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 Time Management – Financial Plan

Time Merchant’s financial planning is centered on rapid growth in order to penetrate the market early and quickly. Time Merchants plans to continually expand the variety of services offered through our home service referral business. Services offered in the Premium Home Delivery Service will expand with changing customer needs and desires.

The Offering
Time Merchants is seeking investors who wish to provide cash in exchange for equity positions in the corporation. This cash will be used to enable rapid growth in the untapped home service market. The founders will invest $150,000 to start the business and is seeking additional investment to promote the TM concept and provide working capital. Based on sales and cost estimates, and an investment of $750,000 in exchange for 30% equity in th company, Time Merchant’s will deliver an annual compounded return of 78% on the initial investment over 5 years using a valuation factor (P/E) of 12. The Net Present Value (NPV), based upon a valuation of $45 million at the end of year five, discounted at 40%, is $8.3 million. (Financial assumptions can be found in appendix H.)

Sources Uses
Founders $150,000 Marketing/Promotion $650,000
Investors $750,000 Working Capital/Operations $250,000

Exit Strategy
Time Merchants intends to be a long-term business and will achieve this by extending beyond our initial launch market. Since there are few firms that currently specialize in consolidating the home service industry, there i plenty of room for growth. It is the intention of Time Merchants to create a pattern of positive experiences for our customers and providers so as to promote continuous growth.

Our most desirable option for exit is a merger or buyout by a large corporation. Time Merchants believes with strong cash flows and a loyal customer base it will be attractive to potential corporate investors within five years. The possibility also exists for Time Merchants to issue an IPO in five years. This option would provide additional capital to fund the national rollout.

Financial Discussion

Year One:

Capital Equipment Requirement
Time Merchants will operate with a minimal capital investment. The majority of the initial investment will go toward the purchase of an ACD system for the call center. It is important to start with a telecommunications system that can grow with the company. Time Merchants has obtained a quote of $74,000 for the purchase and installation of a new Aspect ACD system. The company will also purchase 9 used workstations, which will be used by the initial call center representatives. The company plans to purchase 9 computers and five printers during the first year of operations. Time Merchants will also need to purchase database software to track customer information and ordering habits.

Income Statement
The Beta Test will be underway during the first three months of year one. During the Beta Test TM will offer free trials to 20 premium service customers and 100 service providers. The number of premium customers is forecasted to grow from the 20 initial customers in month 3 to total of 200 by month 12. While this growth rate may seem aggressive it is considered realistic in relation to the advertising budget in year one. Revenue is broken down on th income statement by type. The ‘commissions on goods sold’ represents the commission TM earns from the sale of goods and services to the Premium Delivery Customers, The largest operating expense for TM is will be marketing. During the first year of service TM’s plans to spend a total of $800,000 on marketing and promotion for the concept. The ‘Other Expense” line is to be used for office expenses and travel that will occur during the year. A line item for “Contingency Expense” at 1% of revenue is also included to cover any unexpected costs.

Statement of Cash Flows
Due to the electronic payment system (i.e., credit cards, purchasing cards), TM does not estimate that there will ever be any significant amount of accounts receivable to report. The prepaid expense is for insurance. After receiving the initial investment of $900,000 prior to the start of business, TM does not anticipate any cash flow problems.

Balance Sheet
Current assets for year one will include cash and prepaid insurance. As stated before, accounts receivable and bad debt are not considered an issue for TM. Accounts payable has a $0 balance because TM will pay for the majority of goods and services via a purchasing card. Common stock is held at $1/share par value. The management team’s investment of $150,000 gives them a 66% equity position. The first round investors’ contribution of $750,000 is represented as 64,286 shares of common stock and $685,714 of Additional Paid in Capital.

Years 2 and 3:

Income Statement
During years 2 and 3 the number of customers is forecasted to increase by 3% each month. Time Merchants will begin its geographic expansion of the Referral Service in year 2, an expansion that will continue in each subsequent year. Time Merchants does forecast revenue in year 3 for the sale of consumer data and for advertising on the company web site. Management believes that by year 3 the company will have collected a sufficient amount of consumer data that may be of interest to other companies. Time Merchants also anticipates that the strong customer base will entice other companies to advertise on the web site. Marketing and promotions expense continues to remain high (51% in year 2 and 35% in year 3). Salaries increase by 5% each year along with professional fees and system development costs.

