Printing Company

BUSINESS PLAN

MASTER PRINTER AND PARTNERS PRINTING

52 James St.
Grace, NM 84753

6924 Auburn Dr.
Grace, NM 84753

June 23, 1990

This business plan outlines a two-store operation offering a full range of printing services and supplies. The joint enterprise will improve efficiency through the use of Total Quality Management (TQM). Following is a description of the ways in which the companies will employ extensive use of strategic, operational, and financial planning, as well as ways they intend to incorporate TQM methods into their businesses.

• executive summary
• business description
• company history
• market analysis
• marketing strategy
• operations
• job flow description
• management and organization
• goals and objectives
• historical financial analysis and operational goals
• financial information
• balance sheet
• supplemental documents

EXECUTIVE SUMMARY

There are two components to this company: Master Printer of Grace and Partners Printing of Theadora. Master Printer has been owned, all or in part, by Shawn Russell since 1981. Ms. Russell started Partners in 1990 to increase market share and penetrate the Theadora market. The firm lost a major contract in 1991. This experience caused the first major loss in eight years. It is our goal to diversify the sales to the extent that we will never be dependent on one customer to that degree again. In addition, we will improve our efficiency and effectiveness through the implementation of Total Quality Management (TQM).

The two stores offer a full range of printing services and supplies. We have the ability to operate as a "quick printer" when necessary. A full list of services is included in the Business Description section.

The market is divided into commercial taxable and nontaxable accounts. We are currently identifying the number of potential accounts. The main competition is Charter Stationary, Langston Printing, and Monroe's Print Shop in Grace, and Penny Printing and Paper Supplies and Priceless Printing in Theadora. Our company will emphasize service, quality, price, and speed of service to compete in the market place. The printing industry is growing at a rate of 8 to 11 percent a year. We estimate our market share to be 34.2 percent and plan to increase that to 44.4 percent in five years through the implementation and annual revision of this plan.

Master and Partners have the ability to offer full-line printing services. The labor force consists of 13 people who have 150 combined years of printing and/or sales experience. We will use a delivery service to get the products to our customers in the outlying areas and for customers who need rush service.

We presently have a need for the following funds:

We would like to have this loan over a 12-year term at 8.34 percent interest.

This business plan makes extensive and exhaustive use of strategic, operational, and financial planning. An essential element of this plan is the installation of the TQM method.

BUSINESS DESCRIPTION

Master Printer and Partners Printing offer a range of services, including:

• Offset printing
• Limited in-house full-color
• Job out balance of full-color
• Forms
• Books, manuals, brochures
• Programs
• Checks
• Computer typesetting with Apple Macintosh and Varitype
• Letter press

At the current time our regular customers are:

• Percy's Restaurant
• Jim's Video Arcade
• Grace School System
• Pine Acres Rest Home
• First Bank
• Government Printing Facility
• Sarah's Stitchery
• Others

In addition to the few accounts listed above, we have approximately 100 accounts not listed (i.e., churches, businesses, clubs, etc.).

COMPANY HISTORY

Master Printer is a local commercial printing company that has recently expanded to Theadora, New Mexico. Master was established in Grace, New Mexico in 1889 as a local newspaper printer, along with a job print shop. It was created to meet the printing needs of the local community.

After a period of time, the job print shop was sold as a commercial print shop. It was owned and operated as Grace Printing Company by Mrs. Dorothy Simmons.

In 1935, an employee, Drake Master, purchased Grace Printing Company and changed the name to Master Printer. During 1945, Mr. Master had a building erected at 52 James Street. This site remains the location of the present shop.

Master Printer was operated by Mr. and Mrs. Master until 1972. A few years after the death of Mr. Master, the shop again changed hands. It was sold to Mrs. Jane Appleton, who had been an employee of the company for 20 years.

In January 1981, Ms. Appleton sold Master Printer to two employees, Arthur Banes and Jack Wilson. Annie Reese became a junior partner.

Master Printer operated under this general partnership until it was dissolved in October of 1984. It was during this time that Shawn Russell became the sole proprietor of Master Printer.

In October of 1990, Shawn Russell expanded to Theadora, New Mexico. She opened a print shop under the name of Partners Printing. The two locations are full service printing companies and offer a wide range of printing products and services.

MARKET ANALYSIS

Potential Customers:

In addition to our current customers, I have identified the following businesses that will help diversify our revenue base:

• Tandy Toy Store
• Wednesday's
• Thomas, Bailey, & Hardy
• Jamie's Boutique
• Ralph White's Hardware

Small customers that have been overlooked in the past, such as physicians, young professionals, nonprofit organizations, and small businesses in our market area will be identified by next December.

Estimated Printing Market Size and Competition:

Legend

1. Location
2. Service
3. Quality
4. Selection of Service
5. Price
6. Speed
7. New Business
8. Equity

The threats within the local market are:

• New print shop(s)
• Price wars
• Lawsuits
• New and better copiers, for in-house do-it-yourselfers
• Brokers

These are only potential threats, so no plan of action is necessary at this time. It is important to recognize and monitor these items for future strategy.

MARKETING STRATEGY

Target Markets

We are going to strengthen our local market by concentrating on increasing our smaller business accounts, as mentioned above. We estimate that by concentrating on maintaining our existing accounts and securing new accounts, our market share will increase as follows:

We intend to price our services and products just below or equal to our competition. The goal is to accomplish this while maintaining superior service over our competitors. We can accomplish this through efficiency, company training sessions, and by concentrating on quality control.

