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Desktop Publishing Company Business Plan


BUSINESS PLAN     POWER DESK TOP PUBLISHING, INC.

4900 Maryland PlazaSt. Louis, Missouri 63112

Power Desk Top Publishing aims to fulfill a unique niche in the local market of desk top publishing companies. By targeting selected businesses through direct phone calls, the owners plan to grow their business based on a reputation for topnotch creative and affordable editorial and graphic services.

  • EXECUTIVE SUMMARY
  • THE COMPANY—PRESENT SITUATION
  • OBJECTIVES
  • MANAGEMENT & PERSONNEL
  • PRODUCT DESCRIPTION
  • MARKET ANALYSIS—CUSTOMERS
  • COMPETITION
  • RISKS
  • MARKETING STRATEGY
  • ADVERTISING, PROMOTION PUBLIC RELATIONS
  • PRICING & PROFITABILITY
  • SUMMARY & USE OF FUNDING
  • FINANCIAL PROJECTIONS

EXECUTIVE SUMMARY

Power Desk Top Publishing, Inc. is a small corporation composed exclusively of a husband and wife team who are managers, sales executives, and hands-on operators.

The desk top publishing industry has come of age. Based on modern computer advances, both in hardware and software, desk top publishing has eclipsed the costly traditional methods of printing, enabling creative and well-trained individuals, such as Steve and Mary Lane, to offer exciting and dynamic printing service to business, churches, students, and individuals at affordable prices.

Mr. and Mrs. Lane bring a wealth of talent to this enterprise. Steve has earned Ph.Ds in both Advertising and Graphic Design. He has also logged two years' experience as an intern at a leading advertising agency in St. Louis. Mary holds a degree in English and has years of advertising experience in both production and management. Their creative talent is reflected in the exceptional appeal of their work product. Power Desk Top Publishing will not be merely a mechanical printing operation. The Lanes bring much more to the table. They can take an idea or a concept submitted by a client and produce a finished product that is eye catching and truly unique.

Creativity as compared to mere mechanical reproduction will indeed be a major part of their selling appeal.

Another hard hitting plus will be the fact that Power Desk Top Publishing will be able to compete at a most aggressive price level. For the first two years, Power DTP will be a true owner-operator business with no employees other than the owners.

Desk top publishing, as the name implies, lends itself to a very compact operation, and an inthe-home operation is contemplated for years one through four. Keeping overhead at a bare minimum, Steve and Mary will devote at least 50% of their time calling on potential customers. They will take the business to the customers by meeting them at the client's establishment, providing meaningful samples, and offering to produce prototype newsletters, brochures, price lists, mailers, etc. Operating with the slimmest of fixed overhead, the Lanes are able to offer up to 15% introductory discounts to gain market penetration.

Both Steve and Mary are gifted sales people and, as owner operators, can capture the confidence of the printing buyer. They also posses seemingly boundless energy and are dedicated to working long hours to assure the success of Power Desk Top Publishing. While devoting most of their days to customer calls and support activities, they will work into the evening with the hands-on production aspects of the business. Both are inveterate computer buffs and enjoy the creative challenge of producing new and original pieces.

Like many entrepreneurs, the Lanes have a driving ambition to see their firm grow and prosper, yet their approach is cautious and their expectations quite reasonable.

For the first two years, Steve and Mary will perform all the work, sales, and production. By year three, the business will add one full-time, or two part-time employees, drawing talent from the local universities. Graphic design and advertising majors will be sought for this young, dynamic company. The Lanes will continue on in the home through their fourth year, when a storefront operation will be added along with an expanded scope, including hands-on computer rental time available to the public. At this time an additional worker will be added.

Sales projections for the first year are a modest $70,000, providing net earnings of $8,100 after combined officers' salaries of $28,896. The Lanes have $5,000 of savings invested and will require a line of credit of $30,000, $15,000 of which is for equipment. Year one proforma reflects $24,000 of the line as hard costs; the remainder is budgeted for contingencies and operating reserve.

THE COMPANY— PRESENT SITUATION

Power Desk Top Publishing, Inc. is a Sub-chapter "S" corporation with all stock jointly owned by Steve and Mary Lane. The company, which is in the final planning stages, is targeting an April 15th opening. Power Desk Top Publishing's entry into the market will be timed to coincide with both a print advertising campaign in local university newspapers and an intensive business-to-business sales campaign in which both principals call upon business owners and managers, and distribute attractive fliers, which are samples of their work product.

