MusicWest Store

7/27/2019 MusicWest Store

1/42

March 2005

This sample business plan has been made available to users ofBusiness Plan Pro, businessplanning software published by Palo Alto Software. Names, locations and numbers may have


2/42

planning software published by Palo Alto Software. Names, locations and numbers may have

Confidentiality Agreement

The undersigned reader acknowledges that the information provided by_________________________in this business plan is confidential; therefore, reader agreesnot to disclose it without the express written permission of _________________________.

It is acknowledged by reader that information to be furnished in this business plan is in allrespects confidential in nature, other than information which is in the public domain throughother means and that any disclosure or use of same by reader, may cause serious harm ordamage to _________________________.

Upon request, this document is to be immediately returned to _________________________.

___________________Signature

___________________Name (typed or printed)

___________________Date

This is a business plan. It does not imply an offering of securities.


3/42

1.0 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1.1 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.2 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.3 Keys to Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2.0 Company Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.1 Company Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.2 Start-up Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.3 Company Locations and Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

3.0 Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53.1 Product and Service Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.2 Competitive Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.3 Fulfillment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73.4 Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73.5 Future Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

4.0 Market Analysis Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84.1 Market Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94.2 Target Market Segment Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

4.2.1 Market Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114.2.2 Market Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114.2.3 Market Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

4.3 Service Business Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124.3.1 Business Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124.3.2 Distributing a Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134.3.3 Competition and Buying Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134.3.4 Main Competitors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

4.3.4.1 Grandmas Music and Sound . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

4.3.4.2 Guitar Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144.3.4.3 Marc's Guitar Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144.3.4.4 Music World . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144.3.4.5 Other Competitors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Table of Contents


4/42

8.1 Important Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248.2 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

8.3 Projected Profit and Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268.4 Projected Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298.5 Projected Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308.6 Business Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Table of Contents


5/42

1.0 Executive Summary

An exciting opportunity currently exists for a full service musical instrument retailer inAlbuquerque. Although there are a number of musical instrument retailers in this city of over500,000 people, there are currently only three very small school band and orchestralinstrument dealers; these stores have small selections and short hours. At the other end of thespectrum (stores with a more guitar and electrical focus), big chains are competing on pricesat the expense of customer service.

MusicWest will offer the buying public a superior shopping alternative, with a huge selection of

school band and orchestra instruments, plus guitars, keyboards and accessories, at reasonableprices. Our products will be supported by skilled repair services and a knowledgeable andfriendly staff, as focused on educating the customer as on closing the sale. We will exploit ourcompetitors' weaknesses by offering ongoing music community events, from free lessons, tomusic clubs, to after-sale follow up to turn one-time shoppers into lifelong customers. Ourunique marketing schemes include "You Play, We Pay" (whereby a portion of instrumentsales and rentals are donated to local school band programs) and "100% Money Back" tradeup programs, where customers receive 100% of their purchase price toward upgrading theirinstrument within one year.

MusicWest will focus on the novice, hobbyist, and semi-professionalmusician; these threegroups are seeking value, customer service, and knowledgeable assistance in making what canbe a rather significant purchase. MusicWest will gain a reasonably large percentage of marketshare in a short period by immediately differentiating ourselves from our competitors. We willestablish our branding with our superior service and selection, the excitingly modern look ofour retail environment, our "hands on" merchandising approach, and a series of ads with ourmotto: Stop Dreaming, Start Playing. Once in the store, our clients want to come backoften for the special treatment they receive here and nowhere else.

The co-owner of MusicWest, David Moore, has over seven years of experience as the storemanager at two successful local music stores. He has seen firsthand where opportunities aremissed through lack of follow-through or careful planning, and knows what local customers arelooking for

MusicWest


6/42

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

FY 2006 FY 2007 FY 2008

SalesGross Margin

Net Profit

Highlights

1.1 Objectives

Gain 25% of the local market share within the first three years.

Maintain a minimum gross profit margin of 40%.

Create a hands-on, educational approach to musical instrument merchandising.

MusicWest


7/42

1.3 Keys to Success

Establish a well-respected music lesson department and start a rapport early withschool band and church music leaders.

Offer extended hours to serve a larger portion of the buying public than ourcompetitors do.

Educate the buying public by merchandising our products with informational/tutorialsignage and literature, and by backing that up with knowledgeable salespeople.

Offer the services of a full time repair department to our client base.

Continually modify the product and service offerings to stay on the leading edge oftechnology within our market.

Exploit the many weaknesses of our local and national competitors to differentiateourselves from them.

2.0 Company Summary

MusicWest is a retailer of musical instruments and their accessories, located on Albuquerque'sWestside. MusicWest will differentiate itself from its direct competitors by marketing the store'seducational approach, and one of the most hands-on store layouts of its type in Albuquerque.In addition, we will offer a wider selection of products, and more services to reward customerloyalty, than our competitors.

2.1 Company Ownership

MusicWest


8/42

Table: Start-up

Start-up

Requirements

Start-up ExpensesLegal $1,000Stationery etc. $500Space Renovation/Preparation/Signage $20,000Miscellaneous Expenses $1,500Insurance $500Rent & Deposits $4,000

Pre-Opening Salaries $4,000Phone System $2,500Other $0Total Start-up Expenses $34,000

Start-up AssetsCash Required $68,500Start-up Inventory $150,000Other Current Assets $0Long-term Assets $7,500Total Assets $226,000

Total Requirements $260,000

Table: Start-up Funding

Start-up FundingStart-up Expenses to Fund $34,000Start-up Assets to Fund $226,000Total Funding Required $260,000

AssetsNon-cash Assets from Start-up $157,500Cash Requirements from Start-up $68,500Additional Cash Raised $0Cash Balance on Starting Date $68,500Total Assets $226,000

MusicWest


9/42

$0

$50,000

$100,000

$150,000

$200,000

$250,000

Expenses Assets Investment Loans

Start-up

2.3 Company Locations and Facilities

We have chosen a site at Ladera Shopping Center on Coors Blvd. near I-40 for several reasons:

Close proximity to Interstate 40. Safe and plentiful parking area. Near high-traffic tenants such as Home Depot and Staples, and anchored by a WalMart

Supercenter

MusicWest


10/42

Although offering school band and orchestral instruments, service and lessons will be our maincompetitive advantage, guitars will remain the primary revenue producer for musicalinstrument stores for the foreseeable future.

