Auto Spa Business PlanYOUR CAR DESRVES MORE

BUSINESS PLAN

Dr. Taniya H. AnwarJaveria IqbalShahreyar BaberSyed Abul Hassan

Table of Contents1.Executive Summary11.1Objectives21.2Mission21.3Keys to Success22.Company Summary32.1Start-up Summary32.2Company Ownership53.Product & Services Offered63.1Services Offered63.2Operational Plan73.2.1Service Operation73.2.2Back Stage73.2.3Front Stage84.INDUSTRY ANALYSIS94.1political Environment94.2Economic Environment94.3Socio-cultural environment94.4technological environment105.Marketing ANAlysis115.1Market Segmentation115.2Target Market Segment Strategy125.3Service Business Analysis125.4Competition and Buying Patterns126.Web Plan146.1Website Marketing Strategy146.2Development Requirements147.Marketing Plan & Strategy157.1SWOT Analysis157.2Strengths157.3Weaknesses167.4Opportunities167.5Threats167.6Competitive Edge167.7Marketing Strategy178.Sales Strategy198.1Sales Forecast199.Management219.1Personnel Plan2110.Financial Plan2310.1Start-up Funding2310.2Important Assumptions2310.3Projected Profit and Loss24Auto Spa Business Plan

Executive SummaryAuto Spa is a dynamic start-up company requiring PKR 5,000,000 to develop the first ever mobile car washing and detailing company in Pakistan. Exceptional quality services that will consistently exceed expectations will establish AutoSpa as the premiere car wash service in Lahore. The founding four partners, veterans ofa number of startups will pledge PKR 500,000 each. The additional PKR 3,000.000 will be from investing partners seeking a solid yet aggressive investment opportunity. With over twenty years experience between them, thefounding partners bring a wealth of experience to the company in the areas of marketing, finance, human resource and operations. They will each handle the day to day details according to their expertise. Extensive research indicates Lahore is ready for such a service. As our plans call for a realistically achievable 500 customers per month (and only 200 customers to breakeven) the business is viable, achieving sustainability within six months. The mild consistent weather will allow us to operate unhindered for twelve months per annum. AutoSpas creative low cost direct marketing campaign and promotions will attract the discriminating car owners in the target locations in Lahore: DHA, Gulburg, and Model Town. Direct competition is limited to unskilled household labor, outdated "tunnel" or friction car washes, and a few scattered washing systems atpetrol pumps. AutoSpa will boast the latest technology in car washing - along with the highest quality chemical(cleaning solvents). Auto Spa will be fully operation within thirty daysof securing financing. We are offering 10% share of Auto Spa for a PKR 3,000,000 investment, preferably from two investors.Investors will be paid a 20% dividend from net profit after the first year, per annumInvestors may sell their investment to any other investor, pending permission from Auto SpaAuto Spa will turn a operating profit after four months. After seven months the business will have recovered initial operating losses. The estimated annual operating profit before tax is:Year 1Year 2Year 3

1,409,250 6,524,240 10,807,300

All partners and investors will be paid via dividend of the net earning per annum after the first year: Partners: 50%; Investors: 20%

Objectives To be the premier car detailing brand in Pakistan within 12 months. Increase from a two units tofour units within two years Customers target 500 REPEAT customers per month within 12 months Gross margin greater than 70% once in steady stateMissionAuto Spa is dedicated to maintaining the loyalty of our customers by delivering unrivaled world-class personalized mobile car detailing services in Pakistan.Keys to SuccessDeveloping and maintaining a strong brandA stellar reputation in the community.Quality serviceCustomer loyaltyFlexible service hoursSkilled work forceCompany SummaryAuto Spa is a dynamic start-up company that will provide exceptional car detailing services at our client's location. Our services, never before offered services in Lahore, will exceedour clients expectations, making a true market maker in the car detailing industry. Auto Spawill provide: exterior detailing, interior cleaning, and head light restoration.Auto Spahas no true competitors able to compete with the quality and customer service. Auto Spa will begin with two mobile units, serving the Defense Housing Authority,Gulburg and Model Town area. Projected customer growth will require Auto Spa to have four service units within two years serving Lahore.Auto Spa has a very achievable target of 500 customers per month.Start-up SummaryTotal projected start-up expenses are5.0 million PKR. Each operating partner will contribute PKR 500,000 for a total of PKR 2,000,000 for a 22.5% share Operating partners are paid a 50% dividend of net profit.Each investing partner will contribute PKR 1,500,000 for a total of PKR 3,000.000 for a 5% ownership share each. Investing partners are paid a 20% dividend of net profit per annum