The desk top publishing industry is rapidly gaining a significant foothold in what was once considered the exclusive domain of traditional printing companies. More and more users are turning to the economics offered by the small, independent, low overhead operators that offer a good product at economic prices. Power Desk Top Publishing offers much more. Highly skilled and dedicated, this team will combine both technical excellence, advertising, layout expertise, and personal service to move their new company to the forefront. Both Mr. and Mrs. Lane have extensive educational backgrounds that lend themselves to advertising and graphic arts. Additionally, because of low overhead and the absence of an outside payroll, Power Desk Top Publishing will compete quite effectively, offering a superior product at a price 10 to 20% less than larger, less efficient speed printers.

Power Desk Top Publishing, Inc. will be addressing a variety of markets. University students represent one market for term papers, theses, and doctoral dissertations, etc. Employment resumes and entrepreneurial business plans are another. Churches, for their bulletins, directories, and publications are a third category of business.

Cash resources presently stand at $5,000, and an equipment budget totaling some $15,000 has been established. Power Desk Top Publishing, Inc. will require $30,000 borrowed capital to successfully start up this company.

OBJECTIVES

Short Term

Power Desk Top Publishing, Inc. has set a goal of $70,000 in sales for the first twelve months of full-time operations. We expect this to increase by 25% during the second twelve-month period for total sales of $86,600 for year two. Evaluation of the market has given rise to these reasonable expectations.

With regard to the college market, there presently exists a need for low price first rate publishing services. Power Desk Top Publishing will be catering directly to this market to a much greater extent than other desk top publishers or speed printers. Mrs. Lane's expertise as an English major will be invaluable in composition and proofreading copy. Her role will be very "hands on" with her customers' projects, offering coaching and advice as needed. The relative youth of the Power DTP principals, and their recent academic background will be a decided plus in accessing and dealing with the student market.

Mr. Lane holds doctoral degrees in both graphic design and advertising. This background will prove to be a great asset as more and more companies avail themselves of Power Desk Top Publishing's services. Power DTP's offering to the market far exceeds the mere mechanical aspect of printed material. Steve's graphic arts expertise and advertising talent will come into play when soliciting orders from business customers. By being able to suggest outstanding layouts and striking designs, it is easy to see that Power Desk Top Publishing will be offering a level of support to their customers that is not always available through competitive sources.

Long Term

Steve and Mary Lane are ambitious and energetic young business people. While their initial expectations are relatively modest, they foresee, by the start of their fifth year, a successful operation that has moved from the in-the-home business to a storefront operation that will have significantly expanded, both in terms of volume and scope.

It is anticipated that, in addition to producing finished desk top publishing products and services, the Lanes will be offering to the public a variety of computer and desk top publishing equipment that may be rented by the hour to walk-in clientele. Eight Macintosh computers, as well as laser printers, color ink jet printers, and other support hardware and software, will be dedicated to this branch of the company. Experienced individuals can easily come in and rent equipment by the hour. Beginners may also avail themselves of this facility and will be helped by the courteous and skilled staff.

Moderately priced training classes in hardware and software operation will also be offered.

MANAGEMENT & PERSONNEL

Steve Lane, 25, recently earned his doctoral degree in Advertising at Washington University, after having earned a Ph.D. in Graphic Design. He will serve as President and Treasurer of Power Desk Top Publishing, Inc. and will function as Manager. During his years at Washington University, Steve spent two summers interning at Thompson-McGuire Advertising agency, where he sharpened his skills in layout and design and gained much practical knowledge of advertising production. With his formidable business education, having also achieved his M.B.A. at Washington University, Steve will handle all the day-to-day business management activities of Power Desk Top Publishing, Inc. In addition to this, he intends to devote at least 4 hours per day to making personal sales calls on prospective business customers.

Throughout his college years, Steve developed work habits that have always included long hours. The plan for Power Desk Top Publishing contemplates a completely owner-operated business, with both Steve and Mary doing most, if not all, of the production and hands-on computer work in the evening after devoting their days primarily to sales calls and customer service in the field.

Mary Lane, 31, graduated from Webster University with a B.A. in English in June of 1992. She will be Vice President and Secretary of Power Desk Top Publishing, Inc. and will share management and sales responsibility with her husband. Upon graduation, she held positions as copywriter in the advertising department for a large food processing company and later, as Assistant Advertising Manager for the same company. For the past seven years she has been a housewife, raising their daughter. The daughter is now in school full-time during the day, and Mrs. Lane is free to devote her daytime efforts to the promotion of the family business.

Mary will have primary responsibility for developing and managing their student market. She will be preparing and inserting display and classified ads in the student newspapers of the local colleges. She will be on campus to discuss with clientele the company's services and, in general, to attend to the needs of this very special market.

