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January 2000

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


Table of Contents

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


1.1 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Keys Success Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2.0 Company Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4


2.1 Company Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Start-up Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Company Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

3.0 Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6


3.1 Product and Service Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 SWOT Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2.1 Strengths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2.2 Weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2.3 Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2.4 Threats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 Macro-environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 Future Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

4.0 Market Analysis Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9


4.1 Market Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 Target Market Segment Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2.1 Market Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2.2 Market Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Industry Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3.1 Industry Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3.2 Competition and Buying Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

5.0 Strategy and Implementation Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12


5.1 Competitive Advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.2.1 Positioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.2.2 Pricing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.2.3 Promotion Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.2.4 Distribution Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.2.5 Marketing Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.3 Sales Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.4 Strategic Alliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

6.0 Human Resources Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16


6.1 Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 Management Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 Personnel Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.4 Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.5 Feedback and Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

7.0 Financial Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18


7.1 Important Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.2 Key Financial Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.3 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.4 Revenue Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.5 Expense Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.6 Projected Profit and Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.7 Projected Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.8 Projected Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Table of Contents
7.9 Business Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

8.0 Contingency Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27


I Tech Solutions

1.0 Executive Summary

I Tech Solutions is a consulting-oriented company, intending to fill in the market need for a
professional, customer-focused computer company. The company emphasizes service and
support to differentiate itself from more price-oriented computer companies. We are on the
brink of penetrating a lucrative market in a rapidly growing industry. The current trend
towards an increase in the number of entrepreneurs and competition amongst existing
companies presents an opportunity for I Tech Solutions to penetrate this market.

Located at (discussion omitted), we realize that, for us to prosper, we need to be flexible and
responsive, to delight clients by providing them with what they want, when they want it, and
before the competition can offer it. The company intends to achieve this through a solutions
approach that is customer-centric, and in which the customer's business objectives enjoy top
priority.

Once the needs and processes are understood and described, leading edge products and best-
of-industry skills will be applied to design and develop a fitting solution to enable the client's
business in the most cost effective way.

Our marketing strategy will be based mainly on ensuring that clients know what need the
service(s) is able to fulfill, and making the right service and information available to the right
target client. We intend to implement a market penetration strategy that will ensure that our
services are well known and respected in our respective industry. Our strategy will convey a
sense of quality and satisfaction in every picture, every promotion, and every publication. Our
promotional strategy will involve traditional advertising, Internet marketing, personal selling,
public relations, and direct marketing, details of which are provided in the marketing section of
this plan.

It is important to recognize that make our intangible resources, such as our ability to relate to
customers regarding their needs and wants, management style, corporate culture and
commitment. These elements will differentiate us from our competitors and contribute towards
the development of a sustainable competitive advantage.

In a nutshell, we don't intend to just market and sell our product and services, but to provide
customized services and products that will enable our clients to optimize their output and,
assist in the attainment of their goals and objectives. However, for us to attain the above
stated we shall need funding from outside investors.

Note: All currency values in the charts and tables are expressed in the Botswana Pula (P).

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I Tech Solutions

Highlights (Planned)

3,500,000

3,000,000

2,500,000

2,000,000 Sales
Gross Margin
1,500,000
Net Profit
1,000,000

500,000

0
2001 2002 2003

1.1 Objectives

Our business strategy will revolve around the need to provide quality products and services to
our various target customers. This shall be undertaken through the establishment of a
professional team and the provision of quality, custom-designed services, catering to the
client's particular needs.

We intend to attain the following objectives:

1. Develop a follow-up strategy to gauge performance with all our clients.

2. To continuously formalize and measure cross-functional working communication so as


to ensure that the various departments work harmoniously towards attainment of
company objectives.

3. To instill a culture of continuous improvement in beating standards of customer


satisfaction and efficiency.

4. We are fully committed to supporting growth and development in the economy.

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I Tech Solutions

1.2 Mission

I Tech Solutions is built on the assumption that the management of information technology for
business is like legal advice or accounting, in that it is not inherently a do-it-yourself prospect,
and requires outside expertise to install and implement it. Smart business people need to find
quality vendors of reliable hardware, software, service, and support. They need to use these
quality vendors as they use their other professional service suppliers: as trusted allies.

I Tech Solutions intends to be such a solution provider. We will serve our clients as trusted
allies, providing them with the loyalty of a business partner and the economics of an outside
vendor. We want to make sure that our clients have what they need to run their businesses as
well as possible, with maximum efficiency and reliability. Many of our information applications
will be mission critical, so we will give our clients the assurance that we will be there when
they need us. The above is well summarized in our mission statement which is as follows:

"The company is dedicated to leveraging emerging technologies to provide the highest level of
quality products and services, customer service, and security."

1.3 Keys Success Factors

The keys to the projects' success will undoubtedly be effective market segmentation through
identification of several niche markets and implementation strategies. The key success factors
will include the following:

1. Excellence in fulfilling the promise: completely confidential, reliable, trustworthy


expertise, and service(s) through the provision of an uncompromising service. This
dictates that we have the latest technology, hardware, software, and well-trained
personnel so as to deliver this promise.

2. Timeous response to clients' orders: we cannot afford to delay our clients for whatever
reason, as this will have a negative bearing on our image, reputation, and future
business. We need to be continually communicating with the client, ensuring we
provide needs-based solutions.

3. Skill and depth of knowledge: Considering the nature of our services and their relative
infancy on the market, the skill and depth of knowledge of our personnel is of utmost
importance in determining the provision of the service(s) to the end-users.

4. Clear product and marketing positioning: Not wanting to be associated with the
numerous vendors on the market, we intend to aggressively market our business and
the services we provide in order to be at the top of our clients' minds.

5. Leveraging from a large pool of expertise: The company's various alliances with
technological and training partners shall prove invaluable. The skills and intellectual
capacity these partners will have in the fields of product support, design and system
integration, implementation and execution, lifecycle support and understanding,
training, and in the application of new technology are intangible benefits to I Tech
Solutions.

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I Tech Solutions

2.0 Company Summary

I Tech Solutions was founded in November 2000 as a private limited company. For most of its
initial existence, the company intends to establish close relationships with its various clients,
with the intention of expanding in the near future.

2.1 Company Ownership

I Tech Solutions is a company incorporated at the Registrar of Companies by Mr. T, Mr. S, and
Mr. P. Though relatively new, the directors realize their company's vast potential market and
opportunity for growth if given the necessary funding.

2.2 Start-up Summary

Total start-up capital and expenses covered (including legal costs, business cards, stationery,
and related expenses) came to approximately P207,749. Start-up assets ent. Messrs. T., S.,
and P. have provided P100,000 with the rest of required financing coming from a P600,000 5-
year commercial loan obtained from Bank Z. The start-up table below itemized the start-up
expenses.