Table: Start-upStart-up

Requirements

Start-up Expenses

Legal50,000

Accountant50,000

Two Mobile Office50,000

2 Water Reclaimation System500,000

Initial Stock of Chemicals & Solvents100,000

Misc Tools30,000

Office Furniture50,000

Office Refurbishment50,000

Office AC50,000

Signage20,000

Office Equipment50,000

Marketing & Adverstiing250,000

Technology Development250,000

* Website

* In House Tools

Uniforms100,000

Total Start-up Expenses1,600,000

Start-up Assets

Cash Required1,000,000

Start-up Inventory

Other Current Assets

Long-term Assets2,400,000

Total Assets3,400,000

Total Requirements5,000,000

Company OwnershipAuto Spa is a partnership compromising of four friends acting as the operating partners and two investment partners.

OPERATING PARTNERS Partner 1 with 22.5% ownership Partner 1 with 22.5% ownership Partner 1 with 22.5% ownership Partner 1 with 22.5% ownership

INVESTMENT PARTNERS Investment Partner 1 with 5% ownership Investment Partner 2 with 5% ownership

Product & Services OfferedServices OfferedAuto Spa firmly believes we are not just washing cars - but providing a very unique service to individual who value the appearances and the overall maintenance of their car. Auto Spa will establish them as the premier car detailing company in Lahore. We will offer the following services:Exterior Services: Complete exterior detailing including high pressure washing Claying the paint Removal of all bugs Paint correction (scratch removal) Cleaning and polishing the finish; all exterior rubber trim and tires will be dressed to like new condition Wheel brush washesInterior Services: Cleaning the interior of the vehicle of all loose material Spot treating of carpets, seats miscellaneous upholstery Shampooing and deep cleaning with aheated extractor. Engine Cleaning: Remove grease and grim from the engine surface A special non-silicone dressing will be applied to ensure a bright clean surface

Future add-on services may include:Windshield repairPaint touch-up Paintless dent repairBlack trim restorationOperational PlanService Operation Clients are able to make reservations for service via the website, mobile application and via a UA number for a specific location and time. Confirmation is sent via SMS and email. Daily the team has a work order for the day. The route is created and required equipment packed. At the time of service, mobile team of four workers arrives at the location. The order is confirmed. Additional services orders will be solicited. Service is rendered at the site with the required equipment and materials The area of service is cleared of all excess water and waste. Client will confirm the work is completed. A receipt is printed on the spot and duplicated is sent via mobile wifi to the head office to enter into our order system the work is complete. Feedback is solicited. Team moves on to the next assignment.In the event of cancelation from either client of Auto Spa, notification is done via phone and confirmed with SMS.Back StageStaff: It is important to recruit skilled trainable staff. Every effort will be made to recruit and maintain staff that can be trained. Monthly reviews will allow us to keep a check on the quality of the staff Selection and Relations with Suppliers: We will select an maintain strong relationships with suppliers of the necessary materials needed. In the event we are unable to source locally, we will go overseas to find the right suppliers. Quality of material is very important to the brand.Relation with Government: Auto Spa will join the Lahore Chamber of Commerce. This will allow us access to news and information affecting the business community.Development of marketing materials: Auto Spa will rely on low cost direct marketing approach. The development of the materials will be outsourced. 10% of gross revenue has been allocated for this development. Auto Spa will also rely heavily on social networking (Facebook, Twitter) to develop a web presence and build a network of customers who in turn promote for us.Employee training: Training is fundamental. We will train all staff not just in cleaning techniques but also in managing and dealing with customers. Training is reinforced monthly.

