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    E Commerce Mall E Commerce Mall Document Transcript

    • Revised 4/30/10 BulldogMall.com 696 Adam Smith Boulevard Fresno, CA 93xxx 559-000-0000 (T)…559-000-0000 Prepared By Jim P. Pappas Submitted To: Fresno National Bank 2641 Capitalism Avenue Fresno, CA 93xxx TABLE OF CONTENTS TABLE OF CONTENTS……………………………………………………………………………………………………………2 1
    • Revised 4/30/10 EXECUTIVE SUMMARY……………………………………………………………………………………………………………3 BUSINESS DESCRIPTION……………………………………………………………………………………………………4 INDUSTRY ANALYSIS……………………………………………………………………………………………………………5 VISION STATEMENT……………………………………………………………………………………………………………12 VISION TRIGGER…………………………………………………………………………………………………………………12 MISSION STATEMENT…………………………………………………………………………………………………………12 BUSINESS OBJECTIVES……………………………………………………………………………………………………13 BUSINESS OPERATIONS……………………………………………………………………………………………………14 MARKETING………………………………………………………………………………………………………………………………14 Traffic Generating Product………………………………………………………………………………14 Revenue Generating Product………………………………………………………………………………15 Price………………………………………………………………………………………………………………………………………15 Sales Strategy………………………………………………………………………………………………………………16 Place………………………………………………………………………………………………………………………………………18 Promotion……………………………………………………………………………………………………………………………18 COMPETITIVE ANALYSIS…………………………………………………………………………………………………19 LEGAL STRUCTURE………………………………………………………………………………………………………………19 MANAGEMENT EXPERTISE…………………………………………………………………………………………………19 SUPPORT PERSONNEL…………………………………………………………………………………………………………20 FINANCIAL INFORMATION………………………………………………………………………………………………21 Sources of Cash……………………………………………………………………………………………………………24 Uses of Cash……………………………………………………………………………………………………………………24 Explanation for Break-Even Analysis………………………………………………………27 Explanation for Cash Flow Projections…………………………………………………31 SUMMARY……………………………………………………………………………………………………………………………………33 EXHIBITS AND APPENDICES Exhibit 1 – Fresno Demographic Profile…………………………………………………5 Exhibit 2 – Adoption Curves for Various Media………………………………6 Exhibit 3 – Relationship Between Levels of Education In Household and Online Access………………………………………………7 Exhibit 4 – Relationship Between Levels of Household Income and Online Access………………………………………………………7 Exhibit 5 – Activities Impacted by Internet Usage……………………8 Exhibit 6 – Local Internet Online Survey…………………………………………10 Exhibit 7 – Monthly Cost of Living – Jim Pappas………………………22 Exhibit 8 – Sources and Applications of Funds……………………………23 Exhibit 9 – First Year Break-Even Analysis……………………………………26 Exhibit 10 – First Year Monthly Cash Flow Projection…………29 Exhibit 11 – Second Year Quarterly Cash Flow Projection…30 APPENDIX A – Local Internet Online Survey Questionnaire…34 EXECUTIVE SUMMARY The purpose of this business plan is to support a request for a $10,000, three-year bank loan as part of the 2
    • Revised 4/30/10 financing for a start-up sole proprietorship, BulldogMall.com. The business will be owned by Jim P. Pappas and will be located in the owner’s residence. The owner will provide a minimum of $20,000 in initial equity. The business will be a Web community that serves California State University, Fresno (CSU Fresno) students and alumni. Based on the financial and competitive analysis presented in this plan, BulldogMall.com will be successful. The cash flow indicates break-even, including an owner’s draw of $12,000, will be attained in the second year of operations. BulldogMall.com will become firmly established in Fresno within three years. BulldogMall.com’s user-friendly environment, technical excellence, competitive ad rates, and its slogan, “BulldogMall.com – For Work, Play, And Shopping” will provide a distinctive competitive edge. The owner, Jim P. Pappas, has eight years of professional experience in the broadcast industry and will receive an undergraduate degree in Business Administration and Entrepreneurship from the California State University, Fresno in May 2001. BUSINESS DESCRIPTION BulldogMall.com will be a service business targeted primarily at Fresno State’s 18,000+ students, but will also be available to 3
    • Revised 4/30/10 alumni and the general public. BulldogMall.com will offer free services to draw traffic including, but not limited to email accounts, classified ads (personal and product), an event calendar, search engines, online games, useful links, chat rooms, software (freeware and shareware), message boards, and personal Web pages. BulldogMall.com will offer free services to student and alumni organizations in the form of Web pages, chat rooms, and message boards. All revenue will be earned via banner advertising sales to area businesses and businesses outside the area that target CSU Fresno students and alumni. BulldogMall.com will be a startup business that capitalizes on Internet growth. BulldogMall.com will initially be organized as a sole proprietorship, but will eventually evolve into a partnership, corporation, or limited liability company so that key workers and managers can earn ownership interests. BulldogMall.com will be profitable by super-serving the student market while maintaining tight control over expenses. BulldogMall.com anticipates launching in the spring of 2001 with a target launch date of April 1, 2001. The site will be operational 24 hours a day, 7 days a week. Business will initially be seasonal, but will eventually enjoy less seasonality due to the ability of customers to access BulldogMall.com from any location with an Internet connection. 4
