eductional software co

7/30/2019 Eductional Software Co

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September 2004

This sample business plan has been made available to users of Business Plan Pro, businessplanning software published by Palo Alto Software. Names, locations and numbers may havebeen changed, and substantial portions of the original plan text may have been omitted topreserve confidentiality and proprietary information.

You are welcome to use this plan as a starting point to create your own, but you do not havepermission to reproduce, publish, distribute or even copy this plan as it exists here.

Requests for reprints, academic use, and other dissemination of this sample plan should beemailed to the marketing department of Palo Alto Software at marketing@paloalto com For


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emailed to the marketing department of Palo Alto Software at marketing@paloalto com For

Confidentiality Agreement

The undersigned reader acknowledges that the information provided by _______________ inthis business plan is confidential; therefore, reader agrees not to disclose it without theexpress written permission of _______________.

It is acknowledged by reader that information to be furnished in this business plan is in allrespects confidential in nature, other than information which is in the public domain throughother means and that any disclosure or use of same by reader, may cause serious harm ordamage to _______________.

Upon request, this document is to be immediately returned to _______________.

___________________Signature

___________________Name (typed or printed)

___________________Date

This is a business plan. It does not imply an offering of securities.


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1.0 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

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

2.0 Company Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2.1 Company Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.2 Start-up Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

3.0 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

3.1 Program Design & Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.1.1 New Program Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.1.2 Existing Program Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

3.2 Course Design and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.3 Learning Object Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.4 Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143.5 Consulting and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

4.0 Market Analysis Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154.1 Market Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164.2 Target Market Segment Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174.3 Service Business Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

4.3.1 Competition and Buying Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

5.0 Strategy and Implementation Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

5.1 Competitive Edge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185.2 Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195.3 Sales Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

5.3.1 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

5.4 Milestones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

6.0 Web Plan Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

6.1 Website Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Table of Contents


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1.0 Executive Summary

Third Degree I.D. is a limited-liability company (LLC) with three founding partners, located inSavannah, Georgia. The company designs, develops, and markets instructional products andservices for the corporate, education, government, and healthcare e-learning industries. It iscommitted to high quality instructional design and educational new media development, andprovides a core deliverable of programs, courses, and learning objects for the distanceeducation, distributed learning, and e-learning markets.

The company employs an object-oriented design methodology that yields flexible, scalable,

and reusable content, supporting clients with rich, targeted solutions that are easily replicatedand maintained. It seeks a balanced portfolio of clients from a variety of industry sectors, andplans to mitigate business fluctuations with an appropriate number of local, national, andinternational clients.

Third Degree I.D. develops strategic relationships and builds its business on a returningcustomer base and an accumulation of educational content that can be re-purposed and re-sold.

The three founding partners of Third Degree I.D. will each invest $35,000 into the company,and are seeking an additional two-year loan of $30,000 to complete the start-up funding.Roughly $19,000 of this initial funding is required for start-up expenses and assets; theremainder will provide a cash basis for the initial year of operations, during which Thid DegreeI.D. will provide some at-cost work to influential clients to create a solid reputation for ourwork and capabilities; this reputation forms the necessary basis for marketing and salesstrategies after the first year.

Third Degree I.D. expects to reach its break-even point late in the first year, and to generate a

net profit of $94,000 in the second year, even after hiring additional staff. Our marketresearch shows our sales goal of $360,000 in the first year is conservative, for a start-upeducational software company with our combined expertise. Growth estimates in years 2 and3 are based on data from comparable businesses in the same industry.

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1.1 Objectives

Key objectives for Third Degree I.D. in the first year are as follows:

Establish a legal business through appropriate licensing. Complete business planning and pursue funding--via venture capital, bank loans,

grants, and contracts. Establish a web presence and list products and services in industry-relevant websites

and publications. Contract with six to eight clients requiring consulting, training, design or development

work of an appropriate scope ($50,000 or more).

1.2 Mission

Third Degree I.D. designs, develops, and markets instructional products and services for thecorporate, education, government, and healthcare e-learning industries. It affords companiesand institutions cost-effective, progressive, flexible and well supported solutions to their

instructional design and e-learning operational needs. Its principal goal is client satisfaction,serving client interests as an ally and loyal business partner. The company operates on a for-profit basis and provides an engaging and equitable work environment for its owners,employees, and contractors.

1.3 Keys to Success

Success will be dependent upon:

persistent and creative client development efforts exceptional product and service quality

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2.1 Company Ownership

Third Degree I.D. is structured as a limited-liability company (LLC), consisting of threeexecutive partners: Susan Hines, Mona Meyer, and Daniel Stanford, who will function in theroles of chief executive officer (CEO), chief learning officer (CLO), and chief creative officer(CCO).

2.2 Start-up Summary

To begin the business, we require $5,924 in start-up expenses, and another $73,000 in assets.Details of these requirements can be found below.

Expenses

Legal Expenses

Attorney Consultation $300

Initial Filing Fee for LLC $400

Name and Logo Trademark $300

Website Expenses

Website Domain (2 Years): $13.90

Website Hosting (1 Year): $95.40

Communications

Stationary/Letterhead + Envelopes (500 set) $500

Business Cards: (500 x 3) $300

Memberships and SubscriptionsCoastal Beta $75

eLearning Guild $95

Faculty Finder.com $745

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All startup expenses and funding requirements are summarized in the tables below.

Table: Start-up

Start-up

Requirements

Start-up ExpensesLegal $1,000Annual State Fees $300Insurance $200Website domain and hosting $109Stationary/ Business Cards $800Office Supplies $100Wireless Home Network (Airport) $200Memberships/Subscriptions $915Software $2,300Total Start-up Expenses $5,924

Start-up AssetsCash Required $116,076Other Current Assets $0Long-term Assets $13,000

Total Assets $129,076

Total Requirements $135,000

Table: Start-up Funding

Start-up FundingStart-up Expenses to Fund $5,924Start-up Assets to Fund $129,076Total Funding Required $135,000

AssetsNon-cash Assets from Start-up $13,000Cash Requirementsfrom Start-up $116,076Additional Cash Raised $0Cash Balance on Starting Date $116,076

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$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

Expenses Assets Investment Loans

Start-up

3.0 Services

Third Degree I.D. focuses on the following deliverables: program/curriculum design anddevelopment, course design and development, program/curriculum and course evaluation,

content analyses and revision, rich-media production, e-learning training, e-learningconsulting, and additional services, such as market research, editing, document workflow, andtranslation. For purposes of billing, project management, and client relations, these servicesare broken down as follows:

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3.1 Program Design & Development

Third Degree I.D. provides development services for clients in accordance with educationalbest practices and client specifications. It employs a systematic design and developmentprocess that produces instructionally sound, engaging programs/curricula that are aligned withinstitutional goals and exceed applicable accreditation and/or compliance standards.