When not engaged in campus sales activities, Mrs. Lane will be calling on the general business community to promote sales in this area. She also will be responsible for composition, proofreading, graphic layout, and typesetting.

Both Mary and Steve will be active in all production facets of the business, with Steve's expertise more concentrated in graphic design and advertising, and Mary's directed to composition and proofing.

Other Personnel

Power Desk Top Publishing will commence business as completely owner-operated, with Steve and Mary Lane handling all phases of business activities. As the business progresses, it is expected that part-time help will be added to assist with some of the more routine activities. The job pool from which the Lanes intend to draw is the student job placement services of both St. Louis University and Washington University.

Both campuses are situated in reasonably close proximity to Power Desk Top Publishing, which will be operating from the Lanes' residence at 4900 Maryland Plaza. Because of the Lanes' close and recent involvement with student life and activities, it is well known to them that a ready source of capable and willing workers is available, in the wage scale of $6.25 to $6.75 per hour. While the wages are only minimum wage or slightly above, the work is deemed more desirable than fast food service and the scheduling quite flexible and very compatible with student needs.

The jobs require computer literacy along with good typing skills. Macintosh experience, particularly with PageMaker or Quark Express, will be a desirable attribute. No problems are anticipated in filling any future personnel requirements from the available student labor pool.

PRODUCT DESCRIPTION

The concept of desk top publishing has come into its own, due to the high cost of traditional printing. Before the advent of the desk top publisher, the printing buyer would often employ a graphic design company or an advertising agency to put together their literature, newsletter, or promotional piece. There were production costs incurred in the design and layout workups. Once completed, the design or advertising company would often deal directly with a printing company on behalf of the customer. The printing company would then utilize the service of a typesetting company, which would compose the type and layout in finished form ready to be run on the presses of the printer. It is easy to see that there were quite a few levels of profit involved in these operations, all at the expense of the printing buyer.

As personal computers and laser printers evolved, it became clear that compact and less expensive equipment could accomplish the same functions of the highly sophisticated and capital intensive traditional typesetting and printing operations. The advent of powerful "typesetting" and page layout software, available at affordable prices, gave the computer operator all the versatility of a traditional composing room at a fraction of the cost. Because of the relative simplicity of the system, and the fact that the various hardware could be conveniently positioned on a typical desk top, the term desk top publishing came into being. The time for desk top publishing has definitely arrived, now an industry in its own right, with sales expected to top $2 billion by 2003.

The work of Steve and Mary Lane is recognized for its highly appealing style and striking impact. Their work is not ordinary. Both possess a certain flair and panache for graphic artistry that is reflected in their work. Comparatively speaking, the efforts of "speed printers" are merely mechanical, taking in camera-ready copy and spitting out 500 or 1000 reproductions, which is not what Steve and Mary Lane are bringing to the marketplace. Expert composing skills, a knack for creative layout, and a complete command of their library of sophisticated and powerful software enable Power Desk Top Publishing to produce a dynamite product to their customers' complete satisfaction.

Some typical jobs might include:

Brochures Fliers
Business Plans Newsletters
Church Bulletins Restaurant Menus
College Dissertations Resumes
Direct Mail Pieces Term Papers

MARKET ANALYSIS— CUSTOMERS

The need for quick, economical printing has been well established. The need for creative printing, that is also quick and economical, remains an unfulfilled need in many regions of the metropolitan area. It is this market that Power Desk Top Publishing intends to cultivate.

Businesses make up the most fertile field in the spectrum of users of desk top publishing. The wide array of companies doing business in the St. Louis area present a most diverse market that is not particularly dependent on any specific industry. Both Steve and Mary intend to cultivate, through personal phone calls, literally hundreds of business contacts each week. Almost every company uses some sort of printed promotional material. Power Desk Top Publishing intends to demonstrate to their clients just how they can save money and have a more appealing presence as a result of the skill and creativity of the Power team.

Preselling calls have revealed that users are overpaying for printing products simply because they are using the outdated mode of traditional typesetting and printing presses. Desk top publishing could fulfill their needs with more style and greater economy. This will be the prime market for Power Desk Top Publishing, Inc.

Another important category of business is the restaurant menu. Literally, hundreds of restaurants feature stylized menus, which change from time to time. Using a system of templates that Mr. Lane has developed, Power Desk Top Publishing will attract a significant customer base in the food industry by providing fast, responsive service with creative, customized menu renditions in a wide variety of styles and formats, each tailored to the needs of a particular client's restaurant.

