... d industry, etc. , even in some cases social associations such as country clubs. The medium-level houses are generally area-specific or function specific, and are not easily able to leverage their business through distribution. 4. 2.

3 Competition and Buying Patterns The key element in purchase decisions made at the Progressive client level is trust in the professional reputation and reliability of the consulting firm. 4. 2. 4 Main Competitors o The high-level prestige management consulting: Strengths: international locations managed by owner-partners with a high level of presentation and understanding of general business. Enviable reputations which make purchase of consulting an easy decision for a manager, despite the very high prices. Weaknesses: General business knowledge doesn't substitute for the specific market, channel, and distribution expertise of Triangle, focusing on high-technology markets and products only.

Also, fees are extremely expensive, and work is generally done by very junior-level consultants, even though sold by high-level partners. o The international market research company: Strengths: International offices, specific market knowledge, permanent staff developing market research information on permanent basis, good relationships with potential client companies. Weaknesses: market numbers are not marketing, not channel development or market development. Although these companies compete for some of the business Triangle is after, they cannot really offer the same level of business understanding at a high level. o Market specific or function-specific experts Strengths: expertise in market or functional areas. Triangle should not try to compete with Nor mura or Select in their markets with market research, or with Channel Corp in channel management.

Weaknesses: the inability to spread beyond a specific focus, or to rise above a specific focus, to provide actual management expertise, experience, and wisdom beyond the specifics. The most significant competition is no consulting at all, companies choosing to do business development and channel development and market research in- house. Strengths: no incremental cost except travel; also, the general work is done by the people who are entirely responsible, the planning done by those who will implement. Weaknesses: most managers are terribly overburdened already, unable to find incremental resources in time and people to apply to incremental opportunities.

Also, there is a lot of additional risk in market development and channel development done in house from the ground up. Finally, retainer-based antenna consultants can greatly enhance a company's reach and extend its position into conversations that might otherwise never have taken place. 4. 3 Market Analysis As indicated by the illustrations, we must focus on a few thousand well- chosen potential customers in the United States, Europe, and Latin America.

These few thousand high-tech manufacturing companies are the key customers for Progressive. Potential Customers 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 alliances with Smith and Jones are possibilities, given the content of existing discussions. Given the background of prospective partners, we might also be talking to European companies including Siemens and Olivetti and others, and to United States companies related to Apple Computer.

In Latin America we would be looking at the key local high-technology vendors, beginning with Printaform. 6. 0 Management Summary The initial management team depends on the founders themselves, with little back-up. As we grow we will take on additional consulting help, plus graphic/ editorial, sales, and marketing. 6. 1 Organizational Structure Progressive should be managed by working partners, in a structure taken mainly from Smith Partners.

In the beginning we assume 3-5 partners: o Ralph Sampson o At least one, probably two partners from Smith and Jones o 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. o 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 in the common consulting company mode in which partners run the business and make sales, while associates fulfill. Partners will necessarily be involved in the fulfillment of the core business proposition, providing the expertise to the clients. The initial personnel plan is still tentative.

It should involve 3-5 partners, 1-3 consultants, 1 strong editorial / graphic person with good staff support, 1 strong marketing person, an office manager, and a secretary. Later we add more partners, consultants and and sales staff. Founders' resumes are included as an additional attachment to this plan. 6. 3 Personnel Plan The detailed monthly personnel plan for the first year is included in the appendices. The annual personal estimates are included here as Table 5.

Personnel Plan 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 Lab. 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 Additional Ratios: 1995 1996 1997.