3.1 Product and Service Description

MusicWest will offer several name brand instruments such as:

A large selection of band instruments by Selmer/Bach, Yamaha, and Leblanc with an

emphasis on the intermediate level instruments.

Electric and acoustic guitars including Albuquerque exclusive lines by Fernandez, Suzuki, Wechter and other nationally known brands, such as Takemine, Ovation and Martin.

Amplifiers by Crate, Kustom, Traynor and Hiwatt to support our guitar sales.

Keyboards by Yamaha, Suzuki and Korg.

Sound reinforcement products will be exclusively Yorkville. We will be the only dealer inNew Mexico, and will offer a rental program for local bands and schools.

A very well stocked accessory department to support the above items. A recent MusicTrades article found that 80% of the buying public considered this the most importantreason they buy from a musical instrument dealer.

In addition to complete repair services for our products, we will emphasize upgrades andcustomization items to develop other income streams our competitors have not considered.

When carrying a brand name item conflicts with giving the customer the best all-around value,we will always pursue the product that best suits our client's interest.

MusicWest


11/42

Accessories are the highest profit center for the store and we have to expose our competitors'weakness in this area if we wish to expand market share from day one of operations.Competitors that do not stock the necessary accessories will send their customers tocompeting stores, from which customers may not return. We must keep our accessorydepartment well-stocked to take advantage of our competitors' flaws, and avoid this pitfallourselves.

3.3 Fulfillment

When feasible, MusicWest will buy its inventory directly from the manufacturer in order toobtain the lowest price possible. We will make use of one or two jobbers that sell a largevariety of small goods that would be impractical to obtain directly. We will frequently compareprices of these distributors to ensure we are getting the very best price possible per item. Thatsaid, MusicWest will always put the quality/value of the product we pass on to the consumerahead of price. The majority of our competitors buy by the piece rather than by the box orcase lot. We intend to buy our key, best-selling items in bulk, to obtain a pricing advantageover our direct competitors. Common discounts in the industry consist of free freight,repayment term incentives, additional free merchandise or incremental percentage discounts

on quantity purchases.

Although we will buy key items in bulk when practical, we will also remind ourselves thatsometimes a better deal for the sake of lower prices is not the best move for our bottom line.We should not risk over-stocking new or unproven merchandise just to get a small advantagein price over competitors.

3.4 Technology

The Music Industry is currently riding a trend toward high-tech electronics in several productareas, most notably in guitar related effects and multi-track recording hard/software. Sales

MusicWest


12/42

3.5 Future Products and Services

MusicWest will rotate its stock so that new products are always available. The store willbalance what is popular today with what will be popular tomorrow. We will institute thefollowing programs in order to ensure expansion of the store:

1. We hope to become the only store in New Mexico to institute the "Weekend Warrior"program, sponsored by the National Association of Music Merchants (N.A.M.M.). Thisprogram is responsible for bringing back into the fold many who had given up onmusic. The program has successfully raised income opportunities for the stores who

have implemented it.

2. By the end of the first year of operations, we must place major emphasis on developingour own school band instrument rental program. This rental program will allow us toinsulate ourselves from any large-scale competitors that might locate here, andgenerate consistent year round high profit income opportunities.

3. MusicWest will take advantage of the internet as a major tool for passing alonginformation about our store and products to potential and current clients. We will

maintain this site as a local site, geared toward information and service. We believethat placing a sales engine in our website would only lower our initial profit margin andlimit sales opportunities, so we will avoid this for now.

4. We hope to start music clubs geared to children and seniors. These will be clubs thatwe can support with little cost, but which can generate additional sales not activelytargeted by our competitors.

5. In the long term, there are many avenues we can explore, such as traditional pianosales, professional sound installations, and service contracts with the public and privateschool systems.

MusicWest


13/42

The musical instrument market has recently been driven by a number of low-cost, high-selection internet and mail order companies, which has caused prices to level out, by givingconsumers comparison shopping at their fingertips. In response, various large chains havetried to offer similarly wide selections in their physical retail spaces, at the expense of stafftraining and customer service. However, the high-profile advertising generated by these chainshas rippled down even to small stores, as more and more musicians at all levels start to seekout the missing elements of these sales model. MusicWest has the experience, prices, andfocus on customer service to fill these gaps.

4.1 Market Segmentation

The following market segmentation table is based on the finding that roughly 46% of thegeneral population are "musicians" of some form or another. Within that group, there aredifferent segments, ranging from professionals, to semi-professionals, to hobbyists andnovices. It is very difficult to make a single demographic profile of the typical consumer for thisindustry, as within each instrument or client type, the figures for age and income will varydrastically. The market analysis numbers show the 46% of the local population aroundMusicWest who will serve as our potential customer base.

Listed directly below are the latest industry figures relating for New Mexico in total MusicalInstrument sales:

Sales Rank - National 38

2002 total music sales $41.4 million

2001 total music sales $40.8 million

2002 number of music stores 59

2001 number of music stores 57

2002 sales per store $701,694

2001 sales per store $715,789

2002 population 1,829,146

MusicWest


14/42

Table: Market Analysis

Market Analysis2005 2006 2007 2008 2009

Potential Customers Growth CAGRMusicians inAlbuquerque

3% 280,050 288,452 297,105 306,018 315,199 3.00%

In Rio Rancho 5% 23,920 25,116 26,372 27,690 29,075 5.00%In Los Ranchos 1% 2,308 2,331 2,354 2,378 2,402 1.00%In Corrales 3% 3,051 3,143 3,237 3,334 3,434 3.00%Total 3.14% 309,329 319,041 329,068 339,420 350,109 3.14%

Musicians in Albuquerque

In Rio Rancho

In Los Ranchos

In Corrales

Market Analysis (Pie)

MusicWest


15/42

4.2.1 Market Needs

Our target clientele, though varied, can be approached in very much the same manner. Theirmost important market needs are:

Selection Value Service and Lessons

Most musicians need support and service. The instruments that we sell can be difficult orimpossible for end users to service. Potential clients tend to seek stores that can fulfill theseservices through word of mouth referrals and/or direct shopping experiences. These musicianscome back time after time if they feel they are getting a fair deal.

