Clothing E-commerce Site Business Plan Liquid Culture Executive Summary The Year 1 season will be a great one

for women looking for distinctive outdoor clothing online. Liquid Culture will eliminate the middle man and offer creative outdoor clothing that is both functional and beautiful. The savings are passed on to our customers who will be paying a fraction of what they normally do for current retreated fashion in stores. Liquid Culture's Year 1 line consists of the best fabric, designs and styling on the market. Larry Wilson and Maggie Granger, co-owners of Liquid Culture, have fifteen years of experience between them in the outdoor garment industry. Maggie has been a senior clothing designer for Manic Woman Clothing for the past seven years. Larry has been the website administrator for South Face the past eight years. Another strength of Liquid Culture is that it will not maintain any clothing inventory. Liquid Culture has contracted with Magic Clothing Company, located in Los Angeles, California, to produce and ship all Liquid Culture clothing. Our design team will work closely with the Magic's Indonesian-based manufacturing facilities. The Magic Clothing Company will maintain the inventory and will produce sufficient product to meet the planned demand.

1.1 Mission Liquid Culture's mission is to present consumers with designs, styling and clothes that energizes any outdoor activity. Whether it be snowboarding, running along the beach, or drifting down a river, Liquid Culture has comfortable, durable clothing that will look and feel wonderful. 1.2 Keys to Success Accessible website that is entertaining to surf. Like a trip to your favorite store where you always find something new that you want. Establishing a strong advertising campaign in a traditional media vehicle; i.e. magazines.

Excellent vendor relationship that will facilitate quality manufacturing of Liquid Culture's clothing and quick shipment of orders. Acquiring an excellent design staff. Company Summary Liquid Culture will offer creative women's outdoor clothing, online, that is both functional and beautiful. Larry Wilson and Maggie Granger, co-owners of Liquid Culture, will create a cost-effective operation that will eliminate the cost of inventory by having a third-party, Magic Clothing Company, handle all manufacturing and shipping of clothing to the customer. Liquid Culture will process the order and collect the payment online. The order will then be sent to Magic Clothing Company to be filled and shipped. Liquid Culture will focus on clothing design and marketing of its products. 2.1 Start-up Summary Liquid Culture's start-up costs consists mostly of design and marketing. Liquid Culture has $260,000 in investments and $200,000 in a short-term loan. Start-up Funding Start-up Expenses to Fund Start-up Assets to Fund Total Funding Required Assets Non-cash Assets from Start-up Cash Requirements from Start-up Additional Cash Raised Cash Balance on Starting Date Total Assets Liabilities and Capital Liabilities Current Borrowing Long-term Liabilities Accounts Payable (Outstanding Bills) Other Current Liabilities (interest-free) Total Liabilities Capital Planned Investment Investor 1 Investor 2 Other Additional Investment Requirement Total Planned Investment

$58,500 $401,500 $460,000 $0 $401,500 $0 $401,500 $401,500

$0 $200,000 $0 $0 $200,000

$130,000 $130,000 $0 $0 $260,000

Loss at Start-up (Start-up Expenses) ($58,500) Total Capital $201,500 Total Capital and Liabilities $401,500 Total Funding $460,000 Need real financials? We recommend using LivePlan as the easiest way to create automatic financials for your own business plan. Create your own business plan Start-up Requirements Start-up Expenses Legal Stationery etc. Brochures Consultants Insurance Rent Leased Office Equipment Computer Equipment/Software Website Other Total Start-up Expenses Start-up Assets Cash Required Start-up Inventory Other Current Assets Long-term Assets Total Assets Total Requirements 2.2 Company Ownership Liquid Culture is owned by Larry Wilson and Maggie Granger.

$1,000 $500 $0 $5,000 $0 $2,000 $10,000 $30,000 $10,000 $0 $58,500 $401,500 $0 $0 $0 $401,500 $460,000

Products Liquid Culture will sell women's outdoor clothing online. We will offer outdoor clothing for almost every type of active use. We will focus on the seasonal clothing demands of our customers including the following: Fleece outerwear. Rain gear, waterproof breathables, as well as coated nylon. Synthetic clothing for outdoor activities. Hats.

