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Sports Equipment Retailer Marketing PlanBoulder Stop

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

2.0 Situation Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1 Market Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2.1.1 Market Demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.1.2 Market Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.1.3 Market Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.1.4 Market Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2.2 SWOT Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.2.1 Strengths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.2.2 Weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.2.3 Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.2.4 Threats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

2.3 Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82.4 Product Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.5 Keys to Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.6 Critical Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.7 Historical Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.8 Macroenvironment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

3.0 Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113.1 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113.2 Marketing Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.3 Financial Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.4 Target Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.5 Positioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133.6 Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133.7 Marketing Mix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

3.7.1 Product Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133.7.2 Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143.7.3 Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143.7.4 Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

3.8 Marketing Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

4.0 Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154.1 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154.2 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

4.2.1 Sales by Mail and Web Direct Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194.2.2 Sales by Retail Store Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

4.3 Expense Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194.4 Contribution Margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

5.0 Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215.1 Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225.2 Marketing Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235.3 Contingency Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Table of Contents

1.0 Executive Summary

This marketing plan is designed to give us a blueprint for marketing our new retail store, The Boulder Stop. We have included a complete market analysis, target market summaries, a SWOT analysis, a detailed milestones table, and other relevant discussions.

Our ambitions for this marketing plan include:

• Using our existing Internet and direct-mail marketing expertise to build local promotions and marketing literature.

• Devising lucrative promotions that will draw sponsorships from possible strategic partners. These promotions are key to our strategy of increasing our strategic alliances through cross-promotions.

• Identifying our strengths, weaknesses, opportunities, and threats. • Identifying the local market forces, target markets, and promotional opportunities.

We hope this marketing plan creates a long-term growth model for our retail success. The Boulder Stop has been successful at direct mail and Internet sales, and we hope to make a smooth transition into retail.

2.0 Situation Analysis

The Bend/Redmond area is growing faster than any other Oregon metropolitan area. This growth is fueled by the purchase of 2nd homes, from home-buyers nationwide and retirees, or those searching for an idyllic America. In addition, many people in Western Oregon make the two to three-hour drive from Portland, Oregon's largest city, or Eugene, site of the University and Oregon's and the state's second largest city, to escape the Spring, Fall, and Winter cloud cover and rainfall. We count all tourists and locals as potential customers, since we offer coffee and ice cream, as well as climbing gear and events.

Many locals in Redmond believe that growth, for the sake of growth, is a political disease. They are right. We must make sure our physical and sociological impact is kept to a minimum, and that locals maintain the quality way of life they deserve.

Our local competition is not as fierce as our direct mail and Web competition. They currently do very little marketing and very few company-sponsored events. We won't rule out the possibility that they may do so in the future as a response to our projected success in such marketing. The competition for coffee is an issue, yet we aren't directly competing with the downtown Starbucks(tm), since we don't cater to the urbane culture, but rather the natural explorers, those who would rather go to a state park than city shops.

The Boulder Stop

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2.1 Market Summary

In a 1997 state-generated report, consumer expenditures for espresso beverages and rock climbing equipment combined rose to $4,000,000 in Central Oregon. We expect sales to increase steadily as Oregon's population grows and the rock climbing industry becomes increasingly popular.

The proximity of several large cities in Western Oregon helps fuel our business, as does the status of Smith Rock as an international destination for rock climbing enthusiasts. Individuals from as far away as Japan, Europe, South America, and Australia travel to Smith Rock to 'recreate'.

• Direct Mail and Web Market

Our direct sales are fueled by our current list of customers and Web co-marketing. To date, we have allocated minimal funds to marketing over the Web. We have relied on word of mouth, free banner exchange programs, our printed catalogs, and Web reviews to drive revenues to the site. We count worldwide readers of such publications as Rock & Ice magazine and Outdoor Adventure among our target direct audience.

• Retail Market

Our three main target markets are weekend warriors, hard core climbers, and the curious. We predict that the number of hard core climbers will grow faster than the number of weekend warriors. Climbing is becoming more and more technical, an "insider's sport", and we believe this will fuel the growth of dedicated, highly sophisticated climbers. At the same time, amateur growth is leveling off.

This market analysis is conservative when compared with Oregon's predicted population growth of 2% per year and Bend's 5% average gains over the last five years.

Weekend warriors

The curious

Hardcore climbers

Target Markets

The Boulder Stop

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2.1.1 Market Demographics

Direct Mail and Web Market

Geography: 80% U.S. customers. 15% European customers. 5% Other countries

Age: 18-34Sex: 75% male

25% female

Retail Market

Geography: 90% U.S. customers9% European customers1% Other countries

Age: 15-45Sex: 62% male

28% female

Males buy gear through catalogs and the Web more often than women. This skews the direct sales toward male customers. In-store customers tend to be younger than catalog shoppers, and a larger % of them are locals or native to the United States.

Table: Market Analysis

Market Analysis2001 2002 2003 2004 2005

Potential Customers Growth CAGRWeekend warriors 25% 40,000 50,000 62,500 78,125 97,656 25.00%The curious 25% 30,000 37,500 46,875 58,594 73,243 25.00%Hardcore climbers 30% 15,000 19,500 25,350 32,955 42,842 30.00%Total 25.93% 85,000 107,000 134,725 169,674 213,741 25.93%

2.1.2 Market Needs

There are two important underlying needs, and the combination of gear and coffee serves both. The Boulder Stop's function is similar to that of the ski lodge at the bottom of the slopes; selling important gear while providing a place for snacks, beverages, and talk. We're the rock climber's version of the ski lodge.

1. There is a real need for a highly professional provider of climbing gear near the Smith Rock location. People forget to pack exactly what they need, and things break.

2. There is a practical need for coffee, a meeting place, and conversation. This is part of the activity focus of the location.

3. There is a need for 'one-stop' shopping. Climbers, and recreationalists don't want to have to buy their gear at one store, and drive miles to enjoy good coffee and conversation at another. The Boulder Stop fulfills this need.

The Boulder Stop

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2.1.3 Market Trends

Trends are in our favor. We have three major trends that help us:

• The sport of rock climbing is enjoying growth. The success of rock climbing gyms in the Silicon Valley, Seattle, Eugene, and other locations offer clear evidence of this growth.

• Central Oregon is booming as a vacation destination and recreation spot. Oregon in general is enjoying the growth of interest from Californians, Washingtonians, and former urban dwellers searching for small, friendly communities.