Note: All currency values in the charts and tables are expressed in the Botswana Pula (P).

Start-up

600,000

500,000

400,000

300,000

200,000

100,000

0
Expenses Assets Investment Loans

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I Tech Solutions

Table: Start-up

Start-up

Requirements

Start-up Expenses
Legal 1,400
Stationery etc. 2,000
Brochures 5,000
Consultants 4,500
Staff Engagement 4,000
Office Locatioin 2,600
Staff Training 5,000
Expensed equipment 171,349
Other 11,900
Total Start-up Expense 207,749

Start-up Assets Needed


Cash Balance on Starting Date 492,251
Start-up Inventory 0
Other Short-term Assets 0
Total Short-term Assets 492,251

Long-term Assets 0
Total Assets 492,251
Total Requirements 700,000

Funding

Investment
Investor 1 40,000
Investor 2 30,000
Investor 3 30,000
Total Investment 100,000

Short-term Liabilities
Accounts Payable 0
Current Borrowing 0
Other Short-term Liabilities 0
Subtotal Short-term Liabilities 0

Long-term Liabilities 600,000


Total Liabilities 600,000

Loss at Start-up (207,749)


Total Capital (107,749)
Total Capital and Liabilities 492,251

2.3 Company Values

I Tech Solutions is committed to the fair and ethical treatment of employees and stakeholders.
This shall be undertaken through implementation of the following company values:

We intend to be a responsible corporate citizen, fulfilling our obligations as an integral


member of society. Our business decisions will give appropriate weight and
consideration to social and environmental impacts.

We intend to provide products and services of uncompromising quality.

We intend to seek mutually beneficial and enduring relationships in all the


commitments that we make, ensuring that they are straightforward and honest. Our
communication will be open and accurate, both internally and externally.

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I Tech Solutions
We will intend to uphold all the above company values, promoting our employees to do
likewise.

Through implementation of the company values, we believe that we will be able to attain our
goals and objectives for the benefit of all concerned, in particular, the communities in which we
will operate.

3.0 Products and Services

I Tech Solutions will provide computer products and services to small, medium, and large
businesses. We will also be focused on providing network systems and services to businesses.
The systems include both PC-based Land Area Networks (LAN) systems and minicomputer
server-based systems. Our services include design and installation of network systems,
training, and support.

3.1 Product and Service Description

I Tech Solutions intends to provide the following services:

1. Financial Solutions (discussion omitted)

2. Network Solutions (discussion omitted)

3. Data Backup Solutions and Services (discussion omitted)

4. E-commerce Solutions (discussion omitted)

5. Hardware Supply and Technical Support (discussion omitted)

6. Paperless Office Automation Solutions (discussion omitted)

7. Training (discussion omitted)

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I Tech Solutions

3.2 SWOT Analysis

The SWOT Analysis is a necessity to any start-up, it is an in-depth look at your Strengths,
Weaknesses, Opportunities, and Threats. We are in a highly lucrative market in a growing
economy. We foresee our strengths as the ability to respond to the market and to provide
custom designed technological services. Our key personnel will have a wide and thorough
knowledge of the technological services we intend to provide, which will go a long way towards
penetrating the market. Below is a summary of the SWOT Analysis.

3.2.1 Strengths

Knowledge. Our competitors are retailers, pushing boxes. We know systems, networks,
connectivity, programming, and data management.
Relationship selling. We intend to get to know our customers, one by one. Our direct
sales efforts will seek to maintain a relationship with our customers.
Diversified market segments. The diversity of the products and services we intend to
provide will ensure the lack of dependency on one particular market.
Combination of skills in implementation. The management team intends to jointly
develop business strategy and long-term plans with its strategic allies, having wide
experience in their respective market and product know-how, and strong technical
skills and business know-how.

3.2.2 Weaknesses

The introduction of new organizational practices and personnel who have not previously
worked together presents a challenge to the organization.
A limited financial base compared to the current major players in the IT industry.

3.2.3 Opportunities

The Internet. The increasing opportunities of the Internet offer us another area of
strength in comparison to the box-on-the-shelf major stores. Our potential customers
want more help with the Internet, and we intend to be in a better position to give it to
them.
Service. As our target market needs more service, our competitors are less likely than
ever to provide it. Their business model doesn't include service, just selling the
computers.
Emerging Technologies. The rate of new product introduction in IT presents an
opportunity to be explored.

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I Tech Solutions

3.2.4 Threats

Innovation shortens life cycles and hence the need to act timeously on the market. This
will recoup new service introductions in a shorter time frame.
Concerns of decision-makers over ease of access and overall security of electronic
transactions may need to be addressed. The recent glitch of the Barclays electronic
system, which enabled some clients to access other account holders' accounts while
upgrading the system, proves the very realistic security concerns regarding the use of
the Internet.
The slow adoption rate of new technologies and products in these parts of the world
does not bode well for our intended products and services.

3.3 Technology

I Tech Solutions will strive to maintain the latest hardware and software capabilities so as to
ensure we are continuously at the forefront in our market arena. The one certainty in our
industry is that technology will continue to evolve and develop, changing what we market, as
well as how we market it. Our aim is to be aware of the implications of this new technology,
and utilize it in our existing framework where possible. Complete presentation facilities for
preparation and delivery of multimedia presentations on Macintosh or Windows machines, in
formats that include on-disk presentation or video presentation are also possibilities.

3.4 Macro-environment

Our macro-environment is exciting. We are in the middle of an unprecedented boom in


connectivity and communications, as the Internet offers information technology like we never
dreamed of. We are concerned with real value, real changes in the way we deal with
information.

Meanwhile, all other signs are positive. The current drive by the government towards a more
diversified economy presents an opportunity for our business to propel and excel in our
intended markets, benefitting from the support of the concerned institutions and trade bodies.
In addition to Botswana becoming an increasing economic hub, we foresee the demand for
high quality business communication solutions to be on the rise. Through the undertaking of
our business activities, we foresee no difficulty, in gaining market acceptance, provided we
deliver the final service timeously, of good quality, and at competitive rates.

3.5 Future Products and Services

We must remain on top of any new technology, because this is our bread and butter. For
networking, we need to provide better knowledge of cross platform technologies. Also, we will
be under pressure to improve our understanding of direct-connect Internet and related
communications.

In putting the company together, we have attempted to offer enough services to allow us to
always be in demand by our clients. However, technological developments have provided us
with a new era of opportunities for the various organizations in which we can only guess at the
needs. For example, current rapid innovations/development of Wireless Application Protocol
(WAP) technology presents an opportunity to be realized, particularly focusing on WAP-enabled
cell phones that allow individuals to access or send email messages on a cell phone. However,

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I Tech Solutions
the most important factor in developing future services will be market need. Our
understanding of the needs of our target market segments will be one of our competitive
advantages.