Newsletters represent a market very worthy of development. Power Desk Top Publishing is in the unique position to provide a full range of services in which copywriting will be offered as an important option. Mary Lane's training and background will be most helpful in creating dynamic and interesting newsletters for clients who have no in-house writer. This will set Power Desk Top Publishing apart from typical printers that offer only mechanical services. Creative service and customized support at attractive prices will be the hallmark of Power Desk Top Publishing.

Churches are another target market for Power Desk Top Publishing. While the in-house duplicators of most church offices will suffice for routine notices, special events and fund raisers are best heralded by attractive eye-catching announcements. This is where the professional attention of Steve and Mary Lane proves invaluable. The training and expertise developed over long years of advanced study honed in the competitive advertising arena, assures their clientele of the very best in desk top publishing.

The student market is another great source of business for Power Desk Top Publishing. Term papers, dissertations, and doctoral theses all demand more attention when presented with style and a professional layout. A special student rate will be available as an added inducement. Both Steve and Mary, because of their own recent academic history, are superbly qualified to address this specialized market. Steve's two Ph.Ds make him eminently qualified to work with doctoral candidates in the preparation and publishing of their theses. Mary, being an English major, is also available to coach and proofread. They are a sales team with whom the student client can identify and enjoy working. It is expected that this type of rapport will engender rapid word of mouth referral in the campus community, all to the betterment of Power Desk Top Publishing, Inc.

Resumes represent a segment of the market that must not be overlooked. Desk top publishers have found this a fertile field, likely to increase in demand when overall economic conditions decline, thereby affording a hedge against recession in the publishing field. Like several of the markets outlined above, this is a specialty market, yet one that can be addressed by strategic placement of inexpensive classified ads and an additional Yellow Page listing.

Business plans will be another important service for Power Desk Top Publishing. The entrepreneurial market continues to expand, and with the competition for borrowed and investor funds, it is increasingly essential for business people to approach the financial community with a solid prospectus of their planned enterprise. PlanMaker, innovative new software for the Macintosh computer, will be an important tool in Power Desk Top Publishing's library. Using PlanMaker, Steve and Mary will work closely in guiding new business people step-by-step in the creation of a dynamic business plan.

COMPETITION

The prime mover in the desk top publishing field in the St. Louis market is currently Speed- Craft Printers, who have three locations. Speed-Craft, which is a franchised operation, has done a good job in raising the consciousness of the printing buyer to the economies of desk top publishing. They maintain a strong advertising presence in the St. Louis Business Journal and the Yellow Pages. They are walk-in operations and will not pick up copy but will deliver finished product via courier. They do not have sales people calling on business and industry on a regular basis. Power Desk Top Publishing, Inc. will not try to wage a dollar for dollar advertising campaign in direct competition with Speed-Craft. Steve and Mary do not feel that would be cost effective at this time. Much more on target will be their daily personal sales calls to owners and managers of businesses of all descriptions. The face-to-face conversations and the personal dissemination of samples of their work will have a greater impact than media advertising.

Other desk top publishing businesses are primarily one-person operations that have carved out their niche in certain areas. These operations cover the complete spectrum of proficiency. Some have only perfunctory skills and limited equipment resources, while others offer excellent products and services.

In addition to others in desk top publishing, Power Desk Top Publishing will be competing with traditional printers and advertising agencies.

Because of their advanced training and experience, as well as the most modern of equipment and software, Power Desk Top Publishing will quickly establish themselves as a major contender in the local desk top publishing industry.

Creativity, speed, and price are the three major factors that all competing companies must successfully address. Drawing from the ample skills of the principals, Power Desk Top Publishing will be known for its exceptional creative design. No one can deliver faster than Steve and Mary with modern equipment, a work-at-home facility, and dedication to spend long hours in the building of their business. Power DTP also will be very competitive with prices. With virtually no overhead, meeting and beating prices will present no problem. Blind surveys of competing firms have indicated that Power Desk Top Publishing can discount their product as much as 20% off prevailing prices and still turn a reasonable profit. No such price slashing is contemplated, however, Power Desk Top Publishing does possess the capability to compete should the market turn aggressive.

RISKS

Risks that are inherent to all businesses have been contemplated by Steve and Mary Lane in the formation of the plan for Power Desk Top Publishing, Inc. Of course, traditional casualty risks will be covered by business owners insurance, ample to protect all assets and with a $250,000 public and product liability umbrella. There are no potential hazards regarding the availability of raw materials, which are primarily paper stocks and in good supply nationwide. Stepped up recycling efforts have served to stabilize paper costs, which in turn has held pricing fairly steady in the printing field.