• Gourmet coffee demand is very strong throughout the Northwest. Growing numbers look to their expensive espresso drink as a way to enjoy a moment, and as a natural part of an outing or activity.

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2001 2002 2003 2004 2005

Weekend warriors

The curious

Hardcore climbers

Market Forecast

2.1.4 Market Growth

• According to [the latest available studies], spending on vacations in Oregon will grow at better than 25% per year.

• Spending on climbing has grown faster than skiing or mountain biking, although from a much smaller base, according to [the latest available studies]. They estimate 30% growth in climbing-related sales for the next three years.

• Spending on coffee is up 15% this year, according to the [omitted] annual report. We expect coffee and espresso beverage sales to level out in 1999-2000.

The Boulder Stop

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0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Weekend warriors The curious Hardcore climbers

Target Market Growth

2.2 SWOT Analysis

The Boulder Stop recognizes the following strengths, weaknesses, opportunities, and threats (SWOT):

Strengths:

• Community commitment• Experience in the sport of rock climbing.• Nationwide marketing experience.

Weaknesses:

• Limited cash.• Limited experience dealing with contractors/builders.• Little experience with local politics.

Opportunities:

• No well-focused, well-marketed competition.• The cost of Internet and other direct marketing opportunities have decreased in

recent years.• Climbers and hikers are not as price-sensitive as other outdoor enthusiasts.

Threats:

• Locals are very sensitive to land use.• La Nina weather.

The Boulder Stop

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2.2.1 Strengths

Our most significant strength lies in our management team's skills in both rock climbing and running a small business. After years of working the pro circuit, Bill Walsh has gained insight into the history, ethics, and progressive nature of traditional wall and sport climbing. Pan Silverton has worked a number of years with small business clients looking for direction and strategic cohesion. His insight has led to multi-million dollar finance deals that helped put some $100K-500K a year businesses on the map. The combination of experience and proven business acumen represent a strength for The Boulder Stop.

With a nationwide direct marketing business that includes Internet and catalog sales of more than $50,000 per year, The Boulder Stop is in a natural position to expand into retail. Gateway Computer started as a small start-up direct assembly business in North Dakota and is now opening "Gateway Country" stores across America. Although The Boulder Stop is taking a more conservative approach, the company also enjoys strong brand recognition. The natural 'next-step' is to expand into retail, into Redmond, OR.

During it's 10 years of operation in Eugene, The Boulder Stop has contributed over $13,000 toward community events and involvement. We have hosted "Boulder Green" for three years. A state wide bowling tournament, "Boulder Green" is about giving bowling balls and free bowling passes to the less fortunate in our community. We view this as one more win in the fight against badminton We are comfortable that our community involvement will only strengthen our business in Redmond, as it has in Eugene.

2.2.2 Weaknesses

The Boulder Stop has access to a limited amount of cash. Initial financing will not be difficult due to solid credit and the low inventory depreciation rate, but ongoing financing will be more difficult to obtain. It's not the receivable days that will wreak havoc on the cash plan, since sales are 100% cash, it is the operating and marketing expenses.

Nobody at the Boulder Stop has experience in negotiating with contractors. This is a liability due to the difficulty in managing and maintaining the timeliness and budget for a contractor. We will compensate for this weakness by retaining an expert contractual lawyer, Frank Nussheim, to negotiate our side of the construction contract. Our lawyer will handle all building commitments and authorize the disbursement of funds for such activities.

Although management at The Boulder Stop understands many of the concerns of local citizens in Redmond, we have few opportunities to express our vision through a useful venue. Eastern Oregon can be very 'status quo' and any new player threatens the old order and puts the locals on the defensive. Instead of proclaiming our innocence and placing the blame on a few radicals, we will pull the community together through free barbecues that include children's' games such as gunny sack races. We're also sponsoring the "Run For Their Lives" event which will raise money for children from broken and violent homes, donating medical care and clothing.

The Boulder Stop

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2.2.3 Opportunities

The market for rock climbing and hiking gear, good coffee, and ice cream in Redmond is far below saturation level. Our two local competitors do very little in the way of marketing, be it advertising or community involvement PR. This gives us the opportunity to develop the market and brand ourselves as the market 'original'.

The cost of selling via e-commerce and through mail-order has decreased tremendously in recent years. Internet domain names (www.yourname.com) cost $35 a year, and e-commerce servers may be set up for only $30 a month. Certain high-circulation catalogs will develop custom catalogs for vendors and mail them for a fixed fee. This is incredibly cost effective for companies that don't have costly relationships with printers, graphic artists, and the like. Both direct mail and Internet sales are a growing segment of our business.

Weekend warriors and hard core climbers will pay anything to get into the latest gear. The average climber carries around $1,200 of equipment. Since climbers place their lives on the line when they use their equipment, the majority of them buy only name brand gear at a price premium. Climbers associate high price with premium quality. Hikers are similar, but to a lesser degree. Hikers look for gear that looks great and feels comfortable. Our typical curious customer is lodging in Sunriver (20 miles), hiking at Smith Rock, Newberry Crater, and lakeside trails in the mountains. They own a new VW, SUV, or 4WD station wagon, are married, have a stable job, and are responsibly putting enough in savings to retire early. In other words, they don't care what they pay for hiking gear, as long as it's not insulting. We categorize insulting as 110% or more above REI (Recreational Equipment Incorporated) prices.

Rock climbing service companies offer us a unique opportunity. We can team up with these services to promote our events and store, and in return we will give them 'shelf-space'. This gives service companies cost-effective market exposure. We will partner with companies such as First Ascent LLC and other American Mountain Guides Association (AMGA) accreditees.

2.2.4 Threats

Locals are sensitive to the manner in which we develop our land for commercial use. The land is state owned. Oregon will lease one, 1/4 acre parcel to The Boulder Stop. Since it is public land, the public can revoke our lease without offering just cause.

The last three years have been 'La Nina' years, pummeling Oregon with rain and cold weather. Last year, the rock climbing season began in May. When the season begins as late as May, it means we have two to three fewer months of revenue with which to pay for our leased land and equipment (fixed costs). Although we can hope for an Indian summer, this doesn't happen very often in Oregon. By early October, the vacation season is over, kids are back in school, and there are few people around to buy our coffee, gear, etc.