We will emphasize our perceived competitive advantage of service, quality, and price, to penetrate the market. To accomplish this, our promotion plan will include:

Public Relations

We intend to have periodic meetings and training sessions teaching employees how to communicate effectively with customers on the phone, and in person. One of our aims, in hopes of satisfying our customers, is to demonstrate alternative ways to do their printing. This should, in many cases, save them time and money. These training sessions are scheduled on the master calendar. (See Supplemental Documents section for information about the company calendar).

Advertising and Sales Incentives

We will develop a series of radio commercials that will be effective in exposing both companies to our market areas. We plan to have periodic promotions offering discounts or specials on various printing items (i.e. business cards, envelopes, letterheads, etc.). We will be able to determine what means of advertising will be most effective for our companies by utilizing these promotions at different intervals on various types of media. Campaigns will be initiated at the monthly Marketing Evaluation Meeting as scheduled on the monthly calendar.

Outside Sales

Outside sales has been a weak area. It has been targeted as a major area of emphasis. We are presently utilizing certain employees who we feel are qualified to work in outside sales. By readjusting production and work schedules, we are certain that the volume of business should noticeably increase for both companies.

Surveys

We will survey present customers and potential customers in an effort to find the weak and strong areas of our products and services. This will be accomplished by utilizing outside sales people and the mail service. Through this survey, we should be able to gain valuable information giving us a competitive edge over our competition. Surveys are also scheduled on the master calendar. A sample survey has been provided in the Supplemental Documents section.

If the marketing goals, as outlined above, are not within 25 percent of projection by February 1, 1994, then the following strategy will be implemented immediately:

• Additional emphasis will be placed on outside sales by doubling our sales efforts.
• A 25 percent increase in radio advertising will be initiated.
• Additional promotional incentives will be implemented.
• A conference will be held with our accountant and banker.

If the marketing goals are still not met by July 1, then a marketing consultant with proven experience in the printing industry will be hired to implement a successful strategy.

OPERATIONS

The printing plants are located at 52 James Street for Master Printer and 6924 Auburn Drive in Theadora for Partners Printing. The combined labor cost for both companies is $121 per hour. Our operations consist of the following procedures:

First, the customer places the order. The employee taking the order should get as much information from the customer as possible (filling out the job worksheet should be sufficient). Also, at the time the employee receives the order a reasonable time should be determined for completing the job. The customer should be notified of any changes occurring with the order.

JOB FLOW DESCRIPTION

Second, the job ticket with all the information should be completed and documented in the job log book. The typesetter should be notified if typesetting is needing or the job should be taken directly to layout if all of the information is camera-ready. If the job is a repeal order, it should also be taken to layout.

Third, the typesetter should typeset any required copy as specified by the customer. Questions or problems should be directed to the person who took the order. No work should leave the typesetter until it has been properly proofed by two or more employees.

Fourth, every time typesetting is done for a customer, the customer must see a proof before printing is done. Therefore, the client is to be called in for proofing and they should sign a proof slip after reviewing the completed work. A customer who is proofing the typesetting that we have done should be encouraged to check spelling, phone numbers, etc. for accuracy.

It is a good idea, and should be a regular practice, for an employee to go over the proofing process with the customer and review the printing specifications as they are printed on the job ticket. Take nothing for granted and never ASSUME anything.

Fifth, after the proofing and correction stage, the job should go to layout, where logos and art work are added, an original is made, and a plate is prepared for printing.

Sixth, the plate is taken to a pressman. The pressman's job is to pull the stock required for the job and then print it to the specifications on the ticket. Again, the pressman should not assume anything. If there is any question or doubt as to the specifications of printing the job, the pressman should take the questions to the shop foreman for clarification.

Seventh, the job is printed and then goes to the bindery for any bindery work needed (i.e. collating, numbering, padding, cutting, gathering, packaging, etc.). When all bindery work is done and the job is complete, it should either be delivered or taken to the front office for pick-up.

Eighth, the delivery person or the front office employee should get a signed delivery receipt and/or a signed in voice when the job is picked-up. The delivery receipt should then be placed in the job envelope and the envelope filed in the completed box. The invoice also has its assigned place and should be filed there without fail.

Personnel in each department should be aware of the delivery dates requested by customers. The work schedules should ensure that these dates are met. Should a job be held up in a department that will affect the delivery dates, the customer should be notified to help maintain proper public relations.

Also, it is the responsibility of the bookkeeper to make sure that all customers are invoiced weekly and that statements are in the mail at the proper time. Any time an invoice can be delivered with the job, it should be, as this will eliminate unnecessary postage and work load in the front office.

MANAGEMENT AND ORGANIZATION

Managers

The managers' duties are quite encompassing, as they oversee all shop employees. Therefore, this job requires knowledge of operational procedures, people skills, and a very broad knowledge of shop equipment maintenance. Further duties and responsibilities are:

• Management of each department supervisor
• Ordering supplies and all paper stock
• Overseeing the completion of jobs and ensuring quality control
• Maintaining schedules
• Cost controlling and waste management which requires shop personnel to use stock that is cut and left from previous jobs, instead of cutting down new stock
• Responsible for monitoring job flow and ensuring that each order is on schedule
• Taking job orders, answering the phone if the front office needs help, and waiting on customers

A listing of all management goals that have been derived as a result of this plan are listed in the Supplemental Documents section.

