January 2000

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 Table of Contents

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

1.1 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.0 The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.1 Company History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

3.0 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

4.0 Market Analysis Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

4.1 Market Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Target Market Segment Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.3 Service Business Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.3.1 Business Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3.2 Competition and Buying Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3.3 Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

5.0 Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1 Value Propositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.2 Competitive Edge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.3 Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3.1 Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3.2 Marketing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.4 Sales Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

6.0 Management Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

6.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.2 Officers and Key Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

7.0 Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.1 Significant Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.2 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 Income Statements - Projected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.4 Projected Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.5 Balance Sheets - Projected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.6 Business Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
 Mike's Trucking Service

1.0 Executive Summary

Mike’s Trucking Service (Mike's Trucking) is a Dallas, Texas-based trucking company whose
mission is to become one of the largest trucking companies servicing the United States. The
company’s strategy is to consolidate its excellent customer and client service by making timely
deliveries, hiring the best drivers, and having a competitive pricing structure. Mike’s Trucking
plans to acquire the best equipment for the job.

Mike’s Trucking will focus mainly on the food industry companies in the United States.
However, in the future the company plans to diversify into other industries. In addition, the
company will provide its services to the following companies: supply companies, lumberyards,
and many other potential companies that use hauling for their cargo.

Companies with whom we compete are Dynasty, Venture, Ace, and ACME. We have a
competitive advantage, however, because of our reputation in the industry and competitive
pricing of services.

The company is seeking financing in the amount of $125,000 for the purpose of financing the
acquisition of trucks, equipment, and funding operating expenses. Projected revenues for 2000
to 2002 are $100,000, $150,000, and $200,000, respectively.

1.1 Mission

The mission of Mike’s Trucking is to be the leading trucking company servicing the United
States.

2.0 The Company

Mike’s Trucking Service is a Texas LLC, with principal offices located in Dallas, Texas. Mike
Smith, president and CEO, is the majority owner. He has been in the trucking business for 15
years.

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2.1 Company History

Mike's Trucking has been in business for one year. We have maintained financial stability
during its first year of operation due to the extensive industry experience of our management
team.

Table: Past Performance

Past Performance
1997 1998 1999
Sales $0 $0 $60,000
Gross Margin $0 $0 $42,000
Gross Margin % 0.00% 0.00% 70.00%
Operating Expenses $0 $0 $18,000
Collection Period (Days) 0 0 37
Inventory Turnover 0.00 0.00 0.00

Balance Sheet
Short-term Assets 1997 1998 1999
Cash $0 $0 $500
Accounts Receivable $0 $0 $10,000
Inventory $0 $0 $5,000
Other Short-term Assets $0 $0 $0
Total Short-term Assets $0 $0 $15,500
Long-term Assets
Capital Assets $0 $0 $40,000
Accumulated Depreciation $0 $0 $4,000
Total Long-term Assets $0 $0 $36,000
Total Assets $0 $0 $51,500

Capital and Liabilities

1997 1998 1999
Accounts Payable $0 $0 $3,500
Current Borrowing $0 $0 $20,000
Other Short-term Liabilities $0 $0 $500
Subtotal Short-term Liabilities $0 $0 $24,000

Long-term Liabilities $0 $0 $25,000

Total Liabilities $0 $0 $49,000
Paid-in Capital $0 $0 $0
Retained Earnings $0 $0 $2,500
Earnings $0 $0 $0
Total Capital $0 $0 $2,500
Total Capital and Liabilities $0 $0 $51,500

Other Inputs 1997 1998 1999

Payment Days 0 0 30
Sales on Credit $0 $0 $50,000
Receivables Turnover 0.00 0.00 5.00

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 Mike's Trucking Service

Past Performance

$60,000

$50,000

$40,000
Sales
$30,000 Gross
Net
$20,000

$10,000

$0
1997 1998 1999

3.0 Services

The trucking industry provides transportation services for persons or companies looking to
haul heavy things. Mike's Trucking enables someone to lease a truck, of any size, for any
project that needs hauling. We will provide this service to the whole of the Dallas area, and
hope to expand from this base area within the first five years of operation.

This service is provided on two bases: for-hire and private carriers. Of these two segments,
Mike's Trucking will concentrate on the for-hire carriers, and, more specifically, the truckload
(TL) and less-than-truckload (LTL) segments. The services offered, and the markets being
targeted, are discussed throughout the following section.

4.0 Market Analysis Summary

Mike's Trucking has an opportunity to entrench its competitive position in the regional
transportation market by selectively focusing its target market on the food industry. The
company has already had experience in servicing such clients and it believes that there is a
growing demand for reliable transportation solutions in this customer segment.

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 Mike's Trucking Service

4.1 Market Segmentation

There are several potential customer segments that we will provide our transportation services
to. Major customer segments include the food industry, PC and semiconductor manufacturers,
and retailers. The chart and table below outline the current market size and growth estimates
for these customer segments in Texas.

Large established companies in the afore-mentioned segments (especially in the food industry)
have their own truck fleets, while smaller players outsource the transportation function. The
latter vary in the scale of their operations, but have a steady demand for reliable
transportation solutions. We will actively solicit such customers.