The Boulder Stop

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2.3 Competition

Direct Mail and Web Sales:

• REI (REI.com) and L.L. Bean (L.L. Bean.com) sell climbing gear to our target market. They are large corporate entities, each with powerful online and retail presence. Fortunately, they have not opened any retail stores in the Bend/Redmond area, so we count them solely as direct mail and Web competitors. We hope to achieve .5-1% of their gross yearly direct sales.

Retail Sales:

• [UnNamed#1] will be our toughest competitor, for they have already established themselves in the rock climbing community. They have a very experienced and knowledgeable staff of expert climbers, and they are located on the highway that leads directly to Smith Rock. They carry 75-80% of the same gear that we sell.

• [UnNamed#2] sells limited gear (clothes), they do not promote, and they do not market their products extensively. On the other hand, they sell ice cream and carry more GenX apparel than The Boulder Stop. Their biggest weakness is small store size.

-5%

0%

5%

10%

15%

20%

-20 0 20 40 60 80 100 120

UnNamed#1

UnNamed#2

REI

Other

Competitor

Other

Competitor by Growth and Share

Table: Growth and Share Analysis

Growth and Share

Competitor Price Growth Rate Market ShareUnNamed#1 $50 10% 45%UnNamed#2 $35 3% 15%REI $300 15% 35%Other $0 0% 0%Competitor $0 0% 0%Other $0 0% 0%

Average $64.17 4.67% 15.83%Total $385.00 28.00% 95.00%

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2.4 Product Offering

Espresso is the big money maker for The Boulder Stop, with coffee peripherals coming in a close second. Straight espresso bean re buys arrive on Mondays and Thursdays, ensuring the freshest beans possible. Modified re buys begin on the first of each month. Bill Walsh will oversee all purchases, shipments, and deliveries.

The Boulder Stop sells high-quality rock climbing gear to serious climbers. Rock climbing gear is a long-term sales project that will rely on future catalog and "word-of-mouth" sales. The gear is checked by knowledgeable employees who use and recommend equipment to customers and management. The gear is purchased from well-known manufacturers like Metolius Mountain Products, Black Diamond, Boreal, and Petzl. Management will rely on employees and customers to shorten the feedback loop in product and service offerings. Climbing gear is delivered every Thursday via UPS.

2.5 Keys to Success

To succeed in this business we must:

• Sell products that are of the highest reliability and quality. We must offer as many or more high-end products than REI offers online and through their Eugene and Portland stores. This means we must carry all high-end brands of harnesses, active protection, passive protection, helmets, ice climbing gear, camping gear and mountaineering gear.

• We will offer loss leaders and other promotions that bring customers into the store, to buy goods and to generate awareness of promotional events.

• Provide for the satisfaction of 100% of our customers. Our customers are very valuable to us, and we will design a customer care plan to manage complaints, implement employee and customer feedback, manage supplier accounts, and predict future conflicts.

• To partner with the appropriate service companies in order to supply our customers with all the climbing products and services they need.

• Establish long-term relationships with great distributors such as Trago, Petzl, Black Diamond, Beal, Metolius Mountain Products, and others.

2.6 Critical Issues

As we expand into retail, our success will depend on whether we will be able to maintain our existing direct business. The retail model offers a more mature market than the direct model and exposes us to fewer outside threats. In our direct business sales, we compete against big players such as REI and LL Bean, among others. Our retail model competes against two small, under-marketed gear stores that don't offer great espresso or a convenient locale.

The integration of retail and direct sales strategies will help The Boulder Stop build business sales in both categories. It's critical that we view the 'big picture' when allocating resources to marketing tactics. For instance, we will both gain allies and increase sales by discounting Eastern Oregon vacations to our existing and potential direct customers. Our allies will offer co-marketing discounts, and we will use their venues to advertise our rock climbing classes, gear selection, and espresso beverages.

The most important issue is this: We must stay the course and build the business

The Boulder Stop

Page 9

conservatively and spend accordingly. Projects must be kept on budget and on time, marketing programs must be cost efficient and backed by solid data gathering and a high potential for success, measured or otherwise.

2.7 Historical Results

Our marketing strategies have always revolved around direct Internet and mail sales. We have done little tele-sales, as that does not fit into our business practices model. To date, our direct sales model has been successful in (1) keeping costs down, (2) giving us great ROI, (3) building a business from nothing to $150,000 a year, and (4) restraining our growth to match our level of financing.

As we expand into a new market and grow with a new business model, we will need to put our direct mail sales experience to work. We will need to be just as aggressive about getting our message out to the locals. Our direct mail sales experience will help us determine which direct market tactics and programs work, and which ones don't. From flyers to magazine and newspaper ads, we will use our connections and resources gathered through national direct sales to focus our retail marketing on one region.

In addition, our Website and Website sales will be of much use to us. We will synch Website sales orders with in-house ordering systems, to ensure that customers may buy over the Web and pick up merchandise in the store if they wish, free of shipping charges. By adopting this marketing program, we will gain from historical experience, while adapting to our retail direct business model.

Things have changed tremendously in the direct catalog (mail) and especially the Internet sales category. Major players such as REI and L.L. Bean now rely on Web sales to boost catalog sales. Both companies put out the same number of catalogs, but use the Web for product real-time pricing, order tracking, and customer feedback. Since 1995, Web business has grown by 3,000%. Direct market growth, and our sales stability in the direct market, give us the power to leverage our direct sales to build non-Internet retail sales.

Table: Historical Data

Historical Data

Variable 1998 1999 2000Industry Revenue $2,000,000 $2,000,000 $2,000,000Company Market Share 2% 4% 8%Company Revenue $40,000 $80,000 $150,000Industry Variable Costs $6 $6 $6Company Variable Costs $4 $4 $3Industry Gross Contribution Margin $1,999,994 $1,999,994 $1,999,995

Company Gross Contribution Margin $39,997 $79,997 $149,997

Marketing Expenses $1,000 $1,200 $2,000Company Net Contribution Margin $38,997 $78,797 $147,997

The Boulder Stop

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2.8 Macroenvironment

Rock climbing

The rock climbing industry is growing faster than ever. Although the gear is expensive, people buy it because it provides them with long-term fun.

Coffee and Espresso

High profit margins on coffee sales and low overhead costs lead to high profit margins in the espresso industry. Expansion of coffee and espresso retail outlets has increased exponentially in the last five years as large companies such as Starbucks[tm] have increased their reach to the East Coast in cities such as Boston, New York, and Washington D.C.