    • Revised 4/30/10 INDUSTRY ANALYSIS Internet usage trends point to a growing market for e-commerce businesses of all types, from online product purchasing to banner advertising. According to a 1999 report by Scarborough Research, over five major markets have already surpassed the 50 percent level of Internet penetration among Adults 18 and over; San Francisco is the leading California market with Internet usage of 56.1 percent, while the Fresno market (DMA) shows healthy Internet growth potential with 35.8 percent penetration. Exhibit 1 presents a demographic profile of the Fresno DMA Adult 18+ population; the Fresno DMA is comprised of a six county area that includes Fresno, Madera, Merced, Mariposa, Kings, and Tulare counties. EXHIBIT 1 Fresno Demographic Profile Scarborough Research: 2/98 - 1/99 Adult 18+ Population: 1,094,610 16% 14% Adults 18 - 24 Adults 25 - 34 11% 21% Adults 35 - 44 Adults 45 - 54 17% Adults 55 - 64 Adults 65 + 21% Source: Scarborough Research (www.usadata.com/free_fresno.htm) There are over 391,000 adults already on the Internet in the Fresno DMA, with ample room for future growth. 5
    • Revised 4/30/10 Another indicator of Internet usage growth is the “rate of adoption” when compared to other electronic media. A study by Morgan Stanley Technology Research illustrates this comparison, as presented in Exhibit 2: EXHIBIT 2 In other words, Internet usage has expanded at double the rate of cable, nearly three times the rate of broadcast TV, and over seven times the rate of radio growth. Internet users are more educated and come from households with higher incomes than non-users. The following Exhibits derived from 1998 data and published by the U.S. Department of Commerce support this claim. 6
    • Revised 4/30/10 The relationship between education and online access is presented in Exhibit 3, which shows that online access increases with the level of education in the household. EXHIBIT 3 Relationship of Education to Online Access Source: U.S. Department of Commerce (www.digitaldivide.gov) The relationship between income level and online access is presented in Exhibit 4, which shows that online access increases with the level of income in the household. EXHIBIT 4 Relationship of Income to Online Access Source: U.S. Department of Commerce (www.digitaldivide.gov) 7
    • Revised 4/30/10 Another survey by Forrester Research (1999), shows the other activities and media that Internet usage has impacted, as presented in Exhibit 5 below. EXHIBIT 5 Activities Impacted by Internet Usage Source: Forrester Research (www.iab.com) This trend is powerful with college students, according to a study by Greenfield Online. Greenfield’s Pulsefinder On-Campus Market Study (May 12 - June 9, 2000) reported that 59 percent of college students described themselves as “Internet dependent” or “cybergeeks”, with 81 percent stating that they have made an online purchase. All of this contribute to the continuing growth in Internet advertising, which increased from $1.92 billion in 1998 to $4.62 billion in 1999; a growth rate of 141 percent (Internet Advertising Bureau). The Internet Advertising Bureau (IAB) also reported that 56 percent of the dollars invested in Internet advertising during 1999 8
    • Revised 4/30/10 were for banner ads, with consumer-related advertising representing 30 percent of all Internet advertising. There are a variety of web sites, communities, and portals targeted at college students, alumni, and/or the general public. However, BulldogMall.com has not found any sites that specifically target CSU Fresno students and alumni. BulldogMall.com will learn from the creativity of other web sites, communities, and portals such as Yahoo.com, ShopInTheValley.com, U-Swap.com, and CollegeClub.com while tailoring its service to the specific needs and desires of CSU Fresno students and alumni. According to a 1999 survey by Scarborough Research, an estimated 95,370 adults in the Fresno market have a 4-year college degree while 20,585 have completed some post graduate studies and 52,515 have earned a post graduate degree. National data measuring online penetration suggests that 48% of households whose inhabitants have at least received a 4-year degree are Internet users. In the Fresno market, this would constitute an online population of over 80,000 adults. When you combine this market with CSU Fresno’s 18,000 students, BulldogMall.com has a current market potential of nearly 100,000 Internet users in the Fresno market and as Internet usage continues to grow in the Fresno market, the opportunities for BulldogMall.com to generate traffic will grow even stronger. 9
