Strategy and Implementation Summary

Excellent word of mouth among motorcycle hobbyists is the Royal Enfield of Eicher
motors. The motorcycle community is close and used by its members to locate
resources and services. Each satisfied customer of Eicher motors will bring in more
business.

5.1 Competitive Edge

Royal Enfield has a special place in the annals of Indias motorcycling history. One of the
oldest brands in existence in the world, it was first introduced in India in 1949. Its
influence on Indian motorcycling was so strong that many Indians would have either
started out riding a Royal Enfield, or experienced one at some point in their lives. It
was Royal Enfield which gave birth to the concept of leisure motorcycling in India. Their
bikes possessed an inherent sturdiness and relatively simple mechanicals, which meant
they could be ridden anywhere without much trouble.

5.2 Sales Strategy

Eicher motors will open with a Customization Show and Competition. During the first
month of operation, Eicher motors will offer a 15% discount on all purchases.

5.2.1 Sales Forecast

The table and charts below projected sales forecast for three years.

Table: Sales Forecast

Sales Forecast
Year 1 Year 2 Year 3
Sales
Motorcycles $137,000 $142,000 $152,000
Motorcycle Parts $98,000 $110,000 $119,000
Total Sales $235,000 $252,000 $271,000

Direct Cost of Sales Year 1 Year 2 Year 3

Motorcycles $62,500 $63,000 $69,000
Motorcycle Parts $45,000 $54,000 $58,000
Subtotal Direct Cost of Sales $107,500 $117,000 $127,000

Chart: Sales Monthly

Page 1
Chart: Sales by Year

Page 2
Financial Plan

The following is the financial plan for Eicher motors.

Break-even Analysis

The monthly break-even point is approximately $16,000.

Table: Break-even Analysis

Break-even Analysis

Monthly Revenue Break-even $16,638

Assumptions:
Average Percent Variable Cost 46%
Estimated Monthly Fixed Cost $9,027

Chart: Break-even Analysis

Page 3
Projected Profit and Loss

The following table and charts shows projected profit and loss for three years.

Chart: Profit Monthly

Chart: Profit Yearly

Table: Profit and Loss

Page 4
 Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $235,000 $252,000 $271,000
Direct Cost of Sales $107,500 $117,000 $127,000
Other Production Expenses $0 $0 $0
Total Cost of Sales $107,500 $117,000 $127,000

Gross Margin $127,500 $135,000 $144,000

Gross Margin % 54.26% 53.57% 53.14%

Expenses
Payroll $69,600 $74,000 $79,000
Sales and Marketing and Other Expenses $6,000 $6,000 $6,000
Depreciation $4,284 $4,284 $4,284
Leased Equipment $0 $0 $0
Utilities $2,400 $2,400 $2,400
Insurance $0 $0 $0
Rent $15,600 $15,600 $15,600
Payroll Taxes $10,440 $11,100 $11,850
Other $0 $0 $0

Total Operating Expenses $108,324 $113,384 $119,134

Profit Before Interest and Taxes $19,176 $21,616 $24,866

EBITDA $23,460 $25,900 $29,150
Interest Expense $2,000 $2,000 $2,000
Taxes Incurred $5,153 $5,885 $6,860

Net Profit $12,023 $13,731 $16,006

Net Profit/Sales 5.12% 5.45% 5.91%

Projected Cash Flow

The table and chart show the projected cash flow for three years.

Table: Cash Flow

Pro Forma Cash Flow

Year 1 Year 2 Year 3
Cash Received

Cash from Operations

Cash Sales $94,000 $100,800 $108,400
Cash from Receivables $116,820 $149,451 $160,645
Subtotal Cash from Operations $210,820 $250,251 $269,045

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $210,820 $250,251 $269,045

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

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Cash Spending $69,600 $74,000 $79,000
Bill Payments $108,864 $160,218 $172,854
Subtotal Spent on Operations $178,464 $234,218 $251,854

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $178,464 $234,218 $251,854

Net Cash Flow $32,356 $16,033 $17,191

Cash Balance $36,356 $52,389 $69,580

Chart: Cash

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Projected Balance Sheet

The table shows the projected balance sheet for three years.

