Car Wash Business Plan Executive Summary Soapy Rides is a prominent hand car wash serving the East Meadow, Long Island, NY community. Soapy Rides will be run by Mark Deshpande, of the prominent Deshpande family. The Deshpande family has been serving the Long Island area with a car repair business and property development /management for over 30 years. Mark will be leveraging the incredible good will and brand recognition of the Deshpande family name to quickly gain market penetration. Soapy Rides Car Wash will be the prominent car wash for luxury vehicles in East Meadow, Long Island. It is owned by Mark Deshpande, a young entrepreneur who has worked in the family car repair business for over 10 years. Having owned a car repair shop in East Meadow for over 30 years, the Deshpande family is well known and respected in the neighborhood. The differentiator for Soapy Rides (SR) will be Mark and the Deshpande name. It is believed that people will come to the car wash not only to have their cars cleaned and detailed, but also as a social outing to meet up with and chat with Mark and his father Barry. Additionally, the car wash will provide excellent service, efficiently and expertly cleaning customer's cars so that they will be repeat users of the service. The car wash will be based in East Meadow, New York. This area has a number of benefits in terms of the market that it will provide for the business. Over 40% of households in the immediate neighborhood earn over $70,000 annually. Many pvision for the company. John is a family friend and has worked with the Deshpande family for 23 years. He has worked with hundreds of small- and medium-sized businesses during his career. Soapy Rides will have 20% market share of the hand car wash business in the East Meadow neighborhood by the end of year three, and it aims to convert a larger percentage of people away from machine car washes, which damage a car's finish. Soapy Rides will maintain a 95% gross profit margin and make 11% net profit margin after 12 months of operation.

Sales Forecast 2003 Sales Individuals Businesses Total Sales Direct Cost of Sales Individuals Businesses Subtotal Direct Cost of Sales The Business Soapy Rides will be providing customers with three services: exterior car washing, , interior cleaning, and detailing. Soapy Rides has no true competitors that are trying to offer a high quality service for a reasonable rate. Most are trying to compete on price alone. Soapy Rides' ability to provide a high quality service, both in regards to the actual washing as well as customer service is all based on their ability to find the best employees. Hiring the best employees is cost effective because it decreases HR costs associated with turnover and other employee costs. Hiring the best employees and making sure that they are well taken care of ensures that they in turn take care of the customers. Study after study proves that a happy employee is far more likely to provide the highest level of customer service compared to an employee who is not happy and feels that they are being taken advantage of. The Customers Soapy Rides will target three main groups of customers: individual car owner and leasers, car dealerships, and local businesses. The surrounding area is quite affluent, 40% of the residents earn over $70,000 a year. Consequently, they have nice cars and want them to look nice. There are five different car dealerships within a three-mile radius which will require car washing services for the various fleets. Lastly, there are many different local businesses that have company cars and that require clean appearances. Management The strength of Mark's experience and his family's name equity and assistance is Soapy Rides' competitive edge as well as a significant asset. Mark has been involved in the family's car repair business for the last ten years. He has worked his way through the organization and has been the manager for the last five years overseeing operations of $1.2 million annually. Before the family venture, Mark received his MBA from Cornell University. With 30 years invested in the community, the Deshpande family name has $76,086 $6,431 $82,517 2003 $3,804 $322 $4,126 2004 $123,033 $8,776 $131,809 2004 $6,152 $439 $6,590 2005 $165,662 $9,988 $175,650 2005 $8,283 $499 $8,783

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generated significant value as a fair, active member of the community. Lastly, Soapy Rides will be able to leverage several of the Deshpande's for their business expertise. Soapy Rides is positioning itself as the premier hand car wash serving the Long Island area. Mark has forecasted a 20% market share. The business will generate a very high gross margin and a modest net margin after year one and comfortable margin after year three. By year three the business will have developed a respectable yearly net profit. Situation Analysis Soapy Rides is entering their first year of operation. Mark believes that a comprehensive marketing strategy will be key to the success of the business. Soapy Rides offers a premium hand car washing service provided by a well-known local family. The basic market need is a premium car washing service that is far less abrasive than the traditional automatic car washes. Market Summary Soapy Rides possess good information about the market and knows a great deal about the target customers. This information will be leveraged to better understand who is served, their specific needs, and how Soapy Rides can better communicate with them. Market Analysis 2003 2004 2005 2006 2007 Potential Customers Growth CAGR Individuals 12% 43,000 48,160 53,939 60,412 67,661 12.00% Businesses 1% 9 9 9 9 9 0.00% Other 0% 0 0 0 0 0 0.00% Total 12.00% 43,009 48,169 53,948 60,421 67,670 12.00% Market Demographics The profile for Soapy Rides' target customer consists of the following geographic, demographic, and behavior factors: Geographics

The immediate geographic target is the city of East Meadow, NY. A 25 mile radius is in need of the services, however, 87% of the business will be from a seven mile radius. The total targeted population is just over 43,000.