3.1.1 New Program Services

New program services are available to clients who do not yet possess an e-learninginfrastructure or who do not yet possess robust programming that would adequately leveragethe infrastructure.

Needs Analysis ReportThe needs analysis report is the end result of a client-partnered consulting and research effort.The report articulates technology, workforce, and policy/procedure needs for e-learningprograms in the general context of any institutional and/or accreditation and/or compliance

constraints. Clients are charged according to the scope of the project, which is generally tiedto the length and/or number of programs/curricula to be developed. For example, a needsanalysis report for an e-learning certificate or academic minor (or group of related courses ofno more than six) would conclude with a base charge of $3600.

Programs/Curricula Types EstimatedDevelopment Cost

Base Charge(1.5 times cost)

3-to 6-Course Series (TrainingProgram, Certificate or

Undergraduate Minor)

32 hours x $75/hour =

$2400

$3600

7- to 12-Course Series(Professional Certificate, MastersDegree)

40 hours x $75/hour =$3000

$4500

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Program/Curriculum ProspectusThe program/curriculum prospectus is the end result of a client-partnered consulting andresearch effort. The prospectus outlines the objectives and viability of a givenprogram/curriculum and critiques any development dependencies or any potentialimplementation constraints; it also includes a market study and a program/curriculumevaluation plan.



3-to 6-Course Series (TrainingProgram, Certificate or

Undergraduate Minor)

24 hours x $50/hour =$1,200

$1,800


32 hours x $50/hour =$1,600

$2,400

13- to 16-Course Series(PhD/Terminals, OtherProfessional Degrees)

40 hours x $50/hour =$2,000

$3,000

17- to 20-Course Series(Corporate College, Undergraduate

Major or Academic Core)

48 hours x $50/hour =$2,400

$3,600

Clients who purchase a needs analysis report are given a 20% discount on eachprogram/curriculum prospectus.

Program/Curriculum Development Plan

The program/curriculum development plan is the end result of a client-partnered consultingand research effort. The development plan is a report that articulates the program/curriculum

specifications according to institutional needs. The document includes a full articulation ofcurriculum design, including course-series or individual course "look and feel" and functionalityrequirements. It characterizes the significant development/delivery features of the courses andidentifies any course developers, subject matter experts (SMEs), or consultants associated

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*Clients are charged a monthly project management fee of 5% on the overall curriculumdesign and development charge for the duration of the project development period. A projectdevelopment period runs from the date of the program/curriculum development planimplementation to the date of program/curriculum development plan completion.

Program/Curriculum Implementation Strategy

The program/curriculum implementation strategy is the end result of a client-partneredconsulting and research effort. It is a report that recommends ways to optimizeprogram/curriculum support and to leverage the program/curriculum in order to maximizelearning and revenues. The report recommends enrollment goals, scheduling, instructorrecruitment, content-reuse, and technical support strategies.



3-to 6-Course Series (TrainingProgram, Certificate orUndergraduate Minor)

10 hours x $50/hour =$500

$750



$1,125


20 hours x $50/hour =$1,000

$1,500

17- to 20-Course Series(Corporate College, UndergraduateMajor or Academic Core)

25 hours x $50/hour =$1,250

$1,875

Clients who purchase a program/curriculum development plan are given a 20% discount on

each corresponding program/curriculum implementation strategy report.

Program/Curriculum Evaluation Plan

The curriculum evaluation plan is the end result of a client-partnered consulting and research

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3.1.2 Existing Program Services

Existing program services are available to clients who possess an e-learning infrastructure anddeliver programs/curricula, but who wish to enhance or improve upon their offerings. Clientswith existing programs may select from the New Program Services, if they wish to add newprograms to their offerings.

Program/Curriculum Evaluation ReportThe program/curriculum evaluation report includes a top-level analysis of a givenprogram/curriculum relevant to institutional or company goals and relative to comparable

institutional and company programs/curricula. It includes a systematic analysis of each coursewithin the program/curriculum and provides recommendations for revision of content,structure, and delivery. Recommendations are informed by educational best practices and anyinstitutional, accreditation and/or compliance standards.

Programs/Curricula TypesEstimated

Development CostBase Charge

(1.5 times cost)

1 Course (Stand-Alone)6 hours x $50/hour =

$300$450

3-to 6-Course Series (TrainingProgram, Certificate orUndergraduate Minor)

36 hours x $50 = $1,800 $2,700


72 hours x $50/hour =$3,600 $5,400


96 hours x $50/hour =$4,800

$7,200

17- to 20-Course Series(Corporate College, UndergraduateMajor or Academic Core)

120 hours x $50/hour =$6,000

$9,000

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Clients who purchase a curriculum evaluation report are given a 20% discount on eachcorresponding program/curriculum strategy report.

Program/Curriculum Maintenance (on Retainer)

Program/Curriculum Maintenance provides institutions or companies with basic maintenanceof courses and learning objects in a given e-learning program or curriculum. Basicmaintenance is a support package that serves clients who require minor course or course-shell changes on a regular basis. Clients who develop courses that feature time-sensitiveinformation and are instructor-led may be better served by regular maintenance to coursefeatures that change, such as schedules, calendars, tests, and evaluations. Maintenance ischarged on a monthly basis at 5 percent of the overall program/curricula charge.

3.2 Course Design and Development

Third Degree I.D. provides course- or project-development services for clients in accordancewith established curriculum plans. The company employs a systematic instructional designprocess that produces instructionally sound, engaging course work, systematically aligned withprogram goals and learning outcomes and designed to exceed institutional accreditationstandards.

Course-design cost estimates are based upon the following assumptions:

A course or training project contains one or more units of instruction.

A unit consists of approximately 8 pages of content and represents 3-5 hours ofinstruction.

A page of content covers a single topic and represents information that would be

presented to a learner at once (e.g. between clicks of a Next button).

A page of content contains from 150-1500 words (as dictated by lesson flow andaudience requirements).

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that re-purpose and/or supplement the existing content.

Type D: The client partner provides both existing content in an alternate medium anda dedicated subject-matter expert. Third Degree I.D. works with the dedicated subject-matter expert over the course of the project to produce courses that re-purpose orsupplement the raw content.

Delivery Options

Type 1: Content is designed for delivery by nonprofit institutions under the rules of theTEACH Act. This is the least restrictive option in terms of copyright and, therefore,requires limited investment in new media development and permissions acquisition.