Front StageOperating hours: The service hours are 8:00 AM to 8:00 PM.Business Location: We will maintain a service office in Gulburg. Service is rendered locally at the clients location.Facilitates & EquipmentShazore Truck: The truck has been modified to be carry the required supplies and equipment. Proper signageWater Tanks in case local water is not availableEnvironmentally friendly cleaning products would need to be used to minimalize harmful effects on the planet. Compressor and high and low power water pressure washer systemConsumable products including polishes, cleaners, compounds, brushes and cleaning cloths both microfiber and non microfiber.Vapor steamerCleaning and deodorizing equipmentHeated extractorWater reclamation system: Inflatable pool with a water pump and storage bins Future valued added value services: Paint chip repair, headlight restoration, plastic trim restoration, glass repair, vinyl and leather repair, carpet dying, odor removal, window tintingINDUSTRY ANALYSISChanges in the wider macro-environment may not be as close to the marketing firms day-to-day operations, but they are just as important. The main factors making up these wider macro-environmental forces fall into four groups.Political factorsEconomic factorsSocial and cultural factorsTechnological advances political EnvironmentDomestic political considerations are a prime concerns when launching any new business. Political instability and economic conditions go hand in hand. At the macro level politics policy often drive economic change. Political policy may also direct effect individual business depending on the nature of the legislative change. Changes in government may introduce new policy that may affect the overall business (e.g. water conservation legislation, tax code changes).Auto Spa is relatively insulated from political change, as there is nothing in our business model that is dependent on the political condition or law.Economic EnvironmentPakistan has a very volatile economic environment. Between security/terrorism concerns, instable government, corruption, the economy is experiences wide swings. The current economy has remained difficult over the past few years.The car wash businesses (considered a luxury) typically operate with a strong state of economic stability. Auto spa will target a discriminating consumer immune to economic shock; the target is only 500 washes per month. The fixed operating costs are relatively low. There is very little hard inventory. Therefore Auto Spa will be able to remain profitable and cash flow positive at all times despite the state of the economy.It is vital to monitor economic condition of the country and adjust the operational model accordingly. Unemployment rate and inflation rate are two broad indicators of the pulse of the economy. Socio-cultural environmentThis is perhaps the most difficult element of the macro-environment to evaluate. Consumers are constantly evolving - tastes, purchasing behavior and changing priorities. The type of goods and services demanded by consumers is a function of their social conditioning and their attitudes and beliefs. Social change is preceded by changes over time in a societys cultural values. In Pakistan, there is a huge demand for luxury branded products. Increasingly customers are asking for time saving convenience. According to our initial survey, we have seen a great demand of a service like mobile car wash. Cars are a very important status symbol. Consumers showing off their status will of course get more value from a beautiful car than one that looks like every other car. People are willing to pay a premium for the brand recognition and time savings. With the trend towards increasing status display, Auto Spa is positioned perfectly.technological environmentTechnology is a major macro-environmental variable which has influenced the development of many of the products. Auto Spa will use the latest machinery in the washing industry to insure consumers are receiving the best available service and result. We also use web based technology for marketing, booking, tracking order status, and customer feedback.Marketing ANAlysis Lahore is the cultural hub of Pakistan with a population of over 8,000,000. Historically the economy was the center of the Punjab province. Increasingly businesses are relocating to Lahore due to the relative safety the area provides. Lahore offers a relatively stable economy. In recent years there also has been in a migration from the other provinces - both the working labor class, but also the families of business communities and the upward mobile middle class professional workers.Within in this vibrant city, AutoSpa willbe focusing on the affluent areas of Lahore, namely: DHA, Gulburg and Model Town.Our target is just 500 monthly customers,preferably repeat customers.We have a three tier product offering:Basic Services (Bronze):Exterior power wash and interior pressure blower/vacuum. Hand drying

