Greeting Card Business Plan

Business PlanBusiness Plan Prepared By

Chris Straka, President

45 Industry Road

Seaside, StateA 50011

(090) 555-2400

(090) 555-2492 Mobile

[email protected]

Date PreparedJanuary, 200B

First Class Greetings LLC Business Plan

Table of ContentsExecutive Summary ..........................................................................................................................5

Management and Organization .....................................................................................................7Management team...................................................................................................................................7Compensation and ownership .................................................................................................................8Contracts and franchise agreements ........................................................................................................8Board of directors/advisory council .........................................................................................................8Infrastructure ...........................................................................................................................................9Insurance..................................................................................................................................................9Employee stock option plan and other incentives .................................................................................10Organization charts ...............................................................................................................................10

Product and Service Plan ..............................................................................................................11Purpose of the product or service ..........................................................................................................11Unique features......................................................................................................................................11Stage of development ............................................................................................................................11Future research and development ..........................................................................................................12Trademarks, patents, copyrights, licenses, royalties................................................................................12Government approvals ...........................................................................................................................12Product and service limitations..............................................................................................................12Product liability .....................................................................................................................................13Related services and spin-offs................................................................................................................13Production .............................................................................................................................................13Facilities .................................................................................................................................................13Suppliers ................................................................................................................................................14Environmental factors............................................................................................................................14

Marketing Plan ..................................................................................................................................15Industry profile ......................................................................................................................................15

Current size .....................................................................................................................................15Growth potential .............................................................................................................................15Geographic location ........................................................................................................................15Industry trends ................................................................................................................................15Seasonality factors ...........................................................................................................................16Profit characteristics ........................................................................................................................16Distribution channels ......................................................................................................................17Basis of competition ........................................................................................................................17

Competition profile ...............................................................................................................................17

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Customer profile....................................................................................................................................18Target market profile .............................................................................................................................18Pricing profile ........................................................................................................................................18Gross margin on products .....................................................................................................................18Break-even analysis................................................................................................................................19Market penetration ................................................................................................................................19

Distribution channels ......................................................................................................................19Sales representatives ........................................................................................................................19Direct sales force..............................................................................................................................19Direct mail/telemarketing................................................................................................................19

Advertising and promotion....................................................................................................................20Packaging and labeling ..........................................................................................................................20Service and warranties ...........................................................................................................................20Trade shows ...........................................................................................................................................20Future markets .......................................................................................................................................20

Operating and Control Systems..................................................................................................21Administrative policies, procedures, and controls ..................................................................................21

Receiving orders ..............................................................................................................................21Billing the customers .......................................................................................................................21Paying the suppliers.........................................................................................................................21Collecting the accounts receivable...................................................................................................21Reporting to management...............................................................................................................21Staff development............................................................................................................................22Inventory control .............................................................................................................................22Handling warranties and returns .....................................................................................................22Monitoring the company budgets ...................................................................................................22Security systems...............................................................................................................................23

Documents and paper flow....................................................................................................................23Planning chart .......................................................................................................................................23

Product development.......................................................................................................................24Manufacturing .................................................................................................................................24Financial requirements ....................................................................................................................24Marketing flow chart.......................................................................................................................24Market penetration..........................................................................................................................24Sales Representatives .......................................................................................................................25Management and infrastructure ......................................................................................................25

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Risk analysis...........................................................................................................................................25Salvaging assets......................................................................................................................................26

Growth Plan.......................................................................................................................................27New offerings to market ........................................................................................................................27Capital requirements..............................................................................................................................27Personnel requirements..........................................................................................................................28Exit strategy...........................................................................................................................................28Financial Plan ....................................................................................................................................29Sales Projections ....................................................................................................................................29Income Projections ................................................................................................................................29Cash Requirements................................................................................................................................29Sources of Financing .............................................................................................................................29Projected Financial Statements

Projected Cash Flow StatementsProjected Year-End Income StatementsProjected Year-End Balance SheetRatio Analysis

Supporting Documents .................................................................................................APPENDIXHistorical Balance SheetSales Projections Inventory Projections Operating Expenses Projections Depreciation Schedules Capital Budget Projection Equity & Debt WorksheetAmortization Table

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Executive Summary

Venture HistoryFirst Class Greetings, LLC continues to impact the national stationery market with patent pending,innovative, stamped and ready-to-mail greeting cards. The First Class Greetings’ card line includes themajor greeting card categories of birthday, thank-you, seasonal holidays and general humor. First ClassGreetings offers a full selection of original artwork, photographs and seasonal images by numerousartists with national and international recognition. First Class Greetings competes within the mid-market price range at $2.75 with a first class postage stamp affixed, creating an added sense of value.

Venture DescriptionThe uniqueness of the First Class Greetings concept is simple. Each greeting card is stamped andready to mail. An envelope, with its corner removed, reveals the stamp affixed to the greeting card.The obvious benefit to the consumer is convenience. The consumer is spared the hassle of searching fora stamp to send the greeting card. This added value makes it an attractive product for targetedlocations such as airports, hotels, card shops and cafés.

Venture OrganizationThe management of the company will be the responsibility of Chris Straka. Chris Straka has overseven years of business development and analysis experience. Chris served as the business analyst forthe national Hoofin’ Joe’s Restaurant chain, and was a founding partner in Enviro-Juice, a $1,500,000four-unit company in the Seaside area.

Venture MarketFirst Class Greetings’ product line is positioned in the 7 billion dollar a year U.S. greeting card industry.Greeting cards can be found in over 100,000 retail outlets in the United States. Over 90% of Americanhouseholds participated in the greeting card industry in 200A, with the average household purchasing35 individual cards per year. This successful national market business model can be applied tointernational markets for continued growth.

For marketing and distribution, First Class Greetings is enlisting sales representatives nationwide. FirstClass Greetings selected 20 representatives to cover the Western regions of the United States, and itwill soon add over 80 additional sales reps to cover the remainder of the nation.

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Venture OperationsFirst Class Greetings is seeking a $300,000 loan in order to implement the second phase of its businessplan. The funding will help to secure an office/shipping location, increase the current line from 100images to over 300, provide working capital, attract an experienced marketing director from within thegreeting card industry, and market at national tradeshows and in industry trade magazines. Current testlocations support the business plan assumptions and project gross income by year three at nearly$4,000,000.

Venture FinancingThe marketing advantage created from the patent pending greeting card system will position First ClassGreetings as an attractive candidate for acquisition within the competitive greeting card industry. Thelong-term strategy is to concentrate on building value in the company through increasing cash flow andto harvest this value by merging with a larger competitor or by taking the company public. Consistentwith these end goals, considerable attention will be placed on business fundamentals as outlined in theplan. Investor distributions are planned in year three, assuming projections are realized and marketsaturation and reinvestment needs begin to level off. Following year three, new limited partners willreplace limited partners wishing to withdraw capital from the company, or, if prudent, their equity willbe purchased by the company.


Management and Organization

Management team

The following three individuals of the management team comprise the original members of First ClassGreetings, LLC, and will continue to take an active role in the leadership of the organization asadditional management staff persons are added.

Chris Straka — All initial First Class Greetings operations, including marketing distribution, advanceplanning and business analysis will be under Chris Straka’s direction. Chris Straka is the founder ofFirst Class Greetings with over 6 years of business development and analysis experience. Chris Strakarecently served as the business analyst for Hoofin’ Joe’s Restaurants—voted America’s number oneeatery in the 1990s—a $300 million restaurant chain with 101 restaurants nationwide. Chris Straka alsobrings to the table a successful entrepreneurial background as a founding partner in Enviro-Juice, a $1.5million four-unit restaurant chain in the Seaside area. Under Chris Straka’s direction, Enviro-Juicereceived national recognition including a write-up in Blue Planet Magazine and was voted best Seasidearea juice chain in 1999. The first Enviro-Juice was profitable after only three months of operation,while the Suntown, StateA, location was profitable from day one. The restaurants were sold to a largercorporation at a multiplier of nearly three times net.

Jody Arbek — Jody Arbek serves as a part-time art director. Jody is owner and founder of StartlingVisions art gallery, located in Conch Ville, StateA. Since founding Startling Visions art gallery in 1980,Jody has been responsible for the production of over 60 original art shows showcasing as many artists.Jody has also received awards and recognition for contribution to the arts. All First Class Greetingsoriginal art procurement will be under Jody Arbek’s direction.

Shaun Patrick — Shaun Patrick serves as a part-time marketing consultant to First Class Greetings.Shaun brings over six years of marketing and tradeshow experience. Shaun was instrumental in thestart-up months of First Class Greetings, seeing the company through its initial product rollout as wellas the first two tradeshows.

Marketing Director — The marketing director position is currently open. The director will be fullyresponsible for all marketing aspects of the business including full implementation and revisions of themarketing plan, tradeshow organization, sales rep negotiations, brand promotion and market expansion.During the early stages of the business, the current management group will manage these functions.As funding permits, a qualified candidate from within the greeting card industry will be sought to fill the position.

During 200B, the primary management of the company will be Chris Straka’s responsibility. Chris willbuild a management team focused on issues of marketing, finance and distribution beginning in 200C.Up to 12 additional production positions will be hired for shipping and order fulfillment. All otherjobs, such as printing, bookkeeping and accounting will be subcontracted out. As the business maturesbeyond its entrepreneurial beginnings, long-term objectives include seeking experienced and seasonedpersonnel from within the greeting card industry.

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Compensation and ownership

Compensation at the management level will be achieved through salary, while shipping and orderfulfillment personnel will be paid on an hourly basis. Cash bonuses tied to profitability will be awardedthroughout the company.

Majority ownership will remain with member, Chris Straka. Minority ownership positions will bemade available to investors and employees.

Contracts and franchise agreements

First Class Greetings has employed Lea Liu, Attorney at Law, to provide legal counsel concerningcontracts and other legal matters. Ms. Liu has developed several contractual agreements to aid in theoperations between vendors, suppliers, artists, manufacturer’s representatives, and employees. Thesecontracts are designed to protect the assets of First Class Greetings and its members. At this time,there are no plans for franchising or licensing.

Board of directors/advisory council

The following advisors will form an informal advisory council to the management of First ClassGreetings. Throughout the year, the management team will call on the advisors asking for their viewpointand expertise on strategic matters. At least once each year, all advisors will be invited to an advisorycouncil meeting where a more formal discussion of the following year’s goals and strategies will take place.

Stefanie Samuelsen — Stefanie Samuelsen is a Clinical Professor of Finance and Management atWestern-Thomas Graduate School of Management, Western University. She has also been anEntrepreneur-in-Residence at the Foundation for Advancement in America since 1994. In 1998,Commerce Weekly named her one of the top 12 entrepreneurship professors at graduate business schoolsin the U.S. In 200A, Wallace and Timberton Accounting Firm selected her as Entrepreneur of the Year.Her guidance and feedback in the areas of financial strategies and entrepreneurship will be immeasurable.

James Task, Ph.D. — James Task is vice president of the Center for Entrepreneurs at the Foundationfor Advancement in America in Center City. James Task was selected as one of the Entrepreneurs ofthe Year in 1998 for his work in support of entrepreneurship. James has great insights and experiencesto share concerning strategic assessment, planning and entrepreneurship.