    • Revised 4/30/10 An online survey shows strong support for a web community targeted at CSU Fresno students, as presented in Exhibit 6 below. Exhibit 6 Local Internet Online Survey Are you a CSU Fresno Student or Alumni? Would you check out a FREE Web Community for CSU Fresno Students & Alumni? Yes Would you join the Community if the content No appealed to you? Are you Male? 0 5 10 15 20 25 30 Number Of Respondents Source: Local Internet Online Survey The above survey was comprised of four questions and posted on the owner’s personal Internet homepage. Respondents were solicited via email and given a link to the survey page (see Appendix A). The owner of BulldogMall.com sent an email to every student and instructor in his address book and to every member of the “Fresno State Club” on CollegeClub.com soliciting participation in the survey and asking every recipient to forward his message to every CSU Fresno student or alumni in his or her address book. The total number of solicitations received is unknown. Jim Pappas monitored the survey page until 30 respondents had participated during a six-week period in October and November 2000. The first question was designed to 10
    • Revised 4/30/10 classify the respondents as CSU Fresno Students and Alumni or members of the general public. The result was that 67% of the respondents identified themselves as CSU Students or Alumni. The second question was designed to measure the popularity of the overall concept of a free web community targeted at CSU Fresno students and alumni, while the third question obtained a more subjective answer by asking whether or not respondents would join the community if the content “appealed” to them. The last of the above questions was designed to qualify the respondents as male or female in order to determine whether or not the survey was skewed too far in either direction. In the end, 60% of the respondents were male and 40% of the respondents were female. The results of the above survey indicate that a web community targeted at CSU Fresno students and alumni should attract substantial user traffic, which could be converted to membership if the content appealed to users. In summary, the growth of internet usage and advertising investment nationwide, combined with the opportunities for growth in the Fresno market and the high degree of willingness to shop online by college students, present a profitable opportunity for an Internet site targeted at CSU Fresno students and alumni. BulldogMall.com will profit by capitalizing on these national and local trends. 11
    • Revised 4/30/10 VISION STATEMENT In three years, BulldogMall.com will be a fully developed Internet community serving the entertainment and information needs of CSU Fresno students and alumni. VISION TRIGGER BulldogMall.com will use the following vision trigger: “BulldogMall.com--for work, play, and shopping”. The name of the business, together with references to work, play, and shopping will paint a visual picture of an online community for CSU Fresno students and alumni to meet, study, play games, or shop. MISSION STATEMENT BulldogMall.com’s mission is to serve the needs of two interrelated groups of customers: online users and advertisers. To our online users, BulldogMall.com, and the employees and management of BulldogMall.com, make the following commitments:  BulldogMall.com will provide you with an online community where you and your fellow students or alumni can meet, study, play games, or shop.  BulldogMall.com will ascertain your needs by asking you what you want via direct online and on-campus surveys.  BulldogMall.com will provide a site that is fun, without being crude, and informative, without boring clutter. 12
    • Revised 4/30/10 To our advertisers, BulldogMall.com, and the employees and management of BulldogMall.com, make the following commitments:  BulldogMall.com will not publish your ad without your prior approval via a signed printed proof or electronic proof delivered by facsimile or email.  BulldogMall.com will contact you within three weeks after the start of an ad campaign to ascertain the progress of the campaign and make corrections, if needed.  BulldogMall.com will provide you with creative design, copy, and promotional ideas to help stimulate results and increase your sales. BulldogMall.com also promises, to advertisers and online users, to be a “good corporate citizen” of the Fresno community in the way that BulldogMall.com plans, promotes, and operates the business. BUSINESS OBJECTIVES BulldogMall.com will achieve the following objectives by the end of its third year of operations: 1. Annual gross revenue of $26,800 in its first year of operations. 2. Cash break-even during its second year of operations. 3. Owner draw of $12,000 by the end of its second year of operations. 4. Working Capital of $23,000 by the end of its second year of operations. 13