Plus Services (Silver):Basic Services plus hand wax

Premium (Gold):Silver Service plus complete detailing

Market SegmentationDetailingis a luxury service.We are limited number of repeat(at leastonce amonth) customers, and of course welcome random walk-in.This service isideally targeting three general kinds of customers: car lovers, individuals who are concerned about appearances and organizations. Ideal targets will include:Luxury car ownersBusiness ownersHigh end professionals (e.g. doctors, dentists, actuaries, corporate executive)Rent acar services: These business will always have car that need to be washed and patched up before the next customer comes in. No one wants to rent a dirty car.Car dealerships: No one wants to BUY a dirty, smelly car. Smart dealers will be sure to wash and their cars regularly.

Target Market Segment StrategyRepeat customers are a key to the success of Auto Spa. Auto spa will target the following groups who are most likely to come back again:Luxury car owners: Luxury car owners will value their expense purchase. They are very likely to spend money to not only "clean" their car - but also protect the car from environmental damage (sun, rain) with routine treatments. Luxury car owners particularly in Pakistan like to "show off" their cars.Business owners: Pakistan has a very brand conscience and "show-off" mind set. People love to flaunt their possessions. No one does this more than the typical business man - no matter how small or large.High end professionals: The up and coming middle class is one of the largest buying groups of cars. They may not rush out to purchase the gold packages, but they will find the lower tier packages very attractive.Service Business AnalysisWhen reviewing the market, there is no offering a similar service. You can certainly get your car "washed" but Auto Spa offers more than a wash. Our main challenge willbe to establish our business idea and brand in the eyes of the customers.The car washing business in Lahore consists of many small competitors. Everything from the houseboys and drivers who wash cars at their owners homes, to few car washing bays are competition for Auto Spa. These customs are budget conscience - choosing price over quality of service. They are not our target customer. Auto Spa targets the customers who need their car cleaned properly- and do see value in spending between PKR 2,500 to PKR 5,000, at least once a month.Competition and Buying PatternsThe relatively mild weather in Lahore will allow for year round sales - with some time off during the rainy season.The true competitionis limited to: the local petrol pump service stations manned by untrained lay workers - liberally firing high pressure water at carsthe driverarmed with a bucket, a pipe packet of surf and a few ragsthe local "chota" who will rub a dirty rag on the car for 20 rupeesthe owner of the car, equally untrainedYour valuable asset deserves proper attention in its care.Auto Spa will use the latest in mobile car washing technologies as well as "imported" branded soaps, shampoos, solvents, and wax. The service will notonly be fast - but convenient. Clients schedule appoints either by phone or on our interactive web site or mobile application - and service will be delivered at their specified location.Price will not be a major issue as the service we are offering is very unique - and we are only targeting 500 - 1000 customers in all of Lahore.Web PlanWebsite Marketing StrategyOur website will serve three purposes: Client will be able to schedule appointment on the websiteAuto Spa will be able to provide on the stop educational material to help differentiate the brand from others. It is critical for the client to know why they are paying a premium price - and the value they will receive.Auto Spa will be able to push out the latest promotional deals to their clientsIn addition, clients will be able to provide immediate feedback to the management team.Development RequirementsThe Auto Spa website will feature simple uncluttered user interface allowing the user to quickly navigate as required. The site will be responsive in order to be viewed on different mediums (desktop,laptops, tablets andsmart phones). The website will be outsourced. The manager will maintain the basic changes periodically.Marketing Plan & Strategy SWOT AnalysisIt is crucial to captilaize on the strengthsof the business,especially for a new business. The newness of the business although a risk, is actuallya key strength that is likely to attract customers looking for quality service. It is a common trend (as in fast food, yoghurt ice cream, coffee shops) for the upcoming Pakistani population to seek "western" experiences. Auto Spa is another such idea.The weaknesses are not critical. Most of the risk is regarding being unknown. We only need 500 repeat customers to achieve our desired profit level, and 50% of that for a comfortable profit margin. Five hundred customers per month out of the tens of thousands of cars on the road is atiny percent of people who will be interested in our services. The threats may be managed as several of them are long term in coming - we will manage lead times to plan for amendment to be made. The main short term threat is from others copying the model. Impeccable service and exclusivity are fundamental to protecting the brand - and the therefore the business. Service must never be compromised in any way.Once the business has been established; we will be in a better position to understand how to exploit the tremendous potential opportunities. None of the potential opportunities require large amounts of additional capital soit is just a question of picking the opportunity with the greatest added value to the business.StrengthsIndividualize Service: Hand wash is safer than machine. Each car is individually assessed and serviced accordingly.Upscale brand for a service that is required but missing in the market place.Training: Although it is specialized training - the time period to learn is minimal. No shortage of labor.Relatively low capital costs: Aside from the initial purchase of the trucks, the additional costs are low, and are necessary only to match the revenue stream.Equipment is easily obtainable. Just a single small office unit is required.High loyalty among repeatcustomerWalk-in customers: Provides service during non-booked timesHigh margin business, particularly in the value added services