Shorts. Pants. Shirts. Market Analysis Summary In the past 15 years, women's outdoor wear has grown into a billion dollar niche in the clothing industry. The popularity of the Internet has launched a number of online stores for women's outdoor wear but no company is exclusively selling their products online. There are a number of reasons for this but the strongest is that the concept is new and untested. Will customers buy something that they wear that can only be seen online? We believe they will, if the process is fun and the products are great and cheap. The key is marketing our target customers in the traditional advertising medium for fashion, i.e. women fitness magazines. The ads will focused on the eliminating the middle man in your clothing budget and stepping up to the distinctive style of Liquid Culture. The company logo will also be an important marketing tool in bringing customers to our website. 4.1 Market Segmentation Liquid Culture will be focusing on two distinct groups of women that purchase outdoor clothing: Women 17-25 years of age: Youth drives the market so this is the important group to attract to the website. They have less money than the older group so we must give them what they want for less. The key is to have inexpensive selections in each clothing group that have the popular cut. The company's logo attractiveness to this group can not be stressed strongly enough. The initial small purchases will grow larger over time. Women 26-40 years of age: They are the core group that will drive Liquid Culture's success. This target group is responsible for the growth of outdoor women's wear. They will be harder to pull into the website. Once there, the key will be promoting the quality, attractiveness and savings. In addition, we will have to assure that the purchase will fit the way the customer wants it to. It will be crucial that the return policy is hassle-free and speedy.

Need actual charts? We recommend using LivePlan as the easiest way to create graphs for your own business plan. Create your own business plan Market Analysis Year 1 Year 2 Year 3 Year 4 Year 5 Potential Customers Growth CAGR Women Ages 1625 20% 6,000,000 7,200,000 8,640,000 10,368,000 12,441,600 20.00% Women Ages 2640 15% 5,000,000 5,750,000 6,612,500 7,604,375 8,745,031 15.00% Other 0% 0 0 0 0 0 0.00% Total 17.81% 11,000,000 12,950,000 15,252,500 17,972,375 21,186,631 17.81% Strategy and Implementation Summary Liquid Culture will win market share in the women's outdoor clothing niche by aggressively pursuing visibility with its target customers. 5.1 Competitive Edge Liquid Culture's competitive edge is its focus on the process than on product. The website is just the endpoint of an entire marketing program to drive customers' interest in Liquid Culture. Though we have confidence in the quality and attractiveness of our products, we know that building the road to the website is our most important job. Larry Wilson's experience with South Face is pivotal to the success of Liquid Culture's website. South Face's website averaged five million hits a year and is considered one of

the most accessible and attractive websites in the clothing industry. His experience is invaluable in assuring customers' satisfaction with the shopping experience online. Larry will introduce a new clothing measurement feature that is fun to use and will reduce customers confusion on how the clothing will fit. This will increase customer satisfaction and reduce returns. Maggie Granger will be in charge of the clothing design team. As senior clothing designer for Manic Woman Clothing, she watched the Manic Woman's sales grow by 20% for the past five years. Her clothing designs have been praised in the industry and have spawned many imitators. With Liquid Culture, Maggie is ready to change how quality women's outdoor clothing is sold. Liquid Culture's agreement with Magic Clothing Company is another strong competitive advantage. Our design team will work closely with the Magic's Indonesian-based manufacturing facilities. The Magic Clothing Company will maintain the inventory and will produce sufficient product to meet the planned demand. This will keep production costs low for products and put a cap on Liquid Culture's overhead. 5.2 Marketing Strategy Liquid Culture's marketing strategy is a simple one. In women's fitness magazines like Self, Shape and Strive, Liquid Culture will introduce customers to their products and website. We will also advertise in CosmoGirl and Ellegirl magazines. For the first two months, Liquid Culture will offer 10% off for all purchases under $100 and 15% off all purchases over $100. We will offer the same discount strategy three more times during the year when new seasonal clothing is introduced. 5.2.1 Pricing Strategy Liquid Culture's pricing strategy is to pass on most of the store mark-up to the consumer in reduced price for clothing. This advantage has no negative impact on our sales profit and will also absorb some of the initial cost of offering discounts during our first three months of operation. 5.3 Sales Strategy Liquid Culture will launch a $245,000 ad campaign targeted at our core customer groups. The focus of the ads will be to "keep the money you give to the middleman" and use it to get outdoors and enjoy life. Liquid Culture's attractive logo will be heavily displayed in these ads. We estimate it will take most of the year to build our sales to the point where we begin to show a profit. Liquid Culture will offer discounts at various times of the year to even out seasonality and build initial awareness of the website. 5.3.1 Sales Forecast We expect sales to increase at a steady rate for the first year. It will begin slow as we open, but will quickly pick up as our customer base increases. Liquid Culture will see a sales increase of 38% between the first and second year. We feel that we can accomplish this steady goal and maintain this amount of sales.

