection of antiques, home accessories, and complementary products along with the interiordesign consulting experience.

5.4 Competitive Edge

Barton Interiors will be differentiated from other interior designers by the value it offersin quality, sought-after products not found through other designers or store choices, andthrough the excellent service and support it offers. Client follow-through will be impeccable. This competitive edge leverages the same proven factors that indicated higher success rates forinterior design services.

5.5 Marketing Strategy

The marketing strategy is based on establishing Barton Interiors as the resource of choice forpeople in need of interior design ideas and products. The more involved "do-it-yourself"and the "buy-it-yourself" clients will find the consulting and guidance helpful. On the otherend of the spectrum, the "just-get-it-done" client will find Barton will successfullyaccomplish exactly that. All clients will find Barton Interiors to be a resources to decoratetheir homes and offices in a way that is inspiring, inviting, and motivating.

Our marketing strategy is based on superior performance in the following areas:

· Unique consulting services.· Product choices specifically chosen for each individual client project.· Overall quality of the experience and the result.· Excellent client service and support regardless.

This marketing strategy will create awareness, interest, and appeal from our target market forwhat Barton Interiors offers our clients. This will be executed in a manner that will entice themto come back for repeat purchases and encourage them to refer friends and professionalcontacts.

5.5.1 Pricing Strategy

Product pricing is based on offering high value to our clients compared to others in the market.Value is determined based on the best design services, providing a "picture" of what the space

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will look like before the work begins, convenience, and timeliness in accomplishing the goal.

5.5.2 Promotion Strategy

The promotion strategy will focus on generating referrals. Other potential sources of promotioninclude:

· Newspaper Advertisements: Select advertisements in the Boulder Herald.· Television Advertisements: Select "Martha Stewart" and "Interior Motives"

local television shows.· Quarterly Postcard: A direct mail postcard distributed to the client mailing list.· Website: Traffic from www.bartoninteriors.com.

5.5.3 Distribution Strategy

The primary source of distribution is through the tradition retail distribution channel. On asecondary basis, it will be through the website via email inquiries and phone sales, or directlyfrom the site itself.

5.5.4 Marketing Programs

The single objective is to position Barton Interiors as the premier source for home decoratorfabrics in the Boulder area, commanding a majority of the market share within three years. Themarketing strategy will seek to first create client awareness regarding the products andservices offered, develop that client base, establish connections with targeted markets and worktoward building client loyalty and referrals.

Barton Interiors' four main marketing strategies are:

1. Increased awareness and image.2. Leveraging existing client base.3. Cross selling.4. New home construction promotion.

The strategies will be implements through the following marketing tactics and programs.

Strategy #1INCREASED AWARENESS and IMAGE - Informing those not yet aware of what Barton Interiorsoffers.

· Advertising° Martha Stewart.° Interior Motives.

· Referral Generation° Realtor "open house" promotions.° Complementary vendor referrals.

° Imperial Floors.° Upholstery resources.

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° "Design Time" Interior Design.° 27th Street Fabrics.

· Organization Relationships° Co-sponsorship of fund raising activities.° Participating in social and service events.

Strategy #2

LEVERAGING EXISTING CLIENT BASE - Our best sales in the future will come from our currentclient base.

· Client Service and Relationships° Exceptional client service in the store.° Follow up contact.° Personal shopper support.

· Additional Experiences° Classes.° Demonstrations.

Strategy #3

CROSS SELLING - Increasing the average dollar amount per transaction.

· Internal° Additional sales of furniture, art pieces, and fabric and home accessories. ° Look for office/commercial assignments.

· Prospecting° Ongoing work including more involvement in the implementation phase.° Future assignments based on additional work initiated by family changes and

transitions.

Strategy #4

NEW HOME CONSTRUCTION PROMOTION - Connecting with people involved in the buildingprocess.

· Connecting with "Suppliers"° Realtors gift certificate program.° Builders design support services.° Loan Officers gift certificate program.

· Connecting with "Clients"° Subscription and use of "newcomers" report.° Chamber of Commerce new members update.

