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Table of Contents

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

Chart: Highlights..................................................................................................................................2
1.1 Keys to Success.................................................................................................................................2
1.2 Mission..............................................................................................................................................2
1.3 Objectives..........................................................................................................................................3
2.0 Company Summary...............................................................................................................................4
2.1 Company Ownership.........................................................................................................................4
2.2 Start-up Summary..............................................................................................................................4
Chart: Start-up......................................................................................................................................5
Table: Start-up.....................................................................................................................................5
......................................................................................................................................................................5
4.0 Market Analysis Summary....................................................................................................................6
4.1 Market Segmentation.........................................................................................................................7
Table: Market Analysis........................................................................................................................7
Chart: Market Analysis (Pie)...............................................................................................................7
4.2 Industry Analysis...............................................................................................................................8
4.2.1 Competition and Buying Patterns...............................................................................................9
4.3 Target Market Segment Strategy.....................................................................................................10
5.0 Strategy and Implementation Summary...............................................................................................10
5.1 Competitive Edge............................................................................................................................10
5.2 Marketing Strategy..........................................................................................................................11
5.3 Sales Strategy...................................................................................................................................12
5.3.1 Sales Forecast............................................................................................................................12
Table: Sales Forecast.....................................................................................................................12
Chart: Sales Monthly.....................................................................................................................13
Chart: Sales by Year......................................................................................................................13
5.4 Milestones........................................................................................................................................14
Table: Milestones...............................................................................................................................14
Chart: Milestones...............................................................................................................................14
6.0 Management Summary........................................................................................................................15
6.1 Personnel Plan.................................................................................................................................15
Table: Personnel.................................................................................................................................15
....................................................................................................................................................................15
7.1 Start-up Funding..............................................................................................................................16
Table: Start-up Funding.....................................................................................................................17
7.2 Important Assumptions....................................................................................................................17
7.3 Break-even Analysis........................................................................................................................17
Table: Break-even Analysis...............................................................................................................18
Chart: Break-even Analysis...............................................................................................................18
7.4 Projected Profit and Loss.................................................................................................................18
Chart: Profit Monthly.........................................................................................................................19
Chart: Profit Yearly............................................................................................................................19
Chart: Gross Margin Monthly............................................................................................................20
Chart: Gross Margin Yearly...............................................................................................................20
Page 1

Table of Contents

Table: Profit and Loss........................................................................................................................21

7.5 Projected Cash Flow........................................................................................................................21
Table: Cash Flow...............................................................................................................................22
...............................................................................................................................................................23
7.6 Projected Balance Sheet..................................................................................................................24
Table: Balance Sheet..........................................................................................................................24
...............................................................................................................................................................24
7.7 Business Ratios................................................................................................................................25
Table: Ratios......................................................................................................................................25
Table: Sales Forecast...................................................................................................................................1
......................................................................................................................................................................1
Table: Personnel...........................................................................................................................................2
......................................................................................................................................................................2
Table: Profit and Loss..................................................................................................................................3
......................................................................................................................................................................3
Table: Cash Flow.........................................................................................................................................4
......................................................................................................................................................................5
Table: Balance Sheet....................................................................................................................................6

Page 2

Garbles Cellular Phones

1.0 Executive Summary

Cellular telephones have revolutionized the communications arena, redefining how we perceive
voice communications. Traditionally, cellular phones remained out of the hands of most
consumers due to their high cost. As a result, cell phone carriers have invested time and
resources into finding ways to give the systems higher capacity and thus lower cost. Cell
systems are benefiting from this research and starting to develop into large-scale consumer
products.
Today, cellular phones are truly consumer electronics devices with over 59 million subscribers.
The Nokia Bowl and Qualcomm Stadium are further evidence of the idea that cell phones are
consumer electronics devices. Cell phones have ceased to be an exclusive status symbol of
high-powered lawyers and are now in the hands of millions of consumers.
Garbles Cellular Phones, Inc. is taking advantage of an opportunity to become a highly
distinguished and recognized leader in the cellular communications industry. It is the goal of
our company to become established as the leading distributor of wireless communications
services in the metro Niceburg area.
In order to achieve this goal, Garbles Cellular Phones' critical success factors will be to identify
emerging trends and integrate them into our company operations, respond quickly to
technology changes/be there early, provide high-quality services, invest time and money in
marketing and advertising, expand into specialty markets, and stay ahead of the "technology
curve."
The company was initially formed as a sole proprietorship by Mr. Seramed Garbles in the East
Atlantic Island Archipelago (EAIA), and succeeded tremendously in that market. Capitalizing on
the growing wireless communications industry and based on their success in EAIA the Garbles
family decided to expand their company's operations to the U.S.A. and create a niche market
for its products and accessories.

Page 1

Garbles Cellular Phones

Chart: Highlights

1.1 Keys to Success

Our company keys to success will include:
1.
2.
3.
4.

Provide excellent customer service

Grow and maintain a referral network of customers
Focus expertise in GSM cellular phones and GSM cellular phone programs
Respond rapidly to customer problems with product or plan

1.2 Mission
Garbles Cellular's mission is to offer its customers the highest quality cell phone products and
services. Its owner focuses on personalized service to his customers by offering convenience
and rapid service. Additionally, Garbles Cellular has the technological expertise to assist
customers in picking the product and service that best meets their needs. Finally, our staff will
have strong vendor relationships with the product suppliers and will be able to meet customers'
demand for the newest innovation in cellular phone technology.
We believe it is important to remain an active member of the community, and to impact
people's lives in more ways than deriving a profit from them. We propose to host community
events that bring out the best in people.