Market Analysis (Pie)

Food Industry
Computer Industry
Retail Industry
Other

Table: Market Analysis

Market Analysis
Potential Customers Growth 2000 2001 2002 2003 2004 CAGR
Food Industry 3% 3,000 3,090 3,183 3,278 3,376 3.00%
Computer Industry 5% 1,500 1,575 1,654 1,737 1,824 5.01%
Retail Industry 2% 1,500 1,530 1,561 1,592 1,624 2.01%
Other 2% 500 510 520 530 541 1.99%
Total 3.17% 6,500 6,705 6,918 7,137 7,365 3.17%

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4.2 Target Market Segment Strategy

Mike's Trucking will focus its marketing budget on a selected industry niche. A narrow-served
market focus will help strengthen the company's reputation of a reliable transportation
services provider and will generate favorable referrals.

The major customer segment the company is focusing on is the food industry. Companies in
this segment have varying needs, and Mike's Trucking has already gained valuable experience
serving such customers. The company management believes that by increasing its truck fleet
it can capture additional clients and provide better service to existing clients.

4.3 Service Business Analysis

Market Description Industry: Trucking, except local

Establishments that are primarily engaged in furnishing "over-the-road" trucking services or

trucking and storage services for freight generally weighing more than 100 pounds. Such
operations are principally outside a single municipality, group of contiguous municipalities, or
municipality and its suburban areas.

Market Size Statistics

Estimated number of U.S. establishments 48,117

Number of people employed in this industry 812,712
Total annual sales in this industry $139 million
Average employees per establishment 17
Average sales per establishment $3.6 million

Standard & Poor’s estimates that the U.S. commercial freight transportation market had
aggregate revenues of $436 billion in 1998. In other words, five cents of every dollar of U.S.
gross domestic product that year was spent on transportation.

Industry trends

While a driver shortage continues to plague the TL sector, the LTL carriers have adapted to
changing market conditions in order to capitalize on growth opportunities. Intermodal shippers
also stand to benefit from market trends. And the evolution of electronic commerce stands to
intensify competition among all carriers.

Truckers Dominate Freight Market

Based on value of service, trucking (excluding warehousing and logistics) accounted for 79%,
or some $344 billion, of U.S. commercial freight revenues in 1998, but only 45% of total ton
miles. This is because products transported by truck tend to be lightweight, manufactured
goods that move short distances, rather than the heavy, long haul, bulk commodities that
travel by rail and barge.

Motor carriers specialize in higher-value freight that moves 750 miles or less and for which
delivery is required within three days. Some 36% of truck freight (measured by shipping cost)
never crosses state lines. Examples of this type of freight are food and consumer staples
delivered locally, and manufactured goods shipped between commercial establishments or
delivered to consumers or retail outlets.

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 Mike's Trucking Service
Truckers have the largest share of the freight market. Unlike railroads, pipelines, or water
carriers, they don’t face geographic limits caused by physical constraints, and can offer door-
to-door service. They also pay relatively little to use the nation’s highway system. Railroads,
by contrast, must build, maintain, and police their rights-of-way.

The trucking industry consists of two broad segments: private and for hire. In turn, for-hire
truckers fall into two broad categories: truckload and less-than-truckload carriers.

4.3.1 Business Participants

Trucking

With some $344 billion in 1998 revenues, the trucking (or motor carrier) business claimed
79% of the U.S. commercial freight transportation market. This total was divided among two
sectors: private carriage and for hire.

Figure 2. Commercial Freight Distribution

Transportation Billion $ % of Total

Trucking, Total $344 63.6%
Private, Interstate $115 21.3%
Private, Local $85 15.7%
Truckload $65 12.0%
Local For-Hire $40 7.4%
LTL, National $9 1.7%
LTL, Regional $11 2.0%
Package/Express (ground) $19 3.5%
Railroad $36 6.7%
Pipeline (oil and gas) $26 4.8%
Air Freight, Package Domestic $17 3.1%
Air Freight, Heavy Domestic $6 1.1%
Water (Great Lakes/rivers) $7 1.3%
Transportation Total* $436 80.6%
Logistics Administration $35 6.5%
Distribution Total $105 19.4%
Total* $541 100.0%

*Excluding $ 5 billion in international cargo.

Sources: Standard & Poor's, Data Resources, Inc., and Cass Information Systems.

Private carriers

Although private carriers comprise the largest component of the motor-carrier industry,
financial information isn’t available for them. However, the industry is estimated to provide
services valued at some $200 billion annually (or 58% of motor carrier revenues in 1998).

The American Trucking Association (ATA) estimates that there are more than three million
trucks operated by private fleets transporting 3.5 billion tons of freight annually.

For-hire carriers

The for-hire category generated $144 billion in 1998, or 42% of the industry total. Of that

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 Mike's Trucking Service
$144 billion, some $105 billion (73% of the sector’s business) came from truckload shipments,
and $39 billion (27%) was from less-than-truckload and package/express delivery.