If paper stock pricing does trend upward, the effect will be industry-wide, with Power Desk Top Publishing being able to pass the costs along by way of retail price adjustments to the extent that industry follows suit, which has traditionally been the case in the printing field. In the event that aggressive competitive pricing develops, Power Desk Top Publishing is ideally situated to successfully compete in a price-dominated market.

Other potential variations in the economy have been carefully evaluated by management. Two of our featured specialities, resumes and business plans, are known to increase in demand during a sluggish economy, as more individuals contemplate career changes and business opportunities.

Diversity of customer base is also another strength of Power Desk Top Publishing. Because Power DTP will be selling to a very wide range of companies, churches, and individuals, encompassing many different fields, they are less dependent on any particular industry and therefore have an added dimension of strength based on diversification of market.

During economic downturns, prudent businesses not only watch their costs more intently, but initiate sales-generating promotions through direct mail and other printed advertisements. Power Desk Top Publishing stands ready to fill that need and at attractive and even discounted prices if warranted.

The Lanes feel that flexibility is their strength and, should economic conditions require a change in price or product concept, they will be quick to react with an updated marketing plan.

MARKETING STRATEGY

Desk top publishing is now widely appreciated as a creative and innovative approach to the field of graphic arts. Traditional methods, involving hard typesetting and massive printing presses, became more and more expensive and, consequently, less and less accessible to cost conscious users. In the true American tradition of "find a need and fill it," the advent of sophisticated computers, like the Macintosh, coupled with powerful software, provided the tools for skilled operators to produce impressive printing for their clients at affordable prices.

It is in this arena that Steve and Mary Lane will launch Power Desk Top Publishing, Inc. The markets have been defined, with General Business being a prime target. Both Steve and Mary will each devote at least four hours per day calling business owners and managers. All types of companies will be canvassed, both large and small. Steve and Mary will work independently of each other, reaching a targeted 20 prospects each per day. Time permitting, additional calls may be made during the early phases of start-up. Each sales call will be accompanied by the distribution of samples, depicting design and printing capabilities of Power Desk Top Publishing. Creativity will be stressed, and buyers will be offered a 15% first-time discount as an introductory offer. Steve and Mary will pick up copy and deliver finished products as they make their sales rounds each day. Personal service and attention will be among their main selling points.

Churches and restaurants also represent specialized markets with particular needs, and these establishments will be targeted for special attention by Steve and Mary. As with businesses, the creative talents of Power Desk Top Publishing will be emphasized as the needs of the clients are discussed. They will be selling a look and feel as well as a printed page.

The student market will be addressed through advertisements placed in campus newspapers of Washington University, St. Louis University, Webster University, Fontbonne College, and Southern Illinois University at Edwardsville. Doctoral theses, dissertations, term papers, and other publications will be given expert attention. A student discount and a referral discount program will be utilized. Citing the academic credentials of the principals, personal consultations will be encouraged.

Resumes and business plans represent another market that will be addressed. Strategically placed classified advertisements in the St. Louis Post Dispatch and the St. Louis Business Journal will be used to attract clients.

Power Desk Top Publishing, Inc. will offer a full range of services. Not merely printing, but graphic design, custom layout, creative writing, guidance, and coaching in self-preparation of copy will be offered. Power DTP will provide the complete spectrum of professional services not found in any other desk top publishing companies.

ADVERTISING, PROMOTION & PUBLIC RELATIONS

Power Desk Top Publishing has designated an advertising budget of $3,000 for year one. A commitment of $1,000 is scheduled for months one and two and is directed at the campus newspapers of St. Louis University, Washington University, Webster University, Fontbonne College, and Southern Illinois University at Edwardsville. Ads will be directed at the student market and will be selling the services of Power Desk Top Publishing in the realm of publishing term papers, theses, and doctoral dissertations, as well as resumes and other published material associated with academia. Personal consultations will be encouraged.

Press releases also will be distributed to these newspapers, with follow-up calls to encourage editorial exposure. As alumni, respectively of Washington University and Webster University, Steve and Mary will give particular attention to those campuses. Press releases announcing the entry of Power Desk Top Publishing also will be distributed to the appropriate editors of the St. Louis Post Dispatch, the St. Louis Business Journal, the Journal Newspaper Group, and St. Louis Computer News. Photographs of the principals will be included with brief resumes and other relevant data.

Power Desk Top Publishing will attempt no media blitz in attracting attention. Personal sales calls, emphasizing face-to-face contact with buyers, remains the promotional medium of choice for Power DTP. All sales calls will include distribution of samples that are relevant to the prospect's business and will include a first-time 15% introductory discount. Both Steve and Mary possess a natural disposition and manner that is well suited to represent their company to the public.