Rashaun Gamberden — Rashaun Gamberden is currently the president and CEO of Hoofin’ Joe’sRestaurant chain. Rashaun has already offered his support and business experience to First ClassGreetings throughout the start-up. In addition, Rashaun’s personal ties to Mary Ann Sparkington,CFO of Mugga Coffee, have proven to be advantageous for acquiring industry trend informationconcerning the retail coffee industry. This connection is important for the marketing of the CoffeeNotes line of cards.

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Sandra Wu — CPA MS-Tax — Sandra Wu, owner of Accounting Specialists, Inc., is handling theaccounting and capital growth needs of the company. Sandra Wu will use many business resources,contacts and knowledge to help secure capital and bank financing for First Class Greetings.

Daniel Renkin – Daniel Renkin is the senior director of business finance and analysis for Hoofin’ Joe’sRestaurant. With over 15 years of business analysis experience, Daniel Renkin’s knowledge of corporatebusiness strategy and financial models will help guide anticipated growth.

Infrastructure

Many outside advisors will be relied upon for their contracted services, among them:

Cara Cuthbert — Insurance advice and coverage, paid for through policies obtained.

Lea Liu,Attorney at Law — Legal services as needed, paid hourly or by project.

Michelle Norris — Mailbox/display rack designs and all marketing and tradeshow displays andmaterials, paid by the project.

W. J. Peete, ITS — Computer and information technology services as needed, paid hourly.

Sandra Wu, CPA MS-Tax — Accounting and tax services provided quarterly and yearly paid by theproject.

Insurance

All LLC members of First Class Greetings will have an individual life insurance policy owned by theLLC. In the unfortunate occurrence of a member’s death, the proceeds of the life insurance policy willbe used to purchase that member’s portion of the equity ownership in the company—as established by avaluation calculation previously agreed upon. This ownership portion will be distributed based on thethen-current percentages of ownership in the company.

Other insurance needs, as outlined by Cara Cuthbert, insurance agent, specializing in commercialcompany protection, include:

■ General liability

■ Product liability

■ Equipment and Property coverage

■ Employee health insurance – as deemed necessary

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Employee stock option plan and other incentives

Members and employees of the LLC will receive yearly cash bonuses tied to profitability. In 200D, andevery year after, investors will receive profit distributions. Various incentive programs encourage outside(non-employee) involvement in the company. Sales representatives are offered a commission based ongross sales (15%) and artists are offered a commission for their artwork based on gross sales associatedwith their artwork (6%).

Organization charts

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DistributionStaff

Beginning 200C

Beginning 200C

Director PositionOperations, Distribution,

Art ProcurementBeginning 200C

Director PositionFinance

Beginning 200C

Director PositionSales and Marketing

Beginning 200B

Jody Arbek, MemberArt Director

Beginning 200A

Shaun Patrick, MemberMarketing Consultant

Beginning 200A

Advisory CouncilMembers

Chris Straka, MemberPresident

ProductionStaff

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Product and Service Plan

Purpose of the product or service

The company’s objective is to develop, market and distribute postage pre-paid greeting cards to selectedupscale card shops, airports, hotels and coffeehouse locations. The First Class Greetings’ product line ispositioned in the high-quality, mid-price range of the market. The company’s product linedifferentiates itself by offering consumers a greeting card that is stamped and ready to mail. First ClassGreetings will also further differentiate its product through unique, high-quality artwork.

Unique features

Card Designs and Images

The First Class Greetings’ card line includes the major greeting card categories of birthday, thank-you,seasonal, holidays and general humor. The line consists of original artwork from a number of differentartists. Different styles include watercolors, oils, photography and other mediums to help diversify andkeep the line fresh, original and appealing to varied demographics and tastes. The initial Coffee Notesline consisted of 15 coffee-related images. The second run produced 15 additional images includingseasonal and general designs. An additional 88 images debuted at the Stationery Show of America,May 200A, in New York. These 118 images will help solidify First Class Greetings as a viablestationery company.

Envelope Design

The envelope is a patent pending original design that incorporates functional and aesthetic features.The original feature of the envelope design is that the top right hand corner is cut off to reveal apostage stamp adhered directly to the note card rather than the envelope.

Display Racks

First Class Greetings can be displayed from a variety of customized counter-top, floor-spinners and walldisplay racks. The original rack design is a patent pending counter-top model, designed with a mailboxbuilt into the display. Floor-spinners and wall racks have recently been added to the display line tooffer space saving alternatives as well as the ability to hold a larger number of the upgraded cards.

Stage of development

First Class Greetings is a new business operating as a limited liability company. After considerableproduct/market research and product design, First Class Greetings began Phase One-Start-Upoperations the first quarter 200A. During Phase One, efforts were concentrated on provingmarketability and profitability of the concept. Since the feasibility of the concept was established, FirstClass Greetings is moving into Phase Two-Operations. The initial Coffee Notes line of cards nowcontains 30 coffee-related images. Another 88 images debuted at the Stationery Show of America,May 200A, in New York.

Future research and development

Continual research concerning trends in the greeting card industry and artwork preferences will have alarge impact on the salability of future card lines. Jody Arbek, Art Director beginning in 200A, willcontinue to serve as an art consultant to First Class Greetings. Jody will offer guidance based on herconsiderable experience procuring artwork for her gallery, Startling Visions. In addition, experiencedand seasoned personnel from within the greeting card industry will be sought as the business matures.

Trademarks, patents, copyrights, licenses, royalties

First Class Greetings has trademarked its logo, which appears on the backs of all cards and envelopes.This trademark will become recognized by consumers as a sign of quality and convenience and will helpto establish First Class Greetings as a superior greeting card company.

The envelope is a patent pending original design that incorporates utility functions as well as aestheticfeatures. The patent approval process should be completed in 200B.

All artwork created under contract for First Class Greetings is held as copyrighted material by FirstClass Greetings, not the artist. The artist is compensated through commissions based on gross salesassociated with the specific artwork.

Governmental approvals

Since First Class Greetings is an already established limited liability company, all governmentalapprovals have been satisfied for its start-up—including local, state, and federal registrations. Inaddition to these regular necessary approvals, the U.S. Postmaster of San Morton, StateA, has testedFirst Class Greetings, finalizing its compatibility with the U.S. postal system and its machinery. Todate, all envelopes sold have successfully passed through the postal system.

Product and service limitations

One product limitation could be additional pilfering and shoplifting of the product because of theadded value of having a stamp affixed to the card. The patent pending design will limit stealing of theenvelopes, since the stamp is affixed to the card itself. A stamped note card is less likely to be stolendue to its perceived higher value ($2.75 value) than a stamped envelope. In addition, the cut envelopecorner renders the envelope useless since no stamp can be adhered to it in the appropriate place.

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Product liability

Product liability risk was discussed at length with people from the greeting card industry, the advisorycouncil members, legal counsel, and the insurance broker. The product does not in and of itself createextreme risk above and beyond what is deemed reasonable. Therefore, the insurance and legal status ofthe company should be sufficient to cover the unlikely risk associated with the product.

Related services and spin-offs

First Class Greetings can easily grow from the current marketing strategy and spin-off product lines toinclude stationery, wrapping paper, boxed note cards, postcards, etc. Of these related products,postcards would be the most likely choice since they are consistent with the current marketingstrategy—a postage-ready product that provides convenience to the customer.

Another option for future growth is to enter the e-market on the Internet. Several card companies haveexperienced phenomenal growth, in terms of visitors, in the last year. In most cases, e-cards are madeavailable for free to visitors. Advertising spots shown while visitors are selecting cards are meant tobring in the profits. As of yet, profitability is often sought after but not attained on the Internet.Opportunities will be evaluated for profitability to make cards available in this medium.

Production

The two main components for production are the greeting cards and the envelopes. In the Seaside areaalone 12 major printing companies are capable of producing the quality and quantity needs projected.The two vendors currently being used were selected in consideration of quality and price.Beachcombers Printing and Lithograph out of Seaside publishes the greeting cards, while Mid-Continent Envelope out of Midtown manufactures the patent pending envelope. Since there are manycompanies that can provide this service, First Class Greetings has developed relationships with back-upproduction companies as well.

Facilities

Currently, First Class Greetings operates out of a 1,300-square-foot facility in Seaside that providesadequate space for current operations. Members and employees work both virtually from their remotelocation and from the Seaside facility. Each Wednesday, all members work at the Seaside facility. Assales top $4 million (anticipated in 200E), the business will move all offices, storage and shippingfacilities to one central location in San Morton, StateA. San Morton has been chosen for its proximityto current printing, employee and financial resources.

Suppliers

Since production is handled by subcontractors, the most pressing concern is to have enough artists tosupply artwork to grow the product line from 100 images to 300—the average number of images anestablished, mid-sized greeting card company carries. It will be necessary to attract artists withdifferent styles including watercolors, oils, photography and other mediums to help diversify and keepthe line appealing to the intended customers. Jody Arbek, Art Director beginning in 200A, will use herbackground, network, and expertise to establish a group of artists that will meet these needs. Manyincentive programs, including commissions on sold cards, will be employed to keep the artists interestedin the potential of working with First Class Greetings.

Environmental factors

All paper used in the production of note cards and envelopes are created from recycled products. Inaddition, environmentally safe printing and manufacturing practices by subcontractors are assuredthrough state and county requirements and regulations.

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Marketing Plan

Industry profile

Current size

First Class Greetings’ product line is positioned in the $7 billion a year U.S. greeting card industry.Large companies command nearly 85 percent of the market share (Market Group Research, Inc.).Given that these companies have greater financial resources, market penetration, and brand recognition,First Class Greetings will target the remaining $1+ billion market currently divided between as many as1,700 small- to medium-sized independent card companies.

Growth potentialAnnual growth in the greeting card industry is expected to remain at 1% to 3% throughout the year200G. This growth comes from two sources. The first is based on the number of consumers in themarketplace. Greeting cards are primarily purchased by women between the ages of 35 and 65—babyboomers. The number of this customer segment is expected to remain the same until the year 200G.The second source is greeting card prices, which are expected to increase at a rate slightly higher thanthe rate of inflation (Cards and Gifts Magazine, January 200B). First Class Greetings’ growthprojections are based on these findings and new market sales.

Geographic locationsGreeting card sales are highly relational to population figures. Therefore, the highest populated geographicareas will generate the highest sales. Due to First Class Greetings’ unique offering, geographic locationswith high tourism and travel will be targeted. These areas will have the highest concentration of potentialcustomers that will respond to a more convenient greeting card—one with the postage already affixed.

Industry trendsMany of the marketing and card design decisions will be guided by the following greeting card industry trends:

■ Of total greeting cards purchased annually, roughly half is from seasonal sales and theremaining half is from everyday card sales. Sales of non-occasion cards are on the increase(USA Research Plus, July 200A).

■ Major card selling holidays are, in order, Christmas, Valentines Day, Easter, Mother’s Day,Father’s Day, and Graduation (USA Research Plus, July 200A).

■ Women between ages 35 and 65 purchase over 80 percent of all greeting cards (Cards andGifts Magazine, January 200B).

■ The average person receives 30 cards per year, eight of which are birthday cards. In fact,nine in 10 Americans aged 16 to 69 received at least one card on their last birthday (GlobalMarketing, Spring 200A).

■ The number of substitutable products for greeting cards is dramatically increasing withtechnology, including e-mail, e-cards, telephone, mobile phones, digital technology, etc.