5.5.5 Positioning Statement

For the person that seeks to create a personalized and unique impression of her home, BartonInteriors is the source for client-oriented design services. Clients will be impressed with, andreturn for, the services they receive and the outcome they have enjoyed. Unlike other interiordesigners or stores, such as JoAnn's, Warehouse Fabric, or catalog options, Barton Interiors is apleasant and tasteful resource that encourages everyone in the process of decorating theirhome. Unlike using the services of other interior decorators, Barton Interiors allows the

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individual to participate in their design choices to the extent they choose, and realize greatervalue for the dollars they invest.

5.6 Sales Strategy

The key to our sales strategy is referrals from pleased clients that are proud of the result BartonInteriors provided them and pleased to tell their friends--people much like them. Keeping incontact with past clients to acquire repeat business and to remind them of this referralopportunity will be key. Sales activities will depend on creating awareness about the servicesBarton Interiors offers and then build on each and every client as they make the decision torefer to others.

5.6.1 Web Plan Summary

The website of www.bartoninteriors.com will be used for information only purposes at thistime. Contact information will be presented with a complete portfolio of work accomplished. Additional information will be provided regarding the product-based resources Barton Interiorsincorporates into the work done for clients.

5.6.2 Sales Forecast

The sales forecast is broken down into three main revenue streams; residential consultingrevenue, commercial consulting revenue, and product sales. The goal is to have these tworevenue streams be equal by the second year, with product sales slower to secure during yearone. The revenue forecast for the upcoming year is based on a modest 12% growth rate. The economic unpredictability adds to the difficulty of making these projections.

Table: Sales Forecast

Sales Forecast

Year 1 Year 2 Year 3

Sales

Residential Consulting $22,700 $31,200 $46,000

Commercial Consulting $3,960 $6,240 $7,200

Product Sales $19,800 $31,200 $46,000

Other $0 $0 $0

Total Sales $46,460 $68,640 $99,200

Direct Cost of Sales Year 1 Year 2 Year 3

Residential Consulting $3,405 $4,680 $6,900

Commercial Consulting $594 $936 $1,080

Product Sales $10,890 $17,160 $25,300

Other $0 $0 $0

Subtotal Direct Cost of Sales $14,889 $22,776 $33,280

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5.6.3 Sales Programs

In brief, our marketing mix is comprised of these approaches to pricing, distribution, advertisingand promotion, and client service.

Pricing - Residential consulting will bill at an average of $90 per hour and commercialconsulting at $100 per hour.

Distribution - All services and products will be distributed directly through the personal contact.

Advertising and Promotion - The most successful advertising is anticipated to be throughthe Boulder Herald and through ads on local broadcasts of the "Martha Stewart" and "InteriorMotives" television shows.

Client Service - Excellent, personalized, fun, one-of-a-kind client service is essential. This isperhaps the only attribute that cannot be duplicated by any competitor.

The first goal is to recognize individualized needs of each client. If they are a repeat client,they benefit from the knowledge regarding their lifestyle and taste that was gained from theprevious experience.

5.7 Strategic Alliances

Barton Interiors does have some dynamic alliances. Based on initial research and contacts,several architect firms are willing to refer clients to Barton Interiors, including Jill's existingemployer, Gibson & Sawyer, LLC. Other alliances include a retail store called "Providance"which focuses on gallery-type pieces for the home and office and is expected to refer clients.

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There is also a positive relationship with "Interior Fabricators" and this business is expected to bea referral resource. Strategic online alliances do not exist at this time. This will be an area ofconcentrated development for the future and is reflected in our milestone chart.

5.8 Milestones

The milestone chart below accompanied by the graphic outlines key activities that will be criticalto Barton Interiors' success in the coming year.

Table: Milestones

Milestones

Milestone Start Date End Date Budget Manager Department

Year Buying Program 1/2/2002 1/30/2002 $560 Jill Products

Membership Strategy 2/2/2002 2/15/2002 $225 Jill Promotions

Seminar Schedule & Prep. 3/1/2002 4/1/2002 $45 Jill Marketing

Seminars 4/1/2002 5/30/2002 $540 Jill Marketing

Client Review/Analysis 6/1/2002 6/15/2002 $250 Jill Marketing

Furniture Market (High Point, N.

C.)