    • Revised 4/30/10 BUSINESS OPERATIONS The operation of BulldogMall.com will be described using the main functions of the business: marketing, competitive analysis, legal structure, management expertise, support personnel, and financial information. MARKETING Traffic Generating Product BulldogMall.com will feature the following free products to generate online traffic: o Personal Email Accounts o Classified Advertising (Personal & Product) o A CSU Fresno Event Calendar o Popular Internet Search Engines o Online Games o Academic Reference Links o Entertainment Links o Downloadable Software Links o General Chat Rooms & Message Boards o Chat Rooms & Message Boards By Major o Web Pages For Students, Faculty, & Alumni o Student & Alumni Organization Web Pages o Campus News Headlines o Local News Headlines 14
    • Revised 4/30/10 Revenue Generating Product BulldogMall.com will generate all of its revenue through the sale of banner advertising to local area businesses and businesses outside the area that target CSU Fresno students and alumni. Web “storefronts” will be offered to advertisers who commit to contracts of at least $60 per week for a minimum of 26 weeks. There are two different approaches BulldogMall.com will employ to sell banner advertising: 1. Advertising Packages: These will be sold primarily to local advertisers. The pricing and banner ad frequency for these packages will be established based on weekly traffic statistics. 2. Specific Banner Ad Campaigns: These will be sold on a CPM (cost per thousand impressions) and/or CPC (cost per click) basis to local, regional, and national advertisers. The owner will manage all advertising sales and will be BulldogMall.com’s sole salesperson until BulldogMall.com reaches cash break-even during its second year of operations. Price According to the AdKnowledge Online Advertising Report for the second quarter of 2000, the average rate card price for Internet advertising has a CPM of $30.52. Another study of banner ad pricing in the second quarter of 2000 by 15
    • Revised 4/30/10 the AdRelevance division of Media Metrix reported CPMs ranging from a low of $19.70 to a high of $42.50. Pricing for CPC advertising is more volatile, according to an article by Jim Meskauskas, Media Manager at Mediasmith, Incorporated, an interactive media agency located in the San Francisco area. In the article, Mr. Meskauskas writes that, on sites that offer both CPC and CPM buys, “CPCs usually run between $.25 and $.50. Though they can be as low as $.10 (for higher cash outlays) or as much as $1 (for high-demand properties like tech sites).” BulldogMall.com will aim for an average CPM of $30.00 and an average CPC rate $.50 for all banner advertising. Sales Strategy BulldogMall.com will begin a direct marketing and advertising campaign during the Spring 2001 semester on the campus of CSU Fresno. The primary focus of the marketing effort will be to secure charter membership in the web community by 50% of the 150 student clubs and organizations plus 10% of the non-club or organization members in the general student population (18,000 students) on campus. According to the University Student Union at CSU Fresno, a safe minimum estimate of average club and organization membership would be 20 students per club. The combination of 20 students from each of the successfully 16
    • Revised 4/30/10 secured 75 clubs and organizations together with 1,500 students from the general student population would number 3,000 members for BulldogMall.com upon or shortly after the launch of BulldogMall.com on April 1, 2001. The features and services offered to members of BulldogMall.com (see Traffic Generating Product) should generate minimum daily traffic of at least 10% of the total membership, which would result in approximately 300 page views per day and nearly 9,000 page views per month, assuming just one page view per day per member and not counting traffic that will be generated by BulldogMall.com’s ongoing marketing campaign. BulldogMall.com’s financial projections in the years 2001 and 2002 are based on average monthly advertising contracts in the amounts of $200 and $300, respectively. In order to bill an advertiser for $200 per month based on a CPM rate of $30, BulldogMall.com will have to generate approximately 7,000 page views for the advertiser’s banner ad during a given calendar month. Based on a CPC rate of $.50, BulldogMall.com will have to generate 400 “click-thru responses” (CTRs) for a given advertiser during a calendar month in order to justify a $200 monthly advertising contract. 17