One of the most common complaints from musicians in our market is the high turnover ofsales staff at other dealers, and the resulting inconsistencies in their shopping experiencesfrom day to day. Consumers like to see the same faces on each visit and this business is onethat thrives with the personal relationships salespeople develop with their clientele.

In addition, female customers have traditionally been treated poorly by this male dominatedfield. By reversing this trend, reinforced by ongoing sales training and with unbiased customerinteraction by our sales staff, we can further exploit the weaknesses of our top localcompetitors.

4.2.2 Market Trends

The musical instruments market is currently being driven by mail order and internet retailers.Although such companies are known for low pricing and large selection, their prices havebottomed out at a level the smaller stores can offer, while still remaining financially sound.

MusicWest


16/42

4.2.3 Market Growth

The musical instrument market has seen steady growth over the last ten years, with revenueincreasing from $4.2 billion in 1995 to $7.1 billion in 2000. 2003 sales were down to $6.9billion, still the second highest year in industry history. These numbers were reached in spiteof the difficulties with the economy and turmoil on Wall Street. The most dramatically decliningproduct was acoustic pianos, a product we are not interested in at the present time. Themarket had seen steady growth of around 4% over the last few years, despite other keyindustries being down (for example, automobiles down 7%, personal computers down 3% andnew home construction down 1.8%). In addition, 10-year growth patterns for the last decade

show incredible gains in key instrument categories. We expect these trends to continue as theeconomy strengthens.

4.3 Service Business Analysis

Musical instrument retailing is accomplished through a variety of outlets:

1. Local Musical Instrument retailers: storefront reseller with less than 10,000 squarefeet. These retailers usually carry one to three main brands and offer a mix ofinstruments and accessories. Occasionally these will be specialty stores, offering onlyone type of instrument for sale (i.e. drums, pianos or band instruments).

2. Chain stores and Superstores: These include major chains such as Guitar Centerand Sam Ash. These stores are always bigger than 10,000 square feet and offergreater selection of instruments. These stores offer sub-par walk-in service andgenerally cater to people looking for products in boxes with aggressive pricing and little

support.

3. Mail Order: the market is increasingly served by mail order businesses that offeraggressive pricing of boxed product. For the purely price-driven buyer, who buys boxes

MusicWest


17/42

4.3.2 Distributing a Service

Musical instrument re-sellers are supplied by a variety of means:

1. Direct purchases from manufacturers - generally the best price, but higher minimumorders.

2. Purchases from national distributors - large selections, good prices.3. Purchases from regional distributors - small selection, average pricing.4. Specialty distributors/mfg. reps - good to great pricing based on yearly volume.

4.3.3 Competition and Buying Patterns

Consumers expect to walk into a clean, well-stocked shopping environment. The consumers doshop between stores, as buying a musical instrument is a big purchase for most. Price tends tobe a huge influence on most musical instrument buyers; if they feel your pricing is out of linewith the market they will usually walk right out. On the other hand, if they feel your price is inline with the market they tend to look to what else your store offers, such as lessons, repair

facilities, knowledgeable staff, etc. Growing percentages of customers are price-driven only,and want to be handled in a direct and efficient manner without lengthy price negotiations.Accessory buyers tend to find the store closest to their home or place of work for the sake ofconvenience.

4.3.4 Main Competitors

There are several local retailers that will compete with us on some level. In the followingsegments, we will attempt to give a consumer view of the main competitors, from largest tosmallest, and a brief description of the others. For school band instruments, our two maincompetitors are Music World and Baum's Music and for guitars and amps Marc's Guitar and

MusicWest


18/42

The stores pricing is adjusted to the knowledge level of the customer. The store in general isvery well laid out and has state of the art lighting and displays, but is also very cluttered, withhazardous audio cables strewn about the floor where one might trip over them. As of this plan,Grandma's is relocating to the Westside at the intersection of Paseo Del Norte and Coors Blvd.They have no plans to add teachers at the new location.

4.3.4.2 Guitar Center

Guitar Center 6001 Menaul Blvd. NE Suite B Albuquerque, NM 87110

Hours M-F: 11-7 | Sat: 10-6 | Sun: 12-6

Guitar Center is the nations largest musical instrument retailer with with local space over13,000 sq. ft.

Guitar Center is the nation's leading retailer of guitars, amplifiers, percussion instruments,keyboards and pro-audio and recording equipment. They presently operate 128 Guitar Centerstores, with 108 stores in 46 major markets and 20 stores in secondary markets across the

U.S., includingAlbuquerque. Guitar Center is also the largest direct response retailer ofmusical instruments in the U.S. through its wholly owned subsidiary, Musician's Friend, Inc. Itscatalog and website, www.musiciansfriend.com, opened in Albuquerque in March, 2004.

4.3.4.3 Marc's Guitar Center

Marc's Guitar Center, 2324 Central Avenue SE.

Hours M-F: 10-6 |Sat: 10-5:30

Marc's Guitar Center is a small shop catering to beginning players. This store offers a very

MusicWest


19/42

between the two locations, but sales had fallen off by more than half when Mr. Johnsonpurchased them. The stores have always had the reputation for high prices and have alwayspushed the idea that they provide more service than most. In fact, the stores offer little moreservice than one normally expect to receive. Music World is extremely out of date in their salesand marketing techniques, and is on the declining slope of technology. These stores sell basicitems available anywhere. The store recently lost its largest piano line (Baldwin/Wurlitzer). Asof the date of this plan, Music World is experiencing severe cash flow problems and is inlitigation for discriminatory employment practices with former employees. A second lawsuithas been filed by his former landlord for damages done to the premises.