When the previous months financial statements are received, these procedures will be reevaluated and appropriate changes will be made. If the cost containment measures are not effective, then changes will be made. Financial reviews are scheduled on the monthly calendar.

Target percentages for the line items that will be monitored for containment are:

TQM will be instituted after management is educated on the benefits and short comings of the process. TQM has been scheduled on the master calendar.

GOALS AND OBJECTIVES

Management Goals

• Recapitalize through loan proceeds.
• Initiate a plan of action to create a better working atmosphere.
• Reduce cost and increase profits.
• Through new formats and procedures, increase profitability.
• Strengthen present customer base and expand customer base to outside areas (Rosemond, Alareado, Mansfield, etc.).
• Update equipment to expand into more specialized areas of the printing market.
• Increase employee benefits.

Operational Goals

Cost Contain

• Contain all costs within FRA guidelines where applicable.
• Establish a regular insurance audit to determine needs and reduce cost where applicable.
• Install TQM in phases as indicated on the master calendar.
• Examine costs on a regular basis during monthly financial review.

Implement the following accounting changes:

• Capital Expenditures

  These items are projected to be purchased in the following time frame:

  February 1994 equipment improvements approximately	$5,000
  July 1995 additional equipment purchases (typesetting equipment, presses)	$30,000

Productivity/Efficiency Goals

• Contain waste through regular management meetings, at the present time and through TQM methods in the long-run.
• Install employee suggestion box with cash incentives for suggestion that result in cost savings on increased productivity. This will lead to a team based presentation program through TQM in the long-run.
• Outline Quality Control Procedures. (See subsection on Production and Quality Control).

Timing

Business Plan complete - September 21st

Loan Funded - October 2nd

A management calendar has been developed to indicate projection dates for reaching strategic decision goals. It is also used to schedule strategic planning sessions, evaluations, and general meetings.

HISTORICAL FINANCIAL ANALYSIS AND OPERATIONAL GOALS

Information about obtaining the comprehensive historical income statements can be found in the Supplemental Documents section. The following text is a summarized version of these statements.

An analysis of the 12-year trend indicates an increase in revenue for 11 of the past 12 years. The year, 1981, is the exception to this trend.

In 1981, Shawn Russell was adjusting to making management decisions, while continuing her work as a presswoman. The work force consisted of the two general partners, one junior partner, one full-time employee, and occasional part-time help. The high number of employees resulted in lower salaries and wages for that year.

In 1982, there was a considerable salary increase without a corresponding increase in sales or gross profit. The difficulties experienced in the partnership limited sound management decisions. This salary increase, along with the absence of an active sales force, contributed to a decrease in gross profits for the company by 1984.

In August of 1984, the partnership realized that it needed to disband. It was dissolved in October of 1984. After the dissolution of the partnership, the shop has realized steady growth.

Several expense line items have been analyzed and have provided opportunities for cost containment.

Cost of Goods

This item appears to have been out of proportion at certain periods. To remedy this, several steps have been and will be taken.

• Procedures are being taken to monitor material waste. Waste due to errors can be considerably reduced by implementing and enforcing policies on quality control.
• Pricing updates will be made more often to reflect price increases on papers and supplies. Price lists have recently been updated and modified to simplify pricing procedures for employees. This will be a major help in eliminating pricing errors.
• Each department will be responsible for recording time spent on each job. This will show what types of printing jobs are more or less profitable, and indicate what measures should be taken to increase profitability.

Wages (including owners)

Wages have averaged 28.6 percent over the 12 year history. Current labor expense is high, 37.3 percent of gross sales, due to the loss of the Hillman Equipment contracts. The figures are ½ actual and ½ projection. One employee has been terminated and one employee quit. As a result, this percentage should be lower by year end. The FRA (Financial Research Association) comparison for a like-size business indicates a 35.98 average. Therefore, Master Printer and Partners Printing are only 1.32 percent above this industry average. Increases in productivity brought about through the implementation of this plan will bring this figure to below the industry average.

Payroll Taxes

Payroll taxes have increased from .7 percent in 1981 to 3.7 percent in 1992. However, this line item is only controllable indirectly through total labor.

Advertising

Advertising is .7 percent on average and is above the FRA average of .39 percent for small-sized businesses. In order to increase our penetration in the market, this item will have to remain above this average for a short time. However, we do feel that by utilizing an effective advertising strategy, our advertising dollars will yield a greater return than in the past.

Auto Expense

Auto expense was .8 percent in 1982, and 1.9 in 1992, or a 237 percent increase. There are no industry averages for this line item, but it is deemed to be high.

The increase is contributed primarily to the frequent trips and distance from Grace to Theadora. These trips should be less frequent due to the loss of certain Hillman contracts. Therefore, this expense should decrease without an action plan.

Bad Debts

Bad debts have not been a significant problem in the past, but we will continue to monitor accounts receivable to avoid developing any problems in this area.

Insurance

Insurance costs have escalated from .4 percent of gross to 1.2 percent and are in line with the FRA industry average of 1.78 percent.

