Executive Summary

Silver House Business Plan

Svarup Puttoo
Silver House
Royal Road
Montagne Blanche
silverhouse1@yahoo.com
7888084 / 9153090

Silver House Business Plan 1

I. Table of Contents

• Executive Summary 3

1.1 Mission 4
1.2 Objectives 4
1.3 Keys to Success 5

• Company Summary 6
2.1 Company Ownership 6
2.2 Start-up Summary 6

• Products and Services 7
3.1 Product and Service Description 7
3.2 Technology 7
3.3 Macro-environment 7
3.4 Future Products and Services 7

• Market Analysis Summary 9
4.1 Market Segmentation 9
4.2 Target Market Segment Strategy 10
4.2.1 Market Needs 10
4.2.2 Market Trends 10
4.2.3 Competition and Buying Patterns 11
4.2.4 Target Market Segment Strategy 11

• Strategy and Implementation Summary 12
5.1 Competitive Edge 12
5.2 Marketing Strategy 12
5.3 Sales Strategy
5.3.1 Sales Forecast 13

• Management Summary 14
6.1 Personnel Plan 14

• Financial Plan 15
7.1 Start-up Funding 16
7.2 Important Assumptions 17
7.3 Projected Profit and Loss 18
7.4 Projected Cash Flow 19
7.5 Business Ratios 20


Executive Summary

Traditionally, electronic gadgets remained out of the hands of most consumers due to their high
cost. As a result, many technological carriers have invested time and resources into finding ways
to give the systems higher capacity and thus lower cost. Electronic systems are benefiting from
this research and starting to develop into large-scale consumer products that are aim to solving
the day to day hassle of people.

Silver house is a technology-oriented company, intending to fill in the market need for the latest
gadgets and must have devices whether its handheld phones, mp3/mp4s or visual as well as
storage data. The company emphasises latest must have gadgets, services and support to
differentiate itself from more price-oriented power house companies. We are on the brink of
penetrating a lucrative market in a rapidly growing industry. The current trend towards an
increase in the number of entrepreneurs and competition amongst existing companies presents
an opportunity for Silver House to penetrate this market and make its name.

Today, electronic gadgets like phones, data storage systems and mp4s are truly consumer
electronics devices with over 59 million subscribers. The Nokia Bowl and Qualcomm Stadium are
further evidence of the idea that gadgets are consumer electronics devices. These gadgets have
ceased to be an exclusive status symbol of high-powered lawyers and are now in the hands of
millions of consumers.

We, at Silver House, have realised that for us to prosper, we need to be flexible and responsive,
to delight clients by providing them with what they want, when they want it, and before the
competition can offer it. The company intends to achieve this through a solutions approach that is
customer-centric, and in which the customer's demand enjoy top priority.

Once the needs and processes are understood and described, leading edge products and
technological skills will be applied to source out latest innovative electronic products in a very cost
effective way.

Our marketing strategy will be based mainly on ensuring that clients know what there gadgets are
able to fulfil, and making the right service and information available to the right target client. We
intend to implement a market penetration strategy that will ensure that our products are well
known and respected in our respective industry. Our strategy will convey a sense of quality and
satisfaction in every picture, every promotion, and every publication. Our promotional strategy will
involve traditional advertising, Internet marketing, personal selling, public relations, and direct
marketing, details of which are provided in the marketing section of this plan.

It is important to recognise that make our intangible resources, such as our ability to relate to
customers regarding their needs and wants, management style, corporate culture and
commitment. These elements will differentiate us from our competitors and contribute towards the
development of a sustainable competitive advantage.

In a nutshell, we don't intend to just market and sell our gadgets and electronic goods, but to
provide latest products that will enable our clients to optimise their output and, assist in the
attainment of their goals and objectives. In order to achieve this goal, Silver house's 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 products
at the cheapest price, invest time and money in marketing and advertising, expand into specialty
markets, and stay ahead of the "technology curve."


1.1 Mission
Silver House mission is to offer its customers the highest quality electronic products and services.
Its owner focuses on personalised service to his customers by offering convenience and rapid
service. Additionally, Silver House 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 electronic 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.

1.2 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.

Our business strategy will revolve around the need to provide quality products and services to our
various target customers. This shall be undertaken through the establishment of a professional
team and the provision of quality, custom-designed services, catering to the client's particular
needs.

We intend to attain the following objectives:

• Develop a follow-up strategy to gauge performance with all our clients.
• To continuously source out latest technology and electronic goods to provide it to the
users at a very early stage compared to our competitors.
• To instate a culture of continuous improvement in beating standards of customer
satisfaction and efficiency.
• We are fully committed to supporting growth and development in the business economy.