Demographics

Male: female- 63%: 37%. The reason for this discrepancy in the male to female ratio is generally explained by the fact that men typically care more about their automobiles. Men are more likely to spend money on their cars with accessories and are more likely to buy a car as a reward for some accomplishment as a treat for themselves. Women tend to view cars more so as an object of utility. Using this line of reasoning, women are more likely to use the automatic car wash as they are less concerned about preserving their "precious" car. 40% of the households have an income exceeding $70,000. 73% of the target population have an undergraduate degree, 39% have a graduate degree.

Behavior Factors

43% of the target customers lease their cars. Individual and family image is personified by the type and condition of the automobile that they have.

Market Needs Soapy Rides is providing the market with a premium hand car wash service for the East Meadow community. SR seeks to fulfill the following benefits that are important to the customers:

Exemplary customer service- The target customers have money and are used to having excellent customer service. They will not regularly use SR unless they receive excellent service. High quality washes- The target market value a higher quality wash for their upper-end cars. Convenience- The hours of operation as well as the time needed to provide the service must be convenient and fast respectively, to gain market share.

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Market Trends The market trends for the car washing industry has been a gravitation from hand washing to automatic washing machine facilities. This trend has been fueled by the progression of technology. The automatic washing machines have become less expensive and more efficient over the last few years to the point that it is typically cost effective to invest in these machines. While one might presume that this would lead to the demise hand washing, the abrasiveness of the machines will never be appropriate for expensive automobiles. This trend will luckily not have a significant impact on hand washing facilities that have a sufficiently large customer base that posess expensive cars. Luckily for Soapy Rides which does have an upper end clientele, market supply will decrease and demand will increase.

Market Growth The car washing market has seen steady, 4% growth for the last six years. 4% growth is forecasted for the next four years.

SWOT Analysis The following SWOT analysis captures the key strength and weaknesses within the company, and describes the opportunities and threats facing Soapy Rides.

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Strengths

Good relationships with many perspective customers in the target market. Strong family name recognition and equity in the community. Well trained employees.

Weaknesses

The need for reliance on outside investors. The learning curve associated with entering an industry without direct prior experience. The need to have a fairly constant volume of business to support the necessary service staff.

Opportunities

Threats

Participation within a steadily growing industry. A high likelihood of repeat business. The ability to decrease the fixed costs as a percentage of an individual sale as volume increases.

Future/ potential competition from a franchised firm. A slump in the economy, reducing discretionary spending. The perception that there is not a difference in quality between a hand and machine wash.

Competition There is one other hand car wash shop in East Meadow. It is quite new and is trying to compete with automatic car washes by offering low prices. However, it is not targeting the customers who seek quality cleaning. The customers who Soapy Rides is targeting have their cars washed based on the quality of the job. They do not mind spending a little more each week to have their car washed and waxed in order to keep the paint work in excellent shape. The businesses that Soapy Rides targets will be more cost conscious, so prices will be approximately 30% less for these customers to promote volume usage. Service Offering Soapy Rides will provide the following services:

Car washing (exterior). Car cleaning (interior). Car detailing.

Keys to Success Soapy Rides keys to success are:

High quality services. Benchmarked customer service. Convenience.

Critical Issues Soapy Rides is still in the speculative stages as a start-up organization. Its critical issues are:

Continue to take a modest fiscal approach, expand at a reasonable rate, not for the sake of expansion in itself, but because it is economically wise to. Build brand awareness, increasing the customer base and developing brand equity. Establish Soapy Rides as the premier hand car wash service provider in the East Meadow area.

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1.1 Objectives The objectives for Soapy Rides Car Wash and Detail Service are: 1. 2. 3. 4. To be viewed as a premium car wash and detail service in East Meadow. Maintain a very high gross profit margin. Maintain a modest, steadily growing net profit margin. Expand to two locations after third year of operation.