First Class Greetings will respond to these trends in the following ways: Due to the special offering ofFirst Class Greetings—a convenient card with postage affixed—everyday cards, including birthdaycards, will be produced. Limited selections of holiday cards may be made available in holiday point-of-purchase displays for established retail customers. Cards will be designed to appeal primarily to womenbetween the ages of 35 to 65. In addition, a larger demographic group including men and womenconcerned with time and convenience will be targeted. In the future, cards appealing to young men andwomen will also be developed to begin to harvest this future market of potential customers.

Seasonality factors

Of the total greeting cards purchased annually, roughly half are seasonal while the remaining half areeveryday card-sending situations. The most popular everyday card-sending situation is still birthday,which accounts for nearly 60 percent of everyday cards sold. First Class Greetings would like toconcentrate on everyday cards in an effort to stabilize revenues and output. A limited selection ofholiday cards may be made available for established retail customers.

Profit characteristics

Net profit margins in the greeting card industry (SIC 2771) have shown some consistency in the lastfour years. (Figures listed from most recent to least recent.) The lowest profit percentage year, 1.4% netprofit, reveals the impact on greeting card sales during a dramatic shift in distribution towards card salesin large discount retailers.

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0.0%

2.0%

4.0%

6.0%

8.0%

S1

Years Previous to 200B

Net Profit for Greeting Card Companies

Series1 6.7%

1 2 3 4

7.2% 1.4% 5.8%

(Statistics taken from the RMA Annual Reports for the cited years)

Distribution channels

Distribution channels within the greeting card industry are experiencing many changes. Over the pastten years, the typical card shop distribution channel has shrunk from about 40% of industry sales to lessthan 30% today. The main cause is increased distribution of cards in mass-merchandisers such asgrocery stores, discount stores, etc. This trend is expected to continue into 200E when this distributionis expected to maintain 15-20% of sales. The number of cards distributed through specialty shops andtrendy gift shops has increased slightly.

A newer distribution channel, the Internet, will also create many changes. This channel is highlyspeculative at this point. Some companies are willing to spend the money to attract the next wave ofconsumers—the 20-somethings. These Internet efforts are expected to bring losses of some magnitudefor the next three to 10 years (Gift Shop Manager Magazine, August 200A).

Basis of competition

Since the large greeting card companies command nearly 85 percent of the market share, First ClassGreetings will compete for the market share of smaller alternative card companies such as Special Arts,E-notes, Century and Sunset Publications, and Green Living Products, Inc. The greeting card industryis extremely competitive; therefore, it is critical to long-term success to establish First Class Greetingsin as many locations and in as short a time as possible. The National Association for Greeting CardProducers (NAGCP) estimates as many as 2,000 greeting card publishers in America, ranging frommajor corporations to small family organizations.

Similar to the competitors, First Class Greetings addresses the largest segment of consumers byproviding images that appeal to the largest group of consumers—women. First Class Greetings will setitself apart from the competition by appealing to an even larger demographic group including men andwomen concerned with time and convenience. First Class Greetings can better service this sector overlarger competitors by tailoring the product, offerings, prices, distribution, promotional efforts, andservices towards that particular market segment.

Competition profile

One competitor worth close examination is Green Living Products (GLP). GLP is a publicly tradedcompany that specializes in wildlife and nature related greeting cards and grosses over $3 millionannually. The company is similar in size and revenue to First Class Greetings’ budget figures. GLPutilizes 130 independent sales reps to support and service 5,200 national retail locations (Source: GLPSEC filing). A complete list of direct competitors is included in the Appendix.

One of First Class Greetings’ greatest marketing advantages is the originality of a greeting card that isstamped and ready to mail. At this time, no other greeting card company has attempted this combination.This allows First Class Greetings a brief window of opportunity to rapidly gain market share and saturation.

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Customer profile

Although people of all ages and types exchange greeting cards, women, aged 35 to 65 still purchase over80 percent of all greeting cards. This demographic will define the primary target customer for mostproduct lines. In addition, First Class Greetings will focus on an even larger demographic groupincluding men and women concerned with time and convenience. Potential customers will be found inhotel gift shops, airports, tourist locations, cafés, card shops, etc.

Target market profile

Greeting cards can be found in over 100,000 retail outlets in the United States. Over 90 percent ofAmerican households participated in the greeting card industry in 200A, with the average householdpurchasing 35 individual cards per year. First Class Greetings seeks entrance into this retail marketthrough

■ Airport concession/retail companies.

■ Hotel gift shops.

■ Unique card and gift shops.

■ Cafés.

A complete list of potential target markets appears in the Appendix.

Pricing profile

First Class Greetings will compete near the mid-price range within the market. While greeting cardsrange in price from $0.38 to $10.00, the average counter card retails for around $2.65. Most of theFirst Class Greetings’ cards retail at $2.75 with a first class postage stamp already affixed, creating anadded sense of value.

Gross margin on products

The gross margin for the industry ranges from 52 to 57 percent.

First Class Greetings’ gross margin will have little fluctuation since the costs are based on raw papergoods and postage stamps. Goods are subcontracted out at a set price and quantity, which can becontrolled through competitive bidding. First Class Greetings’ gross margin is 46.4 percent in 200B.The gross margin will rise slightly by year 200D to 52.3 percent. This increase is attributed toestablished ordering patterns and batch quantity increases.

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Break-even analysis

To determine break-even sales, First Class Greetings uses this formula:

Fixed costs = $227,029 = $746,806Gross Margin % - Commissions % (46.4% - 16%)

Since sales of $835,169 are projected for year 200B, First Class Greetings will exceed break-even in200B. The break-even number of card sales in units can also be calculated. This number can be veryhelpful in initial communication, goal setting, and evaluation of sales representatives.

Fixed costs = $227,029 = 281,814 cardsUnit Gross Margin - Unit Commissions (1.23 - .43)

This amount is the equivalent of 23,385 cards sold per month and 5,871 cards sold per week.

Market penetration

Distribution channels

There are two main channels for product sales and distribution. The first plan is to integrate FirstClass Greetings into as many locations as quickly as possible through national independent salesrepresentatives. The second channel targets specialized stationery, hotel, and coffee tradeshows.

Sales representatives

Independent sales representatives provide the best mode for distribution in order to maintain pricingcontrols and higher margins. Independent sales reps are not full-time employees of First Class Greetings,thus benefits are not necessary. Independent sales reps receive a flat commission based on gross sales.First Class Greetings’ sales reps are set at a commission rate of 15% of gross sales. The average sales repcan service up to 40 accounts with the average location generating around $1,000 per year.

Twenty independent sales reps covering 13 states sell the company’s product. The company anticipatesadding over 80 additional sales reps to cover the remainder of the United States. In addition to fieldcalls, sales reps will represent the product line at all regional tradeshows, with the marketing directorattending all national tradeshows.

Direct-sales force

A direct-sales force will not be used to sell the greeting cards at this time.

Direct mail/telemarketing

Direct mail and telemarketing efforts will not be used to sell the greeting cards at this time.

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Advertising and promotion

The company will use various methods to promote its product at the retail level as well as to the endconsumer—for example, tradeshows, point-of-sale materials, and the website (www.firstclasscards.com).In addition, sales materials will be produced at the beginning of each season featuring new products andmerchandising programs. One of the company’s most effective forms of retail advertising is the visualpoint-of-purchase display in retail stores.

Packaging and labeling

Two important packaging and labeling issues face First Class Greetings. First, the card and envelopemust be manufactured and arranged in an attractive, appealing way. Since each card is stamped andready to mail, an envelope with its corner removed will be packaged with each card to be sold together.

The second packaging issue is the way in which First Class Greetings cards are displayed. The cardscan be displayed from a variety of customized counter-top, floor-spinners and wall display racks. Theoriginal point-of-purchase rack design is an award-winning patent pending counter-top model,designed with a mailbox built into the display.

Service and warranties

First Class Greetings retail accounts have the option of exchanging slow-selling images for new images.This pledge will encourage first-time orders. This exchange is handled via UPS’s three-day service inorder to help keep customers’ inventory on the racks.

Trade shows

Trade shows are an essential strategy to the future success of First Class Greetings and are the mostefficient means of acquiring new accounts as well as new sales reps. A tradeshow presence also helps tosecure brand awareness within the industry. Tradeshows offer a targeted market of owners and buyerslooking for new items for their businesses. With proper marketing and booth location, new accountswill be obtained. The first 60 Coffee Notes accounts were located through two regional coffee-relatedtradeshows.

Future markets

First Class Greetings will focus on national sales while keeping an eye on international potential.Greeting cards have international acceptance, meaning the concept could have similar potentialoverseas. One of the major markets, the U.S. coffeehouse itself, is a carryover from Europe. A recentstudy released in the United Kingdom indicates that five percent of the British population is passionateabout greeting cards. Consumer research findings show that more avid enthusiasts are sending cards fora wide range of occasions (National Association for Greeting Card Producers—NAGCP).

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Operating and Control Systems

Administrative policies, procedures, and controls

Receiving orders

After receiving faxed orders from sales reps, the orders are shipped via UPS Ground to their finaldestination. The main exceptions are orders from Hawaii and Alaska, which are shipped through theU.S. postal system. Current orders are shipped directly from the home office in Seaside, StateA. AllFirst Class Greetings retail accounts also have the option of exchanging slow-selling images for newimages. This exchange is also handled via UPS but on the faster three-day service in order to help keepcustomer’s inventory on the racks.

Billing the customers

A packing slip is included with all shipments. This packing slip can be used by the customer tocompare what is received with the original order and the invoice when it arrives. The invoice is mailedafter the shipment is sent. New account collections are COD and 30-day net for established accounts.If the invoice is not paid within 30 days, a reminder statement is sent and a late fee charged.

Paying the suppliers

All suppliers will be paid upon their payment terms. Most vendors allow 30 days to pay. Any advancepayment discounts will be evaluated and utilized when appropriate. In order to process payment, theoriginal invoice must be attached to the internal approval form with an account number (forcategorizing expenses) and approval signature on it.

Collecting the accounts receivable

The first attempt to collect a late receivable is to send a statement that lists the late invoice and adds alate fee to the total. One of the keys to keeping accounts receivable current is to provide payment termsonly to those customers who fill out a credit application. The credit application requests basic financialinformation including the name of their bank and credit references. All applications will go through anapproval process that includes calling the references to establish the customer’s payment patterns.Collection agencies will be used for accounts over 90 days past due.

Reporting to management

Because of the current virtual operations of the company, excellent communication systems are beingput into place. These systems, including e-mail, project manager software, and a budding intranet, willprovide the foundation for clear communication as the company grows.

Staff development

Certain training and development of staff will be beneficial to the overall efficiency of businessoperations. Computer training, equipment training, and personal development will all be sought andencouraged by management.

Inventory control

Inventory will be ordered as needed so that stock is held for a very short time before it is sent on to thecustomer. Therefore, our inventory turn will be shorter than six weeks. One inventory challenge is theinevitable postal increases. Given the frequency of postal increases in recent years, it is necessary to stayahead of the rate increases so that inventory with non-compliant postage is not left on the market. Thebest way to handle this issue is through advance planning. The post office usually gives unofficial noticeof a rate increase at least a year in advance. The best-case scenario is to begin placing the properpostage in advance of the change. The next rate increase will occur mid-200B by one cent. Because thenew stamp is not yet available, First Class Greetings has already begun to apply the stamp that iscurrently available—two cents above the current rate of first class postage. Although the extra cent willraise the cost of goods for the product, this one-cent increase is preferable to the costs associated withdirectly exchanging merchandise already distributed to current accounts. In a direct exchange, FirstClass Greetings loses the cost of the exchanged card which ranges from $.16-$.20. The cost of theinvalidated stamp can be recovered from the post office, but the card is destroyed. Direct exchange isthe least desirable option.