11/10/2002 11/20/2002 $1,800 Jil l Products

Year End Evaluation 12/20/2002 12/31/2002 $250 Jill & CPA Management

Totals $3,670

6.0 Management Summary

Jill Barton is the founder and owner of Barton Interiors. Jill received a Bachelor of Arts degreefrom the University of Oregon in 1990 through the College of Architecture and Interior Design andis ASID certified. After working for three years at a prestigious interior design firm in Portland,Oregon, she moved to Boulder in 1993 and began working with Gibson & Sawyer, LLC, a well-established architecture firm focusing on the commercial sector. Jill worked with the architectsin the interior design needs for their projects. During this time, she has developedrelationships with a number of community, professional, and supplier contacts throughout theBoulder and Greater Denver area. Jill plans to leave the firm on favorable terms at the end ofthe year.

With her new role at Barton Interiors, Jill will oversee all aspects of the design process and allbusiness operations. Jill's responsibilities include all aspects of establishing the business,marketing, buying, bookkeeping and financial dealings.

6.1 Organizational Structure

The organization structure is simplistic. Jill manages all employees and professional contacts,and will be interfacing with more than 12 account executives/vendors. Jill will determineresources requirements and monitor expenses for all aspects of the firm.

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6.2 Personnel Plan

Jill will act as a sole proprietor without employees at this point. Contract labor may requiredfor upholstery and fabrication purposes, but that will be included in the cost of good for eachclient's project. Jill's salary will begin at a modest $1,200 per month, increase quarterly, andthen is projected at $2,400 per month for year two and $3,000 for year three.

Table: Personnel

Personnel Plan


Jil l Barton $19,800 $28,800 $36,000

Other $0 $0 $0

Total People 0 0 0

Total Payroll $19,800 $28,800 $36,000

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7.0 Financial Plan

The initial funding of $25,000 will be invested by the owner. The goal is to fund the growth ofthe business from its earnings. The financial plan contains these essential factors:

1. A growth rate in sales of 47% for the year 2002 and 15% for 2003.2. An average sales per month that increases each year, averaging $3,870 in the first

year, $5,720 the second, and $6,600 in the third year.3. Continue to fund the growth of the business from the revenues it generates.

Financial difficulties and risks

· Slow sales resulting in less-than-projected cash flow.· Unexpected and excessive cost increases compared to the planned expenses.· Overly aggressive and debilitating actions by competing designers.· A parallel entry by a new competitor further diminishing revenue generation potential.

Worst case risks might include

· Determining the business cannot support itself on an ongoing basis.· Dealing with the financial, business, and personal devastation of the venture's failure.

Survivable but painful.

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7.1 Break-even Analysis

The break-even analysis below is expressed as a per-client unit. This is based on averagehourly billing, product sales, and costs per transaction.

Table: Break-even Analysis

Break-even Analysis

Monthly Revenue Break-even $4,067

Assumptions:

Average Percent Variable Cost 32%

Estimated Monthly Fixed Cost $2,763

7.2 Important Assumptions

The following captured critical assumptions will determine the potential for future success.

· A healthy economy that supports a moderate level of growth in the market.· The ability to support a gross margin percentage in excess of 65%.· Keeping operating costs low, particularly in the areas of product purchases ongoing

monthly expenses.· Receiving an initial payment for each project of 50% of estimated time and product

purchases and collecting the balance of these revenues within 45 days of completingeach project.

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Table: General Assumptions

General Assumptions


Plan Month 1 2 3

Current Interest Rate 9.50% 9.50% 9.50%

Long-term Interest Rate 8.50% 8.50% 8.50%

Tax Rate 28.17% 28.00% 28.17%

Other 0 0 0

7.3 Key Financial Indicators

The key financial indicators focus on cash flow. There is virtually no inventory but latepayments for completed jobs will be a concern. Timely billing and collection will be critical. Allexpenses are tracked on a monthly basis, recorded in the accounting software, and will becompared to our business plan budget.

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7.4 Start-up Summary

The following details the initial start-up expenses for Barton Interiors. Most equipment costs areoffice related. Sample and display costs include books, samples and resources necessary topromote furniture, fabric and other home accessory products.