Need actual charts? We recommend using LivePlan as the easiest way to create graphs for your own business plan. Create your own business plan

Need actual charts? We recommend using LivePlan as the easiest way to create graphs for your own business plan. Create your own business plan Sales Forecast Year 1 Sales Clothing $2,170,000 Year 2 $3,000,000 Year 3 $4,300,000

Other Total Sales Direct Cost of Sales Clothing Other Subtotal Direct Cost of Sales

$0 $2,170,000 Year 1 $1,249,000 $0 $1,249,000

$0 $3,000,000 Year 2 $1,800,000 $0 $1,800,000

$0 $4,300,000 Year 3 $2,580,000 $0 $2,580,000

Management Summary Larry Wilson will manage the marketing team, as well as the development and administration of Liquid Culture's website. Maggie Granger will be in charge of the clothing design team. She will also manage the production of the designs by Magic Clothing Company. 6.1 Personnel Plan Besides Larry and Maggie, Liquid Culture will have a staff of eight: Three member clothing design team. Web administrator. Two member marketing team. Office manager. Accountant. Personnel Plan Marketing/Website Director Design Director Designers Web Administrator Office Manager Marketing Staff Accountant Other Total People Total Payroll Year 1 $84,000 $84,000 $144,000 $48,000 $36,000 $96,000 $39,600 $0 8 $531,600 Year 2 $90,000 $90,000 $156,000 $52,000 $39,000 $104,000 $44,000 $0 8 $575,000 Year 3 $95,000 $95,000 $166,000 $56,000 $42,000 $112,000 $48,000 $0 8 $614,000

Financial Plan The following is the financial plan for Liquid Culture. 7.1 Break-even Analysis Our break-even analysis is based on running costs, the costs we incur to keep the business running, not on theoretical fixed costs that would be relevant only if we were closing. Fixed costs include payroll, rent, utilities, and marketing costs.

Need actual charts? We recommend using LivePlan as the easiest way to create graphs for your own business plan. Create your own business plan Break-even Analysis Monthly Revenue Break-even $177,248 Assumptions: Average Percent Variable Cost 58% Estimated Monthly Fixed Cost $75,228 Need real financials? We recommend using LivePlan as the easiest way to create automatic financials for your own business plan. Create your own business plan 7.2 Projected Profit and Loss The following table and chart are the projected profit and loss for three years.

Need actual charts? We recommend using LivePlan as the easiest way to create graphs for your own business plan. Create your own business plan

Need actual charts? We recommend using LivePlan as the easiest way to create graphs for your own business plan. Create your own business plan

Need actual charts? We recommend using LivePlan as the easiest way to create graphs for your own business plan. Create your own business plan

Need actual charts? We recommend using LivePlan as the easiest way to create graphs for your own business plan. Create your own business plan Pro Forma Profit and Loss Sales Direct Cost of Sales Year 1 $2,170,000 $1,249,000 Year 2 $3,000,000 $1,800,000 Year 3 $4,300,000 $2,580,000

Other Production Expenses $0 $0 $0 Total Cost of Sales $1,249,000 $1,800,000 $2,580,000 Gross Margin $921,000 $1,200,000 $1,720,000 Gross Margin % 42.44% 40.00% 40.00% Expenses Payroll $531,600 $575,000 $614,000 Sales and Marketing and Other Expenses $265,000 $340,000 $440,000 Depreciation $0 $0 $0 Leased Equipment $0 $0 $0 Utilities $2,400 $2,400 $2,400 Insurance $0 $0 $0 Rent $24,000 $24,000 $24,000 Payroll Taxes $79,740 $86,250 $92,100 Other $0 $0 $0 Total Operating Expenses $902,740 $1,027,650 $1,172,500 Profit Before Interest and Taxes $18,260 $172,350 $547,500 EBITDA $18,260 $172,350 $547,500 Interest Expense $17,574 $13,281 $8,801 Taxes Incurred $206 $47,721 $161,610 Net Profit $481 $111,349 $377,089 Net Profit/Sales 0.02% 3.71% 8.77% 7.3 Projected Cash Flow The following table and chart are the projected cash flow for three years.

Need actual charts? We recommend using LivePlan as the easiest way to create graphs for your own business plan. Create your own business plan Pro Forma Cash Flow Year 1 Year 2 Year 3 Cash Received Cash from Operations Cash Sales $2,170,000 $3,000,000 Subtotal Cash from Operations $2,170,000 $3,000,000 Additional Cash Received Sales Tax, VAT, HST/GST Received $0 $0 New Current Borrowing $0 $0 New Other Liabilities (interest-free) $0 $0 New Long-term Liabilities $0 $0 Sales of Other Current Assets $0 $0 Sales of Long-term Assets $0 $0 New Investment Received $0 $0 Subtotal Cash Received $2,170,000 $3,000,000 Expenditures Year 1 Year 2 Expenditures from Operations Cash Spending $531,600 $575,000 Bill Payments $1,590,840 $2,541,460 Subtotal Spent on Operations $2,122,440 $3,116,460 Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out $0 $0 Principal Repayment of Current Borrowing $0 $0 Other Liabilities Principal Repayment $0 $0 Long-term Liabilities Principal Repayment $44,796 $44,796 Purchase Other Current Assets $0 $0 Purchase Long-term Assets $0 $0 Dividends $0 $0 Subtotal Cash Spent $2,167,236 $3,161,256 Net Cash Flow $2,764 ($161,256) Cash Balance $404,264 $243,008 7.4 Projected Balance Sheet The following is the projected balance sheet for three years.