Type 2: Content is designed for delivery by nonprofit institutions and education clientsunder the Fair Use guidelines for copyrighted works. Fair Use strictly limits theamount of copyrighted content that can be used within the context of an online course.Therefore, courses developed for this standard require additional investment in newmedia development and permissions acquisition.

Type 3: Content is developed for commercial delivery. This is the most restrictiveoption and requires that all course content (including media) be developed from scratch

or obtained via purchase or agreement with the copyright holder.

Cost Estimates

Course/Program TypeEstimated Development Cost

per Unit

Base Charge*

(1.5 times cost)

A18 pages x 2.5 hour/pg. x

$50/hour = $1,000$1,500

A2 Cost (A1) + 20%(media/permissions) = $1,200 $1,800

A3Cost (A1) + 40%

(media/permissions) = $1,400$2,100

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Additional Development Services and Pricing

Third Degree I.D. also offers the following additional services related to course/programdevelopment:

ServiceEstimated


(1.5 times cost)

Course Template Design20 hours x $50/hour =

$1,000$1,500 per program

Content (Peer) Review10 hours x $25/hour =

$250$375 per course

Instructional Design Review 8 hours x $50/hour =$400

$600 per course

Retrofit for ADA Compliance20 hours x $50/hour =

$1,000$1,500 per course

Quality Assurance Testing8 hours x $40/hour =

$400$600 per course

Assessment Development(20 QAs, plus feedback)


$225 per assessment

Image Editing (per 25)5 hours x $40/hour =

$200 $300 per 25 images

Audio Editing (per 7 clips*)10 hours x $50/hour =

$500$750 per 7 clips

Video Editing (per 7 clips**)10 hours x $70/hour =

$700$1,050 per 7 clips

*1 audio clip = 60 seconds of digital audio

**1 video clip = 30 seconds of digital video

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Simple Image Gallery: Users cycle through images with corresponding text. Imaginea menu with five buttons, each displaying a single work of art, the title of the piece, theartists name, and the date it was created.

Level 2: These objects are typically 1-2 screen engines, with evaluation and feedback, andare typically used as assessment vehicles. Examples include:

Media-Rich Quiz: For instance, a multiple-choice or fill-in-the-blank quiz with optionalareas for displaying diagrams, photographs, or hints.

Hint/Password Game: The user tries to guess the topic or item that is described by a

growing list of clues.

Level 3: Level 3 objects are media-rich resources that are designed to display a variety ofmedia in a unique format. They may combine text, illustrations, photographs, charts andgraphs, audio/video clips, and web links to create rich, educational experiences. Examplesinclude:

Timelines: Imagine an interactive timeline designed to illustrate key points in thedevelopment of personal computing. For instance, one event on the timeline could

provide photos of the early Apple II computers and later Macintosh models, textdescribing the growth of Apple as a major hardware manufacturer, sound-bytes fromindustry professionals, and a link to the Apple website.

Image Magnifier: Imagine a display engine that allows users to interactively selectand view magnified portions of a small image (e.g. a painting or other work of art). Theengine could handle multiple images (with a page-turning metaphor), and a text areacould provide a description of each work with links to museums featuring work by thesame artist.

Interactive Dictionary/Glossary: Imagine key words or terms hyperlinked fromwithin a course. When a term is clicked, the glossary would open, displaying a basictext definition, supplemented by audio clips, animated diagrams, or illustrations.

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Cost EstimatesEngine Development

ObjectType

Est. I.D.Hours

Est. DevelopmentHours Estimated


(1.5 times cost)

Level 1 5 1520 hours x

$50/hour = $1,000$1,500


$50/hour = $2,000$3,000


$50/hour = $6,750$10,125

Level 4 25 160 185 hours x$50/hour = $9,250

$13,875

Cost EstimatesEngine Population and Media Editing

Level Image ContentAudio

ContentVideo

ContentBase Charge

(1.5 times cost)

A

< 25 images:

5h x $40/h =$200

< 7 clips:

10h x $50/h =$500

< 7 clips:

10h x $70/h =$700

Images: $300

Audio: $750Video: $1050

B25-49 images:10h x $40/h =

$400

7-14 clips:15h x $50/h =

$750

7-14 clips:15h x $70/h =

$1050

Images: $600Audio: $1125Video: $1575

C50-74 images:15h x $40/h =

$600

15-19 clips:20h x $50/h

= $1000

15-19 clips:20h x $70/h =

$1400

Images: $900Audio: $1500Video: $2100

D 75+ images:$10 per image

20+ clips:$50 per clip

20+ clips:$70 per clip

Images: $15/imageAudio: $75/clipVideo: $105/clip

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Media Techniques Training4-hours of classroom training(maximum 10 participants)

$900

Learning Objects MaintenanceTraining 4-hours of classroom training(maximum 10 participants) $900

3.5 Consulting and Other

Third Degree I.D. charges a flat fee of $75 per hour for consulting, and specializes in a variety

of areas, including:

e-learning strategic planning accreditation substantive change documentation learning-objects database planning content-reuse planning "best practices" consulting open-source e-learning assets consulting

Third Degree I.D. charges a flat fee of $60 per hour for work that may stem from consulting,such as:

Research Editing Copy editing Translation Illustration Writing

4.0 Market Analysis Summary

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4.1 Market Segmentation

The e-learning market continues to expand. According to ThinkEquity Partners andEduventures, the global training and education market is a $2 trillion industry, with the UnitedStates accounting for 37.5% of the market.[1] The greatest demand for e-learning in the U.S.comes from the corporate sector, which according to Brandon-Hall realizes a 30 to 60percent savings over traditional classroom instruction.[2] Thus, businesses and corporationshave investedand continue to investin infrastructure that will require a steady supply ofcontent.

Higher education and K-12 are substantial markets, as wella combined industry representingover 100 billion dollars.[3] With the largest class of high school students in U.S. historygraduating in 2009 and a brick-and-mortar system that cannot expand quickly enough toaccommodate them, e-learning is becoming a necessity for institutions as much as it isbecoming an expectation among students who are increasingly computer savvy.[4] Collegesand universities are also turning to e-learning as a way to increase their reachto offerbranded educational opportunities to students outside of their traditional geographicalboundaries.

While the move to e-learning in the healthcare and government sectors remains slower thanin the corporate and educational sectors, these industries are showing a strong interestnevertheless. According to Jones Knowledge, Inc. and CourseShare.com, the healthcareindustry shows an 80% interest (with a 30% commitment) level while government shows 50%interest (with 39% commitment).[5]

--------------------------------------------------------------------------------

[1] ThinkEquity Partners, Eduventures (quoted in The Learning Markets: E-Learning byeMarketer, Inc., 2003) .