Handling warranties and returns

First Class Greetings’ retail accounts have the option of exchanging slow-selling images for new images.This exchange is handled via UPS on the three-day service in order to help keep customers’ inventoryon the racks. Returns are accepted for damaged or incorrectly shipped merchandise.

Monitoring the company budgets

Budgets will be prepared yearly to determine benchmarks for:

■ Revenue

■ Inventory

■ Sales and Marketing Expenses

■ Administrative Expenses

■ General Expenses

■ Capital Expenditures

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The budgets will be used to establish benchmarks and then to review actual performance against thebenchmarks.

Security systems

A sophisticated security system is established for the inventory and equipment areas within the officespace. This system includes 24-hour surveillance.

Documents and paper flow

At this time all documents are scanned into the computer system and stored digitally. This systemsupports the virtual operations of the company and aids in security and storage.

Planning Chart

Phase One (Complete): First-Round Financing – Start-up

Total Finance: $128,000 Investor contribution

Minimum Investment: $150,000 Original member contribution

Time Line: 2 months start-up, 10 complete months of sales figures

Goals: 1) Generate actual business plan figures.2) Establish a viable test market composed of 20 units.Analyze budget revenues, costs, sales distribution and

product mix.

Phase Two (Current): Second-Round Financing – Operations

Finance: $300,000 debt financing

Goals: 1) Provide free display racks to help secure rapid market share.2) Introduce 200 new images (300 minimum total).3) Implement business plan.

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Product development

The product line will be developed from 100 images to 300—the average number of images anestablished, mid-sized greeting card company carries. It will be necessary to attract artists with differentstyles including watercolors, oils, photography and other mediums to help diversify and keep the lineappealing to the intended customers. Jody Arbek, Art Director beginning in 200A, will use herbackground, network, and expertise to establish a group of artists that will meet these needs. Manyincentive programs, including commissions on sold cards, will be employed to keep the artists interestedin the potential of working with First Class Greetings.

Manufacturing

Few factors limit the physical manufacturing of the product. The two main products for production arethe greeting cards and the envelopes. In the Seaside area alone, 12 major printing companies arecapable of producing the quality and quantity needs projected. Beachcombers Printing and Lithographout of Seaside publishes the greeting cards, while Mid-Continent Envelope out of Midtownmanufactures the patent pending envelope.

Financial requirements

First Class Greetings has raised close to $130,000 from individuals in exchange for an overall equityposition of 40%. The second phase funding will help to secure an office/shipping location, increase thecurrent line from 100+ images to over 300, provide working capital, and help attract an experiencedmarketing director from within the greeting card industry.

Marketing flow chart

For marketing and distribution, First Class Greetings is enlisting the service of sales representativesnationwide. First Class Greetings selected 20 representatives that cover the Western regions of theUnited States, and will soon add over 80 additional sales reps to cover the remainder of the nation.Efforts will be made to recruit and evaluate enough sales reps to secure the services of 10 representativeseach month until 100-120 sales representatives are selling the products.

Market penetration

There are two main channels for product sales and distribution. The first plan is to integrate FirstClass Greetings into as many locations as quickly as possible through national independent salesrepresentatives. This plan is well on its way with 20 sales representatives currently selling the productsand more than 80 to be added within the next year. The second plan for distribution is throughspecialized stationery, hotel, and coffee tradeshows. These tradeshows will be held in May, July, andSeptember of each year.

Sales representatives

Independent sales representatives provide the best mode for distribution in order to maintain pricingcontrols and higher margins. Independent sales reps are not full-time employees of First Class Greetings,thus benefits are not necessary. Independent sales reps receive a flat commission based on gross sales.First Class Greetings’ sales reps are set at a commission rate of 15% of gross sales. The average sales repcan service up to 40 accounts with the average location generating around $1,000 per year.

In addition to field calls, sales reps will represent the product line at all regional tradeshows, with themarketing director attending all national tradeshows.

Management and infrastructure

Three individuals from the original team of members in the LLC comprise the current managementteam. This team will add a marketing director by May 200B. This management position will be fullyresponsible for all marketing aspects of the business. The expanded management team will include adirector of operations, distribution and art procurement, and a director of finance. These two positionswill be added in 200C.

The management team relies heavily on the infrastructure and advisory council for certain contractedservices and advice on the strategic direction of the company.

Risk analysis

Despite all planned mitigation, there are always inherent risks especially with a start-up company. Themajor risks are identified and addressed as follows:

1. Unique stamped and ready to mail concept is not accepted.■ The public can be fickle and unsure of new items introduced to the market. Educating the

public through marketing, and providing them with as traditional a product as possibleshould help to integrate the acceptance of the new product. Non-acceptance is perceived asone of the greatest risks. If there is a public inability to adapt to the new envelope andconcept, First Class Greetings can always drop the stamp from the product and form astandard greeting card company with the remaining inventories. The company would operateunder a new name and logo to help shed any ghosts in a post First Class Greetings closet.

2. Too few images are published, or public does not respond to the images.■ Established, mid-sized greeting card companies carry an average of 300 different images.

First Class Greetings already has 100 images ready to debut at the National StationeryTradeshow. In addition, First Class Greetings will closely follow the trends in the marketplace such as category types (e.g. Christmas), popular images (e.g. flowers), and colors/hues(e.g. vibrant or pastels).

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3. A lack of funding undermines flexibility.■ Critical to the success of First Class Greetings is proper funding. The majority of the

funding will go towards display racks and in-store point-of-purchase marketing material tohelp educate the public on the new concept. Free displays are essential to quick marketpenetration. Should First Class Greetings be unable to secure the necessary financing, theoption remains to charge retail accounts for the display racks. This action will severely limitthe ability of First Class Greetings to quickly expand and take advantage of the new productin a timely fashion.

4. Better-financed competitor overtakes market share.■ This risk can also turn to First Class Greetings’ favor. If other companies begin to challenge

First Class Greetings for the stamped greeting card market they will, in effect raiseawareness of the concept as a whole. This turn could lead to attracting investors or bankersto loan money to the concept originator. In addition, First Class Greetings will pursue anycompany that violates the pending patents.

Salvaging assets

If the risks became too excessive for continued involvement in the greeting card industry, many optionsexist. The two primary options are:

1. Sell the business to another greeting card company. The amount would be determinedthrough a valuation assessment at the time of sale.

2. Sell the artwork and inventory to another greeting card company and liquidate the assets ofthe company. The amount would be determined by market value of the assets at the time ofsale.

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New offerings to market

New Offerings – First Class Greetings can easily grow from the current marketing strategy and spin-offproduct lines to include stationery, wrapping paper, boxed note cards, postcards, etc. Of these relatedproducts, postcards would be the most likely choice since they are consistent with the current marketingstrategy—postage-ready products that provide convenience to the customer. It is anticipated that themarket for postcards would bring a 50% increase in sales volume.

New Markets – Greeting cards have international acceptance, meaning the concept could have similarpotential overseas. One of the major markets, the U.S. coffeehouse itself, is a carryover from Europe.The viability of these markets will be assessed.

Capital requirements

Providing new offerings to market will be similar to building our initial inventory of greeting cards.Therefore, many of the same costs apply. The costs associated with entering international markets haveyet to be assessed.

Sources and Uses (New Offerings)

Sources:Financing $200,000

Uses:Working Capital $75,000

300 new images $90,000

Marketing (Tradeshows/Advertising) $35,000

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Growth Plan

Personnel requirements

Additional personnel requirements include support functions such as order entry, order fulfillment, etc.The management team included in this plan is sufficient to incorporate additional growth withoutadded management personnel.

Exit strategy

The marketing advantage created from the patent pending greeting card system will position First ClassGreetings as an attractive acquisition candidate within the competitive greeting card industry. Thelong-term strategy is to concentrate on building value in the company through increasing cash flow andto harvest this value by merging with a larger competitor or by taking the company public. Consistentwith these end goals, considerable attention will be placed on the business fundamentals as outlined inthe plan. Partner distributions are planned in year three, assuming projections are realized and marketsaturation and reinvestment needs begin to level off. Following year three, new limited partners willreplace limited partners wishing to withdraw capital from the company, or, if prudent, their equity willbe purchased by the company.

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Sales ProjectionsSales for the next three years are projected to be $744,106, $2,450,000, and $3,877,594. In year 200A,First Class Greetings increased their independent sales force from 10 representatives to 20. The plan isto add approximately 80-100 additional sales reps to cover the United States in year 200B (the first yearfor the plan). It is estimated that each representative can service 40 locations with an average salesvolume of $1,000. By Year 3 of the plan, each of those sales reps will be selling $40,000.

Income ProjectionsNet income projections for the next three years are $(68,715), $381,606, and $849,789. The companyis not currently profitable, but expects to be profitable in Year 2 of the plan. The large, national salesforce is expected to integrate First Class Greetings into as many retail locations as possible, allowing forrelatively quick market penetration and growth.

Cash RequirementsFirst Class Greetings has received $278,000 in start-up funds to date. The original owner hascontributed $150,000, and investors have supplied the remaining $128,000 of capital. An additional$330,000 will be required to fund working capital requirements, additional personnel, additionalartwork images, and marketing/trade show.

The growth plan could include spin-off product lines to include stationery, wrapping paper, boxed notecards, post cards, and expansion into the international market. Many of the same types of costs wouldapply, and an additional $200,000 in financing would be required to improve working capital, acquireadditional images, and promote the new offerings.

Sources of FinancingFirst Class Greetings expects to obtain an additional $30,000 in equity financing and is seeking a 3-yearbusiness loan in the amount of $300,000. It is estimated that the interest rate on the loan will be 8%.