Strategic use of classified advertising will also play a role in sales development. Targeting resumes and business plans through the Career and Business Opportunities sections of the classified ads will be an inexpensive way to attract customers.

Power Desk Top Publishing will participate in the annual Small Business Expo, which is a regional trade show directed at entrepreneurs and other business enterprises. This well- attended convention attracts some 20,000 visitors to the Convention Center and will provide an ideal forum for meeting new prospects and disseminating sample work to a wide spectrum of business and prospective customers of all descriptions. Booth rental and expenses have been budgeted at $1,200.

Steve and Mary are current participants, or are joining, several worthwhile business and community organizations. Paramount among these is the Association of Desk Top Publishers, a national group dedicated to excellence in desk top publishing. In addition to an annual convention, the organization also promotes local chapters which meet regularly to further the professional standards of desk top publishing. The Lanes are active members in the St. Louis chapter.

Power Desk Top Publishing also will be joining the St. Louis Regional Commerce and Growth Association as a small business Associate Member. Steve is an active member of the Central West End Lions Club and attends the monthly luncheons. Membership is composed primarily of small business owners and managers and this affiliation is expected to be helpful in obtaining additional business for Power Desk Top Publishing.

Mary Lane has formally proposed writing a regular column in the St. Louis Small Business Monthly, which is a tabloid-sized newspaper circulated to about 3,000 small businesses in the St. Louis area. The suggested title column is "Desk Top Publishing Update" and will feature information of a topical nature about advances in desk top publishing and other matters of general interest to the printing buyer and advertising manager. Mary has submitted two sample columns and the proposal is now under active consideration. She will receive no direct remuneration but will be credited as co-owner of Power Desk Top Publishing, Inc., which will have significant advertising value.

PRICING & PROFITABILITY

Competitive pricing will be an important marketing tool of Power Desk Top Publishing, Inc. In doing their market research, all existing desk top publishers in the St. Louis area were surveyed by the Lanes to determine their price structure.

Because of the low overhead operation contemplated by Power Desk Top Publishing, introductory and student discounts can be offered to gain access to the market. Once the quality and service of Power Desk Top Publishing becomes known, Power DTP will be able to compete effectively at prevailing market prices.

Because of the efficiencies inherent to desk top publishing, a good margin of gross profit is normal for the industry. This is particularly true for Power Desk Top Publishing, which, at its inception, will be completely owner-operated and situated in an in-home location.

Paper costs make up the primary hard cost of any given job and normally runs 16% to 18%.

Minimal overhead for insurance, utilities, etc. is presently budgeted at 10-11%.

Sale costs are estimated at 10%.

Advertising and promotion, exclusive of discounts, amount to about 6%.

Equipment depreciation and debt amortization figures at 15%.

This allows 42% gross profit at prevailing retail prices, before officers' salaries. Net after salaries is 11%.

BREAK-EVEN EVALUATION

BREAK-EVEN EVALUATIONComputed on Gross Sales
Percent Cost of Goods Sold 17.0%
Percent Gross Profit 83.0%
Monthly Overhead $3,775
Monthly Gross Sales to reach break-even $4,548

*[For detailed derivation of these calculations, refer to Twelve Month Proforma, financial Projections.]

SUMMARY & USE OF FUNDING

A budget has been prepared by Power Desk Top Publishing, Inc. reflecting necessary capital expenditures and projected start-up costs.

Equipment and Fixtures $15,000
Advertising and Promotion 3,000
Deposits and initial start-up costs 5,000
Contingency 2,000
Operating Reserve $10,000
Total $35,000

[Equipment and Fixtures are listed in the Equipment Schedule following. It has been determined that Steve and Mary Lane will draw a weekly salary of $250 each. The company will also provide health insurance for both officers.

The principals have developed a sound approach to the market, maximizing strengths and minimizing risks.]

Total capitalization of $35,000 will be derived as follows:

Principal's Equity $5,000
Borrowed Capital 30,000
Total $35,000

[The principal equity comes from savings. It is projected that borrowed capital would be drawn down over a period of the first twelve months of business, commencing April 1, 2000. Approximately 50% will be required initially for equipment acquisition.

Start of operations is scheduled for April 15, 2000.]