4.0 Market Analysis Summary

The current drive and emphasis by the government on diversification of the industrial base
away from the minerals sector presents an opportunity for I Tech Solutions to make a valuable
contribution towards achieving this goal. This will result in the implementation of modern
Information Technology (IT) services and techniques, transfer of knowledge, and availability of
quality brands.

4.1 Market Segmentation

We will be focusing on proactive, market seeking organizations that want to ensure an efficient
and effective IT system that will assist in the realization of their business objectives.

Our target companies are large enough to require the high-quality IT management we offer,
but too small to have a separate computer management staff. However, our most important
group of potential customers will be business executives in large, medium, and small
corporations. These are marketing managers, general managers, sales managers, and other
decision makers who often need to access company data and information in their various
business decisions. They will not waste their time or money looking for bargain information,
questionable expertise, or cheap computers and accessories. Our potential clients will include: (
discussion omitted).

Another intention will be to offer an attractive development alternative to the company that is
management constrained and unable to address opportunities in new markets and new market
segments, due to technological shortfalls.

Market Analysis (Pie)

SOHO Executives
Government Institutions
Financial Institutions
Corporations
Professional Firms
Other

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I Tech Solutions

Table: Market Analysis

Market Analysis
Potential Customers Growth 2000 2001 2002 2003 2004 CAGR
SOHO Executives 3% 100 103 106 109 112 2.87%
Government Institutions 12% 800 896 1,004 1,124 1,259 12.00%
Financial Institutions 17% 50 59 69 81 95 17.41%
Corporations 22% 3,000 3,660 4,465 5,447 6,645 22.00%
Professional Firms 3% 400 412 424 437 450 2.99%
Other 4% 200 208 216 225 234 4.00%
Total 17.91% 4,550 5,338 6,284 7,423 8,795 17.91%

4.2 Target Market Segment Strategy

Our marketing strategy will be based mainly on making the right service(s) available to the
right target customer. We will ensure that our products and services' prices take customers'
budgets into consideration, and that these people appreciate the product/service and know
that it exists, including where to find it. One of our intentions will be to target those innovative
or proactive companies contemplating transferring a part of their marketing activities on the
Internet, in order to benefit from the advantages offered by this unique system of
communication. We realize the need to focus our marketing message and our service
offerings.

4.2.1 Market Needs

Since our target market is the product and service seeker, the most important market needs
are support, service, training, and installation, in that order. One of the key points of our
strategy will be the focus on target segments that know and understand these needs and are
willing to pay to have them filled. We realize that all personal computer users need support
and service. Many of our target customers are going to be those who cannot get good
products or services from the major vendors who focus on high volume orders only.

Our target businesses are dependent on reliable information technology. They use the
computers for a complete range of functions, beginning with the core administration
information such as accounting and record entry, communications, and personal productivity.
They are not, however, large enough to have dedicated computer personnel such as the
Management Information System (MIS) departments in large businesses.

4.2.2 Market Trends

The most obvious trend in the market is the increasing number of IT firms on the market. This
has been true for years, but the trend seems to be accelerating. We see the major brand-
name manufacturers being established on the market mainly through agents. Secondly, the
computer has become a basic necessity in the office environment and business set-up. The
vast improvements in computer power and storage, means that owners are mandated to up-
grade or buy new and improved systems, with the former often being much cheaper. A third
trend is ever-greater connectivity. Everybody wants to be on the Internet, and every office is
looking at having a LAN. However, the major stumbling block for the majority of theses
companies is the high cost of installing such networks.

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I Tech Solutions

4.3 Industry Analysis

The following sections provided discussions on who participates in the computer industry, what
the competition provides, and what the customer has been purchasing.

4.3.1 Industry Participants

We are part of the computer reselling business, which includes several kinds of businesses:

1. Computer Dealers: Storefront computer resellers usually offer a minimum of


software, and very little, if any service and support. They are concerned with moving
as much stock as possible. Their prices are usually higher than the larger stores.

2. Chain and Computer Stores: They often occupy a large area of space, decent walk-
in service, and are often warehouse-like locations where people go to find products in
boxes. They often however charge exorbitant prices for their brand products and
maintenance service, if they provide any at all.

3. Computer Consultants: These include consultancy companies that mainly specialize


in the installation of new systems. Their consultant fees are often very high, especially
for small- to medium-sized companies.

4.3.2 Competition and Buying Patterns

The vast majority of proactive, market-oriented businesses understand the value of having an
efficient computer system, as well as the concept of service and support. They are much more
likely to pay for them when the offering and benefits are clearly stated.

There is no doubt that we will compete more against the box pushers than other service
providers. We need to effectively compete against the idea that once a computer is out-dated
businesses should buy new ones, when with ongoing service and support, they can be
upgraded.

The most important element of general competition, by far, is what it takes to keep clients for
repeat business. It is worth making huge concessions in any single service to maintain a client
relationship that brings the client back for future services.

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I Tech Solutions

5.0 Strategy and Implementation Summary

I Tech Solutions intends to win and maintain customers by providing products and services
that add value, safety, and are supported by a well-trained professional team with commercial
expertise. This is important to the successful implementation of our overall strategy and the
need to ensure that all divisions and functions in the organization are working harmoniously
towards attainment of the goals and objectives.

Our marketing strategy emphasizes focus. The target customers will include key decision-
makers in business, who often order or recommend on behalf of the whole organization, the
aim being to obtain an initial order and fully satisfy the customer from then on.

We intend to initially build image and awareness through consistency and


distinctiveness in our product and service provision.

We intend to focus on delivering quality products and services that produce good
referrals, which can then generate revenue. We intend to have a heavy personal selling
component, supported by regular advertising we will always be active in our personal
relationships with clients and strategic allies, keeping abreast of their needs and wants.

We are focusing advertising on several key media.

We intend to achieve growth by creating a more enthusiastic customer culture than that of our
competitors. The strategy is to grow the business by nurturing customers, differentiating the
product/service offering through service and staff behavior.

Through the implementation of a fair, effective, and competitive remuneration policy we intend
to optimize our human resource output and advancement. We need the right people in the
right place at the right time if we are to ensure optimum growth. We intend to develop our
team so that our people can grow as the company grows--a mutually beneficial relationship.

5.1 Competitive Advantage

Our competitive edge is our positioning as a strategic ally with our clients, who are clients
more than customers. By building a business based on long-standing relationships with
satisfied clients, we will simultaneously build defenses against competition. The longer the
relationship stands, the more we help our clients understand what we offer them and why they
need it. The delivery of whole, end-to-end solutions will have a significant impact on gaining
commitment from the market at all levels. The company believes in partnering with its
customers so as to provide customized solutions that are needs-based.

