implement. Weaknesses: most managers are terribly overburdened already, unable
to find incremental resources in time and people to apply to incremental
opportunities. Also, there is a lot of additional risk in market development and
channel development done in house from the ground up. Finally, retainer-based
antenna consultants can greatly enhance a company’s reach and extend its
position into conversations that might otherwise never hanve taken place.
4. 3 Market Analysis
As indicated by the illustrations, we must focus on a few thousand well-chosen
potential customers in the United States,Europe, and Latin America. These few
thousand high-tech manufacturing companies are the key customers for Progressive.
Potential CustomersCustomersGrowth rate _____________________________
_______________________ U.S. High Tech5,00010% European
High Tech1,00015% Latin America250
35% Other10,0002% ______________________________
______________________ Total16,250n.a.
5. 0 Strategy Summary
Progressive will focus on three geographical markets, the United States, Europe,
and Latin America, and in limited product segments: personal computers, software,
networks, telecommunications, personal organizers, and technology integration
products. The target customer is usually a manager in a larger corporation, and
occasionally an owner or president of a medium-sized corporation in a high-
growth period.
5. 1 Pricing Strategy
Progressive Consulting will be priced at the upper edge of what the market will
bear, competing with the name brand consultants. The pricing fits with the
general positioning of Triangle as high-level expertise.
Consulting should be based on $5,000 per day for project consulting, $2,000 per
day for market research, and $10,000 per month and up for retainer consulting.
Market research reports should be priced at $5,000 per report, which will of
course require that reports be very well planned, focused on very important
topics very well presented.
5. 2 Sales Forecast
The sales forecast monthly summary is included in the appendix. The annual sales
projections are included here in the following table.
Sales Forecast
Sales 1995 1996 1997 ____________________
______________________________________________ Retainer Consulting
$200,000$250,000$325,000 Project Consulting$270,000
$325,000$350,000 Market Research$122,000
$150,000$200,000 Strategic Reports$0$50,000
$125,000 Other $0$0$0 Total
Sales$592,000$775,000$1,000,000
Cost of sales199519961997 ____________________
______________________________________________ Retainer Consulting
$30,000$20,000$30,000 Project Consulting
$45,000$25,000$31,000 Market Research
$84,000$45,000$50,000 Strategic
Reports$0$20,000$40,000 Other
$0$0$0 Total Cost of Sales$159,000
$110,000$151,000
5. 3 Strategic Alliances
At this writing strategic alliances with Smith and Jones are possibilities,
given the content of existing discussions. Given the background of prospective
partners, we might also be talking to European companies including Siemens and
Olivetti and others, and to United States companies related to Apple Computer.
In Latin America we would be looking at the key local high-technology vendors,
beginning with Printaform.
6. 0 Management Summary
The initial management team depends on the founders themselves, with little
back-up. As we grow we will take on additional consulting help, plus graphic/
editorial, sales, and marketing.
6. 1 Organizational Structure
Progressive should be managed by working partners, in a structure taken mainly
from Smith Partners. In the beginning we assume 3-5 partners:
?Ralph Sampson
?At least one, probably two partners from Smith and Jones
?One strong European partner, based in Paris.
The organization has to be very flat in the beginning, with each of the founders
reponsible for his or her own work and management.
?One other strong partner
6. 2 Management Team
The Progressive business requires a very high level of international experience
and expertise, which means that it will not be easily leveragable in the common
consulting company mode in which partners run the business and make sales, while
associates fulfill. Partners will necessarily be involved in the fulfillment of
the core business proposition, providing the expertise to the clients.
The initial personnel plan is still tentative. It should involve 3-5 partners,
1-3 consultants, 1 strong editorial/graphic person with good staff support, 1
strong marketing person, an office manager, and a secretary. Later we add more
partners, consultants and and sales staff.
Founders’ resumes are included as an additional attachment to this plan.
6. 3 Personnel Plan
The detailed monthly personnel plan for the first year is included in the
appendices. The annual personal estimates are included here as Table 5.
Personnel Plan
199519961997 ____________________
_____________________________________________
Partners $144,000$175,000$200,000 Consultants
$0$50,000$63,000 Editorial/graphic
$18,000$22,000$26,000 VP Marketing
$20,000$50,000$55,000 Sales people
$0$30,000$33,000 Office Manager $7,500
$30,000$33,000 Secretarial $5,250
$20,000$22,000 Other $0$0
$0 Subtotal$194,750$377,000$432,000
7. 0 Financial Plan
We will maintain a conservative financial strategy, based on developing capital
for future growth.
7. 1 Important Assumptions
The table in this section summarizes key financial assumptions, including 45-day
average collection days, sales entirely on invoice basis, expenses mainly on net
30 basis, 35 days on average for payment of invoices, and present-day interest
rates.
General Assumptions
199519961997 ____________
_____________________________________________________________
Collection days434545
Payment Days353535
199519961997 ____________
_____________________________________________________________ Short Term
Interest Rate8.00%8.00%8.00% Long Term Interest Rate
10.00%10.00%10.00% Payment days
353535 Tax Rate Percent0.00%
0.00%0.00% Expenses in cash%25.00%25.00%
25.00% Sales on credit100.00%
100.00%100.00% Personnel Burden %14.00%
14.00%14.00%
7.2 Key Financial Indicators
The chart summarizes key financial benchmarks. Unfortunately, as we increase
sales we will have to show a decline in performance of collection days and gross
margin.