WeaknessesBrand new market idea - untestedInitially no established client baseNo one knows how good of a job our company doesNo one knows who we are and that we existStaff retention as the work force tends to be casual workersPeople (or their servants) can do it themselves; customers must believe there is a value addedQuick cheaper "copycats" will emerge - must differentiateOpportunitiesLarge potential market (initially Lahore)Ability to franchise to other citiesIncreasing time pressure of people, not time to get basic tasks done.Potential to expand to wash more than just cars (e.g. boats, trucks, plant equipment, windows, pets)Strategic alliances (hotel, restaurants) to offer on the spot service to their customersPurchase/expand facilitiesThreatsLegislation: future potential changes in water restrictionsWaste: perception of water wastageEconomy: economic pressures may change people ability to pay or perception of value.Competition: established automatic car washesReplication: business model can be easily copied by competitors Unpredictable: Low and hard to predict cash flow in the beginningCompetitive EdgeWe start with a critical competitive edge: there is no direct competitorin Lahore - or even Pakistan. Our competitors consist of "chotas," drivers, and a few scattered automatic car washes. Currently,Lahore customers must plan significant time and/or effort to get a quality car wash. Our positioningis very hard to match if we maintain our focus on customer service, speed, quality and reliability.Another aspectthat is critical is the equipment and cleaning materials Auto Spa will use is top quality industry standard. The product is readily available - but current users almost always dilute the productor mix in additives to try to save expenses. Auto Spa will never provide substandard product to our clients.Our staff faces our customers every day. It is therefore mission critical our staff is properly trained in not just their trade - but in customers service Etiquette as well. We will run monthly workshops for our staff. In order to minimize turn over - we will also pay our staffa very competitive salary - plus bonus for behaviors we wish to incent (e.g. positive feedback on questionnaires, new customer targets, repeat business targets)Marketing StrategyProduct: We will highlight the high quality of ourservice, tools, materials and staff inall our promotional materialsPrice: Valued based pricing - our price points will be deliberately expensive as to establish a exclusivity in the brand and service.Promotion: Advertising: Targeted and direct. As we know precisely the neighborhoods we are hunting for customers, we design and implement smart advertising in those locations. Advertising will include: direct flyers delivered to the home, placard placed in restaurants and stores, signage (uniforms, vans, office), This will be a continuous process, with an initial spend of PKR 500,000 and an allocation of 10% of revenue. Cost promotions: A variety of low cost promotional strategies will be implemented including:offering rewardsto customers for referrals, discounts for bulk purchases, lucky draw promotions Education & Awareness: It is critical to our business success for our client to understand the true value of our services. We are not just washing their car - but protecting a very expensive asset. The client must be informed of the steps we take to ensure their car has the absolute best car when being serviced.Partnerships & Relationships: We will partner with top tier hotels and restaurants to offer services to their clients at reduced ratesPlacement: We will be selling our products direct. Our vehicles will bring our service to the client doorstep. As the there are just three selected neighborhoods, our vans will be a familiar sight in these areas.Sales StrategySales in our business are client service. It is repeat business. We will ensure the following elements are the building blocks of our marketing/sales strategy: 24 hour service availabilityquality service at good value (attendants on duty: 10 - 6, Mon - Sat, who are always focused on customer satisfaction)Reliability in all seasons/weather.Quality equipmentBrand recognized cleaning materialsWell trained professional staffAn aggressive smart cost effective advertising and promotions strategies will be rolled out to build brand and attract customers. Pull strategy will include:Personal communication (referral and word of mouth)Advertising (internet, outdoor billboard, target direct mail)Sales promotions (reduce price during introduction months, coupons, gifts and prize promotions, discounts for referrals)Publicity and public relations (trade shows, media initiated coverage)Corporatebranding (signage,uniforms)Team willbe trained (and incented) to upsell servicesPush strategy includes:special discounts on annual and semi-annual membershipsSales ForecastWith a new brand entering the market offering a new service, it will time for Auto Spa to reach their target required customers. From an operational perspective, we expect to reach a break even point within three months of the program launch - covering the monthly operating expenses. By month nine losses from the earlier month are covered.Modeling sales is at best a guess when introducing a newbrand and service. Responses from initial surveys are promising - yet it is best to take a conservative approach when modeling sales.Although seasonal weather will play a large factor in the month to month sales - we have averaged out the fluctuations over the course of the year. Projected Gross Revenue: Growth Rate: We have set the initial sales target to a very modest number starting at 100 sales month. Sales will increase 10% per month for thefirstyear. After the first year, the last month sales was annualized and increased by 25%per annum for the next two years sales forecasts.Direct expenses are assumed to be:Bronze: 20% of the revenue + PKR 250 per visit for petrolSilver: 20% % of the revenue+ PKR 250 per visit for petrolGold: 20% % of the revenue + PKR 250 per visit for petrolNote: All numbers assume additional service vehicles will be added to account for additional sales.Table: Sales ForecastSales Forecast