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I Tech Solutions

5.2 Marketing Strategy

One core element of our marketing strategy will be that of differentiation from our
competitors. In terms of promotion, we intend to sell our company as a strategic ally, not just
our products. We intend to offer extremely reasonable prices in comparison to competition,
and we need to be able to sustain that. Market penetration through lower prices shall be
undertaken where need be, while premium pricing in the case of the upper-end of the market.

We have developed two strategy foci, each based on one main fundamental strategy. The first
strategy is about (discussion omitted).

Our second strategic focus, that of (discussion omitted).

5.2.1 Positioning

I Tech Solutions will position itself as a reliable solutions provider and trusted strategic ally
who makes sure systems work, people are comfortable and conversant with the system, and
down time is minimal. Unlike the other vendors/retail stores, we intend to know the customer
and go to his or her site when needed, offering proactive support, service, training, and
installation. In addition, I Tech Solutions is an ally to our clients' businesses, and offers them a
full range of services, from installation to support.

5.2.2 Pricing Strategy

We must charge appropriately for the high-end, high-quality service and support we offer. Our
revenue structure has to match our cost structure, so the salaries we pay to assure good
service and support must be balanced by the revenue we charge. Therefore, we must make
sure that we deliver and charge for service and support. Training, service, installation, and
networking support--all of this must be readily available and priced to sell and deliver revenue.
We will charge (discussion omitted). This will ensure we penetrate the market upon entry.

5.2.3 Promotion Strategy

Our promotion strategy will be based primarily on informing potential customers of our
existence and making the right information available to our target customer. I Tech Solutions
intends to utilize an aggressive promotional campaign to introduce its products and services to
the market. The intention will be to take advantage of several media sources in announcing
the products and services and in the process enforcing awareness of our existence.

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I Tech Solutions

5.2.4 Distribution Strategy

Service provision and consulting will be sold and purchased mainly on a word-of-mouth basis,
with relationships and previous experience being, by far, the most important factor. In this
regard we intend to provide a service that exceeds customer expectations so as to ensure they
refer us to potential clients through word-of-mouth. New business shall be developed through
industry associations, business associations, and, in some cases, social associations, such as
country clubs.

5.2.5 Marketing Programs

Advertising

In view of the fact that we are new on the market, we intend to undertake extensive
advertising of our name and products and services we offer. This is to instill awareness and
knowledge of our existence in the marketplace, which shall convert into market share. We
intend to advertise in business and IT magazines that are read by our target market and will
ensure we are adequately exposed on the market. A constant lookout will be made of any
special editions in these various publications, which may provide an opportunity for us to
advertise our services and ourselves. Advertising will also be conducted through television,
radio, newspapers/magazines, and the Internet. Sponsoring a technology discussion/call-in
talk show is a possibility.

Personal Selling

Word of mouth is critical in this segment. We will have to make sure that once we gain a
customer, we never lose him/her. To help accomplish this, we must work to establish and
maintain relationships. Personal selling will be a powerful form of promotion due to the fact
that its flexibility will enable us to match the customer's needs to specific attributes of our
services, as well as giving concise details of what we are able to offer.

Public Relations

Recognizing that we are relatively new on the market, there will be a need to organize an
event introducing ourselves onto the market. To this we will invite potential customers, senior
officials, possibly including a government minister and other stakeholders, so as to penetrate
the market. In collaboration with this we, also intend to place news stories and features in
magazines and newspapers to keep stakeholders updated on the latest developments and to
increase awareness.

Events

The number of IT companies on the market dictates that the organization needs to promote
itself through participation in trade shows and expositions. Not only will these increase
awareness of our products and services, but if a particular product or service were to gain
recognition, for example through being chosen No. 1 in innovativeness, the organization will be
able to take advantage of this in all its promotional campaigns, adding leverage to its
reputation and corporate image. An example of a trade show we intend to participate at is
BITEC. These expositions will also be a good opportunity for us to network with various
organizations and individuals.

Internet Marketing

The company will sell its services over the Internet as it is cost effective to reach a large

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I Tech Solutions
number of potential clients, regionally and internationally. We also realize that customer/client
research is needed before building an effective website, something which is rarely done by
existing companies, in order to find out how customers will want to access information and
journey through the site.

5.3 Sales Strategy

The sales forecast monthly summary is included in the appendix. The annual sales projections
are provided in a table below. It should be noted that as we become established and known on
the market we project sales to increase at a faster rate than the initial year.

Note: All currency values in the charts and tables are expressed in the Botswana Pula (P).

Sales Monthly (Planned)

180,000

160,000

140,000

120,000

100,000
Products/Services
80,000 Other
60,000

40,000

20,000

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

Table: Sales Forecast (Planned)

Sales Forecast
Sales 2001 2002 2003
Products/Services 1,422,225 2,528,400 3,034,080
Other 0 0 0
Total Sales 1,422,225 2,528,400 3,034,080

Direct Cost of Sales 2001 2002 2003


Products/Services 711,114 1,264,200 1,517,040
Other 0 0 0
Subtotal Direct Cost of Sales 711,114 1,264,200 1,517,040

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I Tech Solutions

5.4 Strategic Alliances

I Tech Solutions intends to go into strategic alliances with several organizations. This will also
reassure our customers that they are investing in "winning" products, technology, and service
that are maintainable, flexible, and scalable enough to meet future demands.

At this writing, strategic alliances with several companies are possibilities, including X, given
the content of existing interest and discussions. By going into strategic partnerships with
suitable organizations, we will benefit from being able to concentrate on our core activities in
the delivery of our products and services to the end-user, while ensuring that we do not have
to compromise on quality of execution or the number of products and services we are able to
deliver.

6.0 Human Resources Summary

The human resources element shall be an essential component in the delivery of the total
service. By having enthusiastic, capable, and empowered people interacting with our clients,
we intend to build the competitive advantage of being able to comprehensively meet our
clients' needs. We also intend to give our teams enough leverage in decision-making to ensure
that clients are handled promptly and to reduce lead-time in actual delivery of the service. It
will be necessary to evaluate jobs and remuneration packages against market benchmarks to
employees for their tasks to ensure they are competitive.

6.1 Organizational Structure

Our management philosophy is based on responsibility and mutual respect. We recognize the
need to be constantly changing so as to adapt to the prevailing environment. We will have a
flexible structure allowing for the above to be undertaken swiftly and smoothly. Please find
below the job titles and descriptions we intend to have in place for the key personnel. (table
omitted)

6.2 Management Team

In a highly volatile industry with increasing competition, we recognize the need to be


constantly changing to adapt to the prevailing environment. The management team extensive
expertise and a broad knowledge of the products/services and markets, which, if well planned,
will enable the business to realize its goals and objectives.