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Financial Plan

Cash Flow StatementFirst Class Greetings LLC

200B Pre Start-up JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL

Cash In Cash Sales - - - - - - - - - - - - - Collections from Accounts Receivables 108,129 31,679 45,264 38,370 23,904 54,147 49,534 72,637 82,385 72,685 89,102 75,393 743,228 Equity Received - - - - - - - - - - - - 30,000 30,000 Loans Received - - 300,000 - - - - - - - - - - 300,000 Other Cash In (receipts from other assets) - - - - - - - - - - - - - Other Cash In (interest, royalties etc.) - - - - - - - - - - - - - Total Cash In - 108,129 331,679 45,264 38,370 23,904 54,147 49,534 72,637 82,385 72,685 89,102 105,393 1,073,228 Total Cash Available 44,412 152,541 440,761 400,810 388,613 371,726 352,029 336,586 320,939 313,914 298,803 293,738 315,526 1,117,640

Cash Out Inventory Expenditures Inventory/Raw Material (Cash) - - - - - - - - - - - - - - Inventory/Raw Material (Paid on Account) - - 24,468 20,697 13,105 29,292 26,944 39,379 44,553 39,441 48,168 40,957 54,611 381,615 Production Expenses - - - - - - - - - - - - - - Operating Expenses Advertising - - - - - - - - - - - - - - Bank Charges - - - - - - - - - - - - - - Dues & Subscriptions - - - - - - - - - - - - - - Insurance - 38 38 38 38 38 38 38 38 38 38 38 38 456 Licenses & Fees - - - - - - - - - - - - - - Marketing & Promotion - 250 400 1,000 500 6,600 1,000 6,750 1,000 6,500 400 200 500 25,100 Meals & Entertainment - - - - - - - - - - - - - - Miscellaneous - - - - - - - - - - - - - - Office Expense - - - - - - - - - - - - - - Office Supplies - 250 400 500 450 750 750 750 750 750 750 750 750 7,600 Outside Services - - - - - - - - - - - - - - Payroll Expenses Salaries & Wages - 12,998 15,837 14,359 11,385 21,227 20,306 25,178 27,205 25,203 28,622 25,797 31,146 259,262 Payroll Taxes - 1,562 1,562 1,562 1,562 2,437 2,437 2,438 2,438 2,438 2,438 2,438 2,438 25,750 Benefits - - - - - - - - - - - - - - Professional Fees - 750 400 400 750 500 500 750 425 425 750 425 425 6,500 Property Taxes - - - - - - - - - - - - - - Rent - 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 15,600 Repairs & Maintenance - - - - - - - - - - - - - - Shipping & Delivery - - - - - - - - - - - - - - Telephone - 435 435 435 1,425 1,425 1,425 1,425 1,425 1,425 1,425 1,425 1,425 14,130 Training & Development - - - - - - - - - - - - - - Travel - 150 150 150 150 150 150 150 150 150 150 150 200 1,850 Utilities - 325 325 325 325 325 325 325 325 325 325 325 325 3,900 Vehicle - - - - - - - - - - - - - - Other - 400 400 400 400 400 400 400 400 400 400 400 400 4,800 Other - - - - - - - - - - - - - - Other - - - - - - - - - - - - - - Paid on Account - - - - - - - - - - - - - - Non-operating Costs Capital Purchases - 25,000 39,500 - - - - - - - - - - 64,500 Estimated Income Tax Payments - - - - - - - - - - - - - - Interest Payments - - - 2,000 1,951 1,901 1,851 1,801 1,750 1,699 1,648 1,596 1,544 17,741 Loan Principal Payments - - - 7,401 7,450 7,500 7,550 7,600 7,651 7,702 7,753 7,805 7,857 76,269 Owner's Draw - - - - - - - - - - - - - - Other Cash Out - - - - - - - - - - - - - - Total Cash Out - 43,458 85,215 50,567 40,791 73,845 64,976 88,284 89,410 87,796 94,167 83,606 102,959 905,073

Monthly Cash Flow (cash in - cash out) - 64,670 246,464 (5,303) (2,421) (49,941) (10,829) (38,750) (16,774) (5,410) (21,482) 5,496 2,434 168,155 Beginning Cash Balance 44,412 44,412 109,082 355,546 350,243 347,822 297,881 287,052 248,302 231,528 226,118 204,636 210,133 44,412 Ending Cash Balance 44,412 109,082 355,546 350,243 347,822 297,881 287,052 248,302 231,528 226,118 204,636 210,133 212,567 212,567


200C JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL

Cash In Cash Sales - - - - - - - - - - - - - Collections from Accounts Receivables 100,829 104,303 149,033 126,333 78,703 178,282 163,094 239,160 271,257 239,320 293,372 248,235 2,191,920 Equity Received - - - - - - - - - - - - - Loans Received - - - - - - - - - - - - - Other Cash In (receipts from other assets) - - - - - - - - - - - - - Other Cash In (interest, royalties etc.) - - - - - - - - - - - - - Total Cash In 100,829 104,303 149,033 126,333 78,703 178,282 163,094 239,160 271,257 239,320 293,372 248,235 2,191,920 Total Cash Available 313,396 314,493 325,614 330,716 307,751 318,725 315,719 340,946 380,635 362,657 408,170 442,116 2,404,486

Cash Out Inventory Expenditures Inventory/Raw Material (Cash) - - - - - - - - - - - - - Inventory/Raw Material (Paid on Account) 55,000 80,562 68,146 43,149 96,445 88,715 129,657 146,693 129,862 158,596 134,853 179,810 1,311,488 Production Expenses - - - - - - - - - - - - - Operating Expenses Advertising - - - - - - - - - - - - - Bank Charges - - - - - - - - - - - - - Dues & Subscriptions - - - - - - - - - - - - - Insurance 38 38 38 38 38 38 38 38 38 38 38 38 456 Licenses & Fees - - - - - - - - - - - - - Marketing & Promotion 250 400 1,000 500 6,600 1,000 6,750 1,000 6,500 400 200 500 25,100 Meals & Entertainment - - - - - - - - - - - - - Miscellaneous - - - - - - - - - - - - - Office Expense - - - - - - - - - - - - - Office Supplies 750 750 750 750 750 750 750 750 750 750 750 750 9,000 Outside Services - - - - - - - - - - - - - Payroll Expenses Salaries & Wages 31,969 41,314 36,449 26,656 47,537 44,508 60,548 67,223 60,628 71,886 62,584 80,198 631,500 Payroll Taxes 2,437 2,437 2,437 2,437 2,437 2,437 2,438 2,438 2,438 2,438 2,438 2,438 29,250 Benefits - - - - - - - - - - - - - Professional Fees 750 400 400 750 500 500 750 425 425 750 425 425 6,500 Property Taxes - - - - - - - - - - - - - Rent 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 15,600 Repairs & Maintenance - - - - - - - - - - - - - Shipping & Delivery - - - - - - - - - - - - - Telephone 435 435 435 1,425 1,425 1,425 1,425 1,425 1,425 1,425 1,425 1,425 14,130 Training & Development - - - - - - - - - - - - - Travel 150 150 150 150 150 150 150 150 150 150 150 200 1,850 Utilities 325 325 325 325 325 325 325 325 325 325 325 325 3,900 Vehicle - - - - - - - - - - - - - Other 400 400 400 400 400 400 400 400 400 400 400 400 4,800 Other - - - - - - - - - - - - - Other - - - - - - - - - - - - - Paid on Account - - - - - - - - - - - - - Non-operating Costs Capital Purchases - - - - - - - - - - - - - Estimated Income Tax Payments - - - 14,388 - 15,151 - - 43,655 - - 60,368 133,562 Interest Payments 1,492 1,439 1,386 1,332 1,279 1,224 2,170 1,115 1,060 1,004 948 892 15,341 Loan Principal Payments 7,909 7,962 8,015 8,069 8,122 8,177 7,231 8,286 8,341 8,397 8,453 8,509 97,471 Owner's Draw - - - - - - - - - - - 11,448 11,448 Other Cash Out - - - - - - - - - - - - - Total Cash Out 103,205 137,912 121,231 101,669 167,308 166,099 213,933 231,568 257,297 247,859 214,289 349,026 2,311,396

Monthly Cash Flow (cash in - cash out) (2,376) (33,609) 27,802 24,664 (88,605) 12,183 (50,839) 7,592 13,959 (8,540) 79,083 (100,791) (119,476) Beginning Cash Balance 212,567 210,190 176,581 204,383 229,048 140,442 152,626 101,787 109,379 123,338 114,798 193,881 212,567 Ending Cash Balance 210,190 176,581 204,383 229,048 140,442 152,626 101,787 109,379 123,338 114,798 193,881 93,090 93,090


200D JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL

Cash In Cash Sales - - - - - - - - - - - - - Collections from Accounts Receivables 333,793 165,079 235,873 199,946 124,563 282,166 258,127 378,516 429,315 378,769 464,317 392,879 3,643,344 Equity Received - - - - - - - - - - - - - Loans Received - - - - - - - - - - - - - Other Cash In (receipts from other assets) - - - - - - - - - - - - - Other Cash In (interest, royalties etc.) - - - - - - - - - - - - - Total Cash In 333,793 165,079 235,873 199,946 124,563 282,166 258,127 378,516 429,315 378,769 464,317 392,879 3,643,344 Total Cash Available 426,883 349,720 382,346 405,796 364,223 392,533 377,421 428,523 498,974 457,564 537,072 597,968 3,736,435

Cash Out Inventory Expenditures Inventory/Raw Material (Cash) - - - - - - - - - - - - - Inventory/Raw Material (Paid on Account) 181,090 127,505 107,854 68,291 152,643 140,408 205,208 232,170 205,531 251,008 213,431 284,583 2,169,722 Production Expenses - - - - - - - - - - - - - Operating Expenses Advertising - - - - - - - - - - - - - Bank Charges - - - - - - - - - - - - - Dues & Subscriptions - - - - - - - - - - - - - Insurance 38 38 38 38 38 38 38 38 38 38 38 38 456 Licenses & Fees - - - - - - - - - - - - - Marketing & Promotion 250 400 1,000 500 6,600 1,000 6,750 1,000 6,500 400 200 500 25,100 Meals & Entertainment - - - - - - - - - - - - - Miscellaneous - - - - - - - - - - - - - Office Expense - - - - - - - - - - - - - Office Supplies 750 750 750 750 750 750 750 750 750 750 750 750 9,000 Outside Services - - - - - - - - - - - - - Payroll Expenses Salaries & Wages 44,916 59,706 52,006 36,506 76,221 71,427 96,814 107,377 96,941 114,759 100,036 127,914 984,623 Payroll Taxes 2,437 2,437 2,437 2,437 4,103 4,103 4,103 4,103 4,103 4,103 4,103 4,103 42,572 Benefits - - - - - - - - - - - - - Professional Fees 750 400 400 750 500 500 750 425 425 750 425 425 6,500 Property Taxes - - - - - - - - - - - - - Rent 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 15,600 Repairs & Maintenance - - - - - - - - - - - - - Shipping & Delivery - - - - - - - - - - - - - Telephone 435 435 435 1,425 1,425 1,425 1,425 1,425 1,425 1,425 1,425 1,425 14,130 Training & Development - - - - - - - - - - - - - Travel 150 150 150 150 150 150 150 150 150 150 150 200 1,850 Utilities 325 325 325 325 325 325 325 325 325 325 325 325 3,900 Vehicle - - - - - - - - - - - - - Other 400 400 400 400 400 400 400 400 400 400 400 400 4,800 Other - - - - - - - - - - - - - Other - - - - - - - - - - - - - Paid on Account - - - - - - - - - - - - - Non-operating Costs Capital Purchases - - - - - - - - - - - - - Estimated Income Tax Payments - - - 43,862 - 42,013 - - 92,890 - - 118,661 297,426 Interest Payments 835 778 721 663 604 546 487 427 368 307 247 186 6,169 Loan Principal Payments 8,566 8,623 8,680 8,738 8,797 8,855 8,914 8,974 9,033 9,094 9,154 9,215 106,643 Owner's Draw - - - - - - - - - - - 38,241 38,241 Other Cash Out - - - - - - - - - - - - - Total Cash Out 242,243 203,247 176,496 166,136 253,856 273,239 327,414 358,864 420,179 384,809 331,983 588,265 3,726,732

Monthly Cash Flow (cash in - cash out) 91,550 (38,168) 59,377 33,810 (129,293) 8,926 (69,286) 19,652 9,136 (6,040) 132,333 (195,386) (83,388) Beginning Cash Balance 93,090 184,640 146,473 205,850 239,660 110,367 119,293 50,007 69,658 78,795 72,755 205,088 93,090 Ending Cash Balance 184,640 146,473 205,850 239,660 110,367 119,293 50,007 69,658 78,795 72,755 205,088 9,703 9,703