1.2 Mission The mission of Soapy Ride is to provide top-quality washing and detail service for luxury car owners in East Meadow, NY. Soapy Rides will work to keep employees satisfied in order to maintain impeccable customer service. Company Summary The company is solely owned by Mark Deshpande and will be funded by an initial personal investment. Soapy Rides is New York State registered C corporation. 2.1 Company Ownership The company will be solely owned by Mark Deshpande. Mark has been in the car industry all his life, having grown up in the family car repair business. He came across the location in East Meadow purely by accident and he felt it would be a perfect location for a car wash service. 2.2 Start-up Summary The start-up expenses for Soapy Rides will be financed by Mark Deshpande, from the profits he made in selling his part of the family car repair business. The property on Hempstead Road will be leased in April 2001 for a minimum of three years, with the option to extend the lease for another three years after that. Mark is working with the family lawyer to set up incorporation and to discuss lease issues before the business is launched. He is working with a local graphic designer to develop a logo, letterhead, and company brochures. Although Mark has been in the car repair business, he has not been in the wash and detailing business, which is a very different service (quick turnaround per car is incredibly important). For this reason he is working with an acquaintance to set up the system that will ensure efficient service even during peak usage. Rent on the location has been negotiated and will be $1,200 per month. In addition, insurance for the business will be approximately $200 per month and will be paid by direct debit on a monthly basis. Expensed equipment includes three high-power water pumps, two industrial vacuum cleaners, two computer terminals, and one cash register. All of the equipment will be depreciated over three years. The location was previously used as a quick stop automobile service shop, so it is set up to move vehicles quickly through the premises, but does not have all the necessary systems in place to host a car wash and detail facility. The services of a contracting company will be sought to convert the use of the facility and to improve the customer waiting room facilities. Start-up Requirements Start-up Expenses Legal Stationery etc. Brochures Consultants Insurance Rent Research and Development Expensed Equipment Signs Building Materials Building Labor Total Start-up Expenses

$500 $400 $450 $0 $200 $1,200 $300 $4,100 $700 $1,200 $1,000 $10,050

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Start-up Assets Cash Required Start-up Inventory Other Current Assets Long-term Assets Total Assets Total Requirements Start-up Funding Start-up Expenses to Fund Start-up Assets to Fund Total Funding Required

$8,700 $250 $1,000 $10,000 $19,950 $30,000

$10,050 $19,950 $30,000

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

$11,250 $8,700 $0 $8,700 $19,950

Liabilities and Capital Liabilities Current Borrowing Long-term Liabilities Accounts Payable (Outstanding Bills) Other Current Liabilities (interest-free) Total Liabilities Capital Planned Investment Investor 1 Investor 2 Other Additional Investment Requirement Total Planned Investment Loss at Start-up (Start-up Expenses) Total Capital

$0 $0 $0 $0 $0

$30,000 $0 $0 $0 $30,000 ($10,050) $19,950

Total Capital and Liabilities Total Funding Services

$19,950 $30,000

Soapy Rides will provide three services to its customers:

Car washing (exterior) Car cleaning (interior) Car detailing

Market Analysis Summary

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The car wash will be based in East Meadow, New York. This area has a number of benefits in terms of the market that it will provide for the business. Over 40% of households in the immediate neighborhood earn over $70,000 annually. Many people in the neighborhood own and/or lease new cars and place great value on their cars and how they look. There are a large number of car dealerships in the area--five within three miles of the proposed location for Soapy Rides. 4.1 Market Segmentation Soapy Rides segments its customers by type of car ownership. We believe that the type of car that a person owns says volumes about their driving, and, therefore their car washing and detailing requirements.

1.

