These few thousand high-tech manufacturing companies are the key customers
for Progressive.
Potential Customers Growth rate
____________________________________________________
U.S. High Tech 5,000 10%
European High Tech 1,000 15%
Latin America 250 35%
Other 10,000 2%
____________________________________________________
Total 16,250 N.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 sales 1995 1996 1997
__________________________________________________________________
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 alliance 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 responsible 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 leveraged
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 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
1995 1996 1997
_________________________________________________________________
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
1995 1996 1997
_________________________________________________________________________
Collection days 43 45 45
Payment Days 35 35 35
1995 1996 1997
_________________________________________________________________________
Short Term Interest Rate 8.00% 8.00% 8.00%
Long Term Interest Rate 10.00% 10.00% 10.00%
Payment days 35 35 35
Tax Rate Percent 0.00% 0.00% 0.00%
Expenses in cash% 25.00% 25.00% 25.00%
Sales on credit 100.00% 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-even 125,000
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
1995 1996 1997
_________________________________________________________________________
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 percent 72.97% 85.81% 84.90%
Operating expenses:
Advertising/Promotion 10.00% $36,000 $40,000 $44,000
Public Relations 10.00% $30,000 $30,000 $33,000
Travel 10.00% $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
Utilities 20% $12,000 $14,000 $17,000
Insurance 20% $3,600 $2,000 $2,000
Depreciation $0 $0 $0
Rent 25% $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/Sales 4.57% 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
1995 1996 1997
____________________________________________________________________________________
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: 1905 1905 1905
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
1995 1996 1997
____________________________________________________________________________________
Short-term Assets Starting 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
1995 1996 1997
____________________________________________________________________________________
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: 1995 1996 1997
____________________________________________________________________
Gross margin 72.97% 85.81% 84.90%
Net profit margin 4.57% 11.25% 14.92%
Return on Assets 12.38% 20.64% 25.49%
Return on Equity 50.05% 61.73% 51.37%
Activity Ratios:
AR Turnover 6.30 7.77 6.66
Collection days 29 45 45
Inventory Turnover 0.00 0.00 0.00
Accts payable turnover 7.67 7.06 7.35
Total asset turnover 2.71 1.83 1.71
Debt Ratios: 1995 1996 1997
____________________________________________________________________
Debt to net Worth 3.04 1.99 1.02
Short-term Debt to Liab. 0.70 0.82 0.83
Liquidity Ratios:
Current Ratio 1.91 1.83 2.39
Quick Ratio 1.91 1.83 2.39
Net Working Capital $104,050 $191,250 $340,450
Interest Coverage 4.15 5.90 9.38