    • Revised 4/30/10 The owner is confident, based on his experience selling broadcast radio advertising in the Fresno market during the years 1992 and 1993, that local advertisers are highly receptive to making advertising investments that range between $200 and $300 per month for three to twelve month periods. The owner will make an average of 20 new business calls per week and close an average of two new advertising contracts per week, while maintaining a 3-month retention rate of at least 50% of all advertisers who invest in BulldogMall.com. Place BulldogMall.com’s business office will be located at the home of owner, Jim Pappas. Operations will be outsourced to Internet Marketing Associates, an Internet Service Provider located on Shaw Avenue in Fresno, California. Promotion BulldogMall.com will be promoted with the following marketing methods: 1. A full-page back cover ad in The Collegian. 2. Posters and flyers on the CSU Fresno campus and dormitory bulletin boards. 3. Mailers to apartment complexes that have high student populations. 18
    • Revised 4/30/10 4. Participation in all campus events that allow business booth promotions. 5. Direct marketing to student and alumni clubs, fraternities, sororities, and associations. 6. Client sponsored promotional contests offered exclusively to BulldogMall.com users. COMPETITIVE ANALYSIS BulldogMall.com does not have any direct competition, although there are a variety of web sites, communities, and portals that compete for the time and attention of everyone who uses the Internet, including CSU Fresno students and alumni. Additionally, there are sites that offer each and every service that BulldogMall.com will offer. The difference is that BulldogMall.com will offer all of these services to CSU Fresno students and alumni on one site. LEGAL STRUCTURE BulldogMall.com will be operated as a sole- proprietorship owned by Jim Pappas. MANAGEMENT EXPERTISE The owner, Jim Pappas, has a total of eight (8) years experience in radio advertising sales, including two years in sales management. The owner has been a key person in the purchase and sale of radio broadcast properties, the 19
    • Revised 4/30/10 creation of two new radio formats, capital and operational budget planning/oversight, radio format research, and the recruitment of middle management personnel. The owner will receive an undergraduate business degree in Business Administration with the Entrepreneurship option from the Sid Craig School Of Business at California State University, Fresno, in May 2001. SUPPORT PERSONNEL Business operations will be outsourced to Internet Marketing Associates, a Fresno-based Internet service provider. Internet Marketing Associates will provide hosting, set-up, design, and maintenance of the site as well as advertising production and statistical records. The outsourcing agreement between Internet Marketing Associates and BulldogMall.com will be for an initial term of three (3) years. Under the agreement, Internet Marketing Associates will receive 30% of net revenue (gross sales minus advertising agency commission) in the first year, 35% in the second year, and 40% in the third year, paid out as collected by BulldogMall.com. Jim Pappas, the owner of BulldogMall.com, will handle all marketing, accounting, and finance functions and act as General Manager for the business. 20
    • Revised 4/30/10 FINANCIAL INFORMATION Financial Objectives The following objectives are for the first two years of BulldogMall.com: 1. Gross Revenue of $26,800 by the end of Year 1. 2. Break-even cash flow during operations in Year 2. 3. Owner draw of $12,000 by the end of Year 2. 4. Working Capital of $23,000 by the end of Year 2. Monthly Living Expenses For Jim Pappas Exhibit 7, Monthly Living Expenses – Jim Pappas, shows the amount required by the owner to pay for living expenses and compute the draw. Two-Year Cash Flow Projection Cash flow has been projected for a two-year period. All debt service and owner’s withdrawals have been included in the projection. Break-even sales are estimated to be $38,730 in year one. 21
    • Revised 4/30/10 EXHIBIT 7 Monthly Cost of Living – Jim Pappas Regular Monthly Rent or house payments (including taxes) 841 Car payments (including insurance) 570 Loan Payments 200 Health, Life, and other insurance premiums 120 Miscellaneous 100 Total 1831 Household Expense Telephone 155 Utilities 230 Alarm System 30 Pest Control 30 Miscellaneous 100 Total 545 Personal Expense Clothing, cleaning, laundry, shoe repair 200 Medical and dental 100 Internet 40 Automobile expenses 603 Spending allowance 150 Gifts 100 Total 1193 Food Expenses Food at home 600 Food away 120 Total 720 Tax Expenses Federal & State 350 Personal Property 150 Total 500 Total personal monthly cost of living expenses 4789 Subtract monthly income from sources other than the business 5000 Grand total - the minimum monthly draw needed from the business -211 22