Interest

Interest has moved from 2.3 percent of gross to 2.8 percent in 1991, which is a 21.7 percent increase in 11 years. We hope to reduce our interest expense by obtaining a loan at lower interest rates than we are presently paying.

Lease Expense

Lease expense has fluctuated over the years, starting at 4.6 percent in 1981 and decreasing to 2.3 percent in 1991. We hope to reduce this expense even further by purchasing equipment, rather than acquiring it on lease options. The purchases will be evaluated with our accountant to determine what items will be most advantageous at the time.

Repairs and Maintenance

Repairs and maintenance increased significantly from 1981 through 1988. This was due in part to service agreements on new equipment. From 1988, however, this expense has significantly decreased from .77 percent of revenues to .37 percent.

FINANCIAL INFORMATION

Pro-forma income statement projections and balance sheets are available from the main office of Harris, Ridder, & Manny, Inc., 6734 Desert Drive, Grace, NM 84753. The following is a summary of their findings and recommendations.

Two pro-forma income statements were constructed for the purpose of analysis. One is based on the current debt structure and the other focuses on a capital restructuring program. The first indicates a net cash position of $18,348 at year end, while the second reveals a new cash position of $25,016. The capital restructuring program is as follows:

Of the $25,000 in operating costs, $10,000 will be placed in a money market account and marked for emergency use only. This account will be built to a level of $26,000, which is ten percent of gross profit. It will be maintained at that level in accordance with the gross profit figures.

Historical growth has occurred at 15 percent over the last 11 years. However, for purposes of this analysis, the growth rate was held to ten percent. The actual year to year growth rate varies in accordance with the ebb and flow of the local economy. The 1995-1996 fiscal year shows an actual decrease in sales, something the company has experienced only once in the past 11 years.

Owing to greater efficiencies and economies of scale, the net cash available grows from $25,223 in 1993-1994 to $80,404 in 1994-1995.

A FMV balance sheet was constructed because of the extensive depreciation the company currently has on the books. A market analysis was obtained from the company (See Supplemental Documents) to establish the value of the real property. The value of the equipment was estimated using replacement costs, instead of new costs, as a guideline. Value was given to the leased equipment only if it was projected to pay out in less than six months. The owners' equity in FMV terms is 34.5 percent.

Cash was used as a plug figure from the income statements. Accounts receivable and inventory were increased at five percent per year, and this amount was subtracted from cash because no allocation was made in the pro-forma income statements. The capital purchases were also subtracted from cash. Depreciation was estimated at the current rate for the life of the projection. After the current period, the payables were reduced to $1,000.

Since the business has a substantial amount of equipment depreciated out or almost out, the net worth figure was modified by adding the FMV net to arrive at an adjusted figure.

BALANCE SHEET

Major Assumptions

• Economy of Grace and Theadora remain relatively the same.
• No "significant" new competition.
• No large capital purchases within two years.
• TQM will be implemented within one year, with resultant efficiencies.

SUPPLEMENTAL DOCUMENTS

Company Calendar

The Master Calendar is a long range planning tool for company managers. It is a five year record of management meetings and programs. Some of the items included on this calendar are: Insurance Audits, Financial Review Sessions, Policy and Procedure Meetings, a schedule for implementation of the TQM Program, and Quarterly Management Summary Meetings.

A copy of the Master Calendar can be obtained from the Master Printer office.

Organizational Chart and Management Resumes

A chart illustrating the management hierarchy has been prepared by the owner, Shawn Russell. Please contact Ms. Russell for a copy.

Management resumes and references are available upon request.

Financial Documents

Tables containing sales figures, gross profit, operating expenses, other income, and net income over the past 12 years have been prepared by Harris, Ridder, & Manny, Inc., 6734 Desert Dr., Grace, NM 84753.

The firm of Harris, et al has also compiled additional financial statements and supplementary schedules including: a proprietorship balance sheet; a table illustrating the proprietor's capital for the one month and eight month period that ended in August of 1993; and other related statements of income. Please contact the main office, at the address listed above, for copies of these financial documents.

Market Analysis

A Market Analysis of local properties has been completed by the Benchman Company, 7483 Riverside Dr., Grace, NM 84753. The report revealed the estimated market value of both single family dwellings and retail office space. The homes ranged from $45,000 to $105,00 and the office facilities were between $9,500 to $70,000. A copy of the full analysis is available upon request.

Employee Guidelines and Production and Quality Control

Production and Quality Control is everyone's responsibility.

Dealing with Customers

Be polite and cordial

A prerequisite and requirement to taking orders is being friendly and cordial, regardless of how bad a day you may have had. Make each customer feel he or she is important and welcome. Every customer is important, so be careful not to be rude or brash.

When a customer arrives, know in advance who is going to deal with their order. Wait on customers immediately. DO NOT keep them waiting. If more than one customer comes in get someone in the back to help.

Receiving Jobs or Information (in person or on the phone)

Write everything down (use the work order form)

1. Record person's NAME, TIME of call, and DATE.
2. Get the address and phone number if possible.
3. Get a complete and detailed description of what the customer's request. This includes:
   • Type, color, and weight of stock
   • Size or sizes of stock
   • Color or colors of ink
   • Types of bindery required (if necessary)
   • Job due date
   • Question information that is vague
   • Quantity or quantities of order
   • Record price quoted if possible
4. Do not quote the customer a price unless you are sure of it. Double check the price with someone if possible.
5. When receiving information concerning jobs already in production, write down the change and send it immediately to the appropriate department. Make sure that the change is recorded on the job ticket.
6. Watch for Obvious Errors: Always check name, dates, and phone numbers.