• Truckload (TL). The national for-hire truckload segment had total revenues of $65
billion in 1998. The TL sector has historically been mostly privately owned, with the
exception of the top ten publicly-owned companies (For this reason, we focused on the
LTL sector in this survey). Schneider National Carriers was the largest TL operator, with
revenues of $2.8 billion in 1998, followed by J.B. Hunt Transport Services ($1.8 billion),
and the Landstar family of truckload-carriers ($1.3 billion). Of the 50,000 truck load
carriers, perhaps 95% had annual revenues of less than $1 million.

• Less-than-truckload (LTL). The ATA estimates that the less-than-truckload market

garnered $20 billion in 1998. Of this amount, the fast-growing regional segment
accounted for slightly more than the national market.

The largest national LTL carrier was Roadway Express Inc., with $2.32 billion in LTL
revenues in 1998; the company’s total revenue of $2.55 billion includes TL freight.
Yellow Freight System (a unit of Yellow Corporation) was close behind, with $2.25
billion (out of $2.46 billion total). Consolidated Freightways Corporation was third, with
$1.95 billion in LTL revenues.

In the regional LTL market, Con-Way Transportation (a unit of CNF Transportation

Inc.) was the largest player, with $1.5 billion in LTL revenue in 1998. Second place
belonged to US Freightways, whose family of five carriers generated some 41.4 billion
in LTL revenue. American Freightways Corporation was third, with $928 million in less-
than-truckload revenues.

4.3.2 Competition and Buying Patterns

Although there are major players in each of the commercial carrier market segments, the
market remains highly fragmented. According to the Dallas Yellow Pages, there are numerous
companies providing different kinds of the trucking services. Major competitors for Mike's
Trucking are those companies who have comparable truck fleets and are also targeting the
food industry.

Market research shows that customers in the food industry are price sensitive, and they value
on-time deliveries, special handling capabilities, and less-than-truckload orders. Customer
referrals and carrier's reputation are believed to strongly influence the buying decision.

4.3.3 Risks

The company recognizes that it is subject to both market and industry risks. The two primary
risks to the company are:
• Industry concentration risk. The company is mainly focused on food industry
businesses in the United States. This position is favorable since the industry is fairly
stable. Any slow down in the food production would have negative repercussions for
Mike’s Trucking. To mitigate this risk, the company is looking at diversifying its trucking
business to include other industries as well.

• Operational risk. Mike’s Trucking recognizes the fact that there is an inherent risk in
transporting cargo. Any damage to cargo may undermine the profitable of the
company. To reduce this risk, the company maintains all necessary insurance.

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 Mike's Trucking Service

5.0 Strategy

The strategy of Mike's Trucking is to consolidate its good customer and client service by
making timely deliveries, hiring the best drivers and having a competitive pricing structure.
The company’s goal in the next year is to become an independently-run business entity
without having any contracted services. We would like to fully manage our trucking operation,
from hiring drivers to sourcing business. The company’s goal within the next five years is to
operate a full-service trucking business with a fleet of trucks, "hot-shot" trucks, and minifloat
loads. Mike’s Trucking would like to be in a position to handle any job available at this stage.

Key components of our initial strategy can be summarized as follows:

• Expand fleet of trucks. The company is currently working to expand on its existing
fleet of trucks. This will enable us to increase the number of customers we are able to
serve.
• Establish independent status.The company is currently operating under fee sharing,
but is working to become independent and manage its own operations, from sourcing
to daily management.
• Establish a complete trucking business.The company is currently working toward
becoming a complete trucking business with a fleet of trucks which includes long-haul
trucks. The management of the company has identified a good customer base which it
can tap into once all the necessary equipment has been acquired. This will enable the
company to service areas outside its current domain and increase profit levels.

5.1 Value Propositions

Mike’s Trucking offers the following advantages to customers.

• Quality Service. We provide our customers with courteous, prompt, and dependable
service. The company has a reputation for timely deliveries and the best drivers in the
industry, and intends to build upon that.
• Competitive rates. We will provide competitive rates for our customers because we
have low cost inputs.
• Package handling. By maintaining dependable and safe equipment, we will ensure
that there is no damage to customer's cargo.

5.2 Competitive Edge

Our major competitive advantage is the vast industry experience and solid reputation of its
owner, Mike Smith. His company is also well known among its clients for going that extra mile
in the customer-service department.

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 Mike's Trucking Service

5.3 Marketing Strategy

We markets our services as solutions to the many companies requiring cargo to be transported
promptly and efficiently. The company's future marketing plans will be nationwide,
emphasizing haulage capabilities for any cargo. The overall marketing plan for services is
based on the following fundamentals:
• The segment of the market(s) planned to reach.
• Distribution channels planned to reach market segments: television, radio, sales
associates, and mailings.
• Share of the market expected to capture over a fixed period of time.

5.3.1 Pricing

At the time of this writing, Mike’s Trucking has a lease arrangement with various companies.
The company’s pricing is based on miles per thousands of pounds of cargo transported. We will
be able charge competitive rates, as we have minimal overhead compared to our competition.
The table below sketches out the pricing structure; for a key to this table please see asterisks
at the bottom of the page.