    • Revised 4/30/10 EXHIBIT 8 Sources and Applications of Funds Sources of Cash 1. Personal Funds 20,000 2. Loan Proceeds 10,000 3. Cash Proceeds from Business (Net) 25,996 Total Sources 55,996 Uses of Cash 4. Loan Payments (Principal and Interest) 3,872 5. Cost of Goods Sold 7,799 6. Telephone 1,288 7. Business License Fee 10 8. Office Supplies 2,400 9. Legal and Accounting 1,575 10. Advertising and Promotion 11,800 11. Miscellaneous Expenses 1,800 12. Computer Software 229 13. Mailing Address 120 14. Net Working Capital 21,903 15. Auto Fuel and Repairs 3,200 Total Uses 55,996 23
    • Revised 4/30/10 ASSUMPTIONS Sources of Cash 1. Personal Funds. The owner will invest $20,000 into the business. 2. Loan Proceeds. The owner will borrow $10,000 from Fresno National Bank for a three-year term amortized at a 10% annual interest rate. 3. Cash Receipts From Business. $25,996 in cash receipts net of advertising agency commission is estimated. This projection involves selling and maintaining 134 advertising contracts with an average contract value of $200 per contract per month between April 1, 2001 and December 31, 2001. Uses of Cash 4. Loan Payments (Principal and Interest). Represents payment of $322.67 per month for a $10,000 loan amortized over 3 years at a 10% annual interest rate from Fresno National Bank. 5. Cost Of Goods Sold. Reflects 30% of $25,996 in net revenue as compensation to Internet Marketing Associates for the outsourcing of hosting and operations. 6. Telephone. This total includes installation charges of $33.01 for each of the two new phone lines, a monthly charge of $10.69 for each line, and a monthly allowance of $100 for long distance calls based on current Pacific Bell pricing. 7. Business License Fee. The business license fee will be $10 per year (License and Permits Office, Fresno). 8. Office Supplies. This total includes all office- related expenses including copying and paper supplies. The owner will perform office duties. Total is estimated at $2,400 annually based on the owner’s previous experience. 9. Legal And Accounting. Gary L. Higgins, CPA will provide training in the use of Quick Books software 24
    • Revised 4/30/10 for $75 and tax preparation services for $300. An additional $1,200 is allocated for Legal and Accounting consultation as needed, including $35 for a fictitious business name. 10. Advertising And Promotion. $11,800 will be allocated to the advertising and promotion campaigns discussed in the Marketing section above. $8,500 will be invested in a full-page back cover ad in The Collegian (CSU Fresno’s newspaper) and $3,300 will be used for flyers and on-campus marketing. 11. Miscellaneous Expenses. $1,800 has been estimated for miscellaneous expenses based on owner’s previous experience. 12. Computer Software. Reflects a price of $79.95 for Quick Books small business accounting software and $149 for Front Page, a software program for website design and maintenance. 13. Mailing Address. $120 per year for a business mailing address based on a quote from Postal Annex at Bullard and First in Fresno, California. 14. Net Working Capital. Represents unallocated working capital. 15. Auto Fuel And Repairs. Includes an allowance of $100 per month for additional auto repair expense due to increased wear and tear on the owner’s personal automobile and an auto fuel expense estimate of $2,000 based on 20,000 miles in business-related driving at 20 miles to the gallon and average gasoline prices of $2 per gallon (1,000 gallons times 2 dollars). 25
    • Revised 4/30/10 EXHIBIT 9 BREAK-EVEN ANALYSIS YEAR 1 BULLDOGMALL.COM Variable Expenses Fixed Expenses a. COGS (30% of net revenue) $ 7,799 b. Advertising Agency Commission $ 804 [15% of (Sales times 20%)] c. Loan Payments $ 3,876 (Principal & Interest) d. Telephone $ 1,288 e. Business License Fee $ 10 f. Office Supplies $ 2,400 g. Legal and Accounting $ 1,575 h. Advertising and Promotion $ 11,800 i. Miscellaneous Expenses $ 1,800 j. Computer Software $ 229 k. Mailing Address $ 120 l. Auto Fuel and Repairs $ 3,200 TOTALS $ 8,603 $ 26,298 Sales $ 26,800 Variable Costs = $8,603 / 26,800 = .3210 or 32.1% of sales Let x = Break-even Sales Sales = Profit + Fixed Costs + Variable Costs X = 0 + $26,298 + .3210x .6790x = $26,298 X = $26,298 / .6790 X = $38,730 26
    • Revised 4/30/10 Explanation for Break-Even Analysis a. Cost Of Goods Sold. Reflects 30% of $25,996 in net revenue as compensation to Internet Marketing Associates for the outsourcing of hosting and operations. This is based on total sales of $26,800 less agency commission of $804, which involves selling and maintaining 134 advertising contracts with an average contract value of $200 per contract per month between April 1, 2001 and December 31, 2001. b. Advertising Agency Commission. Reflects 15% of $5,360 in total sales through advertising agencies. c. Loan Payments (Principal and Interest). Represents annual total of payments of $322.67 per month for a $10,000 loan amortized over 3 years at a 10% annual interest rate from Fresno National Bank. d. Telephone. This total includes installation