Table: Balance Sheet

Pro Forma Balance Sheet

Year 1 Year 2 Year 3
Assets

Current Assets
Cash $36,356 $52,389 $69,580
Accounts Receivable $24,180 $25,929 $27,884
Inventory $10,550 $18,834 $20,390
Other Current Assets $0 $0 $0
Total Current Assets $71,086 $97,153 $117,854

Long-term Assets
Long-term Assets $15,000 $15,000 $15,000
Accumulated Depreciation $4,284 $8,568 $12,852
Total Long-term Assets $10,716 $6,432 $2,148
Total Assets $81,802 $103,585 $120,002

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities
Accounts Payable $5,779 $13,830 $14,241
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $5,779 $13,830 $14,241

Long-term Liabilities $20,000 $20,000 $20,000

Total Liabilities $25,779 $33,830 $34,241

Paid-in Capital $55,000 $55,000 $55,000

Retained Earnings ($11,000) $1,023 $14,754
Earnings $12,023 $13,731 $16,006
Total Capital $56,023 $69,754 $85,761
Total Liabilities and Capital $81,802 $103,585 $120,002

Net Worth $56,023 $69,754 $85,761

Business Ratios

Page 7
 Business ratios for the years of this plan are shown below. Industry profile ratios
based on the Standard Industrial Classification (SIC) code 5015, Motor Vehicle Parts
Used, are shown for comparison.

Table: Ratios

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 7.23% 7.54% 12.20%

Percent of Total Assets

Accounts Receivable 29.56% 25.03% 23.24% 28.00%
Inventory 12.90% 18.18% 16.99% 38.90%
Other Current Assets 0.00% 0.00% 0.00% 16.40%
Total Current Assets 86.90% 93.79% 98.21% 83.30%
Long-term Assets 13.10% 6.21% 1.79% 16.70%
Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 7.06% 13.35% 11.87% 38.90%

Long-term Liabilities 24.45% 19.31% 16.67% 12.30%
Total Liabilities 31.51% 32.66% 28.53% 51.20%
Net Worth 68.49% 67.34% 71.47% 48.80%

Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 54.26% 53.57% 53.14% 23.10%
Selling, General & Administrative Expenses 49.14% 48.12% 47.23% 14.00%
Advertising Expenses 2.55% 2.38% 2.21% 0.70%
Profit Before Interest and Taxes 8.16% 8.58% 9.18% 2.00%

Main Ratios
Current 12.30 7.02 8.28 2.16
Quick 10.47 5.66 6.84 0.96
Total Debt to Total Assets 31.51% 32.66% 28.53% 51.20%
Pre-tax Return on Net Worth 30.66% 28.12% 26.66% 5.30%
Pre-tax Return on Assets 21.00% 18.94% 19.05% 10.90%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin 5.12% 5.45% 5.91% n.a
Return on Equity 21.46% 19.69% 18.66% n.a

Activity Ratios
Accounts Receivable Turnover 5.83 5.83 5.83 n.a
Collection Days 57 60 60 n.a
Inventory Turnover 6.76 7.96 6.48 n.a
Accounts Payable Turnover 19.84 12.17 12.17 n.a
Payment Days 27 21 30 n.a
Total Asset Turnover 2.87 2.43 2.26 n.a

Debt Ratios
Debt to Net Worth 0.46 0.48 0.40 n.a
Current Liab. to Liab. 0.22 0.41 0.42 n.a

Liquidity Ratios
Net Working Capital $65,307 $83,322 $103,613 n.a
Interest Coverage 9.59 10.81 12.43 n.a

Additional Ratios
Assets to Sales 0.35 0.41 0.44 n.a
Current Debt/Total Assets 7% 13% 12% n.a
Acid Test 6.29 3.79 4.89 n.a
Sales/Net Worth 4.19 3.61 3.16 n.a
Dividend Payout 0.00 0.00 0.00 n.a

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Table: Sales Forecast

Sales
Forecast
Month Month Month Month Month Month Month Month Month Month Month Month
1 2 3 4 5 6 7 8 9 10 11 12
Sales
Used 0% $9,000 $11,000 $12,000 $12,000 $12,000 $12,000 $12,000 $11,000 $12,000 $11,000 $12,000 $11,000
Motorcycles
Used 0% $4,000 $5,000 $7,000 $8,000 $9,000 $10,000 $8,000 $9,000 $10,000 $10,000 $9,000 $9,000
Motorcycle
Parts
Total Sales $13,000 $16,000 $19,000 $20,000 $21,000 $22,000 $20,000 $20,000 $22,000 $21,000 $21,000 $20,000

Direct Cost of Month Month Month Month Month Month Month Month Month Month Month Month
Sales 1 2 3 4 5 6 7 8 9 10 11 12
Used $5,000 $5,000 $6,000 $6,000 $6,000 $6,000 $6,000 $5,000 $6,000 $5,000 $6,000 $500
Motorcycles
Used $2,000 $2,500 $3,500 $4,000 $4,500 $5,000 $4,000 $4,500 $5,000 $5,000 $4,500 $500
Motorcycle
Parts
Subtotal $7,000 $7,500 $9,500 $10,000 $10,500 $11,000 $10,000 $9,500 $11,000 $10,000 $10,500 $1,000
Direct Cost
of Sales