$4,300,000 $4,300,000 $0 $0 $0 $0 $0 $0 $0 $4,300,000 Year 3 $614,000 $3,387,998 $4,001,998 $0 $0 $0 $44,796 $0 $0 $0 $4,046,794 $253,206 $496,214

Pro Forma Balance Sheet Year 1 Year 2 Year 3 Assets Current Assets Cash $404,264 $243,008 $496,214 Inventory $264,000 $380,464 $545,332 Other Current Assets $0 $0 $0 Total Current Assets $668,264 $623,473 $1,041,546 Long-term Assets Long-term Assets $0 $0 $0 Accumulated Depreciation $0 $0 $0 Total Long-term Assets $0 $0 $0 Total Assets $668,264 $623,473 $1,041,546 Liabilities and Capital Year 1 Year 2 Year 3 Current Liabilities Accounts Payable $311,080 $199,736 $285,516 Current Borrowing $0 $0 $0 Other Current Liabilities $0 $0 $0 Subtotal Current Liabilities $311,080 $199,736 $285,516 Long-term Liabilities $155,204 $110,408 $65,612 Total Liabilities $466,284 $310,144 $351,128 Paid-in Capital $260,000 $260,000 $260,000 Retained Earnings ($58,500) ($58,019) $53,329 Earnings $481 $111,349 $377,089 Total Capital $201,981 $313,329 $690,418 Total Liabilities and Capital $668,264 $623,473 $1,041,546 Net Worth $201,981 $313,329 $690,418 7.5 Business Ratios The following table shows the projected businesses ratios. We expect to maintain healthy ratios for profitability, risk, and return. These ratios have been determined by the 5137 industry, Women's and Children's Clothing, as found in the Standard Industry Code (SIC) Index. Ratio Analysis Year 1 0.00% 39.51% Year 2 38.25% 61.02% Year 3 43.33% 52.36% Industry Profile 10.40% 34.10%

Sales Growth Percent of Total Assets Inventory

Other Current Assets 0.00% 0.00% 0.00% Total Current Assets 100.00% 100.00% 100.00% Long-term Assets 0.00% 0.00% 0.00% Total Assets 100.00% 100.00% 100.00% Current Liabilities 46.55% 32.04% 27.41% Long-term Liabilities 23.22% 17.71% 6.30% Total Liabilities 69.78% 49.74% 33.71% Net Worth 30.22% 50.26% 66.29% Percent of Sales Sales 100.00% 100.00% 100.00% Gross Margin 42.44% 40.00% 40.00% Selling, General & Administrative Expenses 42.42% 36.29% 31.23% Advertising Expenses 11.29% 10.00% 9.30% Profit Before Interest and Taxes 0.84% 5.75% 12.73% Main Ratios Current 2.15 3.12 3.65 Quick 1.30 1.22 1.74 Total Debt to Total Assets 69.78% 49.74% 33.71% Pre-tax Return on Net Worth 0.34% 50.77% 78.03% Pre-tax Return on Assets 0.10% 25.51% 51.72% Additional Ratios Year 1 Year 2 Year 3 Net Profit Margin 0.02% 3.71% 8.77% Return on Equity 0.24% 35.54% 54.62% Activity Ratios Inventory Turnover 10.91 5.59 5.57 Accounts Payable Turnover 6.11 12.17 12.17 Payment Days 27 38 25 Total Asset Turnover 3.25 4.81 4.13 Debt Ratios Debt to Net Worth 2.31 0.99 0.51 Current Liab. to Liab. 0.67 0.64 0.81 Liquidity Ratios Net Working Capital $357,185 $423,737 $756,030 Interest Coverage 1.04 12.98 62.21 Additional Ratios Assets to Sales 0.31 0.21 0.24 Current Debt/Total Assets 47% 32% 27%

25.70% 89.40% 10.60% 100.00% 40.70% 9.00% 49.70% 50.30% 100.00% 24.80% 14.80% 0.90% 2.00% 2.36 1.09 49.70% 4.90% 9.70% n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a

Acid Test Sales/Net Worth Dividend Payout

1.30 10.74 0.00

1.22 9.57 0.00

1.74 6.23 0.00

n.a n.a n.a