[2] Adkins, Sam. 2002-2010 U.S. e-Learning Industry (Brandon-Hall Marketing Series, 2002).

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Table: Market Analysis

Market Analysis 2004 2005 2006 2007 2008Potential Customers Growth CAGRCorporate 30% 144,000 187,200 243,360 316,368 411,278 30.00%Higher Education 25% 180,000 225,000 281,250 351,563 439,454 25.00%K-12 Education 30% 36,000 46,800 60,840 79,092 102,820 30.00%Total 27.57% 360,000 459,000 585,450 747,023 953,552 27.57%

Corporate

Higher Education

K-12 Education

Market Analysis (Pie)

4 2 Target Market Segment Strategy

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4.3.1 Competition and Buying Patterns

Until recently, the competition in e-learning has been among large, proprietary coursemanagement or learning management system (CMS/LMS) vendors and IT-infrastructurecompanies. However, as less expensive systems and free, easy-to-install open-source systemsemerge, the focus and interest is moving (appropriately) from delivery systems to the actualcontent delivered.

Third Degree I.D. is committed to leveraging the trend toward less expensive and open-sourcesystems by emphasizing user-centered instructional design and by designing object-orientedcontent that facilitates easy installation and migration into almost any system. The company isdedicated to developing content that meets or exceeds interoperability (SCORM, OKI) andcompliance standards (W3 Accessibility, ADA), so that clients can make better decisions abouthow to serve their content to virtually anyone.

However, the company has extensive experience with the most popular, proprietary CMS/LMSsystems, and recognizes a continued investment by its clients in those systems. Thus, it alsofocuses on design and development for those systems (Blackboard, WebCT), while alsomaintaining interoperability and compliance standards that allow for easy migration of content(from system to system).

5.0 Strategy and Implementation Summary

Third Degree I.D. will focus on four e-learning markets-- the corporate, educational,healthcare, and government sectors. While it seeks business from companies and institutionsacross the United States and abroad, it will make a concerted effort to develop long-term local

and regional clients.

Third Degree I.D.'s target customers are the upper-level management of companies andinstitutions who are charged with the day-to-day operations of e-learning implementation and

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5.2 Marketing Strategy

Third Degree I.D.s marketing strategy for the first year requires that the company:

initiate as many personal contacts as possible

demonstrate excellence with every personal contact

identify six to eight key clients, and win them over through demonstration ofexpertise with limited initial client investment

provide excellent custom development services with enthusiasm and a personal touch

make a name for the company.

Identity Issues

The first year of operations will present a marketing challenge for Third Degree I.D. Thepartnership and identity are newly formed; therefore, the company is relatively unknown inthe marketplace. Although the founders have significant experience and many contacts withinthe e-learning and new media industries, they have worked mainly for corporate orinstitutional employers during the course of their careers. Therefore, Third Degree I.D. wontbenefit from immediate name recognition.

The challenge is mitigated somewhat, for name recognition isnt especially prevalent amongcustom content developers in the industryeven among those who have been successful inthe marketplace for years. Brandon-Hall surveyed over 200 chief learning officers, e-learningmanagers, and training directors to discover that the majority couldnt name more than fivecustom content companies.[1]

Selling ServicesAnother challenge stems from the nature of the business. In the first year, Third Degree I.D.will focus chiefly on marketing and selling instructional-design services, although the long-termplan is to obtain revenue from content re packaging and re licensure at which time the focus

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Clients are overwhelmed by the choices and confused by the options.

Part of Third Degree I.D.'s strategy is to capitalize on that frustration as well as on the growingawareness of companies and institutions that they actually need instructional design services,especially the services of those who design and develop for the e-learning niche.In February 2004, Brandon-Hall published "Custom Content Developers: Comparative Analysisof 97 Outsource E-Learning Providers." The study highlights and evaluates the best-knowncustom content development vendors in the e-learning marketplace. These are, arguably,Third Degree I.D.'s most traditional competitors. However, it also pays to consider a sourcethat would normally be the last place one would look for competitionthe clients themselves.When faced with unfamiliar tasks, clients often try to "do it themselves," rather than take achance on outsourcing services, which are traditionally difficult to quantify and measure.

To succeed in this environment, Third Degree I.D. will demonstrate, through cost analysis, thatoutsourcing content development to a well-equipped development house with streamlinedprocesses is generally more cost-effective than in-house development.

The Personal Touch

During the first year of operation, Third Degree I.D. will focus on developing relationships as aconduit for sales. Rather than mounting an advertising campaign that promotes a facelessservice, the founders will strive to make as many personal or "insider" contacts as possible.

According to Brandon-Hall's custom content report, the majority of the companies surveyed"chose their outsource partner through simple 'word of mouth or they selected companies thatwere in close geographic proximity to themselves."[2]

Fortunately, Third Degree I.D. operates in a city that is known for its relationship networking.The founders have established and continue to establish their credibility among potentialclients, particularly in the higher education and high-tech corporate sectors.

Higher Education Clients

All of the company founders have worked for at least one institution of higher education inSavannah, and the company CEO, who has a 10-year employment history in Georgia atseveral colleges and universities, plans to extend that experience to another Savannah-baseduniversity in August. The potential clients for which personal contacts exist include:

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Another strategy of Third Degree I.D. is to read about and research the higher education e-learning market continuously. There will be no "cold calling." Instead, institutions will beapproached when there is a natural context for doing so. Institutions in likely need of

instructional design products and services include those with high-volume e-learningprograms, troubled or ineffective e-learning programs (that may be "on probation"), orambitious curricula rollouts. Current candidates include:

American InterContinental University Drexel eLearning eArmy U Penn State World Campus University of Maryland University College

University of Phoenix University of Illinois at Springfield

Other potential higher education clients may be non-American institutions wanting to establishthemselves in the U.S. e-learning market and wanting to utilize designers and developersmore familiar with regional accreditation and compliance standards. Countries with high-volume e-learning establishments, such as Canada and the U.K., stand to save substantiallyon design and development costs, as well.

