SECTION 5.0 OPERATIONAL PLAN

5.1 General Operating Requirements

MotoTrend AutoSports days and hours of operation will be as follows:

•  8am-10pm Monday to Friday

•  8am-8pm Saturday

•  10am-8pm Sunday

These days and hours of operation are subject to change and dependent on market need.

Location

Location is one success factor however the focus initially will be supplying existing industry contacts who have committed to using MotoTrend AutoSports's services. As a result, MotoTrend AutoSports will choose a location that is accessible via major traffic arteries, and represents a good balance between traffic and cost. The projections have been made using a “per square foot” and leasehold expense as of November 2013. Two buildings are currently being considered for the business:

1801 Riverside DR
Anytown, ON

Floor plan size: 6100 sq. Ft $8,000/month 124,000/year = Combined lease /leasehold expenses.

5.2 Human Resource Requirements

Given Mr. Bernie Spotman's extensive mechanical experience, he will be responsible for all day to day operations of the company including management, marketing; overseeing the storefront sales division as well as the auto service department and auto sales division. In addition, Bernie's son Jake will assist in all daily business activities including service, marketing and management.

Bernie plans on hiring one full time auto technician, two full time apprentices, two part time tire installers, one full time cashier, one part time cashier and one full time auto salesman. Mr. Bernie Spotman also plans on administrating the day to day operations of the business overseeing the storefront sales division as well as the auto service department and auto sales division.

Once sales exceed the “break even” point, staffing levels will be expanded to increase MotoTrend AutoSports ability to create additional sales opportunities and increase customer service excellence. Employment of staff will regularly be adjusted based on market sales requirement and increases (Please see for more information).

5.3 Insurance Requirements

Mr. Bernie Spotman will need to incur costs for commercial, asset and liability insurance upon start up. At the time this report was developed, Bernie had received a verbal insurance quote of $13,500 per year.

5.4 Government Requirements

MotoTrend AutoSports is subject to corporate law and income tax. The company will collect and remit PST and GST when required. The company will hire a CA to provide audited financial statements and will follow tax law to minimize the tax burden of the company. Mr. Bernie Spotman will endeavor to reduce real taxable profit to zero through an increased salary to eliminate corporate taxes if possible.

Due to the nature of the automotive parts, accessories and tire industry in Ontario and the sensitive data being handled, it is important that Mr. Bernie Spotman protect himself and his family. At this point in time, Mr. Bernie Spotman will both incorporate the company and ensure that appropriate errors and omissions insurances are in place.

5.5 Working Capital Requirements

Due to the demands imposed at start up, Mr. Bernie Spotman will require that the business have sufficient working capital to meet all operational responsibilities of the business for the first three months. Throughout the year there tends to be periods of low than normal activities. Consequently, the company will experience financial pressures during these months. While much of this time will be spent developing additional marketing strategies, there will be a need to maintain sufficient working capital to cover these periods. A long term strategy to maintain a positive cash flow during these periods will be to diversify the company and develop the following areas;

•  Auto towing

•  Auto sales

As this is a service based business, there will be burden on the business financially upon start up. The automotive parts, accessories and tire industry will require a higher than normal operating capital at start up.

The following operating capital will be required:

Lease $6,278.00

Insurance $3,275.00

Utilities $4,500.00

Total $14,053.00

5.6 Capitalization Activities

As documented throughout this plan, Mr. Bernie Spotman has taken the necessary time needed to carefully choose and cost the necessary assets his business will need to provide automotive parts and accessories services. In doing so, he's determined that he will to invest into the following items:

Equipment

Invest into new tools and equipment to perform a wide range of services in order to perform the following activities:

•  Performance Parts sales & installation

•  Customization services & Installation

•  Wheel & tire repair & installation

•  Audio / Alarm sales & installation services

•  Auto Maintenance Plans

•  Window tinting and Vinyl service

•  Detailing services for auto dealers Vehicle detailing service

A total of $105,000 in equipment will be needed to perform these services. Please see attachment #2 for a complete listing of equipment and costs.

Material and supplies

In order to service MotoTrend AutoSports target market, it will be necessary to invest in the necessary materials and supplies. The estimated cost of materials and supplies is $16,250

5.7 Franchise Fee

MotoTrend AutoSports will have an exclusive contract for distribution in the Anytown territory and surrounding areas. Although population growth could result in any given territory being “re-calibrated”, such as a city like Anytown being able to support several individual locations, the agreement is that the initial Franchisee always has the “right of first refusal” on any additional locations that become available.

The head franchise, MotoTrend AutoSports will require an initial $50,000 franchise fee from Mr. Bernie Spotman and an ongoing monthly fee of $1,000 for the life of the business. See attachment #3 for a copy of the franchise agreement.