3.0 Marketing Strategy

• We will build strategic partnerships with climbing service companies.

• We will differentiate The Boulder Stop from competitors through aggressive advertising and promotional campaigns that demonstrate our community support and commitment.

• We will build retail store awareness through our direct mail and Web campaigns, leading to greater word-of-mouth marketing.

3.1 Mission

The Boulder Stop is an equipment store specializing in rock climbing gear and coffee/espresso drinks. Our mission is to provide an entertaining, fun, and knowledgeable atmosphere to climbers who experience nothing but a rock face and nutrition bars all day. Rock climbing is as much about storytelling and nostalgia as it is about routes and gear. The Boulder Stop adds value by creating a 'campfire' social setting in a retail location.

We take care of our employees; that is, we pay them well and give them a share of profits. We respect all customers who respect our store and people, and show respectful diligence toward those who choose not show our people respect.

We work as a team, not as a socialist Mecca. Our people are paid according to their skills and abilities. In addition, each employee will have the option of company-sponsored training courses and outside curricula that build on their skill sets.

Our customers are our most important asset, and we rely on them for feedback. We do not, however, send out unsolicited surveys to unsuspecting customers. We will accept in-store suggestions and test them for results.

We have a plan and our goals are clear: To create a fun, entertaining, and respectful retail environment that generates sales of espresso and climbing gear.

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3.2 Marketing Objectives

1. To make The Boulder Stop the number one destination for rock climbing equipment customers in Oregon, and to achieve the largest market share in the region for rock climbing gear. There are no resources for gauging market share for our local market, but the State of Oregon provides yearly economic data by region. We will use this data to compile an estimate of market share goals for 1998.

2. To be an active and vocal member of the community, and to provide continual re-investment through participation in community activities and financial contributions. We will sponsor two to three events during the year, including the Pacific Amateur (PA) Golf Classic, charity events, and celebrity-hosted competitions.

3. To achieve 30% market share by August of 2000.

3.3 Financial Objectives

Our financial objectives are as follows:

• To always maintain a minimum cash balance of $10,000.• To maintain year-end minimum contribution margins of 40%.• To grow direct retail sales by a conservative minimum of 12% per year. • To achieve sales of $190,000 in year one.

3.4 Target Markets

We will focus on the highly discriminating, hard-core climber segment first, because these are the opinion leaders. Both the weekend warrior and the curious will follow the hard-core climbers. If we can attract and keep the hard-core climbers, then they will become part of the attraction for the others. To attract them, we will carry all the best high-tech gear, know the jargon, use the latest technology, and become a "Futurist" product and services company.

We want to clearly differentiate the weekend warriors from the hard-core climbers. Less competitive, or at least at a different competitive level, these climbers are usually at Smith for fun. They respect the hard-core climbers and want to be like them, but don't want to be classified as having "rock on the brain." Approximately 20-30% of these climbers will respond to family events by bringing their families; the other 70-80% climb with friends and occasionally try to outdo each other. This market is highly susceptible to getting stuck in a coffee shop with friends, they will talk about their latest romance, conflict with other friends, the future, or the fine espresso at The Boulder Stop. We will market the weekend warriors with a combination of amateur climbing events and other sponsored activities.

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3.5 Positioning

For climbers who need a place to stop for gear and coffee near Smith Rock, The Boulder Stop offers high quality climbing gear, gourmet espresso drinks, and a comfortable place to meet and talk. We will position The Boulder Stop as a community-involved organization that creates value for the community while minimizing environmental impact.

3.6 Strategies

Our main marketing strategy is to focus on the overall experience needed by each customer. Some of our customers will seek a friendly gathering place to discuss climbs and prospects. Others want to shop in a semi-sterile retail environment. Still others don't want to linger at all, but wish to get their 'treat' and enjoy the outdoor weather. Therefore, our strategy is to fulfill these various customer needs while minimizing possible friction between these customers. That is our focus.

3.7 Marketing Mix

Our marketing mix relies heavily on our promotions. Our unique promotions set us apart from our local competitors, which sponsor few promotions. From the Perry Claw Rock Festival to The Llama races, The Boulder Stop will seek to create high-impact local events that create consumer recall and increase foot traffic.

Our prices are competitive, but we do not compete on price. We will not match prices; we will simply perform monthly competitive shopping trips to gauge the average prices for goods.

Our store and location give us a competitive advantage. The Boulder Stop is located within 1/4 mile of Smith Rock itself, and within walking distance of the park.

Our opportunities for differentiating on service are limited. Our part-time staff are experienced rock climbers, and are very knowledgeable about gear and the sport itself. Beyond this expertise, there's no reason for us to create special services when we can co-market climbing schools and services through store flyers and posters.

3.7.1 Product Marketing

As a reseller of name-brand products, we have very little control over how our customers view each individual product. We do, however, have control over the customer environment and the manner in which we display our products. From a standard retail standpoint, product marketing appears to be very simple - display the products in an aesthetically pleasing manner, and they will come. It is much more complicated for us. We have identified three types of customers, and each group has it's own buying pattern.

The hard-core climbers need a great selection of gear, and will be disappointed if they aren't offered a 'bargain bin' of last years' model gear. The hard-core gear shoppers will be separated from the curious by a low glass partition. This partition will serve both to absorb the noise of shoppers and eaters, and to separate and maintain the climbers' social order. We will host climber discussion groups, with free coffee on Friday. and Sat. nights after 7:00 p.m. This will give hard-core climbers an opportunity to exchange stories and relax in our

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cafe, away from their nemesis: 'yuppie tourists'.

The weekend warriors won't feel excluded from the gear, and will also partake of the bargain bin. The warriors will find comfort in the cafe area, where they can talk about their pursuits rather than challenge them on the rock face. These people are not in great shape, and are likely to flock to the store as early as 3:00 p.m. for ice cream and cookies. We'll have extra staff on hand during these times.

The curious are difficult to gauge. They will flow in and out all day, and are likely to peruse our magazine rack for hours (we've allowed for the magazine write-offs). This customer base is our most lucrative, and is most likely to buy an iced espresso and/or ice cream before or after their short day hikes. Since espresso is a cash cow for us, we'll offer them a solid selection of beverages so nobody's disappointed.