4.3.4.5 Other Competitors

The following are additional but smaller competitors:

Lesman's Music - Specialize in dj and recording gear and rentals. Lesman's recentlydownsized from a full line retail operation. They have a very poor reputation but still fulfill aneed to the community. The store recently moved to a new location that, oddly, has nostorefront parking.

Baum's Music - School band instruments only. They have a good reputation and loyalclientele. Baum's offers instrument rentals. The store primarily stocks a few entry-levelinstruments and has a large repair department.

Rio Rancho Music - School band instruments only. They call on school band directors as ameans to drive the business. They offer rentals but have a very poor reputation in thecommunity. The store has been for sale for over 5 years.

Encore Music - Very small retailer that specializes in vintage gear and some new guitars andamps. They have a decent reputation. They do some minor repairs. This store is rumored tobe having cash flow issues.

R b ' & S S i li i h l i Th h i i

MusicWest


20/42

5.0 Strategy and Implementation Summary

We will build strong relationships with our customers by providing stellar personal service andby exceeding our customers' expectations on each visit. We will provide unique programs toreward them and gain repeat business. MusicWest intends to attract customers away from themail order firms and bring them back to the local market. It will not be easy, but with acommitment to offer our customers an exciting educational environment along with up front,fair pricing, and excellent before and after the sale service, we can succeed.

5.1 Strategy Pyramids

Our main strategy is to out-serve the competition. We will accomplish this through strongpersonal sales/service, educational aspects, and proper product selection. Programs such asour "100% of purchase price trade up guarantee" and our "You play we pay" incentiveprograms will support these areas of concentration. In addition, we intend to build strongrelationships with key consumers who have influence on the purchasing decisions of others, bethey teachers, clergy or performing musicians. These individuals are important to the long-

term success of the business. We will take advantage of the great clinics and concerts providedby our manufacturers and suppliers to bring excitement and energy to our customer base; wewill also bring in local stand-out musicians. We will follow up on these events with call-backsand surveys to maximize their potential for future sales.

5.2 Value Proposition

MusicWest offers the novice to semi-professional musician the convenience of a wide selection,unique offers, experienced and reliable staff, and an educationally-focusedcommunity center,all in one location. These values more than offset our lack of usefulness to the professionalmusician market segment

MusicWest


21/42

5.4 Marketing Strategy

The marketing strategy is as follows:

Emphasize our superior service and support. Aggressively expose competitors' weaknesses in order to attract new clientele. Key in on consumers who have been pushed out of the market by local dealer apathy. Educate our clients and respect their needs. Address these needs to keep them coming

back. Exude our excitement and enthusiasm for music to our customers.

Always, always differentiate ourselves from our competition. Consistently end all of our advertising with our motto, "Stop dreaming, startplaying," to make our advertisements easily recognizable to the public.

5.4.1 Positioning Statements

For our target clientele, including those who feel abandoned by the local retailers, MusicWestwill provide a complete one stop shopping experience that will address all the needs of theaspiring musician. By offering repairs and unique marketing programs such as our "You playwe pay" and our "100% of purchase price trade up policy" we can exceed the local clientbase's expectations of what a music store can be. Unlike the vast majority of our competitors,MusicWest will more selectively stock products with value in mind and not just the lowestprice, and we will always strive to provide the highest level of attention to our customers inorder to gain their trust and purchasing power.

5.4.2 Pricing Strategy

MusicWest


22/42

5.4.3 Promotion Strategy

MusicWest will target our desired customer base using Radio, Direct Mail, Newspapers andword of mouth. Radio is the greatest vehicle to reach musicians for the simple reason that thelove of music is what drives us to become musicians. Direct Mail will target consumers who arebudget or coupon minded. Newsprint reaches a large portion of the public, letting them seewhat we have to offer before making a trip to the store. Word of mouth is the one area wereally hope to see develop, as a personal endorsement by a customer is worth more to us thanany advertisement can achieve.

M u s i c W e s t w i l l a l w a y s p r o m o t e i t s e l f a s a n e d u c a t i o n o r i e n t e d s t o r e , o f f e r i n g

p r i v a t e a n d g r o u p l e s s o n s f o r a l l t h e i n s t r u m e n t s w e s e l l . O u r m o t t o i s " S t o p

D r e a m i n g , S t a r t P l a y i n g ! "

5.4.4 Marketing Programs

Our critical marketing program will be the grand opening, so we will place our initial

advertising to give the greatest coverage. Our specific goal for the event is to create thebiggest buzz the local music community has ever seen regarding a new store. The base budgetwe have set for this event is $5,000. We will have other events that will have no direct cost,such as performing bands and contests.

We will review our efforts by canvassing targeted zip codes to see if we achieved the desiredcoverage of our target markets. After the initial grand opening, we will have ongoingpromotions that will coincide with the N.A.M.M. (National Association of Music Merchants)calendar of events. For example, N.A.M.M. has named April of each year, "International Guitar

Month." N.A.M.M provides sales kits to promote these events at little or no cost to the dealer.Different staff members will handle these sales on a rotating schedule, so that all of us areinvolved personally with the promotion of our store.

MusicWest


23/42

5.5.1 Sales Forecast

Our projections are largely based on Dave Moore's experiences as manager of King Music andMarc's Guitar Center, respectively. We believe we can easily meet the projected sales figuresfor the first year and believe we may be conservative in our projections for the next two years.The fact that there are only two band instrument dealers in our targeted territory and thatthese two dealers are weak, should provide a great opportunity for garnering instant credibilityin the market we serve. Mr. Moore has compiled a list of over 4,000 musicians he has helpedduring his tenure in the Musical Instrument market. This will allow us to save time and moneyby drawing in proven customers for the opening of the store, and a client base to operate fromduring the initial months.