EQUIPMENT SCHEDULE

Brand Model Capacity/Rating New/Used Cost
*[The Lanes already own a large library of graphic arts and page design software.]
2 Computers Macintosh SE New $2,200
Hard Drive Xographics A-16XYG 300 MG New 2,000
Removable Hard Drive Emmon EHM-DriA1 44 MG New 600
2 Laser Writer Printers Apple Ilnt New 5,000
Scanner Microtek MSD 300Z New 1,850
Jogger Martin-Yale 100 New 150
Paper Cutter Martin-Yale 6100L 1 HP Used 1,200
Software* Various New 1,000
Desks, chairs, file cabinets Various New/Used 1,000
Total Equipment Costs $15,000

TWELVE-MONTH PROFORMA

MonthOne MonthTwo MonthThree MonthFour MonthFive MonthSix MonthSeven MonthEight MonthNine MonthTen
Sales
Sale of Printing 4,400 4,642 4,897 5,167 5,451 5,751 5,952 6,160 6,376 6,599
Other Sales 0 0 0 0 0 0 0 0 0 0
Total Sales 4,400 4,642 4,897 5,167 5,451 5,751 5,952 6,160 6,376 6,599
Cost of Sales 748 789 833 878 927 978 1,012 1,047 1,084 1,122
Gross Profit 3,652 3,853 4,065 4,288 4,524 4,773 4,940 5,113 5,292 5,477
Operating Expenses
Sales & Marketing
Advertising 250 250 250 250 250 250 250 250 250 250
Commissions 0 0 0 0 0 0 0 0 0 0
Entertainment 0 0 0 0 0 0 0 0 0 0
Literature 100 100 100 100 100 100 100 100 100 100
Sales Promotion 175 175 175 175 175 175 175 175 175 175
Trade Shows 100 100 100 100 100 100 100 100 100 100
Travel 100 100 100 100 100 100 100 100 100 100
Salaries (Sales Personnel) 0 0 0 0 0 0 0 0 0 0
PR Taxes & Costs, Sales 0 0 0 0 0 0 0 0 0 0
Total Selling Cost 725 725 725 725 725 725 725 725 725 725
MonthEleven MonthTwelve YearOne Percent
6,830 7,069 69,293 100%
0 0 0 0%
6,830 7,069 69,293
1,161 1,202 11,780 17%
5,669 5,867 57,513 83%
250 250 3,000
0 0 0
0 0 0
100 100 1,200
175 175 2,100
100 100 1,200
100 100 1,200
0 0 0
0 0 0
725 725 8,700 13%
MonthOne MonthTwo MonthThree MonthFour MonthFive MonthSix MonthSeven MonthEight MonthNine MonthTen
General &Administrative
Accounting 50 50 50 50 50 50 50 50 50 50
Amorization 0 0 0 0 0 0 0 0 0 0
Bad Debts 88 93 98 103 109 115 119 123 128 132
Depreciation 179 179 179 179 179 179 179 179 179 179
Insurance 100 100 100 100 100 100 100 100 100 100
Legal Fees 25 25 25 25 25 25 25 25 25 25
Licenses & Permits 25 25 25 25 25 25 25 25 25 25
Salaries & Wages 0 0 0 0 0 0 0 0 0 0
PR Taxes & PR Costs 0 0 0 0 0 0 0 0 0 0
Taxes (non-income taxes) 0 0 0 0 0 0 0 0 0 0
Office Expense 100 110 121 133 146 161 177 195 214 236
Rent 0 0 0 0 0 0 0 0 0 0
Telephone 75 76 77 77 78 79 80 80 81 82
Utilities 0 0 0 0 0 0 0 0 0 0
Officers' Salary 2,150 2,150 2,150 2,150 2,150 2,150 2,150 2,150 2,150 2,150
PR Taxes & Costs Officers 258 258 258 258 258 258 258 258 258 258
Total General &Administrative Cost 3,050 3,065 3,082 3,100 3,120 3,141 3,162 3,185 3,210 3,236
Net Income Before Taxesand Interest -123 63 258 463 679 907 1,053 1,203 1,357 1,510
Interest 250 247 244 240 237 234 230 227 224 220
Net Income -372 -184 14 223 442 673 823 976 1,134 1,296
MonthEleven MonthTwelve YearOne Percent
50 50 600
0 0 0
137 141 1,386
179 179 2,143
100 100 1,200
25 25 300
25 25 300
0 0 0
0 0 0
0 0 0
259 285 2,138
0 0 0
83 84 951
0 0 0
2,150 2,150 25,800
258 258 3,096
3,265 3,297 37,914 55%
1,678 1,845 10,899 15.7%
217 213 2,781 4.0%
1,462 1,632 8,118 11.7%