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Garbles Cellular Phones

1.3 Objectives
The company plans to focus on the following target markets that will provide us with the
greatest market penetration: the specialty business users, the general business users, and the
personal users. We intend to offer products and service packages that are priced appropriately
for each segment and will offer the services that best suit each segment's needs.
The suburb of Pleasant Village, picked to be our headquarters' location, is a focal point in the
Niceburg area. Located a few miles south of downtown Niceburg, it is a community with a small
town atmosphere but big city conveniences.
The Metro Niceburg area is populated today by more than 700,000 inhabitants, is home to 13
Fortune 500 and 24 Fortune 1,000 company headquarters. The Metropolitan Niceburg Chamber
of Commerce and corporate executives are committed to actively recruiting new companies to
the region. Public and private partnerships with business, financial and nonprofit communities
are key to spurring quality job creation and investment throughout the citys neighborhoods.
Our company will center on serving the growing the Niceburg community (presently at a 6%
per year rate) as well as concentrating on the local Pleasant Village population, banking on the
current growing trend of using mobile phones.
Our company will concentrate on selling Global System for Mobile Communications (GSM)
protocol cellular phones - sales, services and support.
Business Objectives

Company growth
Become established as the leading distributor of cellular phones and wireless
communications services
Increase number of retail outlets

Financial Objectives

Create and increase revenue

Marketing Objectives

Increase marketing efforts

Expand market area
Expand marketing reach
Brand recognition
Increase telemarketing efforts

Page 3

Garbles Cellular Phones

2.0 Company Summary

Garbles Cellular Phones, Inc. will offer its customers GSM cellular phones, and cellular phones
accessories.
GSM stands for "Global System for Mobile Communications." GSM is originally a European
system and is largely being adopted today in the United States. Its greatest advantage, a
technical one, is that the owner can use the phone all over the world since the system is used
mostly anywhere.
Market demand drives cell phone manufactures and service providers to offer new and
improved services and functions in their cell phones. The demand for more visual interaction
and entertainment with cell phones in the Japanese market, for instance, is great and as such,
their phones are many years ahead of what we will see in the U.S.A. Phones have definitely
become an important part of people's lives all over the world, whereas in North America many
still view the cell phone as a tool and not as a entertainment device. The average phone in
North America lasts 3-5 years before being replaced, in Japan it is a fraction of this time.
We believe that, with our long and thorough experience in the EAIA, our store will be in the
perfect location to start our operations in the U.S.A., and will start operating in the right time.
Garbles Cellular Phones will provide its customers support and convenience second to none.
2.1 Company Ownership
Garbles Cellular Phones is wholly owned by Mr. Seramed Garbles, who is a citizen of the East
Atlantic Island Archipelago and the owner of Garbles Cellular Phones Ltd in that country.
2.2 Start-up Summary
Mr. Seramed Garbles will invest $43,000 in Garbles Cellular Phones, Inc. He will also invest
an additional $50,000 when operation takes off in April Year 1. The following chart and table
show projected initial start-up costs for Garbles Cellular Phones, Inc.

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Garbles Cellular Phones

Chart: Start-up

Table: Start-up

Start-up
Requirements
Start-up Expenses
Legal
Insurance
Rent
Equipment
Other
Total Start-up Expenses

$5,000
$1,000
$2,000
$2,000
$1,000
$11,000

Start-up Assets
Cash Required
Start-up Inventory
Other Current Assets
Long-term Assets
Total Assets

$2,000
$30,000
$0
$0
$32,000

Total Requirements

$43,000

Page 5

Garbles Cellular Phones

3.0 Products
The following are the products that will be offered by Garbles Cellular Phones:

GSM Cellular Phones: Motorola, Nokia, Sharp, Siemens, Samsung, Alcatel, Ericsson,
Fujitsu, Hyundai, LG Electronics, and others.
Fixed Wireless Phones
Cellular Phone Accessories: antennas, batteries, belt clips, cables and adapters, cases,
chargers, faceplates, and modems.

4.0 Market Analysis Summary

The market potential is huge for our products, evidenced by what appears to be the
unstoppable growth of the telecom industry. Currently, the telecom industry is among the
strongest growth industries and is responsible for huge gains in the capital markets. The
proliferation of cellular phones is increasing at rates which at one time were unimaginable. One
illustrative example is that it is forecasted that within two years over 65% of children from age
of 10-15 will have cell phones.
Future growth of the market/products is projected in the following areas:
Text messages between friends (in Japan this big). Users can send regular Short-Message
Service (SMS) or email on their phones. Email is of course limited to small file sizes, but many
of the phones allow for English characters to be sent. Each provider also allows special
characters to be sent, such as an array of happy and sad faces, small animated images,
animals, people, hearts, etc. When special characters are not available, people often use a
specialized set of faces to show emotion. Email can also be sent between different provider
phones, but many of the special characters are lost, hence users may try to keep a circle of
friends on the same provider to receive the special characters. Email, of course, may be sent
from computers as well, but files are often stripped of headers and attachments when received
on cell phones.
Most North American phones come with a few games to keep people entertained for a limited
duration. Japanese phones come with two different types of games: built-in ones and Java
application ones. The built-in ones are simple, but again the graphics are very important to the
game value. Java application games are delivered via the network to the customer's phone and
there is a charge for this service. These games are much more complex and require streaming
data to access. New games come out monthly. You can even buy joysticks and navigation
consoles that plug into your phone.
One of the recent popular additions to many of the Japanese and Korean phone models is a
CCD Camera that is mounted either on the outside of the clamshell or on the clamshell hinge.
The camera lens is slightly smaller than a dime and takes 4x4 cm pictures to display on the
phone's screen or to send to others. Not only can users take pictures, they can take video clips
as well. Most phones take between 5-15 seconds of footage due to memory limitations,
but they can send streaming video. Many of the advertisements for camera phones show people
taking to each other and watching each other on the screen (both holding the phone and
camera at arm's length and using a hands-free microphone and earpiece). The camera also has
a couple of neat accessories including an external flash that pops into an accessory port and a
miniature printer that will print out pictures.
Our company will try to take advantage of these developments and serve its customers in all
these new trends and developments.