First Class Greetings LLC Year-End

Income Statement (Projected)200B 200C 200D

Net Sales (less returns & allowances) 744,106 2,450,000 3,877,594 Cost of Goods Sold 398,841 1,261,750 1,849,612 Gross Margin $ 345,265 $ 1,188,250 $ 2,027,982

Operating Expenses Advertising - - - Bad Debt Expense 7,441 24,500 38,776 Bank Charges - - - Depreciation & Amortization 23,849 24,717 24,717 Dues & Subscriptions - - - Insurance 456 456 456 Licenses & Fees - - - Marketing & Promotion 25,100 25,100 25,100 Meals & Entertainment - - - Miscellaneous - - - Office Expense - - - Office Supplies 7,600 9,000 9,000 Outside Services - - - Payroll Expenses Salaries & Wages 259,262 631,500 984,623 Payroll Taxes 25,750 29,250 42,572 Benefits - - - Professional Fees 6,500 6,500 6,500 Property Taxes - - - Rent 15,600 15,600 15,600 Repairs & Maintenance - - - Shipping & Delivery - - - Telephone 14,130 14,130 14,130 Training & Development - - - Travel 1,850 1,850 1,850 Utilities 3,900 3,900 3,900 Vehicle - - - Other 4,800 4,800 4,800 Other - - - Other - - - Total Operating Expenses $ 396,239 $ 791,303 $ 1,172,023

Operating Income $ (50,974) $ 396,947 $ 855,958

Interest Expense 17,741 15,341 6,169 Other Income (interest, royalties, etc.) - - -

Income Before Taxes $ (68,715) $ 381,606 $ 849,789

Income Taxes (if C Corp) - - -

Net Income $ (68,715) $ 381,606 $ 849,789

First Class Greetings LLC

Balance Sheet (Projected)Year-End

200B 200C 200D

AssetsCurrent Assets

Cash & Equivalents 212,567 93,090 9,703 Accounts Receivable 101,887 335,467 530,941 Inventory 141,986 317,814 743,444 Security Deposits - - - Other Current Assets - - -

Total Current Assets $ 456,440 $ 746,372 $ 1,284,088

Fixed AssetsProperty, Plant & Equipment 107,763 107,763 107,763 Less: Accumulated Depreciation (35,263) (59,980) (84,697) Other Non-Current Assets - - -

Total Non-Current Assets $ 72,500 $ 47,783 $ 23,066

Total Assets $ 528,939 $ 794,155 $ 1,307,154

LiabilitiesCurrent Liabilities Accounts Payable 122,240 248,330 353,850

Line of Credit - - - Other Current Liabilities - - -

Total Current Liabilities $ 122,240 $ 248,330 $ 353,850

Long-term LiabilitiesLoans 223,731 126,260 19,617 Mortgages - - - Other Non-Current Liabilities - - -

Total Non-Current Liabilities $ 223,731 $ 126,260 $ 19,617

Total Liabilities $ 345,971 $ 374,590 $ 373,467

EquityEquity Investments 308,000 308,000 308,000 Retained Earnings (125,032) 256,575 1,106,364 Less: Owner's & Investor's Draws - (145,010) (480,677) Total Equity $ 182,968 $ 419,564 $ 933,687

Total Liabilities and Equity $ 528,939 $ 794,155 $ 1,307,154

First Class Greetings LLCFinancial Ratios

200B 200C 200D

Profitability Ratios

Gross Margin 46.40% 48.50% 52.30%

Operating Margin -6.85% 16.20% 22.07%

Net Margin -9.23% 15.58% 21.92%

Return on Assets (ROA) -12.99% 48.05% 65.01%

Return on Equity (ROE) -37.56% 90.95% 91.01%

Liquidity Ratios

Current Ratio 3.73 3.01 3.63

Quick Ratio 2.57 1.73 1.53

Risk Ratios

Debt Ratio 0.65 0.47 0.29

Debt to Equity 1.89 0.89 0.40

Efficiency Ratios

Inventory Turnover 2.81 3.97 2.49

Days Sales Outstanding (DSO) 49.98 49.98 49.98

Investment Turnover Ratio 1.41 3.09 2.97

Net IncomeNet Sales

Total Liabilities

Shareholders' EquityNet Income

Total Current Assets

Current Liabilities

Accounts Receivable

Net Sales

Total Assets

InventoryCost of Goods Sold

Total LiabilitiesShareholders' Equity

Net Sales/365

Net Sales

Total Assets

Gross Income

Total Current Liabilities

Current Assets - Inventory

Net SalesOperating Income

Total AssetsNet Income

30


Supporting Documents

Appendix

HISTORICAL BALANCE SHEETFirst Class Greetings LLC

12/31/02

Assets Current Assets Cash & Equivalents 44,412 Accounts Receivable 108,450 Inventory 104,212 Security Deposits - Other Current Assets - Total Current Assets $ 257,074

Fixed Assets Property, Plant & Equipment Computer Equipment 34,215 Equipment/Machinery - Furniture & Fixtures 9,048 Vehicles - Leasehold Improvements - Building - Land - Less: Accumulated Depreciation (Do not enter a negative number) 11,414 Other Non-current Assets - Total Non-current Assets $ 31,849

Total Assets $ 288,923

Liabilities Current Liabilities Accounts Payable 67,240 Line of Credit - Other Current Liabilities - Total Current Liabilities $ 67,240

Long-term Liabilities Loans - Real Estate Loans - Other Non-current Liabilities - Total Long-term Liabilities $ -

Total Liabilities $ 67,240

Equity Owners Equity 278,000 Retained Earnings (Enter a negative number for a loss) (56,317) Less: Owner's & Investor's Draws (Not for use by C Corporations) -

Total Equity $ 221,683

Total Liabilities and Equity $ 288,923

Appendix

SALES PROJECTIONSFirst Class Greetings LLCYear 1 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALSales BudgetProduct/Service Category A 32,135 45,650 38,614 24,450 54,650 50,269 73,468 83,121 73,584 89,866 76,412 101,887 744,106 Product/Service Category B - - - - - - - - - - - - - Product/Service Category C - - - - - - - - - - - - - Product/Service Category D - - - - - - - - - - - - - Product/Service Category E - - - - - - - - - - - - - Product/Service Category F - - - - - - - - - - - - - Product/Service Category G - - - - - - - - - - - - - Gross Sales 32,135 45,650 38,614 24,450 54,650 50,269 73,468 83,121 73,584 89,866 76,412 101,887 744,106 Less: Returns & Allowances - - - - - - - - - - - - - Net Sales 32,135 45,650 38,614 24,450 54,650 50,269 73,468 83,121 73,584 89,866 76,412 101,887 744,106 Other Income - - - - - - - - - - - - - Total Income 32,135 45,650 38,614 24,450 54,650 50,269 73,468 83,121 73,584 89,866 76,412 101,887 744,106 Credit Management Sales (cash) - - - - - - - - - - - - - Sales (credit) 32,135 45,650 38,614 24,450 54,650 50,269 73,468 83,121 73,584 89,866 76,412 101,887 744,106 Received on Account 108,450 32,135 45,650 38,614 24,450 54,650 50,269 73,468 83,121 73,584 89,866 76,412 750,669 Bad Debt Expense 321 457 386 245 547 503 735 831 736 899 764 1,019 7,441

Year 1 AssumptionsProduct/Service Category AProduct/Service Category BProduct/Service Category CProduct/Service Category DProduct/Service Category EProduct/Service Category FProduct/Service Category GLess: Returns & AllowancesOther Income Sales (cash) Sales (credit) Received on Account Bad Debt Expense

YE

AR

1 YE

AR

1 YE

AR

1 YE

AR

1

Sales are based on total number of sales reps, minimum sales orders and seasonally adjusted cards sold. YE

AR

1 YE

AR

1 YE

AR

1

Appendix

SALES PROJECTIONSFirst Class Greetings LLCYear 2 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALSales BudgetProduct/Service Category A 105,806 150,305 127,138 80,503 179,937 165,513 241,896 273,679 242,278 295,888 251,590 335,467 2,450,000 Product/Service Category B - - - - - - - - - - - - - Product/Service Category C - - - - - - - - - - - - - Product/Service Category D - - - - - - - - - - - - - Product/Service Category E - - - - - - - - - - - - - Product/Service Category F - - - - - - - - - - - - - Product/Service Category G - - - - - - - - - - - - - Gross Sales 105,806 150,305 127,138 80,503 179,937 165,513 241,896 273,679 242,278 295,888 251,590 335,467 2,450,000 Less: Returns & Allowances - - - - - - - - - - - - - Net Sales 105,806 150,305 127,138 80,503 179,937 165,513 241,896 273,679 242,278 295,888 251,590 335,467 2,450,000 Other Income - - - - - - - - - - - - - Total Income 105,806 150,305 127,138 80,503 179,937 165,513 241,896 273,679 242,278 295,888 251,590 335,467 2,450,000 Credit ManagementSales (cash) - - - - - - - - - - - - - Sales (credit) 105,806 150,305 127,138 80,503 179,937 165,513 241,896 273,679 242,278 295,888 251,590 335,467 2,450,000 Received on Account 101,887 105,806 150,305 127,138 80,503 179,937 165,513 241,896 273,679 242,278 295,888 251,590 2,216,420 Bad Debt Expense 1,058 1,503 1,271 805 1,799 1,655 2,419 2,737 2,423 2,959 2,516 3,355 24,500


YE

AR

2 YE

AR

2 YE

AR

2 YE

AR

2 Y

EA

R 2 Y

EA

R 2 Y

EA

R 2

Sales are based on total number of sales reps, minimum sales orders and seasonally adjusted cards sold.

Appendix

SALES PROJECTIONSFirst Class Greetings LLCYear 3 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALSales BudgetProduct/Service Category A 167,458 237,886 201,221 127,411 284,785 261,956 382,847 433,150 383,452 468,299 398,189 530,941 3,877,594 Product/Service Category B - - - - - - - - - - - - - Product/Service Category C - - - - - - - - - - - - - Product/Service Category D - - - - - - - - - - - - - Product/Service Category E - - - - - - - - - - - - - Product/Service Category F - - - - - - - - - - - - - Product/Service Category G - - - - - - - - - - - - - Gross Sales 167,458 237,886 201,221 127,411 284,785 261,956 382,847 433,150 383,452 468,299 398,189 530,941 3,877,594 Less: Returns & Allowances - - - - - - - - - - - - - Net Sales 167,458 237,886 201,221 127,411 284,785 261,956 382,847 433,150 383,452 468,299 398,189 530,941 3,877,594 Other Income - - - - - - - - - - - - - Total Income 167,458 237,886 201,221 127,411 284,785 261,956 382,847 433,150 383,452 468,299 398,189 530,941 3,877,594 Credit ManagementSales (cash) - - - - - - - - - - - - - Sales (credit) 167,458 237,886 201,221 127,411 284,785 261,956 382,847 433,150 383,452 468,299 398,189 530,941 3,877,594 Received on Account 335,467 167,458 237,886 201,221 127,411 284,785 261,956 382,847 433,150 383,452 468,299 398,189 3,682,120 Bad Debt Expense 1,675 2,379 2,012 1,274 2,848 2,620 3,828 4,331 3,835 4,683 3,982 5,309 38,776


YE

AR

3 YE

AR

3 YE

AR

3 YE

AR

3 Y

EA

R 3 Y

EA

R 3 Y

EA

R 3

Sales are based on total number of sales reps, minimum sales orders and seasonally adjusted cards sold.