Corporate ClientsWhile Third Degree I.D. wants to build its reputation in education, it appreciates the need tokeep a balanced client portfolio. Recognizing that industries fluctuate and that corporate e-learning is the sector predicted to show the largest growth, the company will work to establisha number of corporate relationships, as well, approaching potential clients through appropriateforums, and via a context that clarifies need (such as a news article or press releaseannouncing a potential client's new e-learning infrastructure). Third Degree I.D. has alreadybegun to market its products and services to local companiesand particularly high-techcompanies--through a number of forums, associations and businesses, including:

Advanced Technology Development Center (ATDC) Coastal BETA Coastal Venture Investment Forum

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Healthcare ClientsHealthcare represents a small, but growing market (relative to the corporate and educationale-learning markets). Clients that are likely to develop e-learning infrastructures are large,

university-affiliated hospitals that do a good deal of teaching and research. Third Degree I.D.has already established contacts with the University of Chicago Hospitals Academy and isplanning to contact several of the local Savannah hospitals, one of which is Memorial Health, amedical university that has been listed as one of the 100 most wired hospitals three yearsin a row by hospitalconnect.com.[3]

Government Clients

Like healthcare, government e-learning is demonstrating some growth, especially in sectorswhere training is mandated by law. The recent Forecast of Contract Opportunities for FY 2004

issued by the Department of Homeland Security features a number of projects that will requiretraining that is flexible, mobile and cost-effective. A number of the projects are also based inGeorgia and South Carolina.

New and Key Clients

While Third Degree I.D. seeks clients who have established e-learning programs and wish toimprove upon or extend them, many of its potential clients (particularly the local clients) willbe forging ground in unfamiliar territory as they move from traditional educational and trainingenvironments to the e-learning arena. They will be uncertain about the benefits of e-learning

and protective of their subject-matter expertise. They will be wary of third-party contentdevelopers claiming to have the "answer to their prayers."

The founders of Third Degree I.D. recognize the cautious environment they are likely to faceand have realistic expectations for the first year of operation. The general goal is to establish alimited number of key clients and provide high-quality services and exemplary products. Keyclients are best characterized as clients with genuine e-learning ambitions who are consideringa number of large-scale projects and will require some training and maintenance. Key clientswould be returning customers.

To acquire key clients, Third Degree I.D. is prepared to take limited-scope developmentprojects at a reduced rate to prove its capabilities. For instance, the company may offer todevelop a single course in a certificate program at cost, with the goal of winning a more

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write press releases

get featured in articles and on websites

register keywords with major search engines

approach CMS/LMS vendors and professional organization about linking to our website

advertise in industry-specific publications

register with RFP exchanges

investigate/initiate strategic partnerships

attend trade shows (as exhibitors)

present our solutions at conferences and seminars.

As the market demonstrates its needs, Third Degree I.D. will begin to narrow its focus,optimizing those products and services that are most useful, beneficial, and cost-effective. Thecompany will invest in a market research strategy utilizing a number of evaluation and survey

techniques to assure its understanding of the market and its staying power within that market.

--------------------------------------------------------------------------------

[1] Chapman, Bryan. Custom Content Developers: Comparative Analysis of 97 Outsource e-Learning Providers (Brandon-Hall Marketing Series, 2004) .

[2] Chapman, Bryan. Custom Content Developers: Comparative Analysis of 97 Outsource e-Learning Providers (Brandon-Hall Marketing Series, 2004) .

[3] Hospitals Connect. 100 Most Wired. .

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5.3.1 Sales Forecast

While business began in May 2004 and will intensify through August 2004, September 2004 isthe partnership's first month of official operations. The sales forecast (from September 2004 toAugust 2005) represents a year of operations.

For the purpose of this plan, we treat our development costs as our staff costs. The only directcost of sales listed here is software packaging, which we project at 5% of the sale price.Although this effectively brings our direct costs to zero, it reflects the fact that all threefounding members will, in fact, be directly involved in the development of our products. Ourstaff costs are laid out in the Personnel Plan. On average, we'll markup our development costsby 50% to set the final price.

During the first year of operations, all our sales will come from new content and curriculumdevelopment. We will strive to make this content re-usable and subsequently re-package it tomeet the needs of additional clients. This should decrease our overall development costs infuture periods. We plan that 25% of cumulative previous years' sales will come from such re-used content.

The table below summarizes our sales forecasts.

Table: Sales Forecast

Sales ForecastFY 2005 FY 2006 FY 2007

SalesNew Curriculum & ContentDevelopment

$360,000 $400,000 $480,000

Reuse, Re-licensure and

Maintenance

$0 $90,000 $190,000

Learning Object Development $0 $20,000 $30,000Training $0 $20,000 $30,000Consulting $0 $30,000 $40,000Other Services $0 $0 $0

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$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

New Curriculum & Content Development

Reuse, Re-licensure and Maintenance

Learning Object Development

Training

Consulting

Other Services

Sales Monthly

$600,000

$800,000

New Curriculum & Content Development

Sales by Year

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5.4 Milestones

Our milestones for the initial period are summarized in the table below.

Table: Milestones

Milestones

Milestone Start Date End Date Budget Manager DepartmentEstablish LLC 6/1/2004 6/18/2004 $400 CEO BusinessDevelop Sales Portfolio

6/1/2004 6/30/2004 $0

CEO/CLO/C

CO

Business/De

signDevelop SalesPresentation

6/1/2004 6/30/2004 $0CEO/CLO/C

COBusiness/De

signDevelop WebCTTemplate

6/14/2004 6/30/2004 $0CEO/CLO/C

CODesign

Develop Sales Contracts6/14/2004 7/31/2004 $0

CEO/CLO/CCO

Business

Develop WebCTCourse(s)

6/14/2004 8/15/2004 $0 CEO Design

Seek Funding: Loans6/1/2004 8/31/2004 $0

CEO/CLO/CCO

Business

Develop LearningObjects 6/15/2004 12/15/2004 $0 CLO/CCO Design

Move to Office Space1/1/2005 1/15/2005 $1,000

CEO/CLO/CCO

Business

Revise Website2/1/2005 4/1/2005 $0

CEO/CLO/CCO

Business

Promote Company6/15/2004 8/31/2005 $6,000

CEO/CLO/CCO

Business/Design

Totals $7,400

Establish LLC

Milestones

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6.0 Web Plan Summary

The Third Degree I.D. website will help familiarize potential clients with the companys uniqueapproach to instructional design and e-learning content development. The website willestablish Third Degree I.D. as a sophisticated yet approachable instructional design group withover 25 years of collective experience in educational new media development.

6.1 Website Marketing Strategy

Through sample learning objects and case studies, the website will showcase the type of detail-oriented instructional design that Third Degree I.D. provides. These examples will demonstratehow the company can leverage new media capabilities to create richer learning experiences.The work samples and promotional copy will help clients make the connection betweenengaging content and effective instruction, while emphasizing the companys ability to identifyand meet learning goals.