Page 6

Garbles Cellular Phones

4.1 Market Segmentation

Garbles Cellular Phones, Inc. will focus on five customer groups, bearing in mind that it is quite
customary today to have more than one cell phone per family:

Children in the age group of 10-17 years old

Students
General public
Professionals
Service organizations and companies that need to be in constant communication with their
employees.

Table: Market Analysis

Market Analysis
Potential Customers

Growth

Children 10-17 years old

Students
Professionals
General Public
Operating Service Companies
Other
Total

3%
2%
2%
2%
4%
1%
2.29%

Year 1

Year 2

Year 3

Year 4

Year 5

90,000
50,000
40,000
250,000
40,000
30,000
500,000

92,700
51,000
40,800
255,000
41,600
30,300
511,400

95,481
52,020
41,616
260,100
43,264
30,603
523,084

98,345
53,060
42,448
265,302
44,995
30,909
535,059

101,295
54,121
43,297
270,608
46,795
31,218
547,334

CAGR
3.00%
2.00%
2.00%
2.00%
4.00%
1.00%
2.29%

Chart: Market Analysis (Pie)

Page 7

Garbles Cellular Phones

4.2 Industry Analysis

The U.S. market is dominated today by three large companies:
T-Mobile Wireless - owned by a subsidiary of Deutsche Telekom since May 31, 2001.

Revenues:Exceeding $13.6 billion in 2001.

Wireless Phone Service Subscribers: Cellular voice, messaging and high-speed wireless data
services to more than 8 million customers.
Cellular Phone Service and Technology: T-Mobile Wireless operates the largest all digital,
wireless network based exclusively on GSM (Global System for Mobile Communications)
technology. GSM is the most widely used digital standard worldwide, accounting for more
than 70 percent of the total digital wireless market.

Cingular Wireless is the second largest wireless company in the U.S. A leader in mobile voice
and data communications, Cingular is a wireless company determined to promote the individual
to a new level.

Ownership: Cingular Wireless is a joint venture between the domestic wireless divisions of
SBC (NYSE:SBC) and BellSouth (NYSE: BLS). Headquarters in Atlanta, Georgia. SBC owns
60 percent of the company and BellSouth owns 40 percent, based on the value of the assets
both contributed to the venture.
Revenue on the cellular service in Year 2002 was more than $14.7 billion.
Cellular Phone Service Subscribers: more than 22 million voice and data customers across
the U.S.A.
Cellular Phone Service and Technology: A leader in mobile voice and data communications,
Cingular is the only U.S. wireless carrier to offer Rollover, the wireless plan that lets
customers keep their unused monthly minutes. Cingular provides cellular/PCS service in 43
of the top 50 markets nationwide, and provides corporate e-mail and other advanced data
services through its GPRS and Mobitex packet data networks

Nextel Communications, based in Reston, VA, is a leading provider of fully integrated,

wireless communications services on the largest guaranteed, all-digital, wireless network in the
country.

Ownership: Nextel Wireless is traded on the NASDAQ National Market under the symbol
NXTL. Nextel Partners is a separate company traded on the NASDAQ National Market.
Revenue on the cellular service $8.7 billion (2002).
Cellular Phone Service Subscribers: 10.61 million (Q4 2002).
Cellular Phone Service and Technology: Nextel uses a packet-based platform, the integrated
Digital Enhanced Network (iDEN) technology, developed by Motorola. The Nextel 4-in-1
serviceNextel Digital Cellular, Direct ConnectSM, Nextel Mobile Messaging, and Nextel
Onlinecovers thousands of communities across the United States. Nextel and Nextel
Partners, Inc., currently serve 197 of the top 200 U.S. markets.

Garbles Cellular Phones is aiming to gather a share of the market from these three.

Page 8

Garbles Cellular Phones

4.2.1 Competition and Buying Patterns

Brand names are of little, if any, importance. The key to the buying decision on the part of the
consumer is the salesman and the cell phone being in front of them. As has been pointed out in
the Competitive Analysis section there are other sellers with similar brand names as those
supplied by Garbles Cellular Phones, Inc. which may even be less expensive. It is essential that
the salesman point out the salient features and selling points favoring our products. Most
importantly, our products must be available in the retail outlet, since whatever products our
store carries are the ones that are going to be sold.
The need to attract, acquire, leverage, and retain customers remains a primary concern to
business. Revenue growth through customer acquisition and retention is as important a
requirement in e-commerce as it is in other business. Customers, especially in the Western
business culture, count speed of service as a key reason why they do business with a company.
They resent delays and hate waiting for service. In the United States, almost 80% of the gross
domestic product (GDP) is generated through different kinds of services, and speed of service
no longer distinguishes an enterprise as providing superior value. Customers generally are not
thrilled if they receive good service, but they are highly dissatisfied if they do not. Garbles
Cellular will provide the necessary framework to cope with these demands by cutting the
waiting time for a service.
Customers also want consistent, reliable, and easy-to-use service. As the speed of service
increases, customer expectations grow, making friendly, easy, and solution-oriented customer
service an important business trend.
Reflective shoppers get some support from e-commerce as well. They like to investigate
products precisely and consciously. However, when browsing costs a lot because of on-line
charges, they do less of it. Consequently, they do not get a holistic view of the available
options, and their expectations often are not met. Reference-spending customers do not let
themselves be hurried or forced. They use alternative offline sources to get information. They
refuse aggressive marketing, which is accepted in Western e-commerce.
Soon, shoppers will simply wave their cell phone over the item they want and the charge will
automatically appear on their cell phone bill. Its happening in some cities overseas already.
And right now, MasterCard and Motorola are testing out a similar program here in the States.
Retailers have registers that will take the signal from the cell phone, and the purchase is
automatically converted to a MasterCard charge. Buyers dont have to sign anything. The scary
part is what could happen when people lose their cell phones or have them stolen. There are
lots of technical and legal issues to work out here, but paying wirelessly is going to gain
momentum quickly.
Garbles Cellular is planning to take advantage of these trends of buying patterns. We shall also
be very quick in establishing our own website to take advantage of E-trade.