Appendix

INVENTORY PROJECTIONSFirst Class Greetings LLC

Year 1 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALInventory ManagementInventory Purchases 24,468 20,697 13,105 29,292 26,944 39,379 44,553 39,441 48,168 40,957 54,611 55,000 436,615 Inventory/ Raw Material Purchases (Cash) - - - - - - - - - - - - - Inventory/ Raw Material Purchases (Credit) 24,468 20,697 13,105 29,292 26,944 39,379 44,553 39,441 48,168 40,957 54,611 55,000 436,615 Payment on Account - 24,468 20,697 13,105 29,292 26,944 39,379 44,553 39,441 48,168 40,957 54,611 381,615

Production ExpensesFreight-in & Trucking - - - - - - - - - - - - - Insurance - - - - - - - - - - - - - Payroll Expenses - production Salaries & Wages - - - - - - - - - - - - - Employee Benefits - - - - - - - - - - - - - Payroll Taxes - - - - - - - - - - - - - Rent - - - - - - - - - - - - - Repairs & Maintenance - - - - - - - - - - - - - Rework - - - - - - - - - - - - - Subcontracting - - - - - - - - - - - - - Utilities - - - - - - - - - - - - - Other Production Expenses - - - - - - - - - - - - - Inventory Production Expenses - - - - - - - - - - - - -

Inventory BalanceBeginning Inventory Balance 104,212 111,456 107,684 100,092 116,279 113,931 126,365 131,540 126,428 135,155 127,943 141,598 104,212 Inventory Purchased 24,468 20,697 13,105 29,292 26,944 39,379 44,553 39,441 48,168 40,957 54,611 55,000 436,615 Inventory Production - - - - - - - - - - - - - (Cost of Goods Sold) (17,224) (24,468) (20,697) (13,105) (29,292) (26,944) (39,379) (44,553) (39,441) (48,168) (40,957) (54,611) (398,841) Ending Inventory Balance 111,456 107,684 100,092 116,279 113,931 126,365 131,540 126,428 135,155 127,943 141,598 141,986 141,986

Year 1 AssumptionsInventory/ Raw Material Purchases Freight-in & TruckingInsurancePayroll Expenses - production Salaries & Wages Employee Benefits Payroll TaxesRentRepairs & MaintenanceReworkSubcontractingUtilitiesOther Production Expenses

YE

AR

1 YE

AR

1 YE

AR

1 YE

AR

1 Y

EA

R 1 Y

EA

R 1 Y

EA

R 1 Y

EA

R 1

Inventory will be ordered as needed so that stock is held for a very short time before it is shipped. The inventory turn should be shorter than six weeks.

Appendix


Year 2 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALInventory ManagementInventory Purchases 80,562 68,146 43,149 96,445 88,715 129,657 146,693 129,862 158,596 134,853 179,810 181,090 1,437,578 Inventory/ Raw Material Purchases (Cash) - - - - - - - - - - - - - Inventory/ Raw Material Purchases (Credit) 80,562 68,146 43,149 96,445 88,715 129,657 146,693 129,862 158,596 134,853 179,810 181,090 1,437,578 Payment on Account 55,000 80,562 68,146 43,149 96,445 88,715 129,657 146,693 129,862 158,596 134,853 179,810 1,311,488


Inventory BalanceBeginning Inventory Balance 141,986 168,058 158,798 136,470 191,457 187,504 231,922 254,038 242,955 276,777 259,248 309,489 141,986 Inventory Purchased 80,562 68,146 43,149 96,445 88,715 129,657 146,693 129,862 158,596 134,853 179,810 181,090 1,437,578 Inventory Production - - - - - - - - - - - - - (Cost of Goods Sold) (54,490) (77,407) (65,476) (41,459) (92,668) (85,239) (124,577) (140,945) (124,773) (152,382) (129,569) (172,766) (1,261,750) Ending Inventory Balance 168,058 158,798 136,470 191,457 187,504 231,922 254,038 242,955 276,777 259,248 309,489 317,814 317,814


YE

AR

2 YE

AR

2 YE

AR

2 YE

AR

2 Y

EA

R 2 Y

EA

R 2 Y

EA

R 2 Y

EA

R 2


Appendix


Year 3 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALInventory ManagementInventory Purchases 127,505 107,854 68,291 152,643 140,408 205,208 232,170 205,531 251,008 213,431 284,583 286,610 2,275,242 Inventory/ Raw Material Purchases (Cash) - - - - - - - - - - - - - Inventory/ Raw Material Purchases (Credit) 127,505 107,854 68,291 152,643 140,408 205,208 232,170 205,531 251,008 213,431 284,583 286,610 2,275,242 Payment on Account 181,090 127,505 107,854 68,291 152,643 140,408 205,208 232,170 205,531 251,008 213,431 284,583 2,169,722


Inventory BalanceBeginning Inventory Balance 317,814 365,442 359,824 332,134 424,002 428,567 508,822 558,374 557,292 625,393 615,446 710,093 317,814 Inventory Purchased 127,505 107,854 68,291 152,643 140,408 205,208 232,170 205,531 251,008 213,431 284,583 286,610 2,275,242 Inventory Production - - - - - - - - - - - - - (Cost of Goods Sold) (79,877) (113,471) (95,982) (60,775) (135,843) (124,953) (182,618) (206,613) (182,907) (223,378) (189,936) (253,259) (1,849,612) Ending Inventory Balance 365,442 359,824 332,134 424,002 428,567 508,822 558,374 557,292 625,393 615,446 710,093 743,444 743,444


YE

AR

3 YE

AR

3 YE

AR

3 YE

AR

3 Y

EA

R 3 Y

EA

R 3 Y

EA

R 3 Y

EA

R 3


Appendix

OPERATING EXPENSE PROJECTIONSFirst Class Greetings LLC

Year 1 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL Operating Expenses

Advertising - - - - - - - - - - - - - Bank Charges - - - - - - - - - - - - - Dues & Subscriptions - - - - - - - - - - - - - Insurance 38 38 38 38 38 38 38 38 38 38 38 38 456 Licenses & Fees - - - - - - - - - - - - - Marketing & Promotion 250 400 1,000 500 6,600 1,000 6,750 1,000 6,500 400 200 500 25,100 Meals & Entertainment - - - - - - - - - - - - - Miscellaneous - - - - - - - - - - - - - Office Expense (postage) - - - - - - - - - - - - - Office Supplies 250 400 500 450 750 750 750 750 750 750 750 750 7,600 Outside Services - - - - - - - - - - - - - Payroll Expenses Salaries & Wages 12,998 15,837 14,359 11,385 21,227 20,306 25,178 27,205 25,203 28,622 25,797 31,146 259,262 Payroll Taxes 1,562 1,562 1,562 1,562 2,437 2,437 2,438 2,438 2,438 2,438 2,438 2,438 25,750 Benefits - - - - - - - - - - - - - Professional Fees 750 400 400 750 500 500 750 425 425 750 425 425 6,500 Property Taxes - - - - - - - - - - - - - Rent 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 15,600 Repairs & Maintenance - - - - - - - - - - - - - Shipping & Delivery - - - - - - - - - - - - - Telephone 435 435 435 1,425 1,425 1,425 1,425 1,425 1,425 1,425 1,425 1,425 14,130 Training & Development - - - - - - - - - - - - - Travel 150 150 150 150 150 150 150 150 150 150 150 200 1,850 Utilities 325 325 325 325 325 325 325 325 325 325 325 325 3,900 Vehicle - - - - - - - - - - - - - Other 400 400 400 400 400 400 400 400 400 400 400 400 4,800 Other - - - - - - - - - - - - - Other - - - - - - - - - - - - -

Total Operating Expenses 18,458 21,247 20,469 18,285 35,152 28,631 39,504 35,456 38,954 36,598 33,248 38,947 364,948

Assumptions - Year 1AdvertisingBank ChargesDues & SubscriptionsInsuranceLicenses & FeesMarketing & PromotionMeals & EntertainmentMiscellaneousOffice Expense (postage)Office SuppliesOutside ServicesPayroll Expenses Salaries & Wages Payroll Taxes BenefitsProfessional FeesProperty TaxesRentRepairs & MaintenanceShipping & DeliveryTelephoneTraining & DevelopmentTravelUtilitiesVehicleOtherOtherOther

YE

AR

1 YE

AR

1 YE

AR

1 YE

AR

1 YE

AR

1 YE

AR

1

Estimates for basic office supplies and computer supplies.

Sales commission @ 15% of sales, artist commission @ 6% of sales, Mktg Dir @ $42K/yr starting May 200B, Mgr @ $40K/yr & support @ $35K/yr

YE

AR

1 YE

AR

1 YE

AR

1 YE

AR

1 YE

AR

1 YE

AR

1

Insurance estimates provided by Cara Cuthbert, insurance broker.

Print costs for brochues, mailers, etc. Trade shows 3 @ $6K each in May, July, and September.

25% of non-commission payroll

General legal representation and bookeeping and tax preparation

Based on 1,300 quare foot office/storage facilities at $1/sq ft.

Telephone system lease, local service, long-distance service, 1-800 service, and mobile phone charges.

Utilities for rental property based on 25% of rent.

Contingency for additional costs not considered.

Appendix




Total Operating Expenses 38,804 47,949 43,684 34,731 61,462 52,833 74,874 75,474 74,379 79,862 70,035 87,999 742,086


YE

AR

2 YE

AR

2 YE

AR

2 YE

AR

2 YE

AR

2 YE

AR

2 Y

EA

R 2 Y

EA

R 2 Y

EA

R 2 Y

EA

R 2 Y

EA

R 2 Y

EA

R 2




Sales & artists commissions (15% & 6%), Mktg Dir @ $42K/yr, Mgr @ $40K/yr & support @ $35K/yr25% of non-commission payroll






Appendix




Total Operating Expenses 51,751 66,341 59,241 44,581 91,812 81,418 112,805 117,293 112,357 124,400 109,152 137,380 1,108,531


YE

AR

3 YE

AR

3 YE

AR

3 YE

AR

3 YE

AR

3 YE

AR

3 Y

EA

R 3 Y

EA

R 3 Y

EA

R 3 Y

EA

R 3 Y

EA

R 3 Y

EA

R 3








Sales & artists (15% & 6%), Mktg Dir @ $42K/yr, Mgr @ $40K/yr & support @ $35K/yr, & directors of operations & finance in May @40k/yr25% of non-commission payroll


Appendix

DEPRECIATION SCHEDULESFirst Class Greetings LLC

Year 1 Existing Assets JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALSet-up Assets (no detail entered) - - - - - - - - - - - - - Set-up Assets (detail entered) 776 776 776 776 776 776 776 776 776 776 776 776 9,312 Start-up Purchases - - - - - - - - - - - - - Total 776 776 776 776 776 776 776 776 776 776 776 776 9,312 Year 2 Existing AssetsSet-up Assets (no detail entered) - - - - - - - - - - - - - Set-up Assets (detail entered) 776 776 776 776 776 776 776 776 776 776 776 776 9,312 Start-up Purchases - - - - - - - - - - - - - Total 776 776 776 776 776 776 776 776 776 776 776 776 9,312 Year 3 Existing AssetsSet-up Assets (no detail entered) - - - - - - - - - - - - - Set-up Assets (detail entered) 776 776 776 776 776 776 776 776 776 776 776 776 9,312 Start-up Purchases - - - - - - - - - - - - - Total 776 776 776 776 776 776 776 776 776 776 776 776 9,312