Follow-Up

Job Orders

After information on Page One has been obtained and recorded, the old job ticket should be pulled and a new ticket should be filled out. Someone other than the person taking the job should call the customer to verify information recorded, including the price.

Proofs

After a proof is ready, with respect to the due date, the customer will be contacted, or proof will be delivered to the customer. If proof has not been picked up or OK'd in a reasonable time, with respect to the due date, a follow-up call needs to be made to the customer.

The same shall apply to completed jobs waiting to be picked up by the customer.

Supplies

If supplies that have been ordered have not arrived in a reasonable amount of time, a follow-up call is to be made to the company. This also applies to orders shipped outside of the print shop.

Errors

• If it is clear where the fault lies, due to carelessness or negligence, the cost of the job may be charged to the person or persons responsible for the error.
• The majority of errors can be eliminated by follow a few simple guidelines:
  1. Communicate effectively
  2. Work together
  3. Keep your mind and thoughts on your job

Reducing Expenses

• Reducing Waste
  1. Utilized supplies efficiently
  2. Avoid cutting too much stock
  3. Be conservative when using supplies. Use only what is needed.
  4. Designated persons will be responsible for cutting papers and stocks for each job prior to printing
  5. Each job ticket will be attached to a production control sheet. Each person and department will be responsible for recording the time the project was started and the time it was completed.
• Production Time
  1. Quality Time
     1. Utilize time efficiently
     2. Strive to produce 8 hours of quality production daily
  2. Overtime
     1. Work overtime only when necessary
     2. Overtime is encouraged when the level of production justifies it.
     3. Inform the front office when you are making up time or working comp-time or overtime.
• Maintenance & Neatness

  Equipment

  1. Regular Maintenance on equipment is required: Equipment will be lubricated on a regular basis. Operators of each piece of equipment will set up a regular maintenance schedule for each piece of equipment. These schedules will be submitted and reviewed at the end of each month.
  2. Equipment will be cleaned and kept clean daily.

  Work Areas

  1. Each person will be responsible for keeping his or her immediate work area neat and organized
  2. An organized work space will create a more efficient work environment

It is in everyone's best interest to be efficient and to reduce costs as much as possible. If you see something that needs to be done, inquire about it, and see that it gets done. Each person working at this company is a valuable and important part of our success.

CUSTOMER SURVEY FORM FOR MASTER PRINTER

Printing Company

BUSINESS PLAN

PRINTER PERFECT

7521 Hwy. 59
Baton Rouge, LA 26390

March 9, 1993

Printer Perfect is a new venture specializing in full-color, sheet-fed printing. It caters to short and medium runs. The following start-up plan provides an approach to new business planning and describes how the company will keep ahead of its competition.

• sec notice
• offer
• concept
• market
• initial start-up cost
• lease equipment
• location
• assumptions
• fixed monthly expenses
• officers

SEC NOTICE

The information contained in this presentation is confidential and intended for the private use of those parties selected by the Officers of Printer Perfect pursuant to the needs of Printer Perfect and has been issued to those parties in good faith and under this pretence. This presentation is not intended as an offer to purchase stock in Printer Perfect nor is such an offer being made, implied, or otherwise stated by the Officers of Printer Perfect.

Any and all selected parties who may share the views of Printer Perfect, regarding the potential for growth and financial prosperity, and who may desire to become financially involved with the Officers of Printer Perfect, with regards to such potential, are assumed to be of a "Sophisticated Investor" class, as described in the codes of the Securities Exchange Commission.

Printer Perfect is a new start-up venture organized and chartered as a corporation in the State of Louisiana. Its Officers are listed later in this presentation. Printer Perfect is a Sub-Chapter S Corporation, capitalized at $1,000, with 1,000 shares, and no par value stock issued. Printer Perfect will build its home base of operations in Baton Rouge, Louisiana.

Printer Perfect is seeking financial assistance to commence its operations. The amount needed to begin operation is a fifty-thousand dollar ($50,000) line of credit.

OFFER

The Officers of Printer Perfect realize the necessity to offer an attractive incentive for the use of an Investor's credit lines. In an effort to be realistic and fair from the viewpoint of the potential Investor, the Officers of Printer Perfect have elected to offer a simple and totally realistic profit plan for the Investor, based solely on gross sales.

Printer Perfect will deposit five percent (5%) of all gross receipts from all sales of Printer Perfect in an escrow account with National Bank, Baton Rouge, LA, until such funds in said account amount to a total of twenty-five thousand dollars ($25,000). The proceeds of this account will be made available to the Investors upon the release of the lines of credit by Printer Perfect. The total length of time for the use of the Investor's credit lines shall not exceed two years from date of investment. This twenty-five thousand dollar ($25,000) profit represents a net gain of fifty percent (50%) in two years or less.

Printer Perfect agrees to make quarterly financial statements available to all Investors until such time as escrow funds attain the twenty-five thousand dollar ($25,000) maximum. All accounts of Printer Perfect will be audited on an annual basis by Cooper and Schornack, PC, New Orleans, LA. The findings of these audits will also be made available to the Investors until such time as escrow funds reach the twenty-five thousand dollar ($25,000) maximum.