Page 9

Garbles Cellular Phones

4.3 Target Market Segment Strategy

The market for cellular phones and their accessories is very fragmented, crowded and
competitive. Among these, there are only a few large local firms that serve the entire city of
Niceburg and its surroundings. The remainder are small firms that sell from kiosks in the
surrounding malls. Garbles Cellular Phones current niche in its location, variety of products and
expertise in serving the public will assure the projected sales.
We expect to take full advantage of the trends described in the Market Analysis above, and try
to penetrate the market with new innovations and gadgets mainly with the younger
generation, using advertisements and demonstrations. We shall also try to lure independent
small sellers to join our effort.
5.0 Strategy and Implementation Summary
Garbles Cellular Phones will use a strategy of total market service. Assumptions:
1. Every person is a potential customer and all our potential markets will experience growth.
2. Marketing to one segment of the population will lead to an expansion in overall market
growth.
The following sections review the various strategies that will support this effort.
5.1 Competitive Edge
The Seramed Communication's competitive edge will be:
Location: Locating the company in a suburb of Niceburg, Homestate enables the company to
cover a large and rapidly developing customer populace.
Customer Service: Mr. Seramed Garbles, owner and CEO of Garbles Cellular Inc., has been
the CEO of the Garbles Cellular Phones Ltd. in the East Atlantic Island Archipelago for many
years past, and accumulated a vast knowledge and experience in the cellular phone market,
with a special expertise in GSM phones. He is very familiar with his target customer base. He
has an excellent reputation for customer service.
E-Commerce: The company will make an effort to enhance its sales through a serious and
advantageous website in order to attract customers that are reluctant to do business with large
companies.

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Garbles Cellular Phones

5.2 Marketing Strategy

Short-term marketing strategies are those that bring will bring us a temporary boost in traffic.
Although these techniques are very important to our over-all plan, they are only a temporary
traffic source and must not be solely relied upon. Short-term marketing strategies include:

Purchasing Advertising
Bulletin Boards
Search Engines

Long-term marketing strategies are those that will bring us a steady stream of targeted traffic
over time. These strategies will continue to produce results even years down the road. Longterm marketing strategies include:

Opt-in Lists
Freebies
Content

By creating and implementing a balanced marketing strategy, using both short-term and longterm strategies, Garbles Cellular will drive a steady stream of targeted traffic to our website.
Using this simple formula when creating our Internet marketing strategy and excelling at all
three, we hope to guarantee our success.
Our short-term marketing strategy will focus heavily on sales promotion, niche positioning in
the market and customer service with loyalty and retention in sales.
Our promotions will always stay in tune with our company objectives and mission statement.

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Garbles Cellular Phones

5.3 Sales Strategy

Constructing our Sales Strategy we shall follow the following steps:
Sales Success Requires Planning - we shall formulate our sales strategy and tactics to
achieve our sales success.
Analyze Our Potential - we shall step through a structured process that will prepare us for
the development of our sales strategy.
Strategize Around Strengths - the description of our sales activity will be analyzed producing
a report that reveals factors impacting our sales potential.
Develop Our Tactics - we shall receive guidance to develop a comprehensive tactical plan to
achieve our success.
Measure Our Success - we shall constantly develop key measurements that mark the
progress of financial estimates that guide our growth.
Employ An Action Plan for Success - we shall provide our sales force a clear tactical plan
that is also aligned with management's strategic objectives.
The sales strategy of Garbles Cellular Phones is simple. The key to customer satisfaction is
having the product and services that meet the customer's needs. A crucial part of that is to also
have knowledgeable employees to help customers quickly find what they want.
5.3.1 Sales Forecast
Sales forecast displayed here is very conservative although we aim very high, we decided to
show a very slow growth and revise the plan on a yearly basis. As a rule we expect to expand
the volume much more rapidly.
Table: Sales Forecast

Sales Forecast
Year 1

Year 2

Year 3

$138,000
$126,000
$46,500
$46,500
$357,000

$190,000
$160,000
$60,000
$90,000
$500,000

$270,000
$200,000
$90,000
$150,000
$710,000

Year 1
$31,650
$30,450
$11,700
$11,710
$85,510

Year 2
$43,560
$41,500
$15,500
$23,300
$123,860

Year 3
$61,900
$51,800
$23,300
$38,900
$175,900

Sales
Cellular Phones
Cellular Phones Accessories
Fixed Wireless Phones
Other Sevices
Total Sales
Direct Cost of Sales
Cellular Phones
Cellular Phones Accessories
Fixed Wireless Phones
Other Services
Subtotal Direct Cost of Sales

Page 12

Garbles Cellular Phones

Chart: Sales Monthly

Chart: Sales by Year

Page 13

Garbles Cellular Phones

5.4 Milestones
The Milestones table hereunder is destined to be a working plan for the formation of the new
organization, including legal negotiations, hiring of personnel, rental of the facility, building of
initial inventory, beginning of marketing and start of physical operation.
The team to execute the chores will have to follow up on the timetable and make sure that
everything falls in place to ensure smooth start of sales and success of the organization.
Table: Milestones

Milestones
Milestone
Preview of Business Plan by
Investor
Concluding Legal Matters
Hiring of Operators
Conclussion of Rentals
Preparation of Website
Acquiring Initial Inventory
Start of Marketing
Start of Operation
Totals