Cash Flow Statement
Depreciation expense increases in both years due to the purchase of additional workstations and compute equipment. The cash position remains strong in both years.

Balance Sheet
As in year 1, current assets for both years 2 and 3 include cash and prepaid insurance. The equity distribution remains unchanged during these two years.

Years 4 and 5:

Income Statement
Time Merchants anticipates a dramatic increase in sales during years 4 and 5 for several reasons. To begin with, the company will have expanded the referral service to four other geographic areas. This will provide a significant amount of revenue to TM at a relatively low cost. The Premium Delivery Service will also grow at a substantial rate during years 4 and 5. This will result from the increased availability of the service to new communities as well as the growing acceptance of the service. The revenues from the sale of consumer buying habits and advertising space are also expected to increase. Marketing and promotions expense continues to remain high. Salaries increase by 5% each year along with professional fees and system development costs.

Cash Flow Statement
The company is expected to have an extremely strong cash position during years 4 and 5. Increases in capital expenditures during year 4 are for computer upgrades and additional workstations.

Balance Sheet
The equity value of the company is expected to grow to nearly $9.6 million in year 5.

The following proforma financial statements show the results of operations for the first five years. Additional financial projections can be seen in Appendix H.


Income Statement Year 1 % of Revenue Year 2 % of Revenue Year 3 % of Revenue Year 4 % of Revenue Year 5 % of Revenue
Operational Revenue
Commissions On Goods 94,250 13% 317,980 14% 527,112 12% 879,551 13% 1,504,331 13%
Premium Delivery Fees 55,000 8% 163,151 7% 279,043 7% 465,617 7% 796,364 7%
Provider Fees 578,749 79% 1,859,847 79% 3,338,949 78% 5,403,221 77% 8,745,215 76%
Other Income
Advertising 0% 0% 29,250 1% 50,032 1% 85,572 1%
Consumer Data 0% 0% 117,000 3% 200,128 3% 342,286 3%
Total Revenue 727,999 100% 2,340,978 100% 4,291,354 100% 6,998,549 100% 11,473,767 100%
Operating Expenses
Rent 21,600 3% 21,600 1% 21,600 1% 24,000 0% 24,000 0%
Utilities 2,160 0% 2,160 0% 2,160 0% 2,400 0% 2,400 0%
Insurance 18,000 2% 18,000 1% 18,000 0% 18,000 0% 18,000 0%
Truck Lease 24,000 3% 32,000 1% 52,000 1% 83,000 1 % 139,000 1%
Salaries 380,240 52% 610,022 26% 1,044,559 24% 1,502,476 21% 2,061,122 18%
Employee Taxes/Benefits 68,443 9% 109,804 5% 188,021 4% 270,446 4% 371,002 3%
Credit Card Fees 21,940 3% 70,229 3% 128,741 3% 209,956 3% 344,213 3%
Professional Fees 7,000 1% 7,350 0% 7,718 0% 8,103 0% 8,509 0%
Selling 0%
Marketing/Promotions 800,000 110% 700,000 30% 500,000 12% 500,000 7% 500,000 4%
System Development 15,000 2% 45,000 2% 45,000 1% 50,000 1% 25,000 0%
Other Expense 12,000 2% 35,000 1% 50,000 1% 50,000 1% 50,000 0%
Depreciation Expense 40,471 6% 42,467 2% 45,467 1% 36,800 1% 36,800 0%
Expansion Expense 0% 500,000 21% 1,000,000 23% 1,500,000 21% 1,500,000 13%
Contingency Expense 7,000 1% 15,000 1% 50,000 1% 75,000 1% 90,000 1%
Total Operating Expense 1,417,754 195% 2,208,632 94% 3,153,264 73% 4,330,182 62% 5,170,045 45%
Operating Profit Before Tax (EBIT) (689,755) -95% 132,346 6% 1,138,090 27% 2,668,368 38% 6,303,722 55%
Income Tax 232,2712 1,067,347 2,521,489
Net Profit After Tax (689,755) 132,346 905,818 1,601,021 3,782,233

Time Merchants
Table of Contents Appendices
1. Executive Summary
2. Company Overview
3. Market Analysis
4. Marketing Strategy
5. Operational Strategy
6. Critical Risks
7. Management Team
8. Financial Plan
Gantt Chart
Promotional Plan
Cost Benefit Analysis
Market Research
Potential Service Providers
Staffing/Revenue Streams
© 1999 Time Merchants

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