(profiles omitted)

The management style will reflect the participation of the shareholders. The company will
respect its community and treat all employees well. We will develop and nurture the company
as a community. We will not be hierarchical, especially considering the rate of change in our
industry, which makes it mandatory for us to be highly flexible. Management's ongoing
initiatives to drive sales, market share and productivity will provide additional impetus.

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I Tech Solutions

6.3 Personnel Plan

The detailed monthly personnel plan for the first three years is included in the appendix. The
annual personnel estimates are included here. We believe this plan is a fair compromise
between fairness and expedience, and meets the commitments of our mission statement. We
want the company to stay lean and flexible so that we can respond to our markets' needs
quickly. As we expand and increase in size we do expect to increase our personnel.

We will compensate our personnel well, so as to retain their invaluable expertise and ensure
job satisfaction and enrichment through delegation of authority. Our compensation will include
health care, generous profit sharing, and a minimum of 3 weeks vacation.

Note: All currency values in the charts and tables are expressed in the Botswana Pula (P).

Table: Personnel (Planned)

Personnel Plan
2001 2002 2003
Directors 135,000 180,000 216,000
Personal Assistant 10,800 13,200 14,520
Cleaner 3,600 6,000 7,200
Total Payroll 149,400 199,200 237,720

Total Headcount 5 5 5
Payroll Burden 0 0 0
Total Payroll Expenditures 149,400 199,200 237,720

6.4 Training

In-house training shall be continuous with regular external training being undertaken,
particularly following any new developments in the market. This is to ensure that we are
continuously able to anticipate our markets needs--a proactive approach, which is so essential
if we are to gain and maintain a competitive advantage. External training will also be
conducted to ensure we are aware of the latest products and technology. This will also ensure
that our personnel are able to set high standards, or benchmark, using these organizations
standards.

6.5 Feedback and Control

(a) We will encourage our employees to put forward any suggestions they might have
regarding the improvement of any of the company's functions--an open door philosophy. Such
a culture will enhance innovativeness and creativity in turn leading to job satisfaction and
enrichment.

(b) We undertake to continuously formalize and measure cross-functional working


communication so as to ensure that the various departments work harmoniously towards
attainment of corporate objectives

(c) Important notices and developments will be continuously communicated to employees so


as to keep them abreast of developments and promoting a sense of belonging and oneness in
the organization.

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I Tech Solutions

7.0 Financial Plan

We want to finance growth mainly through cash flow and equity. We recognize that this means
we will have to grow more slowly than we might like. The most important factor in our case is
collection days. We can't push our clients hard on collection days, because they are in larger
companies and will normally have marketing authority, not financial authority. Therefore we
need to develop a permanent system of receivables financing, using one of the established
accounting systems. In turn we intend to ensure that our investors are compatible with our
growth plan, management style, and vision. Compatibility in this regard means:

1. A fundamental respect for giving our customers value, and for maintaining a healthy
and congenial workplace
2. Respect for realistic forecasts, conservative cash flow, and financial management
3. Cash flow as first priority, growth second, profits third
4. Willingness to follow the project objectives and contribute valuable input to strategy
and implementation decisions.

Of these, only the last 2 are flexible.

7.1 Important Assumptions

The financial plan depends on important assumptions. From the beginning, we recognize that
collection days are critical, but not a factor we can influence easily. Interest rates, tax rates,
and personnel burden are based on conservative assumptions.

Some of the more important underlying assumptions are:

We assume a strong economy, without major recession.


We assume that there are no unforeseen changes in economic policy to make our
products and service immediately obsolete.

Others include 30-day average collection days, sales entirely on invoice basis, including a
favorable deposit policy, expenses mainly on a net 30-day basis, 30 days on average for
payment of invoices, and present-day interest rates.

Table: General Assumptions

General Assumptions
2001 2002 2003
Short-term Interest Rate % 17.00% 17.00% 17.00%
Long-term Interest Rate % 17.00% 17.00% 17.00%
Tax Rate % 25.00% 25.00% 25.00%
Expenses in Cash % 10.00% 10.00% 10.00%
Sales on Credit % 70.00% 70.00% 70.00%
Personnel Burden % 0.00% 0.00% 0.00%

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I Tech Solutions

7.2 Key Financial Indicators

We foresee major growth in sales and operating expenses, and a bump in our collection days
as we spread the business during expansion.

Collection days are very important. We do not want to let our average collection days get
above 30 under any circumstances. This could cause a serious problem with cash flow,
because our working capital situation is chronically tight. However, we recognize that we
cannot control this factor easily, because of the relationship with our clients.

Benchmarks (Planned)

2
2000
2001
1 2002

0
Sales Gross OpEx AR Est. Turns Est.

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I Tech Solutions

7.3 Break-even Analysis

The following table summarizes our Break-even Analysis. With fixed costs of approximately
P20,000 per month at the outset (a bare minimum), we need to bill just under P24,000 to
cover our costs. We don't really expect to reach break-even until several months into the
business operation, as illustrated in the financials.

Note: All currency values in the charts and tables are expressed in the Botswana Pula (P).

Break-even Analysis

10,000

5,000

(5,000)

(10,000)

(15,000)

(20,000)
0 5,580 11,160 16,740 22,320 27,900

Monthly break-even point

Break-even point = where line intersects with 0

Table: Break-even Analysis

Break-even Analysis:
Monthly Units Break-even 832
Monthly Sales Break-even 23,221

Assumptions:
Average Per-Unit Revenue 27.90
Average Per-Unit Variable Cost 3.87
Estimated Monthly Fixed Cost 20,000

7.4 Revenue Generation

I Tech Solutions will receive its revenue streams from a combination of licensing agreements,
sales commissions, monthly subscriptions, registration fees, network access charges, service
fees, transaction charges, training, promotional incentive programs, and sales of hardware and
software. The derived value of I Tech Solutions will come from the key partnerships
established and developed in order to deliver a product and service provision of transactionally-
based activities, providing opportunity to build brand and loyalty, around which relationship
marketing will play a key role.

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I Tech Solutions

7.5 Expense Forecast

Initial marketing and training expenses will be relatively high as we seek to become known on
the market and staff get trained in provision of our services. This will be brought about by the
development of sales literature, advertising expenses, and function expenses. As our market
share increases and capital is generated, further marketing programs and the expansion of
those in existence at the time will be undertaken, to ensure market development. However,
with time, these programs will start generating revenue for the business, which we shall
reinvest.

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I Tech Solutions

7.6 Projected Profit and Loss

Our projected Profit and Loss is shown in the appendix, with sales increasing from more than
P1,422,225 the first year to more than P2,528,400 the second, and P3,034,080 in the third
year. We do expect to more than break-even in the first year of operation. Our cost of sales
should be much lower, and gross margin higher, than in this projection.