Figure 3. The company’s pricing structure.

1501-6000 lbs. 6001-16000 lbs. 16001-30000

0-1500 lbs. FAK*
FAK* FAK* lbs. FAK*
Hot Shot** Stakebed** Minifloat** Single Axle**
Mileage:
10 $50 $90 $115 $196
20 $50 $90 $137 $210
30 $50 $90 $155 $228
40 $52 $90 $175 $247
50 $65 $94 $195 $275
60 $77 $105 $200 $300
70 $90 $115 $220 $356
80 $104 $124 $240 $375
90 $116 $140 $255 $409
100 $130 $155 $270 $438
110 $140 $170 $290 $477
120 $157 $185 $305 $500
130 $170 $200 $316 $526
140 $183 $215 $335 $530
150 $195 $230 $350 $540
160 $210 $249 $385 $558
170 $220 $264 $400 $575
180 $235 $279 $420 $595
190 $250 $295 $450 $615
200 $260 $305 $480 $630
210 $275 $325 $505 $645
220 $288 $341 $530 $660
230 $300 $357 $555 $685
240 $313 $372 $580 $700
250 $325 $385 $600 $710
260 $340 $400 $615 $720

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 Mike's Trucking Service
270 $355 $419 $630 $730
280 $367 $434 $645 $745

* FAK= Freight of all kinds.

** Types of trucks.

5.3.2 Marketing Plan

Market Responsibilities. Mike’s Trucking is committed to an extensive promotional

campaign. To accomplish initial sales goals, the company will require an extremely effective
promotional campaign to accomplish two primary objectives:
1. Attract quality sales/service personnel with a desire to be successful.
2. Attract customers that will consistently look to Mike’s Trucking for their hauling needs.

Promotion. In addition to standard advertisement practices, Mike’s Trucking will gain

considerable recognition through these additional promotional mediums:
• Press releases sent to radio stations, newspapers, and magazines.
• Radio advertising on secondary stations.
• We plan to advertise nationally, in magazines and newspapers, on television and radio,
and on billboards.

Incentives. As an extra incentive for customers and potential customers to remember the
name, Mike's Trucking plans to distribute coffee mugs, T-shirts, pens, and other advertising
specialties with the company logo.

Brochures. The objective of a brochure is to portray the company's goals and products as an
attractive functionality. Mike’s Trucking will develop three brochures: one to be used to
promote sales, one to announce the product in a new market, and the third to recruit sales
associates.

5.4 Sales Strategy

The company will base its sales strategy on increasing the sales from its existing customers,
and also to target new businesses. For the latter purpose, we will employ a part-time sales
representative.

A customer survey has shown that currently Mike's Trucking is losing sales from its existing
clients because the company cannot provide certain types of services. The customers have
also shown interest in giving more business to Mike's Trucking once the company increases its
truck fleet to handle special orders. Once the new trucks are purchased, we will notify our
clientele of the new services and pitch our services to the new businesses. We will further
continue our policy of only accepting jobs which can be delivered with high customer
satisfaction. Orders that require outsourcing will be gradually eliminated so that we can
provide total quality control over the services we render.

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 Mike's Trucking Service

Sales Monthly (Planned)

$10,000
$9,000

$8,000

$7,000
$6,000

$5,000 Trucking Services

$4,000 Other

$3,000

$2,000

$1,000

$0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Table: Sales Forecast (Planned)

Sales Forecast
Sales 2000 2001 2002
Trucking Services $100,000 $250,000 $400,000
Other $0 $0 $0
Total Sales $100,000 $250,000 $400,000

Direct Cost of Sales 2000 2001 2002

Trucking Services $20,000 $50,000 $80,000
Other $0 $0 $0
Subtotal Direct Cost of Sales $20,000 $50,000 $80,000

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 Mike's Trucking Service

6.0 Management Summary

The company's management is minimal in order to reduce the overhead. Mike Smith, the
company owner and president, makes all executive decisions. At the moment, he also
generates most of the sales leads. Joan Rose works as an executive secretary who answers
phone inquiries and maintains the customer database. A part-time sales representative will be
hired to solicit new business once the company acquires new trucks. In the years 2001-2002,
the administrative staff is planned to increase in order to handle the higher sales volume. In
the future, a sales manager will be hired to allow Mr. Smith more time to dedicate himself to
company management.

Table: Personnel (Planned)

Personnel Plan
2000 2001 2002
Mike Smith $18,000 $20,000 $30,000
Joan Rose $12,000 $15,000 $20,000
Other $0 $15,000 $40,000
Total Payroll $30,000 $50,000 $90,000

Total People 2 3 4
Payroll Burden $4,500 $7,500 $13,500
Total Payroll Expenditures $34,500 $57,500 $103,500

6.1 Organization

The company’s management philosophy is based on responsibility and mutual respect. Mike’s
Trucking maintains an environment that stimulates productivity and emphasizes respect for
customers and fellow employees. The company structure is linear, which lends the staff
responsibilities and decision-making power.