Year 1 Year 2 Year 3

Unit Sales

Bronze1,260 2,580 3,200

Silver705 1,440 1,800

Gold390 900 1,100

Total Unit Sales2,355 4,920 6,100

Unit Prices Year 1 Year 2 Year 3

Bronze2,500 3,000 3,500

Silver4,000 4,500 5,000

Gold5,000 6,000 7,000

Sales

Bronze3,150,000 7,740,000 11,200,000

Silver2,820,000 6,480,000 9,000,000

Gold1,950,000 5,400,000 7,700,000

Total Sales7,920,000 19,620,000 27,900,000

Direct Unit Costs Year 1 Year 2 Year 3

Bronze750 772 1,000

Silver1,050 1,175 1,300

Gold1,250 1,475 1,700

Direct Cost of Sales

Bronze945,000 1,991,760 3,200,000

Silver740,250 1,692,000 2,340,000

Gold487,500 1,327,500 1,870,000

Subtotal Direct Cost of Sales2,172,750 5,011,260 7,410,000

Management AutoSpa currently compromised of four partners, one operations manager, eight staff members (the washing teams) and two support staff. As the business grows, we will hire staff as required. Periodic specialized skills, including web development, accounting/bookkeeping, legal, graphic designer will be hired as contractors as required.Each member of the management team has specific industry experience that will apply totheir assignment:MarketingHuman Resource and TrainingFinanceOperationsThe operations manager will staff the field office.Theirprimarily responsibilityis to look after the assignments of the day, and manage customer bookings and complaints. In addition he will support the efforts of each of the particular partners tasks.There will be two service teams, each compromised of four workers. The team lead will be a rotational position, changed once a month.There will be two support staff: office guard, sweeper/office boy.We will form an advisory team comprised of seasoned industry veterans who are interested to support new ventures. The team will meet once a month to offer general guidance of the developing business.Personnel PlanThe team will be lean - hiring as needed. Annual salaries raises will be 10%per annum At the start of year 2 (depending on the business development),2 additional units(8 staffers) will be hired Partners will not draw a salary. They will be compensated via annual dividend from the distributable profit. Specialized skills will be hired on a contract basis as needed.