The debts incurred, as a result of the use of the Investor's credit lines, will be repaid in the following manner: A ten thousand dollar ($10,000) limit will be placed on the general fund account of Printer Perfect. Any and all deposited funds which exceed the ten thousand dollar ($10,000) limit will be swept out and automatically applied to any outstanding debts resulting from the use of borrowed funds. This sweep account method of repayment will allow Printer Perfect to use the available credit lines in a more efficient and cost effective manner than regular thirty, sixty or ninety day notes.

It is understood that all assets of Printer Perfect will be pledged toward repayment of any and all unpaid debts resultant from the use of the Investor's credit lines, until such time as all said debts have been fully repaid. Furthermore, the Officers of Printer Perfect will pledge to make personal restitution for any and all unpaid debts resultant from use of the funds of Investor's credit lines, should Printer Perfect default in such-indebtedness.

CONCEPT

The basic concept of any printing company is to put ink on paper for a profit. The primary difference between a large printing company, such as Random House, and a small printing company, is how much ink they can place on how much paper for how much profit. This simple concept allows for major differences in the degree of sophistication by which ink is applied to paper, the types of paper to which ink is applied, what is done with the paper once the ink has been applied, and the amount of profit to be made. This brings us to where Printer Perfect will fit in the overall picture of the printing industry. Printer Perfect will be a short-to-medium run, sheet-fed, fiill-color printing company, which specializes in affordable, pleasing color printing. Short-to-medium runs means jobs of 1,000 to 100,000 copies. Sheet-fed means that the equipment prints individual sheets of paper, rather than continuous roll stock paper. Full-color means that the end product is a printed image like a color photograph. Pleasing color means that the color printed images produced are reasonably close to the colors of the original from which they were taken, and are clear and pleasing to the eye. In layman's terms, Printer Perfect will specialize in producing the type of color printing which accounts for seventy-five percent of all color printing that is produced in America today.

In Baton Rouge there is only one company classified as a full-color printing company, Print 1. This company has become specialized as a short-to-medium run color publication company, with long-term contracts for monthly publications. Print 1 does not solicit general color printing. The market in the Baton Rouge area is wide-open for an aggressive, full-color printing company. Printer Perfect intends to aggressively serve this market.

As our nation grows, it becomes more sophisticated. Due to the technological revolution which is being waged, small companies are demanding more of their printers than they did ten years ago. Today's printing clients demand perfection. They want smart, good-looking color pieces for their products and advertising. They want it, they can afford it, and they deserve to get it. To survive in any business today a company must zero in on a market in which it wants to compete, be capable of producing the type of work which that market demands, be well organized and capable of producing its product cost-effectively, and be sales oriented and aggressive. Printing is no different. No longer can a printing company simply hang out a "Print Shop" sign and expect the world to come running.

Printing can be a very lucrative business venture. However, to be profitable in today's competitive market one must become specialized. If a company can only produce short run, simple printing profitably, then this is the market it must aggressively pursue. A full-color printing company simply cannot produce 250 business cards profitably. Conversely, a small single-color print shop cannot produce 50,000 full-color brochures profitably. Specialization is here.

No printing company can compete in a '90s high-speed, full-color world with slow' 50s equipment and skills. The ones who try will fail. Any printing company, large or small, which refuses to expand, upgrade its equipment, and increase its skill levels, will slowly lose its profitability and eventually vanish. The days of the local "Print Shop" that could print everything its customers wanted have drawn to a close.

Printer Perfect will start with an edge over its local competitors because of its equipment choices and skilled people. It will remain a leader because of the vision and determination of its officers.

Today's full-color printing companies require extensive and sophisticated equipment, skilled personnel, and a good client base for survival and growth. Printer Perfect can lease the equipment, it has the key personnel in place, and has instant access to a broad client base. All that is needed to make this new company a thriving Baton Rouge industry is a small financial "Jump Start." Printer Perfect needs your assistance. Today IS the future and Printer Perfect is for today.

MARKET

Within a forty mile radius of Printer Perfect there are over fifty large national and international manufacturing companies. Each of these companies uses the services of full color printing companies. Printer Perfect will aggressively seek out these accounts to produce their printing. One advantage Printer Perfect will have over the printing companies in New Orleans will be the ability to produce the end product at a more competitive cost. As earlier stated, we are living in a computer world. By selecting new state-of-the-art equipment, the production costs will be lowered because of the speed of the equipment and the lower skill level requirements. By being a "new" company, Printer Perfect will not be concerned with recovering its investment in slower, "old style" equipment which has many good years of service left.

Full-color printing will be the specialty of Printer Perfect. However, simple single and two-color work will also be solicited. The same sophisticated equipment that prints four colors of ink on one side of a sheet of paper is also capable of printing two colors of ink on one side of the paper, reversing the paper, and printing two additional colors on the other side. This is an obvious advantage over simple single-color equipment. Although the equipment may cost more initially, the speed at which the work may be accomplished will easily offset these costs and make the end product better and less expensive for the client.

In the immediate Baton Rouge area, there are over two hundred smaller accounts which are now being serviced by the local "print shops." These accounts will be easily serviced by Printer Perfect simply because of the ability to provide a better product, at the same or even lower costs, than the local "print shops."