Table: Sales Forecast

Sales ForecastFY 2006 FY 2007 FY 2008

SalesGuitar Sales $195,000 $263,500 $283,000Band and Orchestral Instruments $58,144 $79,000 $85,000Amplifiers, Keyboards etc. $27,600 $26,200 $27,500

Accessories $196,274 $243,000 $259,000Print & DVD $15,550 $13,500 $14,000Rentals $4,950 $4,950 $5,900Repair Labor $17,260 $20,000 $22,500Total Sales $514,778 $650,150 $696,900

Direct Cost of Sales FY 2006 FY 2007 FY 2008Guitar Sales $117,000 $158,100 $169,800Band and Orchestral Instruments $29,072 $39,500 $42,500Amplifiers, Keyboards etc. $16,560 $15,720 $16,500Accessories $78,510 $97,200 $103,600

Print & DVD $9,330 $8,100 $8,400Rentals $4,950 $4,950 $5,900Repair Labor $2,589 $3,000 $3,375Subtotal Direct Cost of Sales $258,011 $326,570 $350,075

MusicWest


24/42

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

FY 2006 FY 2007 FY 2008

Guitar Sales

Band and Orchestral Instruments

Amplifiers, Keyboards etc.Accessories

Print & DVD

Rentals

Repair Labor

Sales by Year

5.5.2 Sales Programs

MusicWest will offer several programs designed to increase sales and reward customer loyalty:

1. MusicWest's "100% Of Purchase Price Trade Up Policy" on fretted instruments.Within the first year of purchase, MusicWest will give a consumer 100% of what theypaid for a fretted instrument less tax toward a step-up instrument that is currently instock The trade can have normal wear and tear MusicWest will be the sole judge of

MusicWest


25/42

5.6 Strategic Alliances

MusicWest will become a member of N.A.M.M. (National Association of Music Merchants). Thisorganization plans many events throughout the year, such as, "International Guitar Month."We intend to follow this group's promotion schedule and to tie it in to our own advertisingcampaigns. No local storefront is currently taking full advantage of these offerings. By takingadvantage of this trade organization's expertise, we can save ourselves time and money ondeveloping an effective advertisement campaign from day one. Some manufacturers also haveadvertising co-ops that we will use when feasible. In addition, these manufacturers providenationally known musicians on a fee basis to their dealers, to use in informational/instructionalclinics and to drive additional sales opportunities.

6.0 Web Plan Summary

MusicWest will have an informational based website containing hyper-links to our mainmanufacturers' home pages. We will also offer promotional coupons to entice Web surfers tovisit our storefront. We haven purposely chosen to avoid a sales engine, as we believe our

major Web competitors could easily beat our local price. The User Interface we envision willbe easy to page through, with exciting graphics and again it will be geared toward steeringvisitors to our storefront.

We will work with an outside website design and hosting service to create and maintain ourwebsite.

7.0 Management Summary

MusicWest


26/42

7.1 Organizational Structure

MusicWest will require its staff to be multi-skilled. Each employee will likely oversee manyaspects of the business on a given day. Our main divisions will be Sales, Service andAdministration. Our focus on customer service will depend on all of our employees knowing asmuch about each area of the business as possible. A complete book of structures and policies,along with successful actions, will be created and maintained from the date of opening tostreamline the process of adding new employees as they become necessary. Ongoing trainingfor all employees will be necessary in order to keep our edge on the competition.

7.2 Management Team

Kayle Moore - Co-OwnerOperations Manager

Qualifications:

Kayle is a 16-year veteran of the wholesale jewelry industry where she worked her way froman entry-level shipping clerk to the CEO/COO position with Shube's Manufacturing. Over her16-year tenure, Kayle took the company from 60 to over 300 employees and from $1 to over$15 million dollars in sales. Kayle's strengths are writing and carrying out sales programs, andkeeping a company within its financial limitations.Kayle, who plays the clarinet, has had alifelong interest in music and plans to translate that enthusiasm, along with her managementskills, into making MusicWest a successful long-term investment.

Related Management Strengths:

CEO/COO level responsibility.

MusicWest


27/42

Related, industry-specific strengths:

Music Store Management. (7 years +)

Direct purchasing of up to $400,000 in inventory annually. Top sales producer in the musical instrument combo department, in addition to his full

time management responsibilitiesat both music stores where he has worked. Outstanding employee relations, with lower than industry average turnover. Excellent relations with vendors. Vast knowledge of Musical Instruments and the Musical Instrument Industry locally and

nationally. Superior customer interaction/retention skills.

Additional Qualifications:

Sales, Sales Manager and Finance Manager in the automotive industry. Trade show management and Sales in the Wholesale Jewelry Trade. Certified computer skills.

C. Ray HimesService Department - Manager

Qualifications:

Graduate of the prestigious Roberto Venn School of Luthiery in Phoenix, Arizona. Trained in all aspects of fretted instrument repair from the simple to the complex,

including re-frets, neck resets, crack repair, wiring and modification work. Completely versed on new construction of electric and acoustic guitars, from the

planning and design phase to final product. Instructed in all phases of managing a full service repair shop as part of his training at

Roberto Venn School of Luthiery.

Trained personally by Dave Moore in the area of guitar sales and accessory sales, inaddition to his repair duties at King Music Center and Marc's Guitar Center.

Great at improvising and solving difficult problems as they arise. Good woodworking skills essential to this position

MusicWest


28/42

7.4 Personnel Plan

The personnel plan highlights our intent to hire as few employees as possible, in order to keepcontrol over how our customers are treated during the crucial first stages of our business. Wewill have four full time salespeople and two to three part time employees to call upon as trafficdemands. In addition, all key employees have agreed to work at lower pay structures to keeppersonnel costs at minimum during the critical first two years.