3.7.2 Price

We are a store that is positioned for impulse buying; therefore, it is important that we maintain a flexible pricing strategy.

• Our pricing strategy will be based on competitive parity guidelines. We will not exceed competitors' prices by more than 10%.

• Price says a lot about a product. The products that are innovative and not available elsewhere in the region will be marked up to meet the demand curve. We are not afraid of premium pricing a premium product.

• Espresso beverages will be priced a little below the industry average. Although we will still make money off the beverages, we consider this a "Loss Leader" strategy whereby word-of-mouth advertising brings customers in for the drinks, simply to make them aware of our additional products and services.

3.7.3 Promotion

The Boulder Stop will implement a strong sales promotion strategy. Advertising will be secondary.

• [Omitted] will be paid up to $2,000 to determine the needs of the surrounding population and how the company may best meet those needs with promotions, literature and other marketing programs..

• Promotional campaigns will be partially outsourced to [Omitted]. • Advertising will be consistent with [Omitted].• Sales promotions and public relation strategies will work together to inform

customers of new products, to encourage an image of community involvement for The Boulder Stop, and to limit environmental impact.

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3.7.4 Service

Service is important to our mix. We have an obligation to provide quality products and cheerful service, fast and efficiently. Our service goals are simple and easy to maintain.

We will make plain our policy that we do not accept returns or exchanges without receipt and proof of product failure. We are in this to make money, as a business, and cannot afford to give our value to free riders or people with 'buyer's remorse', who choose not to take responsibility for their purchase(s).

3.8 Marketing Research

We will obtain market research through in-store customer comment cards and the local Chamber of Commerce.

4.0 Financials

• Sales are expected to grow from $193,000 the first year to $262,000 by year three.

• Expenses will increase with the rate of inflation (3%) minus diminishing cost of goods (1%).

4.1 Break-even Analysis

For our break-even analysis, we have chosen $3 to represent our average revenue per unit. Although revenue from ropes and other gear amount to significantly more revenue per unit, such items skew the revenue curve toward less units sold. We want to engage in a practical analysis of precisely what it will take to turn the company profitable by using the P&L statement. In light of this, the Break-even analysis merely becomes a gauge by which we can measure our monthly revenue streams to predict long-term profitability.

According to the analysis, we will break-even at 1,333 units.

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($3,000)

($2,000)

($1,000)

$0

$1,000

$2,000

0 400 800 1200 1600 2000

Monthly break-even point

Break-even point = where line intersects with 0

Break-even Analysis

Table: Break-even Analysis

Break-even Analysis

Monthly Units Break-even 1,333Monthly Revenue Break-even $4,000

Assumptions:Average Per-Unit Revenue $3.00Average Per-Unit Variable Cost $0.75Estimated Monthly Fixed Cost $3,000

4.2 Sales Forecast

We will promote to the weekend warriors by hosting fun events like the "Llama Run". Our part-time sales clerks, also trained in the ways of promotional tactics, will call businesses within the Bend area and establish additional sponsors for these events.

For in-store sales, our strategy will be to maintain as much on-site POP (point-of-purchase) literature as possible. Our part-time staff will be responsible for informing customers of the products and creating the best fit between customer and product. Our employees do not work on commission.

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$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

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

Carabiners

Ropes

Books and Magazines

Cookies and Cones

Espresso Regulars

Espresso Shakes

Gear Rentals

All Other Gear

Other

Sales Monthly

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Table: Sales Forecast

Sales ForecastFY 2002 FY 2003 FY 2004 FY 2005 FY 2006

Unit SalesCarabiners 3,577 4,007 4,488 5,026 5,629Ropes 331 370 415 465 520Books and Magazines 181 203 227 254 285Cookies and Cones 17,358 19,441 21,773 24,386 27,313Espresso Regulars 23,867 26,731 29,938 33,531 37,555Espresso Shakes 2,387 2,673 2,994 3,353 3,755Gear Rentals 362 405 454 508 569All Other Gear 2,172 2,433 2,725 3,052 3,418Other 0 0 0 0 0Total Unit Sales 50,234 56,262 63,013 70,575 79,044

Unit Prices FY 2002 FY 2003 FY 2004 FY 2005 FY 2006Carabiners $9.13 $9.50 $9.88 $10.27 $10.68Ropes $141.95 $147.63 $153.54 $159.68 $166.07Books and Magazines $12.15 $12.64 $13.14 $13.67 $14.21Cookies and Cones $1.01 $1.05 $1.10 $1.14 $1.18Espresso Regulars $1.77 $1.84 $1.92 $1.99 $2.07Espresso Shakes $2.68 $2.79 $2.90 $3.02 $3.14Gear Rentals $4.05 $4.21 $4.38 $4.56 $4.74All Other Gear $20.30 $21.11 $21.95 $22.83 $23.74Other $0.00 $0.00 $0.00 $0.00 $0.00

SalesCarabiners $32,669 $38,052 $44,323 $51,628 $60,136Ropes $46,946 $54,682 $63,694 $74,191 $86,417Books and Magazines $2,197 $2,559 $2,980 $3,472 $4,044Cookies and Cones $17,574 $20,470 $23,843 $27,773 $32,350Espresso Regulars $42,287 $49,256 $57,373 $66,828 $77,841Espresso Shakes $6,403 $7,459 $8,688 $10,120 $11,787Gear Rentals $1,464 $1,706 $1,987 $2,314 $2,696All Other Gear $44,084 $51,349 $59,811 $69,668 $81,149Other $0 $0 $0 $0 $0Total Sales $193,623 $225,532 $262,700 $305,993 $356,421

Direct Unit Costs FY 2002 FY 2003 FY 2004 FY 2005 FY 2006Carabiners $3.54 $3.64 $3.75 $3.87 $3.98Ropes $55.57 $57.24 $58.96 $60.73 $62.55Books and Magazines $0.76 $0.78 $0.80 $0.83 $0.85Cookies and Cones $0.10 $0.10 $0.11 $0.11 $0.11Espresso Regulars $0.25 $0.26 $0.27 $0.28 $0.28Espresso Shakes $0.40 $0.42 $0.43 $0.44 $0.45Gear Rentals $0.25 $0.26 $0.27 $0.28 $0.28All Other Gear $12.13 $12.50 $12.87 $13.26 $13.66Other $0.00 $0.00 $0.00 $0.00 $0.00