Table: PersonnelPersonnel Plan

Year 1 Year 2 Year 3

Office Manager360,000396,000435,600

Field Workers1,440,0003,168,0003,484,800

Guard144,000158,400174,240

Office Boy120,000132,000145,200

Part Time Accountant120,000132,000145,200

Total People11.5019.5019.50

Total Payroll2,184,000 3,986,400 4,385,040

Note: In Year 2 two more teams of fields workers (eight in total) will be added.Financial PlanOur business is an "all cash" business that will pay for all variable and fixed expenses monthly. Thus, we will rapidly build cash flow to finance future growth. Due to the initial sales slowly launching, there is an initial loss for six months until sales are build up (as per the break even analysis, 216 must be washed to covered out monthly operating expenses). Two key issues will assist Auto Spa in rapidly building capital: Partners will not receive any payments/dividends for the first year We will keep very little inventory, supplies are purchased according to reservationsStart-up FundingThe start-up costs ofAuto Spawill consistprimarily of the purchase of two trucks & water reclamation systems,three months of monthly expenses, initial marketing expenses and inventory. After the initial spend, Auto Spa will have PKR 1,000,000 cash in the bank for contingencies.The four partners will invest PKR 500,000 each and two investing partners, investing PKR 1,500,000 each. The partners will be paid an annual dividend from distributable profits.The business will generate a profit after four months to cover operating expenses. By the seventh month, prior losses will be covered.BY the end of year two, the Auto Spa balance sheet will show earnings have exceeded the initial investment.Important AssumptionsThe financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions. From the beginning, we recognize that variable expenses are critical. Cost of water, sewer and electricity are our largest expenses. Water is our major concern in Lahore. Two of the more important underlying assumptions are: We assume asound economy, without major recession despite ourmodestpricing. We assume, of course, that there are no unforeseen changes in local regulations that will interrupt our service.

Projected Profit and Loss Projected Revenue See "Sales Forecast" for a detailed breakdown of projected revenue. Projected Operating Expenses Direct Cost of Services: Chemicals (include soap, wax and salt): 20% of revenueVariable/Fixed Expenses Petrol: PKR 250 per client visit (increasing at 10% per annum) Sales and Marketing and Other Expenses: 10% of Gross Sale Incentive Pool: 2.5% of Gross Sales Depreciation of trucks: fixed over five years (PKR 20,000 per month per truck) All expenses will increase by 10% per annum

Revenue will increase by the following schedule: Year 1 Year 2 Year 3Bronze 2,5003,0004,000Silver 4,000 5,000 6,000Gold 6,000 7,0008,000

Table: Profit and Loss (Income Statement)Pro Forma Profit and Loss

Year 1 Year 2 Year 3

Sales7,920,000 19,620,000 27,900,000

Direct Cost of Sales2,172,750 5,011,260 7,410,000

Gross Margin5,747,250 14,608,740 20,490,000

Gross Margin %72.57% 74.46% 73.44%

Operating Expenses

Payroll2,184,000 3,986,400 4,385,040

Sales and Marketing Expenses792,000 1,962,000 2,790,000

Health Insurance120,000 220,000 242,000

Incentive Pay198,000 490,500 697,500

Accounting / Legal60,000 66,000 72,600

Utilities: Electricity180,000 198,000 217,800

Utilities: Mobile Phone72,000 158,400 174,240

Utilities: Phone/Net60,000 66,000 72,600

Utilities: Gas12,000 13,200 14,520

Utilities: Water60,000 132,000 145,200

Maintenance of Trucks120,000 264,000 290,400

Rent480,000 528,000 580,800

Total Expense 4,338,000 8,084,500 9,682,700

Profit Before Interest and Taxes1,409,250 6,524,240 10,807,300

Page 24