Table: Personnel

Personnel PlanFY 2006 FY 2007 FY 2008

Dave Moore $31,000 $31,000 $35,000Kayle Moore $31,000 $31,000 $35,000Full Time Employee #1 $20,400 $22,000 $25,000Full Time Employee #2 $20,400 $22,000 $25,000Part Time Employee #1 $6,600 $6,800 $7,200Part Time Employee #2 $6,600 $6,800 $7,200Seasonal Employee #1 $1,750 $2,350 $2,450Total People 7 7 7

Total Payroll $117,750 $121,950 $136,850

8.0 Financial Plan

We expect revenues and sales to increase drastically between the second and fourth years ofoperation. After that high growth period, we expect growth to be steady and stable for theforeseeable future. This industry is very susceptible to consumers' judgements about the storebased on inventory, brands offered, pricing and staffing. It is crucial that we generate

sufficient cash reserves during the growth years to be able to jump on future opportunities,allowing us to increase our market share.

MusicWest


29/42

Table: General Assumptions

General Assumptions FY 2006 FY 2007 FY 2008Plan Month 1 2 3Current Interest Rate 6.50% 6.50% 6.50%Long-term Interest Rate 6.50% 6.50% 6.50%Tax Rate 30.00% 30.00% 30.00%Other 0 0 0

8.2 Break-even Analysis

For break-even analysis purposes, we are assuming running costs of approximately$20,000.00 per month. Payroll on its own is about $9,800. The break-even assumptions arebased on the personal experience of the co-owner, David Moore, based on his actualexperiences as manager of King Music Centers, Inc., and Marc's Guitar Center for an averagemonth's need. We believe we can achieve higher than industry average margins by selectivelychoosing products that allow these margins to be possible, and by value-added marketing ofthese products and related services.

Table: Break-even Analysis

Break-even Analysis

MonthlyRevenue Break-even $40,771

Assumptions:Average Percent Variable Cost 50%Estimated MonthlyF ixed Cost $20,336

$20 000

Break-even Analysis

MusicWest


30/42

8.3 Projected Profit and Loss

If we take advantage of the current market conditions in Albuquerque, we can achieve greatgains in market share during our start-up year and beyond. Our assumptions for sales areconservative compared to industry averages in similarly sized markets.

Table: Profit and Loss

Pro Forma Profit and LossFY 2006 FY 2007 FY 2008

Sales $514,778 $650,150 $696,900Direct Costs of Goods $258,011 $326,570 $350,075Other Production Expenses $0 $0 $0

------------ ------------ ------------Cost of Goods Sold $258,011 $326,570 $350,075

Gross Margin $256,767 $323,580 $346,825

Gross Margin % 49.88% 49.77% 49.77%

ExpensesPayroll $117,750 $121,950 $136,850Sales and Marketing and OtherExpenses

$51,200 $55,400 $58,900

Depreciation $0 $0 $0Acountant Expense $5,200 $5,500 $6,000Utilities $17,120 $18,000 $19,000Insurance $4,800 $5,200 $5,700

Rent $30,000 $30,000 $30,000Payroll Taxes $17,663 $18,293 $20,528Website Maintenance $300 $325 $350

------------ ------------ ------------Total Operating Expenses $244 033 $254 668 $277 328

MusicWest


31/42

($10,000)

($5,000)

$0

$5,000

$10,000

$15,000

Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Profit Monthly

$30 000

$35,000

$40,000

$45,000

Profit Yearly

MusicWest


32/42

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000


Gross Margin Monthly

$250,000

$300,000

$350,000

Gross Margin Yearly

MusicWest


33/42

8.4 Projected Cash Flow

Our cash flow projections show only a slight negative cash flow that our cash "in bank" willeasily allow us to cover, without the need for accessing additional lines of credit financing. Wewill maintain a positive cash balance throughout the foreseeable future.

Table: Cash Flow

Pro Forma Cash FlowFY 2006 FY 2007 FY 2008

Cash Received

Cash from OperationsCash Sales $514,778 $650,150 $696,900Subtotal Cash from Operations $514,778 $650,150 $696,900

Additional Cash ReceivedSales Tax, VAT, HST/GSTReceived

$29,921 $37,790 $40,507

New Current Borrowing $0 $0 $0New Other Liabilities (interest-free) $0 $0 $0New Long-term Liabilities $0 $0 $0

Sales of Other Current Assets $0 $0 $0Sales of Long-term Assets $0 $0 $0New Investment Received $0 $0 $0Subtotal Cash Received $544,699 $687,940 $737,407

Expenditures FY 2006 FY 2007 FY 2008

Expenditures from OperationsCash spending $117,750 $121,950 $136,850Bill Payments $245,820 $473,468 $516,282Subtotal Spent on Operations $363,570 $595,418 $653,132

Additional Cash SpentSales Tax, VAT, HST/GST Paid Out $27,557 $35,544 $38,700Principal Repaymentof CurrentBorrowing

$0 $0 $0

MusicWest


34/42

($50,000)

$0

$50,000

$100,000

$150,000

$200,000

$250,000


Net Cash Flow

Cash Balance

Cash

8.5 Projected Balance Sheet

The projections in the balance sheet are quite solid. We do not anticipate any trouble meetingour debt obligations as long as we follow through with the plans and strategies set forth in this

business plan.

MusicWest


35/42

Table: Balance Sheet

Pro Forma Balance Sheet FY 2006 FY 2007 FY 2008Assets

Current AssetsCash $186,445 $207,795 $217,743Inventory $22,460 $28,429 $30,475Other Current Assets $0 $0 $0Total Current Assets $208,905 $236,224 $248,218

Long-term AssetsLong-term Assets $7,500 $7,500 $7,500

Accumulated Depreciation $0 $0 $0Total Long-term Assets $7,500 $7,500 $7,500Total Assets $216,405 $243,724 $255,718

Liabilities and Capital FY 2006 FY 2007 FY 2008

Current LiabilitiesAccounts Payable $22,976 $42,106 $44,320Current Borrowing $0 $0 $0Other Current Liabilities $2,365 $4,611 $6,418Subtotal Current Liabilities $25,341 $46,717 $50,738

Long-term L iabilities $164,372 $128,744 $93,116Total Liabilities $189,713 $175,461 $143,854

Paid-in Capital $60,000 $60,000 $60,000Retained Earnings ($34,000) ($33,307) $8,263Earnings $693 $41,570 $43,601Total Capital $26,693 $68,263 $111,864Total Liabilit iesand Capital $216,405 $243,724 $255,718

Net Worth $26,693 $68,263 $111,864

MusicWest


36/42

8.6 Business Ratios

The following table shows industry relevant ratios as determined by the standard industryclassification index (SIC) under category 5736 - Musical Instrument Stores.