5.8 Operational Workflow

As with most automotive parts and accessories store, the operational workflow for the business is quite uniform and simple to follow. The following is a step by step outline of how the sales cycle and product fulfilment is completed on a regular basis:

Step 1: Provide an assessment of the vehicle and provide recommendations (and solutions). Once the client is satisfied, look up the products on our computer system.

Step 2: Create a work order then order parts.

Step 3: Take a 10-25% deposit on custom orders.

Step 4: When the customer's parts arrive, the parts are installed.

Step 5: Close the work order

Step 6: Customer pays bill using cash credit or debit

The above operational workflow is very standard, easy to understand and within the industry's norm.

MotoTrend AutoSports will accept cash, debit or credit as payment. Only those clients who are able to demonstrate financial stability will be offered credit. MotoTrend AutoSports is expected to have 99% of its sales made on a cash basis or cash on delivery basis. A minimum fee of 25% deposit will be required on all cash on delivery orders. It is expected that 1% of wholesale clients will ask for payment terms, which will be offered as “net 30 days terms” with a 5% per month surcharge. The maximum legally-allowed annual interest will be used for all invoices at a rate of approximately 30% per year. All invoices in default past 90 days will be sent to an affiliate collections agency. All credit customers will be required to sign off an invoice that affirms they understand the terms and conditions, as well as the “no refund” policy.

The above noted capital purchases will increase work effectiveness, enhance professionalism and will prepare the business for the forecasted demand for services. Further, the equipment may be leased out to partner associates during times of low activity.

SECTION 6.0 FINANCIAL PLAN

In order to properly establish MotoTrend AutoSports, Mr. Bernie Spotman is proposing a financing mix that consists of: cash equity, Federal contributions, and traditional debt financing. As follows:

Projected Costs

Financing

Capital & Operating $ Capital & Operating Amount %
         
Working capital $14,053 Cash equity $27,795 15%
Equipment $105,000 ADPC $74,121 40%
Materials/Stock $16,250 Commercial financing $83,387 45%
Franchise Fees $50,000      
Sub total $185,303 Sub total $185,303 100%
         
Marketing
$
Marketing
$
%
         
Start up/on-going activities $10,000 Cash from operations $4,000 40%
Marketing   ADPC funding $6,000 60%
Sub total $10,000 Sub total $10,000 100%
         
Business support
$
Business support
$
%
         
Accounting/Management Support $3,000 Cash from operations $750 25%
    ADPC funding $2,250 75%
Sub total $3,000 Sub total $3,000 100%
         
Total project costs
$
Total project financing
$
%
         
Capital & operating $185,303 Cash equity $27,795 11%
Marketing $10,000 Cash from operations $4,750 9%
Business support $3,000 Commercial financing $83,387 20%
    ADPC $82,371 60%
         
Grand Total $198,303 Grand Total $198,303 100%

As identified in the table above:

Mr. Bernie Spotman is prepared to invest $27,795 towards the capitalization of this business startup.

Mr. Bernie Spotman is requesting that ADPC contribute 40% or $74,121 towards capital, 40% or $6,000 towards marketing and 75% or $2,250 towards business support costs.

Mr. Bernie Spotman is requesting a loan from commercial financing in the amount of $83,387 towards capital. This loan will be financed at 8% for 5 years.

60% or $4,000 in marketing and 25% or $750 in business support costs will be financed through cash from operations and cash equity.

6.1 NOTES TO FINANCIAL PROJECTIONS

The following pages contain:

•  12 month projected cash flow statement;

•  3 year projected income statement;

•  3 year projected balance sheet;

•  3 year projected sources and uses of funds statement;

•  3 year amortization schedule.

(A) Revenues

MotoTrend AutoSports will generate revenues by providing automotive parts and accessories services to the market within and around the Anytown area. Total market size is an estimated at $4,704,208. It is estimated that MotoTrend AutoSports will capture a conservative 8% market share in its first year of operations.

It is anticipated that the company will generate $392,011 in sales in year 1. A moderate increase in sales is expected to occur at 20% per year.

(B) Cost of Sales

Cost of sales will include all labour (excluding owner drawings) and materials. It is estimated that the cost of sales for automotive parts and accessories services will be 30%.

(D) Cash Flow

The cash flow of the business remains healthy throughout the first three years of operations. Without the ADPC contribution and loan, the business would not survive. Cash flow must be continually monitored and compared to projections to ensure that operational costs and other expenses were not seriously over or understated.

(D) Assets, Liabilities and Owner's Equity

The assets and liabilities of the business have been well documented throughout the plan. The assistance from ADPC and FABC provides Mr. Bernie Spotman with a healthy level of equity. It should be noted that only contributions to the capitalization of the project are included on the balance sheet.

* For the sake of this sample, projected sources and uses of funds is the 3 year projected cash flow statement

FINANCIAL PROJECTIONS >>>

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