6.2 Officers and Key Employees

The management of Mike's Trucking is highly experienced and qualified. Mike Smith, president
and CEO, has been involved in the trucking industry for 15 years. He is well respected by the
trucking professionals with whom he has worked. All administrative functions are performed by
Joan Rose, who has worked with Mr. Smith for the last seven years. She posesses
extraordinary customer service and database management skills.

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 Mike's Trucking Service

7.0 Finance

Funding Requirements and Uses

The company is raising $125,000 for the purpose of financing equipment purchases to meet a
growing demand for its services. The company management has reason to believe that an
increased truck fleet wil assist the company in its effort to widen its market offering and
increase sales.

7.1 Significant Assumptions

The following table highlights the important general assumptions of Mike's Trucking. Interest
rates, tax rates, and personnel burden are based on conservative assumptions.

Table: General Assumptions

General Assumptions
2000 2001 2002
Short-term Interest Rate % 10.00% 10.00% 10.00%
Long-term Interest Rate % 10.00% 10.00% 10.00%
Tax Rate % 25.00% 25.00% 25.00%
Expenses in Cash % 10.00% 10.00% 10.00%
Sales on Credit % 20.00% 20.00% 20.00%
Personnel Burden % 15.00% 15.00% 15.00%

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 Mike's Trucking Service

7.2 Break-even Analysis

The break-even chart and table below indicate that 22 runs per month are necessary for the
company to make enough to cover monthly expenses.

Break-even Analysis

$4,000
$3,000
$2,000
$1,000
$0
($1,000)
($2,000)
($3,000)
($4,000)
$0 $1,600 $3,200 $4,800 $6,400 $8,000

Monthly break-even point

Break-even point = where line intersects with 0

Table: Break-even Analysis

Break-even Analysis:
Monthly Units Break-even 22
Monthly Sales Break-even $4,375

Assumptions:
Average Per-Unit Revenue $200.00
Average Per-Unit Variable Cost $40.00
Estimated Monthly Fixed Cost $3,500

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 Mike's Trucking Service

7.3 Income Statements - Projected

The table below summarizes our projected income statement for the first three years of plan
implementation, fiscal years 2000, 2001, and 2002. As with the other tables, the Profit and
Loss table is projected to be quite conservative. The detailed monthly projection can be found
in the appendices.

Table: Profit and Loss (Planned)

Pro Forma Profit and Loss

2000 2001 2002
Sales $100,000 $250,000 $400,000
Direct Cost of Sales $20,000 $50,000 $80,000
Other $0 $0 $0
------------ ------------ ------------
Total Cost of Sales $20,000 $50,000 $80,000
Gross Margin $80,000 $200,000 $320,000
Gross Margin % 80.00% 80.00% 80.00%
Operating Expenses:
Advertising/Promotion $1,200 $3,000 $5,000
Travel $3,600 $5,000 $7,000
Sales commission $1,800 $4,000 $5,000
Miscellaneous $480 $1,000 $1,500
Payroll Expense $30,000 $50,000 $90,000
Payroll Burden $4,500 $7,500 $13,500
Depreciation $4,800 $5,000 $5,500
Depreciation $0 $0 $0
Fuel & Maintenance $6,000 $12,000 $20,000
Utilities $2,400 $3,000 $3,500
Insurance $4,800 $5,000 $6,000
Contract/Consultants $0 $0 $0
------------ ------------ ------------
Total Operating Expenses $59,580 $95,500 $157,000
Profit Before Interest and Taxes $20,420 $104,500 $163,000
Interest Expense Short-term $1,805 $1,290 $690
Interest Expense Long-term $10,413 $13,470 $12,670
Taxes Incurred $2,050 $22,435 $37,410
Extraordinary Items $0 $0 $0
Net Profit $6,151 $67,305 $112,230
Net Profit/Sales 6.15% 26.92% 28.06%

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 Mike's Trucking Service

7.4 Projected Cash Flow

The projected cash flow is presented in the chart and table below. The long-term loan in the
amount of $125,000 is expected to be received in May, 2000, which is reflected in the increase
of the long-term borrowing row for that month. The company is planning to purchase two
trucks (one in June and one in August) in the first year of plan implementation, 2000;
corresponding transactions are reflected in the capital expenditure rows. Monthly repayments
on the $125,000 loan will be made in the amount of $1,500.

The monthly cash flow is presented in the illustration, with one bar representing cash flow per
month, and the other the monthly balance. The annual cash flow can be found in the table
below, and are in monthly detail in the appendices.