In addition to introducing prospective clients to the company, the website will provide

supplementary information for those already familiar with Third Degree I.D., its products, andits services. Through a password-protected client extranet, the website will serve existingclients as a means to track project progress and to investigate new opportunities forcurriculum development. Message boards in this portion of the site will offer a convenientlocation where clients can exchange ideas with project managers, subject matter experts,content developers, and instructional designers.

Internationally-known educational media organizations, such as the eLearning Guild, theAssociation for the Advancement of Computing in Education, and World Wide Learn, will

provide cost-effective opportunities for exposure and drive traffic to the Third Degree I.D.website. Similarly, ads placed online in publications such as the Chronicle of Higher Educationwill allow the company to reach its target market and establish a network of links to thecompany website. These links will contribute to higher rankings in search engine result lists,

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7.0 Management Summary

Third Degree I.D. is owned and operated by its founders. It is a small company with a lateral,non-hierarchical structure that cultivates mutual input and collective solutions. The companywill operate with three full-time employees (also the founders) in the first year, hiringcontractor and consultants as needed. As our business grows, we plan to add additional staff,as discussed below.

7.1 Personnel Plan

Third Degree I.D. will be formed with three executive partners, a Chief Executive Officer(CEO), a Chief Learning Officer (CLO), and a Chief Creative Officer (CCO). While a number oftheir job duties overlap, the CEO is primarily responsible for front-end consulting, planning,and project management, while the CLO and CCO are responsible for back-end productdevelopment, refinement, and implementation. The partners work together at promoting thebusiness and managing office operations.

Susan Hines, CEOSusan has worked in the educational sector for twenty years. She has seventeen years ofteaching experience across a broad range of institutions, including public and privateuniversities, four-year colleges, community colleges, and college-preparatory facilities. She hastaught at institutions both domestic and foreign, has been a traditional tenure-track facultymember, and has servedand continues to serveas online adjunct faculty. Susan wasAssistant Professor of English and Digital Art at LaSalle University from 1998 to 2000, beforetaking a job as an Instructional Analyst with the e-learning company Eduprise, Inc. (nowSunGuard Collegis). She was hired by the Savannah College of Art and Design in 2002 to

develop its distance education curricula and continues to serve as SCADs Director ofInstructional Design. Susan holds several degrees in English Literature: a Ph.D. from GeorgiaState University, an M.A. from the University of British Columbia, and a B.A. from theUniversity of Alaska.

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SCAD, where he has put his combination of artistic and technical skills to use in learning objectprogramming, graphic interface development, and project management.

Future StaffingAs the client-base grows, the partners plan to hire a Technology Director who will work closelywith the CLO and CCO to develop database-driven learning objects, as well as with the CEO todevelop broader e-learning solutions, such as installation packages for open-source coursemanagement and learning management systems (CMS/LMS). In the first year, the partnerswill rely on outside consultants to provide information technology, instructional design, andmedia development support, as dictated by project load. As the client base grows and revenueis increasingly generated through content and technology re-licensure, the partners may addadditional development staff to support project needs.

Table: Personnel

Personnel PlanFY 2005 FY 2006 FY 2007

Susan Hines (CEO) $75,000 $75,000 $75,000Mona Meyer (CLO) $75,000 $75,000 $75,000Danny Stanford (CCO) $75,000 $75,000 $75,000Instructional Designer $0 $0 $50,000Production Assistant $0 $0 $30,000Director of Technology $0 $75,000 $75,000Total People 3 4 6

Total Payroll $225,000 $300,000 $380,000

8.0 Financial Plan

Our financial plan is based on our assumption of achieving desired levels of sales. Our first-

year revenues (projected at $360,000) will probably be insufficient to turn a profit in the firstyear. However, we plan to generate over 15% of net profit starting in year two. Our initialcash reserve should be sufficient to keep us afloat during the first year. Subsequent years'cash flows generate a cushion that will allow us to further develop our business.

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8.2 Break-even Analysis

The main development costs of the product will be our staff costs. Our variable costs are solelythose related to packaging (5% of sales), since our staff costs are monthly payroll numbers,reflected in the P&L forecasts later in this document. We estimate that we'll need to generateabout $32,000 per month to break even, as summarized in the table below.

Table: Break-even Analysis

Break-even Analysis

Monthly Revenue Break-even $32,154

Assumptions:Average Percent Variable Cost 5%Estimated Monthly Fixed Cost $30,546

($40,000)

($30,000)

($20,000)

($10,000)

$0

$10,000

$20,000

$30,000

$0 $10,000 $20,000 $30,000 $40,000 $50,000

Monthly break-even point

Break-even Analysis

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outside consultants and contractors on the product development side. As stated earlier in thisdocument, as our business grows, we plan to add additional staff. We also plan to utilize ourCEO's home office for the remaining part of 2004 and move into a new office space in January

2005.

Overall, we plan to end our first year of operations with a loss of about $26,000 on sales of$360,000. Our subsequent years' profitability is planned to be over 15%, as summarized inthe table below.

Table: Profit and Loss

Pro Forma Profit and Loss FY 2005 FY 2006 FY 2007Sales $360,000 $560,000 $770,000Direct Cost of Sales $18,000 $28,000 $38,500Other Costs of Sales $0 $0 $0

------------ ------------ ------------Total Cost of Sales $18,000 $28,000 $38,500

Gross Margin $342,000 $532,000 $731,500Gross Margin % 95.00% 95.00% 95.00%

ExpensesPayroll $225,000 $300,000 $380,000Sales and Marketing and OtherExpenses

$6,000 $10,000 $15,000

Depreciation $0 $0 $0Rent $8,800 $14,000 $16,000Utilities $1,000 $1,500 $2,000Insurance $3,600 $4,000 $5,000Payroll Taxes $33,750 $45,000 $57,000Consultants $75,000 $0 $0Telecommunications $2,600 $4,000 $5,000

Business Travel $5,000 $8,000 $10,000Moving Expenses/Redecorating $1,000 $0 $0Other $4,800 $10,000 $10,000

------------ ------------ ------------Total Operating Expenses $366 550 $396 500 $500 000

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($25,000)

($20,000)

($15,000)

($10,000)

($5,000)

$0

$5,000

$10,000

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Profit Monthly

$150,000

$200,000

Profit Yearly

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$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000


Gross Margin Monthly

$600,000

$700,000

$800,000

Gross Margin Yearly

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8.4 Projected Cash Flow

Our cash plan is based on the assumption that we meet our sales objectives and collectreceivables within 60 days. This will be especially critical during our first year of operations,during which our cash balance will also depend on the initial cash contributions of the threefounding partners and a two-year $30,000 loan. The combination of the two should besufficient to keep our cash balance positive during the most critical first year of operations.