Direct Cost of SalesCarabiners $12,658 $14,603 $16,845 $19,433 $22,418Ropes $18,379 $21,202 $24,459 $28,215 $32,549Books and Magazines $137 $158 $182 $210 $242Cookies and Cones $1,752 $2,021 $2,331 $2,690 $3,103Espresso Regulars $6,022 $6,947 $8,014 $9,245 $10,665Espresso Shakes $964 $1,112 $1,282 $1,479 $1,706Gear Rentals $91 $105 $121 $140 $162All Other Gear $26,353 $30,401 $35,071 $40,457 $46,672Other $0 $0 $0 $0 $0Subtotal Direct Cost of Sales $66,356 $76,549 $88,306 $101,870 $117,518

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4.2.1 Sales by Mail and Web Direct Sales

Our direct sales are seasonal in nature, yet, unlike retail sales, we can maintain small margins throughout the Northern Hemisphere's Fall/Winter months. We will maintain these sales by temporarily discontinuing our direct mail sales in favor of Web sales. Website management costs are between $25-50 a month. Banner advertising on sites such as outside.com, rockandice.com, and others will cost under $1,500 and will help us maintain market exposure during the off season.

We will create direct mail catalogs again in April.

4.2.2 Sales by Retail Store Sales

Retail store sales will end in November and begin again in April. Retail sales figures rely heavily on espresso and carabiner purchases.

The average climber loses one carabiner every trip, and The Boulder Stop will be there to provide them with the best selection of 'biners in the Redmond area. We will price the 'biners competitively, but not too competitively. At an average price of $9 per 'biner, we priced higher than REI, but lower than any of our local competition.

In-store espresso sales are driven by our marketing promotion machine. As people learn that we are a community-involved, neighborhood organization, we'll gain the trust of locals who will choose to drive five miles to the The Boulder Stop, at scenic Smith Rock, rather than visit the local 'strip malled' ice-cream parlor for a cone. This goes back to our main objective: To become a place where locals and expert climbers can mingle to enjoy good gear, coffee, ice cream, cookies, etc.

4.3 Expense Forecast

Our expense forecast relies on a conservative inflation forecast of 4% per year minus a 1% diminishing cost allowance.

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$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

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

Advertising/Promotion

Sponsored Activities

Other

Monthly Expense Budget

Table: Marketing Expense Budget

Marketing Expense Budget FY 2002 FY 2003 FY 2004 FY 2005 FY 2006Advertising/Promotion $3,000 $3,000 $3,000 $3,000 $3,000Sponsored Activities $11,250 $9,000 $9,000 $8,000 $7,000Other $49,500 $42,000 $42,000 $42,000 $42,000

------------ ------------ ------------ ------------ ------------Total Sales and Marketing Expenses $63,750 $54,000 $54,000 $53,000 $52,000Percent of Sales 32.92% 23.94% 20.56% 17.32% 14.59%

4.4 Contribution Margins

May and August will provide us with the lowest contribution margins. May, because we are opening our doors in May, requiring plenty of promotional material, and the supplies necessary for our big Grand Opening celebration. August, because we've scheduled the Perry Claw Rock Festival during August. This event will bring some of the finest local musicians and nationally recognized climbers to Smith Rock for a three-day climbing celebration/contest.

The rest of the seasonal year, our contribution margins will average 40% for the first three years. Not great for the industry, but then we are marketing more aggressively than our industry. With our current financial backing and direct sales, we can maintain these 40-50% contribution margins for at least three years, or long enough to gain local recognition and at least 70% market share.

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$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

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

Contribution Margin Monthly

Table: Contribution Margin

Contribution MarginFY 2002 FY 2003 FY 2004 FY 2005 FY 2006

Sales $193,623 $225,532 $262,700 $305,993 $356,421Direct Costs of Goods $66,356 $76,549 $88,306 $101,870 $117,518Other Variable Costs of Sales $0 $0 $0 $0 $0

------------ ------------ ------------ ------------ ------------Cost of Goods Sold $66,356 $76,549 $88,306 $101,870 $117,518

Gross Margin $127,267 $148,984 $174,394 $204,123 $238,903Gross Margin % 65.73% 66.06% 66.39% 66.71% 67.03%

Marketing Expense Budget FY 2002 FY 2003 FY 2004 FY 2005 FY 2006Advertising/Promotion $3,000 $3,000 $3,000 $3,000 $3,000Sponsored Activities $11,250 $9,000 $9,000 $8,000 $7,000Other $49,500 $42,000 $42,000 $42,000 $42,000

------------ ------------ ------------ ------------ ------------Total Sales and Marketing Expenses $63,750 $54,000 $54,000 $53,000 $52,000Percent of Sales 32.92% 23.94% 20.56% 17.32% 14.59%

Contribution Margin $63,517 $94,984 $120,394 $151,123 $186,903Contribution Margin / Sales 32.80% 42.12% 45.83% 49.39% 52.44%

5.0 Controls

Our marketing plan is designed around a dynamic internal and external business environment. We will complete this topic as we gain new insight into our market and program effectiveness.

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5.1 Implementation

The first milestone is distribution of a flyer to announce our grand opening celebration. The flyer will appear on telephone poles (where legal), in outdoor stores, and will be mailed to our list of direct-mail customers. Our celebration will consist of an outdoor barbecue, gunny sack races, climber-dunking festivities, and llama racing. Local vendors have been invited to set up booths and participate, subject to prior approval.

During the flyer campaign, Pan Silverton will arrange for Yellow Pages print ads and Internet Web banner advertising within the Bend/Redmond area, as well as the Portland area. The Yellow Page ads are purchased through a flat-fee to USWest Dex, and The Yellow Pages company. Banner ads are more complex and require a media kit with a value-added offering to retailers with Internet websites. The pitch will be - help us market ourselves and we will add your company to our online listing of outside resources.

The first annual Llama Run is a special event for the St. Charles Medical Center in Bend. Llamas and their owners will converge on Redmond for races that include 1st, 2nd, and 3rd-place winners. First prize wins $1,000, 2nd wins $750, and 3rd wins $250. The Most Colorful Llama award will be given to one winner at the end of the show, and will include a bag of llama feed and a $100 gift certificate to the Heathman restaurant. The entry fee will be $100 per llama, and all fees will go directly to St. Charles Medical Center.