INITIAL START-UP COST

It would be sheer folly to think that all building improvements, equipment purchases, inventory, and operational expenses for six months of operation could be covered for $50,000. However, we will start the operation in a conservative and cost effective manner that will allow growth at a financially solid pace.

The building, described later, will need a few internal improvements to make operation feasible. Two restrooms must be added to accommodate the production employees, a camera room must be built, and electrical current for equipment must be run from the main source. The labor for these improvements will be done by the officers and staff of Printer Perfect. The plumbing for the additional restrooms will be the responsibility of the landlord. There are several small used pieces of equipment that will be purchased, rather than leased. The offices must be furnished and made presentable.

Listed below are the budgeted figures for these start up costs.

LEASE EQUIPMENT

There are four major pieces of equipment which will be acquired during the first year of operation. These four pieces are:

• 30" Challenge auto-spacer program paper cutter (or its equivalent)
  Approximate cost: $13,500 (new)
• 19" × 25" Omni Adast two-color perfect or offset printing press
  Approximate cost: $165,000 (new)
• McCain nine-pocket collator/saddle binder with three knife trimmer
  Approximate cost: $24,000 (used)
• Merganthaler/Linotronic typesetting machine
  Approximate cost: $35,000 (new)

All of the above equipment will be acquired on lease/purchase plans which are available through the respective manufacturers. Total lease payments for all of the above equipment will not exceed $4,000.00 monthly. No lease/purchase will be entered into until such time as a positive cash flow has been established.

LOCATION

One of the pitfalls of any new business is the poor choice of a location. Printer Perfect has circumvented this potential problem by selecting an excellent location for its operation. Printer Perfect will be located at US Hwy. 59 at SR 51. This location is a short three minute drive from the west side of Baton Rouge, and is located in an area which shows the greatest potential for growth in Baton Rouge. The building is a 13,520 sq.ft. metal structure with a solid concrete base capable of handling the weight of any massive printing equipment. It has a loading dock for paper and equipment deliveries, ample employee parking, and a 1,000 sq.ft. brick veneer office.

Many printing companies opt to select more prestigious locations under the false pretense that clients will seek them out. In many instances, a small printing company will locate in a more retail traffic-oriented building, thinking that walk in traffic will offset the additional costs of the more sophisticated environment. This has proven to be a false concept over and over again. Printing clients are not the general public, but rather, business executives who make their selections of printers based on performance, quality and costs, rather than location of the printing company. Printer Perfect has opted to put its financial investment in space, rather than prestige.

The following factors have been carefully considered in selecting this location for Printer Perfect.

Proximity to clients

Since the printing industry demands personal one-on-one service, most of the clients will be served by sales/management personnel at their respective businesses. However, should a client desire to visit the printing facility in person, the selected location will be easy to find. It will be clearly identifiable, as a stand-alone structure facing US Hwy. 59, not hidden in a maze of look-a-like offices in some discrete industrial complex.

Potential for expansion

This one factor is probably the largest deterrent to growth that any new business faces. Printing companies are complex with many large pieces of equipment. They require highly skilled, industrial moving companies to relocate. Moves are very costly in actual dollars spent and loss of revenue from production down-time. There have been thousands of instances where printing companies elected to stay small simply because the cost of relocation was too great. Printer Perfect is fortunate to have this location available. Through negotiations with the lessor, Printer Perfect will be able to secure a portion of the entire building for the first three years, with an option for the balance of the building after the first three years. This will allow a great potential for growth. Based on national averages for the printing industry, a company with 13,000 sq.ft. of production area, when properly managed and staffed, should be able to produce approximately twelve million dollars in annual gross sales. This potential should be sufficient for ten to twelve years of operation of Printer Perfect. Once a printing company reaches this level of production, an alternate production facility is usually chosen over a plant expansion or relocation.

Cost

Obviously, any company must consider the cost of the location. Printer Perfect is fortunate that the chosen location will be available at realistic costs. For the first three years, the lease will be on an accelerating scale, beginning at $0.13 (thirteen cents) per sq.ft. occupied space and ending at $0.20 (twenty cents) per sq.ft. This will give the company an opportunity to recover start-up costs and build a solid financial foundation prior to accepting responsibility for the larger monthly rent expenditures. The officers of Printer Perfect have negotiated to begin operation in the east portion of the building, which encompasses 9,460 sq.ft. of the total 13,520 sq.ft. This translates into a monthly expenditure of $1,229.80 ($0.13 × 9,460 sq.ft.) for the first year, $1,513.60 ($0.16 × 9,460) for the second year, and a maximum of $1,982.00 ($0.10 × 9,460) beginning the third year and continuing for six additional years thereafter. First option for the entire 13,520 sq.ft. building, at the end of the first three years, at the $0.20 per sq.ft. rate, has also been agreed upon by the lessor.

ASSUMPTIONS

Gross Profit

Using a formula developed and tested over a lengthy period of time, we found the average gross profit to be 67.67% of sales price. We will be using 68% as a gross profit figure in making the projections for the potential profitability of Printer Perfect. The average price per impression was $.05.

Efficiency

Using a similarly tested formula, we found the total number of impressions (applying ink to one piece of 8 ½ × 11 inch paper) possible in an eight hour day will be 1,032,000. This is a 100% efficiency rate. No company can possibly attain this figure. However, based on the experience of the officers of Printer Perfect, efficiency ratios of 45% to 65% are attainable. We will use the efficiency factor of 50% in making projections regarding the addition of more equipment or an additional shift of workers.