charges of $33.01 for each of the two new phone lines, a monthly charge of $10.69 for each line, and a monthly allowance of $100 for long distance calls based on current Pacific Bell pricing. e. Business License Fee. The business license fee will be $10 per year (License and Permits Office, Fresno). f. Office Supplies. This total includes all office- related expenses including copying and paper supplies. The owner will perform office duties. Total is estimated at $2,400 annually based on the owner’s previous experience. g. Legal And Accounting. Gary L. Higgins, CPA will provide training in the use of Quick Books software for $75 and tax preparation services for $300. An additional $1,200 is allocated for Legal and Accounting consultation as needed, including $35 for a fictitious business name. h. Advertising And Promotion. $11,800 will be allocated to the advertising and promotion campaigns discussed in the Marketing section above. $8,500 will be 27
    • Revised 4/30/10 invested in a full-page back cover ad in The Collegian (CSU Fresno’s newspaper) and $3,300 will be used for flyers and on-campus marketing. i. Miscellaneous Expenses. $1,800 has been estimated for miscellaneous expenses based on owner’s previous experience. j. Computer Software. Reflects a price of $79.95 for Quick Books small business accounting software and $149 for Front Page, a software program for website design and maintenance. k. Mailing Address. $120 per year for a business mailing address based on a quote from Postal Annex at Bullard and First in Fresno, California. l. Auto Fuel And Repairs. Includes an allowance of $100 per month for additional auto repair expense due to increased wear and tear on the owner’s personal automobile and an auto fuel expense estimate of $2,000 based on 20,000 miles in business-related driving at 20 miles to the gallon and average gasoline prices of $2 per gallon (1,000 gallons times 2 dollars). 28
    • Revised 4/30/10 BulldogMall.com Monthly Cash Flow Projection January 2001 - December 2001 January February March April May June July August September October November December Total 1 Beginning Cash Balance $0 $27,522 $25,282 $23,041 $20,904 $19,064 $17,611 $16,520 $15,760 $15,325 $15,225 $15,463 2 Cash Receipts $0 $0 $0 $146 $233 $291 $349 $437 $495 $582 $640 $728 $3,899 3 A/R Collections $0 $0 $0 $0 $340 $834 $1,290 $1,678 $2,086 $2,474 $2,900 $3,298 $14,899 4 Loan Proceeds $10,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $10,000 5 Personal Funds $20,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $20,000 6 Total Cash Inflows $30,000 $0 $0 $146 $572 $1,125 $1,639 $2,115 $2,580 $3,056 $3,541 $4,026 $48,799 7 8 Cash Outflows 9 Internet Marketing Associates 0 0 0 44 172 338 492 634 774 917 1,062 1,208 $5,640 10 Owner Draw 0 0 0 0 0 0 0 0 0 0 0 0 $0 11 Loan Payments $323 $323 $323 $323 $323 $323 $323 $323 $323 $323 $323 $323 $3,876 12 Telephone $107 $107 $107 $107 $107 $107 $107 $107 $107 $107 $107 $107 $1,284 13 Business License Fee $10 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $10 14 Office Supplies $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $2,400 15 Legal and Accounting $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $2,400 16 Advertising and Promotion $983 $983 $984 $983 $983 $984 $983 $983 $984 $983 $983 $984 $11,800 17 Miscellaneous Expenses $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $1,800 18 Computer Software $229 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $229 19 Mailing Address $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $120 20 Auto Fuel and Repairs $266 $267 $267 $266 $267 $267 $266 $267 $267 $266 $267 $267 3,200 21 Total Cash Outflows $2,478 $2,240 $2,241 $2,283 $2,412 $2,579 $2,731 $2,874 $3,015 $3,156 $3,302 $3,449 $32,759 22 23 Net Cash Increase (Decrease) $27,522 ($2,240) ($2,241) ($2,137) ($1,839) ($1,453) ($1,091) ($760) ($435) ($100) $238 $577 $16,040 24 25 Ending Cash Balance $27,522 $25,282 $23,041 $20,904 $19,064 $17,611 $16,520 $15,760 $15,325 $15,225 $15,463 $16,040 EXHIBIT 10 29
    • Revised 4/30/10 EXHIBIT 11 BulldogMall.com Quarterly Cash Flow Projection January 2002 - December 2002 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Beginning Cash Balance $45,685 $36,690 $35,254 $50,130 Cash Receipts $1,396 $2,369 $3,722 $4,907 $12,394 A/R Collections $9,690 $9,859 $16,300 $23,857 $59,706 Loan Proceeds $0 $0 $0 $0 $0 Personal Funds $0 $0 $0 $0 $0 Total Cash Inflows $11,086 $12,228 $20,022 $28,764 $72,100 Cash Outflows Internet Marketing Associates $3,880 $4,280 $7,008 $10,067 25,235 Owner Draw $3,000 $3,000 $3,000 $3,000 12,000 Loan Payments $969 $969 $969 $969 $3,876 Telephone $649 $650 $650 $651 $2,600 Business License Fee $10 $0 $0 $0 $10 Office Supplies $750 $750 $750 $750 $3,000 Legal and Accounting $450 $375 $375 $375 $1,575 Advertising and Promotion $2,950 $2,950 $2,950 $2,950 $11,800 Miscellaneous Expenses $450 $450 $450 $450 $1,800 Computer Software $0 $0 $0 $0 $0 Mailing Address $30 $30 $30 $30 $120 Auto Fuel and Repairs $800 $800 $800 $800 $3,200 Total Cash Outflows $13,938 $14,254 $16,982 $20,042 $65,216 Net Cash Increase (Decrease) ($2,852) ($2,026) $3,040 $8,722 $6,884 Ending Cash Balance $92,882 $87,626 $112,302 $156,464 30