Start Date
1/1/2005

End Date
1/15/2005

Budget
$1,000

Manager
CEO

Department
Department

1/10/2005
2/1/2005
1/15/2005
1/15/2005
2/15/2005
3/1/2005
4/1/2005

2/10/2005
3/1/2005
2/15/2005
3/1/2005
3/15/2005
4/1/2005
4/10/2005

$4,000
$500
$2,000
$2,500
$31,000
$0
$2,000
$43,000

Owner
CEO
Owner
Programmer
Store Personnel
Marketing Mgr.
All

Department
Department
Department
Department
Department
Department
Department

Chart: Milestones

Page 14

Garbles Cellular Phones

6.0 Management Summary

The management of Garbles Cellular Phones, Inc. is made up of the owner, a Marketing
manager (Mr. Nomassu Perozia) and three other members who will be hired locally and will
be added: a Programmer, and two store attendants with one serving at the beginning as
secretary.
6.1 Personnel Plan
The Garbles Cellular Phones' store will operate virtually 24 hours a day 7 days a week. Although
the store opening hours will be officially 10:00 a.m. to 6:00 p.m., it is clear that due to our
Internet operation the customer support will be a non-stop one. The personnel plan, as detailed
in the following table, has been developed to support these hours.
Assumptions regarding personnel have been made for year 1 through year 3 as follows:
Year 1 Ending March, 2006 - Owner, Mr. Seramed Garbles, will draw a salary of $42,000.
The Marketing Manager, Mr. Nomassu Perozia will receive a yearly salary of $26,400. The
programmer will have $21,000 a year plus a percentage of his Internet sales, and the two store
attendants will earn $16,800 each. However, they will divide the total week hours between
them so that only during busy hours will they both be present.
Year 2 Ending March, 2007 - Salaries will be boosted by 10 - 15 percent. Additional staff will
be hired if significant increases in sales warrant.
The same applies to Year 3 Ending March, 2008.
Table: Personnel

Personnel Plan
CEO
Marketing Manager
Programmer/Office Administrator
2 Store Attendantds
Other
Total People
Total Payroll

Year 1

Year 2

Year 3

$42,000
$26,400
$21,000
$33,600
$0
0

$48,000
$28,800
$22,200
$36,960
$0
0

$54,000
$31,200
$23,400
$40,000
$0
0

$123,000

$135,960

$148,600

Page 15

Garbles Cellular Phones

7.0 Financial Plan

It is assumed that the owner's private resources will be sufficient to finance any monthly cashflow shortage. However, it would be advisable to establish a bank relationship as soon as
possible. Sales could very well increase at a much sharper rate than assumed in these
conservative projections. Sharper sales will result in a greater need for funds in support of
inventory and receivables. An over-draft line of credit with the bank will be an excellent cushion
to fall back on.
This is considered a very good time to start a new business. The economy is beginning its
trek up, and consumer spending is up. The Commerce Department reported, "Consumers had
increased their spending, the largest advance in nine months."
A shorter learning curve will be brought to the business by the owner due to his extensive
background and in-depth market knowledge. He has a clear understanding of the need to
manage costs and forecast future needs so that the business is not "broadsided" by the
unexpected.
One other component on which the financial plan is based is wise purchases. Finding the right
product, at the right price will enable the business to meet planned margins and maintain
inventory at an attractive level with a high turn rate.
7.1 Start-up Funding
Mr. Seramed Garbles will invest $43,000 in Garbles Cellular Phones, Inc. to cover start-up
costs. He will also invest an additional $50,000 when operation takes off in April 2005. The
table below illustrates funding sources for our start-up costs.

Page 16

Garbles Cellular Phones

Table: Start-up Funding

Start-up Funding
Start-up Expenses to Fund
Start-up Assets to Fund
Total Funding Required

$11,000
$32,000
$43,000

Assets
Non-cash Assets from Start-up
Cash Requirements from Start-up
Additional Cash Raised
Cash Balance on Starting Date
Total Assets

$30,000
$2,000
$0
$2,000
$32,000

Liabilities and Capital

Liabilities
Current Borrowing
Long-term Liabilities
Accounts Payable (Outstanding Bills)
Other Current Liabilities (interest-free)
Total Liabilities

$0
$0
$0
$0
$0

Capital
Planned Investment
Owner
Investor
Additional Investment Requirement
Total Planned Investment
Loss at Start-up (Start-up Expenses)
Total Capital

$43,000
$0
$0
$43,000
($11,000)
$32,000

Total Capital and Liabilities

$32,000

Total Funding

$43,000

7.2 Important Assumptions

As a general rule our company will not sell on credit. However for very special cases we might
offer short-term credit against valid assurances. We shall accept cash and checks, Visa,
MasterCard, Discover and American Express, and PayPal on the Internet. All sales paid via
credit cards will be deposited in our business checking account within 48 hours.
7.3 Break-even Analysis
Our break-even analysis is summarized by the following chart and table.

Page 17

Garbles Cellular Phones

Table: Break-even Analysis

Break-even Analysis
Monthly Revenue Break-even

$17,916

Assumptions:
Average Percent Variable Cost
Estimated Monthly Fixed Cost

24%
$13,625

Chart: Break-even Analysis

7.4 Projected Profit and Loss

There are many factors to include when determining a projected profit and loss statement,
these are included in the following table.