Business Objectives

• Company growth
• Become established as the leading distributor of electronic and computer gadgets,
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


1.3 Keys to Success
The keys to the projects' success will undoubtedly be effective market segmentation through
identification of several niche markets and implementation strategies. The key success factors
will include the following:

• Excellence in fulfilling the promise: completely confidential, reliable, trustworthy expertise,
and service(s) through the provision of an uncompromising service. This dictates that we
have the latest technology, hardware, software, and well-trained personnel so as to
deliver this promise.
• Timeous response to clients' orders: we cannot afford to delay our clients for whatever
reason, as this will have a negative bearing on our image, reputation, and future business.
We need to be continually communicating with the client, ensuring we provide needs-
based solutions.
• Skill and depth of knowledge: Considering the nature of our services and their relative
infancy on the market, the skill and depth of knowledge of our personnel is of utmost
importance in determining the provision of the service(s) to the end-users.
• Clear product and marketing positioning: Not wanting to be associated with the numerous
vendors on the market, we intend to aggressively market our business and the services
we provide in order to be at the top of our clients' minds.
• Leveraging from a large pool of expertise: The Company’s various alliances with
technological and training partners shall prove invaluable. The skills and intellectual
capacity these partners will have in the fields of product support, design and system
integration, implementation and execution, lifecycle support and understanding, training
and in the application of new technology are intangible benefits to I Tech Solutions.


Company Summary
Silver House will offer its customers latest electronic gadgets like Electronic Watches with MP4
players Integrated, Pendrives, MP3/MP4 Players, cellular phones, and cellular phones
accessories, laptops and computer Accessories.

Market demand drives electronic product manufacturers and service providers to offer new and
improved services and functions in their products. 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 Mauritius. Gadgets have definitely become
an important part of people's lives all over the world, whereas in Mauritius many still view
electronic gadgets like phones and computers as a tool and not as a entertainment device. The
average electronic devices in Mauritius 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 electronic and technology
department will make our store the perfect location to start our operations in Mauritius, and will
start operating in the right time. Silver House will provide its customers support and convenience
second to none.

2.1 Company Ownership
Silver is wholly owned by Mr. Ravindra Svarupa Goswami Puttoo and Ms. Koshima Puttoo who
are both computer and electronic experts providing an indepth technical know-how of the latest
trend on the market.

2.2 Start-up Summary
Total start-up capital and expenses covered include legal costs, business cards, stationery, and
related expenses. Messrs. Svarup and Koshima. have provided investment covering much of the
starting assets, with the rest of required financing coming from a 5-year commercial loan obtained
from Sehda. The start-up table below itemises the start-up expenses.

Start-up

Requirements

Start-up Expenses
Legal Rs.5,000
Insurance Rs.1,000
Rent Rs.2,000
Equipment Rs.2,000
Other Rs.1,000
Total Start-up Expenses Rs.11,000

Start-up Assets
Cash Required Rs.2,000
Start-up Inventory Rs.30,000
Other Current Assets Rs.0
Long-term Assets Rs.0
Total Assets Rs.32,000

Total Requirements Rs.43,000


Products and Services

Silver House will provide electronic and computer products and services to individual, small,
medium, and large businesses. We will also be focused on providing network systems and
services to businesses. The systems include both PC-based Land Area Networks (LAN) systems
and minicomputer server-based systems. Our services include design and installation of network
systems, training, and support.

3.1 Product and Service Description
Silver House intends to provide the following services:

• MP3/MP4
• Mobile and Cellular Devices + Accessories
• Laptops and Desktops + Accessories
• Memory Cards
• Pen drive and Electronic Storage Devices
• Digital Cameras
• Digital Watches
• Playstations, Xbox and portable gaming devices
• HD Digital Boxes

3.2 Technology
Silver House will strive to maintain the latest electronic and digital capabilities so as to ensure we
are continuously at the forefront in our market arena. The one certainty in our industry is that
technology will continue to evolve and develop, changing what we market, as well as how we
market it. Our aim is to be aware of the implications of this new technology, and utilize it in our
existing framework where possible. Complete presentation facilities for preparation and delivery
of multimedia presentations on Macintosh or Windows machines, in formats that include on-disk
presentation or video presentation are also possibilities.

3.3 Macro-environment
Our macro-environment is exciting. We are in the middle of an unprecedented boom in
connectivity and communications, as the Internet offers information technology like we never
dreamed of. We are concerned with real value, real changes in the way we deal with information.