Table: Personnel

Personnel Plan
Month Month Month Month Month Month Month Month Month Month Month Month
1 2 3 4 5 6 7 8 9 10 11 12
Brian Jefferson 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Staff Person 0% $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800
Total People 2 2 2 2 2 2 2 2 2 2 2 2

Total Payroll $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800

Table: General Assumptions

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

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Table: Profit and Loss

Pro Forma
Profit and
Loss
Month Month Month Month Month Month Month Month Month Month Month Month
1 2 3 4 5 6 7 8 9 10 11 12
Sales $13,000 $16,000 $19,000 $20,000 $21,000 $22,000 $20,000 $20,000 $22,000 $21,000 $21,000 $20,000
Direct Cost $7,000 $7,500 $9,500 $10,000 $10,500 $11,000 $10,000 $9,500 $11,000 $10,000 $10,500 $1,000
of Sales
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Production
Expenses
Total Cost of $7,000 $7,500 $9,500 $10,000 $10,500 $11,000 $10,000 $9,500 $11,000 $10,000 $10,500 $1,000
Sales

Gross $6,000 $8,500 $9,500 $10,000 $10,500 $11,000 $10,000 $10,500 $11,000 $11,000 $10,500 $19,000
Margin
Gross 46.15% 53.13% 50.00% 50.00% 50.00% 50.00% 50.00% 52.50% 50.00% 52.38% 50.00% 95.00%
Margin %

Expenses
Payroll $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800
Sales and $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500
Marketing
and Other
Expenses
Depreciation $357 $357 $357 $357 $357 $357 $357 $357 $357 $357 $357 $357
Leased $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Equipment
Utilities $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200
Insurance $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Rent $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300
Payroll 15% $870 $870 $870 $870 $870 $870 $870 $870 $870 $870 $870 $870
Taxes
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total $9,027 $9,027 $9,027 $9,027 $9,027 $9,027 $9,027 $9,027 $9,027 $9,027 $9,027 $9,027
Operating
Expenses

Profit Before ($3,027) ($527) $473 $973 $1,473 $1,973 $973 $1,473 $1,973 $1,973 $1,473 $9,973
Interest and
Taxes
EBITDA ($2,670) ($170) $830 $1,330 $1,830 $2,330 $1,330 $1,830 $2,330 $2,330 $1,830 $10,330
Interest $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167 $167
Expense
Taxes ($958) ($208) $92 $242 $392 $542 $242 $392 $542 $542 $392 $2,942
Incurred

Net Profit ($2,236) ($486) $214 $564 $914 $1,264 $564 $914 $1,264 $1,264 $914 $6,864
Net -17.20% -3.03% 1.13% 2.82% 4.35% 5.75% 2.82% 4.57% 5.75% 6.02% 4.35% 34.32%
Profit/Sales

Page 10
Table: Cash Flow

Pro Forma
Cash Flow
Month Month Month Month Month Month Month Month Month Month Month Month
1 2 3 4 5 6 7 8 9 10 11 12
Cash
Received

Cash from
Operations
Cash Sales $5,200 $6,400 $7,600 $8,000 $8,400 $8,800 $8,000 $8,000 $8,800 $8,400 $8,400 $8,000
Cash from $0 $260 $7,860 $9,660 $11,420 $12,020 $12,620 $13,160 $12,000 $12,040 $13,180 $12,600
Receivables
Subtotal $5,200 $6,660 $15,460 $17,660 $19,820 $20,820 $20,620 $21,160 $20,800 $20,440 $21,580 $20,600
Cash from
Operations

Additional
Cash
Received
Sales Tax, 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
VAT,
HST/GST
Received
New Current $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Borrowing
New Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Liabilities
(interest-free)
New Long- $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
term
Liabilities
Sales of $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Current
Assets
Sales of $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term
Assets
New $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Investment
Received
Subtotal $5,200 $6,660 $15,460 $17,660 $19,820 $20,820 $20,620 $21,160 $20,800 $20,440 $21,580 $20,600
Cash
Received

Expenditures Month Month Month Month Month Month Month Month Month Month Month Month
1 2 3 4 5 6 7 8 9 10 11 12