Year 1 New Purchases JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALComputer Equipment - 25,000 - - - - - - - - - - 25,000 Computer Equipment Depreciation - 694 694 694 694 694 694 694 694 694 694 694 7,639 Equipment/Machinery - - - - - - - - - - - - - Equipment Depreciation - - - - - - - - - - - - - Furniture - 14,500 - - - - - - - - - - 14,500 Furniture Depreciation - 173 173 173 173 173 173 173 173 173 173 173 1,899 Leasehold Improvements 25,000 - - - - - - - - - - - 25,000 Leasehold Depreciation 417 417 417 417 417 417 417 417 417 417 417 417 5,000 Vehicles - - - - - - - - - - - - - Vehicle Depreciation - - - - - - - - - - - - - Building - - - - - - - - - - - - - Building Depreciation - - - - - - - - - - - - - Year 2 New PurchasesComputer Equipment - - - - - - - - - - - - - Computer Equipment Depreciation 694 694 694 694 694 694 694 694 694 694 694 694 8,333 Equipment/Machinery - - - - - - - - - - - - - Equipment Depreciation - - - - - - - - - - - - - Furniture - - - - - - - - - - - - - Furniture Depreciation 173 173 173 173 173 173 173 173 173 173 173 173 2,071 Leasehold Improvements - - - - - - - - - - - - - Leasehold Depreciation 417 417 417 417 417 417 417 417 417 417 417 417 5,000 Vehicles - - - - - - - - - - - - - Vehicle Depreciation - - - - - - - - - - - - - Building - - - - - - - - - - - - - Building Depreciation - - - - - - - - - - - - - Year 3 New PurchasesComputer Equipment - - - - - - - - - - - - - Computer Equipment Depreciation 694 694 694 694 694 694 694 694 694 694 694 694 8,333 Equipment/Machinery - - - - - - - - - - - - - Equipment Depreciation - - - - - - - - - - - - - Furniture - - - - - - - - - - - - - Furniture Depreciation 173 173 173 173 173 173 173 173 173 173 173 173 2,071 Leasehold Improvements - - - - - - - - - - - - - Leasehold Depreciation 417 417 417 417 417 417 417 417 417 417 417 417 5,000 Vehicles - - - - - - - - - - - - - Vehicle Depreciation - - - - - - - - - - - - - Building - - - - - - - - - - - - - Building Depreciation - - - - - - - - - - - - -

Appendix

CAPITAL BUDGET PROJECTIONSYear 1 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALCapital BudgetOwner's Draw - - - - - - - - - - - - - Investor's Draw - - - - - - - - - - - - - Dividends Paid - - - - - - - - - - - - - Security Deposits - - - - - - - - - - - - - Amortization - - - - - - - - - - - - - Depreciation (existing assets) 776 776 776 776 776 776 776 776 776 776 776 776 9,312 Capital Asset Purchases 25,000 39,500 - - - - - - - - - - 64,500 Depreciation (new purchases) 417 1,284 1,284 1,284 1,284 1,284 1,284 1,284 1,284 1,284 1,284 1,284 14,538 Land - - - - - - - - - - - - -

Year 1 Total Depreciation 23,849 Assumptions - Year 1Owner's DrawInvestor's DrawDividends PaidSecurity DepositsAmortizationEquipmentEquipment DepreciationFurnitureFurniture DepreciationLeasehold ImprovementsLeasehold DepreciationVehiclesVehicle DepreciationBuildingBuilding DepreciationLand

YE

AR

1 YE

AR

1 YE

AR

1 Y

EA

R 1 Y

EA

R 1 Y

EA

R 1 Y

EA

R 1

Appendix

CAPITAL BUDGET PROJECTIONSYear 2 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALCapital BudgetOwner's Draw - - - - - - - - - - - 11,448 11,448 Investor's Draw - - - - - - - - - - - - - Dividends Paid - - - - - - - - - - - - - Security Deposits - - - - - - - - - - - - - Amortization - - - - - - - - - - - - - Depreciation (existing assets) 776 776 776 776 776 776 776 776 776 776 776 776 9,312 Capital Asset Purchases - - - - - - - - - - - - - Depreciation (new purchases) 1,284 1,284 1,284 1,284 1,284 1,284 1,284 1,284 1,284 1,284 1,284 1,284 15,405 Land - - - - - - - - - - - - -


YE

AR

2 YE

AR

2 YE

AR

2 Y

EA

R 2 Y

EA

R 2 Y

EA

R 2 Y

EA

R 2

Appendix

CAPITAL BUDGET PROJECTIONSYear 3 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALCapital BudgetOwner's Draw - - - - - - - - - - - 25,494 25,494 Investor's Draw - - - - - - - - - - - 12,747 12,747 Dividends Paid - - - - - - - - - - - - - Security Deposits - - - - - - - - - - - - - Amortization - - - - - - - - - - - - - Depreciation (existing assets) 776 776 776 776 776 776 776 776 776 776 776 776 9,312 Capital Asset Purchases - - - - - - - - - - - - - Depreciation (new purchases) 1,284 1,284 1,284 1,284 1,284 1,284 1,284 1,284 1,284 1,284 1,284 1,284 15,405 Land - - - - - - - - - - - - -


YE

AR

3 YE

AR

3 YE

AR

3 YE

AR

3 Y

EA

R 3 Y

EA

R 3 Y

EA

R 3

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Equity InvestmentFirst Class Greetings LLC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL

Year 1 - - - - - - - - - - - 30,000 30,000 Year 2 - - - - - - - - - - - - - Year 3 - - - - - - - - - - - - -

Real Estate LoansFirst Class Greetings LLC

Existing Balance - New Borrowing JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALYear 1 - - - - - - - - - - - - - Outstanding balance - - - - - - - - - - - - Year 2 - - - - - - - - - - - - - Outstanding balance - - - - - - - - - - - - Year 3 - - - - - - - - - - - - - Outstanding balance - - - - - - - - - - - -

Repayment JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALYear 1 - principal - - - - - - - - - - - - - Year 1 - interest - - - - - - - - - - - - - Year 2 - principal - - - - - - - - - - - - - Year 2 - interest - - - - - - - - - - - - - Year 3 - principal - - - - - - - - - - - - - Year 3 - interest - - - - - - - - - - - - -

Traditional Business Loan and/or other Long-term LoansFirst Class Greetings LLC

Loan 1 Existing Balance - New Borrowing JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALYear 1 - 300,000 - - - - - - - - - - 300,000 Outstanding balance - 300,000 292,599 285,149 277,649 270,099 262,499 254,848 247,146 239,393 231,588 223,731 Year 2 - - - - - - - - - - - - - Outstanding balance 215,822 207,860 199,845 191,776 183,654 175,477 168,246 159,960 151,619 143,222 134,769 126,260 Year 3 - - - - - - - - - - - - - Outstanding balance 117,694 109,071 100,391 91,653 82,856 74,001 65,087 56,113 47,080 37,986 28,832 19,617

Repayment JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALYear 1 - principal - - 7,401 7,450 7,500 7,550 7,600 7,651 7,702 7,753 7,805 7,857 76,269 Year 1 - interest - - 2,000 1,951 1,901 1,851 1,801 1,750 1,699 1,648 1,596 1,544 17,741 Year 2 - principal 7,909 7,962 8,015 8,069 8,122 8,177 7,231 8,286 8,341 8,397 8,453 8,509 97,471 Year 2 - interest 1,492 1,439 1,386 1,332 1,279 1,224 2,170 1,115 1,060 1,004 948 892 15,341 Year 3 - principal 8,566 8,623 8,680 8,738 8,797 8,855 8,914 8,974 9,033 9,094 9,154 9,215 106,643 Year 3 - interest 835 778 721 663 604 546 487 427 368 307 247 186 6,169

Loan 2 Borrowing JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALYear 1 - - - - - - - - - - - - - Outstanding balance - - - - - - - - - - - - Year 2 - - - - - - - - - - - - - Outstanding balance - - - - - - - - - - - - Year 3 - - - - - - - - - - - - - Outstanding balance - - - - - - - - - - - -


Line of CreditFirst Class Greetings LLC

Existing Balance -

Borrowing JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALYear 1 - - - - - - - - - - - - - Outstanding balance - - - - - - - - - - - - Year 2 - - - - - - - - - - - - - Outstanding balance - - - - - - - - - - - - Year 3 - - - - - - - - - - - - - Outstanding balance - - - - - - - - - - - -


Year 1 - total principal paid 76,269 Year 1 - total interest paid 17,741 Year 2 - total principal paid 97,471 Year 2 - total interest paid 15,341 Year 3 - total principal paid 106,643 Year 3 - total interest paid 6,169

Appendix

Amount of Loan 300,000 Annual Interest Rate 8.0%Term of Loan (in months) 36

Monthly OutstandingMonth Payment Principal Interest Balance

300,000.00 1 $9,400.91 7,400.91 2,000.00 292,599.09 2 9,400.91 7,450.25 1,950.66 285,148.84 3 9,400.91 7,499.92 1,900.99 277,648.92 4 9,400.91 7,549.92 1,850.99 270,099.01 5 9,400.91 7,600.25 1,800.66 262,498.76 6 9,400.91 7,650.92 1,749.99 254,847.84 7 9,400.91 7,701.92 1,698.99 247,145.92 8 9,400.91 7,753.27 1,647.64 239,392.65 9 9,400.91 7,804.96 1,595.95 231,587.69

10 9,400.91 7,856.99 1,543.92 223,730.70 11 9,400.91 7,909.37 1,491.54 215,821.32 12 9,400.91 7,962.10 1,438.81 207,859.22 13 9,400.91 8,015.18 1,385.73 199,844.04 14 9,400.91 8,068.62 1,332.29 191,775.42 15 9,400.91 8,122.41 1,278.50 183,653.02 16 9,400.91 8,176.56 1,224.35 175,476.46 17 9,400.91 8,231.07 1,169.84 167,245.40 18 9,400.91 8,285.94 1,114.97 158,959.46 19 9,400.91 8,341.18 1,059.73 150,618.28 20 9,400.91 8,396.79 1,004.12 142,221.49 21 9,400.91 8,452.77 948.14 133,768.72 22 9,400.91 8,509.12 891.79 125,259.60 23 9,400.91 8,565.85 835.06 116,693.76 24 9,400.91 8,622.95 777.96 108,070.81 25 9,400.91 8,680.44 720.47 99,390.37 26 9,400.91 8,738.31 662.60 90,652.06 27 9,400.91 8,796.56 604.35 81,855.50 28 9,400.91 8,855.21 545.70 73,000.29 29 9,400.91 8,914.24 486.67 64,086.05 30 9,400.91 8,973.67 427.24 55,112.38 31 9,400.91 9,033.49 367.42 46,078.89 32 9,400.91 9,093.72 307.19 36,985.17 33 9,400.91 9,154.34 246.57 27,830.83 34 9,400.91 9,215.37 185.54 18,615.46 35 9,400.91 9,276.81 124.10 9,338.65 36 9,400.91 9,338.65 62.26 (0.00)

Appendix

Greeting Card Business Plan

Documents

Transcript of Greeting Card Business Plan