Table: Start-up

Start-up

Requirements

Start-up Expenses

Legal $500

Stationery etc. $850

Brochures $420

Consultants $450

Insurance $150

Samples and Reference Books $3,250

Research and development $800

Expensed equipment $4,250

Other $550

Total Start-up Expenses $11,220

Start-up Assets

Cash Required $9,780

Other Current Assets $1,000

Long-term Assets $3,000

Total Assets $13,780

Total Requirements $25,000

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Table: Start-up Funding

Start-up Funding

Start-up Expenses to Fund $11,220

Start-up Assets to Fund $13,780

Total Funding Required $25,000

Assets

Non-cash Assets from Start-up $4,000

Cash Requirements from Start-up $9,780

Additional Cash Raised $0

Cash Balance on Starting Date $9,780

Total Assets $13,780

Liabilities and Capital

Liabilities

Current Borrowing $0

Long-term Liabil ities $0

Accounts Payable (Outstanding Bills) $0

Other Current Liabil ities (interest-free) $0

Total Liabil ities $0

Capital

Planned Investment

Jil l Barton $25,000

Investor 2 $0

Other $0

Additional Investment Requirement $0

Total Planned Investment $25,000

Loss at Start-up (Start-up Expenses) ($11,220)

Total Capital $13,780

Total Capital and Liabil ities $13,780

Total Funding $25,000

7.5 Projected Profit and Loss

The following represents the projected profit and loss for Barton Interiors based on sales andexpense projections for 2002 through 2004.

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Table: Profit and Loss

Pro Forma Profit and Loss


Sales $46,460 $68,640 $99,200

Direct Cost of Sales $14,889 $22,776 $33,280

Other $0 $0 $0

Total Cost of Sales $14,889 $22,776 $33,280

Gross Margin $31,571 $45,864 $65,920

Gross Margin % 67.95% 66.82% 66.45%

Expenses

Payroll $19,800 $28,800 $36,000

Sales and Marketing and Other Expenses $11,560 $13,430 $15,100

Depreciation $300 $750 $800

Leased Equipment $0 $0 $0

Util ities $540 $660 $800

Insurance $960 $1,200 $1,600

Rent $0 $0 $0

Payroll Taxes $0 $0 $0

Other $0 $0 $0

Total Operating Expenses $33,160 $44,840 $54,300

Profit Before Interest and Taxes ($1,589) $1,024 $11,620

EBITDA ($1,289) $1,774 $12,420

Interest Expense $0 $76 $238

Taxes Incurred $0 $265 $3,206

Net Profit ($1,589) $683 $8,176

Net Profit/Sales -3.42% 0.99% 8.24%

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7.6 Projected Cash Flow

The cash flow projections are outlined below. These cash flow projects are based on ourbasic assumptions and expense and revenue projections.

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Table: Cash Flow

Pro Forma Cash Flow


Cash Received

Cash from Operations

Cash Sales $32,522 $48,048 $69,440

Cash from Receivables $9,578 $18,511 $26,892

Subtotal Cash from Operations $42,100 $66,559 $96,332

Additional Cash Received

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

New Current Borrowing $0 $1,600 $1,800

New Other Liabil ities (interest-free) $0 $0 $0

New Long-term Liabil ities $0 $0 $0

Sales of Other Current Assets $210 $0 $0

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

New Investment Received $0 $0 $0

Subtotal Cash Received $42,310 $68,159 $98,132

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending $19,800 $28,800 $36,000

Bill Payments $24,693 $38,506 $52,924

Subtotal Spent on Operations $44,493 $67,306 $88,924

Additional Cash Spent

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

Principal Repayment of Current Borrowing $0 $0 $0

Other Liabilities Principal Repayment $0 $0 $0

Long-term Liabil ities Principal Repayment $0 $0 $0

Purchase Other Current Assets $0 $0 $0

Purchase Long-term Assets $0 $0 $0

Dividends $0 $0 $0

Subtotal Cash Spent $44,493 $67,306 $88,924

Net Cash Flow ($2,183) $852 $9,209

Cash Balance $7,597 $8,449 $17,658

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7.7 Projected Balance Sheet

Barton Interiors' balance sheet is outlined below.