Cash (Planned)

$150,000

$100,000

$50,000
Net Cash Flow

$0 Cash Balance

($50,000)

($100,000)
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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 Mike's Trucking Service

Table: Cash Flow (Planned)

Pro Forma Cash Flow 2000 2001 2002

Cash Received
Cash from Operations:
Cash Sales $80,000 $200,000 $320,000
From Receivables $27,067 $45,600 $75,600
Subtotal Cash from Operations $107,067 $245,600 $395,600

Additional Cash Received

Extraordinary Items $0 $0 $0
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $125,000 $0 $0
Sales of other Short-term Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $232,067 $245,600 $395,600

Expenditures 2000 2001 2002

Expenditures from Operations:
Cash Spent on Costs and Expenses $17,955 $12,020 $17,877
Wages, Salaries, Payroll Taxes, etc. $34,500 $57,500 $103,500
Payment of Accounts Payable $160,380 $109,734 $159,355
Subtotal Spent on Operations $212,835 $179,253 $280,732

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $3,600 $7,000 $5,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $11,300 $8,000 $8,000
Purchase Other Short-term Assets $0 $0 $0
Purchase Long-term Assets $125,000 $0 $0
Dividends $0 $0 $0
Adjustment for Assets Purchased on Credit ($125,000) $0 $0
Subtotal Cash Spent $227,735 $194,253 $293,732

Net Cash Flow $4,332 $51,347 $101,868

Cash Balance $4,832 $56,178 $158,046

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 Mike's Trucking Service

7.5 Balance Sheets - Projected

The table below shows Mike's Trucking balance sheets for 2000-2002.

Table: Balance Sheet (Planned)

Pro Forma Balance Sheet

Assets
Short-term Assets 2000 2001 2002
Cash $4,832 $56,178 $158,046
Accounts Receivable $2,933 $7,333 $11,733
Other Short-term Assets $0 $0 $0
Total Short-term Assets $7,765 $63,512 $169,780
Long-term Assets
Long-term Assets $165,000 $165,000 $165,000
Accumulated Depreciation $8,800 $13,800 $19,300
Total Long-term Assets $156,200 $151,200 $145,700
Total Assets $163,965 $214,712 $315,480

Liabilities and Capital

2000 2001 2002
Accounts Payable $4,714 $3,156 $4,693
Current Borrowing $16,400 $9,400 $4,400
Other Short-term Liabilities $500 $500 $500
Subtotal Short-term Liabilities $21,614 $13,056 $9,593

Long-term Liabilities $138,700 $130,700 $122,700

Total Liabilities $160,314 $143,756 $132,293

Paid-in Capital $0 $0 $0
Retained Earnings ($2,500) $3,651 $70,956
Earnings $6,151 $67,305 $112,230
Total Capital $3,651 $70,956 $183,186
Total Liabilities and Capital $163,965 $214,712 $315,480
Net Worth $3,651 $70,956 $183,186

7.6 Business Ratios

The following table includes Industry Profile statistics for the trucking industry, as determined
by the Standard Industry Classification (SIC) Index. The SIC Code for this plan is 4213, and
the SIC Description is Trucking except local. These statistics show a comparison of industry
standards and key ratios for this plan.

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Table: Ratios (Planned)

Ratio Analysis
2000 2001 2002 Industry Profile
Sales Growth 66.67% 150.00% 60.00% 5.60%

Percent of Total Assets

Accounts Receivable 1.79% 3.42% 3.72% 19.70%
Inventory 0.00% 0.00% 0.00% 1.00%
Other Short-term Assets 0.00% 0.00% 0.00% 22.30%
Total Short-term Assets 4.74% 29.58% 53.82% 43.00%
Long-term Assets 95.26% 70.42% 46.18% 57.00%
Total Assets 100.00% 100.00% 100.00% 100.00%

Other Short-term Liabilities 0.30% 0.23% 0.16% 30.80%

Subtotal Short-term Liabilities 13.18% 6.08% 3.04% 25.80%
Long-term Liabilities 84.59% 60.87% 38.89% 27.00%
Total Liabilities 97.77% 66.95% 41.93% 52.80%
Net Worth 2.23% 33.05% 58.07% 47.20%

Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 80.00% 80.00% 80.00% 100.00%
Selling, General & Administrative Expenses 73.85% 53.08% 51.94% 82.10%
Advertising Expenses 1.20% 1.20% 1.25% 0.20%
Profit Before Interest and Taxes 20.42% 41.80% 40.75% 1.10%

Main Ratios
Current 0.36 4.86 17.70 1.32
Quick 0.36 4.86 17.70 1.07
Total Debt to Total Assets 97.77% 66.95% 41.93% 57.80%
Pre-tax Return on Net Worth 893.89% 168.08% 96.27% 2.50%
Pre-tax Return on Assets 19.91% 55.54% 55.90% 6.00%

Business Vitality Profile 2000 2001 2002 Industry

Sales per Employee $50,000 $83,333 $100,000 $0
Survival Rate 0.00%

Additional Ratios 2000 2001 2002

Net Profit Margin 6.15% 26.92% 28.06% n.a
Return on Equity 168.47% 94.85% 61.27% n.a

Activity Ratios
Accounts Receivable Turnover 6.82 6.82 6.82 n.a
Collection Days 118 37 43 n.a
Inventory Turnover 0.00 0.00 0.00 n.a
Accounts Payable Turnover 34.28 34.28 34.28 n.a
Total Asset Turnover 0.61 1.16 1.27 n.a

Debt Ratios
Debt to Net Worth 43.91 2.03 0.72 n.a
Short-term Liab. to Liab. 0.13 0.09 0.07 n.a