The table below summarizes our cash flow forecasts.

Table: Cash Flow

Pro Forma Cash FlowFY 2005 FY 2006 FY 2007

Cash Received

Cash from OperationsCash Sales $0 $0 $0Cash from Receivables $281,333 $516,296 $724,111Subtotal Cash from Operat ions $281,333 $516,296 $724,111

Additional Cash ReceivedSales Tax, VAT, HST/GSTReceived

$14,400 $22,400 $30,800

New Current Borrowing $0 $0 $0New Other Liabilities (interest-free) $0 $0 $0New Long-term Liabilities $0 $0 $0Sales of Other Current Assets $0 $0 $0Sales of Long-term Assets $0 $0 $0New Investment Received $0 $0 $0Subtotal Cash Received $295,733 $538,696 $754,911

Expenditures FY 2005 FY 2006 FY 2007

Expenditures from OperationsCash spending $225,000 $300,000 $380,000Bill Payments $147 878 $165 338 $222 614

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($40,000)

($20,000)

$0

$20,000

$40,000

$60,000

$80,000

$100,000


Net Cash Flow

Cash Balance

Cash

8.5 Projected Balance Sheet

The table below summarizes our forecasted balance sheet. For the first two years ofoperations (i.e., until we generate a sufficient cash reserve), receivables represent our main

current asset. Our fixed assets should be mostly limited to the computer equipment that wedepreciate over 5 years. With manageable liabilities, our accounting net worth should steadilygrow over the projected period.

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Table: Balance Sheet

Pro Forma Balance SheetFY 2005 FY 2006 FY 2007

Assets

Current AssetsCash $9,531 $45,490 $166,988Accounts Receivable $78,667 $122,370 $168,259Other Current Assets $0 $0 $0Total Current Assets $88,198 $167,860 $335,247

Long-term AssetsLong-term Assets $13,000 $13,000 $13,000

Accumulated Depreciation $0 $0 $0Total Long-term Assets $13,000 $13,000 $13,000Total Assets $101,198 $180,860 $348,247

Liabilities and Capital FY 2005 FY 2006 FY 2007

Current LiabilitiesAccounts Payable $13,860 $14,197 $19,533Current Borrowing $15,000 $0 $0Other Current Liabilities $0 $0 $0Subtotal Current Liabilities $28,860 $14,197 $19,533

Long-term Liabilities $0 $0 $0Total Liabilities $28,860 $14,197 $19,533

Paid-in Capital $105,000 $105,000 $105,000Retained Earnings ($5,924) ($32,662) $61,663Earnings ($26,738) $94,325 $162,050Total Capital $72,339 $166,664 $328,714Total Liabili ties and Capital $101,198 $180,860 $348,247

Net Worth $72,339 $166,664 $328,714

8.6 Business Ratios

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Table: Ratios

Ratio AnalysisFY 2005 FY 2006 FY 2007 Industry Profile

Sales Growth 0.00% 55.56% 37.50% 5.21%

Percent of Total AssetsAccounts Receivable 77.74% 67.66% 48.32% 19.34%Other Current Assets 0.00% 0.00% 0.00% 46.42%Total Current Assets 87.15% 92.81% 96.27% 68.91%Long-term Assets 12.85% 7.19% 3.73% 31.09%Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 28.52% 7.85% 5.61% 32.29%

Long-term Liabilities 0.00% 0.00% 0.00% 20.16%Total Liabilities 28.52% 7.85% 5.61% 52.45%Net Worth 71.48% 92.15% 94.39% 47.55%

Percent of SalesSales 100.00% 100.00% 100.00% 100.00%Gross Margin 95.00% 95.00% 95.00% 100.00%Selling, General & AdministrativeExpenses

27.91% 78.16% 73.95% 80.41%

Advertising Expenses 1.67% 1.79% 0.78% 1.08%Profit Before Interest and Taxes -6.82% 24.20% 30.06% 1.17%

Main RatiosCurrent 3.06 11.82 17.16 1.45Quick 3.06 11.82 17.16 1.16Total Debt to Total Assets 28.52% 7.85% 5.61% 61.68%Pre-tax Return on Net Worth -36.96% 80.85% 70.43% 1.52%Pre-tax Return on Assets -26.42% 74.50% 66.48% 3.96%

Additional Ratios FY 2005 FY 2006 FY 2007Net Profit Margin -7.43% 16.84% 21.05% n.aReturn on Equity -36.96% 56.60% 49.30% n.a

Activity RatiosAccounts Receivable Turnover 4.58 4.58 4.58 n.aCollection Days 57 66 69 n.aAccounts Payable Turnover 11.67 11.67 11.67 n.a

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Appendix Table: Sales Forecast

Sales ForecastSep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

SalesNew Curriculum & ContentDevelopment

0%$10,000 $20,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $40,000 $40,000 $40,000

Reuse, Re-licensure andMaintenance 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Learning Object Development 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Training 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Consulting 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Other Services 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Sales $10,000 $20,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $40,000 $40,000 $40,000

Direct Cost of Sales Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul AugSoftware packaging 5% $500 $1,000 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $2,000 $2,000 $2,000Other Services $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Subtotal Direct Cost of Sales $500 $1,000 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $2,000 $2,000 $2,000

Appendix

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Appendix Table: Personnel

Personnel PlanSep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Susan Hines (CEO) 0% $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250Mona Meyer (CLO) 0% $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250Danny Stanford (CCO) 0% $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250

Instructional Designer 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Production Assistant 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Director of Technology 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total People 3 3 3 3 3 3 3 3 3 3 3 3

Total Payroll $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750

Appendix

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Appendix Table: General Assumptions

General AssumptionsSep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Plan Month 1 2 3 4 5 6 7 8 9 10 11 12Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%Other 0 0 0 0 0 0 0 0 0 0 0 0

Appendix

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Appendix Table: Profit and Loss

Pro Forma Profit and LossSep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Sales $10,000 $20,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $40,000 $40,000 $40,000Direct Cost of Sales $500 $1,000 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $2,000 $2,000 $2,000Other Costs of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

------- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- -Total Cost of Sales $500 $1,000 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $2,000 $2,000 $2,000