Table: Balance Sheet

Pro Forma Balance Sheet


Assets

Current Assets

Cash $7,597 $8,449 $17,658

Accounts Receivable $4,360 $6,441 $9,308

Other Current Assets $790 $790 $790

Total Current Assets $12,747 $15,680 $27,757

Long-term Assets

Long-term Assets $3,000 $3,000 $3,000

Accumulated Depreciation $300 $1,050 $1,850

Total Long-term Assets $2,700 $1,950 $1,150

Total Assets $15,447 $17,630 $28,907

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabil ities

Accounts Payable $3,256 $3,157 $4,457

Current Borrowing $0 $1,600 $3,400

Other Current Liabil ities $0 $0 $0

Subtotal Current Liabil ities $3,256 $4,757 $7,857

Long-term Liabil ities $0 $0 $0

Total Liabil ities $3,256 $4,757 $7,857

Paid-in Capital $25,000 $25,000 $25,000

Retained Earnings ($11,220) ($12,809) ($12,126)

Earnings ($1,589) $683 $8,176

Total Capital $12,191 $12,874 $21,050

Total Liabil ities and Capital $15,447 $17,630 $28,907

Net Worth $12,191 $12,874 $21,050

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7.8 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on theStandard Industrial Classification (SIC) code 7389, Business Services--Interior Design Services,are shown for comparison. If we fail in any of these areas, we will need to re-evaluate ourbusiness model:

· Gross margins at, or above, 65%.· Month-to-month and annual increases to meet the expected growth requirements.· Self-fund growth not dependant on the credit line to meet cash requirements.

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Table: Ratios

Ratio Analysis

Year 1 Year 2 Year 3 Industry Profile

Sales Growth n.a. 47.74% 44.52% 12.40%

Percent of Total Assets

Accounts Receivable 28.22% 36.53% 32.20% 26.10%

Other Current Assets 5.11% 4.48% 2.73% 44.70%

Total Current Assets 82.52% 88.94% 96.02% 74.50%

Long-term Assets 17.48% 11.06% 3.98% 25.50%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabil ities 21.08% 26.98% 27.18% 44.30%

Long-term Liabil ities 0.00% 0.00% 0.00% 16.00%

Total Liabilities 21.08% 26.98% 27.18% 60.30%

Net Worth 78.92% 73.02% 72.82% 39.70%

Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 67.95% 66.82% 66.45% 0.00%

Selling, General & Administrative Expenses 73.96% 65.72% 38.61% 80.80%

Advertising Expenses 16.36% 12.24% 11.36% 1.30%

Profit Before Interest and Taxes -3.42% 1.49% 11.71% 2.20%

Main Ratios

Current 3.92 3.30 3.53 1.75

Quick 3.92 3.30 3.53 1.38

Total Debt to Total Assets 21.08% 26.98% 27.18% 60.30%

Pre-tax Return on Net Worth -13.03% 7.36% 54.07% 3.80%

Pre-tax Return on Assets -10.29% 5.38% 39.38% 9.70%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin -3.42% 0.99% 8.24% n.a

Return on Equity -13.03% 5.30% 38.84% n.a

Activity Ratios

Accounts Receivable Turnover 3.20 3.20 3.20 n.a

Collection Days 55 96 97 n.a

Accounts Payable Turnover 8.58 12.17 12.17 n.a

Payment Days 27 30 26 n.a

Total Asset Turnover 3.01 3.89 3.43 n.a

Debt Ratios

Debt to Net Worth 0.27 0.37 0.37 n.a

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

Liquidity Ratios

Net Working Capital $9,491 $10,924 $19,900 n.a

Interest Coverage 0.00 13.47 48.93 n.a

Additional Ratios

Assets to Sales 0.33 0.26 0.29 n.a

Current Debt/Total Assets 21% 27% 27% n.a

Acid Test 2.58 1.94 2.35 n.a

Sales/Net Worth 3.81 5.33 4.71 n.a

Dividend Payout 0.00 0.00 0.00 n.a

Appendix

Page 1

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

Sales

Residential Consulting 0% $800 $900 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,400 $2,800 $3,200 $3,600

Commercial Consulting 0% $0 $0 $0 $240 $280 $320 $360 $400 $440 $560 $640 $720

Product Sales 0% $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,400 $3,000 $3,600

Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Sales $1,200 $1,500 $1,800 $2,440 $2,880 $3,320 $3,760 $4,200 $4,840 $5,760 $6,840 $7,920

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

Residential Consulting $120 $135 $150 $180 $210 $240 $270 $300 $360 $420 $480 $540

Commercial Consulting $0 $0 $0 $36 $42 $48 $54 $60 $66 $84 $96 $108

Product Sales $220 $330 $440 $550 $660 $770 $880 $990 $1,100 $1,320 $1,650 $1,980

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Direct Cost of Sales $340 $465 $590 $766 $912 $1,058 $1,204 $1,350 $1,526 $1,824 $2,226 $2,628

Appendix

Page 2

Table: General Assumptions

General Assumptions


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

Current Interest Rate 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50%

Long-term Interest Rate 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50%

Tax Rate 30.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00%

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

Appendix

Page 3

Table: Profit and Loss

Pro Forma Profit and Loss


Sales $1,200 $1,500 $1,800 $2,440 $2,880 $3,320 $3,760 $4,200 $4,840 $5,760 $6,840 $7,920

Direct Cost of Sales $340 $465 $590 $766 $912 $1,058 $1,204 $1,350 $1,526 $1,824 $2,226 $2,628

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Cost of Sales $340 $465 $590 $766 $912 $1,058 $1,204 $1,350 $1,526 $1,824 $2,226 $2,628

Gross Margin $860 $1,035 $1,210 $1,674 $1,968 $2,262 $2,556 $2,850 $3,314 $3,936 $4,614 $5,292

Gross Margin % 71.67% 69.00% 67.22% 68.61% 68.33% 68.13% 67.98% 67.86% 68.47% 68.33% 67.46% 66.82%

Expenses

Payroll $1,200 $1,200 $1,200 $1,500 $1,500 $1,500 $1,800 $1,800 $1,800 $2,100 $2,100 $2,100

Sales and Marketing and Other

Expenses

$2,165 $615 $615 $885 $625 $625 $685 $685 $935 $685 $2,425 $615

Depreciation $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25

Leased Equipment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Utilities $45 $45 $45 $45 $45 $45 $45 $45 $45 $45 $45 $45

Insurance $80 $80 $80 $80 $80 $80 $80 $80 $80 $80 $80 $80

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

Payroll Taxes 15% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Operating Expenses $3,515 $1,965 $1,965 $2,535 $2,275 $2,275 $2,635 $2,635 $2,885 $2,935 $4,675 $2,865

Profit Before Interest and Taxes ($2,655) ($930) ($755) ($861) ($307) ($13) ($79) $215 $429 $1,001 ($61) $2,427

EBITDA ($2,630) ($905) ($730) ($836) ($282) $12 ($54) $240 $454 $1,026 ($36) $2,452

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

Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Net Profit ($2,655) ($930) ($755) ($861) ($307) ($13) ($79) $215 $429 $1,001 ($61) $2,427

Net Profit/Sales -221.25% -62.00% -41.94% -35.29% -10.66% -0.39% -2.10% 5.12% 8.86% 17.38% -0.89% 30.64%

Appendix

Page 4

Table: Cash Flow

Pro Forma Cash Flow


Cash Received

Cash from Operations

Cash Sales $840 $1,050 $1,260 $1,708 $2,016 $2,324 $2,632 $2,940 $3,388 $4,032 $4,788 $5,544

Cash from Receivables $0 $12 $363 $453 $546 $736 $868 $1,000 $1,132 $1,266 $1,461 $1,739

Subtotal Cash from Operations $840 $1,062 $1,623 $2,161 $2,562 $3,060 $3,500 $3,940 $4,520 $5,298 $6,249 $7,283

Additional Cash Received

Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

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

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

New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Sales of Other Current Assets $0 $0 $0 $210 $0 $0 $0 $0 $0 $0 $0 $0

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

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

Subtotal Cash Received $840 $1,062 $1,623 $2,371 $2,562 $3,060 $3,500 $3,940 $4,520 $5,298 $6,249 $7,283

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 $1,200 $1,200 $1,200 $1,500 $1,500 $1,500 $1,800 $1,800 $1,800 $2,100 $2,100 $2,100