Note: All currency values in the charts and tables are expressed in the Botswana Pula (P).

Table: Profit and Loss (Planned)

Pro Forma Profit and Loss


2001 2002 2003
Sales 1,422,225 2,528,400 3,034,080
Direct Cost of Sales 711,114 1,264,200 1,517,040
Other 0 0 0
------------ ------------ ------------
Total Cost of Sales 711,114 1,264,200 1,517,040
Gross Margin 711,111 1,264,200 1,517,040
Gross Margin % 50.00% 50.00% 50.00%
Operating Expenses:
Advertising/Promotion 13,800 10,560 11,616
General & Administrative 3,600 3,960 4,356
Travel 6,000 6,600 7,260
Miscellaneous 1,800 1,980 2,178
Payroll Expense 149,400 199,200 237,720
Payroll Burden 0 0 0
Leased Equipment 0 0 0
Utilities 3,600 3,960 4,356
Telephone 6,000 6,600 7,260
Insurance 14,400 15,840 17,424
Rent 16,800 18,480 20,328
Depreciation 0 0 0
Outsourced personnel 66,372 126,420 151,704
Bank Charges 1,800 1,980 2,178
Maintenance 2,400 2,640 2,904
------------ ------------ ------------
Total Operating Expenses 285,972 398,220 469,284
Profit Before Interest and Taxes 425,139 865,980 1,047,756
Interest Expense Short-term 0 0 0
Interest Expense Long-term 102,000 102,000 102,000
Taxes Incurred 80,785 190,995 236,439
Extraordinary Items 0 0 0
Net Profit 242,354 572,985 709,317
Net Profit/Sales 17.04% 22.66% 23.38%

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I Tech Solutions

7.7 Projected Cash Flow

The chart and table below present the cash flow projections for I Tech Solutions.

Note: All currency values in the charts and tables are expressed in the Botswana Pula (P).

Cash (Planned)

500,000

400,000

300,000

200,000
Net Cash Flow
100,000 Cash Balance

(100,000)

(200,000)
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct

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I Tech Solutions

Table: Cash Flow (Planned)

Pro Forma Cash Flow 2001 2002 2003

Cash Received
Cash from Operations:
Cash Sales 426,668 758,520 910,224
From Receivables 881,499 1,681,167 2,083,302
Subtotal Cash from Operations 1,308,166 2,439,687 2,993,526

Additional Cash Received


Extraordinary Items 0 0 0
Sales Tax, VAT, HST/GST Received 0 0 0
New Current Borrowing 0 0 0
New Other Liabilities (interest-free) 0 0 0
New Long-term Liabilities 0 0 0
Sales of other Short-term Assets 0 0 0
Sales of Long-term Assets 0 0 0
Capital Input 0 0 0
Subtotal Cash Received 1,308,166 2,439,687 2,993,526

Expenditures 2001 2002 2003


Expenditures from Operations:
Cash Spent on Costs and Expenses 158,023 188,732 214,698
Wages, Salaries, Payroll Taxes, etc. 149,400 199,200 237,720
Payment of Accounts Payable 1,302,042 1,675,233 1,912,533
Subtotal Spent on Operations 1,609,465 2,063,165 2,364,950

Additional Cash Spent


Sales Tax, VAT, HST/GST Paid Out 0 0 0
Principal Repayment of Current Borrowing 0 0 0
Other Liabilities Principal Repayment 0 0 0
Long-term Liabilities Principal Repayment 0 0 0
Purchase Other Short-term Assets 141,200 0 0
Purchase Long-term Assets 240,000 0 0
Dividends 0 0 0
Adjustment for Assets Purchased on Credit (381,200) 0 0
Subtotal Cash Spent 1,609,465 2,063,165 2,364,950

Net Cash Flow (301,299) 376,523 628,576


Cash Balance 190,952 567,474 1,196,050

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I Tech Solutions

7.8 Projected Balance Sheet

The balance sheet shows healthy growth of net worth, and strong financial position. The three-
year estimates are included in the appendix.

Note: All currency values in the charts and tables are expressed in the Botswana Pula (P).

Table: Balance Sheet (Planned)

Pro Forma Balance Sheet

Assets
Short-term Assets 2001 2002 2003
Cash 190,952 567,474 1,196,050
Accounts Receivable 114,059 202,771 243,326
Inventory 168,560 299,662 359,594
Other Short-term Assets 141,200 141,200 141,200
Total Short-term Assets 614,771 1,211,107 1,940,169
Long-term Assets
Long-term Assets 240,000 240,000 240,000
Accumulated Depreciation 0 0 0
Total Long-term Assets 240,000 240,000 240,000
Total Assets 854,771 1,451,107 2,180,169

Liabilities and Capital


2001 2002 2003
Accounts Payable 120,165 143,517 163,262
Current Borrowing 0 0 0
Other Short-term Liabilities 0 0 0
Subtotal Short-term Liabilities 120,165 143,517 163,262

Long-term Liabilities 600,000 600,000 600,000


Total Liabilities 720,165 743,517 763,262

Paid-in Capital 100,000 100,000 100,000


Retained Earnings (207,749) 34,605 607,590
Earnings 242,354 572,985 709,317
Total Capital 134,605 707,590 1,416,907
Total Liabilities and Capital 854,771 1,451,107 2,180,169
Net Worth 134,605 707,590 1,416,907

7.9 Business Ratios

The following table shows important ratios from the computer related services industry, as
determined by the Standard Industry Classification (SIC) Index #7379, Computer Related
Services.

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I Tech Solutions

Table: Ratios (Planned)

Ratio Analysis
2000 2001 2002 Industry Profile
Sales Growth 0.00% 77.78% 20.00% 7.20%

Percent of Total Assets


Accounts Receivable 13.34% 13.97% 11.16% 21.70%
Inventory 19.72% 20.65% 16.49% 3.50%
Other Short-term Assets 16.52% 9.73% 6.48% 46.70%
Total Short-term Assets 71.92% 83.46% 88.99% 71.90%
Long-term Assets 28.08% 16.54% 11.01% 28.10%
Total Assets 100.00% 100.00% 100.00% 100.00%

Other Short-term Liabilities 0.00% 0.00% 0.00% 51.40%


Subtotal Short-term Liabilities 14.06% 9.89% 7.49% 41.00%
Long-term Liabilities 70.19% 41.35% 27.52% 19.10%
Total Liabilities 84.25% 51.24% 35.01% 60.10%
Net Worth 15.75% 48.76% 64.99% 39.90%

Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 50.00% 50.00% 50.00% 0.00%
Selling, General & Administrative Expenses 32.96% 27.34% 26.62% 80.70%
Advertising Expenses 0.97% 0.42% 0.38% 1.20%
Profit Before Interest and Taxes 29.89% 34.25% 34.53% 1.70%

Main Ratios
Current 5.12 8.44 11.88 1.27
Quick 3.71 6.35 9.68 1.01
Total Debt to Total Assets 84.25% 51.24% 35.01% 70.50%
Pre-tax Return on Net Worth 391.62% 136.80% 81.15% 3.50%
Pre-tax Return on Assets 61.67% 66.71% 52.74% 11.80%

Business Vitality Profile 2000 2001 2002 Industry


Sales per Employee 284,445 505,680 606,816 0
Survival Rate 0.00%

Additional Ratios 2000 2001 2002


Net Profit Margin 17.04% 22.66% 23.38% n.a
Return on Equity 180.05% 80.98% 50.06% n.a

Activity Ratios
Accounts Receivable Turnover 8.73 8.73 8.73 n.a
Collection Days 21 33 38 n.a
Inventory Turnover 8.44 5.40 4.60 n.a
Accounts Payable Turnover 11.84 11.84 11.84 n.a
Total Asset Turnover 1.66 1.74 1.39 n.a

Debt Ratios
Debt to Net Worth 5.35 1.05 0.54 n.a
Short-term Liab. to Liab. 0.17 0.19 0.21 n.a

Liquidity Ratios
Net Working Capital 494,605 1,067,590 1,776,907 n.a
Interest Coverage 4.17 8.49 10.27 n.a

Additional Ratios
Assets to Sales 0.60 0.57 0.72 n.a
Current Debt/Total Assets 14% 10% 7% n.a
Acid Test 2.76 4.94 8.19 n.a
Sales/Net Worth 10.57 3.57 2.14 n.a
Dividend Payout 0 0.00 0.00 n.a

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I Tech Solutions

8.0 Contingency Planning

1. We intend to watch our results very carefully. We may need to concentrate less on
certain products and services than others, if we intend to get the margin up or clients
become difficult to attract. We might be able to avoid straight competition with the
major IT companies by focusing more on our prime services.

2. Another possibility is the introduction of a company or several companies in our niche.


The need to undertake aggressive marketing, networking, and delivering a value-added
service in our organization is a fundamental one.

Page 27
Appendix

Appendix Table: Sales Forecast (Planned)

Sales Forecast
Sales Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Products/Services 31,605 31,605 31,605 105,350 105,350 105,350 168,560 168,560 168,560 168,560 168,560 168,560
Other 0 0 0 0 0 0 0 0 0 0 0 0
Total Sales 31,605 31,605 31,605 105,350 105,350 105,350 168,560 168,560 168,560 168,560 168,560 168,560

Direct Cost of Sales Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Products/Services 15,803 15,803 15,803 52,675 52,675 52,675 84,280 84,280 84,280 84,280 84,280 84,280
Other 0 0 0 0 0 0 0 0 0 0 0 0
Subtotal Direct Cost of Sales 15,803 15,803 15,803 52,675 52,675 52,675 84,280 84,280 84,280 84,280 84,280 84,280

Page 1
Appendix

Appendix Table: Personnel (Planned)

Personnel Plan
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Directors 7,500 7,500 7,500 7,500 7,500 7,500 15,000 15,000 15,000 15,000 15,000 15,000
Personal Assistant 900 900 900 900 900 900 900 900 900 900 900 900
Cleaner 300 300 300 300 300 300 300 300 300 300 300 300
Total Payroll 8,700 8,700 8,700 8,700 8,700 8,700 16,200 16,200 16,200 16,200 16,200 16,200

Total Headcount 5 5 5 5 5 5 5 5 5 5 5 5
Payroll Burden 0 0 0 0 0 0 0 0 0 0 0 0
Total Payroll Expenditures 8,700 8,700 8,700 8,700 8,700 8,700 16,200 16,200 16,200 16,200 16,200 16,200

Page 2
Appendix

Appendix Table: General Assumptions

General Assumptions
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Short-term Interest Rate % 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00%
Long-term Interest Rate % 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00%
Tax Rate % 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00%
Expenses in Cash % 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Sales on Credit % 70.00% 70.00% 70.00% 70.00% 70.00% 70.00% 70.00% 70.00% 70.00% 70.00% 70.00% 70.00%
Personnel Burden % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

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Appendix

Appendix Table: Profit and Loss (Planned)

Pro Forma Profit and Loss


Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Sales 31,605 31,605 31,605 105,350 105,350 105,350 168,560 168,560 168,560 168,560 168,560 168,560
Direct Cost of Sales 15,803 15,803 15,803 52,675 52,675 52,675 84,280 84,280 84,280 84,280 84,280 84,280
Other 0 0 0 0 0 0 0 0 0 0 0 0
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Cost of Sales 15,803 15,803 15,803 52,675 52,675 52,675 84,280 84,280 84,280 84,280 84,280 84,280
Gross Margin 15,802 15,802 15,802 52,675 52,675 52,675 84,280 84,280 84,280 84,280 84,280 84,280
Gross Margin % 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00%
Operating Expenses:
Advertising/Promotion 5,000 800 800 800 800 800 800 800 800 800 800 800
General & Administrative 300 300 300 300 300 300 300 300 300 300 300 300
Travel 500 500 500 500 500 500 500 500 500 500 500 500
Miscellaneous 150 150 150 150 150 150 150 150 150 150 150 150
Payroll Expense 8,700 8,700 8,700 8,700 8,700 8,700 16,200 16,200 16,200 16,200 16,200 16,200
Payroll Burden 0 0 0 0 0 0 0 0 0 0 0 0
Leased Equipment 0 0 0 0 0 0 0 0 0 0 0 0
Utilities 300 300 300 300 300 300 300 300 300 300 300 300
Telephone 500 500 500 500 500 500 500 500 500 500 500 500
Insurance 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200
Rent 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400
Depreciation 0 0 0 0 0 0 0 0 0 0 0 0
Outsourced personnel 0 0 0 5,268 5,268 5,268 8,428 8,428 8,428 8,428 8,428 8,428
Bank Charges 150 150 150 150 150 150 150 150 150 150 150 150
Maintenance 200 200 200 200 200 200 200 200 200 200 200 200
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Operating Expenses 18,400 14,200 14,200 19,468 19,468 19,468 30,128 30,128 30,128 30,128 30,128 30,128
Profit Before Interest and Taxes (2,598) 1,602 1,602 33,207 33,207 33,207 54,152 54,152 54,152 54,152 54,152 54,152
Interest Expense Short-term 0 0 0 0 0 0 0 0 0 0 0 0
Interest Expense Long-term 8,500 8,500 8,500 8,500 8,500 8,500 8,500 8,500 8,500 8,500 8,500 8,500
Taxes Incurred (2,775) (1,725) (1,725) 6,177 6,177 6,177 11,413 11,413 11,413 11,413 11,413 11,413
Extraordinary Items 0 0 0 0 0 0 0 0 0 0 0 0
Net Profit (8,324) (5,174) (5,174) 18,530 18,530 18,530 34,239 34,239 34,239 34,239 34,239 34,239
Net Profit/Sales -26.34% -16.37% -16.37% 17.59% 17.59% 17.59% 20.31% 20.31% 20.31% 20.31% 20.31% 20.31%