The Perry Claw Rock Festival will bring big-name climbing stars such as Louis Baruqe and Sheri Lassiter to Smith Rock for a full day climb. Climbers will be available to sign autographs on gear and such. Admission will be $7 and all proceeds will go to support prostate cancer research.

The Boulder Stop will be one of the sponsors of the PA Golf Classic held in Bend, OR on Sept. 1, 1999.

Table: Milestones

Milestones

Advertising Start Date End Date Budget Manager DepartmentYellow pages print and web listings 4/1/1999 5/1/1999 $500 Silverton MarketingPrint and distribute Grand Opening flyer 4/1/1999 5/15/1999 $400 Silverton Marketing

Other $0 Total Advertising Budget $900PR Start Date End Date Budget Manager DepartmentGrand Opening Celebration 5/15/1999 5/15/1999 $3,500 Walsh Marketing1st Annual Llama run 7/23/1999 7/23/1999 $2,000 Walsh MarketingPerry Claw Rock Festival 8/1/1999 8/3/1999 $3,500 Walsh MarketingPA Golf Classic -- Sponsor for evening hikes 9/1/1999 10/1/1999 $2,000 Walsh Marketing

Total PR Budget $11,000Direct Marketing Start Date End Date Budget Manager DepartmentPrint and distribute Grand Opening flyer 4/1/1999 5/15/1999 $400 Silverton Marketing

Other $0 Total Direct Marketing Budget $400Web Development Start Date End Date Budget Manager DepartmentOther $0 Other $0 Total Web Development Budget $0Other Start Date End Date Budget Manager DepartmentOther $0 Other $0 Total Other Budget $0Totals $12,300

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5.2 Marketing Organization

We are a small company where sales and marketing consist of two to three people. Bill Walsh and Pan Silverton will lead and implement the marketing programs, while part-time employees will carry out many of the tasks. The marketing organization is very informal, but tightly managed, with clear obtainable goals, and a thorough list of deadlines. Details are very important to the implementation of our marketing plan, the most important being those that are unseen. Marketing will do its very best to plan for the unforeseeable.

5.3 Contingency Planning

Contingency planning is an important part of the marketing organization, as noted in the previous topic.

Our biggest potential problems, the ones that will limit our ability to create programs, are financial. Our budget relies on sales figures that are reliable and well-researched, but are also affected by such things as weather and political difficulties. Our first plan is a 'scale-down' plan; that is, we will eliminate the Llama run, Rock festival, and PA Golf sponsorship and wait out the year, relying on website and direct sales to cover our cost of doing business. The direct business alone will not support our financial commitments, but with excellent credit, inventory as collateral, and basic Smith Rock foot traffic, we will survive without popular marketing programs.

If we lose a part-time employee, there will be plenty to find elsewhere. If we lose Pan Silverton, his skills will be difficult to replace, but we will have plenty of quality applicants living in the Bend/Redmond area. Will also have the option of hiring away competitors' employees, as they are poorly paid and are given very little company ownership.

Our climbing gear supply chain will survive as long as there are many competitors making climbing gear and powerful international service companies to deliver the gear. We will never have difficulty finding coffee, because this IS the Pacific Northwest and fresh-roasted coffee/espresso beans are available in abundance.

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Appendix Table: Sales Forecast

Sales ForecastMay Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Unit SalesCarabiners 0% 420 428 437 446 455 432 108 108 108 108 108 420Ropes 0% 40 41 42 42 43 41 10 10 10 10 10 30Books and Magazines 0% 25 26 26 27 27 26 0 0 0 0 0 25Cookies and Cones 0% 2,400 2,448 2,497 2,547 2,598 2,468 0 0 0 0 0 2,400Espresso Regulars 0% 3,300 3,366 3,433 3,502 3,572 3,393 0 0 0 0 0 3,300Espresso Shakes 0% 330 337 343 350 357 339 0 0 0 0 0 330Gear Rentals 0% 50 51 52 53 54 51 0 0 0 0 0 50All Other Gear 0% 250 255 260 265 271 276 69 69 69 69 69 250Other 0% 0 0 0 0 0 0 0 0 0 0 0 0Total Unit Sales 6,815 6,951 7,090 7,232 7,377 7,027 187 187 187 187 187 6,805

Unit Prices May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AprCarabiners $9.00 $9.03 $9.06 $9.09 $9.12 $9.15 $9.18 $9.21 $9.24 $9.27 $9.30 $9.34Ropes $140.00 $140.47 $140.93 $141.40 $141.88 $142.35 $142.82 $143.30 $143.78 $144.26 $144.74 $145.22Books and Magazines $12.00 $12.04 $12.08 $12.12 $12.16 $12.20 $12.24 $12.28 $12.32 $12.36 $12.41 $12.45Cookies and Cones $1.00 $1.00 $1.01 $1.01 $1.01 $1.02 $1.02 $1.02 $1.03 $1.03 $1.03 $1.04Espresso Regulars $1.75 $1.76 $1.76 $1.77 $1.77 $1.78 $1.79 $1.79 $1.80 $1.80 $1.81 $1.82Espresso Shakes $2.65 $2.66 $2.67 $2.68 $2.69 $2.69 $2.70 $2.71 $2.72 $2.73 $2.74 $2.75Gear Rentals $4.00 $4.01 $4.03 $4.04 $4.05 $4.07 $4.08 $4.09 $4.11 $4.12 $4.14 $4.15All Other Gear $20.00 $20.07 $20.13 $20.20 $20.27 $20.34 $20.40 $20.47 $20.54 $20.61 $20.68 $20.75Other $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

SalesCarabiners $3,780 $3,868 $3,959 $4,052 $4,146 $3,952 $991 $995 $998 $1,001 $1,005 $3,921Ropes $5,600 $5,731 $5,865 $6,002 $6,143 $5,855 $1,469 $1,474 $1,478 $1,483 $1,488 $4,357Books and Magazines $300 $307 $314 $322 $329 $314 $0 $0 $0 $0 $0 $311Cookies and Cones $2,400 $2,456 $2,514 $2,572 $2,633 $2,509 $0 $0 $0 $0 $0 $2,489Espresso Regulars $5,775 $5,910 $6,048 $6,190 $6,335 $6,038 $0 $0 $0 $0 $0 $5,990Espresso Shakes $875 $895 $916 $937 $959 $914 $0 $0 $0 $0 $0 $907Gear Rentals $200 $205 $209 $214 $219 $209 $0 $0 $0 $0 $0 $207All Other Gear $5,000 $5,117 $5,237 $5,359 $5,485 $5,613 $1,408 $1,413 $1,417 $1,422 $1,427 $5,186Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Sales $23,930 $24,489 $25,063 $25,649 $26,249 $25,405 $3,868 $3,881 $3,894 $3,907 $3,920 $23,369