Page 18

Garbles Cellular Phones

Chart: Profit Monthly

Chart: Profit Yearly

Page 19

Garbles Cellular Phones

Chart: Gross Margin Monthly

Chart: Gross Margin Yearly

Page 20

Garbles Cellular Phones

Table: Profit and Loss

Pro Forma Profit and Loss

Year 1

Year 2

Year 3

Sales
Direct Cost of Sales
Other Costs of Sales
Total Cost of Sales

$357,000
$85,510
$26,824
$112,334

$500,000
$123,860
$30,000
$153,860

$710,000
$175,900
$45,000
$220,900

Gross Margin
Gross Margin %

$244,666
68.53%

$346,140
69.23%

$489,100
68.89%

Payroll
Marketing/Promotion
Depreciation
Rent
Insurance
Payroll Taxes
Other

$123,000
$4,500
$0
$24,000
$12,000
$0
$0

$135,960
$10,000
$0
$24,000
$12,000
$0
$0

$148,600
$25,000
$0
$24,000
$12,000
$0
$0

Total Operating Expenses

$163,500

$181,960

$209,600

Profit Before Interest and Taxes

EBITDA
Interest Expense
Taxes Incurred

$81,166
$81,166
$0
$24,350

$164,180
$164,180
$0
$49,254

$279,500
$279,500
$0
$83,850

Net Profit
Net Profit/Sales

$56,816
15.91%

$114,926
22.99%

$195,650
27.56%

Expenses

7.5 Projected Cash Flow

Our projected cash flow is outlined in the following chart and table.
Chart: Cash

Page 21

Garbles Cellular Phones

Table: Cash Flow

Pro Forma Cash Flow

Year 1

Year 2

Year 3

$357,000
$357,000

$500,000
$500,000

$710,000
$710,000

$0
$0
$0
$0
$0
$0
$50,000
$407,000

$0
$0
$0
$0
$0
$0
$0
$500,000

$0
$0
$0
$0
$0
$0
$0
$710,000

Year 1

Year 2

Year 3

$123,000
$139,315
$262,315

$135,960
$256,158
$392,118

$148,600
$364,659
$513,259

Sales Tax, VAT, HST/GST Paid Out

Principal Repayment of Current Borrowing
Other Liabilities Principal Repayment
Long-term Liabilities Principal Repayment
Purchase Other Current Assets
Purchase Long-term Assets
Dividends
Subtotal Cash Spent

$0
$0
$0
$0
$0
$0
$0
$262,315

$0
$0
$0
$0
$0
$0
$0
$392,118

$0
$0
$0
$0
$0
$0
$0
$513,259

Net Cash Flow

$144,685

$107,882

$196,741

Cash Received
Cash from Operations
Cash Sales
Subtotal Cash from Operations
Additional Cash Received
Sales Tax, VAT, HST/GST Received
New Current Borrowing
New Other Liabilities (interest-free)
New Long-term Liabilities
Sales of Other Current Assets
Sales of Long-term Assets
New Investment Received
Subtotal Cash Received
Expenditures
Expenditures from Operations
Cash Spending
Bill Payments
Subtotal Spent on Operations
Additional Cash Spent

Page 22

Garbles Cellular Phones

Cash Balance

$146,685

$254,566

$451,307

Page 23

Garbles Cellular Phones

7.6 Projected Balance Sheet

The table shows the annual balance sheet results, with a healthy projected increase in net
worth. Detailed monthly projections are in the appendix.
Table: Balance Sheet

Pro Forma Balance Sheet

Year 1

Year 2

Year 3

$146,685
$8,000
$0
$154,685

$254,566
$20,694
$0
$275,261

$451,307
$28,814
$0
$480,121

$0
$0
$0
$154,685

$0
$0
$0
$275,261

$0
$0
$0
$480,121

Year 1

Year 2

Year 3

Accounts Payable
Current Borrowing
Other Current Liabilities
Subtotal Current Liabilities

$15,869
$0
$0
$15,869

$21,518
$0
$0
$21,518

$30,729
$0
$0
$30,729

Long-term Liabilities
Total Liabilities

$0
$15,869

$0
$21,518

$0
$30,729

Paid-in Capital
Retained Earnings
Earnings
Total Capital
Total Liabilities and Capital

$93,000
($11,000)
$56,816
$138,816
$154,685

$93,000
$45,816
$114,926
$253,742
$275,261

$93,000
$160,742
$195,650
$449,392
$480,121

Net Worth

$138,816

$253,742

$449,392

Assets
Current Assets
Cash
Inventory
Other Current Assets
Total Current Assets
Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets
Liabilities and Capital
Current Liabilities

Page 24

Garbles Cellular Phones

7.7 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the
Standard Industrial Classification (SIC) code 5731.9902, Consumer electronic equipment, nec,
are shown for comparison.
Table: Ratios

Ratio Analysis
Year 1

Year 2

Year 3

Industry Profile

n.a.

40.06%

42.00%

5.90%

Inventory
Other Current Assets
Total Current Assets
Long-term Assets
Total Assets

5.17%
0.00%
100.00%
0.00%
100.00%

7.52%
0.00%
100.00%
0.00%
100.00%

6.00%
0.00%
100.00%
0.00%
100.00%

33.94%
26.57%
80.73%
19.27%
100.00%

Current Liabilities
Long-term Liabilities
Total Liabilities
Net Worth

10.26%
0.00%
10.26%
89.74%

7.82%
0.00%
7.82%
92.18%

6.40%
0.00%
6.40%
93.60%

41.85%
11.83%
53.68%
46.32%

100.00%
68.53%
52.62%
0.00%
22.74%

100.00%
69.23%
46.24%
0.00%
32.84%

100.00%
68.89%
41.33%
0.00%
39.37%

100.00%
32.59%
17.11%
2.28%
0.85%

9.75
9.24
10.26%
58.47%
52.47%

12.79
11.83
7.82%
64.70%
59.65%

15.62
14.69
6.40%
62.20%
58.21%

1.73
0.79
58.93%
2.27%
5.54%

Sales Growth
Percent of Total Assets

Percent of Sales
Sales
Gross Margin
Selling, General & Administrative Expenses
Advertising Expenses
Profit Before Interest and Taxes
Main Ratios
Current
Quick
Total Debt to Total Assets
Pre-tax Return on Net Worth
Pre-tax Return on Assets
Additional Ratios