Meanwhile, all other signs are positive. The current drive by the government towards a more
diversified economy presents an opportunity for our business to propel and excel in our intended
markets, benefiting from the support of the concerned institutions and trade bodies. In addition to
Mauritius becoming an increasing economic hub, we foresee the demand for high quality
business communication solutions to be on the rise. Through the undertaking of our business
activities, we foresee no difficulty, in gaining market acceptance, provided we deliver the final
service timeously, of good quality, and at competitive rates.

3.4 Future Products and Services
We must remain on top of any new technology, because this is our bread and butter. For
technology, we need to provide better knowledge of cross platform technologies. Also, we will be
under pressure to improve our understanding of direct-connect Internet and related
communications.

In putting the company together, we have attempted to offer enough services to allow us to
always be in demand by our clients. However, technological developments have provided us with
a new era of opportunities for the various organizations in which we can only guess at the needs.
For example, current rapid innovations/development of Wireless Application Protocol (WAP)


technology presents an opportunity to be realized, particularly focusing on WAP-enabled cell
phones that allow individuals to access or send email messages on a cell phone. However, the
most important factor in developing future services will be market need. Our understanding of the
needs of our target market segments will be one of our competitive advantages.


Market Analysis Summary
The market potential is huge for our products, evidenced by what appears to be the unstoppable
growth of the electronic industry. Currently, the electronic industry is among the strongest growth
industries and is responsible for huge gains in the capital markets. The proliferation of electronic
goods 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 an
electronic gadgets like phones or mp4s.

Our company will try to take advantage of these developments and serve its customers in all
these new trends and developments.

4.1 Market Segmentation
Silver House 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 organisations and companies that need to be in constant communication with
their employees.


Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5

Potential
Customers Growth RS Rs Rs Rs Rs CAGR
Children 10-
17 years old 3% 90,000 92,700 95,481 98,345 101,295 3.00%
Students 2% 50,000 51,000 52,020 53,060 54,121 2.00%

Professionals 2% 40,000 40,800 41,616 42,448 43,297 2.00%
General
Public 2% 250,000 255,000 260,100 265,302 270,608 2.00%
Operating
Service
Companies 4% 40,000 41,600 43,264 44,995 46,795 4.00%
Other 1% 30,000 30,300 30,603 30,909 31,218 1.00%
Total 2.29% 500,000 511,400 523,084 535,059 547,334 2.29%

4.2 Target Market Segment Strategy
Our marketing strategy will be based mainly on making the latest technology available to the right
target customer. We will ensure that our products and services' prices take customers' budgets
into consideration and that these people appreciate the product/service and know that it exists,
including where to find it. One of our intentions is to provide all our customers to benefit from
taking full advantages of the products we offer at the right price. We realise the need to focus our
marketing message and our service offerings.

4.2.1 Market Needs
Since our target market is the product seeker, the most important market needs are support,
product and demonstration. One of the key points of our strategy will be the focus on target
segments that know and understand these needs and are willing to pay to have them filled. We
realise that all personal technology users need support and service. Many of our target customers
are going to be those who cannot get good products or services from the major vendors who
focus on high volume orders only.

4.2.2 Market Trends
The most obvious trend in the market is the increasing number of computer and electronic firms
on the market. This has been true for years, but the trend seems to be accelerating. We see the
major brand-name manufacturers being established on the market mainly through agents.
Secondly, technology has become a basic necessity in people’s everyday life. The vast
improvements in electronic functions, power and storage, means that owners are mandated to
up-grade or buy new and improved systems, with the former often being much cheaper. A third
trend is ever-greater connectivity. Everybody wants to be on the Internet, and every people are
thinking how they can take full advantage of these technologies to make their life much easier.
However, the major stumbling block for the majority of these people is the high cost of these
technologies.


4.2.3 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 gadget 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 Silver House 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 needs 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 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 Mauritius, 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. Silver House 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 e-commerce.

Soon, shoppers will simply wave their gadgets over the item they want and the charge will
automatically appear on their invoice. It’s happening in some cities overseas already.

Silver House 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.

4.2.4 Target Market Segment Strategy
The market for electronic accessories is very fragmented, crowded and competitive. Among these,
there are only a few large local firms that serve the entire country. The remainder are small firms
that sell from kiosks in the surrounding malls like Jumbo and Orchard. Silver House 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.