New car owners: Owners of newer cars are most likely to use a hand car washing service. These owners take great pride in their cars and will bring them often to the wash and detail service. The goal with these customers is to promote regular use of the wash and detail service. The aim is to inform these customers that Soapy Rides will keep their car looking as good as it did the day they drove it off the lot. 2. Older luxury car owners: These people have either owned their high-end luxury cars for several years or are unable to afford the expense of a new luxury car but want the feel of relaxed driving. Both of these groups want to keep their cars in the best shape possible. Those who have bought second-hand cars will often spend many hours in their cars and will place high importance on keeping their cars looking good. These owners will bring their cars in for regular washes and occasional details. 3. Sports car owners: These people are often younger or middle-aged men and will regard the look of their car as important. They will also pride themselves on the look of their car and will have their car hand washed (at least) weekly. These drivers will have an occasional detail, but will keep their cars so clean the detail will not be necessary very often. 4. Lifetime owners: Many of these people have owned their cars for more than five or six years, and are more likely to be women. They are attached to their cars as friends and though it may be more sensible for them to purchase a new car, they will bring their car in for a wash occassionally, just when the car is dirty. They like their cars to look presentable, and want to keep it in good shape but are not tied up in the look of their car. For this reason, they will not have a detail carried out on their car unless they are selling it. 5. Dealerships: There are five new and used car dealerships within three miles of the proposed location of Soapy Rides. These dealerships often use outside car wash services to detail their vehicles before they are put up for sale. In addition, there are fifteen other car dealerships within a seven mile radius of Soapy Rides. 6. Local businesses: Some local businesses have fleets of cars and small vans that must be kept clean to maintain their company image. These businesses will be looking for a cost effective, efficient car washing service to perform this service, and will prefer to use a car wash service during the week rather than during weekends, like the general public. Market Analysis Year 1 Potential Customers New Car Owners Older Luxury Car Owners Sports Car Owners Lifetime Owners New and Used Car Dealerships Total Positioning Soapy Rides seeks to position themselves as the premier hand auto washing service provider in the East Meadow area. This positioning will be achieved by leveraging their competitive edge: Soapy Rides' competitive edge will be Mark Deshpande and the quality of the family name in the East Meadow area. As mentioned, the family has been in the car business for over 30 years, and has an excellent reputation and a myriad of both business and personal contacts. In addition, Mark has put a great deal of emphasis on creating a system that is both fast and efficient, which will keep costs, in terms of time spent per car, to a minimum. Strategy Pyramids Growth 10% 15% 15% 10% 7% 12.28% 7,200 12,500 6,500 17,000 9 43,209 Year 2 7,920 14,375 7,475 18,700 10 48,480 Year 3 8,712 16,531 8,596 20,570 11 54,420 Year 4 9,583 19,011 9,885 22,627 12 61,118 Year 5 10,541 21,863 11,368 24,890 13 68,675 CAGR 10.00% 15.00% 15.00% 10.00% 9.63% 12.28%

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The single objective is to position Soapy Rides as the premier automobile hand washing company in the area, steady increasing market share. The marketing strategy will seek to first create customer awareness, develop a customer base, and work toward building customer loyalty. The message that SR will seek to communicate is that their hand washes are superior to the machine washed alternatives that can actually cause harm to cars. This message will be communicated through several different methods. The first method is the placement of advertisements in the local newspaper. The local paper, The Islander, is well read and will reach a high portion of the target market segment. The second method will be networking. Mark will leverage the equity already earned by his family from years of local business dealings. The networking will be a good source of customers as Mark's family has developed significant trust relationships with many within their community. The last method of communication for SR's marketing pyramid is the use of coupons within The Islander. The use of coupons will likely introduce people who are not yet familiar with Mark's family to SR and the services that they offer. Marketing Mix Soapy Rides marketing mix is comprised of the following approaches to pricing, distribution, advertising and promotion, and customer service.

Pricing- The pricing scheme is based on a per service price. A "Soapy Card" can be purchased which provides a volume discount to the user. Distribution- The offered services will be distributed from SR's facilities. Advertising and Promotion- SR will use several different methods for advertising and promotion. Customer service- Exemplary customer service will be provided.

Marketing Research During the initial stages of the marketing plan development Mark performed primary market research in the form of a questionnaire/ survey. Mark outsourced the development of the survey to a local Professor of Statistics. While Mark could have developed the survey in-house, the end result was a far more valid and statistically significant product . The survey was handed out to a total of 150 people within the target market. 54 surveys were returned completed. The results of the survey provided valuableinsight into the customer preferences as well as the decision making process of the target market. While some of the already held assumptions were confirmed, the survey provided Soapy Rides with new information that would have been otherwise unavailable. 4.2 Target Market Segment Strategy The strategy behind Soapy Rides target segmentation is to attract customers who will be repeat users and will frequent the business in the typically quiet times for a car wash business. It will not be difficult to attract customers during the summer months and on the weekends, the weekdays however, especially in the winter, people will not think about having their cars washed. For this reason, Soapy Rides will target people who will tend not to be restricted to these busy times.