Year 1

Year 2

Year 3

Net Profit Margin

Return on Equity

15.91%
40.93%

22.99%
45.29%

27.56%
43.54%

n.a
n.a

8.67
9.78
27
2.31

8.63
12.17
26
1.82

7.11
12.17
26
1.48

n.a
n.a
n.a
n.a

0.11
1.00

0.08
1.00

0.07
1.00

n.a
n.a

$138,816
0.00

$253,742
0.00

$449,392
0.00

n.a
n.a

0.43
10%
9.24
2.57

0.55
8%
11.83
1.97

0.68
6%
14.69
1.58

n.a
n.a
n.a
n.a

Activity Ratios
Inventory Turnover
Accounts Payable Turnover
Payment Days
Total Asset Turnover
Debt Ratios
Debt to Net Worth
Current Liab. to Liab.
Liquidity Ratios
Net Working Capital
Interest Coverage
Additional Ratios
Assets to Sales
Current Debt/Total Assets
Acid Test
Sales/Net Worth

Page 25

Garbles Cellular Phones

Dividend Payout

0.00

0.00

0.00

n.a

Page 26

Appendix
Table: Sales Forecast

Sales Forecast
Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$10,000
$9,000
$3,500
$3,500
$26,000

$10,000
$9,000
$3,500
$3,500
$26,000

$10,000
$9,000
$3,500
$3,500
$26,000

$11,000
$10,000
$3,750
$3,750
$28,500

$11,000
$10,000
$3,750
$3,750
$28,500

$11,000
$10,000
$3,750
$3,750
$28,500

$12,000
$11,000
$4,000
$4,000
$31,000

$12,000
$11,000
$4,000
$4,000
$31,000

$12,000
$11,000
$4,000
$4,000
$31,000

$13,000
$12,000
$4,250
$4,250
$33,500

$13,000
$12,000
$4,250
$4,250
$33,500

$13,000
$12,000
$4,250
$4,250
$33,500

Direct Cost of Sales

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Cellular Phones

$2,300

$2,300

$2,300

$2,500

$2,500

$2,500

$2,750

$2,750

$2,750

$3,000

$3,000

$3,000

Cellular Phones Accessories

Sales
Cellular Phones
Cellular Phones Accessories
Fixed Wireless Phones
Other Sevices
Total Sales

0%
0%
0%
0%

$2,250

$2,250

$2,250

$2,400

$2,400

$2,400

$2,600

$2,600

$2,600

$2,900

$2,900

$2,900

Fixed Wireless Phones

$900

$900

$900

$950

$950

$950

$1,000

$1,000

$1,000

$1,050

$1,050

$1,050

Other Services

$900

$900

$900

$950

$950

$950

$1,000

$1,000

$1,000

$1,060

$1,050

$1,050

$6,350

$6,350

$6,350

$6,800

$6,800

$6,800

$7,350

$7,350

$7,350

$8,010

$8,000

$8,000

Subtotal Direct Cost of Sales

Page 1

Appendix
Table: Personnel

Personnel Plan
CEO
Marketing Manager
Programmer/Office Administrator
2 Store Attendantds
Other
Total People
Total Payroll

0%
0%
0%
0%
0%

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$3,500
$2,200
$1,750
$2,800
$0
0

$3,500
$2,200
$1,750
$2,800
$0
0

$3,500
$2,200
$1,750
$2,800
$0
0

$3,500
$2,200
$1,750
$2,800
$0
0

$3,500
$2,200
$1,750
$2,800
$0
0

$3,500
$2,200
$1,750
$2,800
$0
0

$3,500
$2,200
$1,750
$2,800
$0
0

$3,500
$2,200
$1,750
$2,800
$0
0

$3,500
$2,200
$1,750
$2,800
$0
0

$3,500
$2,200
$1,750
$2,800
$0
0

$3,500
$2,200
$1,750
$2,800
$0
0

$3,500
$2,200
$1,750
$2,800
$0
0

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

Page 2

Appendix
Table: Profit and Loss

Pro Forma Profit and Loss

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$26,000

$26,000

$26,000

$28,500

$28,500

$28,500

$31,000

$31,000

$31,000

$33,500

$33,500

$33,500

Direct Cost of Sales

$6,350

$6,350

$6,350

$6,800

$6,800

$6,800

$7,350

$7,350

$7,350

$8,010

$8,000

$8,000

Other Costs of Sales

$2,000

$2,040

$2,081

$2,122

$2,165

$2,208

$2,252

$2,297

$2,343

$2,390

$2,438

$2,487

Total Cost of Sales

$8,350

$8,390

$8,431

$8,922

$8,965

$9,008

$9,602

$9,647

$9,693

$10,400

$10,438

$10,487

Gross Margin

$17,650

$17,610

$17,569

$19,578

$19,535

$19,492

$21,398

$21,353

$21,307

$23,100

$23,062

$23,013

Gross Margin %

67.88%

67.73%

67.57%

68.69%

68.54%

68.39%

69.02%

68.88%

68.73%

68.95%

68.84%

68.70%

Sales

Expenses
Payroll

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

Marketing/Promotion

$0

$500

$500

$500

$0

$0

$1,000

$0

$1,000

$0

$1,000

$0

Depreciation

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$13,250

$13,750

$13,750

$13,750

$13,250

$13,250

$14,250

$13,250

$14,250

$13,250

$14,250

$13,250

Profit Before Interest and Taxes

$4,400

$3,860

$3,819

$5,828

$6,285

$6,242

$7,148

$8,103

$7,057

$9,850

$8,812

$9,763

EBITDA

$4,400

$3,860

$3,819

$5,828

$6,285

$6,242

$7,148

$8,103

$7,057

$9,850

$8,812

$9,763

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$1,320

$1,158

$1,146

$1,748

$1,886

$1,873

$2,144

$2,431

$2,117

$2,955

$2,644

$2,929

Rent
Insurance
Payroll Taxes
Other
Total Operating Expenses

Interest Expense
Taxes Incurred

15%

Net Profit

$3,080

$2,702

$2,673

$4,079

$4,400

$4,369

$5,003

$5,672

$4,940

$6,895

$6,168

$6,834

Net Profit/Sales

11.85%

10.39%

10.28%

14.31%

15.44%

15.33%

16.14%

18.30%

15.93%

20.58%

18.41%

20.40%

Page 3

Appendix
Table: Cash Flow

Pro Forma Cash Flow

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Cash Sales

$26,000

$26,000

$26,000

$28,500

$28,500

$28,500

$31,000

$31,000

$31,000

$33,500

$33,500

$33,500

Subtotal Cash from Operations

$26,000

$26,000

$26,000

$28,500

$28,500

$28,500

$31,000

$31,000

$31,000

$33,500

$33,500

$33,500

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

New Other Liabilities (interest-free)