Gross Margin $9,500 $19,000 $28,500 $28,500 $28,500 $28,500 $28,500 $28,500 $28,500 $38,000 $38,000 $38,000Gross Margin % 95.00% 95.00% 95.00% 95.00% 95.00% 95.00% 95.00% 95.00% 95.00% 95.00% 95.00% 95.00%

ExpensesPayroll $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750Sales and Marketing and OtherExpenses

$500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500

Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Rent $200 $200 $200 $200 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000Utilities $50 $50 $50 $50 $100 $100 $100 $100 $100 $100 $100 $100Insurance $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300Payroll Taxes 15% $2,813 $2,813 $2,813 $2,813 $2,813 $2,813 $2,813 $2,813 $2,813 $2,813 $2,813 $2,813Consultants $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250 $6,250Telecommunications $150 $150 $150 $150 $250 $250 $250 $250 $250 $250 $250 $250Business Travel $250 $250 $250 $250 $500 $500 $500 $500 $500 $500 $500 $500Moving Expenses/Redecorating $0 $0 $0 $1,000 $0 $0 $0 $0 $0 $0 $0 $0Other $200 $200 $200 $200 $500 $500 $500 $500 $500 $500 $500 $500

------- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- -Total Operating Expenses $29,463 $29,463 $29,463 $30,463 $30,963 $30,963 $30,963 $30,963 $30,963 $30,963 $30,963 $30,963

Profit Before Interest and Taxes ($19,963) ($10,463) ($963) ($1,963) ($2,463) ($2,463) ($2,463) ($2,463) ($2,463) $7,038 $7,038 $7,038Interest Expense $240 $229 $219 $208 $198 $188 $177 $167 $156 $146 $135 $125Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Net Profit ($20,202) ($10,692) ($1,181) ($2,171) ($2,660) ($2,650) ($2,640) ($2,629) ($2,619) $6,892 $6,902 $6,913Net Profit/Sales -202.02% -53.46% -3.94% -7.24% -8.87% -8.83% -8.80% -8.76% -8.73% 17.23% 17.26% 17.28%

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Appendix Table: Cash Flow

Pro Forma Cash FlowSep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Cash Received

Cash from Operations

Cash Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Cash from Receivables $0 $333 $10,333 $20,333 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,333 $40,000Subtotal Cash from Operations $0 $333 $10,333 $20,333 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,333 $40,000

Additional Cash ReceivedSales Tax, VAT, HST/GST Received 4.00% $400 $800 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,600 $1,600 $1,600New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Subtotal Cash Received $400 $1,133 $11,533 $21,533 $31,200 $31,200 $31,200 $31,200 $31,200 $31,600 $31,933 $41,600

Expenditures Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Expenditures from OperationsCash spending $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 $18,750Bill Payments $382 $11,468 $11,958 $12,464 $13,437 $13,910 $13,900 $13,889 $13,879 $13,885 $14,358 $14,348Subtotal Spent on Operations $19,132 $30,218 $30,708 $31,214 $32,187 $32,660 $32,650 $32,639 $32,629 $32,635 $33,108 $33,098

Additional Cash SpentSales Tax, VAT, HST/GST Paid Out $0 $400 $800 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,600 $1,600 $1,600Principal Repayment of CurrentBorrowing

$1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $1,250

Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Long-term Liabilities PrincipalRepayment

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

Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Subtotal Cash Spent $20,782 $32,268 $33,158 $33,664 $34,637 $35,110 $35,100 $35,089 $35,079 $35,485 $35,958 $35,948

Net Cash Flow ($20,382) ($31,135) ($21,625) ($12,131) ($3,437) ($3,910) ($3,900) ($3,889) ($3,879) ($3,885) ($4,025) $5,652Cash Balance $95,694 $64,559 $42,935 $30,804 $27,366 $23,456 $19,557 $15,668 $11,789 $7,904 $3,879 $9,531

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Appendix Table: Balance Sheet

Pro Forma Balance SheetSep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Assets Starting Balances

Current Assets

Cash $116,076 $95,694 $64,559 $42,935 $30,804 $27,366 $23,456 $19,557 $15,668 $11,789 $7,904 $3,879 $9,531Accounts Receivable $0 $10,000 $29,667 $49,333 $59,000 $59,000 $59,000 $59,000 $59,000 $59,000 $69,000 $78,667 $78,667Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Current Assets $116,076 $105,694 $94,226 $92,268 $89,804 $86,366 $82,456 $78,557 $74,668 $70,789 $76,904 $82,546 $88,198

Long-term AssetsLong-term Assets $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000

Accumulated Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Long-term Assets $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000 $13,000Total Assets $129,076 $118,694 $107,226 $105,268 $102,804 $99,366 $95,456 $91,557 $87,668 $83,789 $89,904 $95,546 $101,198

Liabilities and Capital Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Current LiabilitiesAccounts Payable $0 $11,070 $11,544 $12,017 $12,973 $13,447 $13,437 $13,427 $13,417 $13,406 $13,880 $13,870 $13,860Current Borrowing $30,000 $28,750 $27,500 $26,250 $25,000 $23,750 $22,500 $21,250 $20,000 $18,750 $17,500 $16,250 $15,000Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Subtotal Current Liabilities $30,000 $39,820 $39,044 $38,267 $37,973 $37,197 $35,937 $34,677 $33,417 $32,156 $31,380 $30,120 $28,860

Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Liabilities $30,000 $39,820 $39,044 $38,267 $37,973 $37,197 $35,937 $34,677 $33,417 $32,156 $31,380 $30,120 $28,860

Paid-in Capital $105,000 $105,000 $105,000 $105,000 $105,000 $105,000 $105,000 $105,000 $105,000 $105,000 $105,000 $105,000 $105,000Retained Earnings ($5,924) ($5,924) ($5,924) ($5,924) ($5,924) ($5,924) ($5,924) ($5,924) ($5,924) ($5,924) ($5,924) ($5,924) ($5,924)Earnings $0 ($20,202) ($30,894) ($32,075) ($34,246) ($36,906) ($39,556) ($42,196) ($44,825) ($47,444) ($40,552) ($33,650) ($26,738)Total Capital $99,076 $78,874 $68,182 $67,001 $64,830 $62,170 $59,520 $56,880 $54,251 $51,632 $58,524 $65,426 $72,339Total Liabilities and Capital $129,076 $118,694 $107,226 $105,268 $102,804 $99,366 $95,456 $91,557 $87,668 $83,789 $89,904 $95,546 $101,198

Net Worth $99,076 $78,874 $68,182 $67,001 $64,830 $62,170 $59,520 $56,880 $54,251 $51,632 $58,524 $65,426 $72,339

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