Business owners (new car owners) tend to be very busy people, but are often able to make their own hours. Retired people (older luxury car owners) are not restricted by typical work schedules so will be able to frequent the car wash during the week. Dealerships will need cars detailed and washed regardless of the time of the day and week. This will supply a constant flow of traffic. Businesses will need their fleet cars washed during the week during regular business hours. 4.3 Service Business Analysis The hand car washing business in East Meadow consists of many small competitors. Everything from local children raising money for their youth group on a Saturday by cleaning cars, to the automatic car wash machines, are competition for Soapy Rides. However, these two alternatives aim to meet the needs of the price-conscious individuals who are choosing the service simply so they do not have to clean the car themselves. Soapy Rides on the other hand, targets the quality-conscious individuals who value their car enough to spend $10-$15 per week to make it look good. 4.3.1 Competition and Buying Patterns There is one other hand car wash shop in East Meadow. It is quite new and is trying to compete with automatic car washes by offering low prices. However, it is not targeting the customers who seek quality cleaning.

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The customers who Soapy Rides is targeting have their cars washed based on the quality of the job. They do not mind spending a little more each week to have their car washed and waxed in order to keep the paint work in excellent shape. The businesses that Soapy Rides targets will be more cost conscious, so prices will be approximately 30% less for these customers to promote volume usage. Strategy and Implementation Summary The key differentiator for Soapy Rides Car Wash is Mark Deshpande and his business and personal connections within the East Meadow neighborhood. For this reason, the sales and marketing focus will be on a one-to-one basis, with the emphasis on gaining loyal and repeat customers as "friends" of the business. Soapy Rides, therefore, will depend on word-of-mouth advertising for the immediate community. 5.1 Competitive Edge Soapy Rides' competitive edge will be Mark Deshpande and the quality of the family name in the East Meadow area. As mentioned, the family has been in the car business for over 30 years, and has an excellent reputation and a myriad of both business and personal contacts. In addition, Mark has put a great deal of emphasis on creating a system that is both fast and efficient, which will keep costs, in terms of time spent per car, to a minimum. 5.2 Sales Strategy Sales strategy is on a one-to-one basis. All customers will feel they are a valued friend of Soapy Rides, and that all employees care about the care and upkeep of each vehicle. We must be aware that there are low switching costs in the car washing industry, so we have to work hard to develop and keep repeat customers. 5.2.1 Sales Forecast The following chart forecasts sales based upon the Market Segmentation Strategy. Sales are seasonal in this industry, tending to be higher in the warmer summer months, and to drop off in the winter. However, we will aim to flatten sales across the sales cycle by targeting segments that will want to keep their cars clean and looking good year round. . Financials, Budgets, and Forecasts This section will offer a financial overview of Soapy Rides as it relates to the marketing activities. SR will address Break-even Analysis, sales forecasts, expense forecasts, and how they relate to the marketing effort. Break-even Analysis

The break-even analysis indicates that $9,122 is needed in monthly revenue to break-even.

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Break-even Analysis

Monthly Revenue Break-even

$7,508

Assumptions: Average Percent Variable Cost Estimated Monthly Fixed Cost Sales Forecast 5% $7,500

The following chart forecasts sales based upon the Market Segmentation Strategy. Sales are seasonal in this industry, tending to be higher in the warmer summer months, and to drop off in the winter. However, SR will aim to flatten sales across the sales cycle by targeting segments that will want to keep their cars clean and looking good year round.

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Expense Forecast

The expense forecast will be used as a tool to keep the department on target and provide indicators if corrections need to be made. Additionally, it will require the department to undertake long-term analysis.

Marketing Expense Budget 2003 2004 2005

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Advertisements Networking Other

$14,100 $1,600 $1,575 ------------

$19,000 $2,000 $1,500 -----------$22,500 17.07%

$24,000 $2,500 $1,500 -----------$28,000 15.94%

Total Sales and Marketing Expenses Percent of Sales Controls

$17,275 20.94%

The purpose of SR's marketing plan is to serve as a guide for the organization. The following areas will be monitored to gauge performance:

Revenue- monthly and annual. Sales- monthly and annual. Repeat business. Customer satisfaction.

Implementation Milestones

The following milestones identify the key marketing programs. It is important to accomplish each one on time and on budget.

Milestones

Advertising Advertisement campaign #1 Advertisement campaign #2 Other Total Advertising Budget PR Profitability for the coupon program Other Total PR Budget Direct Marketing

Start Date 1/1/2003 3/1/1999

End Date 6/30/2003 12/30/2003

Budget $6,550 $7,550

Manager Mark Mark

Department Marketing Marketing

$14,100 Start Date 1/1/2003 End Date 7/15/2003 Budget $1,005 Manager Mark Department Marketing

$1,005 Start Date End Date Budget Manager Department

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Marketing plan completion Other Total Direct Marketing Budget Web Development

1/1/2003

2/1/2003

$0

Mark

Marketing

$0 Start Date End Date Budget Manager Department

Other Total Web Development Budget Other Start Date End Date $0 Budget Manager Department

Other Total Other Budget Totals Marketing Organization $0 $15,105

Mark Deshpande will be responsible for the marketing activities. Contingency Planning

Difficulties and Risks

Problems generating visibility. Overly aggressive and debilitating actions by competitors.