Table: Ratios

Ratio AnalysisFY 2006 FY 2007 FY 2008 Industry Profile

Sales Growth 0.00% 26.30% 7.19% 4.64%

Percent of Total AssetsInventory 10.38% 11.66% 11.92% 37.97%Other Current Assets 0.00% 0.00% 0.00% 27.27%Total Current Assets 96.53% 96.92% 97.07% 79.90%Long-term Assets 3.47% 3.08% 2.93% 20.10%Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 11.71% 19.17% 19.84% 38.59%Long-term Liabilities 75.96% 52.82% 36.41% 14.67%Total Liabilities 87.67% 71.99% 56.25% 53.26%Net Worth 12.33% 28.01% 43.75% 46.74%

Percent of SalesSales 100.00% 100.00% 100.00% 100.00%Gross Margin 49.88% 49.77% 49.77% 27.24%Selling, General & AdministrativeExpenses

48.16% 42.21% 42.19% 12.59%

Advertising Expenses 5.63% 4.92% 4.88% 1.79%Profit Before Interest and Taxes 2.47% 10.60% 9.97% 0.84%

Main RatiosCurrent 8.24 5.06 4.89 1.81

Quick 7.36 4.45 4.29 0.75Total Debt to Total Assets 87.67% 71.99% 56.25% 60.09%Pre-tax Return on Net Worth 3.71% 87.00% 55.68% 2.46%Pre-tax Return on Assets 0.46% 24.37% 24.36% 6.17%

MusicWest


37/42

Appendix Table: Sales Forecast

Sales ForecastMar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

SalesGuitar Sales 0% $7,000 $8,500 $10,500 $10,500 $12,500 $14,500 $17,000 $17,500 $22,000 $35,000 $22,000 $18,000Band and Orchestral Instruments 0% $3,200 $3,500 $3,460 $3,632 $3,200 $6,576 $6,576 $5,900 $7,000 $10,000 $3,100 $2,000

Amplifiers, Keyboards etc. 0% $1,200 $1,500 $1,700 $1,900 $2,000 $2,000 $2,000 $2,200 $3,000 $5,200 $2,900 $2,000Accessories 0% $9,000 $11,004 $11,316 $13,464 $13,900 $13,500 $18,516 $17,590 $20,000 $30,000 $22,000 $15,984Print & DVD 0% $300 $750 $800 $1,000 $1,000 $1,200 $1,200 $1,200 $2,100 $3,800 $1,200 $1,000Rentals 0% $0 $100 $250 $300 $500 $500 $500 $600 $600 $1,000 $400 $200Repair Labor 0% $350 $500 $650 $700 $1,005 $1,400 $1,755 $1,500 $1,900 $3,500 $2,500 $1,500Total Sales $21,050 $25,854 $28,676 $31,496 $34,105 $39,676 $47,547 $46,490 $56,600 $88,500 $54,100 $40,684

Direct Cost of Sales Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan FebGuitar Sales $4,200 $5,100 $6,300 $6,300 $7,500 $8,700 $10,200 $10,500 $13,200 $21,000 $13,200 $10,800Band and Orchestral Instruments $1,600 $1,750 $1,730 $1,816 $1,600 $3,288 $3,288 $2,950 $3,500 $5,000 $1,550 $1,000

Amplifiers, Keyboards etc. $720 $900 $1,020 $1,140 $1,200 $1,200 $1,200 $1,320 $1,800 $3,120 $1,740 $1,200Accessories $3,600 $4,402 $4,526 $5,386 $5,560 $5,400 $7,406 $7,036 $8,000 $12,000 $8,800 $6,394Print & DVD $180 $450 $480 $600 $600 $720 $720 $720 $1,260 $2,280 $720 $600Rentals $0 $100 $250 $300 $500 $500 $500 $600 $600 $1,000 $400 $200Repair Labor $53 $75 $98 $105 $151 $210 $263 $225 $285 $525 $375 $225Subtotal Direct Cost of Sales $10,353 $12,777 $14,404 $15,647 $17,111 $20,018 $23,578 $23,351 $28,645 $44,925 $26,785 $20,419

Appendix

Page 33


38/42

Appendix Table: Personnel

Personnel PlanMar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Dave Moore 0% $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $3,500 $2,500 $2,500Kayle Moore 0% $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $3,500 $2,500 $2,500Full Time Employee #1 0% $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700

Full Time Employee #2 0% $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $1,700Part Time Employee #1 0% $450 $450 $450 $450 $450 $450 $450 $550 $750 $950 $750 $450Part Time Employee #2 0% $450 $450 $450 $450 $450 $450 $450 $550 $750 $950 $750 $450Seasonal Employee #1 0% $0 $0 $0 $0 $0 $0 $0 $0 $700 $700 $350 $0Total People 6 6 6 6 6 6 6 6 7 7 7 7

Total Payroll $9,300 $9,300 $9,300 $9,300 $9,300 $9,300 $9,300 $9,500 $10,600 $13,000 $10,250 $9,300

Appendix

Page 34


39/42

Appendix Table: General Assumptions

General AssumptionsMar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Plan Month 1 2 3 4 5 6 7 8 9 10 11 12Current Interest Rate 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50%Long-term Interest Rate 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50%

Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%Other 0 0 0 0 0 0 0 0 0 0 0 0

Appendix

Page 35


40/42

Appendix Table: Profit and Loss

Pro Forma Profit and LossMar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Sales $21,050 $25,854 $28,676 $31,496 $34,105 $39,676 $47,547 $46,490 $56,600 $88,500 $54,100 $40,684Direct Costs of Goods $10,353 $12,777 $14,404 $15,647 $17,111 $20,018 $23,578 $23,351 $28,645 $44,925 $26,785 $20,419Other Production Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

--- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- -Cost of Goods Sold $10,353 $12,777 $14,404 $15,647 $17,111 $20,018 $23,578 $23,351 $28,645 $44,925 $26,785 $20,419

Gross Margin $10,698 $13,077 $14,272 $15,849 $16,994 $19,658 $23,969 $23,139 $27,955 $43,575 $27,315 $20,265Gross Margin % 50.82% 50.58% 49.77% 50.32% 49.83% 49.55% 50.41% 49.77% 49.39% 49.24% 50.49% 49.81%

ExpensesPayroll $9,300 $9,300 $9,300 $9,300 $9,300 $9,300 $9,300 $9,500 $10,600 $13,000 $10,250 $9,300Sales and Marketing and OtherExpenses

$6,400 $3,400 $3,400 $3,400 $5,900 $3,400 $3,400 $2,400 $4,500 $5,700 $5,900 $3,400

Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Acountant Expense $800 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400Utilities $1,040 $1,040 $1,130 $1,380 $1,790 $1,460 $1,370 $1,460 $1,760 $2,210 $1,400 $1,080Insurance $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400Rent $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500Payroll Taxes 15% $1,395 $1,395 $1,395 $1,395 $1,395 $1,395 $1,395 $1,425 $1,590 $1,950 $1,538 $1,395Website Maintenance $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25

--- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- - - -- -- -- -- -- -Total Operating Expenses $21,860 $18,460 $18,550 $18,800 $21,710 $18,880 $18,790 $18,110 $21,775 $26,185 $22,413 $18,500

Profit Before Interest and Taxes ($11,163) ($5,383) ($4,278) ($2,951) ($4,716) $778 $5,179 $5,029 $6,180 $17,390 $4,903 $1,765Interest Expense $1,067 $1,051 $1,035 $1,019 $1,003 $987 $971 $955 $939 $923 $906 $890Taxes Incurred ($3,669) ($1,930) ($1,594) ($1,191) ($1,716) ($63) $1,263 $1,222 $1,572 $4,940 $1,199 $263

Net Profit ($8,561) ($4,504) ($3,719) ($2,779) ($4,003) ($146) $2,946 $2,852 $3,669 $11,527 $2,797 $613Net Profit/Sales -40.67% -17.42% -12.97% -8.82% -11.74% -0.37% 6.20% 6.13% 6.48% 13.03% 5.17% 1.51%

Appendix

Page 36


41/42


42/42

Appendix Table: Balance Sheet

Pro Forma Balance SheetMar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Assets Starting Balances

Current Assets

Cash $68,500 $78,173 $82,134 $90,411 $101,089 $113,670 $129,743 $154,934 $176,770 $195,864 $220,971 $179,997 $186,445Inventory $150,000 $139,648 $126,871 $112,467 $96,820 $79,710 $59,692 $36,114 $25,686 $31,510 $49,418 $29,464 $22,460Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0T otal Current Assets $ 218 ,50 0 $21 7,820 $20 9,005 $20 2,878 $ 197 ,91 0 $193 ,3 79 $1 89,435 $1 91,048 $ 202 ,45 6 $ 227,37 4 $ 270,38 8 $20 9,461 $2 08,905

Long-term AssetsLong-term Assets $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500

Accumulated Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Long-term Assets $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500Total Assets $ 226 ,00 0 $22 5,320 $21 6,505 $21 0,378 $ 205 ,41 0 $200 ,8 79 $1 96,935 $1 98,548 $ 209 ,95 6 $ 234,87 4 $ 277,88 8 $21 6,961 $2 16,405

Liabilities and Capital Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Current LiabilitiesAccounts Payable $0 $9,626 $8,005 $8,401 $9,017 $11,307 $10,154 $11,333 $22,920 $46,549 $79,151 $20,395 $22,976Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Other Current Liabilities $0 $1,224 $1,503 $1,667 $1,831 $1,982 $2,306 $2,764 $2,702 $3,290 $5,144 $3,145 $2,365Subtotal Current Liabilities $0 $10,850 $9,508 $10,068 $10,848 $13,290 $12,460 $14,096 $25,622 $49,839 $84,295 $23,540 $25,341

L ong-term Lia bi liti es $ 200 ,00 0 $19 7,031 $19 4,062 $19 1,093 $ 188 ,12 4 $185 ,1 55 $1 82,186 $1 79,217 $ 176 ,24 8 $ 173,27 9 $ 170,31 0 $16 7,341 $1 64,372Total Liabilities $ 200 ,00 0 $20 7,881 $20 3,570 $20 1,161 $ 198 ,97 2 $198 ,4 45 $1 94,646 $1 93,313 $ 201 ,87 0 $ 223,11 8 $ 254,60 5 $19 0,881 $1 89,713

Paid-in Capital $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000Retai ned Ea rn ing s ($ 34,000 ) ($34 ,0 00) ($34,00 0) ($ 34,000 ) ($ 34,000 ) ($34,00 0) ($ 34,000 ) ($3 4,0 00) ($ 34,000 ) ($3 4,0 00) ($34,00 0) ($34 ,00 0) ($3 4,000)Earnings $0 ($8,561) ($13,064) ($16,784) ($19,562) ($23,565) ($23,712) ($20,766) ($17,913) ($14,245) ($2,717) $80 $693Total Capital $26,000 $17,439 $12,936 $9,216 $6,438 $2,435 $2,288 $5,234 $8,087 $11,755 $23,283 $26,080 $26,693T otal L iab il itie s a nd Capi ta l $ 226 ,00 0 $22 5,320 $21 6,505 $21 0,378 $ 205 ,41 0 $200 ,8 79 $1 96,935 $1 98,548 $ 209 ,95 6 $ 234,87 4 $ 277,88 8 $21 6,961 $2 16,405

Net Worth $26,000 $17,439 $12,936 $9,216 $6,438 $2,435 $2,288 $5,234 $8,087 $11,755 $23,283 $26,080 $26,693

Appendix

Documents

MusicWest Store