Typesetting

Typesetting will not be figured in this presentation. Typesetting is a separate entity in printing and must be treated as such. Printer Perfect will have typesetting facilities by the sixth month of operation. However, the cost and profits from this phase of the operation are not included in the projections. Any and all profits from the typesetting department will be included in all financial reports and dividend payments, since such reports and payments are based on the gross sales of the entire operation.

Existing Economic Conditions

It will be assumed that the economic conditions that currently exist in Louisiana will continue. The officers of Printer Perfect cannot control these factors. Should extreme negative economic conditions befall the Louisiana area, these adverse conditions could effect the projections made in this presentation.

FIXED MONTHLY EXPENSES

The first six months of operation are probably the most crucial for any new business. The Officers of Printer Perfect are fully prepared to guide this new venture through this difficult stage of operation. Every effort will be made to maintain a low fixed monthly expenditure level during this time period.

Tables for projected fixed monthly expenditures for the first six months, the first year, and the second year have been prepared.

OFFICERS

Mr. Paulie Perlman, President. Mr. Perlman's experience in color printing spans a twenty year period. His in-depth printing knowledge and skills assure Printer Perfect of a foundation from which to build an exceptional color printing company. Mr. Perlman has served in virtually every phase of the printing industry. He began his printing career during his high school years in the late 1950s. By 1968, he had become a journeyman color pressman. Mr. Perlman entered management in 1970, and by 1976 had risen to the position of General Manager of Copy Quickly, a major New Orleans printing company employing over 75 skilled people. In 1975, he was asked to join the staff at New Orleans Junior College, where he taught evening classes in Advanced Color Printing. Mr. Perlman also served as Advisor to the Board of the Printing Industry Association in 1977. In late 1979, Mr. Perlman left the printing industry to become self-employed as president of Bayou Building Trades, a New Orleans-based, offshore model construction company. Under his leadership, BBT grew to become the most respected and well-known offshore model construction company on the Gulf Coast. Due to negative economic conditions that existed in New Orleans during late 1987, Mr. Perlman was unable to continue operation of BBT and, in mid-summer 1988, he elected to relocate to Baton Rouge. He is currently employed as General Manager of Vidalia Imports in Baton Rouge. Mr. Perlman is a man of vision and wisdom. He is enthusiastic, with sharp business skills and a vast knowledge of color printing. Mr. Perlman gives Printer Perfect an enviable edge over any of its competitors, both present and future. Mr. Perlman is 49 years old, married, and lives in Baton Rouge.

Mr. Mark Benjamin, Vice President. Mr. Benjamin comes to Printer Perfect with 12 years of solid, "hands on" printing experience. Mr. Benjamin began his printing career here in the Baton Rouge area while under the employ of Louisiana State Insurance Company. In 1979, he joined the staff at Vidalia Imports, where he currently serves as production manager. Mr. Benjamin has a unique ability to bridge the "gap" between the desires of the customer and the production necessary to meet those desires. Mr. Benjamin is constantly seeking ways to increase efficiency and lower costs, while maintaining high standards of quality for the client. He is a very capable manager of production employees and has an extensive knowledge of printing equipment. Over his ten year tenure with Vidalia Imports, Mr. Benjamin has become well-known for his promptness with delivery schedules, as well as for working with clients. Mr. Benjamin is driven by his desire to improve the quality of printing services in Baton Rouge. He is stalwart of energy and strength for the long, laborious hours so necessary in building a new company. Mr. Benjamin is 38 years old, married, and lives in Baton Rouge.

Mr. Gregory May, Secretary/Treasurer. Printer Perfect is indeed fortunate to secure the services of such an outstanding professional as Mr. May. Mr. May began his professional career with the Louisiana State Insurance Company in New Orleans. While under the employ of LSIC, Mr. May managed the largest single Premium Payment Department in the LSIC state office. He was honored several times with efficiency awards and quickly rose to division manager for the LSIC State Premium Payment Department. In 1979, Mr. May joined the National Bay Bank in New Orleans as assistant bookkeeper. In three years, Mr. May had risen to Assistant Head Teller of that same bank. In 1983, Mr. May joined the staff of Gulf State Bank, also in New Orleans, as manager of Drive-Thru Operations, where he became solely responsible for the 21 -lane Drive-Thru. His efficiency and excellent management skills were awarded upon two occasions as "Employee of the Month" for the entire GSB system, encompassing 17 branch banks and the third largest downtown bank in New Orleans. This is most impressive when one considers that his competition was over 6,000 fellow employees and managers. In 1988, Mr. May relocated to Baton Rouge and is currently serving as Accounts Manager for AABAA, a Third Party Administrator for the Louisiana School Systems. His primary duty, under this employ, is the management of over 5,000 individual payroll deducation accounts for teachers and other school officials. Mr. May is well-versed in computer skills and has mastered the use of all of the popular database and financial computer software programs used in business today. Mr. May is a very personable and talented individual. He is driven by his desire for perfection and efficiency. His financial background with the banking industry, plus his ability to control and manage massive amounts of data, will provide Printer Perfect with financial and office management second to none. Mr. May is 44 years old, married, and lives in a suburb of Baton Rouge.