Liquidity Ratios
Net Working Capital ($13,849) $50,456 $160,186 n.a
Interest Coverage 1.67 7.08 12.20 n.a

Additional Ratios
Assets to Sales 1.64 0.86 0.79 n.a
Current Debt/Total Assets 13% 6% 3% n.a
Acid Test 0.22 4.30 16.47 n.a
Sales/Net Worth 27.39 3.52 2.18 n.a
Dividend Payout $0 0.00 0.00 n.a

Page 19
 Appendix

Appendix Table: Sales Forecast (Planned)

Sales Forecast
Sales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Trucking Services $6,000 $6,000 $7,000 $7,000 $8,000 $8,000 $9,000 $9,000 $10,000 $10,000 $10,000 $10,000
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Sales $6,000 $6,000 $7,000 $7,000 $8,000 $8,000 $9,000 $9,000 $10,000 $10,000 $10,000 $10,000

Direct Cost of Sales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Trucking Services $1,200 $1,200 $1,400 $1,400 $1,600 $1,600 $1,800 $1,800 $2,000 $2,000 $2,000 $2,000
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $1,200 $1,200 $1,400 $1,400 $1,600 $1,600 $1,800 $1,800 $2,000 $2,000 $2,000 $2,000

Page 1
 Appendix

Appendix Table: Personnel (Planned)

Personnel Plan
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Mike Smith $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500
Joan Rose $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Payroll $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500

Total People 2 2 2 2 2 2 2 2 2 2 2 2
Payroll Burden $375 $375 $375 $375 $375 $375 $375 $375 $375 $375 $375 $375
Total Payroll Expenditures $2,875 $2,875 $2,875 $2,875 $2,875 $2,875 $2,875 $2,875 $2,875 $2,875 $2,875 $2,875

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 Appendix

Appendix Table: General Assumptions

General Assumptions
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Short-term Interest Rate % 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate % 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate % 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00%
Expenses in Cash % 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Sales on Credit % 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00%
Personnel Burden % 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00%

Page 3
 Appendix

Appendix Table: Profit and Loss (Planned)

Pro Forma Profit and Loss

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Sales $6,000 $6,000 $7,000 $7,000 $8,000 $8,000 $9,000 $9,000 $10,000 $10,000 $10,000 $10,000
Direct Cost of Sales $1,200 $1,200 $1,400 $1,400 $1,600 $1,600 $1,800 $1,800 $2,000 $2,000 $2,000 $2,000
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Cost of Sales $1,200 $1,200 $1,400 $1,400 $1,600 $1,600 $1,800 $1,800 $2,000 $2,000 $2,000 $2,000
Gross Margin $4,800 $4,800 $5,600 $5,600 $6,400 $6,400 $7,200 $7,200 $8,000 $8,000 $8,000 $8,000
Gross Margin % 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00%
Operating Expenses:
Advertising/Promotion $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100
Travel $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300
Sales commission $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150
Miscellaneous $40 $40 $40 $40 $40 $40 $40 $40 $40 $40 $40 $40
Payroll Expense $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500
Payroll Burden $375 $375 $375 $375 $375 $375 $375 $375 $375 $375 $375 $375
Depreciation $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400
Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Fuel & Maintenance $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500
Utilities $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200
Insurance $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400
Contract/Consultants $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Operating Expenses $4,965 $4,965 $4,965 $4,965 $4,965 $4,965 $4,965 $4,965 $4,965 $4,965 $4,965 $4,965
Profit Before Interest and Taxes ($165) ($165) $635 $635 $1,435 $1,435 $2,235 $2,235 $3,035 $3,035 $3,035 $3,035
Interest Expense Short-term $164 $162 $159 $157 $154 $152 $149 $147 $144 $142 $139 $137
Interest Expense Long-term $207 $205 $203 $202 $1,243 $1,231 $1,218 $1,206 $1,193 $1,181 $1,168 $1,156
Taxes Incurred ($134) ($133) $68 $69 $9 $13 $217 $221 $424 $428 $432 $436
Extraordinary Items $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Net Profit ($402) ($399) $204 $208 $28 $39 $651 $662 $1,273 $1,284 $1,296 $1,307
Net Profit/Sales -6.70% -6.65% 2.92% 2.96% 0.35% 0.49% 7.23% 7.35% 12.73% 12.84% 12.96% 13.07%

Page 4
 Appendix

Appendix Table: Cash Flow (Planned)

Pro Forma Cash Flow Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Cash Received
Cash from Operations:
Cash Sales $4,800 $4,800 $5,600 $5,600 $6,400 $6,400 $7,200 $7,200 $8,000 $8,000 $8,000 $8,000
From Receivables $6,667 $2,862 $2,311 $1,307 $1,400 $1,507 $1,600 $1,707 $1,800 $1,907 $2,000 $2,000
Subtotal Cash from Operations $11,467 $7,662 $7,911 $6,907 $7,800 $7,907 $8,800 $8,907 $9,800 $9,907 $10,000 $10,000