Worst Case Risks May Include

Determining that the business cannot support itself on an ongoing basis. Having to liquidate equipment to cover liabilities

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Sales Forecast Year 1 Unit Sales Full Wash Exterior Wash Interior Clean End User Detail Business Fleet Washes Car Dealership Details Total Unit Sales Unit Prices Full Wash Exterior Wash Interior Clean End User Detail Business Fleet Washes Car Dealership Details Sales Full Wash Exterior Wash Interior Clean End User Detail 1,760 2,050 770 129 615 494 5,818 Year 1 $15.00 $9.00 $8.00 $140.00 $10.00 $70.00 Year 2 2,288 2,665 1,001 193 923 642 7,712 Year 2 $15.00 $10.00 $9.00 $145.00 $10.00 $75.00 Year 3 2,974 3,465 1,301 290 1,384 963 10,376 Year 3 $15.00 $12.00 $9.00 $150.00 $10.00 $80.00

$26,400 $18,450 $6,160 $18,060

$34,320 $26,650 $9,009 $27,985

$44,616 $41,574 $11,712 $43,425

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Business Fleet Washes Car Dealership Details Total Sales Direct Unit Costs Full Wash Exterior Wash Interior Clean End User Detail Business Fleet Washes Car Dealership Details Direct Cost of Sales Full Wash Exterior Wash Interior Clean End User Detail Business Fleet Washes Car Dealership Details Subtotal Direct Cost of Sales 5.3 Milestones

$6,150 $9,225 $13,838 $34,580 $48,150 $77,040 $109,800 $155,339 $232,204 Year 1 $0.70 $0.40 $0.30 $3.00 $0.70 $3.00 Year 2 $0.80 $0.45 $0.35 $3.50 $0.75 $3.50 Year 3 $0.90 $0.50 $0.40 $4.00 $0.80 $4.00

$1,232 $820 $231 $387 $431 $1,482 $4,583

$1,830 $1,199 $350 $676 $692 $2,247 $6,994

$2,677 $1,732 $521 $1,158 $1,107 $3,852 $11,047

The following table outlines the important milestones in the planning and implementation of Soapy Rides.

Milestones Milestone Complete Business Plan Sign Rental Contract Convert Premises Hire Car Wash Staff Hire Admin Staff Open for Business Distribute Flyers Press Release Follow-up on Press Release Totals Management Summary Start Date 2/1/2001 3/20/2001 4/1/2001 4/20/2001 4/20/2001 5/1/2001 4/28/2001 4/29/2001 4/30/2001 End Date 5/1/2001 3/20/2001 4/30/2001 4/20/2001 4/20/2001 5/1/2001 5/5/2001 4/29/2001 4/30/2001 Budget $0 $475 $0 $200 $200 $0 $75 $25 $0 $975 Manager ABC Mark Contractors Mark Mark Staff Friends Mark Mark Department Department Owner Contractors Owner Owner Staff Friends Owner Owner

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Mark Deshpande is the sole owner and manager of Soapy Rides. In addition, he will be helped (on an unofficial basis) by his father, Barry Deshpande. Barry has over 30 years experience as an entrepreneur, both in the car business and in property development and management. Mark will also have the assistance of John Shine, the family accountant, in creating a long-term strategic vision for the company. John is a family friend and has worked with the Deshpande family for 23 years. He has worked with hundreds of smalland medium-sized businesses during his career. 6.1 Personnel Plan Since car washing is a seasonal business, with business increasing in the warm summer months, and being busier on the weekends than during the week, Soapy Rides will rely on both temporary and part-time help. The company will hire one full-time car wash/detail specialist and one full-time car wash specialist when it opens for business. Although it will rely on temporary and part-time help, quality will not be compromised, since all washers and detailers will receive thorough training. The company will also hire an administrative assistant who will assist Mark with paperwork and act as a receptionist.