THREE-YEAR PROJECTED INCOME STATEMENT

Sales Year 1 Year 2 Year 3
Sale of Printing 69,293 86,617 99,609
Other Sales 0 0 0
Total Sales 69,293 86,617 99,609
Cost-of-Goods-Sold 11,780 17% 14,725 17% 16,934 17%
Gross Profit 57,513 71,892 82,676
Selling Expense 8,700 13% 9,179 11% 9,683 10%
General & Administrative 37,914 55% 40,000 46% 42,200 42%
Net Income Before Taxesand Interest 10,899 16% 27,714 26% 30,793 31%
Interest 2,781 4% 2,271 2.6% 1,707 1.7%
Income taxes 2,029 5,111 7,271
New Income or Loss 6,088 9% 15,332 18% 21,814 22%

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CASH FLOW PROJECTION

Month Month Month Month Month Month Month Month Month Month
One Two Three Four Five Six Seven Eight Nine Ten
Beginning Cash Balance 5,000 2,055 1,528 3,190 3,049 3,117 8,403 8,889 9,521 10,304
Cash Receipts from Sales 2,200 4,433 4,677 4,934 5,205 5,492 5,736 5,939 6,145 6,360
Total Cash Available 7,200 6,488 6,205 8,124 8,255 8,609 14,140 14,826 15,666 16,663
Cash Disbursements:
Accounts Payable, merchandise 0 748 789 833 878 927 978 1,012 1,047 1,084
Selling Costs 725 725 725 725 725 725 725 725 725 725
General & Administrative 375 386 398 410 424 440 457 475 496 518
Salaries 2,408 2,408 2,408 2,408 2,408 2,408 2,408 2,408 2,408 2,408
Total Cash Disbursements 3,508 4,267 4,320 4,376 4,436 4,500 4,567 4,620 4,676 4,735
Net Cash from Operations 3,692 2,221 1,885 3,748 3,819 4,109 9,572 10,206 10,990 11,929
Proceeds of Loans
National Bnk, Fixtures & Equip 15,000 0 0 0 0 0 0 0 0 0
National Bnk, Operating Line 0 2,000 2,000 0 0 5,000 0 0 0 0
Capital Infusion
Additonal Paid in Capital 0 0 0 0 0 0 0 0 0 0
Other Disbursements
Debt Service 638 638 638 638 638 638 638 638 638 638
Capital Disbursements
Furniture & Fixtures 0 0 0 0 0 0 0 0 0 0
Equipment 15,000 0 0 0 0 0 0 0 0 0
Inventory Purchases 1,000 55 58 61 65 68 46 47 49 51
Prepaid Expense/Deposits 0 2,000 0 0 0 0 0 0 0 0
Net Cash Balance 2,055 1,528 3,190 3,049 3,117 8,403 8,889 9,521 10,304 11,241
MonthEleven MonthTwelve
11,241 12,336
6,582 6,813
17,823 19,149
1,122 1,161
725 725
542 569
2,408 2,408
4,797 4,863
13,026 14,286
0 0
0 0
0 0
638 638
0 0
0 0
52 54
0 0
12,336 13,594

BALANCE SHEET, CURRENT & PROJECTED

Assets Current Year 1 Year 2 Year 3
Current Assets
Cash and Equivalents 4,000 15,594 30,424 49,901
Receivables from Sales 0 3,393 4,241 4,878
Other Receivables 0 0 0 0
Inventory 1,000 1,607 1,640 1,887
Prepaid Expense/Deposits 0 0 0 0
Total Current Assets 5,000 20,594 36,306 56,665
Fixed Assets:
Equipment & Machinery 15,000 15,000 15,000 15,000
Less accumulated depreciation 0 2,143 4,286 6,429
Net Fixed Assets 15,000 12,857 10,714 8,571
TOTAL ASSETS 20,000 33,451 47,021 65,237
LIABILITIES
Current Liabilities
Trade Payables 0 1,202 1,227 1,411
Income Tax Payable 0 2,029 5,111 7,271
Short Term Notes 0 0 0 0
Total Current Liabilities 0 3,231 6,338 8,682
Long Term Liabilities
Notes Payable, Bank 15,000 19,131 14,263 8,320
Notes Payable, Others 0 0 0 0
Other Liabilities 0 0 0 0
Total Long Term Liabilities 15,000 19,131 14,263 8,320
TOTAL LIABILITIES 15,000 22,362 20,600 17,002
Stockholder's Equity
Capital Stock 5,000 5,000 5,000 5,000
Retained Earnings 0 6,088 21,420 43,234
Total Stockholder's Equity 5,000 11,088 26,420 48,234
TOTAL LIABILITIES &STOCKHOLDERS EQUITY 20,000 33,451 47,021 653,237
Current Ratio 6.4 5.7 6.5
Quick Ratio 5.9 5.5 6.3
Debt to Equity Ratio 2.0 0.8 0.4
Return on Investment 54.9% 58.0% 45.2%

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