Direct Unit Costs May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AprCarabiners 0.00% $3.50 $3.51 $3.52 $3.53 $3.54 $3.54 $3.55 $3.56 $3.57 $3.58 $3.59 $3.60Ropes 0.00% $55.00 $55.14 $55.28 $55.41 $55.55 $55.69 $55.83 $55.97 $56.11 $56.25 $56.39 $56.53Books and Magazines 0.00% $0.75 $0.75 $0.75 $0.76 $0.76 $0.76 $0.76 $0.76 $0.77 $0.77 $0.77 $0.77Cookies and Cones 0.00% $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10Espresso Regulars 0.00% $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.26 $0.26 $0.26 $0.26Espresso Shakes 0.00% $0.40 $0.40 $0.40 $0.40 $0.40 $0.41 $0.41 $0.41 $0.41 $0.41 $0.41 $0.41Gear Rentals 0.00% $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.26 $0.26 $0.26 $0.26All Other Gear 0.00% $12.00 $12.03 $12.06 $12.09 $12.12 $12.15 $12.18 $12.21 $12.24 $12.27 $12.30 $12.33Other 0.00% $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Direct Cost of SalesCarabiners $1,470 $1,503 $1,537 $1,572 $1,607 $1,531 $384 $385 $386 $386 $387 $1,511Ropes $2,200 $2,250 $2,300 $2,352 $2,405 $2,291 $574 $576 $577 $578 $580 $1,696Books and Magazines $19 $19 $20 $20 $20 $20 $0 $0 $0 $0 $0 $19Cookies and Cones $240 $245 $251 $257 $262 $250 $0 $0 $0 $0 $0 $247Espresso Regulars $825 $844 $863 $882 $902 $859 $0 $0 $0 $0 $0 $848Espresso Shakes $132 $135 $138 $141 $144 $137 $0 $0 $0 $0 $0 $136Gear Rentals $13 $13 $13 $13 $14 $13 $0 $0 $0 $0 $0 $13All Other Gear $3,000 $3,068 $3,137 $3,208 $3,280 $3,354 $841 $843 $845 $847 $849 $3,084Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Subtotal Direct Cost of Sales $7,898 $8,076 $8,258 $8,445 $8,635 $8,454 $1,798 $1,803 $1,807 $1,812 $1,816 $7,553

Appendix

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Appendix Table: Sales Breakdown by Mail and Web Direct Sales

Sales by: Mail and Web Direct Sales

May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AprSalesName me 0 0 0 0 0 0 0 0 0 0 0 0Name me 0 0 0 0 0 0 0 0 0 0 0 0Other 6,815 6,951 7,090 7,232 7,377 7,027 187 187 187 187 187 6,805Total 6,815 6,951 7,090 7,232 7,377 7,027 187 187 187 187 187 6,805Average 2,272 2,317 2,363 2,411 2,459 2,342 62 62 62 62 62 2,268

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Appendix Table: Sales Breakdown by Retail Store Sales

Sales by: Retail Store Sales

May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AprSalesName me 0 0 0 0 0 0 0 0 0 0 0 0Name me 0 0 0 0 0 0 0 0 0 0 0 0Other 6,815 6,951 7,090 7,232 7,377 7,027 187 187 187 187 187 6,805Total 6,815 6,951 7,090 7,232 7,377 7,027 187 187 187 187 187 6,805Average 2,272 2,317 2,363 2,411 2,459 2,342 62 62 62 62 62 2,268

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Appendix Table: Sales Breakdown by Region

Sales by: RegionMay Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

SalesName me 0 0 0 0 0 0 0 0 0 0 0 0Name me 0 0 0 0 0 0 0 0 0 0 0 0Other 6,815 6,951 7,090 7,232 7,377 7,027 187 187 187 187 187 6,805Total 6,815 6,951 7,090 7,232 7,377 7,027 187 187 187 187 187 6,805Average 2,272 2,317 2,363 2,411 2,459 2,342 62 62 62 62 62 2,268

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Appendix Table: Contribution Margin

Contribution MarginMay Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Sales $23,930 $24,489 $25,063 $25,649 $26,249 $25,405 $3,868 $3,881 $3,894 $3,907 $3,920 $23,369Direct Costs of Goods $7,898 $8,076 $8,258 $8,445 $8,635 $8,454 $1,798 $1,803 $1,807 $1,812 $1,816 $7,553Other Variable Costs of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------Cost of Goods Sold $7,898 $8,076 $8,258 $8,445 $8,635 $8,454 $1,798 $1,803 $1,807 $1,812 $1,816 $7,553

Gross Margin $16,031 $16,413 $16,804 $17,204 $17,614 $16,951 $2,070 $2,078 $2,087 $2,095 $2,103 $15,817Gross Margin % 66.99% 67.02% 67.05% 67.08% 67.10% 66.72% 53.51% 53.55% 53.59% 53.62% 53.66% 67.68%

Marketing Expense Budget May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AprAdvertising/Promotion $900 $350 $350 $350 $350 $350 $0 $0 $0 $0 $0 $350Sponsored Activities $3,500 $0 $2,000 $3,500 $2,000 $0 $0 $0 $0 $0 $0 $250Other $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $1,500 $1,500 $1,500 $1,500 $1,500 $6,000

------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------Total Sales and Marketing Expenses $10,400 $6,350 $8,350 $9,850 $8,350 $6,350 $1,500 $1,500 $1,500 $1,500 $1,500 $6,600Percent of Sales 43.46% 25.93% 33.32% 38.40% 31.81% 25.00% 38.78% 38.65% 38.52% 38.39% 38.27% 28.24%

Contribution Margin $5,631 $10,063 $8,454 $7,354 $9,264 $10,601 $570 $578 $587 $595 $603 $9,217Contribution Margin / Sales 23.53% 41.09% 33.73% 28.67% 35.29% 41.73% 14.73% 14.90% 15.06% 15.23% 15.40% 39.44%

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