Strategy and Implementation Summary
Silver House will use a strategy of total market service. Assumptions:

Every person is a potential customer and all our potential markets will experience growth.
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
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.

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. Long-term
marketing strategies include:

• Opt-in Lists
• Freebies
• Content

By creating and implementing a balanced marketing strategy, using both short-term and long-
term strategies, Silver House 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.

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.

Analyse Our Potential - we shall step through a structured process that will prepare us for the
development of our sales strategy.

Strategise 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.


Measures 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 Silver House 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.

Sales Forecast
Year 1 Year 2 Year 3
Sales
Mp3 / MP4 Rs.138,000 Rs.190,000 Rs.270,000
Electronic Accessories Rs.126,000 Rs.160,000 Rs.200,000
Mobile Phones Rs.46,500 Rs.60,000 Rs.90,000
Pendrives Rs.46,500 Rs.90,000 Rs.150,000
Total Sales Rs.357,000 Rs.500,000 Rs.710,000
Direct Cost of Sales Year 1 Year 2 Year 3
Mp3 / MP4 Rs.31,650 Rs.43,560 Rs.61,900
Electronic Accessories Rs.30,450 Rs.41,500 Rs.51,800
Mobile Phones Rs.11,700 Rs.15,500 Rs.23,300
Pendrives Rs.11,710 Rs.23,300 Rs.38,900
Subtotal Direct Cost of
Sales Rs.85,510 Rs.123,860 Rs.175,900


Management Summary
The management of Silver House is made up of the owner, a Marketing manager (Mr. Svarup
Puttoo) and three other members who will be hired locally and will be added: a Programmer - Mr
Rishi Puttoo, and two store attendants with one serving at the beginning as secretary.

6.1 Personnel Plan
The Silver House 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, 2010 - Owner, Mr. Svarup, will draw a salary of Rs 42,000. The Marketing
Manager, Ms. Koshima Puttoo will receive a yearly salary of Rs 26,400. The programmer will
have Rs 21,000 a year plus a percentage of his Internet sales, and the two store attendants will
earn Rs 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, 2011 - 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, 2012.

Personnel Plan
CEO Rs.42,000 Rs.48,000 Rs.54,000
Marketing
Manager Rs.26,400 Rs.28,800 Rs.31,200

Programmer/Office
Administrator Rs.21,000 Rs.22,200 Rs.23,400

2 Store Attendants Rs.33,600 Rs.36,960 Rs.40,000
Other Rs.0 Rs.0 Rs.0

Total People 0 0 0

Total Payroll Rs.123,000 Rs.135,960 Rs.148,60


Financial Plan
It is assumed that the owner's private resources will be sufficient to finance any monthly cash-
flow 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
The Start up will be funded primarily from the loan of Rs 400,000.

Start-up Funding
Rs
Start-up Expenses to Fund 41666
Start-up Assets to Fund 358334
Total Funding Required 400000

Assets
Non-cash Assets from Start-up 310252
Cash Requirements from Start-
up 48082
Additional Cash Raised 0
Cash Balance on Starting Date 48082
Total Assets 358334

Liabilities and Capital

Liabilities
Current Borrowing 0
Long-term Liabilities 312500
Accounts Payable (Outstanding
Bills) 0
Other Current Liabilities
(interest-free) 0
Total Liabilities 312500

Planned Investment
Hector Priamson 25000
Investor 1 37500
Investor 2 25000
Additional Investment
Requirement
Total Planned Investment 87500

Loss at Start-up (Start-up
Expenses) -41666
Total Capital 45834

Total Capital and Liabilities 358334

Total Funding 400,000


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 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.

Pro Forma Profit and
Loss

Sales Rs357,000 Rs500,000 Rs710,000
Direct Cost of Sales Rs85,510 Rs123,860 Rs175,900
Other Costs of Sales Rs26,824 Rs30,000 Rs45,000
Total Cost of Sales Rs112,334 Rs153,860 Rs220,900

Gross Margin Rs244,666 Rs346,140 Rs489,100
Gross Margin % 68.53% 69.23% 68.89%

Expenses
Payroll Rs123,000 Rs135,960 Rs148,600
Marketing/Promotion Rs4,500 Rs10,000 Rs25,000
Depreciation Rs0 Rs0 Rs0
Rent Rs24,000 Rs24,000 Rs24,000
Insurance Rs12,000 Rs12,000 Rs12,000
Payroll Taxes Rs0 Rs0 Rs0
Other Rs0 Rs0 Rs0
Total Operating
Expenses Rs163,500 Rs181,960 Rs209,600