Bill Payments $88 $2,583 $1,209 $1,345 $1,772 $1,667 $1,815 $2,019 $2,174 $2,588 $2,705 $4,729

Subtotal Spent on Operations $1,288 $3,783 $2,409 $2,845 $3,272 $3,167 $3,615 $3,819 $3,974 $4,688 $4,805 $6,829

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 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

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

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

Subtotal Cash Spent $1,288 $3,783 $2,409 $2,845 $3,272 $3,167 $3,615 $3,819 $3,974 $4,688 $4,805 $6,829

Net Cash Flow ($448) ($2,721) ($786) ($474) ($710) ($106) ($114) $122 $546 $611 $1,444 $454

Cash Balance $9,332 $6,612 $5,826 $5,352 $4,642 $4,536 $4,421 $4,543 $5,089 $5,700 $7,143 $7,597

Appendix

Page 5

Table: Balance Sheet

Pro Forma Balance Sheet


Assets Starting Balances

Current Assets

Cash $9,780 $9,332 $6,612 $5,826 $5,352 $4,642 $4,536 $4,421 $4,543 $5,089 $5,700 $7,143 $7,597

Accounts Receivable $0 $360 $798 $975 $1,254 $1,572 $1,831 $2,091 $2,350 $2,670 $3,132 $3,722 $4,360

Other Current Assets $1,000 $1,000 $1,000 $1,000 $790 $790 $790 $790 $790 $790 $790 $790 $790

Total Current Assets $10,780 $10,692 $8,410 $7,801 $7,396 $7,004 $7,157 $7,302 $7,683 $8,549 $9,621 $11,656 $12,747

Long-term Assets

Long-term Assets $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

Accumulated Depreciation $0 $25 $50 $75 $100 $125 $150 $175 $200 $225 $250 $275 $300

Total Long-term Assets $3,000 $2,975 $2,950 $2,925 $2,900 $2,875 $2,850 $2,825 $2,800 $2,775 $2,750 $2,725 $2,700

Total Assets $13,780 $13,667 $11,360 $10,726 $10,296 $9,879 $10,007 $10,127 $10,483 $11,324 $12,371 $14,381 $15,447

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

Current Liabilities

Accounts Payable $0 $2,542 $1,165 $1,286 $1,717 $1,607 $1,748 $1,947 $2,088 $2,500 $2,546 $4,617 $3,256

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

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

Subtotal Current Liabilities $0 $2,542 $1,165 $1,286 $1,717 $1,607 $1,748 $1,947 $2,088 $2,500 $2,546 $4,617 $3,256

Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Liabilities $0 $2,542 $1,165 $1,286 $1,717 $1,607 $1,748 $1,947 $2,088 $2,500 $2,546 $4,617 $3,256

Paid-in Capital $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000

Retained Earnings ($11,220) ($11,220) ($11,220) ($11,220) ($11,220) ($11,220) ($11,220) ($11,220) ($11,220) ($11,220) ($11,220) ($11,220) ($11,220)

Earnings $0 ($2,655) ($3,585) ($4,340) ($5,201) ($5,508) ($5,521) ($5,600) ($5,385) ($4,956) ($3,955) ($4,016) ($1,589)

Total Capital $13,780 $11,125 $10,195 $9,440 $8,579 $8,272 $8,259 $8,180 $8,395 $8,824 $9,825 $9,764 $12,191

Total Liabilities and Capital $13,780 $13,667 $11,360 $10,726 $10,296 $9,879 $10,007 $10,127 $10,483 $11,324 $12,371 $14,381 $15,447

Net Worth $13,780 $11,125 $10,195 $9,440 $8,579 $8,272 $8,259 $8,180 $8,395 $8,824 $9,825 $9,764 $12,191

Appendix

Page 6

Table: Personnel

Personnel Plan


Jill Barton 0% $1,200 $1,200 $1,200 $1,500 $1,500 $1,500 $1,800 $1,800 $1,800 $2,100 $2,100 $2,100

Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total People 0 0 0 0 0 0 0 0 0 0 0 0

Total Payroll $1,200 $1,200 $1,200 $1,500 $1,500 $1,500 $1,800 $1,800 $1,800 $2,100 $2,100 $2,100

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