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Appendix

Appendix Table: Cash Flow (Planned)

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

Cash Received
Cash from Operations:
Cash Sales 9,482 9,482 9,482 31,605 31,605 31,605 50,568 50,568 50,568 50,568 50,568 50,568
From Receivables 737 22,124 22,124 23,844 73,745 73,745 75,220 117,992 117,992 117,992 117,992 117,992
Subtotal Cash from Operations 10,219 31,605 31,605 55,449 105,350 105,350 125,788 168,560 168,560 168,560 168,560 168,560

Additional Cash Received


Extraordinary Items 0 0 0 0 0 0 0 0 0 0 0 0
Sales Tax, VAT, HST/GST Received 0.00% 0 0 0 0 0 0 0 0 0 0 0 0
New Current Borrowing 0 0 0 0 0 0 0 0 0 0 0 0
New Other Liabilities (interest-free) 0 0 0 0 0 0 0 0 0 0 0 0
New Long-term Liabilities 0 0 0 0 0 0 0 0 0 0 0 0
Sales of other Short-term Assets 0 0 0 0 0 0 0 0 0 0 0 0
Sales of Long-term Assets 0 0 0 0 0 0 0 0 0 0 0 0
Capital Input 0 0 0 0 0 0 0 0 0 0 0 0
Subtotal Cash Received 10,219 31,605 31,605 55,449 105,350 105,350 125,788 168,560 168,560 168,560 168,560 168,560

Expenditures Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Expenditures from Operations:
Cash Spent on Costs and Expenses 8,283 4,808 18,928 17,186 9,812 9,812 20,133 13,812 13,812 13,812 13,812 13,812
Wages, Salaries, Payroll Taxes, etc. 8,700 8,700 8,700 8,700 8,700 8,700 16,200 16,200 16,200 16,200 16,200 16,200
Payment of Accounts Payable 2,485 73,508 47,507 169,828 152,465 88,308 91,404 179,302 124,309 124,309 124,309 124,309
Subtotal Spent on Operations 19,468 87,016 75,135 195,715 170,977 106,820 127,737 209,314 154,321 154,321 154,321 154,321

Additional Cash Spent


Sales Tax, VAT, HST/GST Paid Out 0 0 0 0 0 0 0 0 0 0 0 0
Principal Repayment of Current Borrowing 0 0 0 0 0 0 0 0 0 0 0 0
Other Liabilities Principal Repayment 0 0 0 0 0 0 0 0 0 0 0 0
Long-term Liabilities Principal Repayment 0 0 0 0 0 0 0 0 0 0 0 0
Purchase Other Short-term Assets 0 0 141,200 0 0 0 0 0 0 0 0 0
Purchase Long-term Assets 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
Dividends 0 0 0 0 0 0 0 0 0 0 0 0
Adjustment for Assets Purchased on Credit (20,000) (20,000) (161,200) (20,000) (20,000) (20,000) (20,000) (20,000) (20,000) (20,000) (20,000) (20,000)
Subtotal Cash Spent 19,468 87,016 75,135 195,715 170,977 106,820 127,737 209,314 154,321 154,321 154,321 154,321

Net Cash Flow (9,250) (55,411) (43,530) (140,265) (65,627) (1,470) (1,949) (40,754) 14,239 14,239 14,239 14,239
Cash Balance 483,001 427,590 384,061 243,795 178,168 176,699 174,749 133,996 148,235 162,474 176,713 190,952

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Appendix

Appendix Table: Balance Sheet (Planned)

Pro Forma Balance Sheet

Assets
Short-term Assets Starting Balances Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Cash 492,251 483,001 427,590 384,061 243,795 178,168 176,699 174,749 133,996 148,235 162,474 176,713 190,952
Accounts Receivable 0 21,386 21,386 21,386 71,287 71,287 71,287 114,059 114,059 114,059 114,059 114,059 114,059
Inventory 0 31,606 31,606 31,606 105,350 105,350 105,350 168,560 168,560 168,560 168,560 168,560 168,560
Other Short-term Assets 0 0 0 141,200 141,200 141,200 141,200 141,200 141,200 141,200 141,200 141,200 141,200
Total Short-term Assets 492,251 535,994 480,582 578,253 561,632 496,005 494,535 598,568 557,815 572,054 586,293 600,532 614,771
Long-term Assets
Long-term Assets 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000 220,000 240,000
Accumulated Depreciation 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Long-term Assets 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000 220,000 240,000
Total Assets 492,251 555,994 520,582 638,253 641,632 596,005 614,535 738,568 717,815 752,054 786,293 820,532 854,771

Liabilities and Capital


Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Accounts Payable 0 72,066 41,828 164,672 149,521 85,364 85,364 175,158 120,165 120,165 120,165 120,165 120,165
Current Borrowing 0 0 0 0 0 0 0 0 0 0 0 0 0
Other Short-term Liabilities 0 0 0 0 0 0 0 0 0 0 0 0 0
Subtotal Short-term Liabilities 0 72,066 41,828 164,672 149,521 85,364 85,364 175,158 120,165 120,165 120,165 120,165 120,165

Long-term Liabilities 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000
Total Liabilities 600,000 672,066 641,828 764,672 749,521 685,364 685,364 775,158 720,165 720,165 720,165 720,165 720,165

Paid-in Capital 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000
Retained Earnings (207,749) (207,749) (207,749) (207,749) (207,749) (207,749) (207,749) (207,749) (207,749) (207,749) (207,749) (207,749) (207,749)
Earnings 0 (8,324) (13,497) (18,671) (140) 18,390 36,920 71,159 105,398 139,637 173,876 208,115 242,354
Total Capital (107,749) (116,073) (121,246) (126,420) (107,889) (89,359) (70,829) (36,590) (2,351) 31,888 66,127 100,366 134,605
Total Liabilities and Capital 492,251 555,994 520,582 638,253 641,632 596,005 614,535 738,568 717,815 752,054 786,293 820,532 854,771
Net Worth (107,749) (116,073) (121,246) (126,420) (107,889) (89,359) (70,829) (36,590) (2,351) 31,888 66,127 100,366 134,605

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