    • Revised 4/30/10 Explanation for Cash Flow Projections 1. Beginning Cash Balance. Represents available cash for operations at the beginning of the period. 2. Cash Receipts. The amount of cash received during the period, which is estimated to be 15% of current month’s income (Income Statements available upon request). 3. A/R Collections. Reflects cash collected from Net 30 billing of invoices from previous periods, which is estimated to be 35% of 30-day invoices, 30% of 60-day invoices, 15% of 90-day invoices, and 5% of invoices that are aged 120 days or more. This estimate is based on the advertising sales and collection experience of the owner. 4. Loan Proceeds. Capital loan proceeds. 5. Personal Funds. Proceeds from personal investment of owner. 6. Total Cash Inflows. Total of all cash received during the period. 7. No Data. 8. Cash Outflows. See items 9 thru 20. 9. Internet Marketing Associates. Represents cash outlays for outsourced operations based on three- year outsourcing agreement (see Support Personnel). 10. Owner Draw. Reflects withdrawal of cash from the business by the owner during the period. 11. Loan Payments: Represents payment of $322.67 per month for a $10,000 loan amortized over 3 years at a 10% annual interest rate from Fresno National Bank. 12. Telephone. This total includes installation charges of $33.01 for each of the two new phone lines, a monthly charge of $10.69 for each line, and a monthly allowance of $100 for long distance calls during the year 2001 and $195 during the year 31
    • Revised 4/30/10 2002 based on current Pacific Bell pricing; amortized over a 12 month period. 13. Business License Fee. The business license fee will be $10 per year (License and Permits Office, Fresno). 14. Office Supplies. This total includes all office- related expenses including copying and paper supplies. The owner will perform office duties. Total is estimated at $2,400 annually based on the owner’s previous experience during the year 2001 and $3000 during the year 2002. 15. Legal And Accounting. Gary L. Higgins, CPA will provide training in the use of Quick Books software for $75 and tax preparation services for $300. An additional $1,200 is allocated for Legal and Accounting consultation as needed, including $35 for a fictitious business name. 16. Advertising And Promotion. $11,800 will be allocated to the advertising and promotion campaigns discussed in the Marketing section above. $8,500 will be invested in a full-page back cover ad in The Collegian (CSU Fresno’s newspaper) and $3,300 will be used for flyers and on-campus marketing. 17. Miscellaneous Expenses. $1,800 has been estimated for miscellaneous expenses based on owner’s previous experience. 18. Computer Software. Reflects a price of $79.95 for Quick Books small business accounting software and $149 for Front Page, a software program for website design and maintenance during the year 2001. 19. Mailing Address. $120 per year for a business mailing address based on a quote from Postal Annex at Bullard and First in Fresno, California. 20. Auto Fuel And Repairs. Includes an allowance of $100 per month for additional auto repair expense due to increased wear and tear on the owner’s personal automobile and an auto fuel expense estimate of $2,000 based on 20,000 miles in business-related driving at 20 miles to the gallon 32
    • Revised 4/30/10 and average gasoline prices of $2 per gallon (1,000 gallons times 2 dollars). 21. Total Cash Outflows. The total of all cash disbursements during the period. 22. No data. 23. Net Cash Increase (Decrease). Total cash inflows less total cash outflows for the period. 24. No data. 25. Ending Cash Balance. Represents available cash for operations at the end of the period. SUMMARY BulldogMall.com will be successful. This business plan has documented that the establishment of BulldogMall.com is feasible. All of the critical factors such as industry trends, marketing analysis, business operations, competitive analysis, management expertise, and financial analysis support this conclusion. We invite you to “surf” our site when it goes online. We will provide CSU Fresno students and alumni with the first web community tailored to meet their needs, “BulldogMall.com--for work, play, and shopping”! 33
    • Revised 4/30/10 APPENDIX A Bulldog Mall Survey Page Bulldog Mall---Answer “Yes” or “No” to the following: 1. Are you a CSU Fresno Student or Alumni? 2. Would you check out a FREE Web Community for CSU Fresno Students & Alumni? 3. Would you join the Community if the content appealed to you? 4. Are you Male? Answer view results Powered by CreateSurvey Thank you for taking this survey! Home 34