Personnel Plan

Year 1

Year 2

Year 3

Owner

$18,000

$30,000

$40,000

Car Washers

$30,240

$43,312

$51,174

Admin/Sales

$13,440

$15,000

$22,000

Total People

0

0

0

Total Payroll

$61,680

$88,312

$113,174

Financial Plan The following plan outlines the financial development of Soapy Rides. The business will be initially financed by a personal investment by Mark Deshpande and will finance growth through cash flow. This will mean that the company will grow more slowly than it could, but it will ensure that Mark retains control over the direction of the company. In year three, it is hoped that the company will be able to open a second location. It is envisioned that an outside loan or equity funding will be sought at that time. 7.1 Important Assumptions The financial projections for Soapy Rides are based on the following assumptions. These assumptions are thought to be quite conservative, as are the financial forecasts.

General Assumptions

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Year 1

Year 2

Year 3

Plan Month

1

2

3

Current Interest Rate

10.00%

10.00%

10.00%

Long-term Interest Rate

10.00%

10.00%

10.00%

Tax Rate

25.42%

25.00%

25.42%

Other 7.2 Break-even Analysis

0

0

0

The table and chart below show the monthly break-even analysis calculations for Soapy Rides.

Break-even Analysis

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Monthly Units Break-even

423

Monthly Revenue Break-even

$7,974

Assumptions:

Average Per-Unit Revenue

$18.87

Average Per-Unit Variable Cost

$0.79

Estimated Monthly Fixed Cost 7.3 Projected Profit and Loss

$7,641

The following Profit and Loss table illustrates income and expenses monthly for the first year, and annually for the next two years.

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Pro Forma Profit and Loss

19

Year 1

Year 2

Year 3

Sales

$109,800

$155,339

$232,204

Direct Cost of Sales

$4,583

$6,994

$11,047

Other

$0

$0

$0

Total Cost of Sales

$4,583

$6,994

$11,047

Gross Margin

$105,218

$148,345

$221,157

Gross Margin %

95.83%

95.50%

95.24%

Expenses

Payroll

$61,680

$88,312

$113,174

Sales and Marketing and Other Expenses

$2,600

$1,550

$1,700

Depreciation

$2,070

$2,070

$2,070

Leased Equipment

$0

$0

$0

Utilities

$3,325

$3,500

$3,750

Insurance

$1,800

$1,800

$1,800

20

Rent

$4,800

$5,500

$6,000

Payroll Taxes

$15,420

$22,078

$28,294

Other

$0

$0

$0

Total Operating Expenses

$91,695

$124,810

$156,788

Profit Before Interest and Taxes

$13,523

$23,535

$64,370

EBITDA

$15,592

$25,605

$66,440

Interest Expense

$0

$0

$0

Taxes Incurred

$3,204

$5,884

$16,361

Net Profit

$10,318

$17,651

$48,009

Net Profit/Sales 7.4 Projected Cash Flow

9.40%

11.36%

20.68%

The following Cash Flow table illustrates that if Soapy Rides meets projected sales, it will have positive cash flow after half a year of operations.

21

Pro Forma Cash Flow

Year 1

Year 2

Year 3

Cash Received

Cash from Operations

Cash Sales

$93,330

$132,038

$197,374

Cash from Receivables

$13,097

$21,902

$32,470

Subtotal Cash from Operations

$106,427

$153,940

$229,843

Additional Cash Received

Sales Tax, VAT, HST/GST Received

$0

$0

$0

New Current Borrowing

$0

$0

$0

22

New Other Liabilities (interest-free)

$0

$0

$0

New Long-term Liabilities

$0

$0

$0

Sales of Other Current Assets

$0

$0

$0

Sales of Long-term Assets

$0

$0

$0

New Investment Received

$0

$0

$0

Subtotal Cash Received

$106,427

$153,940

$229,843

Expenditures

Year 1

Year 2

Year 3

Expenditures from Operations

Cash Spending

$61,680

$88,312

$113,174

Bill Payments

$33,052

$46,837

$67,743

Subtotal Spent on Operations

$94,732

$135,149

$180,917

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out

$0

$0

$0

Principal Repayment of Current Borrowing

$0

$0

$0

23

Other Liabilities Principal Repayment

$0

$0

$0

Long-term Liabilities Principal Repayment

$0

$0

$0

Purchase Other Current Assets

$0

$0

$0

Purchase Long-term Assets

$0

$0

$0

Dividends

$0

$0

$0

Subtotal Cash Spent

$94,732

$135,149

$180,917

Net Cash Flow

$11,695

$18,791

$48,927

Cash Balance 7.5 Projected Balance Sheet

$20,395

$39,186

$88,112

Soapy Rides' balance sheet illustrates a healthy financial position for this new company. The monthly estimates are included in the appendix.