7. 3 Break-even Analysis
Break Even Analysis: ___________________________________________________ Monthly
Units Break-even125,000 Monthly Sales Break-even
$125,000
Assumptions: Average Unit Sale$1.00 Average Per-Unit Cost
$0.20 Fixed Cost$100,000
7. 4 Projected Profit and Loss
The detailed monthly pro-forma income statement for the first year is included
in the appendices. The annual estimates are included here.
Pro-forma Income Statement
199519961997 ____________
_____________________________________________________________ Sales
$592,000$775,000$1,000,000 Cost of Sales
$159,000$110,000$151,000 Other
$1,000$0$0
_________________________________________________
Total Cost of Sales$160,000$110,000$151,000 Gross
margin$432,000$665,000$849,000 Gross margin
percent72.97%85.81%84.90% Operating
expenses: Advertising/Promotion10.00%$36,000
$40,000$44,000 Public Relations10.00%$30,000
$30,000$33,000 Travel10.00%
$90,000$60,000$110,000 Miscellaneous
10.00%$6,000$7,000$8,000 Payroll expense
$194,750$377,000$432,000 Leased Equipment$6,000
$7,000$7,000 Utilities20%$12,000
$14,000$17,000 Insurance20%$3,600
$2,000$2,000 Depreciation$0
$0$0 Rent25%
$18,000$23,000$29,000 Payroll Burden
$0$0$0 Contract/Consultants
$0$0$0 Other$0
$0$0
_________________________________________________
Total Operating Expenses$396,350$560,000$682,000 Profit
Before Interest and Taxes$35,650$105,000$167,000
Interest Expense ST$3,600$12,800$12,800
Interest Expense LT$5,000$5,000$5,000 Taxes
Incurred$0$0$0 Net Profit
$27,050$87,200$149,200 Net
Profit/Sales4.57%11.25%14.92%
7. 5 Projected Cash Flow
Cash flow projections are critical to our success. The monthly cash flow is
shown in the illustration, with one bar representing the cash flow per month and
the other the monthly balance. The annual cash flow figures are included here.
Detailed monthly numbers are included in the appendices.
Pro-Forma Cash Flow
199519961997 ____
________________________________________________________________________________
Net Profit:$27,050$87,200
$149,200 Plus: Depreciation$0
$0$0 Change in Accounts Payable$49,413
$16,799$13,764 Current Borrowing (repayment)
$60,000$100,000$0 Increase (decrease) Other
Liabilities$0$0$0 Long-term Borrowing
(repayment)$50,000$0$0 Capital
Input$0$0$0
Subtotal$186,463$203,999$162,964
Less:190519051905
Change in Accounts Receivable$94,000$5,750
$50,500 Change in Inventory$0$0
$0 Change in Other ST Assets$0$0$0
Capital Expenditure$0$0$0
Dividends$0$0$0
Subtotal$94,000$5,750
$50,500 Net Cash Flow$92,463
$198,249$112,464 Cash balance$117,463
$315,712$428,176
7. 6 Projected Balance Sheet
The balance sheet shows healthy growth of net worth, and strong financial
position. The monthly estimates are included in the appendices.
Pro-forma Balance Sheet
199519961997 ____
________________________________________________________________________________
Short-term AssetsStarting Balances Cash$25,000
$117,463$315,712$428,176 Accounts receivable$0
$94,000$99,750$150,250 Inventory$0
$0$0$0 Other Short-term Assets$7,000
$7,000$7,000$7,000 Total Short-term Assets
$32,000$218,463$422,462$585,426 Long-term
Assets Capital Assets$0$0$0
$0 Accumulated Depreciation$0$0$0$0 Total
Long-term Assets$0$0$0$0
_________________________________________________ Total
Assets$32,000$218,463$422,462$585,426
Debt and Equity
199519961997 ____
________________________________________________________________________________
Accounts Payable$5,000$54,413$71,212
$84,976 Short-term Notes$0$60,000
$160,000$160,000 Other ST Liabilities$0$0
$0$0 Subtotal Short-term Liabilities
$5,000$114,413$231,212$244,976
Long-term Liabilities$0$50,000$50,000
$50,000 Total Liabilities$5,000$164,413
$281,212$294,976
Paid in Capital$50,000$50,000
$50,000$50,000 Retained Earnings($23,000)
($23,000)$4,050$91,250 Earnings$0
$27,050$87,200$149,200 Total Equity
$27,000$54,050$141,250$290,450 Total
Debt and Equity$32,000$218,463$422,462
$585,426 Net Worth$27,000$54,050
$141,250$290,450
7. 7 Business Ratios
Progressive Consulting will be formed as a consulting company specializing in
marketing of high-technology products in international markets. Its founders are
former marketers of consulting services, personal computers, and market research,
all in international markets. They are founding Progressive to formalize the
consulting services they offer.
Ratio Analysis
Profitability Ratios:199519961997 ____________
________________________________________________________ Gross margin
72.97%85.81%84.90% Net profit margin
4.57%11.25%14.92% Return on Assets12.38%
20.64%25.49% Return on Equity50.05%
61.73%51.37%
Activity Ratios: AR Turnover6.307.77
6.66 Collection days294545
Inventory Turnover0.000.000.00 Accts
payable turnover7.677.067.35 Total asset
turnover2.711.831.71
Debt Ratios:199519961997 ____________
________________________________________________________ Debt to net Worth
3.041.991.02 Short-term Debt to Liab.0.70
0.820.83
Liquidity Ratios: Current Ratio1.911.83
2.39 Quick Ratio1.911.83
2.39 Net Working Capital$104,050$191,250$340,450
Interest Coverage4.155.909.38
Additional Ratios:199519961997 ____________
_________________________________________________________ Asset