Expenditures
from
Operations
Cash $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800
Spending
Bill Payments $69 $2,104 $2,839 $3,134 $3,652 $14,500 $15,030 $12,185 $12,507 $16,104 $12,545 $14,195
Subtotal $5,869 $7,904 $8,639 $8,934 $9,452 $20,300 $20,830 $17,985 $18,307 $21,904 $18,345 $19,995
Spent on
Operations

Additional
Cash Spent
Sales Tax, $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
VAT,
HST/GST
Paid Out
Principal $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Repayment
of Current
Borrowing
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Liabilities
Principal
Repayment
Long-term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Liabilities
Principal
Repayment

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 Purchase $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Current
Assets
Purchase $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term
Assets
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal $5,869 $7,904 $8,639 $8,934 $9,452 $20,300 $20,830 $17,985 $18,307 $21,904 $18,345 $19,995
Cash Spent

Net Cash ($669) ($1,244) $6,821 $8,726 $10,368 $520 ($210) $3,175 $2,493 ($1,464) $3,235 $605
Flow
Cash $3,331 $2,087 $8,909 $17,635 $28,003 $28,523 $28,313 $31,487 $33,981 $32,517 $35,752 $36,356
Balance

Table: Balance Sheet

Pro Forma
Balance
Sheet
Month Month Month Month Month Month Month Month Month Month Month Month
1 2 3 4 5 6 7 8 9 10 11 12
Assets Starting
Balance
s

Current
Assets
Cash $4,000 $3,331 $2,087 $8,909 $17,635 $28,003 $28,523 $28,313 $31,487 $33,981 $32,517 $35,752 $36,356
Accounts $0 $7,800 $17,140 $20,680 $23,020 $24,200 $25,380 $24,760 $23,600 $24,800 $25,360 $24,780 $24,180
Receivable
Inventory $45,000 $38,000 $30,500 $21,000 $11,000 $11,550 $12,100 $11,000 $10,450 $12,100 $11,000 $11,550 $10,550
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Current
Assets
Total $49,000 $49,131 $49,727 $50,589 $51,655 $63,753 $66,003 $64,073 $65,537 $70,881 $68,877 $72,082 $71,086
Current
Assets

Long-term
Assets
Long-term $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000
Assets
Accumulat $0 $357 $714 $1,071 $1,428 $1,785 $2,142 $2,499 $2,856 $3,213 $3,570 $3,927 $4,284
ed
Depreciati
on
Total $15,000 $14,643 $14,286 $13,929 $13,572 $13,215 $12,858 $12,501 $12,144 $11,787 $11,430 $11,073 $10,716
Long-term
Assets
Total $64,000 $63,774 $64,013 $64,518 $65,227 $76,968 $78,861 $76,574 $77,681 $82,668 $80,307 $83,155 $81,802
Assets

Liabilities Month Month Month Month Month Month Month Month Month Month Month Month
and 1 2 3 4 5 6 7 8 9 10 11 12
Capital

Current
Liabilities
Accounts $0 $2,009 $2,734 $3,024 $3,169 $13,996 $14,624 $11,773 $11,966 $15,688 $12,063 $13,996 $5,779
Payable
Current $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Borrowing
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Current
Liabilities
Subtotal $0 $2,009 $2,734 $3,024 $3,169 $13,996 $14,624 $11,773 $11,966 $15,688 $12,063 $13,996 $5,779
Current
Liabilities

Long-term $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000
Liabilities
Total $20,000 $22,009 $22,734 $23,024 $23,169 $33,996 $34,624 $31,773 $31,966 $35,688 $32,063 $33,996 $25,779
Liabilities

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Paid-in $55,000 $55,000 $55,000 $55,000 $55,000 $55,000 $55,000 $55,000 $55,000 $55,000 $55,000 $55,000 $55,000
Capital
Retained ($11,00 ($11,00 ($11,00 ($11,00 ($11,00 ($11,00 ($11,00 ($11,00 ($11,00 ($11,00 ($11,00 ($11,00 ($11,00
Earnings 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0)
Earnings $0 ($2,236 ($2,721 ($2,507 ($1,942 ($1,028 $237 $801 $1,715 $2,980 $4,244 $5,159 $12,023
) ) ) ) )
Total $44,000 $41,764 $41,279 $41,493 $42,058 $42,972 $44,237 $44,801 $45,715 $46,980 $48,244 $49,159 $56,023
Capital
Total $64,000 $63,774 $64,013 $64,518 $65,227 $76,968 $78,861 $76,574 $77,681 $82,668 $80,307 $83,155 $81,802
Liabilities
and
Capital

Net Worth $44,000 $41,764 $41,279 $41,493 $42,058 $42,972 $44,237 $44,801 $45,715 $46,980 $48,244 $49,159 $56,023

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