Additional Cash Received

Extraordinary Items $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $125,000 $0 $0 $0 $0 $0 $0 $0
Sales of other Short-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $11,467 $7,662 $7,911 $6,907 $132,800 $7,907 $8,800 $8,907 $9,800 $9,907 $10,000 $10,000

Expenditures Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Expenditures from Operations:
Cash Spent on Costs and Expenses $313 $312 $352 $352 $470 $6,469 $7,007 $506 $545 $544 $543 $542
Wages, Salaries, Payroll Taxes, etc. $2,875 $2,875 $2,875 $2,875 $2,875 $2,875 $2,875 $2,875 $2,875 $2,875 $2,875 $2,875
Payment of Accounts Payable $3,594 $2,814 $2,823 $3,168 $3,201 $6,027 $58,379 $61,117 $4,568 $4,906 $4,896 $4,886
Subtotal Spent on Operations $6,781 $6,001 $6,050 $6,395 $6,546 $15,370 $68,261 $64,498 $7,989 $8,325 $8,314 $8,303

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $200 $200 $200 $200 $0 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500
Purchase Other Short-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $60,000 $65,000 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Adjustment for Assets Purchased on Credit $0 $0 $0 $0 $0 ($60,000) ($65,000) $0 $0 $0 $0 $0
Subtotal Cash Spent $7,281 $6,501 $6,550 $6,895 $6,846 $17,170 $70,061 $66,298 $9,789 $10,125 $10,114 $10,103

Net Cash Flow $4,185 $1,161 $1,361 $11 $125,954 ($9,264) ($61,261) ($57,391) $11 ($219) ($114) ($103)
Cash Balance $4,685 $5,846 $7,207 $7,218 $133,172 $123,909 $62,647 $5,256 $5,268 $5,049 $4,935 $4,832

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 Appendix

Appendix Table: Balance Sheet (Planned)

Pro Forma Balance Sheet

Assets
Short-term Assets Starting Balances Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Cash $500 $4,685 $5,846 $7,207 $7,218 $133,172 $123,909 $62,647 $5,256 $5,268 $5,049 $4,935 $4,832
Accounts Receivable $10,000 $4,533 $2,871 $1,960 $2,053 $2,253 $2,347 $2,547 $2,640 $2,840 $2,933 $2,933 $2,933
Other Short-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Short-term Assets $10,500 $9,219 $8,717 $9,167 $9,271 $135,426 $126,255 $65,194 $7,896 $8,108 $7,982 $7,868 $7,765
Long-term Assets
Long-term Assets $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $100,000 $165,000 $165,000 $165,000 $165,000 $165,000 $165,000
Accumulated Depreciation $4,000 $4,400 $4,800 $5,200 $5,600 $6,000 $6,400 $6,800 $7,200 $7,600 $8,000 $8,400 $8,800
Total Long-term Assets $36,000 $35,600 $35,200 $34,800 $34,400 $34,000 $93,600 $158,200 $157,800 $157,400 $157,000 $156,600 $156,200
Total Assets $46,500 $44,819 $43,917 $43,967 $43,671 $169,426 $219,855 $223,394 $165,696 $165,508 $164,982 $164,468 $163,965

Liabilities and Capital

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Accounts Payable $3,500 $2,720 $2,718 $3,063 $3,060 $4,086 $56,276 $60,965 $4,405 $4,743 $4,733 $4,724 $4,714
Current Borrowing $20,000 $19,700 $19,400 $19,100 $18,800 $18,500 $18,200 $17,900 $17,600 $17,300 $17,000 $16,700 $16,400
Other Short-term Liabilities $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500
Subtotal Short-term Liabilities $24,000 $22,920 $22,618 $22,663 $22,360 $23,086 $74,976 $79,365 $22,505 $22,543 $22,233 $21,924 $21,614

Long-term Liabilities $25,000 $24,800 $24,600 $24,400 $24,200 $149,200 $147,700 $146,200 $144,700 $143,200 $141,700 $140,200 $138,700
Total Liabilities $49,000 $47,720 $47,218 $47,063 $46,560 $172,286 $222,676 $225,565 $167,205 $165,743 $163,933 $162,124 $160,314

Paid-in Capital $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Retained Earnings ($2,500) ($2,500) ($2,500) ($2,500) ($2,500) ($2,500) ($2,500) ($2,500) ($2,500) ($2,500) ($2,500) ($2,500) ($2,500)
Earnings $0 ($402) ($801) ($596) ($389) ($361) ($321) $329 $991 $2,264 $3,549 $4,844 $6,151
Total Capital ($2,500) ($2,902) ($3,301) ($3,096) ($2,889) ($2,861) ($2,821) ($2,171) ($1,509) ($236) $1,049 $2,344 $3,651
Total Liabilities and Capital $46,500 $44,819 $43,917 $43,967 $43,671 $169,426 $219,855 $223,394 $165,696 $165,508 $164,982 $164,468 $163,965
Net Worth ($2,500) ($2,902) ($3,301) ($3,096) ($2,889) ($2,861) ($2,821) ($2,171) ($1,509) ($236) $1,049 $2,344 $3,651

Page 6