Profit Before Interest
and Taxes Rs81,166 Rs164,180 Rs279,500
Interest Expense Rs0 Rs0 Rs0
Taxes Incurred Rs24,350 Rs49,254 Rs83,850
Net Profit Rs56,816 Rs114,926 Rs195,650
Net Profit/Sales 15.91% 22.99% 27.56%


7.4 Projected Cash Flow
Our projected cash flow is outlined in the following chart and table.

Pro Forma Cash Flow


Cash Received
Cash from Operations
Cash Sales Rs357,000 Rs500,000 Rs710,000
Subtotal Cash from Operations Rs357,000 Rs500,000 Rs710,000
Additional Cash Received
Sales Tax, VAT, HST/GST
Received Rs0 Rs0 Rs0
New Current Borrowing Rs0 Rs0 Rs0
New Other Liabilities (interest-
free) Rs0 Rs0 Rs0
New Long-term Liabilities Rs0 Rs0 Rs0
Sales of Other Current Assets Rs0 Rs0 Rs0
Sales of Long-term Assets Rs0 Rs0 Rs0
New Investment Received Rs50,000 Rs0 Rs0
Subtotal Cash Received Rs407,000 Rs500,000 Rs710,000

Expenditures Year 1 Year 2 Year 3
Expenditures from Operations

Cash Spending Rs123,000 Rs135,960 Rs148,600
Bill Payments Rs139,315 Rs247,800 Rs360,927
Subtotal Spent on Operations Rs262,315 Rs383,760 Rs509,527

Additional Cash Spent
Sales Tax, VAT, HST/GST Paid
Out Rs0 Rs0 Rs0
Principal Repayment of Current
Borrowing Rs0 Rs0 Rs0
Other Liabilities Principal
Repayment Rs0 Rs0 Rs0
Long-term Liabilities Principal
Repayment Rs0 Rs0 Rs0
Purchase Other Current Assets Rs0 Rs0 Rs0
Purchase Long-term Assets Rs0 Rs0 Rs0
Dividends Rs0 Rs0 Rs0
Subtotal Cash Spent Rs262,315 Rs383,760 Rs509,527
Net Cash Flow Rs144,685 Rs116,240 Rs200,473
Cash Balance Rs146,685 Rs262,924 Rs463,397


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

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 40.06% 42.00% 5.90%

Percent of Total Assets
Inventory 5.17% 4.22% 3.43% 33.94%
Other Current Assets 0.00% 0.00% 0.00% 26.57%
Total Current Assets 100.00% 100.00% 100.00% 80.73%
Long-term Assets 0.00% 0.00% 0.00% 19.27%
Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 10.26% 7.57% 6.35% 41.85%
Long-term Liabilities 0.00% 0.00% 0.00% 11.83%
Total Liabilities 10.26% 7.57% 6.35% 53.68%
Net Worth 89.74% 92.43% 93.65% 46.32%

Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 68.53% 69.23% 68.89% 32.59%
Selling, General & Administrative
52.62% 46.24% 41.33% 17.11%
Expenses
Advertising Expenses 0.00% 0.00% 0.00% 2.28%
Profit Before Interest and Taxes 22.74% 32.84% 39.37% 0.85%

Main Ratios
Current 9.75 13.22 15.75 1.73
Quick 9.24 12.66 15.21 0.79
Total Debt to Total Assets 10.26% 7.57% 6.35% 58.93%
Pre-tax Return on Net Worth 58.47% 64.70% 62.20% 2.27%
Pre-tax Return on Assets 52.47% 59.81% 58.25% 5.54%

Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 15.91% 22.99% 27.56% n.a
Return on Equity 40.93% 45.29% 43.54% n.a

Activity Ratios
Inventory Turnover 8.67 12.65 12.54 n.a
Accounts Payable Turnover 9.78 12.17 12.17 n.a
Payment Days 27 26 25 n.a
Total Asset Turnover 2.31 1.82 1.48 n.a


Debt Ratios
Debt to Net Worth 0.11 0.08 0.07 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a

Liquidity Ratios
Net Working Capital Rs.138,816 Rs.253,742 Rs.449,392 n.a
Interest Coverage 0.00 0.00 0.00 n.a

Additional Ratios
Assets to Sales 0.43 0.55 0.68 n.a
Current Debt/Total Assets 10% 8% 6% n.a
Acid Test 9.24 12.66 15.21 n.a
Sales/Net Worth 2.57 1.97 1.58 n.a
Dividend Payout 0.00 0.00 0.00 n.a


Executive Summary

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