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

New Long-term Liabilities

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Sales of Other Current Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Sales of Long-term Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

New Investment Received

$50,000

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Subtotal Cash Received

$76,000

$26,000

$26,000

$28,500

$28,500

$28,500

$31,000

$31,000

$31,000

$33,500

$33,500

$33,500

Expenditures

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$10,250

$211

$6,333

$6,699

$6,836

$10,148

$13,851

$13,961

$16,256

$15,103

$15,850

$17,017

$17,050

$10,461

$16,583

$16,949

$17,086

$20,398

$24,101

$24,211

$26,506

$25,353

$26,100

$27,267

$27,300

Sales Tax, VAT, HST/GST Paid Out

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Principal Repayment of Current Borrowing

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Other Liabilities Principal Repayment

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Long-term Liabilities Principal Repayment

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Purchase Other Current Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Purchase Long-term Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Dividends

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Subtotal Cash Spent

$10,461

$16,583

$16,949

$17,086

$20,398

$24,101

$24,211

$26,506

$25,353

$26,100

$27,267

$27,300

Net Cash Flow

$65,539

$9,417

$9,051

$11,414

$8,102

$4,399

$6,789

$4,494

$5,647

$7,400

$6,233

$6,200

Cash Balance

$67,539

$76,957

$86,008

$97,421

$105,523

$109,922

$116,710

$121,204

$126,852

$134,251

$140,484

$146,685

Cash Received
Cash from Operations

Additional Cash Received

Sales Tax, VAT, HST/GST Received
New Current Borrowing

0.00%

Expenditures from Operations

Cash Spending
Bill Payments
Subtotal Spent on Operations
Additional Cash Spent

Page 4

Appendix

Page 5

Appendix
Table: Balance Sheet

Pro Forma Balance Sheet

Assets

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$2,000
$30,000
$0
$32,000

$67,539
$23,650
$0
$91,189

$76,957
$17,300
$0
$94,257

$86,008
$10,950
$0
$96,958

$97,421
$6,800
$0
$104,221

$105,523
$6,800
$0
$112,323

$109,922
$6,800
$0
$116,722

$116,710
$7,350
$0
$124,060

$121,204
$7,350
$0
$128,554

$126,852
$7,350
$0
$134,202

$134,251
$8,010
$0
$142,261

$140,484
$8,000
$0
$148,484

$146,685
$8,000
$0
$154,685

$0
$0
$0
$32,000

$0
$0
$0
$91,189

$0
$0
$0
$94,257

$0
$0
$0
$96,958

$0
$0
$0
$104,221

$0
$0
$0
$112,323

$0
$0
$0
$116,722

$0
$0
$0
$124,060

$0
$0
$0
$128,554

$0
$0
$0
$134,202

$0
$0
$0
$142,261

$0
$0
$0
$148,484

$0
$0
$0
$154,685

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Starting Balances

Current Assets
Cash
Inventory
Other Current Assets
Total Current Assets
Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets
Liabilities and Capital
Current Liabilities
Accounts Payable
Current Borrowing
Other Current Liabilities
Subtotal Current Liabilities

$0
$0
$0
$0

$6,109
$0
$0
$6,109

$6,475
$0
$0
$6,475

$6,502
$0
$0
$6,502

$9,687
$0
$0
$9,687

$13,389
$0
$0
$13,389

$13,418
$0
$0
$13,418

$15,753
$0
$0
$15,753

$14,576
$0
$0
$14,576

$15,283
$0
$0
$15,283

$16,448
$0
$0
$16,448

$16,503
$0
$0
$16,503

$15,869
$0
$0
$15,869

Long-term Liabilities
Total Liabilities

$0
$0

$0
$6,109

$0
$6,475

$0
$6,502

$0
$9,687

$0
$13,389

$0
$13,418

$0
$15,753

$0
$14,576

$0
$15,283

$0
$16,448

$0
$16,503

$0
$15,869

$43,000
($11,000)
$0
$32,000
$32,000

$93,000
($11,000)
$3,080
$85,080
$91,189

$93,000
($11,000)
$5,782
$87,782
$94,257

$93,000
($11,000)
$8,455
$90,455
$96,958

$93,000
($11,000)
$12,535
$94,535
$104,221

$93,000
($11,000)
$16,934
$98,934
$112,323

$93,000
($11,000)
$21,304
$103,304
$116,722

$93,000
($11,000)
$26,307
$108,307
$124,060

$93,000
($11,000)
$31,979
$113,979
$128,554

$93,000
($11,000)
$36,919
$118,919
$134,202

$93,000
($11,000)
$43,813
$125,813
$142,261

$93,000
($11,000)
$49,982
$131,982
$148,484

$93,000
($11,000)
$56,816
$138,816
$154,685

$32,000

$85,080

$87,782

$90,455

$94,535

$98,934

$103,304

$108,307

$113,979

$118,919

$125,813

$131,982

$138,816

Paid-in Capital
Retained Earnings
Earnings
Total Capital
Total Liabilities and Capital
Net Worth

Page 6