Pro Forma Balance Sheet

Year 1

Year 2

Year 3

Assets

Current Assets

Cash

$20,395

$39,186

$88,112

24

Accounts Receivable

$3,373

$4,772

$7,133

Inventory

$668

$1,019

$1,609

Other Current Assets

$1,000

$1,000

$1,000

Total Current Assets

$25,435

$45,976

$97,854

Long-term Assets

Long-term Assets

$10,000

$10,000

$10,000

Accumulated Depreciation

$2,070

$4,140

$6,210

Total Long-term Assets

$7,930

$5,860

$3,790

Total Assets

$33,365

$51,836

$101,644

Liabilities and Capital

Year 1

Year 2

Year 3

Current Liabilities

Accounts Payable

$3,097

$3,917

$5,716

Current Borrowing

$0

$0

$0

Other Current Liabilities

$0

$0

$0

25

Subtotal Current Liabilities

$3,097

$3,917

$5,716

Long-term Liabilities

$0

$0

$0

Total Liabilities

$3,097

$3,917

$5,716

Paid-in Capital

$30,000

$30,000

$30,000

Retained Earnings

($10,050)

$268

$17,919

Earnings

$10,318

$17,651

$48,009

Total Capital

$30,268

$47,919

$95,929

Total Liabilities and Capital

$33,365

$51,836

$101,644

Net Worth 7.6 Business Ratios

$30,268

$47,919

$95,929

The following table contains important ratios for the car wash industry, as determined by the Standard Industry Classification (SIC) code, 7542.

Ratio Analysis

Year 1

Year 2

Year 3

Industry Profile

Sales Growth

0.00%

41.47%

49.48%

3.00%

26

Percent of Total Assets

Accounts Receivable

10.11%

9.21%

7.02%

8.70%

Inventory

2.00%

1.97%

1.58%

9.50%

Other Current Assets

3.00%

1.93%

0.98%

26.40%

Total Current Assets

76.23%

88.69%

96.27%

44.60%

Long-term Assets

23.77%

11.31%

3.73%

55.40%

Total Assets

100.00%

100.00%

100.00%

100.00%

Current Liabilities

9.28%

7.56%

5.62%

29.30%

Long-term Liabilities

0.00%

0.00%

0.00%

27.80%

Total Liabilities

9.28%

7.56%

5.62%

57.10%

Net Worth

90.72%

92.44%

94.38%

42.90%

Percent of Sales

Sales

100.00%

100.00%

100.00%

100.00%

Gross Margin

95.83%

95.50%

95.24%

0.00%

27

Selling, General & Administrative Expenses

86.59%

84.13%

74.45%

68.20%

Advertising Expenses

0.91%

0.74%

0.56%

1.50%

Profit Before Interest and Taxes

12.32%

15.15%

27.72%

2.70%

Main Ratios

Current

8.21

11.74

17.12

1.53

Quick

8.00

11.48

16.84

0.88

Total Debt to Total Assets

9.28%

7.56%

5.62%

57.10%

Pre-tax Return on Net Worth

44.68%

49.11%

67.10%

3.40%

Pre-tax Return on Assets

40.53%

45.40%

63.33%

8.00%

Additional Ratios

Year 1

Year 2

Year 3

Net Profit Margin

9.40%

11.36%

20.68%

n.a

Return on Equity

34.09%

36.83%

50.05%

n.a

Activity Ratios

Accounts Receivable Turnover

4.88

4.88

4.88

n.a

28

Collection Days

57

64

62

n.a

Inventory Turnover

5.45

8.30

8.41

n.a

Accounts Payable Turnover

11.67

12.17

12.17

n.a

Payment Days

27

27

25

n.a

Total Asset Turnover

3.29

3.00

2.28

n.a

Debt Ratios

Debt to Net Worth

0.10

0.08

0.06

n.a

Current Liab. to Liab.

1.00

1.00

1.00

n.a

Liquidity Ratios

Net Working Capital

$22,338

$42,059

$92,139

n.a

Interest Coverage

0.00

0.00

0.00

n.a

Additional Ratios

Assets to Sales

0.30

0.33

0.44

n.a

Current Debt/Total Assets

9%

8%

6%

n.a

29

Acid Test

6.91

10.26

15.59

n.a

Sales/Net Worth

3.63

3.24

2.42

n.a

Dividend Payout

0.00

0.00

0.00

n.a

30